Document:

Exhibit 10.1

 

CREDIT AGREEMENT

 

dated as of January 16, 2004

 

between

 

 

GOLDEN GRAIN ENERGY, LLC

as Borrower

and

 

 

HOME FEDERAL SAVINGS BANK

as Lender

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I.
  DEFINITIONS;
  CONSTRUCTION

  	
   

  
	
   

  	
   

  
	
  Section 1.01
  Definitions

  	
   

  
	
  Section 1.02
  Accounting Terms and
  Determination

  	
   

  
	
  Section 1.03
  Terms Generally

  	
   

  
	
   

  	
   

  
	
  ARTICLE II.
  AMOUNTS AND TERMS
  OF THE COMMITMENTS

  	
   

  
	
   

  	
   

  
	
  Section 2.01
  General
  Description of the Loans

  	
   

  
	
  Section 2.02
  Construction and
  Term Loan Commitment

  	
   

  
	
  Section 2.03
  Procedure for
  Construction Borrowings

  	
   

  
	
  Section 2.04
  Term Loan
  Conversion

  	
   

  
	
  Section 2.05
  Revolving
  Loan Commitment

  	
   

  
	
  Section 2.06
  Procedure for
  Revolving Borrowings

  	
   

  
	
  Section 2.07
  Interest Rates

  	
   

  
	
  Section 2.08
  Reserved

  	
   

  
	
  Section 2.09
  Repayment
  of Loans

  	
   

  
	
  Section 2.10
  Free
  Cash Flow Allocations

  	
   

  
	
  Section 2.11
  Evidence
  of Indebtedness

  	
   

  
	
  Section 2.12
  Prepayments

  	
   

  
	
  Section 2.13
  Interest on
  Loans

  	
   

  
	
  Section 2.14
  Fees

  	
   

  
	
  Section 2.15
  Computation of
  Interest and Fees

  	
   

  
	
  Section 2.16
  Reserved

  	
   

  
	
  Section 2.17
  Reserved

  	
   

  
	
  Section 2.18
  Increased
  Costs

  	
   

  
	
  Section 2.19
  Reserved

  	
   

  
	
  Section 2.20
  Taxes

  	
   

  
	
  Section 2.21
  Payments
  Generally

  	
   

  
	
   

  	
   

  
	
  ARTICLE III.
  CONDITIONS
  PRECEDENT TO LOANS

  	
   

  
	
   

  	
   

  
	
  Section 3.01
  Conditions
  To Effectiveness

  	
   

  
	
  Section 3.02
  Each Loan

  	
   

  
	
  Section 3.03
  Each
  Construction Loan

  	
   

  
	
  Section 3.04
  Delivery
  of Documents

  	
   

  
	
   

  	
   

  
	
  ARTICLE IV.
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
   

  	
   

  
	
  Section 4.01
  Existence;
  Power

  	
   

  
	
  Section 4.02
  Organizational
  Power; Authorization

  	
   

  

 

 

	
  Section 4.03
  Governmental
  Approvals; No Conflicts

  	
   

  
	
  Section 4.04
  Financial
  Statements

  	
   

  
	
  Section 4.05
  Litigation and
  Environmental Matters

  	
   

  
	
  Section 4.06
  Compliance with
  Laws and Agreements

  	
   

  
	
  Section 4.07
  Investment
  Company Act, Etc.

  	
   

  
	
  Section 4.08
  Taxes

  	
   

  
	
  Section 4.09
  Margin
  Regulations

  	
   

  
	
  Section 4.10
  ERISA

  	
   

  
	
  Section 4.11
  Ownership
  of Property

  	
   

  
	
  Section 4.12
  Disclosure

  	
   

  
	
  Section 4.13
  Labor Relations

  	
   

  
	
  Section 4.14
  Subsidiaries

  	
   

  
	
  Section 4.15
  Construction

  	
   

  
	
  Section 4.16
  Projections

  	
   

  
	
  Section 4.17
  Material
  Contracts

  	
   

  
	
  Section 4.18
  Permits

  	
   

  
	
   

  	
   

  
	
  ARTICLE V.
  AFFIRMATIVE
  COVENANTS

  	
   

  
	
   

  	
   

  
	
  Section 5.01
  Financial
  Statements and Other Information

  	
   

  
	
  Section 5.02
  Notices
  of Material Events

  	
   

  
	
  Section 5.03
  Existence;
  Conduct of Business

  	
   

  
	
  Section 5.04
  Compliance
  with Laws, Etc.

  	
   

  
	
  Section 5.05
  Payment
  of Obligations

  	
   

  
	
  Section 5.06
  Books and
  Records

  	
   

  
	
  Section 5.07
  Visitation,
  Inspection, Audit, Etc.

  	
   

  
	
  Section 5.08
  Maintenance of
  Properties; Insurance

  	
   

  
	
  Section 5.09
  Use of
  Proceeds

  	
   

  
	
  Section 5.10
  Subsidiaries

  	
   

  
	
  Section 5.11
  Assignment of Material
  Contracts

  	
   

  
	
  Section 5.12
  Reserved

  	
   

  
	
  Section 5.13
  Shortfall

  	
   

  
	
  Section 5.14
  Non-Liability
  of Lender

  	
   

  
	
   

  	
   

  
	
  ARTICLE VI.
  FINANCIAL
  COVENANTS

  	
   

  
	
   

  	
   

  
	
  Section 6.01
  Fixed
  Charge Coverage Ratio

  	
   

  
	
  Section 6.02
  Leverage Ratio

  	
   

  
	
  Section 6.03
  Capital
  Expenditures

  	
   

  
	
  Section 6.04
  Current Ratio and
  Working Capital

  	
   

  
	
  Section 6.05
  Maximum
  Debt to Net Worth Ratio

  	
   

  
	
  Section 6.06
  Minimum
  Debt Service Ratio

  	
   

  
	
   

  	
   

  
	
  ARTICLE VII.
  NEGATIVE
  COVENANTS

  	
   

  
	
   

  	
   

  
	
  Section 7.01
  Indebtedness

  	
   

  
	
  Section 7.02
  Negative
  Pledge

  	
   

  

 

ii

 

	
  Section 7.03
  Fundamental
  Changes

  	
   

  
	
  Section 7.04
  Investments,
  Loans, Etc

  	
   

  
	
  Section 7.05
  Restricted
  Payments

  	
   

  
	
  Section 7.06
  Sale of Assets

  	
   

  
	
  Section 7.07
  Transactions
  with Affiliates

  	
   

  
	
  Section 7.08
  Restrictive
  Agreements

  	
   

  
	
  Section 7.09
  Sale
  and Leaseback Transactions

  	
   

  
	
  Section 7.10
  Lease
  Obligations

  	
   

  
	
  Section 7.11
  Hedging
  Agreements

  	
   

  
	
  Section 7.12
  Amendment
  to Material Documents and Construction Plans

  	
   

  
	
  Section 7.13
  Accounting
  Changes

  	
   

  
	
  Section 7.14
  Construction

  	
   

  
	
  Section 7.15
  Deposit
  and Investment Accounts

  	
   

  
	
   

  	
   

  
	
  ARTICLE VIII.  EVENTS OF
  DEFAULT

  	
   

  
	
   

  	
   

  
	
  Section 8.01
  Events of
  Default

  	
   

  
	
   

  	
   

  
	
  ARTICLE IX.
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  
	
  Section 9.01
  Notices

  	
   

  
	
  Section 9.02
  Waiver;
  Amendments

  	
   

  
	
  Section 9.03
  Expenses;
  Indemnification

  	
   

  
	
  Section 9.04
  Successors
  and Assigns

  	
   

  
	
  Section 9.05
  Governing
  Law; Jurisdiction; Consent to Service of Process

  	
   

  
	
  Section 9.06
  Waiver of
  Jury Trial

  	
   

  
	
  Section 9.07
  Right of
  Setoff

  	
   

  
	
  Section 9.08
  Counterparts;
  Integration

  	
   

  
	
  Section 9.09
  Survival

  	
   

  
	
  Section 9.10
  Severability

  	
   

  
	
  Section 9.11
  Confidentiality

  	
   

  
	
  Section 9.12
  Interest
  Rate Limitation

  	
   

  
	
  Section 9.13.
  Inspections

  	
   

  
	
  Section 9.14
  Termination

  	
   

  

 

	
  Schedules

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Schedule 4.05

  	
  –

  	
  Environmental Matters

  	
   

  
	
  Schedule 4.17(a)

  	
  –

  	
  Management Contracts

  	
   

  
	
  Schedule 4.17(b)

  	
  –

  	
  Supply Contracts

  	
   

  
	
  Schedule 4.17(c)

  	
  –

  	
  Off-Take Contracts

  	
   

  
	
  Schedule 4.17(d)

  	
  –

  	
  Transportation Contracts

  	
   

  
	
  Schedule 4.17(e)

  	
  –

  	
  Utility Contracts

  	
   

  
	
  Schedule 4.18

  	
  –

  	
  Permits

  	
   

  

 

iii

 

	
  Exhibits

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit
  A

  	
  –

  	
  Form of Construction and Term Loan Note

  	
   

  
	
  Exhibit
  B

  	
  –

  	
  Form of Revolving Credit Note

  	
   

  
	
  Exhibit
  2.03

  	
  –

  	
  Form of Construction Draw Request

  	
   

  
	
  Exhibit
  2.06

  	
  –

  	
  Form of Revolving Draw Request

  	
   

  
	
  Exhibit 3.01(d)(xi)

  	
  –

  	
  Form of Secretary’s Certificate

  	
   

  
	
  Exhibit 3.01(d)(xii)

  	
  –

  	
  Form of Opinion of Borrower’s Counsel

  	
   

  
	
  Exhibit 3.01(d)(xiii)

  	
   

  	
  Form of Officer’s Certificate

  	
   

  
	
  Exhibit 3.01(d)(xix)

  	
   

  	
  Form of Solvency Certificate

  	
   

  

 

iv

 

CREDIT
AGREEMENT

 

THIS
CREDIT AGREEMENT (this “Agreement”) is made and entered into as
of January 16, 2004, by and between GOLDEN GRAIN ENERGY, LLC, an Iowa
limited liability company (“Borrower”) and HOME FEDERAL SAVINGS BANK (“Lender”).

 

RECITALS:

 

•                  Borrower has
requested that Lender establish (a) a $32,000,000 multiple advance construction
and term loan facility in favor of Borrower, and (b) establish a revolving
credit facility of up to $1,500,000 in favor of Borrower; and

 

•                  Subject to the terms
and conditions of this Agreement, Lender is willing to provide financing to
Borrower.

 

AGREEMENT:

 

In consideration of the premises and the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lender agree as
follows:

 

ARTICLE I.

DEFINITIONS; CONSTRUCTION

 

Section 1.01
Definitions. In addition to the other terms defined herein, the
following terms used herein shall have the meanings herein specified (to be
equally applicable to both the singular and plural forms of the terms defined):

 

“Administrative Fee”
shall have the meaning set forth in Section 2.14(c).

 

“Affiliate” shall mean, as to any Person, any
other Person that directly, or indirectly through one or more intermediaries,
Controls, is Controlled by, or is under common Control with, such Person.

 

“Borrower” shall
mean Golden Grain Energy, LLC, an Iowa limited liability company, and any
successor thereof.

 

“Borrowing” shall
mean an advance of funds by Lender to Borrower pursuant to Lender’s Commitments
hereunder.

 

“Business Day” shall
mean any day other than a Saturday, Sunday or other day on which farm credit
system banks or commercial banks in Rochester, Minnesota are authorized or
required by law to close.

 

“Capital
Expenditures” shall mean for any period, without
duplication, (a) the additions to property, plant and equipment and other
capital expenditures of Borrower and its Subsidiaries that are (or would be)
set forth on a combined statement of cash flows of Borrower for such

 

 

period prepared in accordance with GAAP and (b) Capital Lease
Obligations incurred by Borrower and its Subsidiaries during such period.

 

“Capital Lease
Obligations” of any Person shall mean all
obligations of such Person to pay rent or other amounts under any lease (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.

 

“Charges” shall
have the meaning set forth in Section 9.12.

 

“Change in Control” shall
mean the occurrence of one or more of the following events: (a) any sale,
lease, exchange or other transfer (in a single transaction or a series of
related transactions) of all or substantially all of the assets of Borrower to
any Person or “group” (within the meaning of the Securities Exchange Act of
1934 and the rules of the Securities and Exchange Commission thereunder in
effect on the date hereof), (b) occupation of a majority of the seats (other
than vacant seats) on the board of directors of Borrower by Persons who were
neither (i) nominated by the immediately previous board of directors or (ii)
appointed by managers so nominated, or (c) any sale, lease, exchange or other
transfer (in a single transaction or a series of related transactions) of a
majority of any of Borrower’s membership units (as described in the Amended and
Restated Operating Agreement of Borrower dated August 21, 2002, as
amended).

 

“Change in Law” shall
mean (i) the adoption of any applicable law, rule or regulation after the date
of this Agreement, (ii) any change in any applicable law, rule or regulation,
or any change in the interpretation or application thereof, by any Governmental
Authority after the date of this Agreement, or (iii) compliance by Lender with
any request, guideline or directive (whether or not having the force of law) of
any Governmental Authority made or issued after the date of this Agreement.

 

“Closing Date” shall
mean the date on which the conditions precedent set forth in Section 3.01
have been satisfied or waived in accordance with Section 9.02.

 

“Code” shall
mean the Internal Revenue Code of 1986, as amended and in effect from time to
time.

 

“Collateral” shall
mean all tangible and intangible property, real and personal, of Borrower that
is the subject of a Lien granted pursuant to a Loan Document to Lender for the
benefit of Lender to secure the whole or any part of the Obligations or any
Guarantee thereof, and shall include, without limitation, all casualty
insurance proceeds and condemnation awards with respect to any of the foregoing.

 

“Collateral
Assignments” shall mean each collateral assignment
by Borrower (and such other parties as Lender may require) to Lender, along
with consents to such assignments as shall be deemed appropriate by Lender,
from time to time, of the Material Contracts.

 

“Commitment” shall
mean the Revolving Commitment or the Construction and Term Loan Commitment or
any combination thereof (as the context shall permit or require).

 

2

 

“Construction
Agreement” shall mean the “Standard Form of
Agreement Between Borrower and Design Builder - Lump Sum” between Borrower and
Fagen, Inc., dated as of October 24, 2003, as the same may be amended,
restated, supplemented or otherwise modified from time to time, along with all
other material agreements to which Borrower is a party related to the Project,
including the design and construction of the Improvements.

 

“Construction and
Term Loan” shall mean an advance made by Lender to
Borrower under its Construction and Term Loan Commitment.

 

“Construction and
Term Loan Amortization Period” shall mean the
period beginning on the date designated as the beginning of such period in Section 2.04
and ending on the Maturity Date.

 

“Construction and
Term Loan Commitment” shall mean the commitment of
Lender to make Construction and Term Loans to Borrower in an aggregate
principal amount not exceeding the lesser of (i) 60% of the appraised value of
the Project (as determined in the appraisal delivered pursuant to Section 3.01(d)(v)
and (ii) $32,000,000.

 

“Construction and
Term Loan Note” shall mean a note of Borrower
payable to the order of Lender in substantially the form of Exhibit A.

 

“Construction
Borrowing” shall mean a Borrowing pursuant to Section 2.02.

 

“Construction
Commitment Termination Date” shall mean the
earliest of (i) April 1, 2005, (ii) the date on which the Construction and
Term Loan Commitments are fully drawn, and (iii) the date on which all amounts
outstanding under this Agreement have been declared or have automatically
become due and payable (whether by acceleration or otherwise).

 

“Construction
Completion” shall mean the occurrence of all of
the following events with respect to the Project: (a) all Improvements are
completed in accordance with the Construction Plans and are paid for in full,
free of all mechanics’, labor, materialmen’s and other similar lien claims; (b)
said completion has been approved by Borrower and the Inspecting Architect; (c)
a certificate of substantial completion for the Project has been signed by
Borrower and delivered to Lender and no material punch-list items remain to be
completed; (d) Lender has received acceptable evidence that all requirements of
any Governmental Authority and all private restrictions and covenants relating
to the Improvements or the Real Estate on which it is located have been
complied with or satisfied and that unconditional certificates of occupancy (if
required) for all of the Improvements have been issued by all appropriate
Governmental Authorities; (e) Borrower has obtained and delivered to Lender
copies of all licenses, Permits, and Material Contracts (collaterally assigned
to Lender) necessary or appropriate to operate the Improvements at maximum
capacity; (f) Lender has received copies of all warranties from suppliers
covering materials, equipment and appliances included within the Improvements
(to the extent such copies of warranties have been specifically requested by
Lender); (g) Lender has received satisfactory evidence that all insurance
required pursuant to the Loan Documents is in full force and effect; (h) Lender
has received three copies of an “as-built” survey of the Project which conforms
with Lender’s requirements; (i) no Default or Event of Default exists; (j)
Borrower has invested no less than $27,424,000 of equity capital (including not
less than

 

3

 

$26,500,000 in class A equity), (which may include proceeds of tax
increment financing) in Construction Costs; (k) Borrower has developed and
implemented risk management programs, satisfactory to Lender in all respects,
to procure inputs necessary or appropriate for the successful operation of the
Improvements at maximum capacity; and (1) Borrower shall have hired or engaged
management satisfactory to Lender.

 

“Construction Costs”
shall mean expenditures for the purpose of
purchasing real property for the Project, designing and engineering the
Project, preparing the site, constructing the buildings and purchasing and
installing equipment.

 

“Construction Draw
Request” shall have the meaning set forth in Section 2.03.

 

“Construction
Funding Period” shall mean the period from the
Closing Date to the Construction Commitment Termination Date.

 

“Construction Plans”
shall mean the final working plans for completion
of the Project and Improvements to be constructed with respect to the Project,
including drawings, specifications, details and manuals as delivered to Lender.

 

“Control” shall
mean the power, directly or indirectly, either to (i) vote 5% or more of
securities having ordinary voting power for the election of directors (or
persons performing similar functions) of a Person or (ii) direct or cause the
direction of the management and policies of a Person, whether through the
ability to exercise voting power, by contract or otherwise. The terms “Controlling”, “Controlled by”, and
“under common Control with” have
meanings correlative thereto.

 

“Default” shall
mean any condition or event that, with the giving of notice or the lapse of
time, or both, would constitute an Event of Default.

 

“Default Interest” shall
have the meaning set forth in Section 2.13(b).

 

“Deposit Accounts” shall
mean all demand, time, savings, passbook or similar depository accounts of
Borrower, including but not limited to the Equity Deposit Account and
Borrower’s operating, payroll and other deposit accounts.

 

“Determination Date”
shall mean the date three (3) Business Days prior
to the Closing Date with respect to the Interest Period beginning on the
Closing Date, and (b) with respect to all other Interest Periods, the date
three (3) Business Days prior to the first day of the related Interest Period.

 

“Disbursing
Agreement” means the Disbursing Agreement dated as
of the date hereof, among Lender, Borrower and an escrow agent acceptable to
Lender, as amended, restated, supplemented or otherwise modified from time to
time.

 

“Dollars” or “$” shall
mean dollars denominated in the currency of the United States of America.

 

4

 

“EBITDA” shall
mean, for Borrower and its Subsidiaries for any period determined on a
consolidated basis in accordance with GAAP, an amount equal to (a) Net Income
for such period plus (b) to the extent deducted in determining Net Income
for such period, the sum of (i) Interest Expense, (ii) income tax expense,
(iii) depreciation and amortization and (iv) all other non-cash charges, in
each case for such period.

 

“Eligible Account” shall
mean an account (as defined in the UCC) owing to Borrower which is acceptable
to Lender in its sole discretion for lending purposes. Without limiting
Lender’s discretion, Lender shall, in general, consider an account to be an
Eligible Account if it meets, and so long as it continues to meet, the
following requirements:

 

(a)                                  it is genuine and in
all respects what it purports to be;

 

(b)                                 it is owned by
Borrower, Borrower has the right to subject it to a security interest in favor
of Lender or assign it to Lender and it is subject to a first priority
perfected security interest in favor of Lender and to no other claim, lien,
security interest or encumbrance whatsoever, other than liens in favor of
Lender;

 

(c)                                  it arises from (i)
the performance of services by Borrower in the ordinary course of Borrower’s
business, and such services have been fully performed and accepted by the
account debtor (as defined in the UCC) thereunder; or (ii) the sale or lease of
goods by Borrower in the ordinary course of Borrower’s business, and (A) such
goods have been completed in accordance with the account debtor’s specifications
(if any) and delivered to the account debtor, (B) such account debtor has not
refused to accept, returned or offered to return, any of the goods which are
the subject of such account, and (C) Borrower has possession of, or Borrower
has delivered to Lender (at Lender’s request) shipping and delivery receipts
evidencing delivery of such goods;

 

(d)                                 it is evidenced by an
invoice rendered to the account debtor thereunder, is due and payable within
thirty (30) days after the date of the invoice, and it, along with each other
account of the related account debtor, do not remain unpaid more than sixty
(60) days past the invoice date thereof;

 

(e)                                  it is a valid,
legally enforceable and unconditional obligation of the account debtor
thereunder, and is not subject to setoff, counterclaim, credit, allowance or
adjustment by such account debtor, or to any claim by such account debtor
denying liability thereunder in whole or in part;

 

(f)                                    it does not arise
out of a contract or order which fails in any material respect to comply with
the requirements of applicable law;

 

(g)                                 the account debtor
thereunder is not an officer, employee or agent of Borrower, or an affiliate of
Borrower;

 

(h)                                 it is not an account
with respect to which the account debtor is the United States of America or any
state or local government, or any department, agency or instrumentality
thereof, unless Borrower assigns its right to payment of such account to

 

5

 

Lender pursuant to, and in full compliance with, the Assignment of
Claims Act of 1940, as amended, or any comparable state or local law, as
applicable;

 

(i) it is not an account with respect to
which the account debtor is located in a state which requires Borrower, as a
precondition to commencing or maintaining an action in the courts of that
state, either to (i) receive a certificate of authority to do business and be
in good standing in such state; or (ii) file a notice of business activities
report or similar report with such state’s taxing authority, unless (A)
Borrower has taken one of the actions described in clauses (i) or (ii); (B) the
failure to take one of the actions described in either clause (i) or (ii) may
be cured retroactively by Borrower at its election; or (C) Borrower has proven,
to Lender’s satisfaction, that it is exempt from any such requirements under
any such state’s laws;

 

(j)                                     the account debtor
is located within the United States of America;

 

(k) it is not an account with respect to
which the account debtor’s obligation to pay is subject to any repurchase
obligation or return right, as with sales made on a billand-hold, guaranteed
sale, sale on approval, sale or return or consignment basis;

 

(1) it is not an account (i) with respect to
which any representation or warranty contained in this Agreement is untrue; or
(ii) which violates any of the covenants of Borrower contained in this
Agreement;

 

(m)                               it is not an account
which, when added to a particular account debtor’s other indebtedness to
Borrower, exceeds (10%) of all accounts and accrued service fees of Borrower or
a credit limit determined by Lender in its sole discretion for that account
debtor (except that accounts excluded from Eligible Accounts solely by reason
of this clause (xiii) shall be Eligible Accounts to the extent of such credit
limit); and

 

(n)                                 it is not an account
with respect to which the prospect of payment or performance by the account
debtor is or will be impaired, as determined by Lender in its sole discretion.

 

For purposes of determining the value of an Eligible Account, Borrower
shall value the account at (i) face value if all accounts of the related
account debtor remain unpaid no more than thirty (30) days past the invoice
date thereof, and (ii) fifty percent (50%) of the face value of the account if any
account of the related account debtor remains unpaid more than thirty (30) days
but no more than sixty (60) days past the invoice date thereof.

