EXHIBIT 10.16
CREDIT AGREEMENT
dated as of November 23, 2004
between
EAST KANSAS ARGI-ENERGY, L.L.C.
as Borrower
and
HOME FEDERAL SAVINGS BANK
as Lender
HFSB Loan Nos. 2458 and 2459
TABLE OF CONTENTS
Page
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ARTICLE I. DEFINITIONS; CONSTRUCTION..............................................................1
Section 1.01 Definitions............................................................................1
Section 1.02 Accounting Terms and Determination....................................................14
Section 1.03 Terms Generally.......................................................................14
ARTICLE II. AMOUNTS AND TERMS OF THE COMMITMENTS..................................................15
Section 2.01 General Description of the Loans......................................................15
Section 2.02 Loan Commitment.......................................................................15
Section 2.03 Procedure for Borrowings..............................................................15
Section 2.04 Term Loan Conversion..................................................................15
Section 2.05 Reserved..............................................................................16
Section 2.06 Reserved..............................................................................16
Section 2.07 Interest Rates........................................................................16
Section 2.08 Application of Payments Upon Default..................................................17
Section 2.09 Repayment of Loans....................................................................17
Section 2.10 Free Cash Flow Payments...............................................................17
Section 2.11 Evidence of Indebtedness..............................................................17
Section 2.12 Prepayments...........................................................................18
Section 2.13 Interest on Loans.....................................................................19
Section 2.14 Fees..................................................................................19
Section 2.15 Computation of Interest and Fees......................................................20
Section 2.16 Reserved..............................................................................20
Section 2.17 Reserved..............................................................................20
Section 2.18 Increased Costs.......................................................................20
Section 2.19 Reserved..............................................................................21
Section 2.20 Taxes.................................................................................21
Section 2.21 Payments Generally....................................................................21
ARTICLE III. CONDITIONS PRECEDENT TO LOANS.........................................................21
Section 3.01 Conditions To Effectiveness...........................................................21
Section 3.02 Each Loan.............................................................................24
Section 3.03 Each Loan.............................................................................25
Section 3.04 Delivery of Documents.................................................................25
ARTICLE IV. REPRESENTATIONS AND WARRANTIES........................................................25
Section 4.01 Existence; Power......................................................................25
Section 4.02 Organizational Power; Authorization...................................................25
Section 4.03 Governmental Approvals; No Conflicts..................................................26
Section 4.04 Financial Statements..................................................................26
Section 4.05 Litigation and Environmental Matters..................................................26
Section 4.06 Compliance with Laws and Agreements...................................................27
Section 4.07 Investment Company Act, Etc...........................................................27
Section 4.08 Taxes.................................................................................27
Section 4.09 Margin Regulations....................................................................27
Section 4.10 ERISA.................................................................................27
Section 4.11 Ownership of Property.................................................................27
Section 4.12 Disclosure............................................................................28
Section 4.13 Labor Relations.......................................................................28
Section 4.14 Subsidiaries..........................................................................28
Section 4.15 Construction..........................................................................28
Section 4.16 Projections...........................................................................28
Section 4.17 Material Contracts....................................................................29
Section 4.18 Permits...............................................................................29
ARTICLE V. AFFIRMATIVE COVENANTS.................................................................29
Section 5.01 Financial Statements and Other Information............................................29
Section 5.02 Notices of Material Events............................................................31
Section 5.03 Existence; Conduct of Business........................................................31
Section 5.04 Compliance with Laws, Etc.............................................................32
Section 5.05 Payment of Obligations................................................................32
Section 5.06 Books and Records.....................................................................32
Section 5.07 Visitation, Inspection, Audit, Etc....................................................32
Section 5.08 Maintenance of Properties; Insurance..................................................33
Section 5.09 Use of Proceeds.......................................................................33
Section 5.10 Subsidiaries..........................................................................33
Section 5.11 Assignment of Material Contracts......................................................33
Section 5.12 Reserved..............................................................................34
Section 5.13 Shortfall.............................................................................34
Section 5.14 Non-Liability of Lender...............................................................34
ARTICLE VI. FINANCIAL COVENANTS...................................................................34
Section 6.01 Fixed Charge Coverage Ratio...........................................................34
Section 6.02 Tangible Balance Sheet Equity Ratio...................................................34
Section 6.03 Capital Expenditures..................................................................34
Section 6.04 Current Ratio and Working Capital.....................................................34
Section 6.05 Maximum Debt to Tangible Net Worth Ratio..............................................34
Section 6.06 Minimum Debt Service Ratio............................................................35
ARTICLE VII. NEGATIVE COVENANTS....................................................................35
Section 7.01 Indebtedness..........................................................................35
Section 7.02 Negative Pledge.......................................................................35
ii
Section 7.03 Fundamental Changes...................................................................35
Section 7.04 Investments, Loans, Etc...............................................................35
Section 7.05 Restricted Distributions..............................................................35
Section 7.06 Sale of Assets........................................................................36
Section 7.07 Transactions with Affiliates..........................................................36
Section 7.08 Restrictive Agreements................................................................36
Section 7.09 Sale and Leaseback Transactions.......................................................36
Section 7.10 Lease Obligations.....................................................................36
Section 7.11 Hedging Agreements....................................................................37
Section 7.12 Amendment to Material Documents and Construction Plans................................37
Section 7.13 Accounting Changes....................................................................37
Section 7.14 Construction..........................................................................37
Section 7.15 Deposit and Investment Accounts.......................................................38
ARTICLE VIII. EVENTS OF DEFAULT.....................................................................38
Section 8.01 Events of Default.....................................................................38
ARTICLE IX. MISCELLANEOUS.........................................................................41
Section 9.01 Notices...............................................................................41
Section 9.02 Waiver; Amendments....................................................................42
Section 9.03 Expenses; Indemnification.............................................................43
Section 9.04 Successors and Assigns................................................................43
Section 9.05 Governing Law; Jurisdiction; Consent to Service of Process............................43
Section 9.06 Waiver of Jury Trial..................................................................44
Section 9.07 Right of Setoff.......................................................................44
Section 9.08 Counterparts; Integration.............................................................45
Section 9.09 Survival..............................................................................45
Section 9.10 Severability..........................................................................45
Section 9.11 Confidentiality.......................................................................45
Section 9.12 Interest Rate Limitation..............................................................46
Section 9.13. Inspections...........................................................................46
Section 9.14 Termination...........................................................................46
Schedules
Schedule 4.05 - Environmental Matters
Schedule 4.17(a) - Management Contracts
Schedule 4.17(b) - Supply Contracts
Schedule 4.17(c) - Off-Take Contracts
Schedule 4.17(d) - Transportation Contracts
Schedule 4.17(e) - Utility Contracts
Schedule 4.18 - Permits
iii
EXHIBITS
Exhibit A - Form of Loan Note A
Exhibit B - Form of Loan Note B
Exhibit 2.03 - Form of Draw Request
Exhibit 3.01(d)(xi) - Form of Secretary's Certificate
Exhibit 3.01(d)(xii) - Form of Opinion of Borrower's Counsel
Exhibit 3.01(d)(xiii) - Form of Officer's Certificate
Exhibit 3.01(d)(xix) - Form of Solvency Certificate
iv
CREDIT AGREEMENT
THIS
CREDIT AGREEMENT (this "Agreement") is made and entered into as of
November 23, 2004, by and between EAST
KANSAS ARGI-ENERGY, L.L.C., a
Kansas
limited liability company ("Borrower") and HOME FEDERAL SAVINGS BANK ("Lender").
RECITALS:
- Borrower has requested that Lender establish a $26,000,000 multiple
advance loan facility in favor of Borrower consisting of a $5 million
USDA-guaranteed note and a $21 million note; and
- Subject to the terms and conditions of this Agreement, Lender is
willing to provide financing to Borrower.
AGREEMENT:
In consideration of the premises and the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lender agree as
follows:
ARTICLE I.
DEFINITIONS; CONSTRUCTION
SECTION 1.01 DEFINITIONS. In addition to the other terms defined
herein, the following terms used herein shall have the meanings herein specified
(to be equally applicable to both the singular and plural forms of the terms
defined):
"ADMINISTRATIVE FEE" shall have the meaning set forth in SECTION
2.14(b).
"AFFILIATE" shall mean, as to any Person, any other Person that
directly, or indirectly through one or more intermediaries, Controls, is
Controlled by, or is under common Control with, such Person.
"AMORTIZATION PERIOD" shall mean the period beginning on the date
designated as the beginning of such period in SECTION 2.04 and ending on the
Loan A Maturity Date.
"BORROWER" shall mean East
Kansas Agri-Energy, L.L.C., a
Kansas
limited liability company, and any successor thereof.
"BORROWING" shall mean an advance of funds by Lender to Borrower
pursuant to Lender's Commitments hereunder.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
other day on which farm credit system banks or commercial banks in Rochester,
Minnesota are authorized or required by law to close.
"CAPITAL EXPENDITURES" shall mean for any period, without duplication,
(a) the additions to property, plant and equipment and other capital
expenditures of Borrower and its Subsidiaries that are (or would be) set forth
on a combined statement of cash flows of Borrower for such period prepared in
accordance with GAAP and (b) Capital Lease Obligations incurred by Borrower and
its Subsidiaries during such period.
"CAPITAL LEASE OBLIGATIONS" of any Person shall mean all obligations of
such Person to pay rent or other amounts under any lease (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"CHARGES" shall have the meaning set forth in SECTION 9.12.
"CHANGE IN CONTROL" shall mean the occurrence of one or more of the
following events: (a) any sale, lease, exchange or other transfer (in a single
transaction or a series of related transactions) of all or substantially all of
the assets of Borrower to any Person or "group" (within the meaning of the
Securities Exchange Act of 1934 and the rules of the Securities and Exchange
Commission thereunder in effect on the date hereof), (b) occupation of a
majority of the seats (other than vacant seats) on the board of directors of
Borrower by Persons who were neither (i) nominated by the immediately previous
board of directors or (ii) appointed by managers so nominated, or (c) any sale,
lease, exchange or other transfer (in a single transaction or a series of
related transactions) of a majority of any of Borrower's membership units (as
described in the Amended and Restated Operating Agreement of Borrower dated
March 13, 2002, as amended).
"CHANGE IN LAW" shall mean (i) the adoption of any applicable law, rule
or regulation after the date of this Agreement, (ii) any change in any
applicable law, rule or regulation, or any change in the interpretation or
application thereof, by any Governmental Authority after the date of this
Agreement, or (iii) compliance by Lender with any request, guideline or
directive (whether or not having the force of law) of any Governmental Authority
made or issued after the date of this Agreement.
"CLOSING DATE" shall mean the date on which the conditions precedent
set forth in SECTION 3.01 have been satisfied or waived in accordance with
SECTION 9.02.
"CODE" shall mean the Internal Revenue Code of 1986, as amended and in
effect from time to time.
"COLLATERAL" shall mean all tangible and intangible property, real and
personal, of Borrower that is the subject of a Lien granted pursuant to a Loan
Document to Lender for the benefit of Lender to secure the whole or any part of
the Obligations or any guarantee thereof, and shall include, without limitation,
all casualty insurance proceeds and condemnation awards with respect to any of
the foregoing.
"COLLATERAL ASSIGNMENTS" shall mean each collateral assignment by
Borrower (and such other parties as Lender may require) to Lender, along with
consents to such assignments as shall be deemed appropriate by Lender, from time
to time, of the Material Contracts.
2
"COMMITMENT" shall mean the commitment of Lender to make Loans to
Borrower in an aggregate principal amount not exceeding the lesser of (i) 60% of
the appraised value of the Project (as determined in the appraisal delivered
pursuant to SECTION 3.01(d)(v)) and (ii) $26,000,000.
"CONSTRUCTION AGREEMENT" shall mean the "Agreement Between Owner and
Design/Builder on the Basis of Stipulated Price between Borrower and ICM, Inc.,
dated as of August 9, 2004, as the same may be amended, restated, supplemented
or otherwise modified from time to time, along with all other material
agreements to which Borrower is a party related to the Project, including the
design and construction of the Improvements.
"CONSTRUCTION COMMITMENT TERMINATION DATE" shall mean the earliest of
(i) October 1, 2005, (ii) the date on which the Commitments are fully drawn, and
(iii) the date on which all amounts outstanding under this Agreement have been
declared or have automatically become due and payable (whether by acceleration
or otherwise).
"CONSTRUCTION COMPLETION" shall mean the occurrence of all of the
following events with respect to the Project: (a) all Improvements are completed
in accordance with the Construction Plans and are paid for in full, free of all
mechanics', labor, materialmen's and other similar lien claims; (b) said
completion has been approved by the Borrower and Inspecting Architect, and no
material punch-list items remain to be completed; (c) all requirements of any
Governmental Authority and all private restrictions and covenants relating to
the Improvements or the Real Estate on which it is located have been complied
with or satisfied and that unconditional certificates of occupancy (if required)
for all of the Improvements have been issued by all appropriate Governmental
Authorities; (d) Borrower has obtained all licenses and Permits, and entered
into all agreements necessary or appropriate to operate the Improvements at
maximum capacity; (e) all insurance required pursuant to the Loan Documents is
in full force and effect; (f) Borrower has invested no less than the Required
Equity in Construction Costs; (g) Borrower has developed and implemented risk
management programs, satisfactory to Lender in all respects, to procure inputs
necessary or appropriate for the successful operation of the Improvements at
maximum capacity; and (h) Borrower shall have hired or engaged management
satisfactory to Lender.
"CONSTRUCTION COMPLETION DATE" shall mean the earlier of (a) the date
in which Construction Completion occurs, and (b) the date Borrower begins
operation of the plant constructed as the Improvements (whether at maximum
capacity or otherwise).
"CONSTRUCTION COSTS" shall mean expenditures for the purpose of
purchasing real property for the Project, designing and engineering the Project,
preparing the site, constructing the buildings and purchasing and installing
equipment.
"CONSTRUCTION FUNDING PERIOD" shall mean the period from the Closing
Date to the Construction Commitment Termination Date.
"CONSTRUCTION PLANS" shall mean the final working plans for completion
of the Project and Improvements to be constructed with respect to the Project,
including drawings, specifications, details and manuals as delivered to Lender.
3
"CONTROL" shall mean the power, directly or indirectly, either to (a)
vote 5% or more of securities having ordinary voting power for the election of
directors (or persons performing similar functions) of a Person or (b) direct or
cause the direction of the management and policies of a Person, whether through
the ability to exercise voting power, by contract or otherwise. The terms
"CONTROLLING", "CONTROLLED BY", and "UNDER COMMON CONTROL WITH" have meanings
correlative thereto.
"DEFAULT" shall mean any condition or event that, with the giving of
notice or the lapse of time, or both, would constitute an Event of Default.
"DEFAULT INTEREST" shall have the meaning set forth in SECTION 2.07(b).
"DEPOSIT ACCOUNTS" shall mean all demand, time, savings, passbook or
similar depository accounts of Borrower, including but not limited to the Equity
Deposit Account and Borrower's operating, payroll and other deposit accounts.
"DETERMINATION DATE" shall mean the date three (3) Business Days prior
to the Closing Date with respect to the Interest Period beginning on the Closing
Date, and (b) with respect to all other Interest Periods, the date three (3)
Business Days prior to the first day of the related Interest Period.
"DISBURSING AGREEMENT" means the Disbursing Agreement dated as of the
date hereof, among Lender, Borrower and an escrow agent acceptable to Lender, as
amended, restated, supplemented or otherwise modified from time to time.
