Document:

Exhibit
10.7

 

K-SEA TRANSPORTATION PARTNERS L.P.

 

LONG-TERM INCENTIVE PLAN

 

1.                                      Purpose
of the Plan.

 

The
K-Sea Transportation Partners L.P. Long-Term Incentive Plan (the “Plan”) is
intended to promote the interests of K-Sea Transportation Partners L.P., a Delaware
limited partnership (the “Partnership”), by providing to employees and
directors of K-Sea General Partner GP LLC, a Delaware limited liability company
(the “Company”), and its Affiliates who perform services for the Partnership,
incentive compensation awards for superior performance that are based on
Units.  The Plan is also contemplated to
enhance the ability of the Company and its Affiliates to attract and retain the
services of individuals who are essential for the growth and profitability of
the Partnership and to encourage them to devote their best efforts to the
business of the Partnership, thereby advancing the interests of the
Partnership.

 

2.                                      Definitions.

 

As
used in the Plan, the following terms shall have the meanings set forth below:

 

“Affiliate”
means, with respect 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, the Person in question. 
As used herein, the term “control” means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract or otherwise.

 

“Award”
means an Option or Phantom Unit granted under the Plan, and shall include any
DER granted with respect to a Phantom Unit.

 

“Award
Agreement” means the agreement entered into between the Partnership and the
Participant evidencing the terms and conditions of the Award.

 

“Board”
means the Board of Directors of the Company.

 

“Cash-Out
Value” means the amount determined in Clause (i) or (ii), whichever is
applicable, as follows: (i) the per Unit price offered to equityholders of the
Partnership in any merger or consolidation or (iii) in the event of a
reorganization, the Fair Market Value per Unit determined by the Committee as
of the date determined by the Committee to be the date of cancellation and
surrender of an Award.  In the event
that the consideration offered to equityholders of the Partnership in any transaction
described in this definition consists of anything other than cash, the
Committee shall determine the fair cash equivalent of the portion of the
consideration offered which is other than cash.

 

“Change
in Control” shall be deemed to have occurred upon the occurrence of one or more
of the following events: (i) any sale, lease, exchange or other transfer (in
one or a series of related transactions) of all or substantially all of the
assets of the Partnership or K-Sea Operating Partnership L.P. to any Person or
its Affiliates, other than the Partnership, the

 

1

 

Company or any of their Affiliates or (ii) any merger,
reorganization, consolidation or other transaction pursuant to which more than
50% of the combined voting power of the equity interests in the Partnership or
K-Sea Operating Partnership L.P. ceases to be owned by Persons who own such
interests, respectively, as of the date of the initial public offering of
Units.

 

“Committee”
means the Compensation Committee of the Board or such other committee of the
Board appointed by the Board to administer the Plan.

 

“DER”
means a right, granted in tandem with a Phantom Unit, to receive an amount in
cash equal to, and at the same time as, the cash distributions made by the
Partnership with respect to a Unit during the period such Phantom Unit is
outstanding.

 

“Director”
means a member of the Board or the board of directors or managers of an
Affiliate who is not an Employee.

 

“Employee”
means any employee of the Company or an Affiliate, including, without
limitation, K-Sea Transportation Inc., a Delaware corporation, in each case as
determined by the Committee. 
Notwithstanding the foregoing, the term “Employee” shall not include any
individual covered by a collective bargaining or comparable agreement between
representatives of such employees and the Partnership, the Company or any
Affiliate of the Partnership or the Company.

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

“Fair
Market Value” means the closing sales price of a Unit on the date of
determination (or, if there is no trading in the Units on such date, the
closing sales price on the last date the Units were traded) as reported in The
Wall Street Journal (or other reporting service approved by the Committee). In
the event Units are not publicly traded at the time a determination of Fair
Market Value is required to be made hereunder, the determination of Fair Market
Value shall be made in good faith by the Committee.

 

“Option”
means an option to purchase Units granted under the Plan.

 

“Participant”
means any Employee or Director granted an Award under the Plan.

 

“Partnership
Agreement” means the First Amended and Restated Agreement of Limited
Partnership of the Partnership.

 

“Person”
means an individual or a corporation, limited liability company, partnership,
joint venture, trust, unincorporated organization, association, governmental
agency or political subdivision thereof or other entity.

 

“Phantom
Unit” means a phantom (notional) unit granted under the Plan which upon vesting
entitles the Participant to receive a Unit or an amount of cash equal to the
Fair Market Value of a Unit, whichever is determined by the Committee.

 

“Plan”
means this K-Sea Transportation Partners L.P. Long-Term Incentive Plan, as
amended from time to time.

 

2

 

“Restricted
Period” means the period established by the Committee with respect to an Award
during which the Award remains subject to forfeiture (i.e., it is not vested) and
is not exercisable by or payable to the Participant.

 

“Rule
16b-3” means Rule 16b-3 promulgated by the SEC under the Exchange Act, or any
successor rule or regulation thereto as in effect from time to time.

 

“SEC”
means the Securities and Exchange Commission, or any successor thereto.

 

“Unit”
means a Common Unit of the Partnership.

 

3.                                      Administration.

 

The
Plan shall be administered by the Committee. A majority of the Committee shall
constitute a quorum, and the acts of the members of the Committee who are
present at any meeting thereof at which a quorum is present, or acts
unanimously approved by the members of the Committee in writing, shall be the
acts of the Committee. Subject to the following and any applicable law, the
Committee, in its sole discretion, may delegate any or all of its powers and
duties under the Plan, including the power to grant Awards under the Plan, to
the Chief Executive Officer of the Company (provided that the Chief Executive
Officer is a member of the Board), subject to such limitations on such
delegated powers and duties as the Committee may impose, if any. Upon any such
delegation all references in the Plan to the “Committee,” other than in
Section 7, shall be deemed to include the Chief Executive Officer; provided,
however, that such delegation shall not limit the Chief Executive Officer’s
right to receive Awards under the Plan. Notwithstanding the foregoing, the
Chief Executive Officer may not grant Awards to, or take any action with
respect to any Award previously granted to, himself, a person who is an officer
subject to Rule 16b-3 or who is a member of the Board.  Subject to the terms of the Plan and
applicable law, and in addition to other express powers and authorizations
conferred on the Committee by the Plan, the Committee shall have full power and
authority to: (i) designate Participants; (ii) determine the type or types of
Awards to be granted to a Participant; (iii) determine the number of Units to
be covered by Awards; (iv) determine the terms and conditions of any Award; (v)
determine whether, to what extent, and under what circumstances Awards may be
settled, exercised, canceled, or forfeited; (vi) interpret and administer the
Plan and any instrument or agreement relating to an Award made under the Plan;
(vii) establish, amend, suspend, or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the proper administration
of the Plan; and (viii) make any other determination and take any other action
that the Committee deems necessary or desirable for the administration of the
Plan. Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations, and other decisions under or with respect to
the Plan or any Award shall be within the sole discretion of the Committee, may
be made at any time and shall be final, conclusive, and binding upon all
Persons, including the Company, the Partnership, any Affiliate, any
Participant, and any beneficiary of any Award.

 

4.                                      Units.

 

(a)                                  Units
Available.  Subject to adjustment as
provided in Section 4(c), the number of Units with respect to which
Options and Phantom Units may be granted under the 

 

3

 

Plan is 440,000. 
If any Option or Phantom Unit is forfeited or otherwise terminates or is
canceled without the delivery of Units, then the Units covered by such Award,
to the extent of such forfeiture, termination or cancellation, shall again be
Units with respect to which an Option or Phantom Unit, as the case may be, may
be granted.

 

(b)                                 Sources
of Units Deliverable Under Awards. 
Any Units delivered pursuant to an Award shall consist, in whole or in
part, of Units acquired in the open market, from any Affiliate, or from the
Partnership, or any combination of the foregoing, as determined by the
Committee in its discretion.

 

(c)                                  Adjustments.  In the event that the Committee determines
that any distribution (whether in the form of cash, Units, other securities, or
other property), recapitalization, split, reverse split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, or exchange
of Units or other securities of the Partnership, issuance of warrants or other
rights to purchase Units or other securities of the Partnership, or other
similar transaction or event affects the Units such that an adjustment is
determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan, then the Committee shall, in such manner as it may deem
equitable, adjust any or all of (i) the number and type of Units (or other
securities or property) with respect to which Awards may be granted, (ii) the
number and type of Units (or other securities or property) subject to
outstanding Awards, and (iii) the grant or exercise price with respect to any
Award or, if deemed appropriate, make provision for a cash payment to the
holder of an outstanding Award; provided that the number of Units subject to
any Award shall always be a whole number.

 

(d)                                 Cash-Out
of Awards.  In the event that the
Partnership is reorganized, merged or consolidated with another entity, the
Committee may, in its sole discretion, (i) require the mandatory surrender
to the Partnership by selected holders of Options of some or all of the
outstanding Options held by such holder (irrespective of whether such Options
are then exercisable under the provisions of the Plan) as of a date (before or
after the reorganization, merger or consolidation) specified by the Committee,
in which event the Committee shall thereupon cancel such Options and pay to
each holder thereof an amount of cash per Unit equal to the excess, if any, of
the Cash-Out Value of the Units subject to such Option over the exercise price(s)
under such Options for such Units or (ii) require the mandatory surrender to
the Partnership by selected holders of Phantom Units of some or all of the
outstanding Phantom Units held by such holder (irrespective of whether such
Phantom Units are vested under the provisions of the Plan) as of a date (before
or after the reorganization, merger or consolidation) specified by the
Committee, in which event the Committee shall thereupon cancel such Phantom
Units and pay to each holder an amount of cash per Phantom Unit equal to the
Cash-Out Value of the Units.

 

5.                                      Eligibility.

 

Any
Employee who performs services for the benefit of the Partnership as determined
by the Committee, or any Director shall be eligible to be designated a
Participant and receive an Award under the Plan.

 

4

 

6.                                      Awards.

 

(a)                                  Options.  The Committee shall have the authority to
determine the Employees and Directors to whom Options shall be granted, the
number of Units to be covered by each Option, the purchase price therefor, the
Restricted Period and the conditions and limitations applicable to the exercise
of the Option, including the following terms and conditions and such additional
terms and conditions, as the Committee shall determine, that are not
inconsistent with the provisions of the Plan.

 

(i)                                     Exercise
Price.  The purchase price
per Unit purchasable under an Option shall be determined by the Committee at
the time the Option is granted and may not be less than its Fair Market Value
as of the date of grant.

 

(ii)                                  Time and
Method of Exercise.  The
Committee shall determine the Restricted Period with respect to an Option,
which may include, without limitation, accelerated vesting upon the achievement
of specified performance goals, and the method or methods by which payment of
the exercise price with respect thereto be made or deemed to have been made,
which may include, without limitation: (a) cash, (b) check acceptable to the
Company, (c) a “cashless-broker” exercise through procedures approved by the
Company or (d) any combination thereof, having a Fair Market Value on the
exercise date equal to the relevant exercise price.

 

(iii)                               Forfeiture.  Except as otherwise provided in the terms of
the Option grant, upon termination of a Participant’s employment with the
Company and its Affiliates or membership on the Board, whichever is applicable,
for any reason during the applicable Restricted Period, all Options shall be
forfeited by the Participant (or any transferee) unless otherwise provided in a
written employment agreement between the Participant and the Company or its
Affiliates. The Committee may, in its discretion, waive in whole or in part
such forfeiture with respect to a Participant’s Options.

 

(b)                                 Phantom
Units.  The Committee shall have the
authority to determine the Employees and Directors to whom Phantom Units shall
be granted, the number of Phantom Units to be granted to each such Participant,
the Restricted Period, the conditions under which the Phantom Units may become
vested or forfeited, which may include, without limitation, the accelerated
vesting upon the achievement of specified performance goals, and such other
terms and conditions as the Committee may establish with respect to such Awards
including whether DERs are granted with respect to such Phantom Units.

 

(i)                                     DERs.  Phantom Units granted under the Plan may
include a tandem DER grant.

 

(ii)                                  Forfeiture.  Except as otherwise provided in the terms of
the Phantom Units grant, upon termination of a Participant’s employment with
the Company and its Affiliates or membership on the Board, whichever is
applicable, for any reason during the applicable Restricted Period, all Phantom
Units shall be

 

5

 

forfeited by the
Participant (or any transferee) unless otherwise provided in a written
employment agreement between the Participant and the Company or its Affiliates.
The Committee may, in its discretion, waive in whole or in part such forfeiture
with respect to a Participant’s Phantom Units.

 

(iii)                               Lapse of
Restrictions.  Unless a
different payment time is specified in the Award agreement, the Participant
shall be entitled to receive from the Company one Unit or cash equal to the
Fair Market Value of a Unit, as determined by the Committee, in its discretion,
upon or as soon as reasonably practical following the vesting of each Phantom
Unit.

 

(c)                                  General.

 

(i)                                     Awards May
Be Granted Separately or Together. 
Awards may, in the discretion of the Committee, be granted either alone
or in addition to, in tandem with, or in substitution for any other Award
granted under the Plan or any award granted under any other plan of the Company
or any Affiliate. Awards granted in addition to or in tandem with other Awards
or awards granted under any other plan of the Company or any Affiliate may be
granted either at the same time as or at a different time from the grant of
such other Awards or awards.

 

(ii)                                  Limits on
Transfer of Awards.  Unless
otherwise provided in the Award agreement, each Option shall be exercisable
only by the Participant during the Participant’s lifetime, or by the person to
whom the Participant’s right shall pass by will or the law of descent and
distribution.  Unless otherwise provided
in the Award agreement, no Award and no right under any such Award may be
assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant and any such purported assignment, alienation,
pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable
against the Company and any Affiliate.

 

(iii)                               Term of
Awards. The term of each Award shall be for such period as may be
determined by the Committee.

 

(iv)                              Unit
Certificates. All certificates for Units or other securities of the
Partnership delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such stop transfer orders and other restrictions as
the Committee may deem advisable under the Plan or the rules, regulations, and
other requirements of the SEC, any stock exchange upon which such Units or
other securities are then listed, and any applicable federal or state
laws.  The Committee may cause a legend
or legends to be put on any such certificates to make appropriate reference to
such restrictions.

 

(v)                                 Consideration
for Grants.  Awards may be
granted for such consideration, including services, as the Committee
determines.

 

(vi)                              Delivery of
Units or other Securities and Payment by Participant of Consideration.  Notwithstanding anything in the Plan or any
grant agreement to 

 

6

 

the contrary,
delivery of Units pursuant to the exercise or vesting of an Award may be
deferred for any period during which, in the good faith determination of the
Committee, the Company is not reasonably able to obtain Units to deliver
pursuant to such Award without violating the rules or regulations of any
applicable law or securities exchange. No Units or other securities shall be
delivered pursuant to any Award until payment in full of any amount required to
be paid pursuant to the Plan or the applicable Award Agreement (including,
without limitation, any exercise price or tax withholding) is received by the
Company.  Such payment may be made by
such method or methods and in such form or forms as the Committee shall
determine, including, without limitation, cash, other Awards, withholding of
Units, cashless-broker exercises with simultaneous sale, or any combination
thereof; provided that the combined value, as determined by the Committee, of
all cash and cash equivalents and the Fair Market Value of any such Units or
other property so tendered to the Company, as of the date of such tender, is at
least equal to the full amount required to be paid to the Company pursuant to
the Plan or the applicable Award agreement.

 

(vii)                           Change in
Control.  Subject to
additional or contrary provisions in the Award agreement, upon a Change in
Control or such period prior thereto as may be established by the Committee,
all Awards shall automatically vest and become payable or exercisable, as the
case may be, in full. In this regard, all Restricted Periods shall terminate
and all performance criteria, if any, shall be deemed to have been achieved at
the maximum level. To the extent an Option is not exercised upon a Change in
Control, the Committee may, in its discretion, cancel such Award without
payment or provide for a replacement grant with respect to such Award on such
terms as it deems appropriate.

 

7.                                      Amendment
and Termination.

 

Except
to the extent prohibited by applicable law:

 

(a)                                  Amendments
to the Plan.  Except as required by
the rules of the principal securities exchange on which the Units are traded
and subject to Section 7(b) below, the Board or the Committee may amend,
alter, suspend, discontinue, or terminate the Plan in any manner, including
increasing the number of Units available for Awards under the Plan, without the
consent of any partner, Participant, other holder or beneficiary of an Award,
or other Person.

 

(b)                                 Amendments
to Awards.  Subject to Section 7(a),
the Committee may waive any conditions or rights under, amend any terms of, or
alter any Award theretofore granted, provided no change, other than pursuant to
Section 7(c), in any Award shall materially reduce the benefit to a
Participant without the consent of such Participant.

 

(c)                                  Adjustment
of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events.  The Committee is hereby authorized to make
adjustments in the terms and conditions of, and the criteria included in,
Awards in recognition of unusual or nonrecurring events (including, without
limitation, the events described in Section 4(c) of the Plan) affecting
the Partnership or the financial statements of the Partnership, or of changes
in applicable laws,

 

7

 

regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan.

 

8.                                      General
Provisions.

 

(a)                                  No
Rights to Award.  No Person shall
have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Participants. The terms and
conditions of Awards need not be the same with respect to each recipient.

 

(b)                                 Withholding.  The Company, its Affiliate or its designated
third party administrator shall have the right to deduct applicable taxes from
any Award payment and withhold, at the time of delivery or vesting of cash or Units
under this Plan, an appropriate amount of cash or number of Units or a
combination thereof for payment of taxes or other amounts required by law or to
take such other action as may be necessary in the opinion of the Company or its
Affiliate to satisfy all obligations for withholding of such taxes.  The Committee may also permit withholding to
be satisfied by the transfer to the Company or its Affiliate of Units
theretofore owned by the holder of the Award with respect to which withholding
is required.  If Units are used to
satisfy tax withholding, such Units shall be valued based on the Fair Market
Value when the tax withholding is required to be made.

 

(c)                                  No
Right to Employment.  The grant of
an Award shall not be construed as giving a Participant the right to be
retained in the employ of the Company or any Affiliate or to remain on the
Board, as applicable. Further, the Company or an Affiliate may at any time
dismiss a Participant from employment.

 

(d)                                 Governing
Law.  The validity, construction,
and effect of the Plan and any rules and regulations relating to the Plan shall
be determined in accordance with the laws of the State of Delaware without
regard to its conflict of laws principles.

 

(e)                                  Severability.  If any provision of the Plan or any Award becomes
invalid, illegal, or unenforceable in any jurisdiction or as to any Person or
Award, or would disqualify the Plan or any Award under any law deemed
applicable by the Committee, such provision shall be deemed amended to conform
to the applicable laws, or if it cannot be construed or deemed amended without
materially altering the intent of the Plan or the Award, such provision shall
be stricken as to such jurisdiction, person or Award and the remainder of the
Plan and any such Award shall remain in full force and effect.

 

(f)                                    Other
Laws.  Notwithstanding anything in
the Plan or any Award agreement to the contrary, the Committee may refuse to
issue or transfer any Units or other consideration under an Award if, in its
sole discretion, it determines that the issuance or transfer of such Units or
such other consideration might violate any applicable law or regulation, the
rules of the principal securities exchange on which the Units are then traded.

 

(g)                                 No
Trust or Fund Created.  Neither the
Plan nor any Award shall create or be construed to create a trust or separate
fund of any kind or a fiduciary relationship between the Company or any
participating Affiliate and a Participant or any other Person. To the extent
that any Person acquires a right to receive payments from the Company or any
participating Affiliate 

 

8

 

pursuant to an Award, such right shall be no greater
than the right of any general unsecured creditor of the Company or any
participating Affiliate.

 

(h)                                 No
Fractional Units.  No fractional
Units shall be issued or delivered pursuant to the Plan or any Award, and the
Committee shall determine whether cash, other securities, or other property
shall be paid or transferred in lieu of any fractional Units or whether such
fractional Units or any rights thereto shall be canceled, terminated, or
otherwise eliminated.

 

(i)                                     Headings.  Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the
construction or interpretation of the Plan or any provision thereof.

 

(j)                                     Facility
of Payment. Any amounts payable hereunder to any individual under legal
disability or who, in the judgment of the Committee, is unable to properly
manage his financial affairs, may be paid to the legal representative of such
person, or may be applied for the benefit of such person in any manner that the
Committee may select, and the Company and its Affiliates shall be relieved of
any further liability for payment of such amounts.

 

(k)                                  Gender
and Number.  Words in the masculine
gender shall include the feminine gender, the plural shall include the singular
and the singular shall include the plural.

 

9.                                      Term
of the Plan.

 

The
Plan shall be effective on the date of its approval by the Board and shall
continue until the date terminated by the Board or the date Units are no longer
available for the payment of Awards under the Plan, whichever occurs first.
However, unless otherwise expressly provided in the Plan or in an applicable
Award Agreement, any Award granted prior to such termination, and the authority
of the Board or the Committee to amend, alter, adjust, suspend, discontinue, or
terminate any such Award or to waive any conditions or rights under such Award,
shall extend beyond such termination date.

 

9Exhibit
10.16

 

CONSTRUCTION
AND REVOLVING LOAN AGREEMENT

 

by and among

 

UNITED
WISCONSIN GRAIN PRODUCERS, LLC

 

 

and

 

 

AGSTAR
FINANCIAL SERVICES, PCA

 

 

dated

as of

February 26, 2004

 

 

TABLE
OF CONTENTS

 

	
  ARTICLE I.   DEFINITIONS
  AND ACCOUNTING MATTERS

  	
   

  
	
   

  	
  Section 1.01

  	
  Certain Defined Terms

  	
   

  
	
   

  	
  Section 1.02

  	
  Accounting Matters

  	
   

  
	
   

  	
  Section 1.03

  	
  Construction

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II.   AMOUNTS
  AND TERMS OF THE TERM LOANS

  	
   

  
	
   

  	
  Section 2.01

  	
  Construction Loan.

  	
   

  
	
   

  	
  Section 2.02

  	
  Disbursement of Construction Loan

  	
   

  
	
   

  	
  Section 2.03

  	
  Conversion of Construction Loan Into Term Loan

  	
   

  
	
   

  	
  Section 2.04

  	
  Revolving
  Loan

  	
   

  
	
   

  	
  Section 2.05

  	
  Making the Revolving Advances

  	
   

  
	
   

  	
  Section 2.06

  	
  Adjustments to Interest Rate

  	
   

  
	
   

  	
  Section 2.07

  	
  Commitment/Participating/Servicing Fees

  	
   

  
	
   

  	
  Section 2.08

  	
  Default
  Interest.

  	
   

  
	
   

  	
  Section 2.09

  	
  Prepayment of Term Loan

  	
   

  
	
   

  	
  Section 2.10

  	
  Changes in Law Rendering Certain LIBOR Rate
  Loans Unlawful

  	
   

  
	
   

  	
  Section 2.11

  	
  Payments and Computations

  	
   

  
	
   

  	
  Section 2.12

  	
  Maximum Amount Limitation

  	
   

  
	
   

  	
  Section 2.13

  	
  Lender
  Records

  	
   

  
	
   

  	
  Section 2.14

  	
  Loan
  Payments

  	
   

  
	
   

  	
  Section 2.15

  	
  Purchase of Equity Interests in AgStar
  Financial Services, PCA

  	
   

  
	
   

  	
  Section 2.16

  	
  Compensation

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III   CONDITIONS
  PRECEDENT

  	
   

  
	
   

  	
  Section 3.01

  	
  Conditions Precedent to Funding

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV.   REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
   

  	
  Section 4.01

  	
  Representations
  and Warranties of the Borrower

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V.   COVENANTS
  OF THE BORROWER

  	
   

  
	
   

  	
  Section 5.01

  	
  Affirmative Covenants

  	
   

  
	
   

  	
  Section 5.02

  	
  Negative
  Covenants

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI.   EVENTS
  OF DEFAULT AND REMEDIES

  	
   

  
	
   

  	
  Section 6.01

  	
  Events
  of Default

  	
   

  
	
   

  	
  Section 6.02

  	
  Remedies

  	
   

  
	
   

  	
  Section 6.03

  	
  Remedies
  Cumulative

  	
   

  

 

i

 

	
  ARTICLE VII.   MISCELLANEOUS

  	
   

  
	
   

  	
  Section 7.01

  	
  Amendments, etc

  	
   

  
	
   

  	
  Section 7.02

  	
  Notices, etc

  	
   

  
	
   

  	
  Section 7.03

  	
  No
  Waiver; Remedies

  	
   

  
	
   

  	
  Section 7.04

  	
  Costs,
  Expenses and Taxes.

  	
   

  
	
   

  	
  Section 7.05

  	
  Right
  of Set-off

  	
   

  
	
   

  	
  Section 7.06

  	
  Severability
  of Provisions

  	
   

  
	
   

  	
  Section 7.07

  	
  Binding
  Effect; Successors and Assigns; Participations.

  	
   

  
	
   

  	
  Section 7.08

  	
  Consent
  to Jurisdiction.

  	
   

  
	
   

  	
  Section 7.09

  	
  Governing
  Law

  	
   

  
	
   

  	
  Section 7.10

  	
  Execution
  in Counterparts

  	
   

  
	
   

  	
  Section 7.11

  	
  Survival

  	
   

  
	
   

  	
  Section 7.12

  	
  Waiver
  of Jury Trial

  	
   

  
	
   

  	
  Section 7.13

  	
  Entire
  Agreement

  	
   

  

 

LIST
OF SCHEDULES AND EXHIBITS

 

	
  Schedule 3.01(c)

  	
  Real Property

  	
   

  
	
  Schedule 4.01(a)

  	
  Description of Certain Transactions Related to the Borrower’s Stock

  	
   

  
	
  Schedule 4.01(f)

  	
  Description of Certain Threatened Actions, etc.

  	
   

  
	
  Schedule 4.01(j)

  	
  Location of Inventory and Farm Products; Third Parties in Possession;
  Crops

  	
   

  
	
  Schedule 4.01(k)

  	
  Office Locations; Fictitious Names; Etc.

  	
   

  
	
  Schedule 4.01(n)

  	
  Intellectual Property

  	
   

  
	
  Schedule 4.01(p)

  	
  Environmental Compliance

  	
   

  
	
  Schedule 5.01(n)

  	
  Management

  	
   

  
	
  Schedule 5.02(a)

  	
  Description of Certain Liens, Lease Obligations, etc.

  	
   

  
	
  Schedule 5.02(f)

  	
  Loans; Guaranties

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Compliance Certificate

  	
   

  
	
  Exhibit B

  	
  Project Sources and Uses Statement

  	
   

  
	
  Exhibit C

  	
  Sworn Construction Statement

  	
   

  
	
  Exhibit D

  	
  Form of Opinion Letter

  	
   

  

 

ii

 

CONSTRUCTION
AND

REVOLVING
LOAN AGREEMENT

 

THIS Construction and Revolving Loan Agreement between UNITED WISCONSIN
GRAIN PRODUCERS, LLC, a Wisconsin limited liability company (the “Borrower”),
and AGSTAR FINANCIAL SERVICES, PCA, a United States instrumentality (the
“Lender”) is made and executed this 26th day of February, 2004.