 

“Eligible Inventory”
shall mean shall mean inventory (as defined in the
UCC) of Borrower which is acceptable to Lender in its sole discretion for
lending purposes. Without limiting Lender’s discretion, Lender shall, in
general, consider inventory to be Eligible Inventory if it meets, and so long
as it continues to meet, the following requirements:

 

(a) it is owned by Borrower, Borrower has the
right to subject it to a security interest in favor of Lender and it is subject
to a first priority perfected security interest in favor of Lender and to no
other claim, lien, security interest or encumbrance whatsoever, other than
liens in favor of Lender;

 

6

 

(b)                                 it is located on Real
Estate subject to the Mortgage;

 

(c)                                  if held for sale or
lease or furnishing under contracts of service, it is (except as Lender may
otherwise consent in writing) new and unused and free from defects which would,
in Lender’s sole determination, affect its market value;

 

(d)                                 it is not stored with
a bailee, consignee, warehouseman, processor or similar party unless Lender has
given its prior written approval and Borrower has caused any such bailee,
consignee, warehouseman, processor or similar party to issue and deliver to
Lender, in form and substance acceptable to Lender, such Uniform Commercial
Code financing statements, warehouse receipts, waivers and other documents as
Lender shall require;

 

(e)                                  Lender has
determined, in accordance with Lender’s customary business practices, that it
is not unacceptable due to age, type, category or quantity; and

 

(f)                                    it is not inventory
(i) with respect to which any of the representations and warranties contained
in this Agreement are untrue; or (ii) which violates any of the covenants of
Borrower contained in this Agreement.

 

For purposes of determining the value of Eligible Inventory, Borrower
shall value the inventory at fair market value.

 

“Environmental Laws”
shall mean all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by or with any Governmental
Authority, relating in any way to the environment, preservation or reclamation
of natural resources, the management, Release or threatened Release of any
Hazardous Material or to health and safety matters.

 

“Environmental
Liability” shall mean any liability, contingent or
otherwise (including any liability for damages, costs of environmental
investigation and remediation, costs of administrative oversight, fines,
related attorneys’ fees, natural resource damages, penalties or indemnities),
of Borrower or any Subsidiary directly or indirectly resulting from or based
upon (a) any actual or alleged violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of
any Hazardous Materials, (c) any actual or alleged exposure to any Hazardous
Materials, (d) the Release or threatened Release of any Hazardous Materials, or
(e) any contract, agreement or other consensual arrangement pursuant to which
liability is assumed or imposed with respect to any of the foregoing.

 

“Equipment” shall
mean all equipment, machinery, apparatus, fittings, fixtures and other tangible
personal property of every kind and description used in the business operations
of Borrower or owned by Borrower or in which Borrower has an interest, and all
parts, accessories, and special tools and all increases and accessions thereto
and substitutions and replacements therefor.

 

“Equity Deposit
Account” shall mean Borrower’s Escrow Deposit
Account with Lender designated “Golden Grain Energy, LLC, Equity Deposit
Account,” which holds the proceeds of Borrower’s equity drive.

 

7

 

“ERISA” shall mean the Employee Retirement
Income Security Act of 1974, as amended from time to time, and any successor
statute.

 

“ERISA Affiliate” shall mean any trade or
business (whether or not incorporated), which, together with Borrower, is
treated as a single employer under Section 414(b) or (c) of the Code or,
solely for the purposes of Section 302 of ERISA and Section 412 of the
Code, is treated as a single employer under Section 414 of the Code.

 

“ERISA Event” shall mean (a) any “reportable
event”, as defined in Section 4043 of ERISA or the regulations issued
thereunder with respect to a Plan (other than an event for which the 30-day
notice period is waived); (b) the existence with respect to any Plan of an
“accumulated funding deficiency” (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived; (c) the filing pursuant to
Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by Borrower or the ERISA Affiliate from the PBGC or a plan
administrator appointed by the PBGC of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f)
the incurrence by Borrower or any of its ERISA Affiliates of any liability with
respect to the withdrawal or partial withdrawal from any Plan or Multiemployer
Plan; or (g) the receipt by Borrower or any ERISA Affiliate of any notice, or
the receipt by any Multiemployer Plan from Borrower or any ERISA Affiliate of
any notice, concerning the imposition of Withdrawal Liability or a
determination that a Multiemployer Plan is, or is expected to be, insolvent or
in reorganization, within the meaning of Title IV of ERISA.

 

“Event of Default” shall
have the meaning provided in Article VIII.

 

“Fixed Charge
Coverage Ratio” shall mean, for any period of four
consecutive fiscal quarters of Borrower, the ratio of (a) EBITDA for such
period to (b) Fixed Charges for such period.

 

“Fixed Charges” shall
mean, for Borrower and its Subsidiaries for any period determined on a
consolidated basis in accordance with GAAP, the sum of (a) Interest Expense for
such period, plus (b) scheduled principal payments made on Total Debt
(not including payments related to seasonal indebtedness for which Lender has
consented in writing to exclusion therefrom) for such period, plus (c)
income tax expense for such period, plus (d) Restricted Payments paid during
such period, plus (e) Non-Financed Maintenance Capital Expenditures.

 

“Free Cash Flow” shall
mean for any period, the EBITDA less the sum of Interest Expense, Mandatory
Debt Retirement, Taxes paid by Borrower and its Subsidiaries, and Non-Financed
Maintenance Capital Expenditures.

 

“GAAP” shall mean generally accepted
accounting principles in the United States applied on a consistent basis and
subject to the terms of Section 1.02.

 

“Governmental
Authority” shall mean the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising

 

8

 

executive, legislative, judicial, taxing, regulatory or administrative
powers or functions of or pertaining to government.

 

“Guarantee” of
or by any Person (the “guarantor”) shall mean any obligation, contingent or
otherwise, of the guarantor guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in
any manner, whether directly or indirectly and including any obligation, direct
or indirect, of the guarantor (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or other obligation or
to purchase (or to advance or supply funds for the purchase of) any security
for the payment thereof, (b) to purchase or lease property, securities or
services for the purpose of assuring the owner of such Indebtedness or other
obligation of the payment thereof, (c) to maintain working capital, equity
capital or any other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such Indebtedness or other
obligation, or (d) as an account party in respect of any letter of credit or
letter of guaranty issued in support of such Indebtedness or obligation; provided,
that the term “Guarantee” shall not include endorsements for collection or
deposits in the ordinary course of business. The amount of any Guarantee shall
be deemed to be an amount equal to the stated or determinable amount of the
primary obligation in respect of which Guarantee is made or, if not so stated
or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as determined
by such Person in good faith. The term “Guarantee” used as a verb has a
corresponding meaning.

 

“Hazardous
Materials” means all explosive or radioactive
substances or wastes and all hazardous or toxic substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos or asbestos
containing materials, polychlorinated biphenyls, radon gas, infectious or
medical wastes and all other substances or wastes of any nature regulated
pursuant to any Environmental Law.

 

“Hedging Agreements”
shall mean interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap agreements,
currency future or option contracts, commodity agreements and other similar
agreements or arrangements designed to protect against fluctuations in interest
rates, currency values or commodity values, in each case to which Borrower or
any Subsidiary is a party.

 

“Improvements” shall
mean the buildings and improvements to be placed or constructed on the Real
Estate with respect to the Project.

 

“Inspecting
Architect” shall mean the architectural,
engineering or other consultant firm retained by Lender, at Borrower’s cost, to
conduct on-site inspections of the work-in-progress related to the Project, and
to issue periodic reports to Lender as to progress of construction and
adherence to the Construction Plans.

 

“Indebtedness” of
any Person shall mean, without duplication (i) all obligations of such Person
for borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of the deferred purchase price of property or services (other
than trade payables incurred in the ordinary course of business; provided,
that for purposes of Section 8.01(g), trade payables overdue by
more than

 

9

 

120 days shall be included in this definition except to the extent that
any of such trade payables are being disputed in good faith and by appropriate
measures), (iv) all obligations of such Person under any conditional sale or
other title retention agreement(s) relating to property acquired by such
Person, (v) all Capital Lease Obligations of such Person, (vi) all obligations,
contingent or otherwise, of such Person in respect of letters of credit,
acceptances or similar extensions of credit, (vii) all Guarantees of such
Person of the type of Indebtedness described in clauses (i) through (vi) above,
(viii) all Indebtedness of a third party secured by any Lien on property owned
by such Person, whether or not such Indebtedness has been assumed by such
Person, (ix) all obligations of such Person, contingent or otherwise, to
purchase, redeem, retire or otherwise acquire for value any common stock or
other capital interest of such Person, and (x) Off-Balance Sheet Liabilities.
The Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general partner or a
joint venturer, except to the extent that the terms of such Indebtedness
provide that such Person is not liable therefor.

 

“Interest Expense” shall
mean, for Borrower and its Subsidiaries for any period determined on a
consolidated basis in accordance with GAAP, the sum of (i) total cash interest
expense, including without limitation the interest component of any payments in
respect of Capital Lease Obligations capitalized or expensed during such period
(whether or not actually paid during such period), plus (ii) the net amount
payable (or minus
the net amount receivable) under Hedging Agreements during such
period (whether or not actually paid or received during such period).

 

“Interest Period” shall
mean the period beginning on the Closing Date and continuing until the last day
of the calendar quarter; subsequent Interest Periods shall begin on the first
day of a calendar quarter and end on the last day of the calendar quarter.

 

“Investment
Accounts” shall mean all securities or investment
accounts of Borrower.

 

“Investments” shall
have the meaning set forth in Section 7.04.

 

“Lender” shall
mean Home Federal Savings Bank and its successors and assigns.

 

“License Agreement” shall
mean the provisions of the Construction Agreement which specify the terms of
the license of proprietary rights of the design/builder (as set forth in
Exhibit D thereto), as the same may be amended, restated, supplemented or
otherwise modified from time to time

 

“Lien” shall
mean any mortgage, pledge, security interest, lien (statutory or otherwise),
charge, encumbrance, hypothecation, assignment, deposit arrangement, or other
arrangement having the practical effect of the foregoing or any preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement and any capital lease having the same economic effect as any of the
foregoing).

 

“Loan Documents” shall
mean collectively this Agreement, the Notes, all Notices of Borrowing, the
Mortgage, the Security Agreement, the Collateral Assignments, the Disbursing

 

10

 

Agreement and any and all other instruments, agreements, documents and
writings executed in connection with any of the foregoing.

 

“Loans” shall
mean the Revolving Loans and the Construction and Term Loans in the aggregate,
or any of them, as the context shall require.

 

“Management
Contracts” shall mean agreements and contracts
which are material to the management of Borrower’s business in effect presently
and entered into from time to time hereafter, as the same may be amended,
restated, supplemented or otherwise modified from time to time.

 

“Mandatory Debt
Retirement” shall mean principal and interest
payments required during the related period in connection with any Indebtedness
of Borrower.

 

“Material Adverse
Effect” shall mean, 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,
(i) the business, results of operations, financial condition, assets,
liabilities, Projections or prospects of Borrower, (ii) the ability of Borrower
to perform any of its obligations under the Loan Documents, (iii) the rights
and remedies of Lender under any of the Loan Documents or (iv) the legality,
validity or enforceability of any of the Loan Documents.

 

“Material Contracts”
shall mean the Management Contracts, Supply
Contracts, Off-Take Contracts, Transportation Contracts, Utility Contracts, the
Construction Agreement, the License Agreement, the Process Guarantee, and such
other agreements and contracts as may be material to operation of Borrower’s
business.

 

“Material
Indebtedness” shall mean Indebtedness (other than
the Loans) or obligations in respect of one or more Hedging Agreements of
Borrower and its Subsidiaries in an aggregate principal amount exceeding
$100,000. For purposes of determining Material Indebtedness, the “principal
amount” of the obligations of Borrower or any Subsidiary in respect to any
Hedging Agreement at any time shall be the maximum aggregate amount (giving
effect to any netting agreements) that Borrower or such Subsidiary would be
required to pay if such Hedging Agreement were terminated at such time.

 

“Maturity Date” shall
mean the earlier of (i) the date ten (10) years from the day immediately
preceding the first day of the Construction and Term Loan Amortization Period,
and (ii) the date on which the principal amount of all outstanding Loans have
been declared or automatically have become due and payable (whether by
acceleration or otherwise).

 

“Maximum Rate” shall
have the meaning set forth in Section 9.12.

 

“Mortgage” shall
mean each of the Mortgage and other real estate security documents delivered by
Borrower to Lender, all in form and substance satisfactory to Lender, as each
may be amended, restated, modified or otherwise supplemented from time to time,
whereby Borrower

 

11

 

pledges all of its right, title and interest in the Real Estate to
Lender as collateral for the Obligations.

 

“Multiemployer Plan”
shall have the meaning set forth in
Section 4001(a)(3) of ERISA.

 

“Net Income” shall
mean, for any period, the net income (or loss) of Borrower and its Subsidiaries
for such period determined on a consolidated basis in accordance with GAAP, but
excluding therefrom (to the extent otherwise included therein) (i) any
extraordinary gains or losses, (ii) any gains attributable to write-ups of
assets, (iii) any equity interest of Borrower or any Subsidiary in the
unremitted earnings of any Person that is not a Subsidiary, and (iv) any income
(or loss) of any Person accrued prior to the date it becomes a Subsidiary or is
merged into or consolidated with Borrower or any Subsidiary on the date that
such Person’s assets are acquired by Borrower or any Subsidiary. Net Income
shall include USDA Bioenergy program payments and other payments and benefits
received by Borrower in respect of incentives provided by the State of Iowa or
any other Governmental Authority.

 

“Net Worth” shall
mean, as of any date, (i) the total assets of Borrower and its Subsidiaries
that would be reflected on Borrower’s consolidated balance sheet as of such date
prepared in accordance with GAAP, after eliminating all amounts properly
attributable to minority interests, if any, in the stock and surplus of
Subsidiaries, less (ii) the sum of (a) the total liabilities of Borrower
and its Subsidiaries that would be reflected on a consolidated balance sheet of
Borrower and its Subsidiaries as of such date prepared in accordance with GAAP,
(b) the amount of any write-up in the book value of any assets resulting from a
revaluation thereof or any write-up in excess of the cost of such assets
acquired reflected on the consolidated balance sheet of Borrower and its
Subsidiaries as of such date prepared in accordance with GAAP, and (c) the net
book amount of all assets of Borrower and its Subsidiaries that would be classified
as intangible assets on a consolidated balance sheet of Borrower and its
Subsidiaries as of such date prepared in accordance with GAAP.

 

“Non-Financed
Maintenance Capital Expenditures” shall mean the
sum of Capital Expenditures made by Borrower in the ordinary course of business
related to maintenance of Borrower’s property, plant and equipment and paid
during the related period, except the term shall not include Capital
Expenditures for which Borrower or any Subsidiary incurred Indebtedness in
connection therewith.

 

“Notes” shall
mean, collectively, the Revolving Credit Note and the Construction and Term
Loan Note.

 

“Obligations” shall
mean all amounts owing by Borrower to Lender pursuant to or in connection with
this Agreement or any other Loan Document, including without limitation, all
principal, interest (including any interest accruing after the filing of any
petition in bankruptcy or the commencement of any insolvency, reorganization or
like proceeding relating to Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), all reimbursement
obligations, fees, expenses, indemnification and reimbursement payments, costs
and expenses (including all fees and expenses of counsel to Lender incurred
pursuant to this Agreement or any other Loan Document), whether direct or
indirect, absolute or contingent,

 

12

 

liquidated or unliquidated, now existing or hereafter arising hereunder
or thereunder, together with all renewals, extensions, modifications or
refinancings thereof.

 

“Off-Balance Sheet
Liabilities” of any Person shall mean (i) any
repurchase obligation or liability of such Person with respect to accounts or
notes receivable sold by such Person, (ii) any liability of such Person under
any sale and leaseback transactions which do not create a liability on the
balance sheet of such Person, (iii) any liability of such Person under any
so-called “synthetic” lease transaction, or (iv) any obligation arising with respect
to any other transaction which is the functional equivalent of or takes the
place of borrowing but which does not constitute a liability on the balance
sheet of such Person.

 

“Off-Take Contracts”
shall mean agreements and contracts in effect
presently and entered into from time to time hereafter which are material to
the sale or disposal of products and by-products produced by Borrower, as the
same may be amended, restated, supplemented or otherwise modified from time to
time.

 

“Origination Fee” shall
have the meaning set forth in Section 2.14(a).  

 

“Participant” shall
have the meaning set forth in Section 9.04(c).  

 

“Participation Fee” shall
have the meaning set forth in Section 2.14(b).

 

“Payment Office” shall
mean the office of Lender located at 1016 Civic Center Drive Northwest, Post
Office Box 6947, Rochester, Minnesota 55903 or such other location as to which
Lender shall have given written notice to Borrower.

 

“PBGC” shall
mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA,
and any successor entity performing similar functions.

 

“Permits” shall
mean the licenses, consents, approvals authorizations and permits of
Governmental Authorities which are required of Borrower or useful for Borrower
to obtain in connection with the Project and operation of Borrower’s business
(as contemplated following Construction Completion), including but not limited
to any of the foregoing related to Environmental Laws (including an air
emissions permit and a national pollution discharge elimination system
construction permit, each of which will allow Borrower to operate its
facilities at maximum capacity), 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, and laws relating to construction and operation of above ground
storage tanks.

 

“Permitted
Encumbrances” shall mean:

 

(i)                                     Liens
imposed by law for taxes not yet due (or with respect to real estate taxes, not
yet delinquent) or which are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves are being maintained in
accordance with GAAP;

 

(ii)                                  statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for

 

13

 

amounts not yet due or which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves are being
maintained in accordance with GAAP;

 

(iii)                               pledges
and deposits made in the ordinary course of business in compliance with
workers’ compensation, unemployment insurance and other social security laws or
regulations;

 

(iv)                              deposits
to secure the performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations
of a like nature, in each case in the ordinary course of business;

 

(v)                                 judgment
and attachment liens not giving rise to an Event of Default or Liens created by
or existing from any litigation or legal proceeding that are currently being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves are being maintained in accordance with GAAP; and

 

(vi)                              easements,
zoning restrictions, rights-of-way and similar encumbrances on real property
imposed by law or arising in the ordinary course of business that do not secure
any monetary obligations and do not materially detract from the value of the
affected property or materially interfere with the ordinary conduct of business
of Borrower and its Subsidiaries taken as a whole;

 

provided, that the term “Permitted
Encumbrances” shall not include any Lien securing Indebtedness.

 

“Person” shall
mean any individual, partnership, firm, corporation, association, joint
venture, limited liability company, trust or other entity, or any Governmental
Authority.

 

“Plan” means
any employee pension benefit plan (other than a Multiemployer Plan) subject to
the provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069
of ERISA be deemed to be) an “employer” as defined in Section 3(5) of
ERISA.

 

“Prime Rate” shall
mean the rate of that name as published in the “Money Rates” Section of
the Wall
Street Journal as of the applicable Determination Date; provided,
if Lender determines that the foregoing source is unavailable for the
applicable Interest Period, Lender shall determine Prime Rate based on a new
index which is based on comparable information.

 

“Process Guarantee” shall
mean the provisions of the Construction Agreement which specify the terms of
the performance guarantee criteria (as set forth in Exhibit A thereto), as the
same may be amended, restated, supplemented or otherwise modified from time to
time.

 

“Project” shall
mean the design, construction and completion of a dry milling fuel ethanol
plant near Mason City, Iowa which will produce, upon Construction Completion,
not less than 40 million gallons of ethanol per year, dried distillers grains
and solubles, carbon dioxide and other value-added products and carbon dioxide
recovery, together with all necessary and appropriate fixtures, equipment,
attachments, and accessories, as described in the Construction Plans, to be
constructed on the Real Estate.

 

14

 

“Projections” shall
mean Borrower’s forecasted (a) balance sheets; (b) profit and loss statements;
and (c) cash flow statements; all prepared on a combined basis and otherwise
consistent with the historical financial statements of Borrower, together with
appropriate supporting details and a statement of underlying assumptions which
are believed by Borrower to be reasonable and fair in light of the current
condition and past performance of Borrower and to reflect a reasonable estimate
of the projected balance sheets, results of operations, cash flows and other
information presented therein for five (5) years following the Closing Date.

 

“Pro Forma Balance
Sheet” shall mean the unaudited pro forma balance
sheet of Borrower on a consolidated basis setting forth as of the Closing Date
the pro forma financial position of Borrower and its Subsidiaries on a
consolidated basis, copies of which fairly present, on a pro forma basis, in
conformity with GAAP applied on a basis consistent with the financial
statements referred to in Section 4.04, the financial position of
Borrower on a consolidated basis, as of such date and time.

 

“Real Estate” shall
mean all real property owned or leased by Borrower or its Subsidiaries.

 

“Real Estate
Documents” shall mean collectively, the Mortgage,
the Disbursing Agreement and all other documents, instruments, agreements and
certificates executed and delivered by Borrower to Lender in connection with
any of the foregoing.

 

“Release” means
any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal,
discharge, dispersal, leaching or migration into the environment (including
ambient air, surface water, groundwater, land surface or subsurface strata) or
within any building, structure, facility or fixture.

 

“Responsible
Officer” shall mean any of the president, the
chief executive officer, the chief operating officer, the chief financial
officer, the treasurer or a vice president of Borrower or such other
representative of Borrower as may be designated in writing by any one of the
foregoing with the consent of Lender; and, with respect to the financial
covenants only, the chief financial officer or the treasurer of Borrower.

 

“Restricted Payment”
shall have the meaning set forth in Section 7.05.

 

“Revolving
Borrowing” shall mean a Borrowing pursuant to Section 2.05.

 

“Revolving
Commitment” shall mean the commitment of Lender to
make Revolving Loans to Borrower during a Revolving Credit Availability Period
in accordance with the terms of Section 2.05.

 

“Revolving
Commitment Amount” shall mean the lesser of
$1,500,000 and 50% of the aggregate value of Eligible Inventory and Eligible
Accounts.

 

“Revolving
Commitment Termination Date” shall mean the
earlier of (i) the date one year from the last day of the Revolving Credit
Availability Period (as extended at Lender’s option pursuant to Section 2.05
from time to time) and (ii) the date on which the principal

 

15

 

amount of all outstanding Loans have been declared or automatically
have become due and payable (whether by acceleration or otherwise).

 

“Revolving Credit
Availability Period” shall mean the period
beginning on the first day of the Construction and Term Loan Amortization
Period and ending on the date one year thereafter, unless Lender extends the Revolving
Credit Availability Period pursuant to Section 2.05, in which case
the Revolving Credit Availability Period shall continue until the date
specified by Lender in the notice provided to Borrower.

 

“Revolving Credit
Note” shall mean a note of Borrower in the amount
of $1,500,000 payable to the order of Lender in substantially the form of Exhibit
B.

 

“Revolving Draw
Request” shall have the meaning set forth in Section 2.06.

 

“Revolving Loan” shall
mean a loan made by Lender to Borrower under the Revolving Commitment.

 

“Security Agreement”
shall mean the Security Agreement, dated as of the
date hereof, executed by Borrower in favor of Lender as amended, restated,
supplemented or otherwise modified from time to time.

 

“Security Documents”
shall mean, collectively, the Security Agreement,
the Collateral Assignments, the Mortgage, the other Real Estate Documents, and
all other instruments and agreements now or hereafter securing the whole or any
part of the Obligations, all UCC-1 financing statements, fixture financing
statements, stock powers, and all other documents, instruments, agreements and
certificates executed and delivered by Borrower or any other person to Lender
in connection with the foregoing.