"DRAW REQUEST" shall have the meaning set forth in SECTION 2.03.
"EBITDA" shall mean, for Borrower and its Subsidiaries for any period
determined on a consolidated basis in accordance with GAAP, an amount equal to
(a) Net Income for such period plus (b) to the extent deducted in determining
Net Income for such period, the sum of (i) Interest Expense, (ii) income tax
expense, (iii) depreciation and amortization and (iv) all other non-cash
charges, in each case for such period.
"ENVIRONMENTAL LAWS" shall mean all laws, rules, regulations, codes,
ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by or with any Governmental
Authority, relating in any way to the environment, preservation or reclamation
of natural resources, the management, Release or threatened Release of any
Hazardous Material or to health and safety matters.
"ENVIRONMENTAL LIABILITY" shall mean any liability, contingent or
otherwise (including any liability for damages, costs of environmental
investigation and remediation, costs of administrative oversight, fines, related
attorneys' fees, natural resource damages, penalties or indemnities), of
Borrower or any Subsidiary directly or indirectly resulting from or based upon
(a) any actual or alleged violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of any
Hazardous Materials, (c) any actual or alleged exposure to any Hazardous
Materials, (d) the Release or threatened Release of any Hazardous Materials, or
(e) any contract, agreement or other consensual arrangement pursuant to which
liability is assumed or imposed with respect to any of the foregoing.
4
"EQUIPMENT" shall mean all equipment, machinery, apparatus, fittings,
fixtures and other tangible personal property of every kind and description used
in the business operations of Borrower or owned by Borrower or in which Borrower
has an interest, and all parts, accessories, and special tools and all increases
and accessions thereto and substitutions and replacements therefor.
"EQUITY DEPOSIT ACCOUNT" shall mean Borrower's Escrow Deposit Account
with Lender designated "East
Kansas Agri-Energy, L.L.C., Equity Deposit
Account," which holds the proceeds of Borrower's equity drive.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and any successor statute.
"ERISA AFFILIATE" shall mean any trade or business (whether or not
incorporated), which, together with Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for the purposes of Section
302 of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA EVENT" shall mean (a) any "reportable event", as defined in
Section 4043 of ERISA or the regulations issued thereunder with respect to a
Plan (other than an event for which the 30-day notice period is waived); (b) the
existence with respect to any Plan of an "accumulated funding deficiency" (as
defined in Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d)
of ERISA of an application for a waiver of the minimum funding standard with
respect to any Plan; (d) the incurrence by Borrower or any of its ERISA
Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by Borrower or the ERISA Affiliate from
the PBGC or a plan administrator appointed by the PBGC of any notice relating to
an intention to terminate any Plan or Plans or to appoint a trustee to
administer any Plan; (f) the incurrence by Borrower or any of its ERISA
Affiliates of any liability with respect to the withdrawal or partial withdrawal
from any Plan or Multiemployer Plan; or (g) the receipt by Borrower or any ERISA
Affiliate of any notice, or the receipt by any Multiemployer Plan from Borrower
or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal
Liability or a determination that a Multiemployer Plan is, or is expected to be,
insolvent or in reorganization, within the meaning of Title IV of ERISA.
"EVENT OF DEFAULT" shall have the meaning provided in ARTICLE VIII.
"FIXED CHARGE COVERAGE RATIO" shall mean, for any period of four
consecutive fiscal quarters of Borrower, the ratio of (a) EBITDA for such period
to (b) Fixed Charges for such period.
"FIXED CHARGES" shall mean, for Borrower and its Subsidiaries for any
period determined on a consolidated basis in accordance with GAAP, the sum of
(a) Interest Expense for such period, plus (b) scheduled principal payments made
on Total Debt for such period, plus (c) income tax expense for such period, plus
(d) cash distributions paid to members of Borrower paid during such period, plus
(e) Non-Financed Maintenance Capital Expenditures.
5
"FREE CASH FLOW" shall mean for any period, the EBITDA less the sum of
Interest Expense, Mandatory Debt Retirement, Taxes paid by Borrower and its
Subsidiaries, and Non-Financed Maintenance Capital Expenditures.
"GAAP" shall mean generally accepted accounting principles in the
United States applied on a consistent basis and subject to the terms of SECTION
1.02.
"GOVERNMENTAL AUTHORITY" shall mean the government of the United States
of America, any other nation or any political subdivision thereof, whether state
or local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"GUARANTOR" means the United States Department of Agriculture.
"GUARANTY" means the Guaranty of Borrower's obligations under Loan A in
the form of Guarantor's Form 4279-5, executed and delivered by the Guarantor, in
form and substance satisfactory to Lender.
"HAZARDOUS MATERIALS" means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"HEDGING AGREEMENTS" shall mean interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap agreements,
currency future or option contracts, commodity agreements and other similar
agreements or arrangements designed to protect against fluctuations in interest
rates, currency values or commodity values, in each case to which Borrower or
any Subsidiary is a party.
"IMPROVEMENTS" shall mean the buildings and improvements to be placed
or constructed on the Real Estate with respect to the Project.
"INSPECTING ARCHITECT" shall mean the architectural, engineering or
other consultant firm retained by Lender, at Borrower's cost, to conduct on-site
inspections of the work-in-progress related to the Project, and to issue
periodic reports to Lender as to progress of construction and adherence to the
Construction Plans.
"INDEBTEDNESS" of any Person shall mean, without duplication (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person in respect of the deferred purchase price of
property or services (other than trade payables incurred in the ordinary course
of business; PROVIDED, that for purposes of SECTION 8.01(G), trade payables
overdue by more than 120 days shall be included in this definition except to the
extent that any of such trade payables are being disputed in good faith and by
appropriate measures), (iv) all obligations of such Person under any conditional
sale or other title retention agreement(s) relating to property acquired by such
Person, (v) all Capital Lease Obligations of such Person, (vi) all obligations,
contingent or
6
otherwise, of such Person in respect of letters of credit, acceptances or
similar extensions of credit, (vii) all guarantees of such Person of the type of
Indebtedness described in clauses (i) through (vi) above, (viii) all
Indebtedness of a third party secured by any Lien on property owned by such
Person, whether or not such Indebtedness has been assumed by such Person, (ix)
all obligations of such Person, contingent or otherwise, to purchase, redeem,
retire or otherwise acquire for value any common stock or other capital interest
of such Person, and (x) Off-Balance Sheet Liabilities. The Indebtedness of any
Person shall include the Indebtedness of any partnership or joint venture in
which such Person is a general partner or a joint venturer, except to the extent
that the terms of such Indebtedness provide that such Person is not liable
therefor.
"INTEREST EXPENSE" shall mean, for Borrower and its Subsidiaries for
any period determined on a consolidated basis in accordance with GAAP, the sum
of (i) total cash interest expense, including without limitation the interest
component of any payments in respect of Capital Lease Obligations capitalized or
expensed during such period (whether or not actually paid during such period),
PLUS (ii) the net amount payable (or MINUS the net amount receivable) under
Hedging Agreements during such period (whether or not actually paid or received
during such period).
"INTEREST PERIOD" shall mean the period beginning on the Closing Date
and continuing until the last day of the calendar quarter; subsequent Interest
Periods shall begin on the first day of a calendar quarter and end on the last
day of the calendar quarter.
"INVESTMENT ACCOUNTS" shall mean all securities or investment accounts
of Borrower.
"INVESTMENTS" shall have the meaning set forth in SECTION 7.04.
"LENDER" shall mean Home Federal Savings Bank and its successors and
assigns.
"LICENSE AGREEMENT" shall mean the provisions of the Construction
Agreement which specify the terms of the license of proprietary rights of the
design/builder (as set forth in Exhibit D thereto), as the same may be amended,
restated, supplemented or otherwise modified from time to time
"LIEN" shall mean any mortgage, pledge, security interest, lien
(statutory or otherwise), charge, encumbrance, hypothecation, assignment,
deposit arrangement, or other arrangement having the practical effect of the
foregoing or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any
conditional sale or other title retention agreement and any capital lease having
the same economic effect as any of the foregoing).
"LOAN" shall mean an advance under the Commitment.
"LOAN A" shall mean the aggregate of Loans advanced under Note A
pursuant to SECTION 2.02.
"LOAN B" shall mean the aggregate of Loans advanced under Note B
pursuant to SECTION 2.02.
7
"LOAN A MATURITY DATE" shall mean the earlier of (i) the date ten (10)
years from the day immediately preceding the first day of the Amortization
Period, and (ii) the date on which the principal amount of all outstanding Loans
have been declared or automatically have become due and payable (whether by
acceleration or otherwise).
"LOAN B MATURITY DATE" shall mean the earlier of (i) the date five (5)
years from the day immediately preceding the first day of the Amortization
Period, and (ii) the date on which the principal amount of all outstanding Loans
have been declared or automatically have become due and payable (whether by
acceleration or otherwise).
"LOAN DOCUMENTS" shall mean collectively this Agreement, the Notes, all
Notices of Borrowing, the Mortgage, the Security Agreement, the Collateral
Assignments, the Disbursing Agreement and any and all other instruments,
agreements, documents and writings executed in connection with any of the
foregoing.
"MANAGEMENT CONTRACTS" shall mean agreements and contracts which are
material to the management of Borrower's business in effect presently and
entered into from time to time hereafter, as the same may be amended, restated,
supplemented or otherwise modified from time to time.
"MANDATORY DEBT RETIREMENT" shall mean principal and interest payments
required during the related period in connection with any Indebtedness of
Borrower.
"MATERIAL ADVERSE EFFECT" shall mean, with respect to any event, act,
condition or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration, or governmental investigation or proceeding),
whether singularly or in conjunction with any other event or events, act or
acts, condition or conditions, occurrence or occurrences whether or not related,
a material adverse change in, or a material adverse effect on, (i) the business,
results of operations, financial condition, assets, liabilities, Projections or
prospects of Borrower, (ii) the ability of Borrower to perform any of its
obligations under the Loan Documents, (iii) the rights and remedies of Lender
under any of the Loan Documents or (iv) the legality, validity or enforceability
of any of the Loan Documents.
"MATERIAL CONTRACTS" shall mean the Management Contracts, Supply
Contracts, Off-Take Contracts, Transportation Contracts, Utility Contracts, the
Construction Agreement, the License Agreement, the Process Guarantee, and such
other agreements and contracts as may be material to operation of Borrower's
business.
"MATERIAL INDEBTEDNESS" shall mean Indebtedness (other than the Loans)
or obligations in respect of one or more Hedging Agreements of Borrower and its
Subsidiaries in an aggregate principal amount exceeding $100,000. For purposes
of determining Material Indebtedness, the "principal amount" of the obligations
of Borrower or any Subsidiary in respect to any Hedging Agreement at any time
shall be the maximum aggregate amount (giving effect to any netting agreements)
that Borrower or such Subsidiary would be required to pay if such Hedging
Agreement were terminated at such time.
"MAXIMUM RATE" shall have the meaning set forth in SECTION 9.12.
8
"MORTGAGE" shall mean each of the Mortgage and other real estate
security documents delivered by Borrower to Lender, all in form and substance
satisfactory to Lender, as each may be amended, restated, modified or otherwise
supplemented from time to time, whereby Borrower pledges all of its right, title
and interest in the Real Estate to Lender as collateral for the Obligations.
"MULTIEMPLOYER PLAN" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
"NET INCOME" shall mean, for any period, the net income (or loss) of
Borrower and its Subsidiaries for such period determined on a consolidated basis
in accordance with GAAP, but excluding therefrom (to the extent otherwise
included therein) (i) any extraordinary gains or losses, (ii) any gains
attributable to write-ups of assets, (iii) any equity interest of Borrower or
any Subsidiary in the unremitted earnings of any Person that is not a
Subsidiary, and (iv) any income (or loss) of any Person accrued prior to the
date it becomes a Subsidiary or is merged into or consolidated with Borrower or
any Subsidiary on the date that such Person's assets are acquired by Borrower or
any Subsidiary. Net Income shall include USDA Bio Energy program payments and
other payments and benefits received by Borrower in respect of incentives
provided by the State of
Kansas or any other Governmental Authority.
"NON-FINANCED MAINTENANCE CAPITAL EXPENDITURES" shall mean the sum of
Capital Expenditures made by Borrower in the ordinary course of business related
to maintenance of Borrower's property, plant and equipment and paid during the
related period, except the term shall not include Capital Expenditures for which
Borrower or any Subsidiary incurred Indebtedness in connection therewith.
"NOTE A" shall mean Note A of Borrower payable to the order of Lender
in substantially the form of EXHIBIT A.
"NOTE B" shall mean Note B of Borrower payable to the order of Lender
in substantially the form of EXHIBIT B.
"NOTES" shall mean Note A and Note B of Borrower, collectively, payable
to the order of Lender.
"OBLIGATIONS" shall mean all amounts owing by Borrower to Lender
pursuant to or in connection with this Agreement or any other Loan Document,
including without limitation, all principal, interest (including any interest
accruing after the filing of any petition in bankruptcy or the commencement of
any insolvency, reorganization or like proceeding relating to Borrower, whether
or not a claim for post-filing or post-petition interest is allowed in such
proceeding), all reimbursement obligations, fees, expenses, indemnification and
reimbursement payments, costs and expenses (including all fees and expenses of
counsel to Lender incurred pursuant to this Agreement or any other Loan
Document), whether direct or indirect, absolute or contingent, liquidated or
unliquidated, now existing or hereafter arising hereunder or thereunder,
together with all renewals, extensions, modifications or refinancings thereof.
"OFF-BALANCE SHEET LIABILITIES" of any Person shall mean (i) any
repurchase obligation or liability of such Person with respect to accounts or
notes receivable sold by such Person,
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(ii) any liability of such Person under any sale and leaseback transactions
which do not create a liability on the balance sheet of such Person, (iii) any
liability of such Person under any so-called "synthetic" lease transaction, or
(iv) any obligation arising with respect to any other transaction which is the
functional equivalent of or takes the place of borrowing but which does not
constitute a liability on the balance sheet of such Person.
"OFF-TAKE CONTRACTS" shall mean agreements and contracts in effect
presently and entered into from time to time hereafter which are material to the
sale or disposal of products and by-products produced by Borrower, as the same
may be amended, restated, supplemented or otherwise modified from time to time.
"ORIGINATION FEE" shall have the meaning set forth in SECTION 2.14(A).
"PARTICIPANT" shall have the meaning set forth in SECTION 9.04(C).
"PAYMENT OFFICE" shall mean the office of Lender located at ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Post Office ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ or such
other location as to which Lender shall have given written notice to Borrower.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to
and defined in ERISA, and any successor entity performing similar functions.
"PERMITS" shall mean the licenses, consents, approvals authorizations
and permits of Governmental Authorities which are required of Borrower or useful
for Borrower to obtain in connection with the Project and operation of
Borrower's business (as contemplated following Construction Completion),
including but not limited to any of the foregoing related to Environmental Laws
(including an air emissions permit and a national pollution discharge
elimination system construction permit, each of which will allow Borrower to
operate its facilities at maximum capacity), zoning and land-use laws (including
any requirement to obtain a special exception, if applicable), water use laws,
waste disposal laws, laws requiring construction permits and occupancy
certificates, and laws relating to construction and operation of above ground
storage tanks.