 

RECITALS

 

A.                                   The
Borrower has requested the Lender extend to the Borrower a construction loan in
the amount of $33,024,200.00, for the purposes of acquiring, constructing,
equipping and furnishing of an ethanol production facility to be located near
Friesland, Columbia County, Wisconsin (the “Project”).

 

B.                                     The
Borrower has also requested the Lender extend to the Borrower a revolving loan
in the amount of $4,000,000.00 for operating capital and cash management
purposes following the Completion Date of the Project.

 

C.                                     The
Lender is willing to extend such financing to the Borrower upon the terms and
subject to the conditions set forth in this Agreement.

 

AGREEMENT

 

IN CONSIDERATION of the foregoing premises and the mutual covenants
contained in this Construction and Term Loan Agreement and for other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged
by the Borrower, the parties agree as follows:

 

ARTICLE I.

DEFINITIONS
AND ACCOUNTING MATTERS

 

Section 1.01.                             Certain
Defined Terms.  As used
in this Agreement, the following terms shall have the following meanings.  Terms not otherwise defined in this
Agreement shall have the meanings attributed to such terms in the Uniform
Commercial Code, as amended from time to time. 
All references to dollar amounts shall mean amounts in lawful money of
the United States of America.

 

“Accounts” means all of the Borrower’s
“Accounts”, as such term is defined in the UCC, including, without limitation,
the aggregate unpaid obligations of customers and other account debtors to
Borrower arising out of the sale or lease of goods or rendition of services by
Borrower on an open account or deferred payment basis.

 

“Advances” means the loans made under
Sections 2.01 and 2.02.

 

1

 

“Affiliate” means, as to any Person,
any other Person:  (a) that
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such Person; (b) that
directly or indirectly beneficially owns or holds five percent (5%) or more of
any class of voting stock of such Person; or (c) five percent (5%) or more
of the voting stock of which is directly or indirectly beneficially owned or
held by the Person in question.  The
term “control” means the possession, directly or indirectly, of the power to
direct or cause direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise; provided,
however, in no event shall the Lender or any Bank be deemed an
Affiliate of the Borrower or any of their subsidiaries.

 

“Agreement” means this Construction and
Revolving Loan Agreement, as this Construction and Revolving Loan Agreement may
be amended or modified from time to time, together with all exhibits and
schedules attached to this Construction and Revolving Loan Agreement from time
to time.

 

“Borrower” means United Wisconsin Grain
Producers, LLC, a Wisconsin limited liability company.

 

“Business Day” means any day other
than a Saturday, Sunday, or other day on which commercial banks are authorized
to close under the Laws of, or are in fact closed in, the state where the
Lender’s Office is located and, if such day relates to any LIBOR Rate, means
any such day on which dealings in dollar deposits are conducted by and between
banks in the applicable offshore dollar interbank market.

 

“Capital Expenditures” means, for any
period, the sum of all amounts that would, in accordance with generally
accepted accounting principles consistently applied, be included as additions
to property, plant and equipment on a statement of cash flows for the Borrower
during such period, with respect to: 
(a) the acquisition, construction, improvement, replacement or
betterment of land, buildings, machinery, equipment or of any other fixed
assets or leaseholds; or (b) other capital expenditures and other uses recorded
as capital expenditures having substantially the same effect.

 

“Cash Equity” means funds of at least
45% of Project Costs, currently estimated to be $27,019,800.00, made up of the
following amounts:  (i) members’
equity of at least $23,781,500.00; (ii) various grants of at least $800,000.00;
and (iii) subordinated debt from Fagen, Inc., of not more than $2,438,300.00.

 

“Closing Date” means February 26,
2004.

 

“CERCLA” means the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended.

 

2

 

“Collateral” means and includes, without
limitation, all property and assets granted as collateral security for the
Loans or Indebtedness, whether real or personal property, whether granted
directly or indirectly, whether granted now or in the future, and whether
granted in the form of a security interest, mortgage, assignment of rents, deed
of trust, assignment, pledge, chattel mortgage, chattel trust, factor’s lien,
equipment trust, conditional sale, trust receipt, lien, charge, lien or title
retention contract, lease or consignment intended as a security device, or any
other security or lien interest whatsoever, whether created by law, contract or
otherwise.

 

“Commitment” means the respective amounts
committed to by Lender under the Construction Note and Revolving Note, as each
is defined herein.

 

“Commitment fee” shall have the
meaning specified in Section 2.07.

 

“Completion Date” means the earlier of
July 1, 2005, or the date a Completion Certificate is issued for the
Project executed by the Borrower, General Contractor and Inspecting Engineer,
whichever shall first occur.

 

“Completion Certificate” means a
certificate executed by the Borrower, General Contractor and Inspecting
Engineer stating that the Project is completed and that the ethanol production
facility is completely operational.

 

“Compliance Certificate” means a
certificate of the Treasurer, or any other officer acceptable to the Lender, of
the Borrower, in the form attached hereto as Exhibit A, setting forth the
calculations of current financial covenants and stating:  (a) the Financial Statements are true and
correct and have been prepared in accordance with generally accepted accounting
principles consistently applied; (b) whether they have knowledge of the
occurrence of any Event of Default under this Agreement, and if so, stating in
reasonable detail the facts with respect thereto; and (c) reaffirm and ratify
the representations and warranties, as of the date of the certificate, contained
in this Agreement.

 

“Construction Completion Bond” means a
bond, in form and substance satisfactory to the Lender, issued by a bonding
company acceptable to the Lender, in an amount and for a period of time
necessary to complete the Project pursuant to the Plans and Specifications, and
including such endorsements as Lender may require.

 

“Construction Contracts”  means any and all contracts, written or
oral, between the Borrower and any Contractor and any subcontractor and between
any of the foregoing and any other person or entity relating in any way to the
construction of the Project, including the performing of labor or the
furnishing of standard or specially fabricated materials in connection
therewith.

 

“Construction Loan” means the loan
from the Lender to the Borrower in the amount of $33,024,200.00 and pursuant to
the terms and conditions provided for in Section 2.01, below.

 

3

 

“Construction Note” means that certain
promissory note of even date herewith executed and delivered to the Lender by
the Borrower in the amount of $33,024,200.00.

 

“Contractor” means and includes any
person or entity, including the General Contractor, engaged to work on or to
furnish materials or supplies for the Project.

 

“Conversion Date” means the Completion
Date.

 

“Current Portion of Long Term Debt”
means that portion of Funded Debt payable within one year from the date of such
determination, determined in accordance with generally accepted accounting
principles, consistently applied.

 

“Debt” means:  (A) indebtedness for borrowed money or
for the deferred purchase price of property or services; (B) obligations
as lessee under leases which shall have been or should be, in accordance with
generally accepted accounting principles, recorded as capital leases;
(C) obligations under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clause (A) or (B)
above or (E) through (G) below; (D) liabilities in respect of
unfunded vested benefits under plans covered by Title IV of ERISA;
(E) indebtedness in respect of mandatory redemption or mandatory dividend
rights on equity interests but excluding dividends payable solely in additional
equity interests; (F) all obligations of a Person, contingent or
otherwise, for the payment of money under any noncompete, consulting or similar
agreement entered into with the seller of a company or its assets or any other
similar arrangements providing for the deferred payment of the purchase price
for an acquisition permitted hereby or an acquisition consummated prior to the
date hereof; and (G) all obligations of a Person under any Hedging
Agreement.

 

“Default Rate” has the meaning
specified in Section 2.08.

 

“Disbursing Agent”  means Lender, its successors and assigns.

 

“Disbursing Agreement” means the
Disbursing Agreement, of even date herewith, executed by the Title Company, the
Borrower, and the Lender, as the same may be from time to time amended,
modified, or supplemented.

 

“Disbursement Expiration Date” means
the date sixty (60) days subsequent to the Completion Date, unless extended in
writing by the Lender and the Borrower for an additional, quantified term.

 

“Distribution” means any dividend,
distribution, payment, or transfer of property to any member of the Borrower.

 

4

 

“Draw Request” means a request for an
advance against the Revolving Note, or the Construction Note prior to the
Conversion Date, submitted by the Borrower to the Lender and the Disbursing
Agent, in accordance with the terms and conditions of the Disbursing Agreement.

 

“Environmental Laws” means all laws
and regulations relating to environmental, health, safety and land use matters
applicable to any property.

 

“EBITDA” means for any period, the
total of the following each calculated without duplication for the Borrower for
such period:  (i) net income from
operations; plus (ii) any provision for (or less any benefit from) income
taxes included in determining such net income; plus (iii) Interest Expense
deducted in determining such net income; plus (iv) amortization and
depreciation expense deducted in determining such net income.

 

“ERISA” means the Employee Retirement
Income Security Act of 1974.

 

“Events of Default” has the meaning
specified in Section 6.01.

 

“Excess Cash Flow” means EBITDA, less
the sum of:  (i) required payments in
respect of Funded Debt; (ii) Incentive Payments; and (iii) Maintenance Capital
Expenditures.

 

“Extraordinary Items” means items
which are material and significantly different from the Borrower’s typical
business activities, determined in accordance with generally accepted
accounting principles, consistently applied.

 

“Facility Fee” shall have the meaning
specified in Section 2.07.

 

“Fixed Charge Coverage Ratio” means
the ratio of (EBITDA +/- Extraordinary Items) divided by the sum of Current
Portion of Long Term Debt + Distributions + Tax Distributions + Maintenance
Capital Expenditures).

 

“Food Security Act” means the Food
Security Act of 1985, 7 U.S.C. §1631, as amended, and the regulations
promulgated thereunder.

 

“Funded Debt” means the principal
amount of all Debt of the Borrower having a final maturity of more than one
year from the date of origin thereof (or which is renewable or extendible at
the option of the obligor for a period or periods more than one year from the
date of origin) excluding, however, the principal amount due under the
Revolving Note or any other line of credit used by Borrower for working capital
purposes, all determined in accordance with generally accepted accounting
principles, consistently applied for the period in question.

 

“General Contractor” means Fagen,
Inc., a Minnesota corporation, and its successors and assigns.

 

5

 

“Governmental Authority” means and
includes any and all courts, boards, agencies, commissions, offices, or
authorities of any nature whatsoever for any governmental unit (federal, state,
county, district, municipal, city, or otherwise) whether now or hereafter in
existence.

 

“Grantor” means and includes each and
all of the persons or entities granting a Security Interest in any Collateral
for the Indebtedness, including without limitation the Borrower.

 

“Imputed Operating Leases” means the
sum of future minimum rental commitments owed under non-cancelable operating
leases.

 

“Incentive Payments” means any and all
federal or state governmental subsidies, payments, transfers or other benefits,
whether now or hereafter established, received by the Borrower in any fiscal
year.

 

“Incentive Payment Recapture” means an
amount equal to all Incentive Payments less an amount equal to 50% of such
Incentive Payments.

 

“Income Taxes” means the applicable
state, local or federal tax on the net income of the Borrower.

 

“Inspecting Engineer” means BBI
International, a Colorado corporation, and its successors and permitted
assigns.

 

“Intellectual Property” has the
meaning specified in Section 4.01(n).

 

“Interest Bearing Debt” means any Debt
of the Borrower that accrues interest.

 

“Interest Expense” means for any
period, the total interest expense of the Borrower calculated on a consolidated
basis.

 

“Interest Period” means the period
commencing on the date of an Advance and ending on the numerically
corresponding day in the first, second, third, sixth or twelfth calendar month
thereafter, except that each such Interest Period which commences on the last
Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar
month.  Notwithstanding the
foregoing:  (a) each Interest
Period which would otherwise end on a day which is not a Business Day shall end
on the next succeeding Business Day or if such succeeding Business Day falls in
the next succeeding calendar month, on the next preceding Business Day;
(b) any Interest Period which would otherwise extend beyond the Maturity
Date shall end on the Maturity Date; and (c) no Interest Period shall have
a duration of less than one (1) month.

 

“Inventory” means all of the
Borrower’s inventory, as such term is defined in the UCC, whether now owned or
hereafter acquired, whether consisting of whole goods, spare parts or 

 

6

 

components, supplies or materials, whether
acquired, held or furnished for sale, for lease or under service contracts or
for manufacture or processing, and wherever located.

 

“Lender”
means AgStar Financial Services, PCA, and its successors and assigns.

 

“LIBOR Rate” (London Interbank Offered Rate) shall mean the London interbank offered rate per
annum for one-month deposits in United States dollars, as determined by the
British Banker’s Association average of interbank offered rates for United
States dollar deposits in the London market based on quotations at 16 major
banks, 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 LIBOR based on a new index which is
based on comparable information.

 

“Loan and Carrying Charges” means all
commitment fees to the Lender, brokerage fees, standby fees, interest charges,
service fees, attorneys’ fees, contractors’ fees, developers’ fees, funding
fees, title insurance fees and charges, recording fees, registration taxes,
real estate taxes, special assessments, insurance premiums, utility charges
incurred by the Borrower in the construction of the Project and issuance of the
Notes, all costs incurred in acquisition of the Real Property and any other
costs incurred in the development of the Project.

 

“Loan Documents” means this Agreement,
the Notes, the Security Agreement, the Mortgage and all other agreements,
documents, instruments, and certificates of the Borrower delivered to, or in
favor of, the Lender under this Agreement or in connection herewith or
therewith, including, without limitation, all agreements, documents,
instruments, certificates and delivered in connection with the extension of
Advances by the Lender.

 

“Loan Obligations” means all
obligations, indebtedness, and liabilities of the Borrower to the Lender
arising pursuant to any of the Loan Documents, whether now existing or
hereafter arising, whether direct, indirect, related, unrelated, fixed,
contingent, liquidated, unliquidated, joint, several, or joint and several,
including, without limitation, the obligation of the Borrower to repay the
Advances, interest on the Advances, and all fees, costs, and expenses
(including attorneys’ fees and expenses) provided for in the Loan Documents.

 

“Long Term Debt” means indebtedness
that matures more than one year after the date of determination thereof.

 

“Long Term Marketing Agreement” means
any contract, agreement or understanding of the Borrower having a term of one
year or more after the date of determination thereof relating to the sale of
any raw materials, inventory, products or by-products of the Borrower.

 

“Maintenance Capital Expenditures”
means all Capital Expenditures made in the ordinary course of business to
maintain existing business operations of the Borrower in any fiscal 

 

7

 

year, determined in accordance with generally
accepted accounting principles, consistently applied.

 

“Make Whole Amount” means any amounts
in addition to outstanding principal and interest payable under the Notes or
this Agreement in the event of a prepayment thereof.

 

“Material Adverse Effect” means any
set of circumstances or events which: 
(i) has or could reasonably be expected to have any material adverse
effect upon the validity or enforceability of any Loan Documents or any
material term or condition contained therein; (ii) is or could reasonably be
expected to be material and adverse to the condition (financial or otherwise), business
assets, operations, or property of the Borrower; or (iii) materially impairs or
could reasonably be expected to materially impair the ability of the Borrower
to perform the obligations under the Loan Documents.

 

“Maturity Date” means the fifth  (5th) anniversary of the
Conversion Date.

 

“Maximum Rate” means the rate set
forth in Section 2.01(c).

 

“Monthly Payment Date” means the first
day of each calendar month.

 

“Mortgage” means that certain Mortgage
of even date herewith, pursuant to which a mortgage interest shall be given by
the Borrower to the Lender in the Real Property to secure payment to the Lender
of the Loan Obligations.

 

“Net Worth” means the excess of total
assets over total liabilities, total assets and total liabilities each to be
determined in accordance with generally accepted accounting principles
consistent with those applied in the preparation of the financial statements
referred to in Section 4.01(e) for the Borrower.

 

“Net Income” means income after all
operating expenses including salaries and bonuses.

 

“Note/Notes” means and includes the
Construction Note and the Revolving Note evidencing the loans being made
hereunder.

 

“Ordinary Trade Payable Dispute” means
trade accounts payable, in an aggregate amount not in excess of $100,000 with
respect to the Borrower, with respect to which:  (a) there exists a bona  fide dispute between
Borrower and the vendor; (b) the Borrower is contesting the same in good
faith by appropriate proceedings; and (c) the Borrower has established
appropriate reserves on its financial statements.

 

“Outstanding Credit” means, at any
time of determination, the aggregate amount of Advances then outstanding.

 

“Outstanding Revolving Advances” means
the total Outstanding Credit under the Revolving Note.

 

8

 

“Owner Equity Ratio” means Tangible
Net Worth divided by total assets, measured annually at the end of each fiscal
year.

 

“Participation Fee” shall have the
meaning specified in Section 2.07.

 

“Person” means any individual,
corporation, business trust, association, company, partnership, joint venture,
governmental authority, or other entity.

 

“Personal Property” means all
buildings, structures, equipment, fixtures, improvements, building supplies and
materials and personal property now or hereafter attached to, located in,
placed in or necessary to the use of the improvements on the Real Property
including, but without being limited to, all machinery, fixtures, equipment,
furnishings, and appliances, as well as all renewals, replacements, additions,
and substitutes thereof, and all products and proceeds thereof, and including
without limitation all accounts, instruments, chattel paper, other rights to
payment, money, deposit accounts, insurance proceeds and general intangibles of
the Borrower, whether now owned or hereafter acquired.

 

“Plans and Specifications” means the
final plans and specifications for the construction of the Project, to be
prepared by the General Contractor, and approved by the Lender, and all amendments
and modifications thereof approved by Lender.

 

“Project” means any and all buildings,
structures, fixtures, and other improvements made to the Real Property and
other uses identified in the Project Sources and Uses Statement as part of the
acquisition and construction of an ethanol production facility in Friesland,
Wisconsin, for which the Loans to Borrower are being made hereunder.

 

“Project Costs” means the total of all
costs of acquiring the Real Property and constructing the Project as identified
in the Project Sources and Uses Statement, together with all Loan and Carrying
Charges.

 

“Project Sources and Uses Statement”
means the statement attached hereto as Exhibit B which identifies the sources
and uses of monies in a total amount of $60,044,000.00 related to the Project.

 

“Real Property” means that real
property located in the County of Columbia, State of Wisconsin, owned by the
Borrower, upon which the Project is to be constructed and which is described in
Schedule 3.01(c).

 

“Related Documents” means and includes
without limitation all promissory notes, credit agreements, loan agreements,
guaranties, security agreements, mortgages, deeds of trust, assignments and all
other instruments, agreements and documents, whether now or hereafter existing,
executed in connection with the Indebtedness.

 

“Request for Advance” has the meaning specified in
Section 2.05(a).

 

“Revolving Advance” means an advance under the Revolving Note.

 

9

 

“Revolving Loan” means the loan from
the Lender to the Borrower in the amount of $4,000,000.00 and pursuant to the
terms and conditions provided for in Sections 2.02 and 2.05, below.

 

“Revolving Note” means that certain
promissory note to be executed and delivered to the Lender by the Borrower on
the Conversion Date in the amount of $4,000,000.00.

 

“SARA”
means the Superfund Amendment and Reauthorizations Act of 1986, as amended.

 

“Security Agreement” means and
includes, without limitation, any agreements, promises, covenants, arrangements,
understandings, or other agreements, whether created by law, contract, or
otherwise, which evidence, govern, represent, or create a Security Interest, as
the same has been and may hereafter be amended or otherwise modified.

 

“Security Interest” means and includes
without limitation any type of collateral security, whether in the form of a
lien, charge, mortgage, assignment of rents, deed of trust, assignment, pledge,
chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale,
trust receipt, lien or title retention contract, lease or consignment intended
as a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.

 

“Subordinated Debt” means all Debt
held by:  (i) Fagen, Inc., or its
affiliates; (ii) tax increment financing; and (iii) debt owed the State of
Wisconsin or its agencies.

 

“Sworn Construction Statement” means a
sworn construction statement, sworn to by the Borrower and the General
Contractor, and of a form and substance acceptable to the Lender, a sample of
which is attached hereto as Exhibit C.

 

“Tangible Net Worth” means the excess
of total assets over total liabilities except Subordinated Debt, total assets
and total liabilities each to be determined in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 5.01(c) for the
Borrower, excluding, however, from the determination of total assets:  (i) goodwill, organizational expenses,
research and development expenses, trademarks, trade names, copyrights,
patents, patent applications, licenses and rights in any thereof, and other
similar intangibles; (ii) treasury stock; (iii) securities which are not readily
marketable; (iv) cash held in a sinking or other analogous fund
established for the purpose of redemption, retirement or prepayment of capital
stock or Debt; (v) any write-up in the book value of any asset resulting
from a revaluation thereof subsequent to the Closing Date; (vi) amortized
start-up costs; and (vii) any items not included in clauses (i)
through (vi) above which are treated as intangibles in conformity with
generally accepted accounting principles.

 

10

 

“Tax Distributions” has the meaning
specified in Section 5.02(b).

 

“Term Loan” means the loan from the
Lender to the Borrower in the amount and pursuant to the terms and conditions
provided for in Sections 2.01(e) and 2.04, below.

 

“Title Insurance” means a lender’s
title insurance policy, in form and substance satisfactory to the Lender and
containing no exceptions (printed or otherwise) which are unacceptable to
Lender, issued by a title insurer acceptable to the Lender, in the face amount
of the Note, insuring that Lender has a first and prior lien on the Real
Property and containing such endorsements as Lender may require.

 

“Unused Commitment Fee” shall have the
meaning specified in Section 2.04(c).

 

“Working Capital” means current assets
of the Borrower less current liabilities of the Borrower.

 

Section 1.02.                             Accounting
Matters.  All accounting
terms not specifically defined herein shall be construed in accordance with
generally accepted accounting principles consistently applied, except as otherwise
stated herein.  To enable the ready and
consistent determination of compliance by the Borrower with its obligations
under this Agreement, the Borrower will not change the manner in which either
the last day of its fiscal year or the last days of the first three fiscal
quarters of its fiscal years is calculated.

 

Section 1.03.                             Construction.  Wherever herein the singular number is used,
the same shall include the plural where appropriate, and words of any gender
shall include each other gender where appropriate.  The headings, captions or arrangements used in any of the Loan
Documents are, unless specified otherwise, for convenience only and shall not
be deemed to limit, amplify or modify the terms of the Loan Documents, nor
affect the meaning thereof.

 

ARTICLE II

AMOUNTS
AND TERMS OF THE TERM LOANS

 

Section 2.01.                             Construction
Loan.

 

(a)                                  Construction Loan.  Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties set forth in
this Agreement, the Lender agrees to lend to Borrower and Borrower agrees to
borrow from Lender the lesser of the following: (i) $33,024,200.00; or (ii) 55%
of the Project Costs.  Said amount shall
be loaned pursuant to the terms and conditions set forth in this Agreement.

 

(b)                                 Advances.  The Construction Loan shall be
funded by Advances on the Construction Note to be used for the construction of
the Project.

 

11

 

(c)                                  Interest Rate.  Subject to the provisions of Section 2.06 and 2.08, the
Construction Loan shall bear interest at a rate equal to the LIBOR Rate plus
375 basis points.  The computation of
interest, amortization, maturity and other terms and conditions of the
Construction Loan shall be as provided in the Construction Note, provided,
however, in no event shall the applicable rate exceed the maximum nonusurious
interest rate, if any, that at any time, or from time to time, may be
contracted for, taken, reserved, charged, or received under applicable state or
federal laws (the “Maximum Rate”).

 

(d)                                 Construction Loan Term.  The Construction Loan term shall run for a period beginning on
the date of this Agreement and ending on the Conversion Date.  On the Conversion Date, the Construction
Loan shall become fully due and payable, except for that part, if any, of the
Construction Loan which is converted into a Term Loan pursuant to the terms of
this Agreement.

 

(e)                                  Conversion to Term Loan.  The Lender agrees to convert the Construction Loan into a Term
Loan, provided all of the terms, conditions, warranties, representations, and
covenants of the Borrower set forth in his Agreement are satisfied. The
computation of interest, amortization, maturity and other terms and conditions
of the Term Loan, upon conversion, shall be as provided in the Construction
Note.

 

Section 2.02.                             Disbursement of Construction Loan.

 

(a)                                  Deposit Account.  Disbursements of the Construction Loan will
be made by the Lender in the manner provided in the Disbursing Agreement.  Subject to Section 2.02(b) below, all
disbursements will be made by wire transferring such funds to the deposit
account of the Disbursing Agent in the amount of each Draw Request which is
approved pursuant to the Disbursing Agreement. 
All Construction Loan funds will be considered to have been advanced to
and received by the Borrower upon, and interest on such funds will be payable
by the Borrower from and after, their deposit in such deposit account.

 

(b)                                 Lender’s Application of Loan Proceeds.   Notwithstanding the provisions of
Section 2.02(a), above, the Lender may elect, upon ten (10) days’ notice
to the Borrower, to use the Construction Loan funds to pay, as and when due,
any Construction Loan fees owing to Lender, interest on the Construction Loan,
release charges under prior mortgages on the Property, and legal fees and
disbursements of the Lender’s attorneys which are payable by the Borrower,
unless Borrower causes such amount(s) to be paid within said ten (10)
days.  Such payments may be made, at the
option of the Lender, by debiting or charging the Construction Loan funds in
the amount of such payments.

 

(c)                                  Cost Information.  All disbursements will be based upon a
detailed breakdown of the Project Costs. 
The Sworn Construction Statement, as approved by the Lender, is attached
as Exhibit C to this Agreement.  In the
event that the Borrower becomes aware of any change in the approved Project
Costs, which would increase the total cost in excess of $25,000.00 above the
amount shown on the attached Sworn Construction Statement, the Borrower shall
immediately notify the Lender in writing and promptly submit to the Lender for
its approval a 

 

12

 

revised Sworn Construction Statement. 
No further disbursements need be made by the Disbursing Agent unless and
until the revised Sworn Construction Statement is approved.  The Lender reserves the right to approve or
disapprove any revised Sworn Construction Statement in its reasonable
discretion.

 

(d)                                 Loan in Balance, Deposit of Funds by
Borrower.  The Borrower
shall keep the Loan in balance as provided in this Section.  If the Lender at any time reasonably
determines that the amount of the undisbursed Loan proceeds will not be
sufficient fully to pay for all costs required to complete the construction of the
Project in accordance with the approved Plans and Specifications and for all
Project Costs to be incurred by the Borrower, whether such deficiency is
attributable to changes in the work of construction or in the Plans and
Specifications or to any other cause, the Lender may make written demand on the
Borrower to deposit in an escrow fund to be established with the Lender an
amount equal to the amount of the shortage reasonably determined by the Lender.
The Borrower shall then deposit the required funds with the Lender within ten
(10) days after the date of the Lender’s written demand.  No further disbursements shall be made by
the Disbursing Agent until those funds are deposited by the Borrower in the
escrow fund.  Whenever the Lender has
any such funds on deposit in such escrow fund, it shall make all future
advances for Project Costs from the escrow fund before making any further
advances under the Loan.