 

“Subsidiary” shall
mean, with respect to any Person (the “parent”), any corporation, partnership, joint venture,
limited liability company, association or other entity the accounts of which
would be consolidated with those of the parent in the parent’s consolidated
financial statements if such financial statements were prepared in accordance
with GAAP as of such date, as well as any other corporation, partnership, joint
venture, limited liability company, association or other entity (i) of which
securities or other ownership interests representing more than 50% of the
equity or more than 50% of the ordinary voting power, or in the case of a
partnership, more than 50% of the general partnership interests are, as of such
date, owned, Controlled or held, or (ii) that is, as of such date, otherwise
Controlled, by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent. Unless otherwise indicated,
all references to “Subsidiary” hereunder shall mean a Subsidiary of Borrower
(including subsidiaries formed after the Closing Date).

 

“Supply Contracts” shall mean all agreements
and contracts related to the supply of inputs material to operation of
Borrower’s business in effect presently and entered into from time to time
hereafter, as the same may be amended, restated, supplemental or otherwise
modified from time to time.

 

16

 

“Sworn Construction
Cost Statement” shall mean an itemized and
certified statement of actual and estimated costs of the Project broken out
into individual subcontracts, signed and sworn to by the general contractor for
the Project and Borrower and delivered to Lender.

 

“Title Company” shall
mean Title Professionals and Abstract Company, Saint Cloud, Minnesota, and its
successors and assigns, and/or any other title insurance company selected by
Lender from time to time.

 

“Total Debt” shall
mean, as of any date of determination, all Indebtedness of Borrower and its
Subsidiaries that would be reflected on a consolidated balance sheet of
Borrower prepared in accordance with GAAP as of such date.

 

“Transportation
Contracts” shall mean all agreements and contracts
in effect presently and entered into from time to time hereafter related to the
provision of transportation or shipping services which are material to the
operation of Borrower’s business as the same may be amended, restated,
supplemented or otherwise modified from time to time.

 

“Uniform Commercial
Code” or “UCC” means the Uniform Commercial Code as
in effect from time to time in the State of Minnesota.

 

“Utility  Contracts” shall
mean those certain contracts and agreements in effect presently and entered
into from time to time hereafter which are material to the provision to
Borrower of electricity, natural gas, water, fuel oil, coal and other energy
resources in connection with the operation of Borrower’s plant, equipment and
offices, as the same may be amended, restated, supplement and or otherwise
modified from time to time.

 

“Withdrawal
Liability” shall mean liability to a Multiemployer
Plan as a result of a complete or partial withdrawal from such Multiemployer
Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

 

Section 1.02  Accounting
Terms and Determination.  Unless otherwise defined or specified
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required
to be delivered hereunder shall be prepared, in accordance with GAAP as in
effect from time to time, applied on a basis consistent (except for such
changes approved by Borrower’s independent public accountants) with the most
recent audited combined financial statement of Borrower delivered pursuant to Section 5.01();
provided, that if Borrower notifies Lender that Borrower wishes to amend
any covenant in Article VI to eliminate the effect of any change in
GAAP on the operation of such covenant, then Borrower’s compliance with such
covenant shall be determined on the basis of GAAP in effect immediately before
the relevant change in GAAP became effective, until either such notice is
withdrawn or such covenant is amended in a manner satisfactory to Borrower and
Lender.

 

Section 1.03  Terms
Generally.  The definitions of terms herein shall apply equally
to the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words “include”, “includes” and “including” shall be deemed
to be followed by the phrase “without limitation”. The word “will” shall be
construed to have the same meaning and effect as the word

 

17

 

“shall.” In the computation of periods of time from a specified date to
a later specified date, the word “from” means “from and including” and the word
“to” means “to but excluding.” Unless the context requires otherwise (i) any
definition of or reference to any agreement, instrument or other document
herein shall be construed as referring to such agreement, instrument or other
document as it was originally executed or as it may from time to time be
amended, supplemented or otherwise modified (subject to any restrictions on
such amendments, supplements or modifications set forth herein), (ii) any
reference herein to any Person shall be construed to include such Person’s
successors and permitted assigns, (iii) the words “hereof,” “herein” and
“hereunder” and words of similar import shall be construed to refer to this
Agreement as a whole and not to any particular provision hereof, (iv) all
references to Articles, Sections, Exhibits and Schedules shall be construed to
refer to Articles, Sections, Exhibits and Schedules to this Agreement, and (v)
all references to a specific time shall be construed to refer to the time in Rochester,
Minnesota, unless otherwise indicated.

 

ARTICLE II.

AMOUNTS AND TERMS OF THE COMMITMENTS

 

Section 2.01  General
Description of the Loans.  Subject to and upon the terms and
conditions herein set forth, Lender hereby establishes in favor of Borrower (i)
a construction loan facility pursuant to which Lender agrees to make
Construction and Term Loans to Borrower in accordance with Section 2.02;
and (ii) a revolving credit facility pursuant to which Lender may make
Revolving Loans to Borrower from time to time in accordance with Section 2.05.

 

Section 2.02  Construction
and Term Loan Commitment.  Subject to the terms and conditions
set forth herein, Lender agrees to make Construction and Term Loans to
Borrower, from time to time during the Construction Funding Period, in an
aggregate principal amount outstanding at any time that will not result in the
aggregate amount of all Construction and Term Loans exceeding the Construction
and Term Loan Commitment. During the Construction Funding Period, Borrower shall
be entitled to borrow and prepay, but may not reborrow, Construction and Term
Loans in accordance with the terms and conditions of this Agreement; provided,
that Borrower may not borrow should there exist a Default or Event of Default.

 

Section 2.03  Procedure
for Construction Borrowings.  The Borrower shall give Lender
written notice (or telephonic notice promptly confirmed in writing) of each
Construction Borrowing substantially in the form of Exhibit 2.03
attached hereto (a “Construction Draw Request”) prior to 11:00 a.m.
(Central Time) five (5) Business Days prior to the requested date of each
Construction Borrowing. The Borrower shall request no more than one
Construction Borrowing per calendar month. Each Construction Draw Request shall
be irrevocable and shall specify: (a) the aggregate principal amount of the
related Borrowing, and (b) the date of the related Borrowing (which shall be a
Business Day). The aggregate principal amount of each Construction Borrowing
shall be not less than $100,000. If Lender approves the Construction Draw
request, it shall disburse funds pursuant to the Disbursing Agreement. At no
time shall the aggregate balance of Construction Borrowings outstanding exceed
the amount of the Construction and Term Loan Commitment. Notwithstanding
anything to the contrary, Lender shall have the irrevocable right (without
obligation) at any time and from time to time to advance a Construction
Borrowing without first receiving a Construction Draw Request from Borrower.

 

18

 

Section 2.04  Term
Loan Conversion.  Within thirty (30) days following the
occurrence of Construction Completion, Borrower shall provide Lender such
documents, instruments, and certificates (including, without limitation, a
certificate by an appropriate Responsible Officer of Borrower, certifying as to
occurrence of Construction Completion) as Lender may request. Upon
determination by Lender of Construction Completion, the Construction and Term
Loan Amortization Period shall begin.

 

Section 2.05  Revolving
Loan Commitment.  Subject to the terms and conditions set forth
herein, Lender agrees to make Revolving Loans to Borrower, from time to time
during the Revolving Credit Availability Period, in an aggregate principal
amount not to exceed the Revolving Commitment Amount. During the Revolving
Credit Availability Period, Borrower may borrow, prepay and reborrow Revolving
Loans from time to time in accordance with the terms and conditions of this
Agreement; provided, that Borrower may not borrow or reborrow should
there exist a Default or Event of Default; and provided  further,
that at no time shall the aggregate amount of Revolving Loans outstanding
exceed the amount of the Revolving Commitment Amount. Lender may extend the
Revolving Credit Availability Period one or more times by providing notice to
Borrower.

 

Section 2.06  Procedure
for Revolving Borrowings.  The Borrower shall give Lender written
notice (or telephonic notice promptly confirmed in writing) of each Revolving
Borrowing substantially in the form of Exhibit 2.06 attached hereto (a “Revolving
Draw Request”) prior to 11:00 a.m. three (3) Business
Days prior to the requested date of each Revolving Loan. Each Revolving Draw
Request shall be irrevocable and shall specify: (i) the aggregate principal
amount of the related Revolving Borrowing and (ii) the date of the related
Revolving Borrowing (which shall be a Business Day). The aggregate principal
amount of each Revolving Borrowing shall be not less than $100,000 and shall be
in multiples of $100,000.

 

Section 2.07  Interest
Rates

 

(a)                                  Revolving
Loans. Interest on Revolving Loans shall accrue at the Prime Rate
plus 75 basis points (0.75%), as determined on the applicable Determination
Date.

 

(b)                                 Construction
and Term Loans. Prior to the Construction and Term Loan Amortization
Period, interest on the Construction and Term Loans shall accrue at the per
annum rate of interest equal to the greater of (i) 5.50%, and (ii) the Prime
Rate as determined on the applicable Determination Date plus 100 basis points
(1.00%). During the Construction and Term Loan Amortization Period, interest on
the Construction and Term Loans shall accrue at the per annum rate of interest
equal to the greater of (i) 5.00%, and (ii) the Prime Rate as determined on the
applicable Determination Date plus 100 basis points (1.00%); provided,
this rate shall not exceed 8.00% during the first 36 months of the Construction
and Term Loan Amortization Period or 10.0% at any time thereafter.

 

Section 2.08  Reserved.

 

Section 2.09  Repayment
of Loans.

 

(a)                               Construction
and Term Loans. During the Construction Funding Period, Borrower shall pay
interest at the rate in effect from time to time pursuant to Section 2.07(a)

 

19

 

based on the daily balance of the Construction and Term Loans
outstanding during the related monthly period. Borrower shall not be required
to make payments of principal on the Construction and Term Loans during the
Construction Funding Period. During the Construction and Term Loan Amortization
Period, Borrower shall pay, 120 level amortized payments of principal and
interest based on the applicable interest rate in effect pursuant to Section 2.07(b).
The amount of such monthly amortized payments shall be adjusted from time to
time as the interest rate is adjusted pursuant to Section 2.07(b).
All amounts due and owing pursuant to this Section 2.09(a) shall be
paid not later than the first day of each month. All remaining principal and
accrued interest outstanding on the Construction and Term Loans shall be due
and payable on the Maturity Date.

 

(b) Revolving
Facility. During the Revolving Credit Availability Period, Borrower
shall pay in arrears, not later than the first day of each month, interest at
the rate in effect from time to time pursuant to Section 2.07(a)
based on the daily balance of the Revolving Loans outstanding during the
related monthly period. Borrower shall pay all amounts owing on the Revolving
Loans and maintain a balance of zero for a consecutive period of at least 30
days during each rolling 12 month period. Borrower shall immediately pay all
amounts of Revolving Loans which exceed the Revolving Commitment Amount at any
time. Borrower shall pay all amounts of principal and interest owing on the Revolving
Loan on the Revolving Commitment Termination Date.

 

Section 2.10  Free
Cash Flow Allocations.  In addition to all other payments
required on the Loans, Borrower shall deposit in a restricted account with
Lender, on a quarterly basis, beginning with the first fiscal quarter following
Construction Completion Date, within forty five (45) days after the end of each
fiscal quarter, an amount equal to 25% of Borrower’s Free Cash Flow for such
quarter; provided, the aggregate of such additional payments based on
Borrower’s Free Cash Flow shall not exceed $2,750,000 for calendar year 2005
and $1,250,000 for each year thereafter; and provided further that the
aggregate payments pursuant to this Section 2.10 shall not exceed
$6,500,000. Borrower may use such amounts on deposit in the account established
pursuant to this Section 2.10 to prepay the Construction and Term
Loan; provided, such prepayments shall not reduce amortized payment
requirements under Section 2.09(a).

 

Section 2.11  Evidence
of Indebtedness.  Lender shall maintain in accordance with its
usual practice appropriate records evidencing the indebtedness of Borrower to
Lender resulting from each Loan, including the amounts of principal and
interest payable thereon and paid to Lender from time to time under this
Agreement. Lender shall also maintain appropriate records in which shall be
recorded (i) the Revolving Commitment and the Construction and Term Loan
Commitment (ii) the amount of each Loan made hereunder, (iii) the date and
amount of any principal or interest due and payable or to become due and
payable from Borrower to Lender hereunder in respect of such Loans and (iv)
both the date and amount of any sum received by Lender from Borrower in respect
of the Loans. The entries made in such records shall be prima facie evidence of the
existence and amounts of the obligations of Borrower therein recorded; provided,
that the failure or delay of Lender in maintaining or making entries into any
such record or any error therein shall not in any manner affect the obligation
of Borrower to repay the Loans (both principal and unpaid accrued interest) of
Lender in accordance with the terms of this Agreement. Lender shall provide
Borrower with periodic statements evidencing the indebtedness of Borrower to
Lender.

 

20

 

Section 2.12
Prepayments.

 

(a)                                  Borrower
shall have the right at any time and from time to time to prepay any Loan, in
whole or in part, by giving irrevocable written notice (or telephonic notice
promptly confirmed in writing) to Lender no later than 11:00 a.m. (Central
Time) not less than three (3) Business Days prior to any such prepayment; provided,
that the amount of any such prepayment shall not be less than $100,000. Each
such notice shall be irrevocable and shall specify the proposed date of such
prepayment and the principal amount to be prepaid. If such notice is given, the
aggregate amount specified in such notice shall be due and payable on the date
designated in such notice, together with accrued interest to such date on the
amount so prepaid in accordance with Section 2.13(a) and any
prepayment fee pursuant to Section 2.14(e). If no such notice is
given, each prepayment shall be applied against the remaining installments of
principal due in respect of the Construction and Term Loans.

 

(b)                                 If
Borrower issues any membership interests, any other equity interests, or any
debt securities, then no later than the Business Day following the date of
receipt of the proceeds thereof, Borrower shall prepay the Loans in an amount
equal to all such proceeds, net of underwriting discounts and commissions and
other reasonable costs paid to non-Affiliates in connection therewith; provided,
that no such prepayment shall be required in the event Borrower issues membership
interests or other equity interests and the proceeds of such issuance are
invested in assets that constitute either plant or equipment of Borrower and
such assets become Collateral subject to Lender’s first priority security
interest. Any such prepayment shall be applied in accordance with paragraph (c)
below.

 

(c)                                  Any
prepayments made by Borrower shall be applied as follows: first to fees
and reimbursable expenses of Lender then due and payable pursuant to any of the
Loan Documents; second to interest then due and payable on Loans made to
Borrower; third to the principal balance of the Construction and Term
Loans, in inverse order of maturity, until the same shall have been paid in
full; fourth to the principal balance of the Revolving Loans, until the
same shall have been paid in full. The applicable Commitments shall be
permanently reduced by the amount of any prepayments made pursuant to clause
third and fourth above.

 

Section 2.13  Interest
on Loans.

 

(a)                                  Interest
on the principal amount of all Loans shall accrue on a simple interest basis
from and including the date such Loans are made to but excluding the date of
any repayment thereof. Interest on all outstanding Loans shall be payable
monthly in arrears on the first day of each calendar month and also on the
Revolving Commitment Termination Date with respect to all Revolving Loans and
on the Maturity Date.

 

(b)                                 Upon
the occurrence and during the continuance of a Default or after acceleration,
Borrower shall pay interest (“Default Interest”) with respect to all Loans at the
rate otherwise applicable plus an additional 200 basis points (2.0%)
per annum. All Default Interest shall be payable on demand.

 

21

 

Section 2.14  Fees.

 

(a) Origination Fee. Borrower agrees to pay to
Lender an origination fee equal to Two Hundred Forty Two Thousand Five Hundred
Dollars ($242,500) (the “Origination Fee”) on or before the Closing Date.

 

(b) Administrative
Fee. Borrower agrees to pay Lender an annual administrative fee (the
“Administrative Fee”) equal
to Twenty Thousand Dollars ($20,000) on the Closing Date, and on each
anniversary of the Closing Date thereafter, until all obligations hereunder
have been paid or satisfied in full, provided,  however, that on
the fourth anniversary of the Closing Date, and the Administrative Fee shall be
reduced to Ten Thousand Dollars ($10,000), and such reduction shall remain in
effect until all obligations hereunder have been paid or satisfied in full.

 

(c)                                Documentation
Fee. Borrower agrees to pay to Lender a documentation fee equal to Five
Thousand Dollars ($5,000) (the “Documentation Fee”) on or before the Closing Date.

 

(d)                                 Revolving
Loan Fees. Borrower agrees to pay Lender the following fees in
connection with the Revolving Loan:

 

(i)                                     a
fee in the amount of Seven Thousand Five Hundred Dollars ($7,500) on or before
the Closing Date; and

 

(ii)                                  an
annual renewal fee equal to Three Thousand Seven Hundred Fifty Dollars
($3,750), which shall be due annually on the anniversary of the Closing Date if
Lender extends the Revolving Credit Availability Period pursuant to Section 2.05.

 

(e) Prepayment Fee. In the event any amount of
the Construction and Term Loan is paid prior to the time such amount is due and
payable, whether voluntarily or involuntarily (including any prepayment under Section 2.10
or Section 2.12, or effected by Lender’s exercise of any right to
accelerate) Borrower shall pay to Lender a prepayment fee as follows: (a) a fee
equal to Three Hundred Twenty Thousand Dollars ($320,000) in the event payment
is made prior to the beginning of the Construction and Term Loan Amortization
Period, (b) a fee equal to three percent (3.00%) of the principal balance
outstanding if prepayment is made within one year from the first day of the Construction
and Term Loan Amortization Period, (c) a fee equal to two percent (2.00%) of
the principal balance outstanding if prepayment is made within two years from
the first day of the Construction and Term Loan Amortization Period, or (d) a
fee equal to one percent (1.00%) of the principal balance outstanding if
prepayment is made within three years from the first day of the Construction
and Term Loan Amortization Period. Notwithstanding the foregoing, Borrower
shall be allowed to prepay up to twenty percent (20%) of the outstanding
principal balance of the Construction and Term Loan each year without incurring
any prepayment penalty or fee under this Section 2.14(e).

 

(f) Out-of-Pocket Costs. Borrower shall pay,
on demand, all of Lender’s out-of-pocket costs in connection with the Loans,
including but not limited to (i) fees, charges and disbursements of Lender’s
counsel related to the negotiation, documentation, closing and collection of
the Loans, (ii) fees, charges and disbursements of the Inspecting Architect and
Engineer, (iii) fees, charges and disbursements of the Title Company, (iv)
fees, charges and disbursements of the escrow agent acting pursuant to the
Disbursing Agreement, and (v) all

 

22

 

stamp and other taxes and fees payable in connection with the
execution, delivery, filing or recording of any Loan Document.

 

Section 2.15  Computation
of Interest and Fees.  All computations of interest and fees
hereunder shall be made on a Simple Interest basis and on the basis of a year
of 360 days for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest or fees
are payable (to the extent computed on the basis of days elapsed). Each determination
by Lender of an interest amount or fee hereunder shall be made in good faith
and, absent manifest error, shall be final, conclusive and binding for all
purposes. All interest and fees payable hereunder shall be considered earned
when due.

 

Section 2.16  Reserved.

 

Section 2.17  Reserved.

 

Section 2.18  Increased
Costs.

 

(a)                                  If
Lender shall have determined that on or after the date of this Agreement any
Change in Law regarding capital requirements has or would have the effect of
reducing the rate of return on Lender’s capital as a consequence of its
obligations hereunder to a level below that which Lender could have achieved
but for such Change in Law (taking into consideration Lender’s policies with
respect to capital adequacy) then, from time to time, within five (5) Business
Days after receipt by Borrower of written demand by Lender, Borrower shall pay
to Lender such additional amounts as will compensate Lender for any such
reduction suffered.

 

(b)                                 A
certificate of Lender setting forth the amount or amounts necessary to
compensate Lender specified in paragraph (a) of this Section 2.18
shall be delivered to Borrower, together with the written demand referred to in
paragraph (a) of this section, and shall be conclusive, absent manifest error.

 

(c)                                  Failure
or delay on the part of Lender to demand compensation pursuant to this Section 2.18
shall not constitute a waiver of Lender’s right to demand such compensation.

 

Section 2.19  Reserved.

 

Section 2.20  Reserved.

 

Section 2.21  Payments
Generally.

 

(a) Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or reimbursement of amounts
payable under Section 2.14, 2.18 or 2.20, or otherwise)
prior to 11:00 a.m. (Central Time), on the date when due, in immediately available
funds, without set-off or counterclaim. Any amounts received after such time on
any date may, in the discretion of Lender, be deemed to have been received on
the next succeeding Business Day for purposes of calculating interest thereon.
All such payments shall be made to Lender at the Payment Office. If any payment
hereunder shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day, and, in the case
of

 

23

 

any payment accruing interest, interest thereon shall be made payable
for the period of such extension. All payments hereunder shall be made in
Dollars.

 

(b) If at any time insufficient funds are received by and are available
to Lender to pay fully all amounts of principal, interest and fees then due
hereunder, such funds shall be applied (i) first, towards payment of interest
and fees then due hereunder.

 

ARTICLE III.

CONDITIONS PRECEDENT TO LOANS

 

Section 3.01  Conditions
To Effectiveness.  The obligations of Lender to make Loans
hereunder shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section 9.02):

 

(a)                                  Lender
shall have received all fees and other amounts due and payable on or prior to
the Closing Date, including the Origination Fee and amounts for reimbursement
or payment of all out-of-pocket expenses (including reasonable fees, charges
and disbursements of counsel to Lender) required to be reimbursed or paid by
Borrower hereunder, under any other Loan Document and under any agreement with
Lender.

 

(b)                                 The
sum of amounts on deposit with Lender in the Equity Deposit Account and equity
amounts previously expended on organizational costs and Construction Costs is
equal to at least $27,424,000 (including not less than $26,500,000 in class A
equity).

 

(c)                                  Lender
shall have received Phase I Environmental Site Assessment Reports, consistent
with American Society of Testing and Materials (ASTM) Standard E 1527-94, and
applicable state requirements, on all of the Real Estate, dated as of a date
acceptable to Lender, prepared by environmental engineers satisfactory to
Lender, all in form and substance satisfactory to Lender, and Lender shall have
further received such environmental review and audit reports, including Phase
II reports, with respect to the Real Estate of Borrower as Lender shall have
requested, and Lender shall be satisfied with the contents of all such
environmental reports. Lender shall have received letters executed by the
environmental firms preparing such environmental reports, in form and substance
satisfactory to Lender, authorizing Lender to rely on such reports;

 

(d)                                 Lender
(or its counsel) shall have received the following:

 

(i)                                     a
counterpart of this Agreement signed by or on behalf of Borrower or written
evidence satisfactory to Lender (which may include telecopy transmission of a
signed signature page of this Agreement) that Borrower has signed a counterpart
of this Agreement;

 

(ii)                                  the
Notes, duly executed by Borrower payable to the order of Lender;

 

(iii)                               the
duly executed Security Agreement, Collateral Assignments and the control
agreement with State Bank of Lawler together with (A) UCC-1 financing
statements and other applicable documents under the laws of the jurisdictions
with respect to the perfection of the Liens granted under the Security
Agreement and the Collateral Assignments, as requested by

 

24

 

Lender in order to perfect such Liens, duly executed by Borrower and
all other parties, (B) copies of favorable UCC, tax, judgment and fixture lien
search reports in all necessary or appropriate jurisdictions and under all
legal and trade names of Borrower and all other parties requested by Lender,
indicating that there are no prior Liens on any of the Collateral other than
Permitted Encumbrances, (C) duly executed landlord waivers and/or warehouseman,
or bailee agreements with respect to all inventory of Borrower or any
Subsidiary located at leased locations or other locations not owned by Borrower
in fee simple, and (D) a certified copy of all leases of Borrower and each
Subsidiary.