"PERMITTED ENCUMBRANCES" shall mean:
(i) Liens imposed by law for taxes not yet due (or with respect to
real estate taxes, not yet delinquent) or which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves are
being maintained in accordance with GAAP;
(ii) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, materialmen and other Liens imposed by law created in the ordinary
course of business for amounts not yet due or which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves are
being maintained in accordance with GAAP;
(iii) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other social
security laws or regulations;
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(iv) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature, in each case in the ordinary course of
business;
(v) judgment and attachment liens not giving rise to an Event of
Default or Liens created by or existing from any litigation or legal proceeding
that are currently being contested in good faith by appropriate proceedings and
with respect to which adequate reserves are being maintained in accordance with
GAAP; and
(vi) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary course
of business that do not secure any monetary obligations and do not materially
detract from the value of the affected property or materially interfere with the
ordinary conduct of business of Borrower and its Subsidiaries taken as a whole;
PROVIDED, that the term "Permitted Encumbrances" shall not include any Lien
securing Indebtedness.
"PERSON" shall mean any individual, partnership, firm, corporation,
association, joint venture, limited liability company, trust or other entity, or
any Governmental Authority.
"PLAN" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which Borrower or any
ERISA Affiliate is (or, if such plan were terminated, would under Section 4069
of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"PRIME RATE" shall mean the rate of that name as published in the
"Money Rates" Section of the WALL STREET JOURNAL as of the applicable
Determination Date; PROVIDED, if Lender determines that the foregoing source is
unavailable for the applicable Interest Period, Lender shall determine Prime
Rate based on a new index which is based on comparable information.
"PROCESS GUARANTEE" shall mean the provisions of the Construction
Agreement which specify the terms of the performance guarantee criteria (as set
forth in Exhibit A thereto), as the same may be amended, restated, supplemented
or otherwise modified from time to time.
"PROJECT" shall mean the design, construction and completion of a dry
milling fuel ethanol plant near Garnett,
Kansas which will produce, upon
Construction Completion, not less than 35 million gallons of ethanol per year,
dried distillers grains and solubles, carbon dioxide and other value-added
products, together with all necessary and appropriate fixtures, equipment,
attachments, and accessories, as described in the Construction Plans, to be
constructed on the Real Estate.
"PROJECTIONS" shall mean Borrower's forecasted (a) balance sheets; (b)
profit and loss statements; and (c) cash flow statements; all prepared on a
combined basis and otherwise consistent with the historical financial statements
of Borrower, together with appropriate supporting details and a statement of
underlying assumptions which are believed by Borrower to be reasonable and fair
in light of the current condition and past performance of Borrower and to
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reflect a reasonable estimate of the projected balance sheets, results of
operations, cash flows and other information presented therein for five (5)
years following the Closing Date.
"PRO FORMA BALANCE SHEET" shall mean the unaudited pro forma balance
sheet of Borrower on a consolidated basis setting forth as of the Closing Date
the pro forma financial position of Borrower and its Subsidiaries on a
consolidated basis, copies of which fairly present, on a pro forma basis, in
conformity with GAAP applied on a basis consistent with the financial statements
referred to in SECTION 4.04, the financial position of Borrower on a
consolidated basis, as of such date and time.
"REAL ESTATE" shall mean all real property owned or leased by Borrower
or its Subsidiaries.
"REAL ESTATE DOCUMENTS" shall mean collectively, the Mortgage, the
Disbursing Agreement and all other documents, instruments, agreements and
certificates executed and delivered by Borrower to Lender in connection with any
of the foregoing.
"RELEASE" means any release, spill, emission, leaking, dumping,
injection, pouring, deposit, disposal, discharge, dispersal, leaching or
migration into the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata) or within any building,
structure, facility or fixture.
"REQUIRED EQUITY" shall mean cash and/or expenditures previously made
on behalf of Borrower in the amount of $20,750,000 in the aggregate, including
proceeds from the issuance of membership interest (units), cash grants, and tax
increment financing.
"RESPONSIBLE OFFICER" shall mean any of the president, the chief
executive officer, the chief operating officer, the chief financial officer, the
treasurer or a vice president of Borrower or such other representative of
Borrower as may be designated in writing by any one of the foregoing with the
consent of Lender; and, with respect to the financial covenants only, the chief
financial officer or the treasurer of Borrower.
"RESTRICTED DISTRIBUTION" shall mean (a) any dividend or distribution
on any class of Borrower's membership interests or other capital interests, or
(b) any payment on account of, or setting apart assets for a sinking or other
analogous fund for, the purchase, redemption, retirement, defeasance or other
acquisition of, any membership interest or other capital interest of Borrower,
or any options, warrants, or other rights to purchase such membership interest,
other capital interest; except Restricted Distributions do not include, so long
as such distributions are first approved in writing by Lender, cash
distributions to Borrower's members of up to (x) 40% of Net Income for a fiscal
year period if Borrower's Tangible Balance Sheet Equity Ratio is less than 60%
as determined from Borrower's audited financial statements as of its most recent
fiscal year end, or (y) 50% of Net Income for a fiscal year period if Borrower's
Tangible Balance Sheet Equity Ratio is 60% or greater as determined from
Borrower's audited financial statements as of its most recent fiscal year end.
"SECURITY AGREEMENT" shall mean the Security Agreement, dated as of the
date hereof, executed by Borrower in favor of Lender as amended, restated,
supplemented or otherwise modified from time to time.
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"SECURITY DOCUMENTS" shall mean, collectively, the Security Agreement,
the Collateral Assignments, the Mortgage, the other Real Estate Documents, and
all other instruments and agreements now or hereafter securing the whole or any
part of the Obligations, all UCC-1 financing statements, fixture financing
statements, stock powers, and all other documents, instruments, agreements and
certificates executed and delivered by Borrower or any other person to Lender in
connection with the foregoing.
"SUBSIDIARY" shall mean, with respect to any Person (the "PARENT"), any
corporation, partnership, joint venture, limited liability company, association
or other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, partnership, joint venture, limited liability company,
association or other entity (i) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power, or in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, Controlled or held, or (ii) that is, as
of such date, otherwise Controlled, by the parent or one or more subsidiaries of
the parent or by the parent and one or more subsidiaries of the parent. Unless
otherwise indicated, all references to "Subsidiary" hereunder shall mean a
Subsidiary of Borrower (including subsidiaries formed after the Closing Date).
"SUPPLY CONTRACTS" shall mean all agreements and contracts related to
the supply of inputs material to operation of Borrower's business in effect
presently and entered into from time to time hereafter, as the same may be
amended, restated, supplemental or otherwise modified from time to time.
"SWORN CONSTRUCTION COST STATEMENT" shall mean an itemized and
certified statement of actual and estimated costs of the Project broken out into
individual subcontracts, signed and sworn to by the general contractor for the
Project and Borrower and delivered to Lender.
"TANGIBLE BALANCE SHEET EQUITY RATIO" shall mean Tangible Net Worth
divided by Borrower's total assets.
"TANGIBLE NET WORTH" shall mean, as of any date, (i) the total assets
of Borrower and its Subsidiaries that would be reflected on Borrower's
consolidated balance sheet as of such date prepared in accordance with GAAP,
after eliminating all amounts properly attributable to minority interests, if
any, in the stock and surplus of Subsidiaries, LESS (ii) the sum of (a) the
total liabilities (including Indebtedness subordinated to the Obligations) of
Borrower and its Subsidiaries that would be reflected on a consolidated balance
sheet of Borrower and its Subsidiaries as of such date prepared in accordance
with GAAP, (b) the amount of appraisal surplus or any write-up in the book value
of any assets resulting from a revaluation thereof or any write-up in excess of
the cost of such assets acquired reflected on the consolidated balance sheet of
Borrower and its Subsidiaries as of such date prepared in accordance with GAAP,
and (c) the net book amount of all assets of Borrower and its Subsidiaries that
would be classified as intangible assets (including investments in other
entities) on a consolidated balance sheet of Borrower and its Subsidiaries as of
such date prepared in accordance with GAAP.
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"TITLE COMPANY" shall mean First American Title Insurance Company of
Kansas, and its successors and assigns, and/or any other title insurance company
selected by Lender from time to time.
"TOTAL DEBT" shall mean, as of any date of determination, all
Indebtedness of Borrower and its Subsidiaries that would be reflected on a
consolidated balance sheet of Borrower prepared in accordance with GAAP as of
such date.
"TRANSPORTATION CONTRACTS" shall mean all agreements and contracts in
effect presently and entered into from time to time hereafter related to the
provision of transportation or shipping services which are material to the
operation of Borrower's business as the same may be amended, restated,
supplemented or otherwise modified from time to time.
"UNIFORM COMMERCIAL CODE" or "UCC" means the Uniform Commercial Code as
in effect from time to time in the State of Minnesota.
"UTILITY CONTRACTS" shall mean those certain contracts and agreements
in effect presently and entered into from time to time hereafter which are
material to the provision to Borrower of electricity, natural gas, water, fuel
oil, coal and other energy resources in connection with the operation of
Borrower's plant, equipment and offices, as the same may be amended, restated,
supplement and or otherwise modified from time to time.
"WITHDRAWAL LIABILITY" shall mean liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02 ACCOUNTING TERMS AND DETERMINATION. Unless otherwise
defined or specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared, in
accordance with GAAP as in effect from time to time, applied on a basis
consistent (except for such changes approved by Borrower's independent public
accountants) with the most recent audited combined financial statement of
Borrower delivered pursuant to SECTION 5.01(A); PROVIDED, that if Borrower
notifies Lender that Borrower wishes to amend any covenant in ARTICLE VI to
eliminate the effect of any change in GAAP on the operation of such covenant,
then Borrower's compliance with such covenant shall be determined on the basis
of GAAP in effect immediately before the relevant change in GAAP became
effective, until either such notice is withdrawn or such covenant is amended in
a manner satisfactory to Borrower and Lender.
SECTION 1.03 TERMS GENERALLY. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall." In
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the word "to" means "to but
excluding." Unless the context requires otherwise (i) any definition of or
reference to any agreement, instrument or
14
other document herein shall be construed as referring to such agreement,
instrument or other document as it was originally executed or as it may from
time to time be amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(ii) any reference herein to any Person shall be construed to include such
Person's successors and permitted assigns, (iii) the words "hereof," "herein"
and "hereunder" and words of similar import shall be construed to refer to this
Agreement as a whole and not to any particular provision hereof, (iv) all
references to Articles, Sections, Exhibits and Schedules shall be construed to
refer to Articles, Sections, Exhibits and Schedules to this Agreement, and (v)
all references to a specific time shall be construed to refer to the time in
Rochester, Minnesota, unless otherwise indicated.
ARTICLE II.
AMOUNTS AND TERMS OF THE COMMITMENTS
SECTION 2.01 GENERAL DESCRIPTION OF THE LOANS. Subject to and upon the
terms and conditions herein set forth, Lender hereby establishes a construction
loan facility in favor of Borrower pursuant to which Lender agrees to make the
Loans to Borrower in accordance with SECTION 2.02.
SECTION 2.02 LOAN COMMITMENT. Subject to the terms and conditions set
forth herein, Lender establishes a Loan facility in favor of Borrower,
consisting of Loan A and Loan B. Lender agrees to advance Loans to Borrower,
from time to time during the Construction Funding Period, in an aggregate
principal amount outstanding at any time that will not result in the aggregate
amount of all Loans exceeding the Loan Commitment. During the Construction
Funding Period, Borrower shall be entitled to borrow and prepay, but may not
reborrow, Loans in accordance with the terms and conditions of this Agreement;
PROVIDED, Borrower may not borrow should there exist a Default or Event of
Default. Loans will be advanced by Lender ratably between Note A (5/26 of each
Borrowing) and Note B (21/26 of each Borrowing). Notwithstanding the foregoing,
in the event aggregate Loans are less than $26,000,000 upon Construction
Completion, not less than $5,000,000 of the Loans will be allocated to Note A.
SECTION 2.03 PROCEDURE FOR BORROWINGS. The Borrower shall give Lender
written notice (or telephonic notice promptly confirmed in writing) of each
Borrowing substantially in the form of EXHIBIT 2.03 attached hereto (a "DRAW
REQUEST") prior to 11:00 a.m. (Central Time) five (5) Business Days prior to the
requested date of each Borrowing. The Borrower shall request no more than one
Borrowing per calendar month. Each Draw Request shall be irrevocable and shall
specify: (a) the aggregate principal amount of the related Borrowing, and (b)
the date of the related Borrowing (which shall be a Business Day). The aggregate
principal amount of each Borrowing shall be not less than $100,000. If Lender
approves the Draw Request, it shall disburse funds pursuant to the Disbursing
Agreement. At no time shall the aggregate balance of Borrowings outstanding
exceed the amount of the Loan Commitment. Notwithstanding anything to the
contrary, Lender shall have the irrevocable right (without obligation) at any
time and from time to time to advance a Borrowing without first receiving a Draw
Request from Borrower.
SECTION 2.04 TERM LOAN CONVERSION. Except as provided below, within 30
days following the Construction Completion Date, Borrower shall provide the
following to Lender:
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(a) a certificate by an appropriate Responsible Officer of Borrower,
certifying as to occurrence of each item listed in the definition of
Construction Completion, along with such supporting evidence as Lender may
require (e.g., proof of required insurance coverage, Permits and licenses);
(b) copies of all Material Contracts not previously delivered to
Lender, along with Collateral Assignments of such Material Contracts;
(c) to the extent specifically requested by Lender, copies of all
warranties from suppliers covering materials, equipment and appliances included
within the Improvements;
(d) within sixty (60) days following the Construction Completion Date,
one copy of an "as-built" survey of the Project which conforms with Lender's
requirements; and
(e) such other documents, instruments, and certificates as Lender may
request.
Upon receipt of the foregoing in form and substance satisfactory to Lender in
its sole discretion, so long as no Default or Event of Default has occurred, the
Amortization Period shall begin.
SECTION 2.05 RESERVED.
SECTION 2.06 RESERVED.
SECTION 2.07 INTEREST RATES
(a) LOANS. Prior to the Amortization Period, interest on the Loans
shall accrue at the per annum rate of interest equal to the greater of (i)
6.00%, and (ii) the Prime Rate as determined on the applicable Determination
Date PLUS 175 basis points (1.75%). During the Amortization Period, but prior to
the receipt of the Guaranty by Lender, interest on Loan A shall accrue at the
per annum rate of interest equal to the Prime Rate as determined on the
applicable Determination Date PLUS 175 basis points (1.75%), decreasing to a per
annum rate of interest equal to the Prime Rate as determined on the applicable
Determination Date PLUS 125 basis points (1.25%) upon receipt by Lender of the
Guaranty. In addition, during the Amortization Period, interest on Loan B shall
accrue at the per annum rate of interest equal to the greater of (i) 6.00%, and
(ii) the Prime Rate as determined on the applicable Determination Date PLUS 175
basis points (1.75%).
(b) DEFAULT INTEREST. Upon the occurrence and during the continuance of
a Default or after acceleration, Borrower shall pay interest ("DEFAULT
INTEREST") with respect to all Loans at the rate otherwise applicable PLUS an
additional 200 basis points (2.00%) per annum. All Default Interest shall be
payable on demand.
(c) ADDITIONAL INTEREST. Except for Borrower's payroll account (which
may not be funded in any amount exceeding the lesser of (1) Borrower's gross
payroll amount and (2) $75,000) and other accounts with aggregate balances of
less than $10,000, in the event Borrower fails to maintain all of its Deposit
Accounts with the Lender, Borrower shall pay interest with respect to all Loans
at the rate otherwise applicable PLUS an additional 100 basis points (1.00%) per
annum.