 

(e)                                  Additional Security.  The Borrower irrevocably assigns to the
Lender and grants to the Lender a security interest in, as additional security
for the performance of the Borrower’s obligations under this Agreement and the
Related Documents, its interest in all funds held by the Disbursing Agent,
whether or not disbursed, all funds deposited by the Borrower with the Lender
under this Agreement, all governmental permits obtained for the lawful
construction of the Project, and all reserves, deferred payments, deposits,
refunds, cost savings, and payments of any kind relating to the construction of
the Project.  Upon any default of the
Borrower, the Lender may use any of the foregoing for any purpose for which the
Borrower could have used them under this Agreement or with respect to the
construction or financing of the Project. 
The Lender will also have all other rights and remedies as to any of the
foregoing which are provided under applicable law or in equity.

 

(f)                                    Conditions
Precedent to All Advances. 
The Lender’s obligation to make each Advance under the Construction Note
shall be subject to the terms, conditions and covenants set forth in this
Agreement, including, without limitation, the following further conditions
precedent:

 

(i)                                     Loan in Balance.  The Loan is in balance, as required by the
provisions of Section 2.03(d), above;

 

(ii)                                  Draw Request.  The Borrower has submitted to the Lender and
the Disbursing Agent a Draw Request for each such Advance, which such Draw
Request shall comply with the requirements contained in this Agreement and the
Disbursing Agreement;

 

(iii)                               Compliance With
Disbursing Agreement.  All of the
terms and conditions of the Disbursing Agreement have been satisfied with
respect to each such Advance;

 

13

 

(iv)                              Government Action.  No license, permit, permission or authority
necessary for the construction of the Project has been revoked or challenged by
or before any Governmental Authority;

 

(v)                                 Sworn Construction
Statement. If required by the Lender, the Borrower shall furnish to the
Lender an updated Sworn Construction Statement setting forth the Contractor(s)
providing services or materials with respect to specific portions of the
construction of the Project and setting forth the amounts actually incurred and
paid, or to be incurred, in completing construction of the Project.  Such updated Sworn Construction Statement
shall be sworn to by the Borrower and the General Contractor to be a true,
complete and accurate account of all costs actually incurred and an accurate
estimate of all costs to be incurred in the future;

 

(vi)                              No Defaults.  The Borrower is not in default under the
terms of this Agreement, the Related Documents or any other agreement to which
the Borrower is a party and which relates to the construction or operation of
the Project;

 

(vii)                           Construction Completion
Bond.  The Borrower has caused a
bonding company to issue a Construction Completion Bond;

 

(viii)                        Marketing Agreements. The Borrower has executed marketing
agreements for all ethanol and DDGS to be produced at the Project and provided
Lender with collateral assignments of all such agreements in form and content
which is satisfactory to Lender and its counsel and acknowledged by the
non-Borrower party to all such agreements;

 

(ix)                                Deposit of Cash Equity. 
The Borrower has deposited all Cash Equity with the Disbursing Agent,
except that monies expended by Borrower to cover costs of the Project prior to
the Closing Date and grant monies paid directly to a municipality to cover
costs of the Project need not be deposited into the Disbursing Account.

 

(g)                                 Suspension
of Construction.  If the Lender in reasonably good faith determines
that any work or materials do not conform to the approved Plans and
Specifications or sound building practice, or otherwise departs from any of the
requirements of this Agreement, the Lender may require the work to be stopped
and withhold disbursements until the matter is corrected.  In such event, the Borrower will promptly
correct the work to the Lender’s satisfaction. 
Provided Lender’s actions were reasonable, in good faith, and the work
or materials did not conform to the approved Plans and Specifications or sound
building practice, no such action by the Lender will affect the Borrower’s
obligation to complete the Project on or before the Completion Date.

 

(h)                                 Inspections.  The Borrower and the Inspecting Engineer shall be responsible for
making inspections of the Project during the course of construction and shall
determine to their own satisfaction that the work done or materials supplied by
the Contractors to whom payment is to be made out of each Advance has been
properly done or supplied in accordance with the applicable contracts with such
Contractors.  If any work done or
materials supplied by a Contractor are not 

 

14

 

satisfactory to the Borrower or the Inspecting Engineer, the Borrower
will immediately notify the Lender in writing of such fact.  It is expressly understood and agreed that
the Lender or its authorized representative may conduct such inspections of the
Project as it may deem necessary for the protection of the Lender’s interest,
and, specifically, an architectural or engineering firm acceptable to the
Lender may, at the option of the Lender and at the expense of the Borrower,
conduct such periodic inspections of the Project, prepare such written progress
reports during the period of construction, prepare such written reports upon
completion of the Project and sign such Draw Requests, as the Lender may
request, provided that no inspection shall unreasonably delay progress on the
Project.  Any inspections which may be
made of the Project by the Lender or its representative will be made, and all
certificates issued by the Lender’s representative will be issued, solely for
the benefit and protection of the Lender, and that Borrower will not rely
thereon.  The Lender is under no duty to
supervise or inspect construction or examine any books and records.  Any inspection or examination by the Lender
is for the sole purpose of protecting the Lender’s security and preserving the
Lender’s rights under this Agreement. 
No default of the Borrower will be waived by any inspection by the
Lender.  In no event will any inspection
by the Lender be a representation that there has been or will be compliance
with the Plans or Specifications or that the construction is free from
defective materials or workmanship.

 

(i)                                     No Waiver.  Any waiver by the Lender of any condition of
disbursement must be expressly made in writing.  The making of a disbursement prior to fulfillment of one or more
conditions thereof shall not be construed as a waiver of such conditions, and
the Lender reserves the right to require their fulfillment prior to making any
subsequent disbursements.

 

Section 2.03.                             Conversion
of Construction Loan Into Term Loan. 
 Pursuant to the terms and
conditions contained in this Agreement, the Construction Loan may be converted
into a Permanent Loan.

 

(a)                                  Conditions Precedent.  In addition to the terms and conditions of
disbursement set forth in this Agreement and as incorporated from the Disbursing
Agreement, the Lender shall not be obligated to convert any part of the
Construction Loan into a Term Loan unless and until:

 

(i)                                     Amount of Term
Loan.  The maximum amount of the
Construction Loan which is converted to a Term Loan shall be the lesser of the
following:  (A) $29,024,200.00; or (B)
55% of the Project Costs less $4,000,000.00;

 

(ii)                                  Construction
Loan Exceeds Term Loan.  In
the event that the amount of the Construction Loan advanced by Lender exceeds
the amount of the Term Loan to be made by the Lender, including as a result of
the appraisal required above, the Borrower shall immediately repay the amount
of the Construction Loan which is not being converted into a Term Loan; and

 

(iii)                               Facility Fee.  The Borrower shall have paid Lender the Facility
Fee which is due pursuant to Section 2.07.

 

15

 

(b)                                 Incentive Payment Recapture/Excess Cash Flow.  Following the Conversion Date, and in
addition to all other payments of principal and interest required under this
Agreement or the Notes, the Borrower shall annually remit to Lender an amount
equal to the sum of:  (i) 20% of the
Borrower’s Excess Cash Flow; and (ii) the Borrower’s Incentive Payment
Recapture on or before January 31st of the succeeding fiscal
year.

 

(c)                                  Conversion
to Fixed Rate Loan.  On the Conversion Date, the Borrower shall
have the right to convert all or any part of the Construction Loan into a Fixed
Rate Loan, with the consent of the Lender, which shall bear interest at a rate
equal to an agreed upon known funding source, such as the 5-year federal home
loan base rate, plus the existing base point spread which Borrower is currently
at.

 

Section 2.04.                             Revolving
Loan.

 

(a)                                  Revolving Loan.  The Lender agrees, on the terms and
conditions set forth in this Agreement, to extend credit to the Borrower from
time to time during the period from the Conversion Date through and including
the Maturity Date by making loans to the Borrower on a revolving basis from
time to time.

 

(b)                                 Interest Rate.  Subject to the provisions of Section 2.06 and 2.08, the
Revolving Loan shall bear interest at a rate equal to the LIBOR Rate plus 375
basis points.  The computation of
interest, amortization, maturity and other terms and conditions of the
Revolving Loan shall be as provided in the Revolving Note, provided, however,
in no event shall the applicable rate exceed the Maximum Rate.

 

(c)                                  Unused Commitment  Fee.  In addition to the commitment fee payable on
the Closing Date, Borrower agrees to pay to the Lender an Unused Commitment Fee
on the average daily unused portion of such Lender’s Commitment under the
Revolving Loan from the Conversion Date until the Maturity Date at the rate of
0.50% per annum, payable in arrears in quarterly installments payable on the
first day of each third month after the Conversion Date.

 

Section 2.05.                             Making
the Revolving Advances.

 

(a)                                  Revolving Advances.  Each Revolving Advance shall be made, on
notice from the Borrower (a “Request for Advance”) to the Lender
delivered before 12:00 Noon (Minneapolis, Minnesota time) on a Business
Day which is at least three (3) Business Days prior to the date of such
Revolving Advance specifying the amount of such Revolving Advance, provided
that, no Revolving Advance shall be made while an Event of Default exists or if
the interest rate for such LIBOR Rate Accounts would exceed the Maximum
Rate.  Any Request for Advance
applicable to a Revolving Advance received after 12:00 Noon (Minneapolis,
Minnesota time) shall be deemed to have been received and be effective on the
next Business Day.  The amount so
requested from the Lender shall, subject to the terms and conditions of this
Agreement, be made available to the Borrower by:  (i) depositing the same, in same day funds, in an account of
the Borrower; or (ii) wire transferring such funds to a Person or Persons
designated by the Borrower in writing.

 

16

 

(b)                                 Requests for Advances Irrevocable.  Each Request for Advance shall be
irrevocable and binding on the Borrower and the Borrower shall indemnify the
Lender against any loss or expense it may incur as a result of any failure to
borrow any Advance after a Request for Advance (including any failure resulting
from the failure to fulfill on or before the date specified for such Advance
the applicable conditions set forth in Article III of this Agreement),
including, without limitation, any loss (including loss of anticipated profits)
or expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by the Lender to fund such Advance when such Advance, as a
result of such failure, is not made on such date.

 

(c)                                  Minimum Amounts.  Each Revolving Advance shall be in a minimum
amount equal to $50,000.00.

 

(d)                                 Use of Proceeds.  The proceeds of the Revolving Advances shall
be used by the Borrower to finance its working capital requirements in the
ordinary course of business and to fund Project Costs.

 

Section 2.06.                             Adjustments to Interest Rate.    Notwithstanding any other provision of this
Agreement or the Related Documents, the rate of interest under the Term Loan or
the Revolving Loan shall vary according to the following schedule should
the Owner’s Equity in the Borrower achieve the levels set forth below:

 

	
  Owner’s Equity

  	
   

  	
  Interest Rate

  
	
   

  	
   

  	
   

  
	
  40.00%—49.99%

  	
   

  	
  Applicable
  LIBOR Rate plus 375 basis points

  
	
   

  	
   

  	
   

  
	
  50.00%—54.99%

  	
   

  	
  Applicable
  LIBOR Rate plus 325 basis points

  
	
   

  	
   

  	
   

  
	
  Greater
  Than 55.00%

  	
   

  	
  Applicable
  LIBOR Rate plus 275 basis points

  

 

Upon delivery of the monthly financial
statements and the Compliance Certificate pursuant to Section 5.01(c)(iii)
for each month that corresponds with each month end, the rate of interest for
any month shall automatically be adjusted in accordance with the Owner’s Equity
set forth therein and the rates set forth above.  Such automatic adjustment to the rate of interest shall take
effect as of the first Business Day of the month in which the Lender received
the related Compliance Certificate.  The
term “Adjustment
Date” shall mean each such Business Day when such rates, margins or
fees change pursuant to the immediately prior sentence or the next following
sentence.  If the Borrower fails to
deliver such Compliance Certificate which so sets forth the Owner’s Equity
within the period of time required by Section 5.01(c)(iii) hereof or if
any Event of Default occurs, the rate of interest shall automatically be
adjusted to a rate equal to the applicable LIBOR Rate plus 375 basis points,
such automatic adjustments:  (a) to
take effect as of the first Business Day after the last day on which 

 

17

 

the Borrower were required to deliver the
applicable Compliance Certificate in accordance with Section 5.01(c)(ii)
hereof or in the case of an Event of Default, on the date the written notice is
given to the Borrower; and (b) to remain in effect until subsequently
adjusted in accordance herewith upon the delivery of such Compliance
Certificate or, in the case of an Event of Default, when such Event of Default
has been cured to the satisfaction of the Lender.

 

Section 2.07.                             Commitment/Participation/Facility
Fees.  The Borrower
agrees to pay to the Lender on the Closing Date:  (i) a Commitment Fee of $80,000.00; and (ii) a Participation Fee
of  $247,681.50.  In addition, the Borrower shall pay to
Lender on or before the Conversion Date, and on each anniversary of the
Conversion Date through the fourth anniversary, an annual Facility Fee of
$40,000.00.

 

Section 2.08.                             Default
Interest.  Upon the
occurrence of an Event of Default, all past due principal and, to the extent
permitted by applicable law, interest, fees, and other amounts owing hereunder,
shall bear interest, from the date of such Event of Default until the date the
Lender, in writing, acknowledge that such Event of Default is waived or cured
or all Loan Obligations are paid in full, at the Default Rate.  The term “Default Rate”, as used
herein, means the lesser of: 
(a) the Maximum Rate (which shall mean the maximum nonusurious
interest rate, if any, at any time, or from time to time, that may be
contracted for, taken, reserved, charged or received under applicable state or
federal laws); or (b) the rate per annum which shall from day-to-day be
equal to two percent (2%) in excess of the then applicable rate of interest.  Interest payable at the Default Rate shall
be payable from time to time on demand or, if not sooner demanded, on the last
day of each calendar month.

 

Section 2.09.                             Prepayment
of Term Loan.                The
Borrower may, by notice to the Lender, prepay the outstanding amount of the
Term Loan in whole or in part with accrued interest to the date of such
prepayment on the amount prepaid, without penalty or premium, except as
provided in this Section 2.09.  In
the event the Term Loan is prepaid, in whole or in part, within three (3) years
following the date of this Agreement, the Borrower shall pay a prepayment fee
equal to the following specified percentage of the amount of principal prepaid:

 

	
  Months 1-12

  	
   

  	
  3.00

  	
  %

  
	
  Months 13-24

  	
   

  	
  2.00

  	
  %

  
	
  Months 25-36

  	
   

  	
  1.00

  	
  %

  

 

Notwithstanding the foregoing, no prepayment
fee shall be required if such prepayment is made pursuant to
Section 2.03(b) of this Agreement.

 

Section 2.10.                             Changes
in Law Rendering Certain LIBOR Rate Loans Unlawful.  In the event that any change in any
applicable law (including the adoption of any new applicable law) or any change
in the interpretation of any applicable law by any judicial, governmental or
other regulatory body charged with the interpretation, implementation or
administration thereof, should make it (or in the good-faith judgment of the
Lender should raise a substantial question as to whether it is) unlawful for
the Lender to make, maintain or fund LIBOR Rate Loans, then:  (a) the Lender 

 

18

 

shall promptly notify each of the other
parties hereto; and (b) the obligation of the Lender to make LIBOR rate
loans of such type shall, upon the effectiveness of such event, be suspended
for the duration of such unlawfulness.  During
the period of any suspension, Lender shall make loans to Borrower that are
deemed lawful and that as closely as possible reflect the terms of this
Agreement.

 

Section 2.11.                             Payments
and Computations.

 

(a)                                  Method of Payment.  Except as otherwise expressly provided
herein, all payments of principal, interest, and other amounts to be made by
the Borrower under the Loan Documents shall be made to the Lender in U.S.
dollars and in immediately available funds, without set-off, deduction, or
counterclaim, not later than 2:00 P.M. (Minneapolis, Minnesota time) on
the date on which such payment shall become due (each such payment made after
such time on such due date to be deemed to have been made on the next
succeeding Business Day).  The Borrower
shall, at the time of making each such payment, specify to the Lender the sums
payable under the Loan Documents to which such payment is to be applied and in
the event that the Borrower fail to so specify or if an Event of Default
exists, the Lender may apply such payment and any proceeds of any Collateral to
the Loan Obligations in such order and manner as it may elect in its sole
discretion, subject to Section 2.11(c).

 

(b)                                 Payments on a Non-Business Day.  Whenever any payment under any Loan Document
shall be stated to be due on a day that is not a Business Day, such payment may
be made on the next succeeding Business Day, and such extension of time shall
in such case be included in the computation of the payment of interest and
fees, as the case may be.

 

(c)                                  Proceeds of Collateral.  All proceeds received by the Lender from the
sale or other liquidation of the Collateral when an Event of Default exists
shall first be applied as payment of the accrued and unpaid fees and expenses
of the Lender hereunder, including, without limitation, under Section 7.04
and then to all other unpaid or unreimbursed Loan Obligations (including
reasonable attorneys’ fees and expenses) owing to the Lender and then any
remaining amount of such proceeds shall be applied to the unpaid amounts of
Loan Obligations, until all the Loan Obligations have been paid and satisfied
in full or cash collateralized.  After
all the Loan Obligations (including without limitation, all contingent Loan
Obligations) have been paid and satisfied in full, all Commitments terminated
and all other obligations of the Lender to the Borrower otherwise satisfied,
any proceeds of Collateral shall be delivered to the Person entitled thereto as
directed by the Borrower or as otherwise determined by applicable law or
applicable court order.

 

(d)                                 Computations.  Except as expressly provided otherwise
herein, all computations of interest and fees shall be made on the basis of
actual number of days lapsed over a year of 365 or 366 days, as
appropriate.  Interest shall accrue from
and include the date of borrowing, but exclude the date of payment.

 

Section 2.12.                             Maximum
Amount Limitation. 
Anything in this Agreement or the other Loan Documents to the contrary
notwithstanding, Borrower shall not be required to pay unearned interest on any
Note or any of the Loan Obligations, or ever be required to pay interest on any
Note 

 

19

 

or any of the Loan Obligations at a rate in
excess of the Maximum Rate, if any.  If
the effective rate of interest which would otherwise be payable under this
Agreement, any Note or any of the other Loan Documents would exceed the Maximum
Rate, if any, then the rate of interest which would otherwise be contracted
for, charged, or received under this Agreement, any Note or any of the other
Loan Documents shall be reduced to the Maximum Rate, if any.  If any unearned interest or discount or
property that is deemed to constitute interest (including, without limitation,
to the extent that any of the fees payable by Borrower for the Loan Obligations
to the Lender under this Agreement, any Note, or any of the other Loan
Documents are deemed to constitute interest) is contracted for, charged, or
received in excess of the Maximum Rate, if any, then such interest in excess of
the Maximum Rate shall be deemed a mistake and canceled, shall not be collected
or collectible, and if paid nonetheless, shall, at the option of the holder of
such Note, be either refunded to the Borrower, or credited on the principal of
such Note.  It is further agreed that,
without limitation of the foregoing and to the extent permitted by applicable
law, all calculations of the rate of interest or discount contracted for,
charged or received by the Lender under its Note, or under any of the Loan
Documents, that are made for the purpose of determining whether such rate
exceeds the Maximum Rate applicable to the Lender, if any, shall be made, to
the extent permitted by applicable laws (now or hereafter enacted), by
amortizing, prorating and spreading during the period of the full terms of the
Advances evidenced by the Notes, and any renewals thereof all interest at any
time contracted for, charged or received by Lender in connection
therewith.  This Section 2.12 shall
control every other provision of all agreements among the parties to this
Agreement pertaining to the transactions contemplated by or contained in the
Loan Documents, and the terms of this Section 2.12 shall be deemed to be
incorporated in every Loan Document and communication related thereto.

 

Section 2.13.                             Lender
Records.  All advances and
all payments or prepayments made thereunder on account of principal or interest
may be evidenced by the Lender in accordance with its usual practice in an
account or accounts evidencing such advances and all payments or prepayments
thereunder from time to time and the amounts of principal and interest payable
and paid from time to time thereunder; in any legal action or proceeding in
respect of the Notes, the entries made in such account or accounts shall be prima
facie evidence of the existence and amounts of all advances and all
payments or prepayments made thereunder on account of principal or
interest.  Lender shall provide monthly
statements of such entries to Borrower for the purpose of confirming the accuracy
of such entries.

 

Section 2.14.                             Loan Payments.  The Lender may deduct any obligations due or
any other amounts due and payable by the Borrower under the Loan Documents from
any accounts maintained with the Lender.

 

Section 2.15.                             Purchase
of Equity Interests in AgStar Financial Services, PCA.  Besides (and not in lieu of) the other
amounts payable by Borrower under this Agreement, Borrower shall purchase
$1,000.00 of equity interests in AgStar Financial Services, PCA.  The purchase price for the equity interests
shall be payable in full on or prior to the date hereof.  Such purchases of equity interests shall
comply with AgStar Financial Services, PCA’s respective by-laws and capital
plans applicable to borrowers generally. 
Borrower hereby acknowledge receipt of the following information and materials
pertaining to AgStar Financial Services, PCA prior to the execution of this 

 

20

 

Agreement: (i) copies of the by-laws of
AgStar Financial Services, PCA; (ii) a written description of the terms and conditions
under which the equity interests are issued; (iii) a copy of the most recent
annual reports of AgStar Financial Services, PCA; and (iv) if more recent than
the latest annual reports, the latest quarterly reports of AgStar Financial
Services, PCA.  AgStar Financial
Services, PCA shall possess a statutory security interest in its equity
interests.  AgStar Financial Services,
PCA reserves the right to sell participations on a non-patronage basis.

 

Borrower acknowledges and agrees that:  (a) only the portions of the Loans provided
to Borrower by AgStar Financial Services, PCA are entitled to patronage
distributions in accordance with the bylaws of AgStar Financial Services, PCA
and its practices and procedures; and (b) any patronage or similar payments to
which Borrower is entitled as a result of its ownership of the equity interests
in AgStar Financial Services, PCA will not be based on any of the Loans not
belonging to AgStar Financial Services, PCA or in which AgStar Financial
Services, PCA has granted a participation interest at any time.

 

Section 2.16.                             Compensation.  Upon the request of the Lender, the
Borrower shall pay to the Lender such amount or amounts as shall be sufficient
(in the reasonable opinion of the Lender) to compensate it for any loss, cost,
or expense (excluding loss of anticipated profits incurred by it) as a result
of: (i) any payment, prepayment, or conversion of a LIBOR rate loan for any
reason on a date other than the last day of the Interest Period for such Loan;
or (ii) any failure by the Borrower for any reason (including, without
limitation, the failure of any condition precedent specified in
Section 3.01 to be satisfied) to borrow, extend, or prepay a LIBOR rate
loan on the date for such borrowing, extension, or prepayment specified in the
relevant notice of borrowing, extension or prepayment under this Agreement.

 

Such indemnification may include any amount
equal to the excess, if any, of:  (a)
the amount of interest which would have accrued on the amount so prepaid, or
not so borrowed, converted or extended, for the period from the date of such
prepayment or of such failure to borrower, convert or extend to the last day of
the applicable Interest Period (or in the case of a failure to borrow, convert
or extend, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such loan as
provided for herein; over (b) the amount of interest (as reasonably determined
by the Lender) which would have accrued to the Lender on such amount by placing
such amount on deposit for a comparable period with leading banks in the
interbank LIBOR market. The covenants of the Borrower set forth in this
Section 2.16 shall survive the repayment of the Loans and other
obligations under the Loan Documents hereunder.

 

ARTICLE III.