 

(iv)                              the
duly executed Mortgage covering all of the Real Estate owned or leased by
Borrower and duly executed counterparts of the other Real Estate Documents
together with: (A) title insurance policies, current ALTA/ACSM Land Title
surveys (to the extent requested by Lender) certified to Lender, zoning letters
and building permits in each case satisfactory in form and substance to Lender;
and (B) evidence that counterparts of the Mortgage have been recorded in all
places to the extent necessary or desirable, in the judgment of Lender, to
create a valid and enforceable first priority lien (subject to Permitted Encumbrances)
on the fee simple estate of each parcel of Real Estate in favor of Lender for
the benefit of Lender (or in favor of such other trustee as may be required or
desired under local law);

 

(v)                                 satisfactory
appraisals of all Real Estate subject to the Mortgage (including an “as built”
appraisal related to the Improvements), together with satisfactory collateral
audits of all accounts, inventory and other personal property requested by
Lender (including field audit and survey conducted by Lender);

 

(vi)                              the
duly executed Disbursing Agreement among Borrower, Lender and an escrow agent
acceptable to Lender;

 

(vii)                           an
executed copy of the Construction Agreement, together with (A) a complete set
of the Construction Plans, including all mechanical, electrical, structural and
other specialized drawings, (B) a schedule listing all subcontracts
relating to the Project and such other contracts, subcontracts and schedules
relating to the Project as Lender may request, (C) work progress
schedule showing estimated completion time for each phase of the
Construction Agreement, (D) a Sworn Construction Cost Statement, duly executed
by Borrower, including a reconciliation of actual costs incurred to-date
against budgeted amounts, (E) a copy of each Permit and each other building
permit, license and other agreement that Borrower is required by law to obtain
in connection with the Project, together with a schedule of all other
necessary licenses and permits which must be obtained in order to occupy and
operate a dry mill ethanol production facility (at maximum capacity in
accordance with the Construction Plans) on the property where the Improvements
will be built, and (F) a soil report related to the Real Estate where the
Improvements will be built, certified by a registered engineer acceptable to
Lender, including structural design recommendations in form and substance
satisfactory to Lender;

 

(viii)                        executed
copies of the Material Contracts in existence as of the Closing Date;

 

(ix)                                copies
of duly executed payoff letters, in form and substance satisfactory to Lender,
executed by each existing lender, together with (a) UCC-3 or other appropriate

 

25

termination statements, in form and substance satisfactory to Lender,
releasing all liens of the existing lenders upon any of the personal property
of Borrower, (b) cancellations and releases, in form and substance satisfactory
to Lender, releasing all liens of the existing lenders upon any of the Real
Estate, and (c) any other releases, terminations or other documents reasonably
required by Lender to evidence the payoff of Indebtedness owed to existing
lenders;

 

(x)                                   certified
copies of the articles of organization or other charter documents of Borrower
and each Subsidiary, together with certificates of good standing or existence,
as may be available from the Secretary of State of the jurisdiction of
organization of Borrower and each Subsidiary and each other jurisdiction where
Borrower or any Subsidiary is required to be qualified to do business as a
foreign entity;

 

(xi)                                a
certificate, substantially in the form of Exhibit 3.01(d)(xi), dated as
of the Closing Date and signed by an appropriate Responsible Officer, attaching
and certifying copies of the operating agreement, bylaws or similar documents,
and appropriate resolutions authorizing the execution, delivery and performance
of the Loan Documents and certifying the name, title and the signature of each officer
executing the Loan Documents.

 

(xii)                             a
favorable written opinion of counsel to Borrower, addressed to Lender,
substantially in the form of Exhibit 3.01(d)(xii), dated as of the
Closing Date and covering such matters relating to Borrower, the Loan Documents
and the transactions contemplated therein as Lender shall reasonably request;

 

(xiii)                          a
certificate, substantially in the form of Exhibit 3.01(d)(xiii), dated
the Closing Date and signed by an appropriate Responsible Officer, confirming
compliance with the conditions set forth in paragraphs (a), (b) and (c) of Section 3.02;

 

(xiv)                         duly
executed Draw Requests, if applicable;

 

(xv)                            a
report setting forth the sources and uses of funds to be expended in connection
with the Project;

 

(xvi)                         certified
copies of all material consents, approvals, authorizations, registrations and
filings and orders required or advisable to be made or obtained under any
requirement of law or by any material contractual obligation of Borrower, in
connection with the Project or operation of Borrower’s business, including the
production of ethanol and by-products thereof, and such consents, approvals,
authorizations, registrations, filings and orders shall be in full force and
effect and all applicable waiting periods shall have expired;

 

(xvii)                      certificates
of insurance, in form, substance and detail acceptable to Lender (and in any
event as required pursuant to the Mortgage), describing the types and amounts
of insurance (property and liability) carried by Borrower, in each case naming
Lender as loss payee or additional insured, as the case may be, together with a
lender’s loss payable endorsement in form and substance satisfactory to Lender;

 

(xviii)                   copies
of Borrower’s audited financial statements as of its most recent fiscal year
end and internally prepared financial statements as of the last day of the
calendar

 

26

 

quarter immediately preceding the Closing Date, each in form and
substance satisfactory to Lender; and

 

(xix) a certificate, substantially in the form of Exhibit
3.01(d)(xix), dated the Closing Date and signed by an appropriate
Responsible Officer, confirming the solvency of Borrower before and after
giving effect to all transactions contemplated by the Loan Documents, together
with (A) the Projections, and (B) a pro forma balance sheet for Borrower as of
the Closing Date.

 

(e) Borrower shall have entered into Off-Take Contracts, satisfactory
to Lender, sufficient to sell or dispose of a majority of the products and
by-products to be produced by Borrower (as contemplated following Construction
Completion).

 

Section 3.02  Each
Loan.  The obligation of Lender to make a Loan on the occasion of
any Borrowing is subject to the satisfaction of the following conditions:

 

(a)                                  at
the time of and immediately after giving effect to such Borrowing, no Default
or Event of Default shall exist; and

 

(b)                                 all
representations and warranties of Borrower set forth in the Loan Documents
shall be true and correct in all material respects on and as of the date of
such Borrowing before and after giving effect thereto;

 

(c)                                  since
the date of the most recent financial statements of Borrower described in Section 5.01(a),
there shall have been no change which has had or could reasonably be expected
to result in a Material Adverse Effect;

 

(d)                                 with
respect to a Revolving Borrowing, Lender shall have received the Revolving
Credit Note, duly executed and payable to the order of Lender in the amount of
$1,500,000; and

 

(e)                                  Lender
shall have received such other documents, certificates, information or legal
opinions as Lender may reasonably request, all in form and substance reasonably
satisfactory to Lender.

 

Each Borrowing shall be deemed to constitute a representation and
warranty by Borrower on the date thereof as to the satisfaction of the matters
specified in paragraphs (a), (b) and (c) of this Section 3.02.

 

Section 3.03  Each
Construction Loan.  In addition to the conditions set forth in Sections
3.01 and 3.02, the obligation of Lender to make a Construction and
Term Loan, (a) on the occasion of any Construction Borrowing, is subject to the
satisfaction of the each of the conditions set forth in the Disbursing
Agreement, which is hereby incorporated herein by reference, and (b) on the
occasion of the first Construction Borrowing, is conditioned upon (i)
Borrower’s securing Utility Contracts necessary or important for operation of
Borrower’s plant, equipment, offices, as determined by Lender in its sole
discretion, and (ii) Lender’s receipt of evidence acceptable to Lender,
including presentation of lien waivers and other receipts of payment acceptable
to Lender and the escrow agent acting pursuant to the Disbursing Agreement,
that Borrower has theretofore paid Construction Costs in an amount not less than
the

 

27

 

sum of (x) the aggregate amount of estimated Construction Costs stated
in the Sworn Construction Cost Statement, minus (y) the amount of the
Construction and Term Loan Commitment. Each Construction Draw Request shall be
deemed to constitute a representation and warranty by Borrower on the date
thereof as to the satisfaction of the conditions set forth in the Disbursing
Agreement.

 

Section 3.04  Delivery
of Documents.  All of the Loan Documents, certificates, legal
opinions and other documents and papers referred to in this Article III
shall be delivered to Lender unless otherwise specified, and shall be in form,
substance and detail satisfactory in all respects to Lender.

 

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

 

Borrower represents and warrants to Lender, as of the Closing Date and
the date of each Borrowing as follows:

 

Section 4.01  Existence;
Power.  Borrower and each Subsidiary (i) are duly organized,
validly existing and in good standing as a corporation, partnership or limited
liability company, as the case may be, in each case under the laws of the
jurisdiction of its organization, (ii) have all requisite power and authority
to carry on their businesses as now conducted, and (iii) have duly qualified to
do business, and are in good standing, in each jurisdiction where such
qualification is required, except where a failure to be so qualified could not
reasonably be expected to result in a Material Adverse Effect.

 

Section 4.02  Organizational
Power; Authorization.  The execution, delivery and performance by
Borrower of the Loan Documents to which it is a party are within its
organizational powers and have been duly authorized by all necessary
organizational, and if required, member action. This Agreement has been duly
executed and delivered by Borrower, and constitutes, and each other Loan
Document to which Borrower is a party, when executed and delivered by Borrower,
will constitute, valid and binding obligations of Borrower, enforceable against
it in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws
affecting the enforcement of creditors’ rights generally and by general
principles of equity.

 

Section 4.03  Governmental
Approvals; No Conflicts.  The execution, delivery and performance
by Borrower of this Agreement, (a) does not require any consent or approval of,
registration or filing with, or any action by, any Governmental Authority,
except those as have been obtained or made and are in full force and effect or
where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, (b) will not
violate any applicable law or regulation or the charter, by-laws or other
organizational documents of Borrower or any of its Subsidiaries or any order of
any Governmental Authority, (c) will not violate or result in a default under
any indenture, material agreement or other material instrument binding on
Borrower or any of its Subsidiaries or any of its assets or give rise to a
right thereunder to require any payment to be made by Borrower or any

 

28

 

of its Subsidiaries and (d) will not result in the creation or
imposition of any Lien on any asset of Borrower or any of its Subsidiaries,
except Liens (if any) created under the Loan Documents.

 

Section 4.04  Financial
Statements.  Borrower has furnished to Lender copies of
Borrower’s (a) audited financial statements (consistent with the requirements
of Section 5.01(a)) as of its most recent fiscal year end and (b)
internally prepared financial statements (consistent with the requirements of Section 5.01(b))
as of the last day of the most recent month. Such financial statements fairly
present the financial condition of Borrower and its Subsidiaries as of such
dates and the results of operations for such periods in conformity with GAAP
consistently applied, subject to year end audit adjustments and the absence of
footnotes. Since the date of such financial statements, there have been no
changes with respect to Borrower and its Subsidiaries which have had or could
reasonably be expected to have, singly or in the aggregate, a material adverse
effect on the business, results of operations, financial condition, assets,
liabilities or prospects of Borrower and its Subsidiaries taken as a whole.

 

Section 4.05  Litigation
and Environmental Matters.

 

(a)                                  No
litigation, investigation or proceeding of or before any arbitrators or
Governmental Authorities is pending against or, to the knowledge of Borrower,
threatened against or affecting Borrower or any of its Subsidiaries (i) as to
which there is a reasonable possibility of an adverse determination that could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect or (ii) which in any manner draws into question the
validity or enforceability of this Agreement or any other Loan Document.

 

(b)                                 Except
for the matters set forth on Schedule 4.05, neither Borrower nor
any Subsidiary (i) has failed to comply with any Environmental Law or to
obtain, maintain or comply with any permit, license or other approval required
under any Environmental Law, including without limitation, all permits, licenses
and approvals required by the state of Iowa, (ii) has become subject to any
Environmental Liability, (iii) has received notice of any claim with respect to
any Environmental Liability or (iv) knows of any basis for any Environmental
Liability.

 

Section 4.06  Compliance
with Laws and Agreements.  Borrower and each Subsidiary is in
compliance with (a) all applicable laws, rules, regulations and orders of any
Governmental Authority, and (b) all indentures, agreements or other instruments
(including but not limited to the Material Contracts) binding upon it or its
properties, except where non-compliance, either singly or in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect.
Borrower has obtained all Permits necessary or appropriate related to the
present stage of construction of the Project.

 

Section 4.07  Investment
Company Act, Etc.  Neither Borrower nor any Subsidiary is (a) an
“investment company”, as defined in, or subject to regulation under, the
Investment Company Act of 1940, as amended, (b) a “holding company” as defined
in, or subject to regulation under, the Public Utility Holding Company Act of
1935, as amended, or (c) otherwise subject to any other regulatory scheme
limiting its ability to incur debt.

 

29

 

Section 4.08  Taxes.
Borrower and its Subsidiaries and each other Person for whose taxes
Borrower or any Subsidiary could become liable have timely filed or caused to
be filed all Federal income tax returns and all other material tax returns that
are required to be filed by any of them, and have paid all taxes shown to be
due and payable (or with respect to real estate taxes, have paid all taxes
prior to the time the same become delinquent) on such returns or on any assessments
made against it or its property and all other taxes, fees or other charges
imposed on it or any of its property by any Governmental Authority, except (i)
to the extent the failure to do so would not have a Material Adverse Effect or
(ii) where the same are currently being contested in good faith by appropriate
proceedings and for which Borrower or such Subsidiary, as the case may be, has
set aside on its books adequate reserves. The charges, accruals and reserves on
the books of Borrower and its Subsidiaries in respect of such taxes are
adequate, and no tax liabilities that could be materially in excess of the
amount so provided are anticipated.

 

Section 4.09  Margin
Regulations.  None of the proceeds of any of the Loans will be
used, 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.

 

Section 4.10  ERISA.
No ERISA Event has occurred or is reasonably expected to occur that, when taken
together with all other such ERISA Events for which liability is reasonably
expected to occur, could reasonably be expected to result in a Material Adverse
Effect. The present value of all accumulated benefit obligations under each
Plan (based on the assumptions used for purposes of Statement of Financial
Standards No. 87) did not, as of the date of the most recent financial
statements reflecting such amounts, exceed the fair market value of the assets
of such Plan, and the present value of all accumulated benefit obligations of
all underfunded Plans (based on the assumptions used for purposes of Statement
of Financial Standards No. 87) did not, as of the date of the most recent
financial statements reflecting such amounts, exceed by more than $50,000 the
fair market value of the assets of all such underfunded Plans.

 

Section 4.11  Ownership
of Property.

 

(a)                                  Borrower
and each Subsidiary have good title to, or valid leasehold interests in, all of
their real and personal property material to the operation of their respective
businesses.

 

(b)                                 Borrower
and each Subsidiary own, or are licensed, or otherwise have the right, to use,
all patents, trademarks, service marks, tradenames, copyrights and other
intellectual property material to their respective businesses and the use
thereof by Borrower and any Subsidiary does not infringe on the rights of any
other Person, except for any such infringements that, individually or in the
aggregate, would not have a Material Adverse Effect.

 

Section 4.12  Disclosure.
Borrower has disclosed to Lender all agreements, instruments, and
corporate or other restrictions to which Borrower or any of Subsidiary is
subject, and all other matters known to any of them, 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 to Lender in

 

30

 

connection with the negotiation of 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,
taken as a whole, in light of the circumstances under which they were made, not
misleading.

 

Section 4.13  Labor
Relations.  There are no strikes, lockouts or other material
labor disputes or grievances against Borrower or any Subsidiary, or, to the
knowledge of Borrower, threatened against or affecting Borrower or any
Subsidiary, and no significant unfair labor practice, charges or grievances are
pending against Borrower or any Subsidiary, or to the knowledge of Borrower,
threatened against any of them before any Governmental Authority. All payments
due from Borrower or any Subsidiary pursuant to the provisions of any
collective bargaining agreement have been paid or accrued as a liability on the
books of Borrower or any such Subsidiary, except where the failure to do so
could not reasonably be expected to have a Material Adverse Effect.

 

Section 4.14  Subsidiaries.
As of the Closing Date, Borrower has no Subsidiaries and as of any
subsequent date, Borrower has no Subsidiaries other than those for which
Borrower has complied with the requirements of Section 5.10.

 

Section 4.15  Construction.
The exterior lines of the Improvements are, and at all times will
be, within the boundary lines of the Real Estate, and Borrower has examined and
is familiar with all applicable covenants, conditions, restrictions and
reservations and with all applicable requirements of all Governmental
Authorities, including without limitation, building codes and zoning,
environmental, hazardous substance, energy and pollution control laws,
ordinances and regulations affecting the Project.

 

Section 4.16  Projections.
The Projections fairly present Borrower’s reasonable forecast of the
most probable results of operations and changes in cash flows for the periods
covered thereby, based on the assumptions set forth therein, which assumptions
are reasonable based on historical experience and presently known facts. Since
the date of such Projections, there have been no changes with respect to
Borrower or its Subsidiaries which could reasonably be expected to result in,
singly or in the aggregate, a material discrepancy between such Projections and
Borrower’s actual results for the periods stated.

 

Section 4.17  Material
Contracts.  There are no Material Contracts other than the
License Agreement, the Process Guarantee, and those agreements and contracts
disclosed to Lender pursuant to this Section 4.17.

 

(a)                                  Management
Contracts. There are no agreements or contracts which are material
to the management of Borrower’s or any Subsidiary’s business other than those
listed on Schedule 4.17(a).

 

(b)                                 Supply
Contracts. There are no agreements or contracts which are material
to the provision or supply of inputs related to the operation of Borrower’s or
any Subsidiary’s business other than those listed on Schedule 4.17(b).

 

31

 

(c)                                  Off-Take
Contracts. There are no agreements or contracts which are material
to the sale or disposal of products or by-products produced by Borrower or any
Subsidiary other than those listed on Schedule 4.17(c).

 

(d)                                 Transportation
Contracts. There are no agreements or contracts related to the
provision of transportation or shipping services which are material to the
operation of Borrower’s or any Subsidiary’s business other than those listed on
Schedule 4.17(d).

 

(e)                                  Utility Contracts.
There are no agreements or contracts related to the provision of
water, electricity, natural gas, fuel oil, coal or other energy resources which
are material to the operation of Borrower’s or any Subsidiary’s business other
than those listed on Schedule 4.17(e).

 

Section 4.18  Permits.
Each Permit is listed on Schedule 4.18 including each
Permit in effect presently and those Permits to be obtained as necessary or
appropriate for operation of Borrower’s ethanol plant at maximum capacity in
accordance with the Construction Plans.

 

ARTICLE V.

AFFIRMATIVE COVENANTS

 

Borrower covenants and agrees that so long as Lender has a Commitment
hereunder, or the principal of and interest on any Loan or any fee remains
unpaid:

 

Section 5.01  Financial
Statements and Other Information.  The Borrower will deliver to
Lender:

 

(a)                                  as
soon as available and in any event (i) within 120 days after the end of each
fiscal year of Borrower, a copy of the annual audited report for such fiscal
year for Borrower and its Subsidiaries, containing a combined and combining
balance sheet of Borrower and its Subsidiaries as of the end of such fiscal
year and the related combined and combining statements of income, owners’
equity and cash flows (together with all footnotes thereto) of Borrower and its
Subsidiaries for such fiscal year, (ii) setting forth in comparative form the
figures for the previous fiscal year, all in reasonable detail and reported on
by Christianson & Associates, PLLP, Willmar, Minnesota, or other
independent public accountants acceptable to Lender (without a “going concern”
or like qualification, exception or explanation and without any qualification
or exception as to scope of such audit) to the effect that such financial
statements present fairly in all material respects the financial condition and
the results of operations of Borrower and its Subsidiaries, for such fiscal
year on a combined basis in accordance with GAAP and that the examination by
such accountants in connection with such combined financial statements has been
made in accordance with GAAP;

 

(b)                                 as
soon as available and in any event within 30 days after the end of each
calendar month, an unaudited combined balance sheet of Borrower and its
Subsidiaries as of the end of such calendar month and the related unaudited
combined statements of income, stockholder’s equity and cash flow of Borrower
and its Subsidiaries for such calendar month and the then elapsed portion of
such fiscal year, setting forth in each case in comparative form the figures
for the corresponding month and the corresponding portion of Borrower’s
previous fiscal year, all certified by an appropriate Responsible Officer of
Borrower as presenting fairly in all material

 

32

 

respects the financial condition and results of operations of Borrower
and its Subsidiaries on a combined basis in accordance with GAAP, subject to
normal year-end audit adjustments and the absence of footnotes;

 

(c)                                  concurrently
with the delivery of the financial statements referred to in clauses (a) and
(b) above, a certificate of a Responsible Officer, (i) certifying as to whether
there exists a Default or Event of Default on the date of such certificate, and
if a Default or an Event of Default then exists, specifying the details thereof
and the action which Borrower has taken or proposes to take with respect
thereto, (ii) setting forth in reasonable detail calculations demonstrating
compliance with Article VI, (iii) stating whether any change in
GAAP or the application thereof has occurred since the date of Borrower’s
audited financial statements referred to in Section 4.04 and, if
any change has occurred, specifying the effect of such change on the financial
statements accompanying such certificate, and (iv) attaching a production
report, certified as to accuracy, which sets forth pertinent information in
respect of the amount of ethanol produced and other information as Lender may
specify from time to time;

 

(d)                                 concurrently
with the delivery of the financial statements referred to in clause (a) above,
a certificate of the accounting firm that reported on such financial statements
stating whether they obtained any knowledge during the course of their
examination of such financial statements of any Default or Event of Default
(which certificate may be limited to the extent required by accounting rules or
guidelines);

 

(e)                                  promptly
upon Borrower obtaining notice or knowledge of any changes to the Sworn
Construction Cost Statement, revised sworn statements of estimated costs of the
Project, showing changes in or variations from the original Sworn Construction
Cost Statement in excess of $500,000 in the aggregate along with copies of all
material changes or modifications in the Construction Plans, contracts or
subcontracts for the Project prior to incorporation of any such change or
modification into the Project;

 

(f)                                    as
soon as Borrower has notice or knowledge thereof, a revised construction
schedule if and when any target date set forth therein has been delayed by
10 consecutive days or more, or when the aggregate of all such delays equals 30
or more days;

 

(g)                                 promptly
after the same become available, copies of all periodic and other reports, and
other materials distributed by Borrower to its members generally, or to any
Governmental Authority or national securities exchange, as applicable;

 

(h)                                 concurrently
with the delivery of the financial statements referred to in clause (a) above,
a copy of Borrower’s pro forma budget and business plan for the
subsequent fiscal year for Borrower and its Subsidiaries, containing a combined
and combining pro forma balance sheet of Borrower and its Subsidiaries as
of the end of such subsequent fiscal year and the related pro forma combined and
combining statements of income, owners’ equity and cash flows (together with
all footnotes thereto) of Borrower and its Subsidiaries for such subsequent
fiscal year; and

 

(i)                                     promptly
following any request therefor, such other information regarding the results of
operations, business affairs and financial condition of Borrower or any
Subsidiary as Lender may reasonably request.