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SECTION 2.08 APPLICATION OF PAYMENTS UPON DEFAULT. Upon the occurrence
and during the continuance of an Event of Default, all payments received by
Lender (including through Lender's exercise of remedies available hereunder or
otherwise) shall be applied ratably to Loan A and Loan B based on each Loan's
respective outstanding balance on the date such payment is received.
SECTION 2.09 REPAYMENT OF LOANS.
(a) LOAN A. During the Construction Funding Period, Borrower shall pay
interest on Loan A at the rate in effect from time to time pursuant to SECTION
2.07(A) based on the daily balance of Loan A outstanding during the related
monthly period. Borrower shall not be required to make payments of principal on
Loan A during the Construction Funding Period. During the Amortization Period,
Borrower shall pay 120 level amortized payments of principal and interest based
on the applicable interest rate in effect pursuant to SECTION 2.07(A). The
amount of such monthly amortized payments shall be adjusted from time to time as
the interest rate is adjusted pursuant to SECTION 2.07(A). All amounts due and
owing pursuant to this SECTION 2.09(A) shall be paid not later than the
twentieth day of each month. All remaining principal and accrued interest
outstanding on Loan A shall be due and payable on the Loan A Maturity Date.
(b) LOAN B. During the Construction Funding Period, Borrower shall pay
interest on Loan B at the rate in effect from time to time pursuant to SECTION
2.07(A) based on the daily balance of Loan B outstanding during the related
monthly period. Borrower shall not be required to make payments of principal on
Loan B during the Construction Funding Period. During the Amortization Period,
Borrower shall pay level amortized payments of principal and interest based on
an amortization schedule of 120 months and the applicable interest rate in
effect pursuant to SECTION 2.07(A). The amount of such monthly amortized
payments shall be adjusted from time to time as the interest rate is adjusted
pursuant to SECTION 2.07(A). All amounts due and owing pursuant to this SECTION
2.09(B) shall be paid not later than the twentieth day of each month. All
remaining principal and accrued interest outstanding on the Loan B shall be due
and payable on the Loan B Maturity Date.
SECTION 2.10 FREE CASH FLOW PAYMENTS. Upon receipt by Borrower of any
USDA Bio Energy program payments, Borrower shall, within fifteen (15) days after
the receipt of such payment, submit an amount equal to 75% of such payment to
Lender. If 25% of Borrower's Free Cash Flow as stated on Borrower's annual
audited report delivered to Lender pursuant to SECTION 5.01(A) is an amount
greater than the payments made to Lender as described in the previous sentence,
then Borrower shall submit to Lender, within ten (10) days of Borrower's annual
audited report delivered to Lender pursuant to SECTION 5.01(A), an amount equal
to the difference between 25% of Borrower's Free Cash Flow and 75% of any USDA
Bio Energy program payments for such fiscal year. The payments as set forth in
this SECTION 2.10 shall be in addition to all other payments required on the
Loans. The aggregate of all payments under this SECTION 2.10 shall not exceed
$7,500,000 during the term of this Agreement.
SECTION 2.11 EVIDENCE OF INDEBTEDNESS. Lender shall maintain in
accordance with its usual practice appropriate records evidencing the
indebtedness of Borrower to Lender resulting from each Loan, including the
amounts of principal and interest payable thereon and paid to Lender from time
to time under this Agreement. Lender shall also maintain appropriate records
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in which shall be recorded (i) the Commitment (ii) the amount of each Loan made
hereunder, (iii) the date and amount of any principal or interest due and
payable or to become due and payable from Borrower to Lender hereunder in
respect of such Loans and (iv) both the date and amount of any sum received by
Lender from Borrower in respect of the Loans. The entries made in such records
shall be PRIMA FACIE evidence of the existence and amounts of the obligations of
Borrower therein recorded; PROVIDED, that the failure or delay of Lender in
maintaining or making entries into any such record or any error therein shall
not in any manner affect the obligation of Borrower to repay the Loans (both
principal and unpaid accrued interest) of Lender in accordance with the terms of
this Agreement. Lender shall provide Borrower with periodic statements
evidencing the indebtedness of Borrower to Lender.
SECTION 2.12 PREPAYMENTS.
(a) Borrower shall have the right at any time and from time to time to
prepay any Loan, in whole or in part, by giving irrevocable written notice (or
telephonic notice promptly confirmed in writing) to Lender no later than 11:00
a.m. (Central Time) not less than three (3) Business Days prior to any such
prepayment; PROVIDED, that the amount of any such prepayment shall not be less
than $100,000. Each such notice shall be irrevocable and shall specify the
proposed date of such prepayment and the principal amount to be prepaid. If such
notice is given, the aggregate amount specified in such notice shall be due and
payable on the date designated in such notice, together with accrued interest to
such date on the amount so prepaid in accordance with SECTION 2.07 and any
prepayment fee pursuant to SECTIONS 2.14(E) AND 2.14(F). If no such notice is
given, each prepayment shall be applied against the remaining installments of
principal due in respect of the Loans.
(b) If Borrower issues any membership interests, any other equity
interests, or any debt securities, then no later than the Business Day following
the date of receipt of the proceeds thereof, Borrower shall prepay the Loans in
an amount equal to all such proceeds, net of underwriting discounts and
commissions and other reasonable costs paid to non-Affiliates in connection
therewith; PROVIDED, that no such prepayment shall be required in the event
Borrower issues membership interests or other equity interests and the proceeds
of such issuance are invested in assets that constitute either plant or
equipment of Borrower and such assets become Collateral subject to Lender's
first priority security interest. Any such prepayment shall be applied in
accordance with paragraph (c) below. The Lender acknowledges that the Borrower
intends to commence a registered public offering of 10,000 units of its
membership interests within 150 days of the date of this Agreement (the "Public
Offering") and that the proceeds of such offering will be primarily used to
redeem the membership interests (units) purchased by ICM, Inc. and ▇▇▇▇▇, Inc.
pursuant to that certain Unit Purchase and Redemption Agreement dated September
27, 2004. Notwithstanding any provision in this Section 2.12(b) to the contrary,
the proceeds from the Public Offering shall not be subject to the terms of this
Section 2.12(b).
(c) Any prepayments made by Borrower shall be applied as follows: FIRST
to fees and reimbursable expenses of Lender then due and payable pursuant to any
of the Loan Documents; SECOND to interest then due and payable on Loans made to
Borrower; and THIRD to the principal balance of the Loans (ratably to Loan A and
Loan B in accordance with their relative outstanding balances as of the date of
the payment), in inverse order of maturity, until the same shall have
18
been paid in full. The Commitment shall be permanently reduced by the amount of
any prepayments made pursuant to clause third above.
SECTION 2.13 INTEREST ON LOANS. Interest on the principal amount of all
Loans shall accrue on a simple interest basis from and including the date such
Loans are made to but excluding the date of any repayment thereof. Interest on
all outstanding Loans shall be payable monthly in arrears on the first Business
Day of each calendar month and also on the Loan A Maturity Date with respect to
Loan A, and the Loan B Maturity Date with respect to Loan B.
SECTION 2.14 FEES.
(a) ORIGINATION FEE. Borrower agrees to pay to Lender an origination
fee equal to Three Hundred Sixty-seven Thousand Seven Hundred and Fifty Dollars
($367,750)(the "ORIGINATION FEE") on or before the Closing Date.
(b) ADMINISTRATIVE FEE. Borrower agrees to pay to Lender an annual
administrative fee (the "ADMINISTRATIVE FEE") equal to Thirty Thousand Dollars
($30,000) on the Closing Date, and on each anniversary of the Closing Date
thereafter, until all obligations hereunder have been paid or satisfied in full.
(c) CONSTRUCTION PHASE PREPAYMENT FEE. In the event any amount of the
Loans are paid prior to the first day of the Amortization Period, whether
voluntarily or involuntarily (including any prepayment under SECTION 2.10 or
SECTION 2.12 or effected by Lender's exercise of any right to accelerate)
Borrower agrees to pay to Lender a prepayment fee equal to Two Hundred Sixty
Thousand Dollars ($260,000).
(d) PREPAYMENT FEE AFTER CONSTRUCTION COMPLETION DATE FOR LOAN A. In
the event any amount of Loan A is paid prior to the time such amount is due and
payable, whether voluntarily or involuntarily (including any prepayment under
SECTION 2.12 or effected by Lender's exercise of any right to accelerate)
Borrower agrees to pay to Lender a prepayment fee as follows: (i) a fee equal to
five percent (5.00%) of the principal balance outstanding if prepayment is made
within one year following the first day of the Amortization Period; (ii) a fee
equal to four percent (4.00%) of the principal balance outstanding if prepayment
is made within two years following the first day of the Amortization Period;
(iii) a fee equal to three percent (3.00%) of the principal balance outstanding
if prepayment is made within three years following the first day of the
Amortization Period; (iv) a fee equal to two percent (2.00%) of the principal
balance outstanding if prepayment is made within four years following the first
day of the Amortization Period; or (v) a fee equal to one percent (1.00%) of the
principal balance outstanding if prepayment is made within five years following
the first day of the Amortization Period.
(e) PREPAYMENT FEE AFTER CONSTRUCTION COMPLETION DATE FOR LOAN B. In
the event any amount of Loan B is paid prior to the time such amount is due and
payable, whether voluntarily or involuntarily (including any prepayment under
SECTION 2.12 or effected by Lender's exercise of any right to accelerate)
Borrower agrees to pay to Lender a prepayment fee as follows: (i) a fee equal to
three percent (3.00%) of the principal balance outstanding if prepayment is made
within one year from the first day of the Amortization Period, (ii) a fee
19
equal to two percent (2.00%) of the principal balance outstanding if prepayment
is made within two years from the first day of the Amortization Period, or (iii)
a fee equal to one percent (1.00%) of the principal balance outstanding if
prepayment is made within three years from the first day of the Amortization
Period.
(f) OUT-OF-POCKET COSTS. Borrower shall pay, on demand, all of
Lender's reasonable out-of-pocket costs in connection with the Loans, including
but not limited to (i) fees, charges and disbursements of Lender's counsel
related to the negotiation, documentation, closing and collection of the Loans,
(ii) fees, charges and disbursements of the Inspecting Architect and Engineer,
(iii) fees, charges and disbursements of the Title Company, (iv) fees, charges
and disbursements of the escrow agent acting pursuant to the Disbursing
Agreement, and (v) all stamp and other taxes and fees payable in connection with
the execution, delivery, filing or recording of any Loan Document.
(g) USDA GUARANTY FEE. Borrower agrees to pay to Lender a fee equal to
Eighty Thousand Dollars ($80,000) on or before the Closing Date. The parties
agree that this fee will be earned by Lender as of the Closing Date and will not
be refunded to Borrower if the Guaranty is ultimately never issued to Lender;
PROVIDED, if after Borrower's best efforts the Guaranty is not issued, the
guaranty fee will be applied as a payment in accordance with SECTION 2.12(C). No
payment fee under SECTION 2.14(D) or SECTION 2.14(E) will be assessed in
connection with a prepayment that results from application of the guaranty fee
as a payment pursuant to this Section 2.14(g).
SECTION 2.15 COMPUTATION OF INTEREST AND FEES. All computations of
interest and fees hereunder shall be made on a Simple Interest basis and on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such interest
or fees are payable (to the extent computed on the basis of days elapsed). Each
determination by Lender of an interest amount or fee hereunder shall be made in
good faith and, absent manifest error, shall be final, conclusive and binding
for all purposes. All interest and fees payable hereunder shall be considered
earned when due.
SECTION 2.16 RESERVED.
SECTION 2.17 RESERVED.
SECTION 2.18 INCREASED COSTS.
(a) If Lender shall have determined that on or after the date of this
Agreement any Change in Law regarding capital requirements has or would have the
effect of reducing the rate of return on Lender's capital as a consequence of
its obligations hereunder to a level below that which Lender could have achieved
but for such Change in Law (taking into consideration Lender's policies with
respect to capital adequacy) then, from time to time, within five (5) Business
Days after receipt by Borrower of written demand by Lender, Borrower shall pay
to Lender such additional amounts as will compensate Lender for any such
reduction suffered.
(b) A certificate of Lender setting forth the amount or amounts
necessary to compensate Lender specified in paragraph (a) of this SECTION 2.18
shall be delivered to Borrower,
20
together with the written demand referred to in paragraph (a) of this section,
and shall be conclusive, absent manifest error.
(c) Failure or delay on the part of Lender to demand compensation
pursuant to this SECTION 2.18 shall not constitute a waiver of Lender's right to
demand such compensation.
SECTION 2.19 RESERVED.
SECTION 2.20 RESERVED.
SECTION 2.21 PAYMENTS GENERALLY.
(a) Borrower shall make each payment required to be made by it
hereunder (whether of principal, interest, fees or reimbursement of amounts
payable under SECTION 2.14, 2.18 or 2.20, or otherwise) prior to 12:00 noon
(Central Time), on the date when due, in immediately available funds, without
set-off or counterclaim. Any amounts received after such time on any date may,
in the discretion of Lender, be deemed to have been received on the next
succeeding Business Day for purposes of calculating interest thereon. All such
payments shall be made to Lender at the Payment Office. If any payment hereunder
shall be due on a day that is not a Business Day, the date for payment shall be
extended to the next succeeding Business Day, and, in the case of any payment
accruing interest, interest thereon shall be made payable for the period of such
extension. All payments hereunder shall be made in Dollars.
(b) If at any time insufficient funds are received by and are available
to Lender to pay fully all amounts of principal, interest and fees then due
hereunder, such funds shall be applied (i) first, towards payment of interest
and fees then due hereunder.
ARTICLE III.
CONDITIONS PRECEDENT TO LOANS
SECTION 3.01 CONDITIONS TO EFFECTIVENESS. The obligations of Lender to
make Loans hereunder shall not become effective until the date on which each of
the following conditions is satisfied (or waived in accordance with SECTION
9.02):
(a) Lender shall have received all fees and other amounts due and
payable on or prior to the Closing Date, including the Origination Fee and
amounts for reimbursement or payment of all out-of-pocket expenses (including
reasonable fees, charges and disbursements of counsel to Lender) required to be
reimbursed or paid by Borrower hereunder, under any other Loan Document and
under any agreement with Lender.
(b) The sum of amounts on deposit with Lender in the Equity Deposit
Account and equity amounts previously expended on organizational costs and
Construction Costs is equal to at least $20,750,000.
(c) Lender shall have received Phase I Environmental Site Assessment
Reports, consistent with American Society of Testing and Materials (ASTM)
Standard E 1527-94, and applicable state requirements, on all of the Real
Estate, dated as of a date acceptable to Lender,
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prepared by environmental engineers satisfactory to Lender, all in form and
substance satisfactory to Lender, and Lender shall have further received such
environmental review and audit reports, including Phase II reports, with respect
to the Real Estate of Borrower as Lender shall have requested, and Lender shall
be satisfied with the contents of all such environmental reports. Lender shall
have received letters executed by the environmental firms preparing such
environmental reports, in form and substance satisfactory to Lender, authorizing
Lender to rely on such reports;
(d) Lender (or its counsel) shall have received the following:
(i) a counterpart of this Agreement signed by or on behalf of
Borrower or written evidence satisfactory to Lender (which may include telecopy
transmission of a signed signature page of this Agreement) that Borrower has
signed a counterpart of this Agreement;
(ii) the Notes, duly executed by Borrower payable to the order
of Lender;
(iii) the duly executed Security Agreement and Collateral
Assignments, together with (A) UCC-1 financing statements and other applicable
documents under the laws of the jurisdictions with respect to the perfection of
the Liens granted under the Security Agreement and the Collateral Assignments,
as requested by Lender in order to perfect such Liens, duly executed by Borrower
and all other parties, (B) copies of favorable UCC, tax, judgment and fixture
lien search reports in all necessary or appropriate jurisdictions and under all
legal and trade names of Borrower and all other parties requested by Lender,
indicating that there are no prior Liens on any of the Collateral other than
Permitted Encumbrances, (C) duly executed landlord waivers and/or warehouseman,
or bailee agreements with respect to all inventory of Borrower or any Subsidiary
located at leased locations or other locations not owned by Borrower in fee
simple, and (D) a certified copy of all leases of Borrower and each Subsidiary.