CONDITIONS
PRECEDENT

 

Section 3.01.                             Conditions
Precedent to Funding. 
The effectiveness of this Agreement and obligations of the Lender to
fund the Loans are subject to the condition precedent that the Lender shall
have received the following, in form and substance satisfactory to the Lender:

 

(a)                                  This Agreement, duly
executed by the Borrower and the Lender;

 

21

 

(b)                                 The Notes, duly
executed by the Borrower;

 

(c)                                  The Mortgage, fully
executed and notarized, to secure the Loans encumbering on a first Lien basis
the fee interest and/or leasehold interest of the Borrower in the Real Property
and the fixtures thereon described in Schedule 3.01(c);

 

(d)                                 A Security Agreement
duly executed by the Borrower and in a form as provided by the Lender by which
security agreement the Lender is granted a security interest by the Borrower in
the Collateral;

 

(e)                                  A copy of the
Construction Contract(s) and a complete set of the Plans and Specifications,
together with copies of all permits and government approvals relating to the
construction and use of the Project;

 

(f)                                    An assignment of
contract for each of the Construction Contracts and the Plans and
Specifications, duly executed by the Borrower and pursuant to which the
Borrower shall have assigned to the Lender all of the Borrower’s right, title
and interest in and to each such Construction Contract, and which assignment
shall have been consented to and certified in writing by the other party(ies)
to each such Construction Contract;

 

(g)                                 Copies
of all other agreements between Borrower and third parties used in the normal
operations of Borrower, including but not limited to management agreements,
marketing agreements, and corn delivery agreements;

 

(h)                                 Assignments
of the contracts between Borrower and third parties identified above, duly
executed by the Borrower and pursuant to which the Borrower shall have assigned
to the Lender all of the Borrower’s right, title and interest in and to each
such contracts, and which assignment shall have been consented to and certified
in writing by the other party(ies) to each such contract;

 

(i)                                     Financing
Statements in form and content satisfactory to the Lender and in proper form
under the Uniform Commercial Code of all jurisdictions as may be necessary or,
in the opinion of the Lender, desirable to perfect the security interests
created by the Security Agreement;

 

(j)                                     Copies of UCC, tax
and judgment lien search reports listing all financing statements and other
encumbrances which name the Borrower (under its present name and any previous
name) and which are filed in the jurisdictions in which the Borrower is
located, organized or maintains collateral, together with copies of such
financing statements (none of which shall cover the collateral purported to be
covered by the Security Agreement);

 

(k)                                  Evidence that all
other actions necessary or, in the opinion of the Lender, desirable to enable
the Lender to perfect and protect the security interests created by the
Security Agreement have been taken;

 

22

 

(l)                                     An ALTA mortgagee
title insurance policy issued by a title insurance company acceptable to
Lender, with respect to the Real Property, assuring the Lender that the
Mortgage creates a valid and enforceable encumbrance on the Real Property, free
and clear of all defects and encumbrances except Permitted Liens and
containing:  (i) a comprehensive
endorsement (ALTA form 9); (ii) a zoning endorsement (ALTA form 3.1) specifying
an ethanol production facility as a permitted use for all of the parcels
included in the Real Property; and (iii) such endorsements as the Lender shall
reasonably require.  All such title
insurance policies shall be in form and substance reasonably satisfactory to
the Lender and shall provide for affirmative insurance and such reinsurance as
the Lender may reasonably request, all of the foregoing in form and substance
reasonably satisfactory to the Lender;

 

(m)                               Maps or plats of the
Real Property certified to the Lender and the title insurance company issuing
the policy referred to in Subsection 3.01(k) (the “Title Insurance
Company”) in a manner reasonably satisfactory to each of the Lender and the
Title Insurance Company, dated a date reasonably satisfactory to each of the
Lender and the Title Insurance Company by an independent professional licensed
land surveyor, which maps or plats and the surveys on which they are based
shall be sufficient to delete any standard printed survey exception contained
in the applicable title policy and be made in accordance with the Minimum
Standard Detail Requirements for Land Title Surveys jointly established and
adopted by the American Land Title Association and the American Congress on
Surveying and Mapping in 1992, and, without limiting the generality of the
foregoing, there shall be surveyed and shown on such maps, plats or surveys the
following:  (i) the locations on
such sites of all the buildings, structures and other improvements and the
established building setback lines; (ii) the lines of streets abutting the
sites and width thereof; (iii) all access and other easements appurtenant
to the sites necessary to use the sites; (iv) all roadways, paths,
driveways, easements, encroachments and overhanging projections and similar
encumbrances affecting the site, whether recorded, apparent from a physical
inspection of the sites or otherwise known to the surveyor; (v) any
encroachments on any adjoining property by the building structures and
improvements on the sites; and (vi) if the site is described as being on a
filed map, a legend relating the survey to said map;

 

(n)                                 Evidence as to:  (i) whether any portion of the Real
Property is in an area designated by the Federal Emergency Management Agency as
having special flood or mud slide hazards (a “Flood Hazard Property”);
and (ii) if any portion of the Real Property is a Flood Hazard
Property:  (A) whether the
community in which such Real Property is located is participating in the
National Flood Insurance Program; (B) the Borrower’s written
acknowledgment of receipt of written notification from the Lender (1) as
to the fact that such Real Property is a Flood Hazard Property and (2) as
to whether the community in which each such Flood Hazard Property is located is
participating in the National Flood Insurance Program; and (C) copies of
insurance policies or certificates of insurance of the Borrower evidencing
flood insurance satisfactory to the Lender and naming the Lender as sole loss
payee on behalf of the Lender;

 

(o)                                 Evidence reasonably satisfactory to the Lender that the Real Property
and the contemplated use of the Real Property, are in compliance in all
material respects with all applicable Laws including without limitation health
and Environmental Laws, including, but not limited to all concentrated animal
feedlot operations rules and regulations, erosion control ordinances, storm

 

23

 

drainage control laws, doing business and/or
licensing laws, zoning laws (the evidence submitted as to zoning should include
the zoning designation made for the Real Property, the permitted uses of the
Real Property under such zoning designation and zoning requirements as to
parking, lot size, ingress, egress and building setbacks) and laws regarding
access and facilities for disabled persons including, but not limited to, the
Federal Architectural Barriers Act, the Fair Housing Amendments Act of 1988,
the Rehabilitation Act of 1973 and the Americans with Disabilities Act of 1990;

 

(p)                                 A certificate of the
secretary of the Borrower together with true and correct copies of the
following:  (i) the Articles of
Organization of the Borrower, including all amendments thereto, certified by
the Department of Financial Institutions of the state of its incorporation and
dated within 30 days prior to the date hereof; (ii) the Operating
Agreement of the Borrower, including all amendments thereto; (iii) the
resolutions of the Board of Directors of the Borrower authorizing the execution,
delivery and performance of this Agreement, the other Loan Documents, and all
documentation executed and delivered in connection therewith to which the
Borrower is a party; (iv) certificates of the appropriate government
officials of the state of organization of the Borrower as to its existence and
good standing, and certificates of the appropriate government officials in each
state where each corporate Borrower does business and where failure to qualify
as a foreign corporation would have a material adverse effect on the business
and financial condition of the Borrower, as to its good standing and due
qualification to do business in such state, each dated within 30 days prior to
the date hereof; and (v) the names of the officers of the Borrower
authorized to sign this Agreement and the other Loan Documents to be executed
by each corporate Borrower, together with a sample of the true signature of
each such officer;

 

(q)                                 Favorable opinion of
Brown, Winick, Graves, Gross, Baskerville and Schoenebaum, legal counsel for the
Borrower, in the form attached hereto as “Exhibit D”;

 

(r)                                    The Commitment Fee,
Participation Fee, and Facility Fee due pursuant to Section 2.07 have been
paid;

 

(s)                                  An Intercreditor
Agreement between the Lender and Fagen, Inc. as to the priority of the Lender’s
security interests in the Collateral, rights to payment following an Event of
Default, and as to such other matters as requested by the Lender.  Such Intercreditor Agreement shall, among
other things, provide that in the event Lender does not receive required
principal reduction from Borrower, or Borrower does not meet all loan
covenants, no payments are to be made on subordinated debt by Borrower to
Fagen, Inc.  Instead, any such missed
payments shall be added to the end of the amortization schedule for the
subordinated debt owed to Fagen Inc. 
Further providing that the subordinated debt from Fagen, Inc. may be
reduced in the event Borrower injects cash of a like amount into the Company;

 

(t)                                    Evidence that the
costs and expenses (including, without limitation, attorney’s fees) referred to
in Section 7.04, to the extent incurred and invoiced, shall have been paid
in full;

 

(u)                                 The results of the
Lender’s inspection of the Collateral, and the Lender’s receipt of an appraisal
of the Collateral acceptable to Lender in its sole discretion;

 

24

(v)                                 Satisfactory review by
the Lender of any pending litigation relating to the Borrower;

 

(w)                               A Phase I Environmental
Assessment in form and substance acceptable to the Lender;

 

(x)                                   The Borrower shall
have provided to Lender a corn logistics study from PRX prior to the Closing
Date;

 

(y)                                 The Borrower shall
have ordered the General Contractor to begin construction of the Project, and
construction shall have commenced;

 

(z)                                   A
schedule, certified by Borrower as accurate and complete, setting forth:  (i) the necessary licenses, permits and
consents required by applicable federal, state, and local governmental entities
required for the lawful construction and operation of the Project; and (ii) the
deadlines to obtain such licenses, permits and consents so that the Completion
Date occurs as scheduled;

 

(aa)                            Lender
shall have received in form and substance acceptable to Lender, an agreement
with an Inspecting Engineer of recognized standing and acceptable to Lender, by
which agreement such Inspecting Engineer agrees to assist Lender in its
inspection of the Project during construction, review and approve Draw Requests
on behalf of Lender, and provide such additional services as Lender may
reasonably require at the sole expense of Borrower;

 

(bb)                          The
Borrower shall have provided commitment to the Lender of its Cash Equity.  Notwithstanding the foregoing, should the
Borrower’s members’ equity be in excess of $23,781,500.00 at Closing Date, the
required subordinated debt shall be reduced by an amount equal to the amount of
such members’ equity in excess of $23,781,500.00;

 

(cc)                            The Borrower has caused a
bonding company to issue a Construction Completion Bond;

 

(dd)                          The
Borrower shall have provided to Lender evidence of ownership indicating that at
least 50% of the owners of Borrower are eligible borrowers;

 

(ee)                            The
Borrower shall notify Lender of any changes in plant management or any decision
to excuse management;

 

ARTICLE IV.

REPRESENTATIONS
AND WARRANTIES

 

Section 4.01                                Representations
and Warranties of the Borrower. 
The Borrower represents and warrants as follows:

 

(a)                                  Borrower.  The Borrower is a limited liability company
duly organized and validly existing and in good standing under the laws of the
State of Wisconsin and is qualified to do 

 

25

 

business in all jurisdictions in which the
nature of its business makes such qualification necessary and where failure to
so qualify would have a Material Adverse Effect on its financial condition or
operations.  The Borrower has the power
and authority to execute, deliver, and perform its obligations under the Loan
Documents to which it is or may become a party. The Borrower has had no
subsidiaries.  There are no outstanding
subscriptions, options, warrants, calls, or rights (including preemptive
rights) to acquire, and no outstanding securities or instruments convertible
into, membership interests (units) of the Borrower, except for those
transactions set forth on Schedule 4.01(a);

 

(b)                                 The Loan Documents.  The execution, delivery and performance by
the Borrower of the Loan Document are within the Borrower’s powers, have been
duly authorized by all necessary action, do not contravene:  (i) the Borrower’s articles or
operating agreements; or (ii) any law or any contractual restriction
binding on or affecting the Borrower, and do not result in or require the
creation of any lien, security interest or other charge or encumbrance (other
than pursuant to the terms thereof) upon or with respect to any of its
properties;

 

(c)                                  Governmental Approvals.  No authorization or approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is required for the due execution, delivery and performance by the
Borrower of any Loan Documents, except for such approvals and consents which
have been made or obtained;

 

(d)                                 Enforceability.  This Agreement is, and each other Loan
Document to which the Borrower is a party when delivered will be, legal, valid
and binding obligations of the Borrower enforceable against the Borrower in
accordance with their respective terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting
the enforcement of creditor’s rights generally and by general principles of equity;

 

(e)                                  Financial Condition and Operations.  The balance sheets of the Borrower as of
December 31, 2003, and the related statements of income and, with respect
to the period ended December 31, 2003, the related statement of cash flow
of the Borrower for the fiscal period then ended, copies of which have been
furnished to the Lender, fairly present in all material respects the financial
condition of the Borrower as at such date and the results of the operations of
the Borrower for the period ended on such dates, all in accordance with
generally accepted accounting principles consistently applied, and since
December 31, 2003, there has been no material adverse change in such
condition or operations;

 

(f)                                    Litigation.  Except as described on Schedule 4.01(f),
there is no pending or threatened action or proceeding affecting the Borrower
or any of the transactions contemplated hereby before any court, governmental
agency or arbitrator, which may materially adversely affect the financial
condition or operations of the Borrower. 
As of the Closing Date there are no outstanding judgments against the
Borrower;

 

(g)                                 Use of Proceeds of Advances, etc.  (i) No proceeds of the Loans will be
used to acquire any security in any transaction which is subject to
Sections 13 and 14 of the Securities 

 

26

 

Exchange Act of 1934 (provided, however, that
this provision shall not prohibit Borrower from investing in certain value
added cooperatives for the purposes of carrying out their overall business
operations); (ii) the Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U issued by the Board of Governors of the Federal
Reserve System); and (iii) no proceeds of the Loans will be used to
purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock;

 

(h)                                 Liens.  There is no lien, security interest or other
charge or encumbrance, and no other type of preferential arrangement, upon or
with respect to any of the properties or income of the Borrower, which secures
Debt of any Person, except as described in Schedule 5.02(a);

 

(i)                                     Solvency.  As of and from and after the date of this Agreement,
the Borrower:  (i) owns and will
own assets the fair saleable value of which are: (A) greater than the
total amount of liabilities (including contingent liabilities); and
(B) greater than the amount that will be required to pay the probable liabilities
of its then existing debts as they become absolute and matured considering all
financing alternatives and potential asset sales reasonably available to it;
(ii) has capital that is not unreasonably small in relation to its
business as presently conducted or any contemplated or undertaken transaction;
and (iii) does not intend to incur and does not believe that it will incur
debts beyond its ability to pay such debts as they become due;

 

(j)                                     Location
of Inventory and Farm Products; Third Parties in Possession; Crops.  The Borrower’s inventory and farm products
pledged as collateral under the Security Agreement are located at the places
(or, as applicable, jurisdictions) specified in Schedule 4.01(j) for the
Borrower, except to the extent any such inventory and farm products are in
transit.  Schedule 4.01(j)
correctly identifies, as of the date hereof, the landlords or mortgagees, if
any, of each of its locations identified in Schedule 4.01(j) currently
leased or owned by the Borrower.  Except
for the Persons identified on Schedule 4.01(j), no Person other than the
Borrower and the Lender has possession of any of the Collateral.  Except as described in above, none of its
Collateral has been located in any location within the past four months other
than as set forth on Schedule 4.01(k) for the Borrower;

 

(k)                                  Office Locations; Fictitious Names;
Predecessor Companies; Tax I.D. Number.  The Borrower’s chief place of business, its
chief executive office, and its jurisdiction of organization is located at the
place identified for the Borrower on Schedule 4.01(k).  Within the last four months it has not had
any other chief place of business, chief executive office, or jurisdiction of
organization.  Schedule 4.01 (k)
also sets forth all other places where the Borrower keeps its books and records
and all other locations where the Borrower has a place of business.  The Borrower does not do business nor has
the Borrower done business during the past five (5) years under any
trade-name or fictitious business name except as disclosed on
Schedule 4.01(k). 
Schedule 4.01(k) sets forth an accurate list of all names of all
predecessor companies of the Borrower including the names of any entities it
acquired (by stock purchase, asset purchase, merger or otherwise) and the chief
place of business and chief executive office of each such predecessor
company.  For purposes of the foregoing,
a “predecessor company” shall mean any Person whose assets or equity interests
are 

 

27

 

acquired by the Borrower or who was merged
with or into the Borrower within the last four months prior to the date
hereof.  The Borrower’s United States
Federal Income Tax I.D. Number and state organizational identification number
is identified on Schedule 4.01(k);

 

(l)                                     Disclosure.  All factual information furnished by or on
behalf of the Borrower in writing to the Lender (including, without limitation,
all factual information contained in the Loan Documents) for purposes of or in
connection with this Agreement, the other Loan Documents or any transaction
contemplated herein or therein is, and all other such factual information
hereafter furnished by or on behalf of the Borrower to the Lender, will be true
and accurate in all material respects on the date as of which such information
is dated or certified and not incomplete by omitting to state any fact
necessary to make such information not misleading in any material respect at
such time in light of the circumstances under which such information was
provided;

 

(m)                               Operation of Business.  The Borrower possesses all licenses,
permits, franchises, patents, copyrights, trademarks, and tradenames, or rights
thereto, necessary to conduct its business substantially as now conducted and
will obtain all such licenses, permits, franchises, patents, copyrights,
trademarks, and tradenames, or rights thereto necessary to conduct its business
as presently proposed to be conducted except those that the failure to so
possess could not reasonably be expected to have a Material Adverse Effect on
its financial condition or operations, and the Borrower is not in violation of
any valid rights of others with respect to any of the foregoing except
violations that could not reasonably be expected to have such a Material
Adverse Effect;

 

(n)                                 Intellectual Property.    The Borrower owns, or has the legal right
to use, all patents, trademarks, tradenames, copyrights, technology, know-how
and processes (the “Intellectual Property”) necessary for it to
conduct its business as currently conducted except for those the failure to own
or have such legal right to use could not reasonably be expected to have a
Material Adverse Effect.  As of the
Closing Date, set forth in Schedule 4.01(n) is a list of all Intellectual
Property registered with the United States Copyright Office or the United
States Patent and Trademark Office and owed by the Borrower or that the
Borrower has the right to use.  Except
as provided in Schedule 4.01(n), no claim has been asserted and is pending
by any Person challenging or questioning the use of any such Intellectual
Property or the validity or effectiveness of any such Intellectual Property,
nor does the Borrower know of any such claim, and, to the knowledge of the
Borrower, the use of such Intellectual Property by the Borrower does not
infringe on the rights of any Person, except for such claims and infringements
that, in the aggregate, could not reasonably be expected to have a Material
Adverse Effect;

 

(o)                                 Investment Company Act.  The Borrower is not required to be registered
as an “investment company” within the meaning of the Investment Company Act of
1940, as amended; and

 

(p)                                 Environmental Compliance.  The Borrower,
except as set forth in Schedule 4.01(p), is in material compliance with
all applicable Environmental Laws.

 

28

 

ARTICLE V.

COVENANTS
OF THE BORROWER

 

Section 5.01.                             Affirmative Covenants.  So
long as any Loan Obligations remain unpaid or the Lender shall have any
commitment hereunder, the Borrower will, unless the Lender shall otherwise
consent in advance in writing:

 

(a)                                  Compliance with Laws, etc.  Comply in all material respects with all
applicable laws, rules, regulations and orders, such compliance to include,
without limitation, (i) all applicable zoning and land use laws; (ii) all
employee benefit and Environmental Laws, and (iii) paying before the same
become delinquent all taxes, assessments and governmental charges imposed upon
it or upon its property except to the extent contested in good faith;

 

(b)                                 Visitation Rights; Field Examination.  At any reasonable time and from time to
time, permit the Lender or representatives thereof to examine and make copies
of and abstracts from the records and books of account of, and visit the
properties of, and conduct unannounced field examinations and collateral
inspections at least annually of the Borrower and to discuss the affairs,
finances and accounts of the Borrower with any of its officers or directors, provided,
however, upon and during the occurrence of an Event of Default or in
the event that there are deemed by the Lender to be any material
inconsistencies and/or material noncompliance with respect to any financial or
other reporting on the part of the Borrower, any and all visits and inspections
deemed necessary or desirable on account of such Event of Default,
inconsistency and/or noncompliance shall be at the expense of the
Borrower.  In addition to the foregoing,
at any reasonable time and from time to time, the Borrower also shall permit
the Lender or representatives thereof, at the expense of the Lender, to examine
and make copies of and abstracts from the records and books of account of, and
visit the properties of, the Borrower, and to discuss the affairs, finances and
accounts of the Borrower with any of their respective officers or directors;

 

(c)                                  Reporting Requirements.  Furnish to the Lender:

 

(i)                                     Beginning with
Borrower’s fiscal year ending December 31, 2005, as soon as available and
in any event within 120 days after the end of each fiscal year of the
Borrower, a copy of the audited financial statements (including balance sheet,
statements of income and cash flows, all accompanying notes thereto and any
management letter), for such year for the Borrower, certified, without
qualification, in an opinion acceptable to the Lender by independent public
accountants acceptable to the Lender;

 

(ii)                                  Beginning with the
first (1st) month following the Completion Date, as soon as
available and in any event within 30 days after the end of each month,
balance sheets of the Borrower as of the end of such month and statement of
income of the Borrower for the period commencing at the end of the previous
fiscal year and ending with the end of such month, certified by an authorized
officer of the Borrower;

 

29

 

(iii)                               Beginning with first
fiscal quarter end following the Completion Date, and continuing with every
fiscal quarter, as soon as available and in any event within 30 days after
the end of each fiscal quarter, balance sheets of the Borrower as of the end of
such month and statement of income of the Borrower for the period commencing at
the end of the previous fiscal year and ending with the end of such fiscal
quarter, certified by an authorized officer of the Borrower, together with a
Compliance Certificate which: (A) states that no Event of Default, and no
event or condition that but for the passage of time, the giving of notice or
both would constitute an Event of Default, has occurred or is in existence; and
(B) shows in detail satisfactory to the Lender the calculation of, and the
Borrower’ compliance with, each of the covenants contained in
Sections 5.01(d), 5.01(e), 5.01(f), and 5.01(g);

 

(iv)                              promptly upon the
Lender’s request therefor, copies of all reports and notices which the Borrower
or any of its subsidiaries files under ERISA with the Internal Revenue Service
or the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or
which the Borrower or any its subsidiary receives from such Corporation;

 

(v)                                 by November 1 of
each fiscal year of the Borrower, an annual (with monthly break out) operating
plan and budget of the Borrower for the immediately succeeding fiscal year
containing, among other things, pro forma financial statements and forecasts for
all planned lines of business;

 

(vi)                              as soon as available but
in any event not more than 30 days after the end of each month, production
reports for the immediately preceding calendar month setting forth

corn inputs, ethanol output, DDGS output,
natural gas usage and CO2 output, together with such additional production
information as requested by Lender;

 

(vii)                           promptly, upon the
occurrence of an Event of Default or an event or condition that but for the
passage of time or the giving of notice or both would constitute an Event of
Default, notice of such Event of Default or event;

 

(viii)                        promptly after the receipt
thereof, a copy of any management letters or written reports submitted to the
Borrower by its independent certified public accountants with respect to the
business, financial condition or operation of the Borrower;

 

(ix)                                promptly after the
receipt thereof, a copy of any notice of default under any Long-Term Marketing
Agreement; and

 

(x)                                   such other
information respecting the condition or operations, financial or otherwise, of
the Borrower or any of their respective subsidiaries as the Lender may from
time to time reasonably request;

 

(d)                                 Working Capital.  Achieve and maintain Working Capital of at
least $ 3.0 million at the end of the 12th month following the
Completion Date.  Achieve and maintain
Working 

 

30

 

Capital of at least $ 4.0 million at the end
of the 24th month following the Completion Date.  Thereafter, continually maintain Working
Capital of at least $ 4.0 million;

 

(e)                                  Tangible Net Worth.  On the Completion Date, the Borrower’s
Tangible Net Worth shall be not less than $24,000,000.00.  After the Completion Date, the Borrower
shall maintain Tangible Net Worth, measured annually, in an amount equal to the
lesser of:  (i) the Borrower’s Tangible
Net Worth for the immediately preceding fiscal year plus $500,000.00; or (ii)
$24,000,000.00 plus the Borrower’s retained earnings at the end of the current
fiscal year;

 

(f)                                    Owner Equity Ratio.  Maintain at all times during the term of
this Agreement, an Owner Equity Ratio of at least 0.50, beginning at the end of
the 36th month following the Completion Date and measured annually
thereafter;

 

(g)                                 Fixed Charge Coverage Ratio.  Maintain a Fixed Charge Coverage Ratio of
not less than 1.25 to 1.00, measured initially at the end of the 12th
month following the Completion Date and at the end or each quarter thereafter
based on a rolling four quarters average and maintained continually thereafter;

 

(h)                                 Liens.  There shall be no lien, security interest or
other charge or encumbrance, and no other type of preferential arrangement,
upon or with respect to any of the properties or income of the Borrower, which
secures Debt of any Person, except for the security interests of the Security
Agreement and except as described in Schedule 5.02(a);

 

(i)                                     Landlord
and Mortgagee Waivers. 
Obtain and furnish to the Lender as soon as available, waivers,
acknowledgments and consents, duly executed by each:  (i) real property owner, landlord and mortgagee having an
interest in any of the premises owned or leased by the Borrower or in which any
Collateral of the Borrower is located or to be located (and if no Collateral of
Borrower is located at a parcel of property notowned or leased by a Borrower,
no such waivers, acknowledgments or consents will be required); and
(ii) each third party holding any Collateral, all in form and substance
acceptable to the Lender, except as otherwise agreed to by the Lender;

 

(j)                                     Insurance.  Maintain insurance with financially sound
and reputable insurance companies in such amounts and covering such risks as
are usually carried by entities engaged in similar businesses and owning
similar properties in the same general areas in which the Borrower operate,
provided that in any event the Borrower will maintain and cause each of its
subsidiaries to maintain workers’ compensation insurance, property insurance
and comprehensive general liability insurance reasonably satisfactory to the
Lender.  Each insurance policy covering
Collateral shall be in compliance with the requirements of the Security
Agreement;

 

(k)                                  Keeping Books and Records.  Maintain and cause each of its subsidiaries
to, maintain proper books of record and account in which full, true, and correct
entries in conformity with generally accepted accounting principles shall be
made of all dealings and transactions in relation to its business and
activities;

 

31

 

(l)                                     Food
Security Act Compliance. 
If the Borrower acquires any Collateral which may have constituted farm
products in the possession of the seller or supplier thereof, such Borrower
shall, at its own expense, use its best efforts to take such steps to insure
that all Liens (except the liens granted pursuant hereto) in such acquired
Collateral are terminated or released, including, without limitation, in the
case of such farm products produced in a state which has established a Central
Filing System (as defined in the Food Security Act), registering with the
Secretary of State of such state (or such other party or office designated by
such state) and otherwise take such reasonable actions necessary, as prescribed
by the Food Security Act, to purchase farm products free of liens (except the
liens granted pursuant hereto); provided, however, that such Borrower may
contest and need not obtain the release or termination of any lien asserted by
any creditor of any seller of such farm products, so long as it shall be
contesting the same by proper proceedings and maintain appropriate accruals and
reserves therefor in accordance with the generally accepted accounting
principles.  Upon the Lender’s request
made, the Borrower agrees to forward to the Lender promptly after receipt
copies of all notices of liens and master lists of Effective Financing
Statements delivered to the Borrower pursuant to the Food Security Act, which
notices and/or lists pertain to any of the Collateral.  Upon the Lender’s request, the Borrower agrees
to provide the Lender with the names of Persons who supply the Borrower with
such farm products and such other information as the Lender may reasonably
request with respect to such Persons;

 

(m)                               Warehouse Receipts.  If any warehouse receipt or receipts in the
nature of a warehouse receipt is issued in respect of any portion of the
Collateral, then the Borrower: 
(i) will not permit such warehouse receipt or receipts in the
nature thereof to be “negotiable” as such term is used in Article 7 of the
Uniform Commercial Code; and (ii) will deliver all such receipts to the
Lender (or a Person designated by the Lender) within five (5) days of the
Lender’s request and from time to time thereafter.  If no Event of Default exists, the Lender agrees to deliver to
such Borrower any receipt so held by the Lender upon such Borrower’s request in
connection with such Borrower’s

sale or other disposition of the underlying
inventory, if such disposition is in ordinary course of such Borrower’s
business;

 

(n)                                 Management of Borrower.  Management of the Borrower shall be
maintained as set forth on Schedule 5.01(n) hereto, unless otherwise
approved in Lender’s reasonable discretion;

 

(o)                                 Annual Facility Fee.  Borrower shall pay to Lender on or
before the Conversion Date, and on each anniversary of the Conversion Date
through the fourth anniversary, an annual Facility Fee of $40,000.00 as
provided in Section 2.07;

 

(p)                                 Construction of Project.  Borrower shall:

 

(i)                                     diligently proceed
with construction of the Project in accordance with the Plans and
Specifications and in accordance with all applicable laws and ordinance and
will complete the Project on or before the Completion Date;

 

32

 

(ii)                                  use the proceeds of
all Advances solely to pay the Project Costs as specified in the Project
Sources and Uses Statement;

 

(iii)                               use its best efforts to
require the Contractor(s) to comply with all rules, regulations, ordinances and
laws relating to work on the Project;

 

(iv)                              obtain the
Lender’s prior written approval of any change in the Plans and Specifications
for the Project approved by the Lender which might materially adversely affect
the value of the Lender’s security, and has a cost of $25,000.00 or
greater.  The Lender will have a reasonable
time to evaluate any requests for its approval of any changes referred to in
this paragraph. The Lender may approve or disapprove changes in its discretion,
subject to the foregoing provisions of this Section 5.01(p)(iv).  If it reasonably appears to the Lender that
any change may increase the Project Costs, the Lender may require the Borrower
to deposit additional funds with the Lender pursuant to the provisions of this
Agreement in an amount sufficient to cover the increased costs as a condition
to giving its approval;