 

33

 

Section 5.02  Notices
of Material Events.  Borrower will furnish to Lender prompt
written notice of the following:

 

(a)                                  the
occurrence of any Default or Event of Default;

 

(b)                                 the
filing or commencement of any action, suit or proceeding by or before any
arbitrator or Governmental Authority against or, to the knowledge of Borrower,
affecting Borrower or any Subsidiary which, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect;

 

(c)                                  the
occurrence of any event or any other development by which Borrower or any
Subsidiary (i) fails to comply with any Environmental Law or to obtain,
maintain or comply with any permit, license or other approval required under
any Environmental Law, (ii) becomes subject to any Environmental Liability,
(iii) receives notice of any claim with respect to any Environmental Liability,
or (iv) becomes aware of any basis for any Environmental Liability and in each
of the preceding clauses, which individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect;

 

(d)                                 the
occurrence of any ERISA Event that alone, or together with any other ERISA
Events that have occurred, could reasonably be expected to result in liability
of Borrower and its Subsidiaries in an aggregate amount exceeding $100,000; and

 

(e)                                  any
other development that results in, or could reasonably be expected to result
in, a Material Adverse Effect.

 

Each notice delivered under this Section shall be accompanied by a
written statement of a Responsible Officer setting forth the details of the
event or development requiring such notice and any action taken or proposed to
be taken with respect thereto.

 

Section 5.03  Existence;
Conduct of Business.  Borrower will, and will cause each
Subsidiary to, do or cause to be done all things necessary to preserve, renew
and maintain in full force and effect its legal existence and its respective rights,
licenses, permits, privileges, franchises, patents, copyrights, trademarks and
trade names material to the conduct of its business and will continue to engage
in the same business as presently conducted or such other businesses that are
reasonably related thereto.

 

Section 5.04  Compliance
with Laws, Etc.  Borrower will, and will cause each Subsidiary
to, comply with all laws, rules, regulations and requirements of any
Governmental Authority applicable to its properties, except where the failure
to do so, either individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. Borrower will cause all
exterior lines of the Improvements to be, at all times, within the boundary
lines of the Real Estate, and the Project and Improvements will in all respects
conform to and comply with all applicable covenants, conditions, restrictions
and reservations, and with all requirements of Governmental Authorities,
including, without limitation, all building codes and zoning, environmental,
hazardous substance, energy and pollution control laws, ordinances and
regulations affecting the Project and the Improvements.

 

34

 

Section 5.05  Payment
of Obligations.  Borrower will, and will cause each Subsidiary
to, pay and discharge at or before maturity, all of its obligations and
liabilities (including without limitation all tax liabilities and claims that
could result in a statutory Lien) before the same shall become delinquent or in
default, except where (a) the validity or amount thereof is being contested in
good faith by appropriate proceedings, (b) Borrower or such Subsidiary has set
aside on its books adequate reserves with respect thereto in accordance with
GAAP and (c) the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect.

 

Section 5.06  Books
and Records.  Borrower will, and will cause each Subsidiary to,
keep proper books of record and account in which full, true and correct entries
shall be made of all dealings and transactions in relation to its business and
activities to the extent necessary to prepare the combined financial statements
of Borrower in conformity with GAAP.

 

Section 5.07  Visitation,
Inspection, Audit, Etc.

 

(a)                                  Borrower
will, and will cause each Subsidiary to, permit any representative of Lender to
visit and inspect its properties (including, without limitation, the Real
Estate and Improvements), to conduct audits of the Collateral (including
without limitation all Accounts and Inventory and all records relating
thereto), to examine its books and records and to make copies and take extracts
therefrom, to review all change orders relating to the Project, to inspect all
work and materials relating to the Project for which payment is required, to
review all Notices of Borrowing, to submit progress inspection reports relating
to the Project, and to discuss its affairs, finances and accounts with any of
its officers and with its independent certified public accountants, all at such
reasonable times and as often as Lender, may reasonably request after
reasonable prior notice to Borrower; provided, if a Default or an Event
of Default has occurred and is continuing, no prior notice shall be required.
All reasonable expenses incurred by Lender in connection with any such visit,
inspection, audit, examination and discussions shall be borne by Borrower.

 

(b)                                 Borrower
will, and will cause each Subsidiary to, deliver to Lender such appraisals of
the Real Estate and other fixed assets of Borrower as Lender may reasonably
request at any time and from time to time, such appraisals to be conducted by
an appraiser, and in form and substance, reasonably satisfactory to Lender, in
each case conducted at the expense of Borrower if Lender requests such
appraisal in connection with a request for an accommodation, waiver or other
credit action by Borrower.

 

(c)                                  Notwithstanding
the foregoing, (i) neither Borrower nor any other Person shall have the right
to rely on the reports relating to the Project generated by Lender for any
purposes whatsoever, (ii) Borrower shall be responsible for making its own
inspections of the Project during the course of construction and shall satisfy
itself that the work performed and the materials furnished shall conform with
its contracts and (iii) by making Construction and Term Loans after inspections
of the Project by Lender, Lender shall not be deemed to have waived any Event
of Default, or the right to require the correction of construction defects or
to have acknowledged that the construction (as to quality or value of work
performed or material furnished) conforms with the Construction Plans.

 

35

 

Section 5.08  Maintenance
of Properties; Insurance.  Borrower will, and will cause each
Subsidiary to, (a) keep and maintain all property material to the conduct of
its business in good working order and condition, ordinary wear and tear except
where the failure to do so, either individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect and (b) maintain
with financially sound and reputable insurance companies, insurance with
respect to its properties and business, and the properties and business of its
Subsidiaries, against loss or damage of the kinds customarily insured against
by companies in the same or similar businesses operating in the same or similar
locations.

 

Section 5.09  Use of
Proceeds.  Borrower will use the proceeds of all Construction and
Term Loans to Pay the Construction Costs and to finance the Project. No part of
the proceeds of any Loan will be used, whether directly or indirectly, for any
purpose that would violate Regulation T, U or X of the Board. No part of the
proceeds of any Loan will be used, directly or indirectly, to fund start-up
working capital until such time as the Project is at least 80% complete.

 

Section 5.10  Subsidiaries.
If any Subsidiary is acquired or formed after the Closing Date,
Borrower will, within ten (10) business days after such Subsidiary is acquired
or formed, notify Lender and will cause such Subsidiary to execute a guarantee
of the Obligations, a joinder to the Security Agreement, and a joinder to such
other Security Documents as Lender shall require, each in form and substance
satisfactory to Lender, and will cause such Subsidiary to deliver
simultaneously therewith similar documents applicable to such Subsidiary
required under Section 3.01 as requested by Lender.

 

Section 5.11  Assignment
of Material Contracts.  Borrower shall notify Lender of any
Material Contract promptly upon entering into the same. Borrower agrees to
promptly execute and deliver to Lender such Collateral Assignments and take
such other actions as Lender may reasonably request to perfect Lender’s security
interest in Borrower’s rights under such Material Contracts. Borrower
authorizes Lender to file such Uniform Commercial Code financing statements
(and amendments to the same) and continuation statements as Lender may deem
necessary or appropriate from time to time to perfect Lender’s security
interest in such Material Contracts.

 

Section 5.12  Reserved.

 

Section 5.13  Shortfall.
Whenever Borrower determines, or receives written notice from
Lender, that the sum of the principal amount not yet advanced under the
Construction and Term Loan Commitment to pay Construction Costs are
insufficient to complete the Project, Borrower shall, within three days,
irrevocably deposit with Lender immediately available funds not less than such
insufficiency.

 

Section 5.14  Non-Liability
of Lender.  Borrower acknowledges and agrees that Lender assumes
no liability or responsibility for the sufficiency of the Construction and Term
Loans to complete the Project, for the protection, inspection or completion of
the Project, for the adequacy or accuracy of the Sworn Construction Cost
Statement, for any representations made by Borrower or for any action of
Borrower to be performed in the construction of the Project.

 

36

 

Section 5.15
Accounts.
Borrower will maintain all Deposit Accounts with Lender.

 

ARTICLE VI.

FINANCIAL COVENANTS

 

Borrower covenants and agrees that so long as Lender has a Commitment
hereunder, or the principal or interest on any Loan or any fee remains unpaid:

 

Section 6.01
Fixed
Charge Coverage Ratio.  On October 31, 2005, and at each
fiscal year end thereafter, Borrower will maintain a Fixed Charge Coverage
Ratio of not less than 1.15:1.0.

 

Section 6.02  Leverage
Ratio. On October 31, 2005, and at all times thereafter,
Borrower will maintain a ratio of (i) net worth to (ii) total assets of not
less than 0.4:1.0.

 

Section 6.03  Capital
Expenditures.  Borrower will not make Capital Expenditures in
excess of $500,000 during any fiscal year period following Construction Completion
without Lender’s prior written approval.

 

Section 6.04  Current
Ratio and Working Capital.  Borrower will maintain, on
October 31, 2005, and at all times thereafter, a ratio of current assets
to current liabilities of not less than 1.15:1.0 and working capital of at
least $1,500,000 on October 31, 2005, and at all times thereafter.

 

Section 6.05  Maximum
Debt to Net Worth Ratio.  Borrower will maintain, on
October 31, 2004 and at all times thereafter, a ratio of debt to Net Worth
of not more than 1.50:1.00.

 

Section 6.06  Minimum
Debt Service Ratio.  Borrower will maintain, on October 31,
2005, and at all times thereafter, a ratio of EBITDA to interest expense and
scheduled principal payments in respect of Total Debt of not less than
1.15:1.00.

 

Compliance with the financial covenants set forth in this Article VI
shall be determined based on financial statements dated as of the close of
business on the last day of the immediately preceding quarter for the related
period.

 

ARTICLE VII.

NEGATIVE COVENANTS

 

Borrower covenants and agrees that so long as Lender has a Commitment
hereunder or the principal of or interest on any Loan or any fee remains
unpaid:

 

Section 7.01  Indebtedness.
Borrower will not, and will not permit any of its Subsidiaries to,
create, incur, assume or suffer to exist any Indebtedness, except indebtedness
created pursuant to the Loan Documents;

 

37

 

Section 7.02  Negative
Pledge.  Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien on any of
its assets or property now owned or hereafter acquired, except:

 

(a)                                  Liens
created in favor of Lender pursuant to the Loan Documents; and

 

(b)                                 Permitted
Encumbrances.

 

Section 7.03  Fundamental
Changes.  Borrower will not, and will not permit any Subsidiary
to, engage in any business other than businesses of the type conducted by
Borrower and its Subsidiaries on the date hereof and businesses reasonably
related thereto.

 

Section 7.04  Investments,
Loans, Etc.  Borrower will not, and will not permit any
Subsidiary to, purchase, hold or acquire (including pursuant to any merger with
any Person that was not a wholly owned Subsidiary prior to such merger) 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, Guarantee any obligations of, or make
or permit to exist any investment or any other interest in, any other Person,
or purchase or otherwise acquire (in one transaction or a series of
transactions) any assets of any other Person that constitute a business unit,
or create or form any Subsidiary, except Borrower may make loans or advances to
employees, officers or directors of Borrower or any Subsidiary in the ordinary
course of business for travel, relocation and related expenses; provided,
however, that the aggregate amount of all such loans and advances may
not exceed $100,000 at any time.

 

Section 7.05  Restricted
Payments.  Borrower will not, and will not permit any Subsidiary
to, declare or make, or agree to pay or make, directly or indirectly, any
dividend or distribution on any class of its membership interests, or make any
payment on account of, or set apart assets for a sinking or other analogous
fund for, the purchase, redemption, retirement, defeasance or other acquisition
of, any membership interest or Indebtedness subordinated to the Obligations of
Borrower or any options, warrants, or other rights to purchase such common
stock or such Indebtedness, whether now or hereafter outstanding (each, a “Restricted
Payment”), except for (i) dividends or distributions
payable by Borrower solely in units of any class of its membership interests,
(ii) Restricted Payments made by any Subsidiary to Borrower (iii) dividends or
distributions which do not exceed, in the 12 month period following the date of
Construction Completion, 65% of Free Cash Flow; and (iv) dividends or
distributions which do not exceed, in the period following the one year
anniversary of the date of Construction Completion, 50% of Free Cash Flow; and provided
further, that no Restricted Payment shall be paid by Borrower if a
Default exists or would result from the payment of such Restricted Payment. Notwithstanding
anything to the contrary, so long as no Default has occurred and is continuing,
Borrower may distribute up to 65% of its Net Income for any fiscal year if
Borrower’s tangible assets to total debt exceeds (and will exceed following the
distribution) a ratio of 2:1.

 

Section 7.06  Sale of
Assets.  Borrower will not, and will not permit any Subsidiary
to, convey, sell, lease, assign, transfer or otherwise dispose of, any of its
assets, business or property, whether now owned or hereafter acquired, or, in
the case of any Subsidiary, issue or sell any shares of such Subsidiary’s
common stock to any Person other than Borrower (or to

 

38

 

qualify directors if required by applicable law), 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.

 

Section 7.07  Transactions
with Affiliates. Borrower will not, and will not permit any
Subsidiary to, 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 of its Affiliates, except (a) in the
ordinary course of business at prices and on terms and conditions not less
favorable to Borrower or such Subsidiary than could be obtained on an
arm’s-length basis from unrelated third parties in comparable transactions, (b)
transactions between Borrower and its wholly owned Subsidiaries not involving
any other Affiliates and (c) any Restricted Payment permitted by Section 7.05.

 

Section 7.08  Restrictive
Agreements.  Borrower will not, and will not permit any
Subsidiary to, directly or indirectly, enter into, incur or permit to exist any
agreement that prohibits, restricts or imposes any condition upon (a) the
ability of Borrower or any Subsidiary to create, incur or permit any Lien upon
any of its assets or properties, whether now owned or hereafter acquired, or
(b) the ability of any Subsidiary to pay dividends or other distributions with
respect to its common stock, to make or repay loans or advances to Borrower or
any other Subsidiary, to Guarantee Indebtedness of Borrower or any other
Subsidiary or to transfer any of its property or assets to Borrower or any
Subsidiary; provided, that (i) the foregoing shall not apply to
restrictions or conditions imposed by law or by this Agreement or any other
Loan Document, (ii) the foregoing shall not apply to customary restrictions and
conditions contained in agreements relating to the sale of a Subsidiary pending
such sale, provided such restrictions and conditions apply only to the
Subsidiary that is sold and such sale is permitted hereunder, (iii) clause (a)
shall not apply to restrictions or conditions imposed by any agreement relating
to secured Indebtedness permitted by this Agreement if such restrictions and
conditions apply only to the property or assets securing such Indebtedness, and
(iv) clause (a) shall not apply to customary provisions in leases restricting
the assignment thereof.

 

Section 7.09  Sale and
Leaseback Transactions.  Borrower will not, and will not permit
any Subsidiary to, enter into any arrangement, directly or indirectly, whereby
it shall sell or transfer 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.

 

Section 7.10  Lease
Obligations.  Borrower will not, and will not permit any
Subsidiary to, create or suffer to exist any obligations for the payment under
operating leases or agreements to lease (but excluding any obligations under
leases required to be classified as capital leases under GAAP) having a term of
five years or more which would cause the direct or contingent liabilities of
Borrower and its Subsidiaries under such leases or agreements to lease, on a
consolidated basis, to exceed $100,000 in the aggregate in any year.

 

Section 7.11  Hedging
Agreements.  Borrower will not, and will not permit any
Subsidiary to, enter into any Hedging Agreement, other than Hedging Agreements
entered into

 

39

 

in the ordinary course of business to hedge or mitigate risks to which
Borrower or any Subsidiary is exposed in the conduct of its business or the
management of its liabilities.

 

Section 7.12  Amendment
to Material Documents and Construction Plans.

 

(a)                                  Borrower
will not, and will not permit any Subsidiary to, amend, modify or waive any of
its rights under (i) its certificate of organization, operating agreement,
bylaws or other organizational documents, or (ii) any Material Contract.

 

(b)                                 Except
as allowed pursuant to Section 7.14, Borrower will not, and will
not permit any Subsidiary to, amend, modify, waive or consent to any change or
modification in the Construction Plans, contracts or subcontracts related to
the Project, and no work shall be performed with respect to any such change or
modification if such change or modification would, net of any cost reduction
resulting therefrom, increase the cost of the Project.

 

Section 7.13  Accounting
Changes.  Borrower will not, and will not permit any Subsidiary
to, make any significant change in accounting treatment or reporting practices,
except as required by GAAP, or change the fiscal year of Borrower or any
Subsidiary, except to change the fiscal year of a Subsidiary to conform its
fiscal year to that of Borrower.

 

Section 7.14  Construction.
Borrower will not, and will not permit any Subsidiary to, become a
party to any contract for the performance of any work related to the Project or
for the supplying of any labor, materials or services for the construction of
the Improvements that would have the effect of increasing the costs of the
Project more than $1,000,000 (in the aggregate with previous such cost
increases) above those set forth in the Sworn Construction Cost Statement,
except in such amounts and upon such terms and with such parties as shall be
approved in writing by Lender. No approval by Lender of any contract or change
order shall make Lender responsible for the adequacy, form or content of such
contract or change order. Borrower shall expeditiously complete and fully pay
for the development and construction of the Project in a good and workmanlike
manner and in accordance with the contracts, subcontracts and Construction
Plans submitted to Lender and in compliance with all applicable requirements of
all Governmental Authorities, and any covenants, conditions, restrictions and
reservations applicable thereto, so that Construction Completion occurs on or
before April 1, 2005. Borrower assumes full responsibility for the
compliance of the Construction Plans and the Project with all requirements of
all Governmental Authorities and with sound building and engineering practices,
and notwithstanding any approvals by Lender, Lender shall have no obligation or
responsibility whatsoever for the Construction Plans or any other matter
incident to the Project or the construction of the Improvements. Borrower shall
correct or cause to be corrected (a) any defect in the Improvements, (b) any departure
in the construction of the Improvements from the Construction Plans or any
requirements of any Governmental Authorities, and (c) any encroachment by any
part of the Improvements or any other structure located on the Real Estate on
any building line, easement, property line or restricted area. Borrower shall
cause all roads necessary for the utilization of the Improvements for their
intended purposes to be completed and dedicated (if dedication thereof is
required by any Governmental Authority), the bearing capacity of the soil on
the Real Estate to be made sufficient to support the Improvements, and
sufficient local utilities to be made available to the Project and installed at
costs (if any) set out in the Sworn Construction Cost Statement, on or before
April 1, 2005. No work may be performed

 

40

 

pursuant to any change order or pending change order to the
Construction Plans prior to delivery thereof to Lender.

 

Section 7.15  Deposit
and Investment Accounts.  Borrower will not, and will not permit
any Subsidiary to, maintain, deposit or invest funds into any Deposit Account
or Investment Account with any Person other than Lender; provided,  however,
that Borrower may maintain deposits of no more than $250,000 with State Bank of
Lawler, New Hampton, Iowa, so long as such deposits are in an account subject
to a control agreement acceptable to Lender.

 

ARTICLE VIII.

EVENTS OF DEFAULT

 

Section 8.01  Events
of Default.  If any of the following events (each an “Event of Default”) shall
occur:

 

(a)                                  Borrower
shall fail to pay any principal of any Loan when and as the same shall become
due and payable, whether at the due date thereof or at a date fixed for
prepayment or otherwise and such failure shall continue un-remedied for a
period of ten (10) days; or

 

(b)                                 Borrower
shall fail to pay any interest on any Loan or any fee or any other amount
(other than an amount payable under Section 8.01(a)) payable under
this Agreement or any other Loan Document, when and as the same shall become
due and payable, and such failure shall continue un-remedied for a period of
ten (10) days; or

 

(c)                                  any
representation or warranty made or deemed made by or on behalf of Borrower in
or in connection with this Agreement or any other Loan Document (including the
Schedules attached thereto) and any amendments or modifications hereof or
waivers hereunder, or in any certificate, report, financial statement or other
document submitted to Lender by Borrower or any representative of Borrower
pursuant to or in connection with this Agreement or any other Loan Document
shall prove to be incorrect when made or deemed made or submitted; or

 

(d)                                 Borrower
shall fail to observe or perform any covenant or agreement contained in Sections
5.01, 5.02, or 5.03 (with respect to Borrower’ existence) or Articles
VI or VII; or

 

(e)                                  Borrower
shall fail to observe or perform any covenant or agreement contained in this
Agreement (other than those referred to in clauses (a), (b) and (d) above) or
in any other Loan Document, and such failure shall remain unremedied for 30
days after the earlier of (i) any officer of Borrower becomes aware of such
failure, or (ii) notice thereof shall have been given to Borrower by Lender; or

 

(f)                                    any
default or event of default (after giving effect to any grace period) shall
have occurred and be continuing under any Loan Document or Material Contract;
or

 

(g)                                 Borrower
or any Subsidiary (whether as primary obligor or as guarantor or other surety)
shall fail to pay any principal of or premium or interest on any Material
Indebtedness that

 

41

 

is outstanding, when and as the same shall become due and payable
(whether at scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace period,
if any, specified in the agreement or instrument evidencing such Indebtedness;
or any other event shall occur or condition shall exist under any agreement or
instrument relating to such Indebtedness and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such event or condition is to accelerate, or permit the
acceleration of, the maturity of such Indebtedness; or any such Indebtedness
shall be declared to be due and payable; or required to be prepaid or redeemed
(other than by a regularly scheduled required prepayment or redemption),
purchased or defeased, or any offer to prepay, redeem, purchase or defease such
Indebtedness shall be required to be made, in each case prior to the stated
maturity thereof; or

 

(h)                                 Borrower
or any Subsidiary shall (i) commence a voluntary case or other proceeding or
file any petition seeking liquidation, reorganization or other relief under any
federal, state or foreign bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a custodian, trustee,
receiver, liquidator or other similar official of it or any substantial part of
its property, (ii) consent to the institution of, or fail to contest in a
timely and appropriate manner, any proceeding or petition described in clause
(i) of this Section 8.01(h), (iii) apply for or consent to the
appointment of a custodian, trustee, receiver, liquidation or other similar
official for Borrower or any such Subsidiary or for a substantial part of its
assets, (iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (v) make a general assignment for the
benefit of creditors, or (vi) take any action for the purpose of effecting any
of the foregoing; or

 

(i)                                     an
involuntary proceeding shall be commenced or an involuntary petition shall be
filed seeking (i) liquidation, reorganization or other relief in respect of
Borrower or any Subsidiary or its debts, or any substantial part of its assets,
under any federal, state or foreign bankruptcy, insolvency or other similar law
now or hereafter in effect or (ii) the appointment of a custodian, trustee,
receiver, liquidator or other similar official for Borrower or any Subsidiary
or for a substantial part of its assets, and in any such case, such proceeding
or petition shall remain undismissed for a period of 60 days or an order or
decree approving or ordering any of the foregoing shall be entered; or

 

(j)                                     Borrower
or any Subsidiary shall become unable to pay, shall admit in writing its
inability to pay, or shall fail to pay, its debts as they become due; or

 

(k)                                  an
ERISA Event shall have occurred that, in the opinion of the Lender, when taken
together with other ERISA Events that have occurred, could reasonably be
expected to result in liability to Borrower and its Subsidiaries in an
aggregate amount exceeding $100,000; or

 

(1) any judgment or order for the payment of money in excess of $250,000
in the aggregate shall be rendered against Borrower or any Subsidiary, and
either (i) such judgment or order is final and enforcement proceedings shall
have been commenced by any creditor upon such judgment or order, or (ii) there
shall be a period of 30 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall not
be in effect; or

 

42

 

(m)                               any
non-monetary judgment or order shall be rendered against Borrower or any
Subsidiary that could reasonably be expected to have a Material Adverse Effect,
and there shall be a period of 30 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or

 

(n)                                 a
Change in Control shall occur or exist;

 

(o)                                 the
failure of Construction Completion to occur on or before April 1, 2005; or

 

(p)                                 any
event which could reasonably be expected to result in a Material Adverse Effect
shall occur and be continuing;

 

then, and in every such event (other than an event described in clause
(h) or (i) of this Section) and at any time thereafter during the continuance
of such event, Lender may, by notice to Borrower, take any or all of the
following actions, at the same or different times: (i) terminate the
Commitments, whereupon the Commitments shall terminate immediately; (ii)
declare the principal of and any accrued interest on the Loans, and all other
Obligations owing hereunder, to be due and payable, whereupon the same shall
become due and payable immediately, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by Borrower and (iii)
exercise all remedies contained in any other Loan Document or as otherwise
provided by law; and that, if an Event of Default specified in either clause
(h) or (i) shall occur, the Commitments shall automatically terminate and the
principal of the Loans then outstanding, together with accrued interest thereon,
and all fees, and all other Obligations shall automatically become due and
payable, without presentment, demand, protest or other notice of any kind, all
of which are hereby waived by Borrower.