(iv) the duly executed Mortgage covering all of the Real Estate
owned or leased by Borrower and duly executed counterparts of the other Real
Estate Documents together with: (A) title insurance policies, current ALTA/ACSM
Land Title surveys (to the extent requested by Lender) certified to Lender,
zoning letters and building permits in each case satisfactory in form and
substance to Lender; and (B) evidence that counterparts of the Mortgage have
been recorded in all places to the extent necessary or desirable, in the
judgment of Lender, to create a valid and enforceable first priority lien
(subject to Permitted Encumbrances) on the fee simple estate of each parcel of
Real Estate in favor of Lender for the benefit of Lender (or in favor of such
other trustee as may be required or desired under local law);
(v) satisfactory appraisals of all Real Estate subject to the
Mortgage (including an "as built" appraisal related to the Improvements),
together with satisfactory collateral audits of all accounts, inventory and
other personal property requested by Lender (including field audit and survey
conducted by Lender);
(vi) the duly executed Disbursing Agreement among Borrower,
Lender and an escrow agent acceptable to Lender;
(vii) an executed copy of the Construction Agreement, together
with (A) a complete set of the Construction Plans, including all mechanical,
electrical, structural and other
22
specialized drawings, (B) a schedule listing all subcontracts relating to the
Project and such other contracts, subcontracts and schedules relating to the
Project as Lender may request, (C) work progress schedule showing estimated
completion time for each phase of the Construction Agreement, (D) a Sworn
Construction Cost Statement, duly executed by Borrower, including a
reconciliation of actual costs incurred to-date against budgeted amounts, (E) a
copy of each Permit and each other building permit, license and other agreement
that Borrower is required by law to obtain in connection with the Project,
together with a schedule of all other necessary licenses and permits which must
be obtained in order to occupy and operate a dry mill ethanol production
facility (at maximum capacity in accordance with the Construction Plans) on the
property where the Improvements will be built, and (F) a soil report related to
the Real Estate where the Improvements will be built, certified by a registered
engineer acceptable to Lender, including structural design recommendations in
form and substance satisfactory to Lender;
(viii) executed copies of the Material Contracts in existence as
of the Closing Date;
(ix) copies of duly executed payoff letters, in form and
substance satisfactory to Lender, executed by each existing lender, together
with (a) UCC-3 or other appropriate termination statements, in form and
substance satisfactory to Lender, releasing all liens of the existing lenders
upon any of the personal property of Borrower, (b) cancellations and releases,
in form and substance satisfactory to Lender, releasing all liens of the
existing lenders upon any of the Real Estate, and (c) any other releases,
terminations or other documents reasonably required by Lender to evidence the
payoff of Indebtedness owed to existing lenders;
(x) certified copies of the articles of organization or other
charter documents of Borrower and each Subsidiary, together with certificates of
good standing or existence, as may be available from the Secretary of State of
the jurisdiction of organization of Borrower and each Subsidiary and each other
jurisdiction where Borrower or any Subsidiary is required to be qualified to do
business as a foreign entity;
(xi) a certificate, substantially in the form of EXHIBIT
3.01(D)(XI), dated as of the Closing Date and signed by an appropriate
Responsible Officer, attaching and certifying copies of the operating agreement,
bylaws or similar documents, and appropriate resolutions authorizing the
execution, delivery and performance of the Loan Documents and certifying the
name, title and the signature of each officer executing the Loan Documents.
(xii) a favorable written opinion of counsel to Borrower,
addressed to Lender, substantially in the form of EXHIBIT 3.01(D)(XII), dated as
of the Closing Date and covering such matters relating to Borrower, the Loan
Documents and the transactions contemplated therein as Lender shall reasonably
request;
(xiii) a certificate, substantially in the form of EXHIBIT
3.01(D)(XIII), dated the Closing Date and signed by an appropriate Responsible
Officer, confirming compliance with the conditions set forth in paragraphs (a),
(b) and (c) of SECTION 3.02;
(xiv) duly executed Draw Requests, if applicable;
23
(xv) a report setting forth the sources and uses of funds to be
expended in connection with the Project;
(xvi) certified copies of all material consents, approvals,
authorizations, registrations and filings and orders required or advisable to be
made or obtained under any requirement of law or by any material contractual
obligation of Borrower, in connection with the Project or operation of
Borrower's business, including the production of ethanol and by-products
thereof, and such consents, approvals, authorizations, registrations, filings
and orders shall be in full force and effect and all applicable waiting periods
shall have expired;
(xvii) certificates of insurance, in form, substance and
detail acceptable to Lender (and in any event as required pursuant to the
Mortgage), describing the types and amounts of insurance (property and
liability) carried by Borrower, in each case naming Lender as loss payee or
additional insured, as the case may be, together with a lender's loss payable
endorsement in form and substance satisfactory to Lender;
(xviii) copies of Borrower's audited financial statements as
of its most recent fiscal year end and internally prepared financial statements
as of the last day of the calendar quarter immediately preceding the Closing
Date, each in form and substance satisfactory to Lender;
(xix) a certificate, substantially in the form of EXHIBIT
3.01(D)(XIX), dated the Closing Date and signed by an appropriate Responsible
Officer, confirming the solvency of Borrower before and after giving effect to
all transactions contemplated by the Loan Documents, together with (A) the
Projections, and (B) a pro forma balance sheet for Borrower as of the Closing
Date;
(e) evidence that Borrower has entered into Off-Take Contracts,
satisfactory to Lender in all respects, sufficient to sell or dispose of a
majority of the products and by-products to be produced by Borrower (as
contemplated following Construction Completion); and
(f) a duly executed control agreement among Borrower, Lender and each
depository institution other than Lender in which Borrower maintains a Deposit
Account.
SECTION 3.02 EACH LOAN. The obligation of Lender to make a Loan on the
occasion of any Borrowing is subject to the satisfaction of the following
conditions:
(a) at the time of and immediately after giving effect to such
Borrowing, no Default or Event of Default shall exist; and
(b) all representations and warranties of Borrower set forth in the
Loan Documents shall be true and correct in all material respects on and as of
the date of such Borrowing before and after giving effect thereto;
(c) since the date of the most recent financial statements of Borrower
described in SECTION 5.01(a), there shall have been no change which has had or
could reasonably be expected to result in a Material Adverse Effect;
24
(d) Lender shall have received such other documents, certificates,
information or legal opinions as Lender may reasonably request, all in form and
substance reasonably satisfactory to Lender.
Each Borrowing shall be deemed to constitute a representation and
warranty by Borrower on the date thereof as to the satisfaction of the matters
specified in paragraphs (a), (b) and (c) of this SECTION 3.02.
SECTION 3.03 EACH LOAN. In addition to the conditions set forth in
SECTIONS 3.01 and 3.02, the obligation of Lender to make the Loans, (a) on the
occasion of any Borrowing, is subject to the satisfaction of the each of the
conditions set forth in the Disbursing Agreement, which is hereby incorporated
herein by reference, and (b) on the occasion of the first Borrowing, is
conditioned upon (i) Borrower's securing Utility Contracts necessary or
important for operation of Borrower's plant, equipment, offices, as determined
by Lender in its sole discretion, and (ii) Lender's receipt of evidence
acceptable to Lender, including presentation of lien waivers and other receipts
of payment acceptable to Lender and the escrow agent acting pursuant to the
Disbursing Agreement, that Borrower has theretofore paid Construction Costs in
an amount not less than the sum of (x) the aggregate amount of estimated
Construction Costs stated in the Sworn Construction Cost Statement, minus (y)
the amount of the Commitment. Each Draw Request shall be deemed to constitute a
representation and warranty by Borrower on the date thereof as to the
satisfaction of the conditions set forth in the Disbursing Agreement.
SECTION 3.04 DELIVERY OF DOCUMENTS. All of the Loan Documents,
certificates, legal opinions and other documents and papers referred to in this
ARTICLE III shall be delivered to Lender unless otherwise specified, and shall
be in form, substance and detail satisfactory in all respects to Lender.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Lender, as of the Closing Date and
the date of each Borrowing as follows:
SECTION 4.01 EXISTENCE; POWER. Borrower and each Subsidiary (i) are
duly organized, validly existing and in good standing as a corporation,
partnership or limited liability company, as the case may be, in each case under
the laws of the jurisdiction of its organization, (ii) have all requisite power
and authority to carry on their businesses as now conducted, and (iii) have duly
qualified to do business, and are in good standing, in each jurisdiction where
such qualification is required, except where a failure to be so qualified could
not reasonably be expected to result in a Material Adverse Effect.
SECTION 4.02 ORGANIZATIONAL POWER; AUTHORIZATION. The execution,
delivery and performance by Borrower of the Loan Documents to which it is a
party are within its organizational powers and have been duly authorized by all
necessary organizational, and if required, member action. This Agreement has
been duly executed and delivered by Borrower, and constitutes, and each other
Loan Document to which Borrower is a party, when executed and delivered by
Borrower, will constitute, valid and binding obligations of Borrower,
enforceable
25
against it in accordance with their respective terms, except as may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or similar
laws affecting the enforcement of creditors' rights generally and by general
principles of equity.
SECTION 4.03 GOVERNMENTAL APPROVALS; NO CONFLICTS. The execution,
delivery and performance by Borrower of this Agreement, (a) does not require any
consent or approval of, registration or filing with, or any action by, any
Governmental Authority, except those as have been obtained or made and are in
full force and effect or where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, (b) will not violate any applicable law or regulation or the charter,
by-laws or other organizational documents of Borrower or any of its Subsidiaries
or any order of any Governmental Authority, (c) will not violate or result in a
default under any indenture, material agreement or other material instrument
binding on Borrower or any of its Subsidiaries or any of its assets or give rise
to a right thereunder to require any payment to be made by Borrower or any of
its Subsidiaries and (d) will not result in the creation or imposition of any
Lien on any asset of Borrower or any of its Subsidiaries, except Liens (if any)
created under the Loan Documents.
SECTION 4.04 FINANCIAL STATEMENTS. Borrower has furnished to Lender
copies of Borrower's (a) audited financial statements (consistent with the
requirements of SECTION 5.01(A)) as of its most recent fiscal year end and (b)
internally prepared financial statements (consistent with the requirements of
SECTION 5.01(B)) as of the last day of the most recent month. Such financial
statements fairly present the financial condition of Borrower and its
Subsidiaries as of such dates and the results of operations for such periods in
conformity with GAAP consistently applied, subject to year end audit adjustments
and the absence of footnotes. Since the date of such financial statements, there
have been no changes with respect to Borrower and its Subsidiaries which have
had or could reasonably be expected to have, singly or in the aggregate, a
material adverse effect on the business, results of operations, financial
condition, assets, liabilities or prospects of Borrower and its Subsidiaries
taken as a whole.
SECTION 4.05 LITIGATION AND ENVIRONMENTAL MATTERS.
(a) No litigation, investigation or proceeding of or before any
arbitrators or Governmental Authorities is pending against or, to the knowledge
of Borrower, threatened against or affecting Borrower or any of its Subsidiaries
(i) as to which there is a reasonable possibility of an adverse determination
that could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect or (ii) which in any manner draws into
question the validity or enforceability of this Agreement or any other Loan
Document.
(b) Except for the matters set forth on SCHEDULE 4.05, neither Borrower
nor any Subsidiary (i) has failed to comply with any Environmental Law or to
obtain, maintain or comply with any permit, license or other approval required
under any Environmental Law, including without limitation, all permits, licenses
and approvals required by the state of
Kansas, (ii) has become subject to any
Environmental Liability, (iii) has received notice of any claim with respect to
any Environmental Liability or (iv) knows of any basis for any Environmental
Liability.
26
SECTION 4.06 COMPLIANCE WITH LAWS AND AGREEMENTS. Borrower and each
Subsidiary is in compliance with (a) all applicable laws, rules, regulations and
orders of any Governmental Authority, and (b) all indentures, agreements or
other instruments (including but not limited to the Material Contracts) binding
upon it or its properties, except where non-compliance, either singly or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect. Borrower has obtained all Permits necessary or appropriate related to
the present stage of construction of the Project.
SECTION 4.07 INVESTMENT COMPANY ACT, ETC. Neither Borrower nor any
Subsidiary is (a) an "investment company", as defined in, or subject to
regulation under, the Investment Company Act of 1940, as amended, (b) a "holding
company" as defined in, or subject to regulation under, the Public Utility
Holding Company Act of 1935, as amended, or (c) otherwise subject to any other
regulatory scheme limiting its ability to incur debt.
SECTION 4.08 TAXES. Borrower and its Subsidiaries and each other Person
for whose taxes Borrower or any Subsidiary could become liable have timely filed
or caused to be filed all Federal income tax returns and all other material tax
returns that are required to be filed by any of them, and have paid all taxes
shown to be due and payable (or with respect to real estate taxes, have paid all
taxes prior to the time the same become delinquent) on such returns or on any
assessments made against it or its property and all other taxes, fees or other
charges imposed on it or any of its property by any Governmental Authority,
except (i) to the extent the failure to do so would not have a Material Adverse
Effect or (ii) where the same are currently being contested in good faith by
appropriate proceedings and for which Borrower or such Subsidiary, as the case
may be, has set aside on its books adequate reserves. The charges, accruals and
reserves on the books of Borrower and its Subsidiaries in respect of such taxes
are adequate, and no tax liabilities that could be materially in excess of the
amount so provided are anticipated.
SECTION 4.09 MARGIN REGULATIONS. None of the proceeds of any of the
Loans will be used, directly or indirectly, for "purchasing" or "carrying" any
"margin stock" with the respective meanings of each of such terms under
Regulation U of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect, or for any purpose that violates the
provisions of Regulation U, T or X of the Board of Governors of the Federal
Reserve System.
SECTION 4.10 ERISA. No ERISA Event has occurred or is reasonably
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect. The present value of all accumulated
benefit obligations under each Plan (based on the assumptions used for purposes
of Statement of Financial Standards No. 87) did not, as of the date of the most
recent financial statements reflecting such amounts, exceed the fair market
value of the assets of such Plan, and the present value of all accumulated
benefit obligations of all underfunded Plans (based on the assumptions used for
purposes of Statement of Financial Standards No. 87) did not, as of the date of
the most recent financial statements reflecting such amounts, exceed by more
than $50,000 the fair market value of the assets of all such underfunded Plans.
SECTION 4.11 OWNERSHIP OF PROPERTY.
27
(a) Borrower and each Subsidiary have good title to, or valid leasehold
interests in, all of their real and personal property material to the operation
of their respective businesses.