 

(v)                                 comply with and keep in
effect all necessary permits and approvals obtained from any Governmental
Authority relating to the lawful construction of the Project.  The Borrower will comply with all applicable
existing and future laws, regulations, orders, and requirements of any
Governmental Authority, judicial, or legal authorities having jurisdiction over
the Real Property or Project, and with all recorded restrictions affecting the
Real Property;

 

(vi)                              furnish to the Lender
from time to time on request by the Lender, in a form acceptable to the Lender,
correct lists of all contractors and subcontractors employed in connection with
construction of the Project and true and correct copies of all executed
contracts and subcontracts.  The Lender
may contact any contractor or subcontractor to verify any facts disclosed in
the lists, Borrower must consent to the disclosure of such information by the
contractors and subcontractors to Lender or its agents upon Lender’s request,
and Borrower must assist Lender or its agents in obtaining such information
upon Lender’s request;

 

(vii)                           upon completion of the
building foundation of the Project, deliver to the Lender an “as-built” survey
of the Real Property which:  (a) sets
forth the location and exterior lines and egress and other improvements
completed on the Real Property and demonstrates compliance with all applicable
setback requirements; (b) demonstrates that the Project is entirely within the
exterior boundaries of the Real Property and any building restriction lines and
does not encroach upon any easements or rights-of-way; and (c) contains such
other information as the Lender may reasonably request;

 

(viii)                        not purchase any materials,
equipment, fixtures, or articles of personal property placed in the Project
prior to the Conversion Date under any security agreement or other agreement
where the seller reserves or purports to reserve title or the right of removal
or repossession, or the right to consider them personal property after their
incorporation in the work of construction, unless authorized by the Lender in
writing;

 

33

 

(ix)                                provide the Lender and
its representatives with access to the Real Property and the Project at any
reasonable time and upon reasonable notice to enter the Real Property and
inspect the work or construction and all materials, plans, specifications, and
other matters relating to the construction. 
The Lender will also have the right to, at any reasonable time and upon
reasonable notice, examine, copy, and audit the books, records, accounting
data, and other documents of the Borrower and its contractors relating to the
Real Property or construction of the Project;

 

(x)                                   pay and discharge
all claims and liens for labor done and materials and services furnished in connection
with the construction of the Project. 
The Borrower will have the right to contest in good faith any claim or
lien, provided that it does so diligently and without prejudice to the Lender
or the ability to obtain title insurance in the manner required by this
Agreement and the Disbursing Agreement. 
Upon the Lender’s request, the Borrower will promptly provide a bond,
cash deposit, or other security reasonably satisfactory to the Lender to
protect the Lender’s interest and security should the contest be unsuccessful;

 

(xi)                                at the Lender’s request
and expense, post signs on the Real Property for the purpose of identifying the
Lender as the “Lender.”  At the request
of the Lender, or the participating local community banks, the Borrower will
use its best efforts to identify the Lender as the lender in publicity
concerning the Project;

 

(xii)                             maintain in force until
full payment of the Loan all insurance required by law, public liability
insurance, and property insurance.  The
policies must be approved by the Lender as to amounts, form, risk coverage,
deductibles, insurer, and loss payable and cancellation provision.  The Lender’s approval, however, will not be
a representation of the solvency of any insurer or the sufficiency of any
amount of insurance;

 

(xiii)                          cooperate at all times with
the Lender in bringing about the timely completion of the Project, and resolve
all disputes arising during the work of construction in a manner which will
allow work to proceed expeditiously. 
With respect to such disputes, the Borrower will have the right to
contest in good faith claims resulting in disputes, provided that it does so
diligently and without prejudice to the Lender.  Upon the Lender’s request, the Borrower will promptly provide a
bond, cash deposit, or other security reasonably satisfactory to the Lender to
protect the Lender’s interest and security should the contest be unsuccessful;

 

(xiv)                         pay the Lender’s and the
Disbursing Agent’s out-of-pocket costs and expenses incurred in connection with
the making or disbursement of the Loans or in the exercise of any of its rights
or remedies under this Agreement, including but not limited to title insurance
and escrow charges, disbursing agent fees, recording charges, and mortgage
taxes, reasonable legal fees and disbursements, and reasonable fees and costs
for services which are not customarily performed by the Lender’s salaried
employees and are not specifically covered by the fees charged to originate the
Loan, if any.  The provision of this
paragraph will survive the termination of this Agreement and the repayment of
the Loan;

 

34

 

(xv)                            keep true and correct
financial books and records on a cash basis for the construction of the Project
and maintain adequate reserves for all contingencies.  If required by the Lender, the Borrower will submit to the Lender
at such times as it requires (which will in no event be more often than
monthly) a statement which accurately shows the application of all funds
expended to date for construction of the Project and the source of those funds
as well as the Borrower’s best estimate of the funds needed to complete the
Project and the source of those funds. 
The Borrower will promptly supply the Lender with any financial
statements or other information concerning its affairs and properties as the
Lender may reasonably request, and will promptly notify the Lender of any
material adverse change in its financial condition or in the physical condition
of the Property or Project;

 

(xvi)                         comply with the requirements
of any commitment or agreement entered into by Borrower with any Governmental
Authority to assist the construction or financing of the Real Property and/or
Project and with the terms of all applicable laws, regulations, and requirements
governing such assistance;

 

(xvii)                      indemnify and hold the Lender
harmless from and against all liabilities, claims, damages, reasonable costs,
and reasonable expenses (including but not limited to reasonable legal fees and
disbursements) arising out of or resulting from any defective workmanship or
materials occurring in the construction of the Project.  Upon demand by the Lender, the Borrower will
defend any action or proceeding brought against the Lender alleging any
defective workmanship or materials, or the Lender may elect to conduct its own
defense at the reasonable expense of the Borrower.  The provisions of this paragraph will survive the termination of
this Agreement and the repayment of the Loan;

 

(xviii)                   obtain and deliver to the Lender copies
of all necessary occupancy certificates relating to the Project; and

 

(xix)         cause
a bonding company to issue a Construction Completion Bond.

 

Section 5.02.                             Negative
Covenants.  So long as
any of the Loan Obligations remain unpaid or the Lender shall have any
commitment hereunder, the Borrower will not, without the prior written consent
of the Lender:

 

(a)                                  Liens, etc.  Create or suffer to exist,
or permit any of its subsidiaries to create or suffer to exist, any lien,
security interest or other charge or encumbrance, or any other type of
preferential arrangement, upon or with respect to any of its properties,
whether now owned or hereafter acquired, or assign, or permit any of its
subsidiaries to assign, any right to receive income, in each case to secure any
Debt (as defined below) of any Person, other than:

 

(i)                                     those described on
Schedule 5.02(a) hereto and renewals and extensions on the same or
substantially the same terms and conditions and at no increase in the debt or
obligation; or

 

35

 

(ii)                                  liens or security
interests which are subject to an intercreditor agreement in form and substance
acceptable to Lender in Lender’s sole discretion; or

 

(iii)                               the liens or security
interests of the Security Agreement; or

 

(iv)                              liens (other than liens
relating to environmental liabilities or ERISA) for taxes, assessments, or
other governmental charges that are not more than 30 days overdue or, if
the execution thereof is stayed, which are being contested in good faith by
appropriate proceedings diligently pursued and for which adequate reserves have
been established; or

 

(v)                                 liens of warehousemen,
carriers, landlords, mechanics, materialmen, or other similar statutory or
common law liens securing obligations that are not yet due and are incurred in
the ordinary course of business or, if the execution thereof is stayed, which
are being contested in good faith by appropriate proceedings diligently pursued
and for which adequate reserves have been established in accordance with
generally accepted accounting principles; or

 

(vi)                              liens resulting from good
faith deposits to secure payments of workmen’s compensation unemployment
insurance, or other social security programs or to secure the performance of
tenders, leases, statutory obligations, surety, customs and appeal bonds, bids
or contracts (other than for payment of Debt); or

 

(vii)                           any attachment or judgment
lien not constituting an Event of Default; or

 

(viii)                        liens arising from filing UCC
financing statements regarding leases not prohibited by this Agreement; or

 

(ix)                                customary offset rights
of brokers and deposit banks arising under the terms of securities account
agreements and deposit agreements; or

 

(x)                                   any real estate
easements and easements, covenants and encumbrances that customarily do not
affect the marketable title to real estate or materially impair its use; or

 

(b)                                 Dividends, etc.  Declare
or pay any dividends, purchase or otherwise acquire for value any of its
membership interests (units) now or hereafter outstanding, or make any
distribution of assets to its stockholders, members or general partners as
such, or permit any of its subsidiaries to purchase or otherwise acquire for
value any stock, membership interest or partnership interest of the Borrower, provided,
however, the Borrower may:  (i) declare
and pay dividends and distributions payable in membership interests (units);
(ii) purchase or otherwise acquire shares of the membership interests (units)
of the Borrower with the proceeds received from the issuance of new membership
interests (units); (iii) so long as the Borrower first provides such supporting
documentation as the Lender may request with respect to any fiscal year of the
Borrower, the Borrower may pay aggregate cash dividends/distributions, during
such fiscal year in an amount not to exceed the amount necessary for the
members of the Borrower to pay their Income Taxes on such 

 

36

 

member’s allocable share of the taxable
income of the Borrower for such taxable year or fiscal year, as applicable (“Tax
Distributions”); (iv) pay redemptions, dividends or distributions in
an amount not to exceed, in the aggregate, 65% of the Borrower’s Net Income
less Incentive Payments for the immediately preceding fiscal year (“Allowed
Dividends”); (v) pay dividends or distributions which are
immediately reinvested in the Borrower (“Reinvestment Dividends”) provided, however,
that immediately prior to the proposed payment of any such dividends or
distributions, or after giving effect thereto, no Default or Event of Default
shall exist; and (vi) complete the transactions reflected on
Schedule 4.01(a); or

 

(c)                                  Capital Expenditures.  Except for costs identified in the Project
Costs and Uses Statement, make any investment in fixed assets in the aggregate
amount of $500,000 during any fiscal year during the term of this Agreement; or

 

(d)                                 Consolidation,
Merger, Dissolution, Etc.  Directly or indirectly,
merge or consolidate with any other Person or permit any other Person to merge
into or with or consolidate with the Borrower; or

 

(e)                                  Indebtedness, etc.  Create, incur, assume or suffer to exist any
Debt or other indebtedness, liabilities or obligations, whether matured or
unmatured, liquidated or unliquidated, direct or contingent, joint or several,
except:  (i) the liabilities of the
Borrower to the Lender hereunder; (ii) trade accounts payable and accrued
liabilities (other than Debt) arising in the ordinary course of the Borrower’s
business; (iii) Subordinated Debt; and (iv) the liabilities of the
Borrower described on Schedule 5.02(a); or

 

(f)                                    Organization;
Name; Chief Executive Office. 
Change its state of organization, name or the location of its chief
executive office without the prior written consent of the Lender, except that
the principal office shall be moved to the plant site when construction of the
administration office is substantially complete; or

 

(g)                                                                                 Loans, Guaranties, etc.  Make
any loans or advances to (whether in cash, in-kind, or otherwise) any Person,
or directly or indirectly guaranty or otherwise assure a creditor against loss
in respect of any indebtedness, obligations or liabilities (contingent or
otherwise) of any Person; or

 

(h)                                 Subsidiaries; Affiliates.   Form or otherwise acquire any subsidiary or affiliated business,
or acquire the assets of or acquire any equity or ownership interest in any
Person, unless such subsidiary, affiliate or Person executes and delivers to
the Lender:  (i) a guaranty of all of the
Loan Obligations, in form and substance acceptable to the Lender in its sole
discretion; (ii) security agreements in form substantially similar to the to
the Security Agreement; and (iii) such other documents and amendments to this
Agreement and the other Loan Documents as the Lender shall require; or

 

(i)                                     Transfer
of Assets.  Sell, lease,
assign, transfer, or otherwise voluntarily dispose of any of its assets, or
permit any of its subsidiaries to sell, lease, assign, transfer, or 

 

37

 

otherwise voluntarily dispose of any of its
assets except:  (i) dispositions of
inventory in the ordinary course of business; and (ii) dispositions of:
(A) obsolete or worn out equipment; (B) equipment or real property
not necessary for the operation of its business; or (C) equipment or real
property which is replaced with property of equivalent or greater value as the
property which is disposed; or

 

(j)                                     Lines of
Business.  Engage in any
line or lines of business activity other than the production of ethanol and
DDGS.

 

ARTICLE VI.

EVENTS
OF DEFAULT AND REMEDIES

 

Section 6.01.                             Events of
Default.  Each of the
following events shall be an “Event of Default”:

 

(a)                                  The Borrower shall
fail to pay any installments of principal or interest, fees, expenses, charges
or other amounts payable hereunder or under the other Loan Documents or to make
any deposit of funds required under this Agreement when due; or

 

(b)                                 Any representation or
warranty made by the Borrower, or any of its officers or directors under or in
connection with any Loan Document shall prove to have been incorrect in any
material respect when made; or

 

(c)                                  The Borrower shall
fail to perform or observe any term, covenant or agreement contained in
Sections 5.01(d), (e), (f) or (g) or take any action as prohibited by Section 5.02;
or

 

(d)                                 The Borrower shall
fail to deliver the financial statements or Compliance Certificate under
Section 5.01(c) within 5 days of the date due; or

 

(e)                                  The Borrower shall
fail to perform or observe any term, covenant or agreement contained in any
Loan Document (other than those listed in clauses (a) through (d) of
this Section 6.01) on its part to be performed or observed (other than the
covenants to pay the Loan Obligations) and any such failure shall remain
unremedied for ten (10) days after written notice thereof shall have been
given to the Borrower by the Lender, provided, however, that no Event of
Default shall be deemed to exist if, within said ten (10) day period, Borrower
have commenced appropriate action to remedy such failure and shall diligently
and continuously pursue such action until such cure is completed, unless such
cure is or cannot be completed within thirty (30) days after written notice
shall have been given; or

 

(f)                                    The Borrower shall
fail to pay any indebtedness in an amount in excess of $50,000.00 (either in
any individual case or in the aggregate) excluding indebtedness evidenced by
the Notes and excluding Ordinary Trade Payable Disputes, or any interest or
premium thereon, when due (whether by 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 

 

38

 

instrument relating to such indebtedness; or
any other default under any agreement or instrument relating to any such
indebtedness, or any other event, shall occur and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such default or event is to accelerate, or to permit the
acceleration of, the maturity of such indebtedness (excluding Ordinary Trade
Payable Disputes); or any such indebtedness shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), prior to the stated maturity thereof (excluding Ordinary
Trade Payable Disputes); or

 

(g)                                 The Borrower shall
generally not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make a general assignment
for the benefit of creditors; or any proceeding shall be instituted by or
against the Borrower seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee or other
similar official for it or for any substantial part of its property, and, in
the case of any such proceeding instituted against it (but not instituted by
it) either such proceeding shall remain undismissed or unstayed for a period of
30 days or any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against it or the appointment of a
receiver, trustee, custodian or other similar official for it or for any
substantial part of its property) shall occur; or the Borrower shall take any
corporate action to authorize any of the actions set forth above in this
subsection; or

 

(h)                                 Any one or more
judgment(s) or order(s) for the payment of money in excess of $50,000.00 in the
aggregate shall be rendered against the Borrower and either:  (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order; or (ii) there
shall be any period of 10 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

 

(i)                                     Any provision of
any Loan Document shall for any reason cease to be valid and binding on the
Borrower or the Borrower shall so state in writing; or

 

(j)                                     The Mortgage or
the Security Agreement shall for any reason, except to the extent permitted by
the terms thereof, cease to create a valid lien, encumbrance or security
interest in any of the property purported to be covered thereby; or

 

(k)                                  The termination of
any Long Term Marketing Agreement prior to its stated expiration date, unless
such Long Term Marketing Agreement is replaced by another Long Term Marketing
Agreement acceptable to the Lender, within thirty (30) days of the termination
of such Long Term Marketing Agreement; or

 

(l)                                     The Borrower dissolves,
suspends, or discontinues doing business; or

 

39

 

(m)                               Construction of the
Project is halted or abandoned prior to completion for any period of thirty
(30) consecutive days for any cause which is not beyond the reasonable control
of the Borrower, its contractors and subcontractors; or

 

(n)                                 The construction of
the Project shall be delayed for any reason and for such period that, in the
reasonable judgment of the Lender, the Project will not be completed by the
Completion Date.  If such delay is
curable and if Borrower has not been given a notice of a similar breach within
the preceding twelve (12) months, it may be cured (and no Event of Default will
have occurred) if Borrower cures the failure within thirty (30) days, which
shall include advancing the progress of the Project to the point that, in the
reasonable judgment of the Lender, the Project will be completed by the
Completion Date.

 

Section 6.02.                             Remedies.  Upon the occurrence of an Event of Default,
the Lender:

 

(a)                                  may, by notice to the
Borrower, declare the Notes, all interest thereon and all other amounts payable
under this Agreement to be forthwith due and payable, whereupon the Notes, all
such interest and all such amounts shall become and be forthwith due and
payable, without presentment, notice of intent to accelerate or notice of
acceleration, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrower; provided, however, that in the event of an
actual or deemed entry of an order for relief with respect to any of the
Borrower or any of its subsidiaries under the Federal Bankruptcy Code, the
Notes, all such interest and all such amounts shall automatically become due
and payable, without presentment, demand, protest or any notice of any kind,
all of which are hereby expressly waived by the Borrower;

 

(b)                                 may withhold or direct
the Disbursing Agent to withhold any one or more Advances in its
discretion,  and terminate the Lender’s
obligations, if any, under this Agreement to make any Advances whereupon the
commitment and obligations of the Lender to extend credit or to make Advances
hereunder shall terminate, and no disbursement of Loan funds by the Lender will
cure any default of the Borrower, unless the Lender agrees otherwise in
writing;

 

(c)                                  may, by notice to the
Borrower, obtain the appointment of a receiver to take possession of all
Collateral of the Borrower, including, but not limited to all personal
property, including all fixtures and equipment leased, occupied or used by any
of the Borrower.  Borrower hereby
irrevocably consent to the appointment of such receiver and agree to cooperate
and assist any such receiver as reasonably requested to facilitate the transfer
of possession of the Collateral to such receiver and to provide such receiver
access to all books, records, information and documents as requested by such
receiver;

 

(d)                                 in its discretion,
enter the Real Property and take any and all actions necessary in its judgment
to complete construction of the Project, including but not limited to making
changes in Plans and Specifications, work or materials, and entering into,
modifying, or terminating any contractual arrangements, subject to the Lender’s
right at any time to discontinue any work without liability.  If the Lender elects to complete the
Project, it will not assume any liability to the Borrower or any other person
for completing the Project or for the manner or quality of construction of the 

 

40

 

Project, and the Borrower expressly waives
any such liability.  The Borrower
irrevocably appoints the Lender as its attorney-in-fact, with full power of
substitution, to complete the Project in the Borrower’s name, or the Lender may
elect to complete construction in its own name.  In any event, all sums expended by the Lender in completing
construction will be considered to have been disbursed to the Borrower and will
be secured by the Mortgage and any other instruments or documents securing the Loans,
and any such sums that cause the principal amount of the Loans to exceed the
face amount of the Notes will be considered to be an additional loan to the
Borrower bearing interest at the rate provided in the Notes and will be secured
by the Mortgage and any other instrument or documents securing the Loans.  The Lender will not have any obligation
under the Plans and Specifications prepared for the Project, any studies, data,
and drawings with respect thereto prepared by or for Borrower, or the contracts
and agreements relating to the Plans and Specifications, or the aforesaid
studies, data, and drawings, or to the construction of the Project unless it
expressly hereafter agrees in writing. 
The Lender will have the right to exercise any rights of the Borrower
under those contracts and agreements or with respect to such Plans and
Specifications, studies, data, and drawings upon any default by the Borrower
under this Agreement, and shall have such other rights and remedies with
respect thereto as are afforded a secured creditor under applicable law; and

 

(e)                                  may exercise all
other rights and remedies afforded to the Lender under the Loan Documents or by
applicable law or equity.

 

Section 6.03.          Remedies
Cumulative.  Each and
every power or remedy herein specifically given shall be in addition to every
other power or remedy, existing or implied, given now or hereafter existing at
law or in equity, and each and every power and remedy herein specifically given
or otherwise so existing may be exercised from time to time and as often and in
such order as may be deemed expedient by Lender, and the exercise or the
beginning of the exercise of one power or remedy shall not be deemed a waiver
of the right to exercise at the same time or thereafter any other power or remedy.
No delay or omission of Lender in the exercise of any right or power accruing
hereunder shall impair any such right or power or be construed to be a waiver
of any default or acquiescence therein.

 

ARTICLE VII.

MISCELLANEOUS

 

Section 7.01.                             Amendments, etc.  No
amendment or waiver of any provision of any Loan Document to which the Borrower
is a party, nor any consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be agreed or consented to by
the Lender and the Borrower, and each such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.

 

Section 7.02.                             Notices, etc.  All notices and other
communications provided for under any Loan Document shall be in writing and
mailed, faxed, or delivered at the addresses set forth below, or at such other
address as such party may specify by written notice to the other parties
hereto:

41

 

	
  If to the Borrower:

  	
   

  	
  United Wisconsin Grain Producers, LLC

  100 Richland Street

  P.O. Box 247

  Friesland, WI  53935

  Telephone:  (920) 348-5016

  Fax:  (920) 348-5009

  Attention:  President

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Thomas D. Johnson

  Brown, Winick, Graves, Gross, Baskerville

  and Schoenebaum, P.L.C.

  666 Grand Avenue, Suite 2000

  Des Moines, IA  50309

  Fax:  (515) 242-2488

  
	
   

  	
   

  	
   

  
	
  If
  to the Lender:

  	
   

  	
  AgStar Financial Services, PCA

  1921 Premier Drive

  P.O. Box 4249

  Mankato, MN 56002-4249

  Telephone: (507) 386-4242

  Facsimile: (507) 344-5088

  Attention: Mark Schmidt

  
	
   

  	
   

  	
   

  
	
  With copy to:

  	
   

  	
  Phillip L. Kunkel

  Gray Plant Mooty

  1010 West St. Germain, Suite 600

  St. Cloud, MN  56301

  Facsimile: (320) 252-4482

  

 

All such notices and communications shall
have been duly given and shall be effective: 
(a) when delivered; (b) when transmitted via facsimile to the number set
forth above; (c) the Business Day following the day on which the same has been
delivered prepaid (or pursuant to an invoice arrangement) to a reputable
national overnight air courier service; or (d) the third Business Day following
the day on which the same is sent by certified or registered mail, postage
prepaid.   Any

confirmation sent by the Lender to the
Borrower of any borrowing under this Agreement shall, in the absence of
manifest error, be conclusive and binding for all purposes

 

Section 7.03.                             No
Waiver; Remedies.  No
failure on the part of the Lender to exercise, and no delay in exercising, any
right under any Loan Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any right under any Loan Document preclude any
other or further exercise thereof or the exercise of any other right.  The remedies provided in the Loan Documents
are cumulative and not exclusive of any remedies provided by law.

 

42

 

Section 7.04.                             Costs,
Expenses and Taxes.

 

(a)                                  The Borrower agrees,
jointly and severally, to pay on demand all costs and expenses in connection
with the preparation, execution, delivery, filing, recording and administration
of the Loan Documents and the other documents to be delivered under the Loan
Documents, including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Lender (who may be in-house counsel), and local
counsel who may be retained by said counsel, with respect thereto and with
respect to advising the Lender as to its respective rights and responsibilities
under the Loan Documents, and all costs and expenses (including reasonable
counsel fees and expenses) for the Lender in connection with the filing of the
Financing Statements and the enforcement of the Loan Documents and the other
documents to be delivered under the Loan Documents, including, without
limitation, in the context of any bankruptcy proceedings.  In addition, the Borrower agrees to pay on
demand the expenses described in Section 5.01(b).  In addition, the Borrower shall pay any and
all stamp and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of the Loan
Documents and the other documents to be delivered under the Loan Documents, and
agrees to save the Lender harmless from and against any and all liabilities
with respect to or resulting from any delay in paying or omission to pay such
taxes and fees.

 

(b)                                 If, due to payments
made by the Borrower pursuant to Section 2.06 or due to acceleration of
the maturity of the Advances pursuant to Section 6.01 or due to any other
reason, the Lender receives payments of principal of any Loan other than on the
last day of an Interest Period relating thereto, the Borrower shall pay to the
Lender on demand any amounts required to compensate the Lender for any
additional losses, costs or expenses which it may incur as a result of such
payment, including, without limitation, any loss (including loss of anticipated
profits), cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by the Lender to fund or maintain such
Loan.

 

Section 7.05.                             Right of
Set-off.  The Lender is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Lender to or for the credit or the
account of the Borrower against any and all of the Loan Obligations,
irrespective of whether or not the Lender shall have made any demand under such
Loan Document and although deposits, indebtedness or such obligations may be
unmatured or contingent.  The Lender
agrees promptly to notify the Borrower after any such set-off and application,
provided that the failure to give such notice shall not affect the validity of
such set-off and application.  The
rights of the Lender under this Section are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which the
Lender may have.

 

Section 7.06.                             Severability
of Provisions.  Any
provision of this Agreement or of any other Loan Document which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or thereof or affecting the
validity or unenforceability of such provision in any other jurisdiction.

 

43

 

Section 7.07.                             Binding
Effect; Successors and Assigns; Participations.

 

(a)                                  This Agreement shall
be binding upon and inure to the benefit of the Borrower, the Lender and their
respective successors and assigns, except that the Borrower shall not have the
right to assign or otherwise transfer its rights hereunder or any interest
herein without the prior written consent of the Lenders.  Upon the request of Borrower, Lender shall
provide copies of all invoices for costs and expenses to be reimbursed by
Borrower under this Agreement or under any of the Loan Documents.

 

(b)                                 Borrower agrees and
consents to Lender’s sale or transfer, whether now or later, of one or more
participation interests in the Loans to one or more purchasers, whether related
or unrelated to Lender.  Lender may
provide, without any limitation whatsoever, to any one or more purchasers, or
potential purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loans, and Borrower hereby
waives any rights to privacy it may have with respect to such matters;
provided, however, that any information received by any such purchaser or potential
purchaser under this provision which concerns the personal, financial or other
affairs of the Borrower shall be received and kept by the purchaser or
potential purchaser in full confidence and will not be revealed to any other
persons, firms or organizations nor used for any purpose whatsoever other than
for determining whether or not to participate in the Loans and in accord with
the rights of Lender if a participation interest is acquired.  Borrower additionally waives any and all
notices of sale of participation interests, as well as all notices of any
repurchase of such participation interest. 
Borrower also agrees that the purchasers of any such participation
interests will be considered as the absolute owners of such interests in the
Loans and will have all the rights granted under the participation agreement or
agreements governing the sale of such participation interests.  Borrower further waives all rights of offset
or counterclaim that it may have now or later against Lender or against any purchaser
of such a participation interest arising out of or by virtue of the
participation and unconditionally agrees that either Lender or such purchaser
may enforce Borrower’s obligation under the Loans irrespective of the failure
or insolvency of any holder of any interests in the Loans.  Borrower further agrees that the purchaser
of any such participation interests may enforce its interests irrespective of
any personal claims or defenses that Borrower may have against Lender.