 

Upon the occurrence of an Event of Default prior to Construction
Completion, and at any time thereafter during the continuance of such event,
Lender may, in addition to remedies set forth in the preceding paragraph, 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 or cause to be completed the Project, at the cost and
expense of Borrower. If Lender elects to complete or cause to be completed the
Project, it may do so according to the Construction Plans or according to such
changes, alterations or modifications in and to the Construction Plans as
Lender may deem appropriate; and Lender may enforce or cancel all contracts let
by Borrower relating to construction and installation of the Improvements
and/or let other contracts which in Lender’s sole judgment it may deem
advisable; and Borrower shall forthwith turn over and duly assign to Lender, as
Lender may from time to time require, contracts relating to construction and
installation of the Improvements, the Construction Plans, 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 shall be liable
under this Agreement to pay to Lender, on demand, any amount or amounts
expended by Lender in so completing the Project, together with any costs,
charges, or expenses incident thereto or resulting therefrom, all of which shall
be secured by the Security Documents. In the event that a proceeding is
instituted against Borrower for recovery and reimbursement of any moneys
expended by Lender in connection with the completion of the Project, a
statement of such expenditures, verified by the affidavit of an officer of
Lender, shall be prima facie evidence of the amounts so expended and of the

 

43

 

propriety of and necessity for such expenditures; and the burden of
proving to the contrary shall be upon Borrower. Lender shall have the right to
apply the undisbursed amount of the Construction and Term Loan Note to bring
about the completion of the Project and to pay the costs thereof; and if such
funds are insufficient, in the sole judgment of Lender, to complete the
Project, Borrower agrees to promptly deliver and pay to Lender such sum or sums
of money as Lender may from time to time demand for the purpose of completing
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, or for
the purpose of completing the Project. It is expressly understood and agreed
that in no event shall Lender be obligated or liable in any way to complete the
Project or to pay for the costs of construction thereof.

 

ARTICLE IX.

MISCELLANEOUS

 

Section 9.01  Notices.

 

Except in the case of notices and other communications expressly
permitted to be given by telephone, all notices and other communications to any
party herein to be effective shall be in writing and shall be delivered by hand
or overnight courier service, mailed by certified or registered mail or sent by
telecopy, as follows:

 

	
  To Borrower:

  	
  Golden Grain Energy, LLC

  
	
   

  	
  Attention: Stan Laures

  
	
   

  	
  951 North Linn Avenue, P.O. Box 435

  New Hampton, Iowa 50659

  
	
   

  	
  Facsimile No. (641)
  394-2431

  
	
   

  	
   

  
	
  With a Copy to:

  	
  Bill Hanigan, Esq.

  
	
   

  	
  Brown, Winick, Graves, Gross P.L.C.

  
	
   

  	
  666 Grand Avenue, Suite 2000

  
	
   

  	
  Des Moines, Iowa 50309

  
	
   

  	
  Facsimile No. (515)
  283-0231

  
	
   

  	
   

  
	
  To the Lender:

  	
  Home Federal Savings Bank

  
	
   

  	
  Attention: Eric Oftedahl

  
	
   

  	
  Post Office Box 6947

  
	
   

  	
  1016 Civic Center Drive N.W.

  
	
   

  	
  Rochester, Minnesota 55903-6947

  Facsimile
  No. (507) 252-7178

  

 

Any party hereto may change its address or telecopy number for notices
and other communications hereunder by notice to the other parties hereto. All
such notices and other communications shall, when transmitted by overnight
delivery, or faxed, be effective when delivered for overnight (next-day)
delivery, or transmitted in legible form by facsimile machine, respectively, or
if mailed, upon the third Business Day after the date deposited into the mails
or

 

44

 

if delivered, upon delivery; provided, that notices delivered to Lender
shall not be effective until actually received by such Person at its address
specified in this Section 9.01.

 

Any agreement of Lender herein to receive certain notices by telephone
or facsimile is solely for the convenience and at the request of Borrower.
Lender shall be entitled to rely on the authority of any Person purporting to
be a Person authorized by Borrower to give such notice and Lender shall not
have any liability to Borrower or other Person on account of any action taken
or not taken by Lender in reliance upon such telephonic or facsimile notice.
The obligation of Borrower to repay the Loans and all other Obligations
hereunder shall not be affected in any way or to any extent by any failure of
Lender to receive written confirmation of any telephonic or facsimile notice or
the receipt by Lender of a confirmation which is at variance with the terms
understood by Lender to be contained in any such telephonic or facsimile
notice.

 

Section 9.02  Waiver;
Amendments.

 

(a)                                  No
failure or delay by Lender in exercising any right or power hereunder or any
other Loan Document, and no course of dealing between Borrower and Lender,
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power or any abandonment or discontinuance of steps to
enforce such right or power, preclude any other or further exercise thereof or
the exercise of any other right or power hereunder or thereunder. The rights
and remedies of Lender hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies provided by law. No
waiver of any provision of this Agreement or any other Loan Document or consent
to any departure by Borrower therefrom shall in any event be effective unless
the same shall be permitted by paragraph (b) of this Section, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. Without limiting the generality of the foregoing, the
making of a Loan shall not be construed as a waiver of any Default or Event of
Default, regardless of whether Lender may have had notice or knowledge of such
Default or Event of Default at the time.

 

(b)                                 No
amendment or waiver of any provision of this Agreement or the other Loan
Documents, nor consent to any departure by Borrower therefrom, shall in any
event be effective unless the same shall be in writing and signed by Borrower
and Lender and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.

 

Section 9.03  Indemnification.

 

(a) The Borrower shall indemnify Lender against, and hold Lender
harmless from, any and all costs, losses, liabilities, claims, damages and
related expenses, including the fees, charges and disbursements of any counsel
for Lender, which may be incurred by or asserted against Lender arising out of,
in connection with or as a result of (i) the execution or delivery of this
Agreement or any other agreement or instrument contemplated hereby, the
performance by the parties hereto of their respective obligations hereunder or
the consummation of any of the transactions contemplated hereby, (ii) any Loan
or any actual or proposed use of the proceeds therefrom, (iii) any actual or
alleged presence or release of Hazardous Materials on or from any property
owned by Borrower or any Subsidiary or any Environmental Liability related in
any way to Borrower or any Subsidiary or (iv) any actual or prospective claim,
litigation,

 

45

 

investigation or proceeding relating to any of the foregoing, whether
based on contract, tort or any other theory and regardless of whether any
Lender is a party thereto; provided, that Borrower shall not be
obligated to indemnify Lender for any of the foregoing arising out of Lender’s
gross negligence or willful misconduct as determined by a court of competent
jurisdiction in a final and nonappealable judgment.

 

Section 9.04  Successors
and Assigns.

 

(a)                                  The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, except that
Borrower may not assign or transfer any of its rights hereunder without the
prior written consent of Lender (and any attempted assignment or transfer by
Borrower without such consent shall be null and void).

 

(b)                                 Lender
may at any time assign to one or more assignees all or a portion of its rights
and obligations under this Agreement and the other Loan Documents (including
all or a portion of its Commitment and the Loans at the time owing to it).

 

(c)                                  Lender
may at any time, without the consent of Borrower, sell participations to one or
more banks or other entities (a “Participant”) in all or a
portion of Lender’s rights and obligations under this Agreement (including all
or a portion of its Commitment and the Loans owing to it); provided,
that (i) Lender’s obligations under this Agreement shall remain unchanged, (ii)
Borrower shall continue to deal solely and directly with Lender in connection
with Lender’s rights and obligations under this Agreement and the other Loan
Documents. Borrower agrees that each Participant shall be entitled to the
benefits of Section 2.18 to the same extent as if it were the
Lender hereunder and had acquired its interest by assignment pursuant to
paragraph (b).

 

(d)                                 Lender
may at any time pledge or assign a security interest in all or any portion of
its rights under this Agreement and the Notes without complying with this
Section; provided, that no such pledge or assignment shall release Lender
from any of its obligations hereunder or substitute any such pledgee or
assignee for Lender as a party hereto.

 

Section 9.05  Governing
Law; Jurisdiction; Consent to Service of Process.

 

(a)                                  This
Agreement and the other Loan Documents (except as otherwise provided in such
other Loan Documents) shall be construed in accordance with and be governed by
the law (without giving effect to the conflict of law principles thereof) of
the State of Minnesota.

 

(b)                                 Borrower
hereby irrevocably and unconditionally submits, for itself and its property, to
the non-exclusive jurisdiction of the United States District Court of the
District of Minnesota, and of any state court of the State of Minnesota located
in Olmsted County and any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or any other Loan
Document or the transactions contemplated hereby or thereby, or for recognition
or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in such Minnesota state court
or, to the extent permitted by applicable law, such Federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit

 

46

 

on the judgment or in any other manner provided by law. Nothing in this
Agreement or any other Loan Document shall affect any right that Lender may
otherwise have to bring any action or proceeding relating to this Agreement or
any other Loan Document against Borrower or its properties in the courts of any
jurisdiction.

 

(c) Borrower irrevocably and unconditionally waives any objection which
it may now or hereafter have to the laying of venue of any such suit, action or
proceeding described in paragraph (b) of this Section and brought in any
court referred to in paragraph (b) of this Section. Each of the parties hereto
irrevocably waives, to the fullest extent permitted by applicable law, the
defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.

 

Section 9.06  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) CERTIHES 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.

 

Section 9.07  Right of
Setoff.  In addition to any rights now or hereafter granted under
applicable law and not by way of limitation of any such rights, Lender shall
have the right, at any time or from time to time upon the occurrence and during
the continuance of an Event of Default, without prior notice to Borrowers, any
such notice being expressly waived by Borrower to the extent permitted by
applicable law, to set off and apply against all deposits (general or special,
time or demand, provisional or final) of Borrower at any time held or other
obligations at any time owing by Lender to or for the credit or the account of
Borrower against any and all Obligations held by Lender, irrespective of
whether Lender shall have made demand hereunder and although such Obligations
may be unmatured. Lenders agree promptly to notify the Lender and Borrower
after any such set-off and any application made by Lender; provided,
that the failure to give such notice shall not affect the validity of such
set-off and application.

 

Section 9.08  Counterparts;
Integration.  This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument. This Agreement and the other Loan
Documents constitute the entire agreement among the parties hereto and thereto
regarding the subject matters hereof and thereof and supersede all prior
agreements and understandings, oral or written, regarding such subject matters.

 

47

 

Section 9.09  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 shall be considered to have been relied upon
by Lender and shall survive the execution and delivery of this Agreement and
the making of any Loans, 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 Default or incorrect representation or warranty at the time
any credit is extended hereunder, and shall continue in full force and effect
as long as the principal of or any accrued interest on any Loan or any fee or
any other amount payable under this Agreement is outstanding and unpaid and so
long as the Commitments have not expired or terminated. The provisions of Sections
2.18, and 9.03 shall survive and remain in full force and effect
regardless of the consummation of the transactions contemplated hereby, the
repayment of the Loans, and the Commitments or the termination of 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 shall survive the execution and delivery of this
Agreement and the other Loan Documents, and the making of the Loans.

 

Section 9.10  Severability.
Any provision of this Agreement or any other Loan Document held to
be illegal, invalid or unenforceable in any jurisdiction, shall, 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 shall
not invalidate or render unenforceable such provision in any other jurisdiction.

 

Section 9.11  Confidentiality.
Lender agrees to take normal and reasonable precautions to maintain
the confidentiality of any information designated in writing as confidential
and provided to it by Borrower or any Subsidiary, except that such information
may be disclosed (i) to any Affiliate, participant or advisor of Lender,
including without limitation accountants, legal counsel and other advisors, provided
that Lender shall have taken reasonable steps to assure that such Affiliates,
participants, and advisors will maintain such information in confidence to the
same extent required of Lender hereunder, (ii) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process,
(iii) to the extent requested by any regulatory agency or authority, (iv) to
the extent that such information becomes publicly available other than as a
result of a breach of this Section 9.11, or which becomes available
to Lender of any of the foregoing on a nonconfidential basis from a source
other than Borrower, (v) in connection with the exercise of any remedy
hereunder or any suit, action or proceeding relating to this Agreement or the
enforcement of rights hereunder, and (ix) subject to provisions substantially
similar to this Section 9.11, to any actual or prospective assignee
or Participant, or (vi) with the consent of Borrower. Any Person required to
maintain the confidentiality of any information as provided for in this
Section shall be considered to have complied with its obligation to do so
if such Person has exercised the same degree of care to maintain the
confidentiality of such information as such Person would accord its own
confidential information.

 

Section 9.12  Interest
Rate Limitation.  Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together
with all fees, charges and other amounts which may be treated as interest on
such Loan under applicable law (collectively, the “Charges”), shall exceed the maximum lawful
rate of interest (the “Maximum

 

48

 

Rate”) which
may be contracted for, charged, taken, received or reserved by Lender in
accordance with applicable law, the rate of interest payable in respect of such
Loan hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section shall be cumulated and the
interest and Charges payable to Lender in respect of other Loans or periods
shall be increased (but not above the Maximum Rate therefor) until such
cumulated amount, together with interest thereon at the Maximum Rate to the
date of repayment, shall have been received by Lender.

 

Section 9.13  Inspections.
Borrower shall be responsible for making inspections of the Real
Estate and the Improvements during the course of construction and shall
determine to its own satisfaction that the work done or materials supplied by
the contractors to whom payment is to be made out of each Construction Draw
Request has been properly done or supplied in accordance with the applicable
contracts with such contractors. If any work done 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 its authorized representative may conduct such inspections of the
Real Estate and the Improvements as it may deem necessary for the protection of
Lender’s interest, and, specifically, the Inspecting Architect may, at the
option of Lender and at the expense of Borrower, conduct such periodic
inspections, prepare such written progress reports during the period of
construction and prepare such written reports upon completion of the Project,
as Lender may request. Any inspections which may be made by Lender or its
representative will be made, and all certificates issued by Lender’s
representative will be issued, solely for the benefit and protection of Lender,
and Borrower will not rely thereon.

 

Section 9.14  Termination.
Upon satisfaction of all of Borrower’s obligations hereunder and the
related documents and instruments, Lender shall (a) mark the Notes “PAID” and
return the same to Borrower, and (b) release its security interests and file
appropriate documentations of the same.

 

Section 9.15
Waiver. To the extent permitted by applicable
law, Borrower shall not assert, and Borrower hereby waives, any claim against
Lender, on any theory of liability, for special, indirect, consequential or
punitive damages (as opposed to actual or direct damages) arising out of, in
connection with or as a result of, this Agreement or any agreement or
instrument contemplated hereby, the transactions contemplated therein, any Loan
or the use of proceeds thereof.

 

 

[Signature Page Follows]

 

49

 

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

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  GOLDEN GRAIN ENERGY, LLC

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Walter Wendland

  
	
   

  	
   

  	
  Name:

  	
  Walter Wendland

  
	
   

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  HOME FEDERAL
  SAVINGS BANK

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Eric Offedahl

  
	
   

  	
   

  	
  Name:

  	
  Eric Offedahl

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
						

 

-Signature Page-

 

 

Schedule 4.05

Environmental Matters

 

 

-None-

 

4.05 - 1

 

Schedule 4.17(a)

Management Contracts

 

 

-None-

 

4.17(a) - 1

 

Schedule 4.17(b)

Supply Contracts

 

 

-None-

 

4.17(b) - 1

 

Schedule 4.17(c)

Off-Take Contracts

 

 

-None-

 

4.17(c) - 1

 

Schedule 4.17(d)

Transportation Contracts

 

 

-None-

 

4.17(d) - 1

Schedule 4.17(e)

 

Utility
Contracts

 

1.                                       Electric Service
Agreement dated August 13, 2003 by and between Interstate Power and Light
Company and Borrower.

 

2.                                       Natural Gas
Transportation Agreement dated October 23, 2003, by and between Interstate
Power and Light Company and Borrower.

 

4.17(e) - 1

 

Schedule 4.18

Permits

 

	
  Date

  	
   

  	
  Permit/Task

  	
   

  	
  Company/

  Department

  	
   

  	
  RESOLUTION

  	
   

  	
  Permit

  Number

  	
   

  	
  Tom

  Drzvcims

  	
   

  	
   

  
	
  11/26/2002

  	
   

  	
  County Zoning-Siting Facility

  	
   

  	
  Cerro Gordo County

  	
   

  	
  2—60

  	
   

  	
  300534

  	
   

  	
  Ok’d

  	
   

  	
   

  
	
  11/26/2002

  	
   

  	
  County Zoning - Special Use Flammable  Materials

  	
   

  	
  Cerro Gordo County

  	
   

  	
  2—61

  	
   

  	
  300535

  	
   

  	
  Ok’d

  	
   

  	
   

  
	
  11/26/2002

  	
   

  	
  County Zoning — Height

  	
   

  	
  Cerro Gordo County

  	
   

  	
  2—60

  	
   

  	
  300534

  	
   

  	
  Ok’d

  	
   

  	
  Granted by  County

  
	
  4/24/2003

  	
   

  	
  County Entrance Permit

  	
   

  	
  Cerro Gordo County

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11/27/2002

  	
   

  	
  Storm Water NPDES for Construction Activities
  (IDNR)

  	
   

  	
  IDNR

  	
   

  	
   

  	
   

  	
  General Permit No. 2

  	
   

  	
  yes

  	
   

  	
   

  
	
  6/13/2003

  	
   

  	
  Air Quality Construction Permit (IDNR) Listed
  below

  	
   

  	
  IDNR

  	
   

  	
   

  	
   

  	
  03-A-600 thru

  03-A-612

  	
   

  	
  yes

  	
   

  	
   

  

 

	
  Source

  	
   

  	
  Description

  	
   

  	
  Control

  	
   

  	
  IDNR Permit #

  	
   

  	
  Action

  
	
  EP S10

  	
   

  	
  Dryers/Distillation/Boiler

  	
   

  	
  Thermal  Oxidizer

  	
   

  	
  03-A-600

  	
   

  	
  Issue

  
	
  EP S15

  	
   

  	
  Grain Unloading

  	
   

  	
  Baghouse

  	
   

  	
  03-A-601

  	
   

  	
  Issue

  
	
  EP S30

  	
   

  	
  Hammermill

  	
   

  	
  Baghouse

  	
   

  	
  03-A-602

  	
   

  	
  Issue

  
	
  EP S40

  	
   

  	
  Fermentation

  	
   

  	
  Scrubber

  	
   

  	
  03-A-603

  	
   

  	
  Issue

  
	
  EP S70

  	
   

  	
  DDGS Cooler Cyclone

  	
   

  	
  None

  	
   

  	
  03-A-603

  	
   

  	
  Issue

  
	
  EP S90

  	
   

  	
  DDGS Loading

  	
   

  	
  Baghouse

  	
   

  	
  03-A-605

  	
   

  	
  Issue

  
	
  EP 11

  	
   

  	
  Biomethanator

  	
   

  	
  Flare

  	
   

  	
  03-A-606

  	
   

  	
  Issue

  
	
  EP 22

  	
   

  	
  Product Loadout

  	
   

  	
  Flare

  	
   

  	
  03-A-607

  	
   

  	
  Issue

  
	
  EP T61

  	
   

  	
  Ethanol Storage Tank

  	
   

  	
  Int. Floating  Roof

  	
   

  	
  03-A-608

  	
   

  	
  Issue

  
	
  EP T62

  	
   

  	
  Ethanol Storage Tank

  	
   

  	
  Int. Floating  Roof

  	
   

  	
  03-A-609

  	
   

  	
  Issue

  
	
  EP T63

  	
   

  	
  Ethanol Storage Tank

  	
   

  	
  Int. Floating  Roof

  	
   

  	
  03-A-610

  	
   

  	
  Issue

  
	
  EP T64

  	
   

  	
  Denaturant Storage  Tank

  	
   

  	
  Int. Floating  Roof

  	
   

  	
  03-A-611

  	
   

  	
  Issue

  
	
  EP T65

  	
   

  	
  Ethanol Storage Tank

  	
   

  	
  Int. Floating  Roof

  	
   

  	
  03-A-612

  	
   

  	
  Issue

  

 

	
  Permits Yet to be Received

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Public Water Supply System Construction Permit (IDNR)

  	
   

  	
  Shouldn’t be needed due to water supply source chosen by GGE (i.e.
  City)

  
	
   

  	
   

  	
   

  
	
  County Zoning Permits (All Structures)

  	
   

  	
  Process Bldg and DDGS storage permit already obtained. Many yes

  
	
   

  	
   

  	
   

  
	
  Wastewater (Non-contact cooling water) NPDES - (INDR)

  	
   

  	
  This will take a year

  
	
   

  	
   

  	
   

  
	
  Private Wastewater Treatment (County/IDNR)

  	
   

  	
  Will receive in 6 - months to a year 

  
	
   

  	
   

  	
   

  
	
  Production Well Permit (IDNR)

  	
   

  	
  county permit. Within 6 months

  
	
   

  	
   

  	
   

  
	
  Water Withdrawal Permit (IDNR)

  	
   

  	
  Approximately 1 year out

  
	
   

  	
   

  	
   

  
	
  Public Water Supply Operation Permit (IDNR)

  	
   

  	
  Shouldn’t be needed due to water supply source chosen by GGE (i.e.
  City)

  
	
   

  	
   

  	
   

  
	
  Storm Water NPDES for Operation (IDNR)

  	
   

  	
  Approximately 1 year out

  

 

A - 1

 

EXHIBIT A

CONSTRUCTION
AND TERM LOAN NOTE

 

	
  $32,000,000

  	
   

  	
  Rochester, Minnesota

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  , 2004

  

 

FOR VALUE RECEIVED, the undersigned, Golden Grain Energy, LLC, an Iowa
limited liability company (“Borrower”), hereby promises to pay to Home Federal
Savings Bank (together with any subsequent holder hereof, “Lender”) or its successors and assigns, at
Post Office Box 6947, 1016 Civic Center Drive N.W., Rochester, Minnesota
55903-6947, (i) on the Maturity Date (as defined in the Credit Agreement dated
as of                       ,
2004 (as the same may be amended, restated, supplemented or otherwise modified
from time to time, the “Credit Agreement”), between Borrower and Lender, the
principal sum of Thirty Two Million and No/100 Dollars ($32,000,000.00) or so
much of the Construction and Term Loans (as defined in the Credit Agreement) as
shall be advanced by Lender to Borrower pursuant to the Credit Agreement, and
(ii) on each date specified in the Credit Agreement prior to the Maturity Date,
the principal amount of the Construction and Term Loans payable to Lender on
such date as specified therein, in lawful money of the United States of America
in immediately available funds, and to pay interest from the date hereof on the
principal amount thereof from time to time outstanding, in like funds, at said
office, at the rate or rates per annum and payable on such dates as provided in
the Credit Agreement. In addition, should legal action or an attorney-at-law be
utilized to collect any amount due hereunder, Borrower further promises to pay
all costs of collection, including the reasonable attorneys’ fees of Lender.