(b) Borrower and each Subsidiary own, or are licensed, or otherwise
have the right, to use, all patents, trademarks, service marks, tradenames,
copyrights and other intellectual property material to their respective
businesses and the use thereof by Borrower and any Subsidiary does not infringe
on the rights of any other Person, except for any such infringements that,
individually or in the aggregate, would not have a Material Adverse Effect.
SECTION 4.12 DISCLOSURE. Borrower has disclosed to Lender all
agreements, instruments, and corporate or other restrictions to which Borrower
or any of Subsidiary is subject, and all other matters known to any of them,
that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect. None of the reports, financial statements,
certificates or other information furnished by or on behalf of Borrower to
Lender in connection with the negotiation of this Agreement or any other Loan
Document or delivered hereunder or thereunder (as modified or supplemented by
any other information so furnished) contains any material misstatement of fact
or omits to state any material fact necessary to make the statements therein,
taken as a whole, in light of the circumstances under which they were made, not
misleading.
SECTION 4.13 LABOR RELATIONS. There are no strikes, lockouts or other
material labor disputes or grievances against Borrower or any Subsidiary, or, to
the knowledge of Borrower, threatened against or affecting Borrower or any
Subsidiary, and no significant unfair labor practice, charges or grievances are
pending against Borrower or any Subsidiary, or to the knowledge of Borrower,
threatened against any of them before any Governmental Authority. All payments
due from Borrower or any Subsidiary pursuant to the provisions of any collective
bargaining agreement have been paid or accrued as a liability on the books of
Borrower or any such Subsidiary, except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
SECTION 4.14 SUBSIDIARIES. As of the Closing Date, Borrower has no
Subsidiaries and as of any subsequent date, Borrower has no Subsidiaries other
than those for which Borrower has complied with the requirements of SECTION
5.10.
SECTION 4.15 CONSTRUCTION. The exterior lines of the Improvements are,
and at all times will be, within the boundary lines of the Real Estate, and
Borrower has examined and is familiar with all applicable covenants, conditions,
restrictions and reservations and with all applicable requirements of all
Governmental Authorities, including without limitation, building codes and
zoning, environmental, hazardous substance, energy and pollution control laws,
ordinances and regulations affecting the Project.
SECTION 4.16 PROJECTIONS. The Projections fairly present Borrower's
reasonable forecast of the most probable results of operations and changes in
cash flows for the periods covered thereby, based on the assumptions set forth
therein, which assumptions are reasonable based on historical experience and
presently known facts. Since the date of such Projections, there have been no
changes with respect to Borrower or its Subsidiaries which could reasonably
28
be expected to result in, singly or in the aggregate, a material discrepancy
between such Projections and Borrower's actual results for the periods stated.
SECTION 4.17 MATERIAL CONTRACTS. There are no Material Contracts other
than the License Agreement, the Process Guarantee, and those agreements and
contracts disclosed to Lender pursuant to this SECTION 4.17.
(a) MANAGEMENT CONTRACTS. There are no agreements or contracts which
are material to the management of Borrower's or any Subsidiary's business other
than those listed on SCHEDULE 4.17(A).
(b) SUPPLY CONTRACTS. There are no agreements or contracts which are
material to the provision or supply of inputs related to the operation of
Borrower's or any Subsidiary's business other than those listed on SCHEDULE
4.17(B).
(c) OFF-TAKE CONTRACTS. There are no agreements or contracts which are
material to the sale or disposal of products or by-products produced by Borrower
or any Subsidiary other than those listed on SCHEDULE 4.17(C).
(d) TRANSPORTATION CONTRACTS. There are no agreements or contracts
related to the provision of transportation or shipping services which are
material to the operation of Borrower's or any Subsidiary's business other than
those listed on SCHEDULE 4.17(D).
(e) UTILITY CONTRACTS. There are no agreements or contracts related to
the provision of water, electricity, natural gas, fuel oil, coal or other energy
resources which are material to the operation of Borrower's or any Subsidiary's
business other than those listed on SCHEDULE 4.17(E).
SECTION 4.18 PERMITS. Each Permit is listed on SCHEDULE 4.18,including
each Permit in effect presently and those Permits to be obtained as necessary or
appropriate for operation of Borrower's ethanol plant at maximum capacity in
accordance with the Construction Plans.
ARTICLE V.
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that so long as Lender has a Commitment
hereunder, or the principal of and interest on any Loan or any fee remains
unpaid:
SECTION 5.01 FINANCIAL STATEMENTS AND OTHER INFORMATION. The Borrower
will deliver to Lender:
(a) as soon as available and in any event (i) within 120 days after the
end of each fiscal year of Borrower, a copy of the annual audited report for
such fiscal year for Borrower and its Subsidiaries, containing a combined and
combining balance sheet of Borrower and its Subsidiaries as of the end of such
fiscal year and the related combined and combining statements of income, owners'
equity and cash flows (together with all footnotes thereto) of Borrower and its
Subsidiaries for such fiscal year, (ii) setting forth in comparative form the
figures for the previous fiscal year, all in reasonable detail and reported on
by ▇▇▇▇▇▇▇▇▇▇▇▇ & Associates,
29
PLLP, Willmar, Minnesota, or other independent public accountants acceptable to
Lender (without a "going concern" or like qualification, exception or
explanation and without any qualification or exception as to scope of such
audit) to the effect that such financial statements present fairly in all
material respects the financial condition and the results of operations of
Borrower and its Subsidiaries, for such fiscal year on a combined basis in
accordance with GAAP and that the examination by such accountants in connection
with such combined financial statements has been made in accordance with GAAP;
(b) as soon as available and in any event within 30 days after the end
of each calendar month, an unaudited combined balance sheet of Borrower and its
Subsidiaries as of the end of such calendar month and the related unaudited
combined statements of income, stockholder's equity and cash flow of Borrower
and its Subsidiaries for such calendar month and the then elapsed portion of
such fiscal year, setting forth in each case in comparative form the figures for
the corresponding month and the corresponding portion of Borrower's previous
fiscal year, all certified by an appropriate Responsible Officer of Borrower as
presenting fairly in all material respects the financial condition and results
of operations of Borrower and its Subsidiaries on a combined basis in accordance
with GAAP, subject to normal year-end audit adjustments and the absence of
footnotes;
(c) concurrently with the delivery of the financial statements referred
to in clauses (a) and (b) above, a certificate of a Responsible Officer, (i)
certifying as to whether there exists a Default or Event of Default on the date
of such certificate, and if a Default or an Event of Default then exists,
specifying the details thereof and the action which Borrower has taken or
proposes to take with respect thereto, (ii) setting forth in reasonable detail
calculations demonstrating compliance with ARTICLE VI, (iii) stating whether any
change in GAAP or the application thereof has occurred since the date of
Borrower's audited financial statements referred to in SECTION 4.04 and, if any
change has occurred, specifying the effect of such change on the financial
statements accompanying such certificate, and (iv) attaching a production
report, certified as to accuracy, which sets forth pertinent information in
respect of the amount of ethanol produced and other information as Lender may
specify from time to time;
(d) concurrently with the delivery of the financial statements referred
to in clause (a) above, a certificate of the accounting firm that reported on
such financial statements stating whether they obtained any knowledge during the
course of their examination of such financial statements of any Default or Event
of Default (which certificate may be limited to the extent required by
accounting rules or guidelines);
(e) promptly upon Borrower obtaining notice or knowledge of any changes
to the Sworn Construction Cost Statement, revised sworn statements of estimated
costs of the Project, showing changes in or variations from the original Sworn
Construction Cost Statement in excess of $500,000 in the aggregate along with
copies of all material changes or modifications in the Construction Plans,
contracts or subcontracts for the Project prior to incorporation of any such
change or modification into the Project;
(f) as soon as Borrower has notice or knowledge thereof, a revised
construction schedule if and when any target date set forth therein has been
delayed by 10 consecutive days or more, or when the aggregate of all such delays
equals 30 or more days;
30
(g) promptly after the same become available, copies of all periodic
and other reports, and other materials distributed by Borrower to its members
generally, or to any Governmental Authority or national securities exchange, as
applicable;
(h) concurrently with the delivery of the financial statements referred
to in clause (a) above, a copy of Borrower's PRO FORMA budget and business plan
for the subsequent fiscal year for Borrower and its Subsidiaries, containing a
combined and combining PRO FORMA balance sheet of Borrower and its Subsidiaries
as of the end of such subsequent fiscal year and the related PRO FORMA combined
and combining statements of income, owners' equity and cash flows (together with
all footnotes thereto) of Borrower and its Subsidiaries for such subsequent
fiscal year; and
(i) promptly following any request therefor, such other information
regarding the results of operations, business affairs and financial condition of
Borrower or any Subsidiary as Lender may reasonably request.
SECTION 5.02 NOTICES OF MATERIAL EVENTS. Borrower will furnish to
Lender prompt written notice of the following:
(a) the occurrence of any Default or Event of Default;
(b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or, to the knowledge of
Borrower, affecting Borrower or any Subsidiary which, if adversely determined,
could reasonably be expected to result in a Material Adverse Effect;
(c) the occurrence of any event or any other development by which
Borrower or any Subsidiary (i) fails to comply with any Environmental Law or to
obtain, maintain or comply with any permit, license or other approval required
under any Environmental Law, (ii) becomes subject to any Environmental
Liability, (iii) receives notice of any claim with respect to any Environmental
Liability, or (iv) becomes aware of any basis for any Environmental Liability
and in each of the preceding clauses, which individually or in the aggregate,
could reasonably be expected to result in a Material Adverse Effect;
(d) the occurrence of any ERISA Event that alone, or together with any
other ERISA Events that have occurred, could reasonably be expected to result in
liability of Borrower and its Subsidiaries in an aggregate amount exceeding
$100,000; and
(e) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a written
statement of a Responsible Officer setting forth the details of the event or
development requiring such notice and any action taken or proposed to be taken
with respect thereto.
SECTION 5.03 EXISTENCE; CONDUCT OF BUSINESS. Borrower will, and will
cause each Subsidiary to, do or cause to be done all things necessary to
preserve, renew and maintain in full force and effect its legal existence and
its respective rights, licenses, permits, privileges, franchises, patents,
copyrights, trademarks and trade names material to the conduct of its business
31
and will continue to engage in the same business as presently conducted or such
other businesses that are reasonably related thereto.
SECTION 5.04 COMPLIANCE WITH LAWS, ETC. Borrower will, and will cause
each Subsidiary to, comply with all laws, rules, regulations and requirements of
any Governmental Authority applicable to its properties, except where the
failure to do so, either individually or in the aggregate, could not reasonably
be expected to result in a Material Adverse Effect. Borrower will cause all
exterior lines of the Improvements to be, at all times, within the boundary
lines of the Real Estate, and the Project and Improvements will in all respects
conform to and comply with all applicable covenants, conditions, restrictions
and reservations, and with all requirements of Governmental Authorities,
including, without limitation, all building codes and zoning, environmental,
hazardous substance, energy and pollution control laws, ordinances and
regulations affecting the Project and the Improvements.
SECTION 5.05 PAYMENT OF OBLIGATIONS. Borrower will, and will cause each
Subsidiary to, pay and discharge at or before maturity, all of its obligations
and liabilities (including without limitation all tax liabilities and claims
that could result in a statutory Lien) before the same shall become delinquent
or in default, except where (a) the validity or amount thereof is being
contested in good faith by appropriate proceedings, (b) Borrower or such
Subsidiary has set aside on its books adequate reserves with respect thereto in
accordance with GAAP and (c) the failure to make payment pending such contest
could not reasonably be expected to result in a Material Adverse Effect.
SECTION 5.06 BOOKS AND RECORDS. Borrower will, and will cause each
Subsidiary to, keep proper books of record and account in which full, true and
correct entries shall be made of all dealings and transactions in relation to
its business and activities to the extent necessary to prepare the combined
financial statements of Borrower in conformity with GAAP.
SECTION 5.07 VISITATION, INSPECTION, AUDIT, ETC.
(a) Borrower will, and will cause each Subsidiary to, permit any
representative of Lender to visit and inspect its properties (including, without
limitation, the Real Estate and Improvements), to conduct audits of the
Collateral (including without limitation all Accounts and Inventory and all
records relating thereto), to examine its books and records and to make copies
and take extracts therefrom, to review all change orders relating to the
Project, to inspect all work and materials relating to the Project for which
payment is required, to review all Draw Requests, to submit progress inspection
reports relating to the Project, and to discuss its affairs, finances and
accounts with any of its officers and with its independent certified public
accountants, all at such reasonable times and as often as Lender, may reasonably
request after reasonable prior notice to Borrower; PROVIDED, if a Default or an
Event of Default has occurred and is continuing, no prior notice shall be
required. All reasonable expenses incurred by Lender in connection with any such
visit, inspection, audit, examination and discussions shall be borne by
Borrower.
(b) Borrower will, and will cause each Subsidiary to, deliver to Lender
such appraisals of the Real Estate and other fixed assets of Borrower as Lender
may reasonably request at any time and from time to time, such appraisals to be
conducted by an appraiser, and
32
in form and substance, reasonably satisfactory to Lender, in each case conducted
at the expense of Borrower if Lender requests such appraisal in connection with
a request for an accommodation, waiver or other credit action by Borrower.
(c) Notwithstanding anything to the contrary, (i) neither Borrower nor
any other Person shall have the right to rely on the reports relating to the
Project generated by Lender for any purposes whatsoever, (ii) Borrower shall be
responsible for making its own inspections of the Project during the course of
construction and shall satisfy itself that the work performed and the materials
furnished shall conform with its contracts and (iii) by making Loans after
inspections of the Project by Lender, Lender shall not be deemed to have waived
any Event of Default, or the right to require the correction of construction
defects or to have acknowledged that the construction (as to quality or value of
work performed or material furnished) conforms with the Construction Plans.
SECTION 5.08 MAINTENANCE OF PROPERTIES; INSURANCE. Borrower will, and
will cause each Subsidiary to, (a) keep and maintain all property material to
the conduct of its business in good working order and condition, ordinary wear
and tear except where the failure to do so, either individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect and (b) maintain with financially sound and reputable insurance
companies, insurance with respect to its properties and business, and the
properties and business of its Subsidiaries, against loss or damage of the kinds
customarily insured against by companies in the same or similar businesses
operating in the same or similar locations.
SECTION 5.09 USE OF PROCEEDS. Borrower will use the proceeds of all
Loans to Pay the Construction Costs, to finance the Project, and for start-up
working capital to the extent aggregate Construction Costs are less than the sum
of the Commitment and the Required Equity. No part of the proceeds of any Loan
will be used, whether directly or indirectly, for any purpose that would violate
Regulation T, U or X of the Board. No part of the proceeds of any Loan will be
used, directly or indirectly, to fund start-up working capital until such time
as the Project is at least 80% complete.
SECTION 5.10 SUBSIDIARIES. If any Subsidiary is acquired or formed
after the Closing Date, Borrower will, within ten (10) business days after such
Subsidiary is acquired or formed, notify Lender and will cause such Subsidiary
to execute a guarantee of the Obligations, a joinder to the Security Agreement,
and a joinder to such other Security Documents as Lender shall require, each in
form and substance satisfactory to Lender, and will cause such Subsidiary to
deliver simultaneously therewith similar documents applicable to such Subsidiary
required under SECTION 3.01 as requested by Lender.