 

Section 7.08.                             Consent
to Jurisdiction.

 

(a)                                  The Borrower hereby
irrevocably submits to the jurisdiction of any Wisconsin State court sitting in
Columbia County, Wisconsin, or any Federal court sitting in the Eastern
District of Wisconsin, in any action or proceeding arising out of or relating
to this Agreement or any of the other Loan Documents to which it is a party,
and the Borrower hereby irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in such Wisconsni State court
or in such Federal court.  The Borrower
hereby irrevocably waives, to the fullest extent it may effectively do so, the
defense of an inconvenient forum to the maintenance of such action or
proceeding.  The Borrower irrevocably
consents to the service of copies of the summons and complaint and any other
process which may be served in any such action or proceeding by the 

 

44

 

mailing of copies of such process to Borrower
at its address specified in Section 7.02. 
The Borrower agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.

 

(b)                                 Nothing in this
Section 7.08 shall affect the right of the Lender to serve legal process
in any other manner permitted by law or affect the right of the Lender to bring
any action or proceeding against the Borrower or its property in the courts of
other jurisdictions.

 

Section 7.09.                             Governing
Law.  THIS AGREEMENT AND
THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF MINNESOTA.

 

Section 7.10.                             Execution
in Counterparts.  This
Agreement may be executed in any number of counterparts and on telecopy
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute but one and the same
agreement.

 

Section 7.11.                             Survival.  All covenants, agreements, representations
and warranties made by the Borrower in the Loan Documents and in the
certificates or other instruments delivered in connection with or pursuant to
this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Advances, regardless of
any investigation made by any such other party or on its behalf and
notwithstanding that Lender may have had notice or knowledge of any Event of
Default or incorrect representation or warranty at the time any credit is
extended hereunder, and shall continue in full force and effect as long as any
Loan Obligations are outstanding and unpaid and so long as the Lender has any
unexpired commitments under this Agreement or the Loan Documents.  The expense reimbursement, additional cost,
capital adequacy and indemnification provisions of this Agreement shall survive
and remain in full force and effect regardless of the consummation of the
transactions contemplated hereby, the repayment of the Loan Obligations or the
termination of this Agreement or any provision hereof.

 

Section 7.12.                             WAIVER OF
JURY TRIAL.  THE BORROWER AND
THE LENDER HEREBY IRREVOCABLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT TO
WHICH IT IS A PARTY OR ANY INSTRUMENT OR DOCUMENT DELIVERED THEREUNDER.

 

Section 7.13.                             Entire
Agreement.  THIS
AGREEMENT, THE NOTES, AND THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY
THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE
CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OR DISCUSSIONS OF 

 

45

 

THE PARTIES HERETO.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES THERETO.

 

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

 

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
CONSTRUCTION AND REVOLVING LOAN AGREEMENT, AND BORROWER AGREES TO ITS
TERMS.  THIS AGREEMENT IS DATED AS OF
THE DATE FIRST ABOVE STATED.

 

[SIGNATURE
PAGE ON FOLLOWING PAGE]

 

46

 

SIGNATURE PAGE TO:

CONSTRUCTION AND REVOLVING LOAN AGREEMENT

by and among

UNITED WISCONSIN GRAIN PRODUCERS, LLC

and

AGSTAR FINANCIAL SERVICES, PCA

 

 

	
  BORROWER:

  	
   

  	
  LENDER:

  
	
   

  	
   

  	
   

  
	
  UNITED WISCONSIN GRAIN

  PRODUCERS, LLC, a Wisconsin limited

  liability company

  	
   

  	
  AGSTAR FINANCIAL SERVICES, PCA

  a United States instrumentality

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Mark Schmidt

  	
   

  
	
  /s/ Kevin Roche

  	
   

  	
   

  	
  By Mark Schmidt

  
	
  By Kevin Roche

  	
   

  	
  Its Vice President

  
	
  Its President

  	
   

  	
   

  
					

 

47

 

EXHIBIT
A

COMPLIANCE CERTIFICATE

 

TO:                            AGSTAR FINANCIAL SERVICES, PCA (the “Lender”)

 

Pursuant
to that certain Construction and Revolving Loan Agreement dated
                          ,
2004, by and between UNITED WISCONSIN GRAIN PRODUCERS, LLC, a Wisconsin
corporation (the “Borrower”), and the Lender, and any amendments thereto and
extensions thereof (the “Loan Agreement”), the undersigned hereby represents,
warrants and certifies to the Lender as follows:

 

1.                                       The financial statement(s) attached hereto
are complete and correct in all material respects and fairly present the
financial condition of the Borrower as of the date of said financial statement(s)
and the result of its business operations for the period covered thereby;

 

2.                                       Repeats and reaffirms to the Lender each and
all of the representations and warranties made by the Borrower in the Loan
Agreement and the agreements referred to therein or related thereto, and
represents and warrants to the Lender that each and all of said warranties and
representations are true and correct as of the date hereof;

 

3.                                       No Event of Default (as that term is defined
in the Loan Agreement), and no event which with the giving of notice or the
passage of time or both would constitute an Event of Default, has occurred and
is continuing as of the date hereof;

 

4.                                       All the calculations set forth below are made
pursuant to the terms of the Loan Agreement and are true and accurate as of the
date of the attached financial statements:

 

	
  1.

  	
   

  	
  Section 5.01(d)
  – Working Capital.

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (tested
  annually)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (a)

  	
   

  	
  Current
  Assets

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  (b)

  	
   

  	
  Current
  Liabilities

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Line
  (a) less line (b)

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  In
  Compliance

  	
   

  	
  Yes  
        

  	
   

  	
  No  
        

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Section 5.01(e)
  – Tangible Net Worth.

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (tested
  annually)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (a)

  	
   

  	
  Required
  Tangible Net Worth

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Required
  Tangible Net Worth

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
  ($24,000,000
  plus lesser of retained

  earnings or $500,000.00)

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

48

 

	
  (b)

  	
   

  	
  Actual
  Tangible Net Worth

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (1)  Total Assets

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
  (2)  Less Intangible Assets (per definition)

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
  (3)  Total Tangible Assets

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
  (4)  Total Liabilities

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
  (5)  Tangible Net Worth

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
  (line
  (4) minus line (5))

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  In
  Compliance

  	
   

  	
  Yes  
        

  	
   

  	
  No  
        

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Section 5.01(f)
  – Owner Equity Ratio

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (tested
  annually)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (a)

  	
   

  	
  Tangible
  Net Worth

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  (b)

  	
   

  	
  Total
  Assets

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  (c)

  	
   

  	
  Owner
  Equity Ratio

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (ratio
  of line (b) to (c))

  	
   

  	
   

  	
   

  	
         to 1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Required
  Ratio of 0.50 to 1.00

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  In
  Compliance

  	
   

  	
  Yes  
        

  	
   

  	
  No  
        

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Section 5.01(g)
  – Fixed Charge Ratio

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (a)

  	
   

  	
  EBITDA

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  (b)

  	
   

  	
  Extraordinary
  Items

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  (c)

  	
   

  	
  Numerator
  (sum of lines (a) and (b))

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  (d)

  	
   

  	
  Current
  Portion of Long Term Debt

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  (e)

  	
   

  	
  Dividends

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  (f)

  	
   

  	
  Tax
  Distributions

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  (g)

  	
   

  	
  Maintenance
  Capital Expenditures

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  (h)

  	
   

  	
  Denominator
  (sum of lines (d) through (h))

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Ratio
  of line (c) to (h)

  	
   

  	
   

  	
   

  	
         to 1.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Required
  Ratio of 1.25 to 1.00

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  In
  Compliance

  	
   

  	
  Yes  
        

  	
   

  	
  No  
        

  	
   

  

 

49

 

IN WITNESS WHEREOF, the undersigned has signed and delivered this
Certificate to the Lender as of the
         day of
                                  ,
        .

 

	
  BORROWER:

  	
   

  
	
   

  	
   

  
	
  UNITED
  WISCONSIN GRAIN PRODUCERS, LLC

  
	
  a
  Wisconsin limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
  Its

  	
   

  	
   

  
				

 

50

 

EXHIBIT B

PROJECT SOURCE AND USE STATEMENT

 

Identify the sources and uses of monies in a total amount of
$60,044,000.00 related to the project:

 

51

United Wisconsin Grain Producers, LLC

 

	
   

  	
   

  	
   

  	
   

  	
  Budget

  	
   

  	
  Committed

  2/10/2004

  	
   

  	
  Estimated
  Final

  	
   

  	
  Variance

  	
   

  
	
   

  	
   

  	
  SOURCES OF FUNDS

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2300

  	
   

  	
  Construction Loan

  	
   

  	
  29,024,200

  	
   

  	
  —

  	
   

  	
  29,024,200

  	
   

  	
  —

  	
   

  
	
  2301

  	
   

  	
  Revolving Loan

  	
   

  	
  4,000,000

  	
   

  	
  —

  	
   

  	
  4,000,000

  	
   

  	
  —

  	
   

  
	
  3400

  	
   

  	
  Membership Units

  	
   

  	
  25,559,541

  	
   

  	
  25,400,000

  	
   

  	
  27,500,000

  	
   

  	
  1,940,459

  	
   

  
	
  3405

  	
   

  	
  Seedstock

  	
   

  	
  552,500

  	
   

  	
  552,500

  	
   

  	
  552,500

  	
   

  	
  —

  	
   

  
	
  4925

  	
   

  	
  Pioneer Donation

  	
   

  	
  1,000

  	
   

  	
  1,000

  	
   

  	
  1,000

  	
   

  	
  —

  	
   

  
	
  4930

  	
   

  	
  Other Donations

  	
   

  	
  4,900

  	
   

  	
  4,900

  	
   

  	
  4,900

  	
   

  	
  —

  	
   

  
	
  4900

  	
   

  	
  Grant Revenue

  	
   

  	
  881,000

  	
   

  	
  —

  	
   

  	
  881,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  Block Grant

  	
   

  	
  271,000

  	
   

  	
  —

  	
   

  	
  271,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  TEA Grant

  	
   

  	
  160,000

  	
   

  	
  —

  	
   

  	
  160,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  USDA VADG Grant

  	
   

  	
  450,000

  	
   

  	
  —

  	
   

  	
  450,000

  	
   

  	
  —

  	
   

  
	
  4901

  	
   

  	
  Department of Commerce Grant

  	
   

  	
  9,750

  	
   

  	
  9,750

  	
   

  	
  9,750

  	
   

  	
  —

  	
   

  
	
  4910

  	
   

  	
  Interest Income

  	
   

  	
  5,084

  	
   

  	
  5,084

  	
   

  	
  5,084

  	
   

  	
  —

  	
   

  
	
  4920

  	
   

  	
  Other Income

  	
   

  	
  6,025

  	
   

  	
  6,025

  	
   

  	
  6,025

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  TOTAL SOURCES

  	
   

  	
  $

  	
  60,044,000

  	
   

  	
  $

  	
  25,979,259

  	
   

  	
  $

  	
  62,865,459

  	
   

  	
  $

  	
  1,940,459

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  USES OF FUNDS

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PLANT CONSTRUCTION COSTS

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9000

  	
   

  	
  Fagen Construction Contract

  	
   

  	
  45,607,000

  	
   

  	
  4,869,216

  	
   

  	
  45,665,000

  	
   

  	
  58,000

  	
   

  
	
   

  	
   

  	
  Grain Handling Facilities

  	
   

  	
  4,892,000

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Cooking Facilities

  	
   

  	
  3,956,000

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fermentation Facilities

  	
   

  	
  5,387,000

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Distillation Facilities

  	
   

  	
  5,147,000

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Liquid/Solids Separation Facilities

  	
   

  	
  3,628,000

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Evaporation Facilities

  	
   

  	
  4,355,000

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Dryer Facilities

  	
   

  	
  5,225,000

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Product Storage Facilities

  	
   

  	
  2,935,000

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Plant Utilities

  	
   

  	
  4,280,000

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TO2

  	
   

  	
  275,000

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  General Plant Facilities & Services

  	
   

  	
  5,495,000

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Early Completion Bonus

  	
   

  	
  32,000

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  45,607,000

  	
   

  	
  $

  	
  4,869,216

  	
   

  	
  $

  	
  45,665,000

  	
   

  	
  $

  	
  58,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ADMINISTRATION
  BUILDING

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2290

  	
   

  	
  Capitalized Copier Lease

  	
   

  	
  10,000

  	
   

  	
  3,861

  	
   

  	
  10,000

  	
   

  	
  —

  	
   

  
	
  8710

  	
   

  	
  Office Equipment

  	
   

  	
  50,000

  	
   

  	
  8,338

  	
   

  	
  50,000

  	
   

  	
  —

  	
   

  
	
  8711

  	
   

  	
  Office Furniture

  	
   

  	
  40,000

  	
   

  	
  —

  	
   

  	
  40,000

  	
   

  	
  —

  	
   

  
	
  8712

  	
   

  	
  Office Computers/Network

  	
   

  	
  55,000

  	
   

  	
  —

  	
   

  	
  55,000

  	
   

  	
  —

  	
   

  
	
  8713

  	
   

  	
  Office Computers/Software

  	
   

  	
  85,000

  	
   

  	
  —

  	
   

  	
  85,000

  	
   

  	
  —

  	
   

  
	
  8410

  	
   

  	
  Admin Building/Asset

  	
   

  	
  300,000

  	
   

  	
  8,506

  	
   

  	
  300,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  540,000

  	
   

  	
  $

  	
  22,172

  	
   

  	
  $

  	
  540,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  RAILROAD

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8205

  	
   

  	
  Rail Switches Mainline

  	
   

  	
  300,000.00

  	
   

  	
  —

  	
   

  	
  300,000.00

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Mainline Turnouts

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8210

  	
   

  	
  Rail Spur Development

  	
   

  	
  1,261,928.50

  	
   

  	
  —

  	
   

  	
  1,261,928.50

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  Yard Turnouts

  	
   

  	
  320,000.00

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Track Construction

  	
   

  	
  606,580.00

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Sub Ballast

  	
   

  	
  96,000.00

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Miscellaneous

  	
   

  	
  97,355.00

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Contingency

  	
   

  	
  141,993.50

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  1,561,928.50

  	
   

  	
  —

  	
   

  	
  $

  	
  1,561,928.50

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OTHER PLANT
  EQUIPMENT

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8700

  	
   

  	
  Grain Test Equipment

  	
   

  	
  30,000

  	
   

  	
  —

  	
   

  	
  30,000

  	
   

  	
  —

  	
   

  
	
  8720

  	
   

  	
  RO Water System

  	
   

  	
  200,000

  	
   

  	
  —

  	
   

  	
  200,000

  	
   

  	
  —

  	
   

  
	
  8715

  	
   

  	
  Shop Equipment

  	
   

  	
  25,000

  	
   

  	
  —

  	
   

  	
  25,000

  	
   

  	
  —

  	
   

  
	
  8750

  	
   

  	
  Process Area Equipment

  	
   

  	
  10,000

  	
   

  	
  —

  	
   

  	
  10,000

  	
   

  	
  —

  	
   

  
	
  8751

  	
   

  	
  Grading Office

  	
   

  	
  55,000

  	
   

  	
  —

  	
   

  	
  55,000

  	
   

  	
  —

  	
   

  
	
  8752

  	
   

  	
  System Automation

  	
   

  	
  36,000

  	
   

  	
  —

  	
   

  	
  36,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  356,000

  	
   

  	
  —

  	
   

  	
  $

  	
  356,000

  	
   

  	
  —

  	
   

  

 

52

 

	
   

  	
   

  	
   

  	
   

  	
  Budget

  	
   

  	
  Committed

  2/10/2004

  	
   

  	
  Estimated
  Final

  	
   

  	
  Variance

  	
   

  
	
   

  	
   

  	
  ROLLING STOCK

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  40 Rail Cars (DDGS) (Lease)

  	
   

  	
  20,000.00

  	
   

  	
  —

  	
   

  	
  20,000.00

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Pickup

  	
   

  	
  14,000.00

  	
   

  	
  —

  	
   

  	
  14,000.00

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2 Loaders (Lease)

  	
   

  	
  12,000.00

  	
   

  	
  —

  	
   

  	
  12,000.00

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Scissor Lift

  	
   

  	
  4,500.00

  	
   

  	
  —

  	
   

  	
  4,500.00

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fork Lift

  	
   

  	
  5,500.00

  	
   

  	
  —

  	
   

  	
  5,500.00

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Trackmobile (Lease)

  	
   

  	
  7,000.00

  	
   

  	
  —

  	
   

  	
  7,000.00

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  63,000.00

  	
   

  	
  —

  	
   

  	
  $

  	
  63,000.00

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SITE COSTS

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8400

  	
   

  	
  Land

  	
   

  	
  1,000,000

  	
   

  	
  710,411

  	
   

  	
  1,000,000

  	
   

  	
  —

  	
   

  
	
  8402

  	
   

  	
  Land Surveying-CIP

  	
   

  	
  20,000

  	
   

  	
  —

  	
   

  	
  20,000

  	
   

  	
  —

  	
   

  
	
  8445

  	
   

  	
  Site Testing/Engineering

  	
   

  	
  15,000

  	
   

  	
  10,186

  	
   

  	
  15,000

  	
   

  	
  —

  	
   

  
	
  8500

  	
   

  	
  Site/Land Improvements

  	
   

  	
  650,000

  	
   

  	
  407,228

  	
   

  	
  650,000

  	
   

  	
  —

  	
   

  
	
  8501

  	
   

  	
  Paving and Cement

  	
   

  	
  250,000

  	
   

  	
  —

  	
   

  	
  250,000

  	
   

  	
  —

  	
   

  
	
  8502

  	
   

  	
  County Road Improvements

  	
   

  	
  100,000

  	
   

  	
  —

  	
   

  	
  100,000

  	
   

  	
  —

  	
   

  
	
  8460

  	
   

  	
  Security

  	
   

  	
  20,000

  	
   

  	
  —

  	
   

  	
  20,000

  	
   

  	
  —

  	
   

  
	
  8482

  	
   

  	
  Site Utilities/Gas

  	
   

  	
  40,000

  	
   

  	
  —

  	
   

  	
  40,000

  	
   

  	
  —

  	
   

  
	
  8483

  	
   

  	
  Site Utilities/Electric

  	
   

  	
  250,000

  	
   

  	
  68,662

  	
   

  	
  250,000

  	
   

  	
  —

  	
   

  
	
  8484

  	
   

  	
  Site Utilities/Sanitary

  	
   

  	
  50,000

  	
   

  	
  —

  	
   

  	
  50,000

  	
   

  	
  —

  	
   

  
	
  8481

  	
   

  	
  Site Utilities/Water and Drains

  	
   

  	
  170,000

  	
   

  	
  —

  	
   

  	
  170,000

  	
   

  	
  —

  	
   

  
	
  8455

  	
   

  	
  Water Wells

  	
   

  	
  90,000

  	
   

  	
  37,218

  	
   

  	
  90,000

  	
   

  	
  —

  	
   

  
	
  8451

  	
   

  	
  Permitting-CIP

  	
   

  	
  25,000

  	
   

  	
  2,985

  	
   

  	
  25,000

  	
   

  	
  —

  	
   

  
	
  8725

  	
   

  	
  Fire Protection

  	
   

  	
  520,000

  	
   

  	
  —

  	
   

  	
  520,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  Freshwater Tank

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fire Pump

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Sprinklers

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Site Miscellaneous

  	
   

  	
  10,000

  	
   

  	
  2,024

  	
   

  	
  10,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  3,210,000

  	
   

  	
  $

  	
  1,238,712

  	
   

  	
  $

  	
  3,210,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  OTHER BUILDING COSTS

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8440

  	
   

  	
  Insurance-Builders Risk (14 months)

  	
   

  	
  138,000

  	
   

  	
  118,000

  	
   

  	
  138,000

  	
   

  	
  —

  	
   

  
	
  8760

  	
   

  	
  Construction Bond

  	
   

  	
  306,000

  	
   

  	
  308,895

  	
   

  	
  308,895

  	
   

  	
  2,895

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  444,000

  	
   

  	
  $

  	
  426,895

  	
   

  	
  $

  	
  446,895

  	
   

  	
  $

  	
  2,895

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  INVENTORY-WORKING
  CAPITAL

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8010

  	
   

  	
  Inventory – Corn

  	
   

  	
  2,500,000

  	
   

  	
  —

  	
   

  	
  2,500,000

  	
   

  	
  —

  	
   

  
	
  8030

  	
   

  	
  Inventory – Ethanol & DDGS

  	
   

  	
  1,505,000

  	
   

  	
  —

  	
   

  	
  1,505,000

  	
   

  	
  —

  	
   

  
	
  8040

  	
   

  	
  Inventory – Process Supplies/Chemical

  	
   

  	
  97,000

  	
   

  	
  —

  	
   

  	
  97,000

  	
   

  	
  —

  	
   

  
	
  8050

  	
   

  	
  Corn Hedging

  	
   

  	
  500,000

  	
   

  	
  —

  	
   

  	
  500,000

  	
   

  	
  —

  	
   

  
	
  8060

  	
   

  	
  Spare Parts

  	
   

  	
  200,000

  	
   

  	
  —

  	
   

  	
  200,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  4,802,000

  	
   

  	
  —

  	
   

  	
  $

  	
  4,802,000

  	
   

  	
  —

  	
   

  
																

 

53

 

	
   

  	
   

  	
  ENTITY ORGANIZATION

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Legal &
  Filings

  	
   

  	
  10,554

  	
   

  	
  10,554

  	
   

  	
  10,554

  	
   

  	
  —

  	
   

  
	
  5025

  	
   

  	
  Business
  Plan

  	
   

  	
  14,548

  	
   

  	
  14,548

  	
   

  	
  14,548

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  Consulting/Others
  – 3rd Party

  	
   

  	
  28,580

  	
   

  	
  28,580

  	
   

  	
  28,580

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  Advertising
  and Meetings

  	
   

  	
  5,089

  	
   

  	
  5,089

  	
   

  	
  5,089

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  58,771

  	
   

  	
  $

  	
  58,711

  	
   

  	
  $

  	
  58,711

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FINANCING
  COSTS

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Direct Bank Fees

  	
   

  	
  350,500

  	
   

  	
  20,500

  	
   

  	
  350,500

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  Indirect Bank Fees

  	
   

  	
  60,300

  	
   

  	
  —

  	
   

  	
  60,300

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  Annual Fees

  	
   

  	
  40,000

  	
   

  	
  —

  	
   

  	
  40,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  Capital Interest

  	
   

  	
  420,000

  	
   

  	
  994

  	
   

  	
  420,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  870,800

  	
   

  	
  $

  	
  21,493.65

  	
   

  	
  $

  	
  870,800

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  COST
  OF RAISING CAPITAL

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3900

  	
   

  	
  Costs of Raising Capital

  	
   

  	
  2,356

  	
   

  	
  2,356

  	
   

  	
  2,356

  	
   

  	
  —

  	
   

  
	
  3910

  	
   

  	
  Printing

  	
   

  	
  1,941

  	
   

  	
  1,942

  	
   

  	
  1,942

  	
   

  	
  —

  	
   

  
	
  3930

  	
   

  	
  Legal

  	
   

  	
  17,041

  	
   

  	
  17,041

  	
   

  	
  17,041

  	
   

  	
  —

  	
   

  
	
  3940

  	
   

  	
  Accounting

  	
   

  	
  2,255

  	
   

  	
  2,255

  	
   

  	
  2,255

  	
   

  	
  —

  	
   

  
	
  1615

  	
   

  	
  Deferred Offering Costs

  	
   

  	
  258,758

  	
   

  	
  258,758

  	
   

  	
  258,758

  	
   

  	
  —

  	
   

  
	
  1620

  	
   

  	
  Deferred Land Options

  	
   

  	
  13,000

  	
   

  	
  13,000

  	
   

  	
  13,000

  	
   

  	
  —

  	
   

  
	
  5360

  	
   

  	
  Advertising and Meetings

  	
   

  	
  94,999

  	
   

  	
  94,927

  	
   

  	
  94,999

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  390,351

  	
   

  	
  $

  	
  390,279

  	
   

  	
  $

  	
  390,351

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  EQUITY
  CLOSING

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Startup Costs and Interest

  	
   

  	
  12,155

  	
   

  	
  12,155

  	
   

  	
  12,155

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  Administration Labor

  	
   

  	
  27,567

  	
   

  	
  27,567

  	
   

  	
  27,567

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  Consulting Services

  	
   

  	
  311,439

  	
   

  	
  311,439

  	
   

  	
  311,439

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  Accounting and Legal

  	
   

  	
  78,223

  	
   

  	
  78,223

  	
   

  	
  78,223

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  Miscellaneous

  	
   

  	
  6,566

  	
   

  	
  6,566

  	
   

  	
  6,566

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  Permitting

  	
   

  	
  90,956

  	
   

  	
  90,956

  	
   

  	
  90,956

  	
   

  	
  —

  	
   

  
	
  5335

  	
   

  	
  Expired Land Costs

  	
   

  	
  8,713

  	
   

  	
  8,713

  	
   

  	
  8,713

  	
   

  	
  —

  	
   

  
	
  5336

  	
   

  	
  Option Expense

  	
   

  	
  2,500

  	
   

  	
  2,500

  	
   

  	
  2,500

  	
   

  	
  —

  	
   

  
	
  5370

  	
   

  	
  Travel

  	
   

  	
  2,191

  	
   

  	
  2,191

  	
   

  	
  2,191

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  540,309.46

  	
   

  	
  $

  	
  540,309.46

  	
   

  	
  $

  	
  540,309.46

  	
   

  	
  —

  	
   

  

 

54

 

	
   

  	
   

  	
  PRE-OPERATING
  COSTS

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6000

  	
   

  	
  Office Supplies

  	
   

  	
  45,000

  	
   

  	
  20,803

  	
   

  	
  45,000

  	
   

  	
  —

  	
   

  
	
  6020

  	
   

  	
  Telephone

  	
   

  	
  16,000

  	
   

  	
  8,357

  	
   

  	
  16,000

  	
   

  	
  —

  	
   