 

Borrower promises to pay Default Interest (as defined in the Credit
Agreement), on demand, on the terms and conditions set forth in the Credit
Agreement.

 

All borrowings evidenced by this Construction and Term Loan Note and
all payments and prepayments of the principal hereof and the date thereof shall
be recorded by Lender in its internal records; provided, that the
failure of Lender to make such a notation or any error in such notation shall
not affect the obligations of the Borrowers to make the payments of principal
and interest in accordance with the terms of this Construction and Term Loan
Note and the Credit Agreement.

 

This Construction and Term Loan Note is issued in connection with, and
is entitled to the benefits of, the Credit Agreement which, among other things,
contains provisions for the acceleration of the maturity hereof upon the
happening of certain events, and for the amendment or waiver of certain
provisions of the Credit Agreement, all upon the terms and conditions therein
specified.

 

THIS CONSTRUCTION LOAN NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF MINNESOTA AND ANY APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.

 

	
   

  	
  GOLDEN GRAIN
  ENERGY, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
							

 

A - 1

 

EXHIBIT B

REVOLVING CREDIT NOTE

 

	
  $1,500,000

  	
   

  	
  Rochester, Minnesota

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  , 20    

  

 

FOR VALUE RECEIVED, the undersigned, Golden Grain Energy, LLC, an Iowa
limited liability company (“Borrower”), hereby promises to pay to Home Federal
Savings Bank (together with any subsequent holder hereof, “Lender”) or its successors and assigns, at
Post Office Box 6947, 1016 Civic Center Drive N.W., Rochester, Minnesota
55903-6947 on the Revolving Commitment Termination Date (as defined in the
Credit Agreement dated as
of                                                  ,
2004 (as the same may be amended, restated, supplemented or otherwise modified
from time to time, the “Credit Agreement”), between Borrower and Lender, the
lesser of the principal sum of One Million Five Hundred Thousand Dollars
($1,500,000) or so much thereof as shall be advanced by Lender to Borrower
pursuant to the Credit Agreement, in lawful money of the United States of
America in immediately available funds, and to pay interest from the date
hereof on the principal amount thereof from time to time outstanding, in like
funds, at said office, at the rate or rates per annum and payable on such dates
as provided in the Credit Agreement. In addition, should legal action or an
attorney-at-law be utilized to collect any amount due hereunder, Borrower
further promises to pay all costs of collection, including the reasonable
attorneys’ fees of Lender.

 

Borrower promises to pay Default Interest (as defined in the Credit
Agreement), on demand, on the terms and conditions set forth in the Credit
Agreement.

 

All borrowings evidenced by this Revolving Credit Note and all payments
and prepayments of the principal hereof and the date thereof shall be recorded
by Lender in its internal records; provided, that the failure of Lender
to make such a notation or any error in such notation shall not affect the
obligations of Borrower to make the payments of principal and interest in
accordance with the terms of this Revolving Credit Note and the Credit
Agreement.

 

This Revolving Credit Note is issued in connection with, and is entitled
to the benefits of, the Credit Agreement which, among other things, contains
provisions for the acceleration of the maturity hereof upon the happening of
certain events, for prepayment of the principal hereof prior to the maturity
hereof and for the amendment or waiver of certain provisions of the Credit
Agreement, all upon the terms and conditions therein specified. THIS REVOLVING
CREDIT NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF MINNESOTA AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

 

 

	
   

  	
  GOLDEN GRAIN
  ENERGY, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
							

 

B - 1

 

EXHIBIT 2.03

CONSTRUCTION DRAW REQUEST

[Date]

 

Home Federal Savings Bank

Post Office Box 6947

1016 Civic Center Drive N.W.

Rochester, Minnesota 55903-6947

 

Attention:

 

Dear Sir:

 

Reference is made to the Credit Agreement dated as
of                         ,
2004 (as may have been amended and in effect on the date hereof, the “Credit
Agreement”), between the undersigned, as Borrower and Home Federal Savings Bank
as Lender. Terms defined in the Credit Agreement are used herein with the same
meanings. This notice constitutes a Construction Draw Request, and Borrower
hereby requests a Construction Borrowing under the Credit Agreement, and in
that connection Borrower specifies the following information with respect to
the Construction Borrowing requested hereby:

 

(A)                              Principal
amount of Construction Borrowing:

 

(B)                                Date
of Construction Borrowing (which is a Business Day)

 

Attached hereto are each of the documents requested by Lender in
support of satisfaction of the requirements specified in Sections 7, 8 and 9
(as applicable) of the Disbursing Agreement.

 

The Borrower hereby represents and warrants that the conditions
specified in Section 3.02 and 3.03 of the Credit Agreement are satisfied.

 

	
   

  	
   

  	
  Very truly yours,

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GOLDEN GRAIN ENERGY, LLC

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
							

1 Not less than $100,000.

 

2.03 - 1

 

EXHIBIT 2.06

REVOLVING DRAW REQUEST

 

[Date]

 

Home Federal Savings Bank

Post Office Box 6947

1016 Civic Center Drive N.W.

Rochester, Minnesota 55903-6947

 

Attention:

 

Dear Sir:

 

Reference is made to the Credit Agreement dated as
of                                      ,
2004 (as amended and in effect on the date hereof, the “Credit Agreement”), between the undersigned,
as Borrower, and Home Federal Savings Bank as Lender. Terms defined in the
Credit Agreement are used herein with the same meanings. This notice
constitutes a Revolving Draw Request, and Borrower hereby requests a Revolving
Borrowing under the Credit Agreement, and in that connection Borrower certifies
the following information with respect to the Revolving Borrowing requested
hereby:

 

(A)                              Aggregate
principal amount of Revolving Borrowings:

 

(B)                                Date
of Revolving Borrowing (which is a Business Day):

 

(C)                                The
aggregate amount of receivables outstanding in Eligible Accounts is
$                as
of the date hereof.

 

(D)                               The
aggregate value of Eligible Inventory is
$                    
as of the date hereof.

 

Borrower hereby represents and warrants that the conditions specified
in Section 3.02 of the Credit Agreement are satisfied.

 

	
   

  	
   

  	
  Very truly yours,

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  GOLDEN GRAIN
  ENERGY, LLC

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
							

1 Not less than $100,000 and an integral multiple of $100,000.

 

2.06- 1

 

EXHIBIT 3.01(d)(xi)

FORM OF SECRETARY’S CERTIFICATE

 

Reference is made to the Credit Agreement dated as
of                                          ,
2004 (the “Credit Agreement”), by and between Golden Grain Energy, LLC (“Borrower”) and Home
Federal Savings Bank (“Lender”). Terms defined in the Credit Agreement are
used herein with the same meanings. This certificate is being delivered
pursuant to Section 3.01(d)(xi) of the Credit Agreement.

 

I,                                 ,
the                           of
Borrower, DO HEREBY CERTIFY that:

 

(a)                                  no
proceeding have been instituted or are pending or contemplated with respect to
the dissolution, liquidation or sale of all or substantially all the assets of
Borrower or threatening its existence or the forfeiture or any of its
organizational rights;

 

(b)                                 annexed
hereto as Exhibit A is a true and correct copy of the Articles of
Organization of Borrower as in effect on                              ,
2003 and at all times thereafter through the date hereof;

 

(c)                                  annexed
hereto as Exhibit B is a true and correct copy of the Operating
Agreement of Borrower as in effect on                                            ,
2003 and at all times thereafter through the date hereof;

 

(d)                                 annexed
hereto as Exhibit C is a true and correct copy of the unanimous written
consent of the board of managers of Borrower, which consent is the only consent
adopted by the board of managers of Borrower or any committee thereof relating
to the Credit Agreement and the other Loan Documents to which Borrower is a
party and the transactions contemplated therein and have not been revoked,
amended, supplemented or modified and are in full force and effect on the date
hereof; and

 

3.01(d)(xi) - 1

 

(e) each of the persons named below is and has been at all times since [date] a
duly elected and qualified officer of Borrower holding the respective office
set forth opposite his or her name and the signature set forth opposite of each
such person is his or her genuine signature:

 

	
  Name

  	
   

  	
  Title

  	
   

  	
  Specimen
  Signature

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

IN WITNESS WHEREOF, I have hereunto signed my name this
       day of
                                              ,
2004.

 

 

	
   

  	
   

  	
  [Title]

  	
   

  	
   

  

 

I,
                                      ,
the                                 of
Borrower, do hereby certify that [                ]
has been duly elected, is duly qualified and is the
                                    
of Borrower, that the signature set forth above is [his/her] genuine signature
and that [he/she] has held such office at all times since [  ].

 

IN WITNESS WHEREOF, I have hereunto signed my name this         day
of
                                              ,
2004.

 

 

	
   

  	
   

  	
  [Title]

  	
   

  	
   

  

 

3.01(d)(xi) - 2

 

Exhibit
A

Articles of Organization

 

3.01(d)(xi) - 3

 

Exhibit
B

Operating Agreement

 

3.01(d)(xi) - 4

 

Exhibit
C

Board of Managers’ Consent

 

3.01(d)(xi) - 5

 

EXHIBIT  3.01(d)(xii)

 

FORM
OF  OPINION  OF  BORROWER’S  COUNSEL

[Letterhead of Counsel]

 

                     ,
2004

 

Home Federal Savings Bank

Post Office Box 6947

1016 Civic Center Drive N.W.

Rochester, Minnesota 55903-6947

 

Re:                               Credit Agreement (the
“Credit Agreement”) dated as of
                                            ,
2004, between Golden Grain Energy, LLC, as Borrower and Home Federal Savings
Bank, as Lender.

 

Ladies and Gentlemen:

 

This opinion is furnished pursuant to Section 3.01(d)(xviii) of
the Credit Agreement. Terms used herein which are defined in the Credit
Agreement shall have the respective meanings set forth or referred to in the
Credit Agreement unless otherwise defined herein.

 

We have acted as counsel for Golden Grain Energy, LLC, an Iowa limited
liability company (“Borrower”), in connection with the preparation,
negotiation, execution and delivery of the Credit Agreement and each of the
documents described in Part I of Exhibit  A hereto (the “Credit
Documents”), each of the documents described in Part H of Exhibit  A
(the “Real Estate Documents”), all UCC-1 Financing Statements naming Borrower
as debtor and Lender as secured party, describing the Collateral covered by the
Security Agreement or any Collateral Assignment (the “Financing Statements”)
and all UCC-1 Financing Statements naming Borrower as debtor and Lender as
secured party, describing the Collateral covered by the Mortgage (the “Fixture
Financing Statements”).

 

In connection with our opinion we have examined the Credit Documents,
the Real Estate Documents, the Financing Statements and the Fixture Financing
Statements (collectively, the “Opinion Documents”), the other documents and
certificates executed in connection therewith, the company proceedings of the
members of Borrower, and the corporate minutes of Coop. We have also examined
originals or copies, certified or otherwise identified to our satisfaction, of
such documents, records, certificates of public officials and other instruments
and have conducted such other investigations of fact and law as we have deemed
necessary or advisable for purposes of this opinion.

 

3.01(d)(xii) - 1

 

We have assumed the genuineness of all signatures (other than those on
behalf of the Borrower) on, and authenticity of, all documents submitted to us
as originals and the conformity to original documents of all documents
submitted to us as copies.

 

Based on the foregoing, we are of the opinion that:

 

1.                                       Borrower
(i) is a limited liability company duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its organization, and (ii)
has the power and authority and the legal right to own and operate its property
and to conduct its business.

 

2.                                       Borrower
has the power and authority to execute, deliver and perform the Opinion
Documents to which it is a party and has taken all necessary corporate or other
organizational action to authorize the execution, delivery and performance of
the Opinion Documents to which it is a party.

 

3.                                       No
consent, approval or authorization of, or registration or filing with, any
Person (including, without limitation, any Governmental Authority) is required
in connection with the execution, delivery or performance by any Loan Party of
the Opinion Documents or in connection with the operation of Borrower’s ethanol
plant as contemplated pursuant to the Construction Plans, other than such
consents, authorizations or filings which have been made or obtained.

 

4.                                       Borrower
has duly executed and delivered the Opinion Documents to which it is a party,
and the Credit Documents constitute, legal, valid and binding obligations of
Borrower, enforceable against it in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting the enforcement of creditors’ rights
generally and by general principles of equity.

 

5.                                       The
execution, delivery and performance by Borrower of the Opinion Documents to
which it is a party will not (i) violate the articles of organization or the operating
agreement of Borrower, (ii) violate any law applicable to Borrower, (iii)
insofar as known to us, violate any determination of an arbitrator or a court
or other Governmental Authority applicable to Borrower, (iv) cause a breach or
default under any contractual obligation of Borrower, or (v) result in the
creation or imposition of any Lien on any of the property or revenues of
Borrower.

 

6.                                       To
the best of our knowledge, no litigation, investigations or proceedings of or
before any Governmental Authority are pending or threatened by or against
Borrower, or against any of its respective properties or revenues, existing or
future (a) with respect to any Opinion Document or any of the transactions
contemplated thereby, or (b) which, if adversely determined, would reasonably
be expected to have a Material Adverse Effect.

 

7.                                       Borrower
is not an “investment company” or a company “controlled” by an “investment
company” (as each of the quoted terms is defined or used in the Investment
Company Act of 1940, as amended). Borrower is not subject to regulation under
the Public Utility Holding Company Act of 1935, the Federal Power Act, or any
foreign, federal or local statute or regulation limiting its ability to incur
indebtedness for money borrowed, guarantee

 

3.01(d)(xii) - 2

 

such indebtedness, or pledge its assets to secure such indebtedness, as
contemplated by any Opinion Document.

 

8.                                       Assuming
the proceeds of the Loans are used solely for the purposes set forth in the
Credit Agreement, the proceeds of the Loans will not be used for any purpose
which violates, or which would be inconsistent or not in compliance with, the
provisions of the applicable Margin Regulations.

 

9.                                       The
rates of interest and the fees provided for in the Credit Agreement and the
description thereof provided in the Credit Agreement and the Notes do not
violate any laws of the State of Iowa relating to interest and usury, and will
not violate any such law by virtue of any fluctuations in any base, prime,
index or equivalent rate or rates on which interest charges may be based under
such agreements.

 

10.                                 Under
the laws of the State of Iowa, the Credit Documents will be governed by the
internal laws, and not the law of conflicts, of the State of Minnesota,
including all such laws relating to interest and usury.

 

11.                                 The
provisions of the Security Agreement and the Collateral Assignments are
sufficient to grant to Lender, a security interest in all right, title and
interest of the Borrower in those items and types of Collateral in which a
security interest may be created under Article 8 or Article 9 of the
UCC. To the extent that Borrower has rights in the “Collateral” described in
the Security Agreement and the Collateral Assignments and to the extent that
such Collateral consists of types of items of property in which a security
interest may be perfected by the filing of financing statements in the State of
Iowa , such security interests will be duly perfected by the filing of the
Financing Statements in the offices of the Secretary of State of Iowa.

 

12.                                 The
offices and records described in Schedule I are the only offices and
records of the State of Iowa which must be searched to determine if there are
any Uniform Commercial Code financing statements or judgment, tax,
environmental or ERISA Liens of record against Borrower.

 

13.                                 No
taxes, including, without limitation, intangible or documentary stamp taxes,
mortgage taxes, transfer taxes or similar charges, are payable to the State of
Iowa or to any jurisdiction therein on account of the execution or delivery of
the Opinion Documents, or the creation of the indebtedness evidenced or secured
by any of the Opinion Documents, or the recording or filing of any of the
Opinion Documents, except for nominal filing or recording fees.

 

14.                                 The
Mortgage, upon due recordation in the office of [the county recorder] in
County, Iowa, shall constitute in favor of Lender, a valid and continuing lien
on the property described therein as security for the Obligations and shall be
enforceable in accordance with their terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency and other
similar laws, and equity principles of general application, relating to or
affecting the enforcement of creditors’ rights generally.

 

15.                                 The
forms of acknowledgment attached to the Mortgage are satisfactory for use in
the State of Iowa, and upon execution and delivery of the Mortgage, the
Mortgage will be in a form

 

3.01(d)(xii) - 3

 

suitable for recordation in the office of [the county recorder] in
Cerro Gordo County, Iowa, without any further affidavit, County Clerk
certificate, certified resolutions or other certificates.

 

16.                                 The
Mortgage, the Financing Statements and the Fixture Financing Statements conform
to all requirements of the laws of the State of Iowa, and the Mortgage contains
substantially all of the remedial, waiver and other provisions normally
contained in mortgages, deeds of trust and assignment of leases and rents used
in connection with transactions of the type and value described in the Credit
Agreement.

 

17.                                 The
Mortgage, upon execution and delivery, shall constitute valid and enforceable
security agreements with respect to the personal property described therein
under the Uniform Commercial Code as adopted in the State of Iowa, and, upon
the recordation in the office of [the county recorder] in Cerro Gordo County,
Iowa, will be effective as a fixture financing statement.

 

18.                                 To
the extent that Borrower has rights in the personal property and fixtures
described in the Mortgage and to the extent that such personal property
consists of types or items of property in which a security interest may be
perfected by filing or recording of financing statements or fixture financing
statements in the State of Iowa, such security interests will be duly perfected
by the filing or recording of the Fixture Financing Statements in the office of
the Secretary of State of Iowa and in the real estate records of Cerro Gordo
County, Iowa.

 

19.                                 The
Lender has the power to exercise the remedies available under the Mortgage, the
Security Agreement, the Collateral Assignments and the Control Agreement for
the realization of any collateral described thereunder in its own name.
Enforcement of the remedies provided in the Mortgage, the Security
Agreement,-the Collateral Assignments and the Control Agreement will not
deprive Lender of its right to seek a deficiency judgment nor will it limit
Lender’s right to foreclose on other collateral securing the obligations
described therein until such obligations have been paid and performed in full.

 

20.                                 The
State of Iowa has no state “superlien” law pursuant to which a lien against the
properties encumbered by the Mortgage could arise after the recordation of the
Mortgage and the Fixture Financing Statements as a result of a violation of the
environmental laws or regulations of the State of Iowa and be superior to the
liens created by the Mortgage. No environmental law or regulation of the State
of Iowa would require any remedial or removal action or certification of
non-applicability as a condition to the granting of the Mortgage, foreclosure
or other enforcement of the Mortgage or the sale of any of the property
encumbered by the Mortgage and foreclosed upon by Lender.

 

We are admitted to practice in the State of Iowa, and we express no
opinion as to matters under or involving the laws of any jurisdiction other
than Federal laws and the laws of the State of Iowa and their political
subdivisions.

 

This opinion has been delivered solely for the benefit of Lender, its
counsel, and their permitted successors and assigns under the Credit Agreement,
and may not be relied upon by any other person or entity or for any other
purpose without the express written permission of the undersigned.

 

Very truly yours,

 

 

3.01(d)(xii) - 4

 

EXHIBIT
A

 

I.                                         Credit
Documents

 

1.                                       Credit Agreement
between Borrower and Lender dated as of the date hereof.

 

2.                                       Revolving Credit
Note by Borrower in favor of Lender dated as of the date hereof.

 

3.                                       Construction
Note by Borrower in favor of Lender dated as of the date hereof.

 

4.                                       Security
Agreement between Borrower and Lender dated as of the date hereof.

 

5.                                       The following
Collateral Assignments by Borrower in favor of Lender dated as of the date
hereof:

 

II.                                     Real
Estate Documents

 

1.                                       Future Advance
Mortgage and Security Agreement and Fixture Financing Statement and Assignment
of Leases and Rents, Mortgage - Collateral Real Estate Mortgage by Borrower in
favor of Lender dated as of the date hereof.

 

2.                                       Disbursing
Agreement between the Escrow Company, Borrower and Lender dated as of the date
hereof.

 

3.01(d)(xii) - 5

 

SCHEDULE I

 

3.01(d)(xii) - 6

 

EXHIBIT 3.01(d)(xiii)

FORM OF OFFICER’S CERTIFICATE

 

 

Reference is made to the Credit Agreement dated as of
                      ,
2004 (the “Credit Agreement”), by and between Golden Grain Energy, LLC (“Borrower”) and Home
Federal Savings Bank (“Lender”). Terms defined in the Credit Agreement are
used herein with the same meanings. This certificate is being delivered
pursuant to Section 3.01(d)(xiii) of the Credit Agreement.

 

I,                                   ,
the                                      of
Borrower, DO HEREBY CERTIFY that:

 

(a)                                  the
representations and warranties of Borrower set forth in the Credit Agreement
are true and correct on and as of the date hereof; and

 

(b)                                 no
Default or Event of Default has occurred and is continuing at the date hereof;
and

 

(c)                                  since  , which is the date of the most recent
financial statements described in Section 5.01(a) of the Credit Agreement,
there has been no change which has had or could reasonably be expected to have
a Material Adverse Effect.

 

IN WITNESS WHEREOF, I have hereunto signed my name this
         day of
                         ,2004.

 

 

[Name]

[Title]

 

3.01(d)(xiii) - 1

 

EXHIBIT 3.01(d)(xix)

CERTIFICATE REGARDING SOLVENCY

 

The undersigned, as a Responsible Officer familiar with the financial
condition, business and affairs of Golden Grain Energy, LLC, an Iowa limited
liability company (“Borrower”) hereby
gives this certificate to induce Home Federal Savings Bank (“Lender”) to consummate certain financial
accommodations with Borrower pursuant to the terms of the Credit Agreement,
dated as of the date hereof, between Borrower and Lender (the “Credit Agreement”). Capitalized
terms used herein and not otherwise defined herein shall have the meanings
ascribed to such terms in the Credit Agreement.

 

The undersigned hereby certifies that:

 

1.                                       He
is the President of Borrower’s Board of Managers and is authorized and
empowered to issue this certificate for and on behalf of Borrower;

 

2.                                       He
is familiar with the business and financial affairs of Borrower, including,
without limiting the generality of the foregoing, the transactions contemplated
by the Credit Agreement and the other Loan Documents and all of the matters
hereinafter described.

 

3.                                       He
has reviewed the Independent Auditor’s Report
dated                ,
Balance Sheets dated
                    ,
Statements of Operations dated
                       ,
and Statement of Changes in Members’ Equity for
          , which are
attached hereto as Exhibit  A, and the Balance Sheet (unaudited)
dated September 30, 2003, Statements of Operations (unaudited) dated
September 30, 2003, Statements of Changes in Members’ Equity (unaudited)
dated September 30, 2003, and Statements of Cash Flows (unaudited) dated
September 30, 2003, of Borrower which are attached hereto as Exhibit
B, respectively; and he is familiar with the process through which the
Projections and the financial statements were generated.

 

4.                                       The
financial statements attached as Exhibits  A  and  B
fairly presents the financial condition of Borrower, and no material adverse
change has occurred in Borrower’s financial condition, operations or prospects
since the dates of such financial statements.

 

5.                                       On
and as of the date hereof, both before and after giving effect to the
consummation of the transactions contemplated by the Credit Agreement and the
other Loan Documents, Borrower (i) is and will be Solvent (as defined below);
(ii) is and will continue to be able to pay its debts as they mature; and (iii)
has and will continue to have capital sufficient (and will not be left with
unreasonably small capital) to conduct its business and all businesses in which
it is engaged. “Solvent” means that (x) Borrower will have assets with a
present fair saleable value greater than the amount of its total liabilities
(including contingent liabilities);

 

3.01(d)(xix) - 1

 

(y) the sum of Borrower’s assets at book value exceeds the sum of its
debts; and (z) on Borrower’s balance sheet, the sum of its assets exceeds the
sum of its liabilities. In making this statement, the undersigned has
considered the current and anticipated future capital requirements of Borrower
for the current and currently anticipated future conduct of the business of
Borrower, based upon presently known facts.