SECTION 5.11 ASSIGNMENT OF MATERIAL CONTRACTS. Borrower shall notify
Lender of any Material Contract promptly upon entering into the same. Borrower
agrees to promptly execute and deliver to Lender such Collateral Assignments and
take such other actions as Lender may reasonably request to perfect Lender's
security interest in Borrower's rights under such Material Contracts. Borrower
authorizes Lender to file such Uniform Commercial Code financing statements (and
amendments to the same) and continuation statements as Lender may deem necessary
or appropriate from time to time to perfect Lender's security interest in such
Material Contracts.
33
SECTION 5.12 GUARANTY. Borrower will, and will cause each Subsidiary
to, use their best efforts to cooperate with Lender and Guarantor so that
Guarantor issues the Guaranty to Lender in an expeditious manner.
SECTION 5.13 SHORTFALL. Whenever Borrower determines, or receives
written notice from Lender, that the sum of the principal amount not yet
advanced under the Commitment to pay Construction Costs are insufficient to
complete the Project, Borrower shall, within three days, irrevocably deposit
with Lender immediately available funds not less than such insufficiency.
SECTION 5.14 NON-LIABILITY OF LENDER. Borrower acknowledges and agrees
that Lender assumes no liability or responsibility for the sufficiency of the
Loans to complete the Project, for the protection, inspection or completion of
the Project, for the adequacy or accuracy of the Sworn Construction Cost
Statement, for any representations made by Borrower or for any action of
Borrower to be performed in the construction of the Project.
SECTION 5.15 ACCOUNTS. Except for that certain payroll and nonmaterial
operating accounts maintained at local banks as described in SECTION 2.07(C),
Borrower will maintain all Deposit Accounts with Lender.
ARTICLE VI.
FINANCIAL COVENANTS
Borrower covenants and agrees that so long as Lender has a Commitment
hereunder, or the principal or interest on any Loan or any fee remains unpaid:
SECTION 6.01 FIXED CHARGE COVERAGE RATIO. On the last day of Borrower's
fiscal year which includes the Construction Completion Date, and at each fiscal
year end thereafter, Borrower will maintain a Fixed Charge Coverage Ratio of not
less than 1.15:1.0.
SECTION 6.02 TANGIBLE BALANCE SHEET EQUITY RATIO. On the last day of
Borrower's fiscal year which includes the Construction Completion Date, and at
all times thereafter, Borrower will maintain a Tangible Balance Sheet Equity
Ratio of not less than 0.40:1.00.
SECTION 6.03 CAPITAL EXPENDITURES. Borrower will not make Capital
Expenditures in excess of $400,000 during any fiscal year period following the
Construction Completion Date without Lender's prior written approval.
SECTION 6.04 CURRENT RATIO AND WORKING CAPITAL. Borrower will maintain,
on the last day of Borrower's fiscal year which includes the Construction
Completion Date, and at all times thereafter, a ratio of current assets to
current liabilities of not less than 1.25:1.00. In addition, Borrower will
maintain working capital of at least $2,500,000 on the Construction Completion
Date, increasing to $3,000,000 on December 31, 2005, and at all times
thereafter.
SECTION 6.05 MAXIMUM DEBT TO TANGIBLE NET WORTH RATIO. Borrower will
maintain, on the last day of Borrower's fiscal year that includes the
Construction Completion Date, and at all times thereafter, a ratio of debt to
Tangible Net Worth of not more than 1.50:1.00.
34
SECTION 6.06 MINIMUM DEBT SERVICE RATIO. Borrower will maintain, on the
last day of Borrower's fiscal year that includes the Construction Completion
Date, and at all times thereafter, a ratio of EBITDA to interest expense and
scheduled principal payments in respect of Total Debt of not less than
1.15:1.00.
Compliance with the financial covenants set forth in this ARTICLE VI
shall be determined based on year end audited financial statements.
ARTICLE VII.
NEGATIVE COVENANTS
Borrower covenants and agrees that so long as Lender has a Commitment
hereunder or the principal of or interest on any Loan or any fee remains unpaid:
SECTION 7.01 INDEBTEDNESS. Borrower will not, and will not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any
Indebtedness, except indebtedness created pursuant to the Loan Documents;
SECTION 7.02 NEGATIVE PLEDGE. Borrower will not, and will not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien on
any of its assets or property now owned or hereafter acquired, except:
(a) Liens created in favor of Lender pursuant to the Loan Documents;
and
(b) Permitted Encumbrances.
SECTION 7.03 FUNDAMENTAL CHANGES. Borrower will not, and will not
permit any Subsidiary to, engage in any business other than businesses of the
type conducted by Borrower and its Subsidiaries on the date hereof and
businesses reasonably related thereto.
SECTION 7.04 INVESTMENTS, LOANS, ETC. Borrower will not, and will not
permit any Subsidiary to, purchase, hold or acquire (including pursuant to any
merger with any Person that was not a wholly owned Subsidiary prior to such
merger) any common stock, evidence of indebtedness or other securities
(including any option, warrant, or other right to acquire any of the foregoing)
of, make or permit to exist any loans or advances to, guarantee any obligations
of, or make or permit to exist any investment or any other interest in, any
other Person, or purchase or otherwise acquire (in one transaction or a series
of transactions) any assets of any other Person that constitute a business unit,
or create or form any Subsidiary, except Borrower may make loans or advances to
employees, officers or directors of Borrower or any Subsidiary in the ordinary
course of business for travel, relocation and related expenses; PROVIDED,
HOWEVER, that the aggregate amount of all such loans and advances may not exceed
$100,000 at any time.
SECTION 7.05 RESTRICTED DISTRIBUTIONS . Borrower will not, and will not
permit any Subsidiary to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Distribution or payment in respect of Indebtedness
subordinated to the Obligations except for (a) dividends or distributions
payable by Borrower solely in units of any class of its membership interests and
(b) Restricted Distributions made by any Subsidiary to Borrower; PROVIDED no
35
Restricted Distribution or payment in respect of Indebtedness subordinated to
the Obligations shall be paid by Borrower if a Default or Event of Default
exists or would result therefrom.
SECTION 7.06 SALE OF ASSETS. Borrower will not, and will not permit any
Subsidiary to, convey, sell, lease, assign, transfer or otherwise dispose of,
any of its assets, business or property, whether now owned or hereafter
acquired, or, in the case of any Subsidiary, issue or sell any shares of such
Subsidiary's common stock to any Person other than Borrower (or to qualify
directors if required by applicable law), except (a) the sale or other
disposition for fair market value of obsolete or worn out property or other
property not necessary for operations disposed of in the ordinary course of
business; and (b) the sale of inventory in the ordinary course of business.
SECTION 7.07 TRANSACTIONS WITH AFFILIATES. Borrower will not, and will
not permit any Subsidiary to, sell, lease or otherwise transfer any property or
assets to, or purchase, lease or otherwise acquire any property or assets from,
or otherwise engage in any other transactions with, any of its Affiliates,
except (a) in the ordinary course of business at prices and on terms and
conditions not less favorable to Borrower or such Subsidiary than could be
obtained on an arm's-length basis from unrelated third parties in comparable
transactions, (b) transactions between Borrower and its wholly owned
Subsidiaries not involving any other Affiliates and (c) any payments permitted
by SECTION 7.05.
SECTION 7.08 RESTRICTIVE AGREEMENTS. Borrower will not, and will not
permit any Subsidiary to, directly or indirectly, enter into, incur or permit to
exist any agreement that prohibits, restricts or imposes any condition upon (a)
the ability of Borrower or any Subsidiary to create, incur or permit any Lien
upon any of its assets or properties, whether now owned or hereafter acquired,
or (b) the ability of any Subsidiary to pay dividends or other distributions
with respect to its common stock, to make or repay loans or advances to Borrower
or any other Subsidiary, to guarantee Indebtedness of Borrower or any other
Subsidiary or to transfer any of its property or assets to Borrower or any
Subsidiary; PROVIDED, that (i) the foregoing shall not apply to restrictions or
conditions imposed by law or by this Agreement or any other Loan Document, (ii)
the foregoing shall not apply to customary restrictions and conditions contained
in agreements relating to the sale of a Subsidiary pending such sale, provided
such restrictions and conditions apply only to the Subsidiary that is sold and
such sale is permitted hereunder, (iii) clause (a) shall not apply to
restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions and conditions
apply only to the property or assets securing such Indebtedness, and (iv) clause
(a) shall not apply to customary provisions in leases restricting the assignment
thereof.
SECTION 7.09 SALE AND LEASEBACK TRANSACTIONS. Borrower will not, and
will not permit any Subsidiary to, enter into any arrangement, directly or
indirectly, whereby it shall sell or transfer any property, real or personal,
used or useful in its business, whether now owned or hereinafter acquired, and
thereafter rent or lease such property or other property that it intends to use
for substantially the same purpose or purposes as the property sold or
transferred.
SECTION 7.10 LEASE OBLIGATIONS. Borrower will not, and will not permit
any Subsidiary to, create or suffer to exist any obligations for the payment
under operating leases or agreements to lease (but excluding any obligations
under leases required to be classified as capital leases
36
under GAAP) having a term of five years or more which would cause the direct or
contingent liabilities of Borrower and its Subsidiaries under such leases or
agreements to lease, on a consolidated basis, to exceed $100,000 in the
aggregate in any year.
SECTION 7.11 HEDGING AGREEMENTS. Borrower will not, and will not permit
any Subsidiary to, enter into any Hedging Agreement, other than Hedging
Agreements entered into in the ordinary course of business to hedge or mitigate
risks to which Borrower or any Subsidiary is exposed in the conduct of its
business or the management of its liabilities.
SECTION 7.12 AMENDMENT TO MATERIAL DOCUMENTS AND CONSTRUCTION PLANS.
(a) Borrower will not, and will not permit any Subsidiary to, amend,
modify or waive any of its rights under (i) its certificate of organization,
operating agreement, bylaws or other organizational documents, or (ii) any
Material Contract.
(b) Except as allowed pursuant to SECTION 7.14, Borrower will not, and
will not permit any Subsidiary to, amend, modify, waive or consent to any change
or modification in the Construction Plans, contracts or subcontracts related to
the Project, and no work shall be performed with respect to any such change or
modification if such change or modification would, net of any cost reduction
resulting therefrom, increase the cost of the Project.
SECTION 7.13 ACCOUNTING CHANGES. Borrower will not, and will not permit
any Subsidiary to, make any significant change in accounting treatment or
reporting practices, except as required by GAAP, or change the fiscal year of
Borrower or any Subsidiary, except to change the fiscal year of a Subsidiary to
conform its fiscal year to that of Borrower.
SECTION 7.14 CONSTRUCTION. Borrower will not, and will not permit any
Subsidiary to, become a party to any contract for the performance of any work
related to the Project or for the supplying of any labor, materials or services
for the construction of the Improvements that would have the effect of
increasing the costs of the Project more than $500,000 (in the aggregate with
previous such cost increases) above those set forth in the Sworn Construction
Cost Statement, except in such amounts and upon such terms and with such parties
as shall be approved in writing by Lender. No approval by Lender of any contract
or change order shall make Lender responsible for the adequacy, form or content
of such contract or change order. Borrower shall expeditiously complete and
fully pay for the development and construction of the Project in a good and
workmanlike manner and in accordance with the contracts, subcontracts and
Construction Plans submitted to Lender and in compliance with all applicable
requirements of all Governmental Authorities, and any covenants, conditions,
restrictions and reservations applicable thereto, so that Construction
Completion occurs on or before October 1, 2005. Borrower assumes full
responsibility for the compliance of the Construction Plans and the Project with
all requirements of all Governmental Authorities and with sound building and
engineering practices, and notwithstanding any approvals by Lender, Lender shall
have no obligation or responsibility whatsoever for the Construction Plans or
any other matter incident to the Project or the construction of the
Improvements. Borrower shall correct or cause to be corrected (a) any defect in
the Improvements, (b) any departure in the construction of the Improvements from
the Construction Plans or any requirements of any Governmental Authorities, and
(c) any encroachment by any part of the Improvements or any other structure
37
located on the Real Estate on any building line, easement, property line or
restricted area. Borrower shall cause all roads necessary for the utilization of
the Improvements for their intended purposes to be completed and dedicated (if
dedication thereof is required by any Governmental Authority), the bearing
capacity of the soil on the Real Estate to be made sufficient to support the
Improvements, and sufficient local utilities to be made available to the Project
and installed at costs (if any) set out in the Sworn Construction Cost
Statement, on or before November 1, 2005. No work may be performed pursuant to
any change order or pending change order to the Construction Plans prior to
delivery thereof to Lender.
SECTION 7.15 DEPOSIT AND INVESTMENT ACCOUNTS. Except for payroll and
nonmaterial operating accounts maintained at local banks as described in SECTION
2.07(C) Borrower will not, and will not permit any Subsidiary to, maintain,
deposit or invest funds into any Deposit Account or Investment Account with any
Person other than Lender.
ARTICLE VIII.