  
	
  6030

  	
   

  	
  Conference Telephone Calls

  	
   

  	
  1,000

  	
   

  	
  301

  	
   

  	
  1,000

  	
   

  	
  —

  	
   

  
	
  6040

  	
   

  	
  Cell Phone Service

  	
   

  	
  3,000

  	
   

  	
  230

  	
   

  	
  3,000

  	
   

  	
  —

  	
   

  
	
  6050

  	
   

  	
  Internet Service

  	
   

  	
  1,200

  	
   

  	
  259

  	
   

  	
  1,200

  	
   

  	
  —

  	
   

  
	
  6060

  	
   

  	
  Postage

  	
   

  	
  20,000

  	
   

  	
  12,513

  	
   

  	
  20,000

  	
   

  	
  —

  	
   

  
	
  6061

  	
   

  	
  Courier Services

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  6070

  	
   

  	
  Contract labor

  	
   

  	
  295

  	
   

  	
  295

  	
   

  	
  295

  	
   

  	
  —

  	
   

  
	
  6071

  	
   

  	
  IT Maintenance

  	
   

  	
  2,000

  	
   

  	
  127

  	
   

  	
  2,000

  	
   

  	
  —

  	
   

  
	
  6080

  	
   

  	
  Office Rent

  	
   

  	
  8,800

  	
   

  	
  7,200

  	
   

  	
  8,800

  	
   

  	
  —

  	
   

  
	
  6081

  	
   

  	
  Site Trailer

  	
   

  	
  3,000

  	
   

  	
  —

  	
   

  	
  3,000

  	
   

  	
  —

  	
   

  
	
  6090

  	
   

  	
  Reimbursements

  	
   

  	
  556

  	
   

  	
  556

  	
   

  	
  556

  	
   

  	
  —

  	
   

  
	
  6101

  	
   

  	
  Utilities/Water

  	
   

  	
  4,000

  	
   

  	
  —

  	
   

  	
  4,000

  	
   

  	
  —

  	
   

  
	
  6102

  	
   

  	
  Utilities/Gas

  	
   

  	
  8,500

  	
   

  	
  6,000

  	
   

  	
  8,500

  	
   

  	
  —

  	
   

  
	
  6103

  	
   

  	
  Utilities/Electric

  	
   

  	
  2,000

  	
   

  	
  —

  	
   

  	
  2,000

  	
   

  	
  —

  	
   

  
	
  6104

  	
   

  	
  Utilities/Waste Disposal

  	
   

  	
  300

  	
   

  	
  —

  	
   

  	
  300

  	
   

  	
  —

  	
   

  
	
  6190

  	
   

  	
  Directors’ Fees

  	
   

  	
  132,200

  	
   

  	
  73,726

  	
   

  	
  132,200

  	
   

  	
  —

  	
   

  
	
  6200

  	
   

  	
  Directors’ Meeting Expense

  	
   

  	
  10,729

  	
   

  	
  8,752

  	
   

  	
  10,729

  	
   

  	
  —

  	
   

  
	
  6210

  	
   

  	
  Director Travel Expense

  	
   

  	
  11,288

  	
   

  	
  9,328

  	
   

  	
  11,288

  	
   

  	
  —

  	
   

  
	
  6211

  	
   

  	
  Employee Travel Expense

  	
   

  	
  4,000

  	
   

  	
  122

  	
   

  	
  4,000

  	
   

  	
  —

  	
   

  
	
  6220

  	
   

  	
  SEC Expenses

  	
   

  	
  10,000

  	
   

  	
  —

  	
   

  	
  10,000

  	
   

  	
  —

  	
   

  
	
  6221

  	
   

  	
  BATF Bond

  	
   

  	
  20,000

  	
   

  	
  —

  	
   

  	
  20,000

  	
   

  	
  —

  	
   

  
	
  6230

  	
   

  	
  Payroll Tax Expense

  	
   

  	
  20,000

  	
   

  	
  4,715

  	
   

  	
  20,000

  	
   

  	
  —

  	
   

  
	
  6240

  	
   

  	
  401K Expense

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
  6310

  	
   

  	
  Admin Labor

  	
   

  	
  50,000

  	
   

  	
  22,134

  	
   

  	
  50,000

  	
   

  	
  —

  	
   

  
	
  6315

  	
   

  	
  Production Labor

  	
   

  	
  350,000

  	
   

  	
  —

  	
   

  	
  350,000

  	
   

  	
  —

  	
   

  
	
  6360

  	
   

  	
  Advertising and Meetings

  	
   

  	
  3,500

  	
   

  	
  1,361

  	
   

  	
  3,500

  	
   

  	
  —

  	
   

  
	
  6370

  	
   

  	
  Project Manager Travel

  	
   

  	
  15,000

  	
   

  	
  4,799

  	
   

  	
  15,000

  	
   

  	
  —

  	
   

  
	
  6380

  	
   

  	
  Project Manager

  	
   

  	
  150,000

  	
   

  	
  25,000

  	
   

  	
  150,000

  	
   

  	
  —

  	
   

  
	
  6400

  	
   

  	
  Accounting Fees

  	
   

  	
  5,938

  	
   

  	
  5,938

  	
   

  	
  5,938

  	
   

  	
  —

  	
   

  
	
  6401

  	
   

  	
  Accounting/General

  	
   

  	
  35,000

  	
   

  	
  9,960

  	
   

  	
  35,000

  	
   

  	
  —

  	
   

  
	
  6402

  	
   

  	
  Accounting/SEC

  	
   

  	
  20,000

  	
   

  	
  5,211

  	
   

  	
  20,000

  	
   

  	
  —

  	
   

  
	
  6410

  	
   

  	
  Legal

  	
   

  	
  9,744

  	
   

  	
  9,744

  	
   

  	
  9,744

  	
   

  	
  —

  	
   

  
	
  6411

  	
   

  	
  Legal/SEC

  	
   

  	
  10,000

  	
   

  	
  2,985

  	
   

  	
  10,000

  	
   

  	
  —

  	
   

  
	
  6412

  	
   

  	
  Legal/Claims

  	
   

  	
  7,000

  	
   

  	
  5,731

  	
   

  	
  7,000

  	
   

  	
  —

  	
   

  
	
  6413

  	
   

  	
  Legal/Operating

  	
   

  	
  50,00

  	
   

  	
  13,172

  	
   

  	
  50,000

  	
   

  	
  —

  	
   

  
	
  6420

  	
   

  	
  Consulting Fees

  	
   

  	
  80,000

  	
   

  	
  61,996

  	
   

  	
  80,000

  	
   

  	
  —

  	
   

  
	
  6421

  	
   

  	
  Grant Administration

  	
   

  	
  18,000

  	
   

  	
  11,597

  	
   

  	
  18,000

  	
   

  	
  —

  	
   

  
	
  6600

  	
   

  	
  Bank Charges

  	
   

  	
  15,000

  	
   

  	
  8,260

  	
   

  	
  15,000

  	
   

  	
  —

  	
   

  
	
  6620

  	
   

  	
  Miscellaneous Expense

  	
   

  	
  2,500

  	
   

  	
  (215)

  	
   

  	
  2,500

  	
   

  	
  —

  	
   

  
	
  6630

  	
   

  	
  Donations

  	
   

  	
  1,000

  	
   

  	
  133

  	
   

  	
  1,000

  	
   

  	
  —

  	
   

  
	
  6640

  	
   

  	
  Dues/Subscriptions

  	
   

  	
  4,200

  	
   

  	
  1,300

  	
   

  	
  4,200

  	
   

  	
  —

  	
   

  
	
  6650

  	
   

  	
  Insurance-Operations

  	
   

  	
  20,000

  	
   

  	
  671

  	
   

  	
  20,000

  	
   

  	
  —

  	
   

  
	
  6660

  	
   

  	
  Insurance-D&O

  	
   

  	
  16,912

  	
   

  	
  16,912

  	
   

  	
  16,912

  	
   

  	
  —

  	
   

  
	
  6700

  	
   

  	
  Property Taxes

  	
   

  	
  1,000

  	
   

  	
  723

  	
   

  	
  1,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  1,188,660.45

  	
   

  	
  $

  	
  360,714.81

  	
   

  	
  $

  	
  1,188,660.45

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  TOTAL
  USES

  	
   

  	
  $

  	
  59,632,820

  	
   

  	
  $

  	
  7,928,562

  	
   

  	
  $

  	
  59,693,715

  	
   

  	
  $

  	
  1,879,564

  	
   

  
	
   

  	
   

  	
  Construction Contingency

  	
   

  	
  411,180

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  60,044,000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
																

 

55

 

EXHIBIT C 

SWORN CONSTRUCTION STATEMENT

 

56

 

Certification of Project Cost Statement

 

Attached hereto, and by this reference made a
part hereof, is a statement of the anticipated costs of construction of the
Friesland, Wisconsin ethanol plant to be constructed for United Wisconsin Grain
Producers, LLC, subject to change orders approved hereafter.

 

Dated as of the ninth day of February, 2004.

 

 

	
  United Wisconsin Grain Producers, LLC

  	
  Fagen, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/

  	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
   

  	
  Jennifer A. Johnson, CFO

  
						

 

57

 

Schedule of Values for:

United Wisconsin Grain Producers

 

Friesland, Wisconsin

 

 

	
   

  	
   

  	
  Description

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  MOBILIZATION

  	
   

  	
  $

  	
  3,000,000

  	
   

  
	
  2.

  	
   

  	
  ENGINEERING

  	
   

  	
  3,150,000

  	
   

  
	
  3.

  	
   

  	
  GENERAL CONDITIONS

  	
   

  	
  2,700,000

  	
   

  
	
  4.

  	
   

  	
  SITE WORK

  	
   

  	
  250,000

  	
   

  
	
  5.

  	
   

  	
  CONCRETE

  	
   

  	
  3,600,000

  	
   

  
	
  6.

  	
   

  	
  MASONRY

  	
   

  	
  150,000

  	
   

  
	
  7.

  	
   

  	
  STRUCTURAL STEEL/MISC.METAL

  	
   

  	
  2,000,000

  	
   

  
	
  8.

  	
   

  	
  LUMBER/CARPENTRY/FINISHES

  	
   

  	
  50,000

  	
   

  
	
  9.

  	
   

  	
  GIRTS/SIDING & ROOF DECK

  	
   

  	
  425,000

  	
   

  
	
  10.

  	
   

  	
  DOORS & WINDOWS

  	
   

  	
  50,000

  	
   

  
	
  11.

  	
   

  	
  PAINT

  	
   

  	
  200,000

  	
   

  
	
  12.

  	
   

  	
  GRAIN HANDLING SYSTEM

  	
   

  	
  3,750,000

  	
   

  
	
  13.

  	
   

  	
  DDG STORAGE BUILDING

  	
   

  	
  500,000

  	
   

  
	
  14.

  	
   

  	
  DRYER SYSTEM

  	
   

  	
  3,500,000

  	
   

  
	
  15.

  	
   

  	
  FIELD ERECTED TANKS

  	
   

  	
  3,255,000

  	
   

  
	
  16.

  	
   

  	
  PROCESS TANKS & VESSELS

  	
   

  	
  3,000,000

  	
   

  
	
  17.

  	
   

  	
  THERMAL OXIDIZER

  	
   

  	
  2,000,000

  	
   

  
	
  18.

  	
   

  	
  MIXERS

  	
   

  	
  400,000

  	
   

  
	
  19.

  	
   

  	
  PUMPS

  	
   

  	
  650,000

  	
   

  
	
  20.

  	
   

  	
  HEAT EXCHANGERS

  	
   

  	
  955,000

  	
   

  
	
  21.

  	
   

  	
  SIEVE BOTTLES & BEADS

  	
   

  	
  325,000

  	
   

  
	
  22.

  	
   

  	
  CHILLER

  	
   

  	
  200,000

  	
   

  
	
  23.

  	
   

  	
  CENTRIFUGES

  	
   

  	
  1,800,000

  	
   

  
	
  24.

  	
   

  	
  AIR COMPRESSORS

  	
   

  	
  80,000

  	
   

  
	
  25.

  	
   

  	
  METHANATORS

  	
   

  	
  450,000

  	
   

  
	
  26.

  	
   

  	
  COOLING TOWER

  	
   

  	
  340,000

  	
   

  
	
  27.

  	
   

  	
  ETHANOL LOADOUT

  	
   

  	
  120,000

  	
   

  
	
  28.

  	
   

  	
  VAPOR FLARE SYSTEM

  	
   

  	
  100,000

  	
   

  
	
  29.

  	
   

  	
  PROCESS PIPING & VALVES

  	
   

  	
  3,125,000

  	
   

  
	
  30.

  	
   

  	
  INSULATION

  	
   

  	
  600,000

  	
   

  
	
  31.

  	
   

  	
  PLUMBING & HVAC

  	
   

  	
  350,000

  	
   

  
	
  32.

  	
   

  	
  ELECTRICAL

  	
   

  	
  3,750,000

  	
   

  
	
  33.

  	
   

  	
  START-UP

  	
   

  	
  500,000

  	
   

  
	
  34.

  	
   

  	
  DEMOBILIZATION

  	
   

  	
  250,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  $

  	
  45,575,000

  	
   

  

 

58

 

Schedule 5.01(n)

Management

 

Borrower is currently managed by its
President with oversight by the Board of Directors.

 

59

 

Schedule 5.02(a)

Description of Certain Liens, Lease
Obligations, etc.

 

None.

 

60

 

Schedule 5.02(f)

Loans;
Guaranties

 

None.

 

61

 

EXHIBIT D 

FORM OF OPINION LETTER

 

62

 

Brown,
Winick, Graves, Gross,

Baskerville
and Schoenebaum, P.L.C.

ATTORNEYS AT
LAW

 

	
  666
  GRAND AVENUE, SUITE 2000

  DES
  MOINES, IOWA 50309-2510

   

  TELEPHONE:         (515) 242-2400

  FACSIMILE:            (515) 283-0231

   

   

  URL:  www.ialawyers.com

   

   

  Offices
  in:

  West Des Moines, Iowa

  Pella, Iowa

  Washington, D.C.

  	
   

  	
  Richard
  W. Baskerville

  Bruce
  Graves

  Steven
  C. Schoenebaum

  Harold
  N. Schneebeck

  Paul
  D. Hietbrink

  William
  C. Brown

  Richard
  K. Updegraff

  Jill
  Thompson Hansen

  Paul
  E. Carey

  Douglas
  E. Gross

  John
  D. Hunter

  James
  H. Gilliam

  Robert
  D. Andeweg

  Alice
  Eastman Helle

  Michael
  R. Blaser

  Thomas
  D. Johnson

  Charles
  J. Krogmeier

  	
   

  	
  Christopher
  R. Sackett

  Sean
  P. Moore

  Stuart
  I. Feldstein

  Nancy
  S. Boyd

  James
  L. Pray

  Brenton
  D. Soderstrum

  Michael
  D. Treinen

  Scott
  L. Long

  Ronni
  F. Begleiter

  Miranda
  L. Hughes

  Duane
  P. Hagerty

  Kelly
  D. Hamborg

  William
  E. Hanigan

  Mary
  A. Ericson

  Barbara
  B. Burnett

  Michael
  J. Green

  Michael
  A. Dee

  	
   

  	
  Deborah
  J. Schmudlach

  Danielle
  K. Dixon

  Brian
  P. Rickert

  Valerie
  D. Bandstra

  Alexander
  M. Johnson

  James
  S. Niblock

  Ann
  Holden Kendell

  Rebecca
  A. Brommel

  Kelly
  K. Helwig

  Mark
  E. Roth

  Tina
  R. Thompson

  Brian
  M. Green

  Dustin
  D. Smith

  Adam
  W. Jones

  Catherine
  C. Cownie

  	
   

  	
  Patents
  and Trademarks

  G.
  Brian Pingel

  Camille
  L. Urban

   

   

  Washington,
  D.C. Office

  Brian
  Kennedy

   

   

  Of
  Counsel:

  Marvin
  Winick

   

   

  Walter
  R. Brown (1921-2000)

  

 

February 26, 2004

 

Agstar Financial Services, PCA

1921 Premier Drive

P.O. Box 4249

Mankato, MN 56002-4249

 

Re:                             Construction and Revolving Loan Agreement by and
between United Wisconsin Grain Producers, LLC and Agstar Financial Services,
PCA

 

Ladies and Gentlemen:

 

We have acted as special counsel for United Wisconsin Grain Producers,
LLC, a Wisconsin limited liability company (the “Borrower”), in connection with
that certain construction financing by Agstar Financial Services, PCA (the
“Lender”) to Borrower for the purpose of enabling Borrower to construct an
ethanol plant in Columbia County, Wisconsin. 
We have been requested by Borrower to render certain opinions to you in
connection with the aforementioned financing transaction.  For purposes of rendering these opinions, we
have examined the following documents (the “Loan Documents”):

 

(a)                                  Construction and
Revolving Loan Agreement (the “Loan Agreement”) between the Borrower and the
Lender, dated as of the date hereof, pursuant to which the Lender has agreed to
extend construction, term and revolving credit facilities to the Borrower in
the aggregate amount of $33,024,200;

 

(b)                                 Promissory Note, dated
as of the date hereof, payable by Borrower to the order of Lender in an
original principal amount equal to $33,024,200;

 

(c)                                  Revolving Note, dated
as of the date hereof, payable by Borrower to the order of the lender in an
original principal amount equal to $4,000,000;

 

(d)                                 Mortgage, dated as of
the date hereof, by Borrower, as mortgagor, to Lender, as mortgagee;

 

63

 

(e)                                  Security Agreement,
dated as of the date hereof, by the Borrower in favor of Lender;

 

(f)                                    Disbursing Agreement, dated as of the date
hereof, by and among the Borrower, Lender and Old Republic National Title
Insurance Company;

 

 

(g)                                 Assignment of
Design-Build Contract, dated as of the date hereof, by and between Borrower and
Lender; and

 

(h)                                 Uniform Commercial
Code Financing Statements naming the Lender as secured party.

 

This opinion is rendered pursuant to Section 3.01(q) of the Loan
Agreement.  All capitalized terms used
in this opinion letter but not defined herein shall have the meanings given to
them in the Loan Agreement.

 

In rendering these opinions, we have reviewed the Articles
of Organization and Operating Agreement of Borrower.  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.

 

Based upon and subject to the foregoing, it is our opinion that:

 

1.                                       The
Borrower is a limited liability company, duly organized, validly existing and
in good standing under the laws of the State of Wisconsin, and is duly licensed
or qualified to transact business in all jurisdictions where the character of
the property owned or leased or the nature of the business transacted by it
makes such licensing or qualification necessary, except to the extent that the
failure to be so licensed or qualified would not, in the aggregate, have a
material adverse effect on the Borrower. 
The Borrower has the power and authority to conduct its business and to
own its properties.

 

2.                                       The
Borrower has the limited liability company power and authority to execute,
deliver and perform its obligations under the Loan Documents and has taken all
necessary limited liability company action to authorize the execution, delivery
and performance of the Loan Documents to which it is a party.

 

3.                                       The
execution, delivery and performance of the Loan Documents, and the performance
by the Borrower of its obligations thereunder, do not and will not violate or
conflict with any law applicable to Borrower or the Operating Agreement of the
Borrower and, to our knowledge, do not violate or conflict with, or cause any
default or event of default to occur under, any agreement presently binding
upon the Borrower.

 

64

 

4.                                       The
Loan Documents have been duly executed and delivered by the Borrower (except
for UCC-1 Financing Statements which are not executed by Borrower) and
constitute the legal and binding obligation of the Borrower, enforceable
against the Borrower in accordance with their respective terms except that (a)
such enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditor’s rights, (b) the remedy of specific performance and injunctive relief
may be subject to equitable defenses and to the discretion of the court before
which any proceeding therefore may be brought, (c) an implied covenant of good
faith and fair dealing may be imposed, and (d) as hereinafter specifically set
forth.  In expressing our opinions
herein regarding enforceability of the Loan Documents, we assume Lender will at
all relevant times act in good faith and in a commercially reasonable manner in
enforcing its rights and remedies under the Loan Documents and will not at any
relevant time be in material breach of its obligations under the Loan
Documents.

 

5.                                       To
our knowledge, except as disclosed in the Loan Agreement, no litigation or
governmental proceedings are pending or are threatened against the Borrower and
no judgment or order of any court or administrative agency is outstanding
against the Borrower, with respect to any Loan Document or any transactions
contemplated thereby, or which, if adversely determined, would reasonably be
expected to have a material adverse effect on Borrower.

 

The foregoing opinions are based in part upon and subject
to the assumptions, limitations, qualifications and exceptions set forth below:

 

(a)                                  We
express no opinion regarding the enforceability or legal effect of computing
interest based upon a 360-day year.

 

(b)                                 The
enforceability of the Loan Documents is subject to general principles of
equity.  Accordingly, certain remedies
set forth in the Loan Documents may be subject to equitable defenses and to the
discretion of the court and may require further notices and actions to be taken
by the Lender prior to availing itself of such rights and remedies.

 

(c)                                  We
express no opinion with respect to the validity and enforceability of any
provisions of the Loan Documents: (i) purporting to provide for
indemnification, exoneration or limitation of liability of a party for its
action or inaction, or for liability due to its own fault; (ii) stating
that the failure to exercise or delay in exercising rights will not operate as
a waiver of a right or remedy; (iii) relating to choice of law matters or
consent to jurisdiction; (iv) waiving statutes of limitation or jury trials;
(v) purporting to waive any requirement of reasonable or diligent performance
or other care on Lender’s part with respect to the recognition or preservation
of Borrower’s rights to or interest in any property subject to any security
interest of lien granted thereby; (vi) providing that delays will not operate
as a waiver, (vii) attempting to modify or waive any requirements of commercial
reasonableness or notice arising under applicable state or federal laws or the
due process clause of the United States Constitution, or (viii) purporting to
ratify any action the Lender may take without specifying the standards for such
action.  We also express no opinion
regarding the validity

 

65

 

or enforceability of the Loan Documents against any parties other than
the Borrower.

 

(d)                                 Certain
remedies, waivers and other provisions of the Loan Documents may be
unenforceable or limited by applicable law, however, such law does not render
the Loan Documents invalid as a whole or substantially prevent or impair the
practical realization of the benefits intended by the Loan Documents.

 

(e)                                  We
express no opinion as to zoning, subdivision or similar matters, the compliance
of the mortgage property with building codes, municipal ordinances,
restrictions or environmental laws, the title to or ownership of any property
of the Borrower, the sufficiency or accuracy of the description of any
collateral referred to in the Loan Documents, or the priority of any liens or
security interest purported to be created by the Loan Documents.

 

(f)                                    We
express no opinion as to the validity or enforceability of any documents which
we have not examined, but which might be referenced or incorporated as a matter
of law in a document which we have examined.

 

(g)                                 We are
members of the bar of the State of Iowa and the State of Wisconsin only and do
not hold ourselves out as experts on the law of any other state.  Consequently, we have made no independent
review of the laws of any jurisdiction other than the State of Wisconsin and we
express no opinion as to the laws of any jurisdiction other than the laws of
the State of Wisconsin and the federal laws of the United States of
America.  Our opinions are based upon
the assumption (but not our conclusion) that the laws of the State of Wisconsin
are or would be applicable to such matters.

 

(h)                                 We
express no opinion as to the enforceability of the choice of law provisions
contained in the Loan Documents that state that they are to be governed by the
laws of the State of Minnesota, nor assuming such provisions would be
enforceable under the choice of law principles of the State of Minnesota or the
State of Wisconsin, do we state any opinion as to the enforceability of the
Loan Documents under the internal laws of the State of Minnesota.  Notwithstanding the foregoing, you have
requested us to review the Loan Documents and provide you with the opinions set
forth above assuming, solely for the purposes of these opinions, that the
internal laws of the State of Wisconsin would govern them.  If the Loan Documents were to be governed by
the internal laws of the State of Wisconsin, our opinions would be as set forth
herein.  We note that if a court of
competent jurisdiction determines one of more of the Loan Documents to be
unenforceable under the laws of the State of Minnesota, then such Loan Documents
may not be enforceable by Wisconsin courts under the applicable Wisconsin
conflict of law provisions.

 

(i)                                     In
rendering the opinions expressed above, we have assumed: (1) the due
authorization, execution and delivery of the Loan Documents by the Lender, (2)
the binding effect of such Loan Documents on the Lender, (3) the enforceability
of such Loan Documents against the Lender, (4) the terms and conditions of the
Loan as reflected in the Loan Documents have not been amended, modified or
supplemented by any other agreement or

 

66

 

understanding of the parties or waiver of any material provisions of
the Loan Documents, (5) there has not been any mutual mistake of fact or
misunderstanding, fraud, duress or undue influence, and (6) Lender and any
agent acting for Lender in connection with the transaction have acted in good
faith, and complied with the requirement of fair dealing and conscionability,
and without notice of any defense against enforcement of any rights created by,
or adverse claim to any property or security interest transferred or created as
part of the transaction.

 

(j)                                     In
rendering the opinions express above, we advise you that we have not conducted,
nor do we undertake to conduct, any independent review or investigation of, nor
are we expressing any opinion concerning, the accuracy of the representations,
warranties and statements made by the Borrower or the partners, directors,
officers and employees of the Borrower or anyone else.  However, we have discussed with
representatives of the Borrower the representations, warranties and
certifications of the Borrower set forth and contained in the Loan Documents
and, in the course of such discussions, we became aware of no facts or
circumstances which would cause us to believe that any of such warranties,
representations or certifications are untrue, incorrect or misleading in any
material respect

 

(k)                                  As
to any matters of fact material to the opinions expressed above, we have relied
upon the truth, accuracy and completeness of the representations, warranties
and certifications made by the Borrower in the Loan Documents.

 

(l)                                     When
used herein, the term “our knowledge” shall mean that we have no actual
knowledge of facts which are contrary to the opinion rendered, without having
undertaken independent investigation or verification of any such facts, and
shall be limited to our reliance upon an Officer’s Certificate executed by an
officer of the Borrower, attached hereto and incorporated herein by this reference,
and the actual present knowledge of the attorneys in our firm who have devoted
substantive attention to the transaction contemplated by the Loan Documents and
not the knowledge of the firm generally.

 

(m)                               In
rendering all of the opinions set forth above, we have assumed the genuineness
of all signatures, and have further assumed the genuineness, completeness and
authenticity of all documents submitted to us as originals and the conformity
with genuine, complete and authentic originals of all documents submitted to us
as copies.

 

(n)                                 All of
our opinions set forth above are based upon existing law, all of which is
subject to change prospectively and retroactively.  All of our opinions set forth above are based on the facts and
the Loan Documents as they exist on the date of this letter, and we undertake
no obligation to update such opinions as to future changes of law or fact.

 

(o)                                 This
opinion letter is limited to the matters stated in it and no opinion is to be
implied or inferred beyond the matters expressly stated in it.