 

6.                                       The
transactions contemplated by the Credit Agreement and the other Loan Documents
are not being entered into with an intent on the part of Borrower to hinder,
delay or defraud its present or future creditors. In making this statement the
undersigned has considered the current and anticipated future capital
requirements of Borrower for the current and currently anticipated future
conduct of the business of Borrower, based upon presently known facts.

 

7.                                       The
Credit Agreement and the other Loan Documents are being entered into by
Borrower in good faith, and the obligations incurred thereunder and the
security interests granted thereunder were incurred and granted in exchange for
fair equivalent value.

 

8.                                       Borrower
does not intend to incur, nor does it believe it will incur, debts beyond its
ability to pay as such debts mature.

 

9.                                       All
trade and other accounts payable of Borrower are being paid in accordance with
their terms, and the consummation of the transactions contemplated under the
Credit Agreement and other Loan Documents to occur on the Closing Date will not
impair the ability of Borrower to pay its trade and other accounts payable in
accordance with their terms.

 

10.                                 Borrower
does not contemplate filing a petition in bankruptcy or for reorganization
under the federal Bankruptcy Code, nor does the undersigned have any knowledge
of any threatened bankruptcy or insolvency proceedings against Borrower.

 

11.                                 The
undersigned hereby acknowledges that Lender has relied upon the statements
contained herein, and consents to such reliance.

 

IN WITNESS WHEREOF, the undersigned has executed this certificate in
his aforesaid capacity this        day
of
                          ,
2004.

 

 

	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  President, Golden Grain Energy, LLC

  
					

 

3.01(d)(xix) - 2

 

Exhibit
A

 

 

3.01(d)(xix) - 3

 

Exhibit
B

 

 

3.01(d)(xix) - 4Exhibit
10.2

 

AGREEMENT

 

THIS AGREEMENT, effective
as of December 31, 2003, by and between Golden Grain Energy, LLC, an Iowa
limited liability company (“Seller”), and Commodity Specialists Company, a
Delaware corporation (“Buyer”).

 

WITNESSETH:

 

WHEREAS, Seller desires
to sell and Buyer desires to purchase the Distiller’s Dried Grains with
Solubles (“DDGS”), Wet Distillers Grains (“WDG”) and Modified Wet Distillers
Grains (“MW DG”) (hereinafter DDGS, WDG and MWDG are referred to as “Products”)
output of the ethanol production plant which Seller owns in Mason City, Iowa;
and

 

WHEREAS, Seller and Buyer
wish to agree in advance of such sale and purchase to the price formula,
payment, delivery and other terms thereof in consideration of the mutually
promised performance of the other;

 

NOW, THEREFORE, in
consideration of the promises and the mutual covenants and conditions herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by both parties, it is hereby
agreed:

 

1.                                       BUYER
PERFORMANCE. Buyer agrees to perform the services that it provides for
Seller in a professional and competent manner.

 

2.                                       PURCHASE
AND SALE. Seller agrees to sell to Buyer and Buyer agrees to purchase from
Seller the entire output of Products from Seller’s plant at Mason City, Iowa.
(hereinafter the “Plant”), subject to all terms and conditions set forth in
this Agreement. In order to facilitate sales to local customers, Steve Markham
or such other representative(s) of Buyer as Buyer may reasonably select shall
travel to the Mason City area to call on potential customers as Seller may
reasonably request.

 

3.                                       TRADE
RULES. All purchases and sales made hereunder shall be governed by the Feed
Trade Rules of the National Grain and Feed Association unless otherwise
specified. Said Trade Rules, a copy of which is appended hereto as Exhibit A,
shall, to the extent applicable, be a part of this Agreement as if fully set
forth herein.

 

4.                                       TERM.
The term of this Agreement shall be for one year commencing as of completion
and start-up of production of the Plant.                  Start-up
is anticipated to be February 25, 2005. Thereafter this agreement shall
remain in effect until terminated by either party at its unqualified option by
providing the other party hereto not less than 120 days written notice of its
election to terminate this Agreement.

 

5.                                       DELIVERY
AND TITLE.

 

A.  The place of delivery for all Products sold
pursuant to this Agreement shall be FOB Plant. Buyer and Buyer’s agents shall
be given access to Seller’s Plant in a manner

 

 

and at all times
reasonably necessary and convenient for Buyer to take delivery as provided
herein. Buyer shall schedule the loading and shipping of all outbound
Products purchased hereunder which is shipped by truck or rail. All labor and
equipment necessary to load trucks or rail cars shall be supplied by Seller
without charge to Buyer. Seller agrees to handle the Products in a good and
workmanlike manner in accordance with Buyer’s reasonable requirements and in accordance
with normal industry practice. Seller shall maintain the truck and rail loading
facilities in safe operating condition in accordance with normal industry
standards.

 

B.  Seller further warrants that storage space
for not less than 3,000 tons of DDGS, 150 tons of WDG or 200 tons of MWDG shall
be reserved for Buyer’s use at the Plant and shall be continuously available
for storage of DDGS purchased by Buyer hereunder at no charge to Buyer. Seller
shall be responsible at all times for the quantity, quality and condition of
any DDGS in storage at the Plant. Seller shall not be responsible for the
quantity, quality and condition of any DDGS stored by Buyer at locations other
than the Plant.

 

C.  Buyer shall give to Seller a
schedule of quantities of Products to be removed by truck and rail with
sufficient advance notice reasonably to allow Seller to provide the required
services. Seller shall provide the labor, equipment and facilities necessary to
meet Buyer’s loading schedule and, except for any consequential or
indirect damages, shall be responsible for Buyer’s actual costs or damages
resulting from Seller’s failure to do so. Buyer shall order and supply trucks
and rail cars as scheduled for truck and rail shipments. All freight charges
shall be the responsibility of Buyer and shall be billed directly to Buyer.
Buyer shall assist Seller in arranging the lease of railcars for use in the
removal of Product from the Plant. When such railcars are available, Buyer
shall use the cars for the removal of Product, provided, however, should the
railcars leased by Seller be unavailable or insufficient to remove the Product,
Buyer may make other arrangements for the removal of Products from the Plant.

 

D.  Buyer shall provide loading orders as
necessary to permit Seller to maintain Seller’s usual production schedule,
provided, however, that Buyer shall not be responsible for failure to
schedule removal of Products unless Seller shall have provided to Buyer
production schedules as follows:               Five (5) days prior to the beginning of
each calendar month during the term hereof, Seller shall provide to Buyer a
tentative schedule for production in the next calendar month. Seller shall
inform Buyer daily of inventory and production status. For purposes of this
paragraph, notification will be sufficient if made by facsimile as follows:

 

If to Buyer, to the
attention of Steve Markham, Facsimile number 612-330-9894, and

 

If to Seller, to the
attention of Walter Wendland, Facsimile number 641-394-2431.

 

Or to such other
representatives of Buyer and Seller as they may designate to the other in
writing.

 

2

 

E. Title, risk of
loss and full shipping responsibility shall pass to Buyer upon loading the
Products into trucks or rail cars and delivering to Buyer of the bill of lading
for each such shipment.

 

6.                                       PRICE
AND PAYMENT.

 

A. Buyer agrees to
pay Seller for all DDGS removed by Buyer from the Plant a price equal to ninety
eight (98%) of the FOB Plant price actually received by Buyer from its
customers; shall pay Seller for all MWDG removed by Buyer from the Plant a
price equal to ninety seven (97%) of the FOB Plant price actually received by
Buyer from its customers and shall pay Seller for all WDG removed by Buyer from
the Plant a price equal to ninety five (95%) of the FOB Plant price actually
received by Buyer from its customers. For purposes of this provision, the FOB
Plant price shall be the actual sale price, less all freight costs incurred by
Buyer in delivering the Product to its customer. Buyer agrees that it shall not
sell Product for delivery more than 90 days from the date of entering into a
sale without the consent of Seller. Buyer agrees to use commercially reasonable
efforts to achieve the highest resale price available under prevailing market
conditions as judged by Buyer. Seller’s sole and exclusive remedy for breach of
Buyer’s obligations hereunder shall be to terminate this Agreement.

 

B. Within three
(3) business days following receipt of certified weight certificates, which
certificates shall be presented to Buyer each Thursday for all shipments during
the preceding week, Buyer shall pay Seller the full price, determined pursuant
to paragraph 6A above, for all properly documented shipments. Buyer agrees to
maintain accurate sales records and to provide such records to Seller upon
request. Seller shall have the option to audit Buyer’s sales invoices at any
time during normal business hours and during the term of this Agreement. If any
such audit shall reveal a deficiency in payment to Seller, Buyer shall
immediately pay Seller the amount of such deficiency together with interest at
the then current prime rate and if such audit shall reveal that Seller has been
overpaid, Seller shall immediately pay Buyer the amount of such overpayment
together with interest at the then current prime rate. Buyer shall be
responsible for collecting and remitting all applicable state tonnage taxes on
Product sold by Buyer.

 

7.                                       QUANTITY
AND WEIGHTS.

 

A.  It is understood that the output of the Products
shall be determined by Seller’s production schedule and that no warranty
or representation has been made by Seller as to the exact quantities of
Products to be sold pursuant to this Agreement. At the effective date of this
Agreement, the annual output estimated by the Seller is approximately 115,000
tons of DDGS and 50,000 of MWDG.

 

B.  The quantity of Products delivered to Buyer
from Seller’s Plant shall be established by weight certificates obtained from
scales which are certified as of the time of weighing and which comply with all
applicable laws, rules and regulations. The outbound weight certificates shall
be determinative of the quantity of Products for which Buyer is obligated to
pay pursuant to Section 6.

 

3

 

8.                                       QUALITY.

 

A.  Seller understands that Buyer intends to
sell the Products purchased from Seller as a primary animal feed ingredient and
that said products are subject to minimum quality standards for such use.
Seller agrees and warrants that Products produced at its plant and delivered to
Buyer shall be accepted in the feed trade under current industry standards.

 

B.  Seller warrants that all Products sold to
Buyer hereunder shall, at the time of delivery to Buyer, conform to the
following minimum quality standard:

 

 

	
   

  	
   

  	
  Component

  	
   

  	
  Maximum%

  	
   

  	
  Minimum%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DDGS

  	
   

  	
  Protein

  	
   

  	
   

  	
   

  	
  25

  	
   

  	
   

  
	
   

  	
   

  	
  Fat

  	
   

  	
   

  	
   

  	
  10

  	
   

  	
   

  
	
   

  	
   

  	
  Fiber

  	
   

  	
  15

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Moisture

  	
   

  	
  12

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Ash

  	
   

  	
  6

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MWDG

  	
   

  	
  Protein

  	
   

  	
  (to be completed)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fat

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fiber

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Moisture

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Ash

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  WDG

  	
   

  	
  Protein

  	
   

  	
  (to be completed)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fat

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fiber

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Moisture

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Ash

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The standard for DDGS
  will be determined on an as is basis rather than a dry weight basis.

  

 

C.  Seller warrants that at the time of loading,
the Products will not be adulterated or misbranded within the meaning of the
Federal Food, Drug and Cosmetic Act and that each shipment may lawfully be
introduced into interstate commerce under said Act.  Payment of invoice does not waive Buyer’s rights if goods do not
comply with terms or specifications of this Agreement. Unless otherwise agreed
between the parties to this Agreement, and in addition to other remedies
permitted by law, the Buyer may, without obligation to pay, reject either
before or after delivery, any of the Products which when inspected or used are
found by Buyer to fail in a material way to conform to this Agreement. Should
any of the Products be seized or condemned by any federal or state department
or agency for any reason except noncompliance by Buyer with applicable federal
or state requirements, such seizure or condemnation shall operate as a
rejection by Buyer of the goods seized or condemned and Buyer shall not be
obligated to offer any

 

4

 

defense in connection
with the seizure or condemnation. When rejection occurs before or after
delivery, at its option, Buyer may:

 

(1)  Dispose of the rejected goods after first
offering Seller a reasonable opportunity of examining and taking possession
thereof, if the condition of the goods reasonably appears to Buyer to permit
such delay in making disposition; or

 

(2)  Dispose of the rejected goods in any manner
directed by Seller which Buyer can accomplish without violation of applicable laws,
rules, regulations or property rights; or

 

(3)  If Buyer has no available means of disposal
of rejected goods and Seller fails to direct Buyer to dispose of it as provided
herein, Buyer may return the rejected goods to Seller, upon which event Buyer’s
obligations with respect to said rejected goods shall be deemed fulfilled.
Title and risk of loss shall pass to Seller promptly upon rejection by Buyer.

 

(4)  Seller shall reimburse Buyer for all costs
reasonably incurred by Buyer in storing, transporting, returning and disposing
of the rejected goods. Buyer shall have no obligation to pay Seller for
rejected goods and may deduct reasonable costs and expenses to be reimbursed by
Seller from amounts otherwise owed by Buyer to Seller.

 

(5)  If Seller produces Products which comply
with the warranty in Section C above but which do not meet applicable
industry standards, Buyer agrees to purchase such Products for resale but makes
no representation or warranty as to the price at which such product can be sold.
If the product deviates so severely from industry standard as to be unsalable
in Buyer’s reasonable judgment, then it shall be disposed of in the manner
provided for rejected goods in Section C above.

 

D.  If Seller knows or reasonably suspects that
any Products produced at its Plant are adulterated or misbranded, or outside of
industry quality standards, Seller shall promptly so notify Buyer so that such
product can be tested before entering interstate commerce. If Buyer knows or
reasonably suspects that any Products produced by Seller at its Plant are
adulterated, misbranded or outside of industry quality standards, then Buyer
may obtain independent laboratory tests of the affected goods. If such goods
are tested and found to comply with all warranties made by Seller herein, then
Buyer shall pay all testing costs; and if the goods are found not to comply
with such warranties, Seller will pay all testing costs.

 

9.                                       RETENTION
OF SAMPLES. Seller will take an origin sample of the Products from each
truck and rail car before it leaves the Plant using standard sampling
methodology. Seller will label these samples to indicate the date of shipment
and the truck or railcar number involved. Seller will also retain the samples
and labeling information for no less than 1 year.

 

5

 

10. INSURANCE.

 

A.  Seller warrants to Buyer that all employees
engaged in the removal of Products from Seller’s Plant shall be covered as
required by law by worker’s compensation and unemployment compensation
insurance.

 

B.  Seller agrees to maintain throughout every
term of this Agreement comprehensive general liability insurance, including
product liability coverage, with combined single limits of not less than
$2,000,000. Seller’s policies of comprehensive general liability insurance
shall be endorsed to require at least thirty (30) days advance notice to Buyer
prior to the effective date of any decrease in or cancellation of coverage.
Seller shall cause Buyer to be named as an additional insured on Seller’s
insurance policy and shall provide a certificate of insurance to Buyer to
establish the coverage maintained by Seller not later than February 2005.

 

C.  Buyer agrees to carry such insurance on its
vehicles operating on Seller’s property, as Seller reasonably deems
appropriate. The parties acknowledge that Buyer may elect to self-insure its
vehicles. Upon request, Buyer shall provide certificate of insurance to Seller
to establish the coverage maintained by Buyer.

 

D.  Notwithstanding the foregoing, nothing
herein shall be construed to constitute a waiver by either party of claims,
causes of action or other rights which either party may have or hereafter
acquire against the other for damage or injury to its agents, employees,
invitees, property, equipment or inventory, or third party claims against the
other for damage or injury to other persons or the property of others.

 

11.                                 REPRESENTATIONS
AND WARRANTIES.

 

A.  Seller represents and warrants that all
Products delivered to Buyer shall not be adulterated or misbranded within the
meaning of the Federal Food, Drug and Cosmetic Act and may lawfully be
introduced into interstate commerce pursuant to the provisions of the Act.                           Seller
further warrants that the Products shall fully comply with any applicable state
laws governing quality, naming and labeling of product. Payment of invoice
shall not constitute a waiver by Buyer of Buyer’s rights as to goods which do
not comply with this Agreement or with applicable laws and regulations.

 

B.  Seller represents and warrants that products
delivered to Buyer shall be free and clear of liens and encumbrances.

 

C.  EXCEPT AS SPECIFICALLY STATED IN THIS
AGREEMENT, SELLER MAKES NO WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHATABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.

 

12.                                 EVENTS
OF DEFAULT.  The occurrence of any
of the following shall be an event of default under this Agreement (“Event of
Default”): (1) failure of either party to make

 

6

 

payment to the other when
due; (2) default by either party in the performance of the covenants and
agreements set forth in this Agreement; (3) if either party shall become
insolvent, or make a general assignment for the benefit of creditors or to an
agent authorized to liquidate any substantial amount of its assets, or be
adjudicated bankrupt, or file a petition in bankruptcy, or apply to a court for
the appointment of a receiver for any of its assets or properties with or without
consent, and such receiver shall not be discharged within sixty (60) days
following appointment.

 

13.                                 REMEDIES.
Upon the happening of an Event of Default, the parties hereto shall have all
remedies available under applicable law with respect to an Event of Default by
the other party. Without limiting the foregoing, the parties shall have the
following remedies whether in addition to or as one of the remedies otherwise
available to them; (1) to declare all amounts owed immediately due and payable;
and (2) immediately to terminate this Agreement effective upon receipt by the
party in default of the notice of termination, provided, however, such party
shall be allowed 10 days from the date of receipt of notice of default to cure
any Event of Default. Notwithstanding any other provision of this Agreement,
Buyer may offset against amounts otherwise owed to Seller the price of any
product, which fails to conform to any requirements of this Agreement.

 

14.                                 FORCE
MAJEURE. Neither Seller nor Buyer will be liable to the other for any
failure or delay in the performance of any obligation under this Agreement due
to events beyond its reasonable control, including, but not limited to, fire,
storm, flood, earthquake, explosion, act of the public enemy, riots, civil disorders,
sabotage, strikes, lockouts, labor disputes, labor shortages, war stoppages or
slowdowns initiated by labor, transportation embargoes, failure or shortage of
materials, acts of God, or acts or regulations or priorities of the federal,
state or local government or branches or agencies thereof.

 

15.                                 INDEMNIFICATION.

 

A.  Seller shall indemnify, defend and hold
Buyer and its officers, directors, employees and agents harmless, from any and
all losses, liabilities, damages, expenses (including reasonable attorneys’
fees), costs, claims, demands, that Buyer or its officers, directors, employees
or agents may suffer, sustain or become subject to, or as a result of (i) any
misrepresentation or breach of warranty, covenant or agreement of Seller
contained herein or (ii) the Seller’s negligence or willful misconduct.

 

B.  Buyer shall indemnify, defend
and hold Seller and its officer, directors, employees and agents harmless, from
any and all losses, liabilities, damages, expenses (including reasonable
attorneys’ fees), costs, claims, demands, that Seller or its officers,
directors, employees or agents may suffer, sustain or become subject to, or as
a result of (i) any misrepresentation or breach of warranty, covenant or
agreement of Buyer contained herein or (ii) the Buyer’s negligence or willful
misconduct.

 

C.  Where such personal injury,
death or loss of or damage to property is the result of negligence on the part
of both Seller and Buyer, each party’s duty of

 

7

 

indemnification shall be
in proportion to the percentage of that party’s negligence or faults.

 

D.  Seller acknowledges that in order to
maximize the total revenue to be generated through the sale of Products, Buyer
may take positions by buying or selling Product in anticipation of Seller
providing the Products. Notwithstanding the fact that Seller’s obligation is to
provide Buyer with the output of the Plant the parties acknowledge that Buyer
may suffer losses as a result of positions taken by Buyer if Seller
discontinues operations for any reason whatsoever including Force Majeure,
provided Buyer has taken all commercially reasonable steps to avoid loss.
Therefore, Seller shall indemnify, defend and hold Buyer and its officers,
directors, employees and agents harmless from any and all losses, liabilities,
damages, expenses (including reasonable attorney’s fees), costs, claims,
demands that Buyer or its officers, directors, employees, or agents may suffer,
sustain or become subject to as a result of any sale or purchase of product or
other positions taken by Buyer in anticipation of Seller delivering products
hereunder.

 

16.                                 GOVERNMENTAL
ACTION. The parties recognize that the value of Products could change as a
result of various governmental programs, be they foreign or domestic. In the
event that a significant value change of the Products as a result of any such
governmental program, Buyer may request re-negotiation of the contract price
for the Products by providing written notice to Seller. Buyer shall be required
to demonstrate that the value of the Products has significantly changed in the
market. Should such a change take place, the parties agree to negotiate, in
good faith, a revised sale price for the Products. If, after a good faith
effort, the parties are unable to agree on a new price within the 90 day period
immediately following notice to the other party, then in such event and
notwithstanding the other provisions hereof, Buyer may terminate this Agreement
upon 90 days prior written notice.

 

17.                                 RELATIONSHIP
OF PARTIES. This Agreement creates no relationship other than that of buyer
and seller between the parties hereto. Specifically, there is no agency,
partnership, joint venture or other joint or mutual enterprise or undertaking
created hereby. Nothing contained in this Agreement authorizes one party to act
for or on behalf of the other and neither party is entitled to commissions from
the other.

 

18.                                 MISCELLANEOUS.

 

A. This writing is
intended by the parties as a final expression of their agreement and a complete
and exclusive statement of the terms thereof.

 

B.  No course of prior dealings between the
parties and no usage of trade, except where expressly incorporated by
reference, shall be relevant or admissible to supplement, explain, or vary any
of the terms of this Agreement.

 

C.  Acceptance of, or acquiescence in, a course
of performance rendered under this or any prior agreement shall not be relevant
or admissible to determine the meaning

 

8

 

of this Agreement even
though the accepting or acquiescing party has knowledge of the nature or the
performance and an opportunity to make objection.

 

D.  No representations, understandings or
agreements have been made or relied upon in the making of this Agreement other
than as specifically set forth herein.

 

E.  This Agreement can only be modified by a
writing signed by all of the parties or their duly authorized agents.

 

F.  The paragraph headings herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.

 

G.  This Agreement shall be construed and
performed in accordance with the laws of the State of Iowa.

 

H.  The respective rights, obligations and
liabilities of the parties under this Agreement are not assignable or delegable
without the prior written consent of the other pay.

 

I.  Notice shall be deemed to have been given to
the party to whom it is addressed ninety-six (96) hours after it is deposited
in certified U.S. mail, postage prepaid, return receipt requested, addressed as
follows:

 

 

	
  Buyer:

  	
   

  	
  Commodity Specialist
  Company

  
	
   

  	
   

  	
  310 Grain Exchange
  Bldg.

  
	
   

  	
   

  	
  400 South Fourth Street

  
	
   

  	
   

  	
  Minneapolis, Minnesota
  55415

  
	
   

  	
   

  	
  ATTN: Steve J. Markham

  
	
   

  	
   

  	
   

  
	
  Seller:

  	
   

  	
  Golden Grain Energy,
  LLC

  
	
   

  	
   

  	
  14542 240th
  Street

  
	
   

  	
   

  	
  Mason City, Iowa 50401

  
	
   

  	
   

  	
  ATTN: Walter Wendland

  

 

IN WITNESS THEREOF, the
parties have caused this Agreement to be executed the day and year first above
written.

 

	
   

  	
  COMMODITY SPECIALISTS
  COMPANY

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Phil J.
  Lindau, Jr.

  	
   

  
	
   

  	
  Title Executive Vice
  President

  

 

9

 

	
   

  	
  GOLDEN GRAIN, LLC

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Walter
  Wendland

  	
   

  
	
   

  	
  Title  President

  

 

10

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