 

(p)                                 In
rendering the opinions expressed above, we have not examined title to any of
the Borrower’s properties and express no opinion with respect to title or the
priority of any

 

67

 

lien or security interest arising under the Loan Documents.

 

(q)                                 We
express no opinion as to the solvency of the Borrower as of the date of this
opinion letter, and to the extent that any opinion herein is reliant on such
Borrower being solvent, such opinion is limited accordingly.

 

This opinion has been rendered solely for the benefit of the Lender
under the terms of the Loan Agreement and the transactions contemplated thereby
and may not be used, circulated, quoted, relied upon or otherwise referred to for
any other purpose without our prior written consent, nor may it be relied upon
by any other party without our prior written consent; provided, however, and
subject to the foregoing sentence, this opinion may be delivered to your
loan participants, regulators, accountants, attorneys and other professional
advisers and may be used in connection with any legal or regulatory proceeding
relating to the subject matter of this opinion.

 

This opinion constitutes the entire opinion regarding the subject
matter hereof and supersedes all prior opinions regarding such subject matter.

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  BROWN, WINICK, GRAVES, GROSS,

  BASKERVILLE & SCHOENBAUM, P.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Christopher R. Sackett

  

 

68

 

OFFICER’S CERTIFICATE

 

The undersigned, Kevin M. Roche, being the President of United
Wisconsin Grain Producers, LLC (the “Company”), a Wisconsin limited liability
company, having personal knowledge as to the assets, business, and affairs of
United Wisconsin Grain Producers, LLC hereby certifies to and for the benefit
of Brown, Winick, Graves, Gross, Baskerville & Schoenebaum, P.L.C. (the
“Law Firm”), as follows:

 

1.               United Wisconsin Grain Producers, LLC
has provided to the Law Firm copies of its Articles of Organization and
Operating Agreement (attached hereto as Exhibit A), including all amendments
thereto, all as in effect as of the date hereof.

 

2.               Neither the execution of the Loan
Documents, nor the consummation of the transactions contemplated in the Loan
Documents constitutes a default under or a violation or breach of (i) the
Company’s Articles of Organization; (ii) the Company’s Operating Agreement, or
(iii) any other material agreement affecting the Company or its assets.

 

3.               There are no consents or approvals other
than the approval of the Board of Directors necessary for the approval and
performance of the Loan Documents.

 

4.               On February 19, 2004, a meeting of
the Board of Directors of United Wisconsin Grain Producers, LLC was held for
the purpose of authorizing the loan transaction and giving the President, Vice
President, Secretary and Treasurer, acting either alone or collectively the
authority to execute loan documents on behalf of the Company. Oral notice of
the meeting was given on February 5, 2004 at the Company’s previous
meeting of the Board of Directors and the Company also mailed written notice to
the board members on February 12, 2004.

 

5.               The Company’s Board of Directors
approved, by written resolution, the authorization of the loan transaction and
the authorization of the President, Vice President, Treasurer, and Secretary,
acting alone or collectively, to execute any and all documents necessary to
effectuate the loan transaction.

 

6.               Each of the warranties and
representations made by or on behalf of the Company in the Loan Documents is
true, accurate and complete.

 

7.               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 of the Loan Documents by the Company, other than such
consents, authorizations or filings which have been made or obtained.

 

8.               The Company has executed and delivered
the Loan Documents to which it is a party, and the Loan Documents constitute
legal, valid and binding obligations of the Company.

 

9.               No litigation, investigations or
proceedings of or before any Governmental Authority are pending or threatened
by or against the Company or any of its respective properties or

 

69

 

revenues, existing or future (a) with respect to any Loan Document or
any of the transactions contemplated thereby, or (b) which, if adversely
determined, would reasonably be expected to have a Material Adverse Effect on
the Company.

 

10.         I have reviewed the opinion letter dated
February 26, 2004 prepared by the Law Firm in connection with the
construction financing by AgStar Financial Services, PCA and there is no fact
or circumstance that would render it inaccurate, untrue, or incorrect.

 

Terms not otherwise defined herein shall have the meanings assigned to
such terms in the Opinion Letter. The undersigned hereby acknowledges and
agrees that the Law Firm is relying upon this Officer’s Certificate in providing
the Opinion Letter.

 

Dated as of February 26, 2004.

 

 

	
   

  	
   

  	
   

  
	
   

  	
  Kevin M. Roche, President

  United Wisconsin Grain Producers, LLC

  

 

70

 

Schedule 3.01(c)

Real
Property

 

Lot 1 of Certified Survey Map No. 4050, recorded in the Columbia County
Register of Deeds Office, In Volume 28 of Certified Survey Maps, page 44, as
Document No. 697073, in the Town of Randolph, Columbia County, Wisconsin,
EXCEPT land described in Volume 187 of Deeds, page 374.

 

71

 

Schedule 4.01 (a)

Description of Certain Transactions Related
to the Borrowers’ Stock

 

The following Subscription Agreements have been entered into, but
payment has not been received:

 

	
  NAME

  	
   

  	
  NUMBER OF UNITS

  	
   

  	
  PURCHASE PRICE

  	
   

  
	
  Lyle E. Wendorf

  	
   

  	
  50

  	
   

  	
  $

  	
  50,000

  	
   

  
	
  Jacob Griswold

  	
   

  	
  15

  	
   

  	
  $

  	
  15,000

  	
   

  
	
  Jeanine L. Griswold

  	
   

  	
  65

  	
   

  	
  $

  	
  65,000

  	
   

  

 

72

 

Schedule 4.01(f)

Description of Certain Threatened Actions,
etc.

 

Kevin Fry v. United Wisconsin Grain Producers,Case No. CI-03-103 Antelope County, Nebraska.

 

73

 

Schedule 4.01(j) Location of Inventory and Farm Products; Third
Parties in Possession; Crops

 

Borrower’s inventory and farm products pledged as collateral under the
Security Agreement are located at:

None

 

Landlords or mortgages of the locations identified above currently
leased or owned by Borrower:

None

 

74

 

Schedule 4.01(k)

Office Locations; Fictitious Names; Etc.

 

Office of United Wisconsin:

100 Richland Street

Friesland, WI 53935

 

Plant Address:

W 1231 Tessman Road

Cambria, WI 53923

 

Jurisdiction of Organization:

Wisconsin

 

Trade or Fictitious Names:

None

 

Federal ID Number:
39-2032455

 

Wisconsin ID Number: 654859-8

 

75

 

Schedule 4.01(n)

Intellectual
Property

 

76

 

UNITED STATES
DEPARTMENT OF COMMERCE

 

Tom Johnson

 

-----Original Message-----

From: United Wisconsin Grain
Producers [mailto:mail@uwgp.com]

Sent: Thursday, January 29,
2004 11:43 AM

To: johnson@ialawyers.com

Subject: FW: TRADEMARK APPLICATION
NO. 78205275 - UWGP UNITED WISCONSIN GRAIN PRODUCERS, L ETC. - N/A

 

Tom,

 

FYI.......about our trademark

-----Original Message-----

From: Kevin Roche
[mailto:Roche@uwgp.com]

Sent: Tuesday, August 19,
2003 3:58 PM

To: Bill Hanigan

Cc: United Wisconsin Grain
Producers

Subject: Fw: TRADEMARK APPLICATION
NO. 78205275 - UWGP UNITED WISCONSIN GRAIN PRODUCERS, L ETC. - N/A

 

Bill,

 

Do
you have anyone in your office who deals in trademarks?

 

Kevin
Roche

 

----- Original Message -----

From: ECom112

To: roche@uwgp.com

Sent: Monday, July 21, 2003 2:05 PM

Subject: TRADEMARK APPLICATION NO. 78205275 - UWGP
UNITED WISCONSIN GRAIN PRODUCERS, L ETC. - N/A

 

UNITED
STATES PATENT AND TRADEMARK OFFICE

 

	
  SERIAL NO:
  78/205275

  

  APPLICANT: United Wisconsin
  Grain Producers, LLC

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  CORRESPONDENT ADDRESS:

  United Wisconsin Grain Producers, LLC

  PO Box 247

  Friesland WI USA 53935-0247

  	
   

  	
  RETURN ADDRESS:

  
Commissioner for Trademarks 2900 Crystal Drive Arlington, VA 22202-3514  ecom112@uspto.gov

  
	
   

  	
   

  	
   

  
	
  MARK:                               UWGP UNITED WISCONSIN
  GRAIN PRODUCERS, L ETC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  CORRESPONDENT’S
  REFERENCE/DOCKET NO:         N/A

  

  CORRESPONDENT EMAIL ADDRESS:

  	
   

  	
  Please provide in all
  correspondence:

  

 

77

 

OFFICE ACTION

 

	
  roche@uwgp.com

  	
   

  	
  1.                 Filing date,
  serial number, mark and applicant’s name.

   

  2.                 Date of this
  Office Action. 

   

  3.                 Examining
  Attorney’s name and Law Office number. 

   

  4.                 Your telephone
  number and e-mail address.

  

 

 

TO AVOID
ABANDONMENT, WE MUST RECEIVE A PROPER RESPONSE TO THIS OFFICE ACTION WITHIN 6
MONTHS OF OUR MAILING OR E-MAILING DATE.

 

Serial Number 78/205275

 

The assigned examining attorney has reviewed the referenced application
and determined the following.

 

Search Results

The examining attorney has searched the Office records and has found no
similar registered or pending mark which would bar registration under Trademark
Act Section 2(d), 15 U.S.C. §1052(d). 
TMEP §704.02.

 

However, the applicant must address the following to enable further
prosecution of this file.

 

Recitation of
Services

The application identifies services that may be classified in more than
one international class.  However,
Office records indicate that the applicant has only paid for one class.
Therefore, the applicant must either: 
(1) restrict the application to the number of class(es) covered by the
fee already paid, or (2) pay the required fee for each additional
class(es).  37 C.F.R. §2.86(a)(2); TMEP
§§810.01, 1401.04, 1401.04(b) and 1403.01.

 

Effective January 1, 2003, the fee for filing a trademark
application is $335 for each class. 
This applies to classes added to pending applications as well as to new
applications

 

78

 

filed on or after that date.  37
C.F.R. §2.6(a)(1).

 

The recitation of services is also unacceptable because applicant
included the wording “ethanol sales” . 
“Sales” are not considered services within the meaning of the Trademark
Act.  That is, unlike services, “sales”
are not activities rendered for the benefit of others. The only beneficiary of
the actual sale is the proprietor of the store or owner of the goods since, presumably,
the owner or proprietor makes a profit from that commercial transaction. The
activities of a retail establishment that do provide a benefit to others are
those that surround the sale.

 

The applicant should delete “ethanol sales” and may adopt the following
recitation, if accurate:  Distributorships
featuring ethanol in Int. Class 35; and

 

Ethanol production services in Int. Class 40.

 

For additional guidance, the applicant may wish to consult the
Acceptable Identification of Goods and Services Manual for the United States
Trademark Office which may be found at
http://www.uspto.gov/web/offices/tac/doc/gsmanual/.

 

Please note that, while an application may be amended to clarify or
limit the identification, additions to the identification are not
permitted.  37 C.F.R. §2.71(a); TMEP
§1402.06.  Therefore, the applicant may
not amend to include any services that are not within the scope of the services
recited in the present identification.

 

Multiple Class
Prosecution

If the applicant prosecutes this application as a combined, or
multiple-class, application, the applicant must comply with each of the
following.

 

(1)  The applicant must list the
services by international class with the classes listed in ascending numerical
order.  TMEP §1403.01.

 

(2)  The applicant must submit a
filing fee for each international class of goods/services not covered by the
fee already paid.  37 C.F.R. §§2.6(a)(1)
and 2.86(a); TMEP §§810.01 and 1403.01. 
Effective January 1, 2003, the fee for filing a trademark
application is $335 for each class. 
This applies to classes added to pending applications as well as to new
applications filed on or after that date.

 

Disclaimer Required

Further, the applicant must disclaim the descriptive wording “WISCONSIN
GRAIN PRODUCERS, LLC” apart from the mark as shown. Trademark Act Section 6,
15 U.S.C. §1056; TMEP §§1213 and 1213.03(a). 
This wording is descriptive because it is merely descriptive or and
primarily geographically descriptive as used

 

79

 

in connection with the identified services.

 

Terms such as “Corporation,” “Inc.” and “LLC.” must be disclaimed
because they merely indicate the nature of the applicant’s entity and are not
source indicators.  See In re Packaging Specialists, Inc.,
221 USPQ 917 (TTAB 1984); In re Martin’s Famous Pastry Shoppe, Inc.,
221 USPQ 364 (TTAB 1984) aff’d on other grounds, 748 F.2d 1565, 223
USPQ 1289 (Fed. Cir. 1984); TMEP §1213.03(d).

 

A disclaimer does not remove the disclaimed matter from the
mark.  It is simply a statement that the
applicant does not claim exclusive rights in the disclaimed wording or design
apart from the mark as shown in the drawing.

 

The computerized printing format for the Trademark Official Gazette
requires a standard form for a disclaimer. 
TMEP §1213.08(a)(i).  A properly
worded disclaimer should read as follows:

 

No claim is made to the exclusive right to use WISCONSIN GRAIN
PRODUCERS LLC apart from the mark as shown.

 

See In re Owatonna
Tool Co., 231 USPQ 493 (Comm’r Pats. 1983).

 

Drawing Not Accepted

Finally, the drawing is not acceptable because the design feature
includes gray shading/stippling and overtones. 
Therefore, it will not reproduce satisfactorily.  The applicant must submit a new drawing
showing the mark clearly and conforming to 37 C.F.R. §2.52.  TMEP §807.07(a).

 

The requirements for a special-form drawing are as follows:

 

(1) The drawing must appear in black and white; no color is permitted.

 

(2)  Every line and letter must
be black and clear.

 

(3)  The use of gray to indicate
shading is unacceptable.

 

(4)  The lining must not be too
fine or too close together.

 

(5)  The preferred size of the
area in which the mark is displayed is 21⁄2 inches (6.1 cm.) high and 21⁄2 inches
(6.1 cm.) wide.  It should not be larger
than 4 inches (10.3 cm.) high or 4 inches (10.3 cm.) wide.

 

(6)  If the reduction of the
mark to the required size renders any details illegible, the applicant may
insert a statement in the application to describe the mark and these details.

 

80

 

37 C.F.R. §2.52; TMEP §§807.01(b) and 807.07(a).  The Office will enforce these drawing
requirements strictly.

 

The Office prefers that the drawing be depicted on a separate sheet of
smooth, nonshiny, white paper 8 to 81⁄2 inches (20.3 to 21.6 cm.) wide and 11
inches (27.9 cm.) long, and that the sheet contain a heading listing, on
separate lines, the applicant’s complete name; the applicant’s address; the
goods or services recited in the application; and, if the application is filed
under Section 1(a) of the Act, the dates of first use of the mark and of
first use of the mark in commerce; or, if the application is filed under
Section 44(d), the priority filing date of the foreign application.  37 C.F.R. §2.52(b); TMEP §§807.01(a),
807.01(b), 807.01(c) and 807.07(a).

 

A description of color in the design feature of the mark is included in
the application.  This is acceptable IF
the applicant is claiming color as a feature of the mark.  If the applicant does not consider color to
be a feature of the mark, the applicant should not submit a description of the
color and where it appears in the mark.

 

Response

No set form is required for response to this Office action.  The applicant must respond to each point
raised.  The applicant should simply set
forth the required changes or statements and request that the Office enter
them.  The applicant must sign the
response.  If the applicant responds
electronically, the response must be
signed electronically; e.g. the
signatory must enter any combination of alpha/numeric characters that has been
specifically adopted to serve the function of the signature; preceded and
followed by the forward slash symbol (/). 
See 64 CFR 33056, 33062 (June 21, 1999).

 

Additional Assistance

The following authorities govern the processing of trademark and
service mark applications:  The
Trademark Act, 15 U.S.C. §§1051 et seq., the Trademark Rules of Practice,
37 C.F.R. Part 2, and the Trademark Manual of Examining Procedure (TMEP).  The applicant may find an electronic version
of the TMEP by visiting http://www.uspto.gov/web/offices/tac/tmep/.

 

Due to the technicalities involved in the federal trademark application
and for specific legal advice regarding the successful prosecution
thereof,  the applicant may wish to hire
a trademark attorney.  The Patent and
Trademark Office cannot aid in the selection of an attorney.

 

The status of this application may be checked by calling 703/305-8747
or by visiting our website as listed below.

 

General questions about registering federal trademarks may be answered
by calling 703/308-9000 (Trademark Assistance Center).

 

81

 

/kbp/

Kimberly Boulware Perry

Attorney, US Patent & Trademark Office

phone: 703-308-9112 x251; fax: 703-746-8112

ecom112@uspto.gov [FORMAL RESPONSES]

kimberly.perry@uspto.gov [QUESTIONS]

 

How to respond to this Office Action:

 

To respond formally using the Office’s
Trademark Electronic Application System (TEAS), visit http://www.uspto.gov/teas/index.html
and
follow the instructions.

 

To respond formally via E-mail, visit  http://www.uspto.gov/web/trademarks/tmelecresp.htm and follow the
instructions.

 

To respond formally via regular mail, your
response should be sent to the mailing Return Address listed above and include
the serial number, law office and examining attorney’s name on the upper right
corner of each page of your response.

 

To check the status of
your application at any time, visit the Office’s Trademark Applications and
Registrations Retrieval (TARR) system at
http://tarr.uspto.gov/

 

For general and other
useful information about trademarks, you are encouraged to visit the Office’s
web site at http://www.uspto.gov/main/trademarks.htm

 

FOR
INQUIRIES OR QUESTIONS ABOUT THIS OFFICE ACTION, PLEASE CONTACT THE ASSIGNED
EXAMINING ATTORNEY.

 

82

 

Tom Johnson

 

From: United Wisconsin Grain Producers
[mailto:uwgp@centurytel.net]

Sent: Thursday, January 29, 2004 11:44
AM

To: johnson@ialawyers.com

Subject: FW: Received your Trademark
Application

 

 

fyi.....trademark information

 

-----Original Message-----

From: Kevin Roche
[mailto:Roche@powerweb.net]

Sent: Tuesday, January 21, 2003 8:28
AM

To: Bob Lange; Robert Miller; Paul Casper-
uwgp

Subject: Fw: Received your Trademark
Application

 

 

----- Original Message -----

From: <PrinTEAS@uspto.gov>

To: <roche@uwgp.com>

Cc: <teas@uspto.gov>;
<e-receipt@teas1.uspto.gov>

Sent: Tuesday, January 21, 2003 8:21
AM

Subject: Received your Trademark
Application

 

 

>

> <MARK> DESIGN IMAGE

>

> We have received your application and
assigned serial number ‘78205275’ to  your submission. The summary of the
application data below serves as your official filing receipt. For
electronically-submitted applications, the USPTO will no longer mail a paper
filing receipt.  If the USPTO laterdetermines
that no filing date was justified, your submission will be returned,
and your filing fee will be refunded. 
You could then, if possible, cure the deficiency, and re-file
the application.

>

> If you determine that you made an
error in the information you entered,  you may file a preliminary amendment
electronically, stating your proposed correction, at
http://eteas.uspto.gov/V2.0/pa200/WIZARD.htm.

> NOTE: You cannot file a Preliminary
Amendment until at least 15 days after  initial filing of the application.
Prior to that time, the serial number will not appear in the USPTO
database (even though the number was assigned at the time of filing), preventing
the uploading of new data.

>

> The examining attorney will determine
whether the change proposed in the  amendment is permissible, within the
normal course of his or her review of the application.  Please note that not all errors may be
corrected; for example, if you submitted the wrong mark or the incorrect goods
and/or services,
if the proposed correction would be considered a material alteration
to your original filing, this will NOT be accepted. Unfortunately,
your only recourse in that event is to re-file - your fee would NOT
be refunded.  Once you submit an
application, either electronically or through the mail, we will not cancel the
filing or refund 

 

83

 

your fee, unless the application fails to
satisfy minimum filing  requirements. The fee is a processing fee,
which we do not refund even if we cannot issue a registration after our
substantive review.

>

> In approximately 4-5 months, you will
hear from the assigned examining attorney.

>

> NOTE: If you have a question, comment
or technical concern about your  specific application or TEAS in
general, please send that question to PrinTEAS@uspto.gov. NOTE: To check
status information, please use either http://tarr.uspto.gov, or call
703-305-8747 (M-F, 6:30 a.m. to 12 midnight, EST). However, do NOT attempt to
check status until at least 45 days after submission, to allow sufficient time
for our databases to be updated.

>

>

>

> The applicant, United Wisconsin Grain
Producers, LLC, residing at PO Box  247,  Friesland, WI USA 53935-0247, requests registration of thetrademark/service
mark shown on the drawing page in the United States Patent and
Trademark Office on the Principal Register established by the Act of July 5,
1946 (15 U.S.C. Section 1051 et seq.), as amended.

>

> * Classification and Listing of
Goods/Services:

>

>

> The applicant has a bona fide intention
to use or use through the  applicant’s related company or licensee the
mark in commerce on or in connection with the identified goods and/or
services. (15 U.S.C. Section 1051(b)).

>

>                                         International
Class 004: Ethanol Production, Ethanol Sales

>

> *Additonal Statement

>

> “The mark consists of A circle around
a kernel of corn.  The top part of
circle
includes the colors of orange and yellow. 
The bottom part of circle includes the colors of green and black..”

>

>

> “We issued a news release of our new
logo in the local papers on January 4, 2003”

>

>

> * Fees

>

> A fee payment in the amount of $335
will be submitted with the  application, representing payment for 1
class(es).

>

> *Declaration Signature

>

> Signature:/Kevin Roche/ Date:
01/21/2003

> Signatory’s Name: Kevin Roche

> Signatory’s Position: President

 

84

 

>

>
==============================================================

>

>

>

> ===================TEAS XML
APPLICATION=======================

> <?xml version = ‘1.0’ encoding =
‘ISO-8859-1’?>

> <uspto-tm-document
document-type=“app” description=“Base Application Form”

system-creator=“eteas” version=“2.0”
version-date=“2002-06-17”

copyright=“Copyright 1999-2002 United
States Patent and Trademark Office”>

> <trademark-case-files>

> <trademark-case-file>

> <case-file-header>

>
<serial-number>78205275</serial-number>

> <mark action-code=“create”
version=“new”>

> <design-mark>

> <file-name

image-type=“pjpeg”>6411840191-21091541441-UWGP_Logo_gray.jpg</file-name>

> </design-mark>

> </mark>

>
<filing-date>20030121</filing-date>

> </case-file-header>

> <base-application-form>

> <goods-services>

> <goods-service action-code=“create”
version=“new”>

>
<sequence-number>1</sequence-number>

>
<class-code>004</class-code>

> <description-text>Ethanol
Production, Ethanol Sales</description-text>

>
<filing-basis-current-1b-in>Y</filing-basis-current-1b-in>

> </goods-service>

> </goods-services>

> <case-file-statements>

> <case-file-statement
action-code=“create” version=“new”>

> <type-code>DM</type-code>

> <text>The mark consists of A
circle around a kernel of corn.  The top
part of circle includes the colors of orange and yellow.  The bottom part of circle includes the
colors of green and black..</text>

> </case-file-statement>

> <case-file-statement
action-code=“create” version=“new”>

> <type-code>UK</type-code>

> <text>We issued a news release
of our new logo in the local papers on January 4, 2003</text>

> </case-file-statement>

> </case-file-statements>

> <case-file-owners>

> <case-file-owner
action-code=“create” version=“new”>

>
<legal-entity-type-code>10</legal-entity-type-code>

> <name>United Wisconsin Grain
Producers, LLC</name>

> <street>PO Box
247</street>

> <city>Friesland</city>

> <state>WI</state>

> <postal-code>53935-0247</postal-code>

>
<country-name>USA</country-name>

> <email
authorized=“y”>roche@uwgp.com</email>

>
<phone>920-348-5016</phone>

> <fax>920-348-5009</fax>

>
<state-organized>Wisconsin</state-organized>

> </case-file-owner>

 

85

 

> </case-file-owners>

> <signatures>

> <signature action-code=“create”
version=“new”>

>
<signature-type>D</signature-type>

>
<signature-entry-number>1</signature-entry-number>

> <signature-name>/Kevin
Roche/</signature-name>

> <signatory-date>20030121</signatory-date>

> <signatory-name>Kevin
Roche</signatory-name>

>
<signatory-position>President</signatory-position>

> </signature>

> </signatures>

> <fee-types>

> <fee-type action-code=“create”
version=“new”>

> <fee-code>7001</fee-code>

>
<number-of-classes>1</number-of-classes>

>
<number-of-classes-paid>1</number-of-classes-paid>

>
<subtotal-amount>335</subtotal-amount>

> </fee-type>

>
<total-amount>335</total-amount>

> </fee-types>

> <payment>

>
<ram-sale-number>973</ram-sale-number>

>
<ram-accounting-date>20030121</ram-accounting-date>

> </payment>

> </base-application-form>

> <correspondence-form>

>
<source-form>app</source-form>

> <correspondences>

> <correspondence
action-code=“create” version=“new”>

> <type-code>c</type-code>

> <new-address>

> <name>United Wisconsin Grain
Producers, LLC</name>

> <firm-name/>

> <street>PO Box
247</street>

> <city>Friesland</city>

> <state>WI</state>

>
<postal-code>53935-0247</postal-code>

>
<country-name>USA</country-name>

> <email authorized=“y”>roche@uwgp.com</email>

> </new-address>

> </correspondence>

> </correspondences>

> </correspondence-form>

> </trademark-case-file>

> </trademark-case-files>

> <filing>

>
<filing-identifier>20030121092139638018-78205275</filing-identifier>

> <xml-create-date>20030121
09:15:28</xml-create-date>

> <submit-date>Tue Jan 21 09:21:39
EST 2003</submit-date>

>

<teas-stamp>USPTO/BAS-6411840191-20030121092139638018-78205275-2002a8c35a9fe
295ee31ffb929c9e2b1119-RAM-973-20030121091528808038</teas-stamp>

> <filing-description>Trademark/Service
Mark Application, Principal

Register, with
Declaration</filing-description>

>
<reply-email>roche@uwgp.com</reply-email>

> </filing>

> </uspto-tm-document>

>

> TEAS support team

> Tue Jan 21 09:21:39 EST 2003

 

86

 

> 

> STAMP:

USPTO/BAS-6411840191-20030121092139638018-78205275-2002a8c35a9fe295ee31ffb92

9c9e2b1119-RAM-973-20030121091528808038

>

 

87

 

 

88

 

Schedule 4.01(p)

Environmental Compliance

 

The Borrower is in material compliance with all environmental laws
except:

 

None except any previously disclosed in the Phase I report previously
provided.

 

89

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