EVENTS OF DEFAULT
SECTION 8.01 EVENTS OF DEFAULT. If any of the following events (each an
"EVENT OF DEFAULT") shall occur:
(a) Borrower shall fail to pay any principal of any Loan when and as
the same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment or otherwise and such failure shall continue
un-remedied for a period of ten (10) days; or
(b) Borrower shall fail to pay any interest on any Loan or any fee or
any other amount (other than an amount payable under SECTION 8.01(A)) payable
under this Agreement or any other Loan Document, when and as the same shall
become due and payable, and such failure shall continue un-remedied for a period
of ten (10) days; or
(c) any representation or warranty made or deemed made by or on behalf
of Borrower in or in connection with this Agreement or any other Loan Document
(including the Schedules attached thereto) and any amendments or modifications
hereof or waivers hereunder, or in any certificate, report, financial statement
or other document submitted to Lender by Borrower or any representative of
Borrower pursuant to or in connection with this Agreement or any other Loan
Document shall prove to be incorrect when made or deemed made or submitted; or
(d) Borrower shall fail to observe or perform any covenant or agreement
contained in SECTIONS 5.01, 5.02, or 5.03 (with respect to Borrower' existence)
or ARTICLES VI or VII; or
(e) Borrower shall fail to observe or perform any covenant or agreement
contained in this Agreement (other than those referred to in clauses (a), (b)
and (d) above) or in any other Loan Document, and such failure shall remain
unremedied for 30 days after the earlier of (i) any officer of Borrower becomes
aware of such failure, or (ii) notice thereof shall have been given to Borrower
by Lender; or
38
(f) any default or event of default (after giving effect to any grace
period) shall have occurred and be continuing under any Loan Document or
Material Contract; or
(g) Borrower or any Subsidiary (whether as primary obligor or as
guarantor or other surety) shall fail to pay any principal of or premium or
interest on any Material Indebtedness that is outstanding, when and as the same
shall become due and payable (whether at scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument evidencing such Indebtedness; or any other event shall occur or
condition shall exist under any agreement or instrument relating to such
Indebtedness and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or permit the acceleration of, the maturity of such
Indebtedness; or any such Indebtedness shall be declared to be due and payable;
or required to be prepaid or redeemed (other than by a regularly scheduled
required prepayment or redemption), purchased or defeased, or any offer to
prepay, redeem, purchase or defease such Indebtedness shall be required to be
made, in each case prior to the stated maturity thereof; or
(h) Borrower or any Subsidiary shall (i) commence a voluntary case or
other proceeding or file any petition seeking liquidation, reorganization or
other relief under any federal, state or foreign bankruptcy, insolvency or other
similar law now or hereafter in effect or seeking the appointment of a
custodian, trustee, receiver, liquidator or other similar official of it or any
substantial part of its property, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or petition described
in clause (i) of this SECTION 8.01(H), (iii) apply for or consent to the
appointment of a custodian, trustee, receiver, liquidation or other similar
official for Borrower or any such Subsidiary or for a substantial part of its
assets, (iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (v) make a general assignment for the
benefit of creditors, or (vi) take any action for the purpose of effecting any
of the foregoing; or
(i) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization or other relief
in respect of Borrower or any Subsidiary or its debts, or any substantial part
of its assets, under any federal, state or foreign bankruptcy, insolvency or
other similar law now or hereafter in effect or (ii) the appointment of a
custodian, trustee, receiver, liquidator or other similar official for Borrower
or any Subsidiary or for a substantial part of its assets, and in any such case,
such proceeding or petition shall remain undismissed for a period of 60 days or
an order or decree approving or ordering any of the foregoing shall be entered;
or
(j) Borrower or any Subsidiary shall become unable to pay, shall admit
in writing its inability to pay, or shall fail to pay, its debts as they become
due; or
(k) an ERISA Event shall have occurred that, in the opinion of the
Lender, when taken together with other ERISA Events that have occurred, could
reasonably be expected to result in liability to Borrower and its Subsidiaries
in an aggregate amount exceeding $100,000; or
39
(l) any judgment or order for the payment of money in excess of
$250,000 in the aggregate shall be rendered against Borrower or any Subsidiary,
and either (i) such judgment or order is final and enforcement proceedings shall
have been commenced by any creditor upon such judgment or order, or (ii) there
shall be a period of 30 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect; or
(m) any non-monetary judgment or order shall be rendered against
Borrower or any Subsidiary that could reasonably be expected to have a Material
Adverse Effect, and there shall be a period of 30 consecutive days during which
a stay of enforcement of such judgment or order, by reason of a pending appeal
or otherwise, shall not be in effect; or
(n) a Change in Control shall occur or exist;
(o) the failure of the Amortization Period to begin on or before
November 1, 2005;
(p) any event which could reasonably be expected to result in a
Material Adverse Effect shall occur and be continuing; or
(q) the Guaranty shall, at any time after its execution and delivery
and for any reason, cease to be in full force and effect or shall be declared
null and void, or the validity or enforceability thereof shall be contested by
the Guarantor, or the Guarantor shall deny it has any further liability or
obligation under or shall fail to perform its obligations under the Guaranty;
then, and in every such event (other than an event described in clause (h) or
(i) of this Section) and at any time thereafter during the continuance of such
event, Lender may, by notice to Borrower, take any or all of the following
actions, at the same or different times: (i) terminate the Commitments,
whereupon the Commitments shall terminate immediately; (ii) declare the
principal of and any accrued interest on the Loans, and all other Obligations
owing hereunder, to be due and payable, whereupon the same shall become due and
payable immediately, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by Borrower and (iii) exercise all remedies
contained in any other Loan Document or as otherwise provided by law; and that,
if an Event of Default specified in either clause (h) or (i) shall occur, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon, and all fees, and all other
Obligations shall automatically become due and payable, without presentment,
demand, protest or other notice of any kind, all of which are hereby waived by
Borrower.
Upon the occurrence of an Event of Default prior to Construction
Completion, and at any time thereafter during the continuance of such event,
Lender may, in addition to remedies set forth in the preceding paragraph, enter
upon Borrower's property and proceed either in its own name or in the name of
Borrower (which authority is coupled with an interest and is irrevocable by
Borrower) to complete or cause to be completed the Project, at the cost and
expense of Borrower. If Lender elects to complete or cause to be completed the
Project, it may do so according to the Construction Plans or according to such
changes, alterations or modifications in and to the Construction Plans as Lender
may deem appropriate; and Lender may enforce or cancel all contracts let by
Borrower relating to construction and installation of the Improvements
40
and/or let other contracts which in Lender's sole judgment it may deem
advisable; and Borrower shall forthwith turn over and duly assign to Lender, as
Lender may from time to time require, contracts relating to construction and
installation of the Improvements, the Construction Plans, blueprints, shop
drawings, bonds, building permits, bills and statements of accounts pertaining
to the Project, whether paid or not, and any other instruments or records in the
possession of Borrower pertaining to the Project. Borrower shall be liable under
this Agreement to pay to Lender, on demand, any amount or amounts expended by
Lender in so completing the Project, together with any costs, charges, or
expenses incident thereto or resulting therefrom, all of which shall be secured
by the Security Documents. In the event that a proceeding is instituted against
Borrower for recovery and reimbursement of any moneys expended by Lender in
connection with the completion of the Project, a statement of such expenditures,
verified by the affidavit of an officer of Lender, shall be prima facie evidence
of the amounts so expended and of the propriety of and necessity for such
expenditures; and the burden of proving to the contrary shall be upon Borrower.
Lender shall have the right to apply the undisbursed amount of the Loan Notes to
bring about the completion of the Project and to pay the costs thereof; and if
such funds are insufficient, in the sole judgment of Lender, to complete the
Project, Borrower agrees to promptly deliver and pay to Lender such sum or sums
of money as Lender may from time to time demand for the purpose of completing
the Project or of paying any liability, charge or expense which may have been
incurred or assumed by Lender under or in performance of this Agreement, or for
the purpose of completing the Project. It is expressly understood and agreed
that in no event shall Lender be obligated or liable in any way to complete the
Project or to pay for the costs of construction thereof.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01 NOTICES.
Except in the case of notices and other communications expressly permitted to be
given by telephone, all notices and other communications to any party herein to
be effective shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by telecopy, as
follows:
To Borrower: East Kansas Agri-Energy, L.L.C.
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇/▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇
FACSIMILE NO. (▇▇▇) ▇▇▇-▇▇▇▇
With a Copy to: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇, Winick, Graves, Gross P.L.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
FACSIMILE NO. (▇▇▇) ▇▇▇-▇▇▇▇
41
To the Lender: Home Federal Savings Bank
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Post Office Box 6947
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
FACSIMILE NO. (▇▇▇) ▇▇▇-▇▇▇▇
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All such notices
and other communications shall, when transmitted by overnight delivery, or
faxed, be effective when delivered for overnight (next-day) delivery, or
transmitted in legible form by facsimile machine, respectively, or if mailed,
upon the third Business Day after the date deposited into the mails or if
delivered, upon delivery; provided, that notices delivered to Lender shall not
be effective until actually received by such Person at its address specified in
this SECTION 9.01.
Any agreement of Lender herein to receive certain notices by telephone or
facsimile is solely for the convenience and at the request of Borrower. Lender
shall be entitled to rely on the authority of any Person purporting to be a
Person authorized by Borrower to give such notice and Lender shall not have any
liability to Borrower or other Person on account of any action taken or not
taken by Lender in reliance upon such telephonic or facsimile notice. The
obligation of Borrower to repay the Loans and all other Obligations hereunder
shall not be affected in any way or to any extent by any failure of Lender to
receive written confirmation of any telephonic or facsimile notice or the
receipt by Lender of a confirmation which is at variance with the terms
understood by Lender to be contained in any such telephonic or facsimile notice.
SECTION 9.02 WAIVER; AMENDMENTS.
(a) No failure or delay by Lender in exercising any right or power
hereunder or any other Loan Document, and no course of dealing between Borrower
and Lender, shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power or any abandonment or discontinuance of
steps to enforce such right or power, preclude any other or further exercise
thereof or the exercise of any other right or power hereunder or thereunder. The
rights and remedies of Lender hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies provided by law No
waiver of any provision of this Agreement or any other Loan Document or consent
to any departure by Borrower therefrom shall in any event be effective unless
the same shall be permitted by paragraph (b) of this Section, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which given. Without limiting the generality of the foregoing, the
making of a Loan shall not be construed as a waiver of any Default or Event of
Default, regardless of whether Lender may have had notice or knowledge of such
Default or Event of Default at the time.
(b) No amendment or waiver of any provision of this Agreement or the
other Loan Documents, nor consent to any departure by Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by
Borrower and Lender and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
42
SECTION 9.03 INDEMNIFICATION.
(a) The Borrower shall indemnify Lender against, and hold Lender
harmless from, any and all costs, losses, liabilities, claims, damages and
related expenses, including the fees, charges and disbursements of any counsel
for Lender, which may be incurred by or asserted against Lender arising out of,
in connection with or as a result of (i) the execution or delivery of this
Agreement or any other agreement or instrument contemplated hereby, the
performance by the parties hereto of their respective obligations hereunder or
the consummation of any of the transactions contemplated hereby, (ii) any Loan
or any actual or proposed use of the proceeds therefrom, (iii) any actual or
alleged presence or release of Hazardous Materials on or from any property owned
by Borrower or any Subsidiary or any Environmental Liability related in any way
to Borrower or any Subsidiary or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Lender is a party thereto; PROVIDED, that Borrower shall not be obligated to
indemnify Lender for any of the foregoing arising out of Lender's gross
negligence or willful misconduct as determined by a court of competent
jurisdiction in a final and nonappealable judgment.
SECTION 9.04 SUCCESSORS AND ASSIGNS.
(a) The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
except that Borrower may not assign or transfer any of its rights hereunder
without the prior written consent of Lender (and any attempted assignment or
transfer by Borrower without such consent shall be null and void).
(b) Lender may at any time assign to one or more assignees all or a
portion of its rights and obligations under this Agreement and the other Loan
Documents (including all or a portion of its Commitment and the Loans at the
time owing to it).
(c) Lender may at any time, without the consent of Borrower, sell
participations to one or more banks or other entities (a "PARTICIPANT") in all
or a portion of Lender's rights and obligations under this Agreement (including
all or a portion of its Commitment and the Loans owing to it); PROVIDED, that
(i) Lender's obligations under this Agreement shall remain unchanged, (ii)
Borrower shall continue to deal solely and directly with Lender in connection
with Lender's rights and obligations under this Agreement and the other Loan
Documents. Borrower agrees that each Participant shall be entitled to the
benefits of SECTION 2.18 to the same extent as if it were the Lender hereunder
and had acquired its interest by assignment pursuant to paragraph (b).
(d) Lender may at any time pledge or assign a security interest in all
or any portion of its rights under this Agreement and the Notes without
complying with this Section; PROVIDED, that no such pledge or assignment shall
release Lender from any of its obligations hereunder or substitute any such
pledgee or assignee for Lender as a party hereto.
SECTION 9.05 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
PROCESS.
43
(a) This Agreement and the other Loan Documents (except as otherwise
provided in such other Loan Documents) shall be construed in accordance with and
be governed by the law (without giving effect to the conflict of law principles
thereof) of the State of Minnesota.
(b) Borrower hereby irrevocably and unconditionally submits, for itself
and its property, to the non-exclusive jurisdiction of the United States
District Court of the District of Minnesota, and of any state court of the State
of Minnesota located in Olmsted County and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement or any
other Loan Document or the transactions contemplated hereby or thereby, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such Minnesota state
court or, to the extent permitted by applicable law, such Federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement or
any other Loan Document shall affect any right that Lender may otherwise have to
bring any action or proceeding relating to this Agreement or any other Loan
Document against Borrower or its properties in the courts of any jurisdiction.
(c) Borrower irrevocably and unconditionally waives any objection which
it may now or hereafter have to the laying of venue of any such suit, action or
proceeding described in paragraph (b) of this Section and brought in any court
referred to in paragraph (b) of this Section. Each of the parties hereto
irrevocably waives, to the fullest extent permitted by applicable law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
SECTION 9.06 WAIVER OF JURY TRIAL. EACH PARTY HERETO IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 9.07 RIGHT OF SETOFF. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, Lender shall have the right, at any time or from time to time upon the
occurrence and during the continuance of an Event of Default, without prior
notice to Borrowers, any such notice being expressly waived by Borrower to the
extent permitted by applicable law, to set off and apply against all deposits
(general or special, time or demand, provisional or final) of Borrower at any
time held or other obligations at
44
any time owing by Lender to or for the credit or the account of Borrower against
any and all Obligations held by Lender, irrespective of whether Lender shall
have made demand hereunder and although such Obligations may be unmatured.
Lenders agree promptly to notify the Lender and Borrower after any such set-off
and any application made by Lender; PROVIDED, that the failure to give such
notice shall not affect the validity of such set-off and application.
SECTION 9.08 COUNTERPARTS; INTEGRATION. This Agreement may be executed
by one or more of the parties to this Agreement on any number of separate
counterparts (including by telecopy), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument. This
Agreement and the other Loan Documents constitute the entire agreement among the
parties hereto and thereto regarding the subject matters hereof and thereof and
supersede all prior agreements and understandings, oral or written, regarding
such subject matters.
SECTION 9.09 SURVIVAL. All covenants, agreements, representations and
warranties made by Borrower herein and in the certificates or other instruments
delivered in connection with or pursuant to this Agreement shall be considered
to have been relied upon by Lender and shall survive the execution and delivery
of this Agreement and the making of any Loans, regardless of any investigation
made by any such other party or on its behalf and notwithstanding that Lender
may have had notice or knowledge of any Default or incorrect representation or
warranty at the time any credit is extended hereunder, and shall continue in
full force and effect as long as the principal of or any accrued interest on any
Loan or any fee or any other amount payable under this Agreement is outstanding
and unpaid and so long as the Commitments have not expired or terminated. The
provisions of SECTIONS 2.18, and 9.03 shall survive and remain in full force and
effect regardless of the consummation of the transactions contemplated hereby,
the repayment of the Loans, and the Commitments or the termination of this
Agreement or any provision hereof. All representations and warranties made
herein, in the certificates, reports, notices, and other documents delivered
pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the other Loan Documents, and the making of the Loans.
SECTION 9.10 SEVERABILITY. Any provision of this Agreement or any other
Loan Document held to be illegal, invalid or unenforceable in any jurisdiction,
shall, as to such jurisdiction, be ineffective to the extent of such illegality,
invalidity or unenforceability without affecting the legality, validity or
enforceability of the remaining provisions hereof or thereof; and the
illegality, invalidity or unenforceability of a particular provision in a
particular jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
SECTION 9.11 CONFIDENTIALITY. Lender agrees to take normal and
reasonable precautions to maintain the confidentiality of any information
designated in writing as confidential and provided to it by Borrower or any
Subsidiary, except that such information may be disclosed (i) to any Affiliate,
participant or advisor of Lender, including without limitation accountants,
legal counsel and other advisors, PROVIDED that Lender shall have taken
reasonable steps to assure that such Affiliates, participants, and advisors will
maintain such information in confidence to the same extent required of Lender
hereunder, (ii) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (iii) to the extent requested by any
regulatory agency or authority, (iv) to the extent that such information becomes
publicly available other than as a result of a breach of this SECTION 9.11, or
which becomes available to
45
Lender of any of the foregoing on a nonconfidential basis from a source other
than Borrower, (v) in connection with the exercise of any remedy hereunder or
any suit, action or proceeding relating to this Agreement or the enforcement of
rights hereunder, and (ix) subject to provisions substantially similar to this
SECTION 9.11, to any actual or prospective assignee or Participant, or (vi) with
the consent of Borrower. Any Person required to maintain the confidentiality of
any information as provided for in this Section shall be considered to have
complied with its obligation to do so if such Person has exercised the same
degree of care to maintain the confidentiality of such information as such
Person would accord its own confidential information.
SECTION 9.12 INTEREST RATE LIMITATION. Notwithstanding anything herein
to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts which may be treated as
interest on such Loan under applicable law (collectively, the "CHARGES"), shall
exceed the maximum lawful rate of interest (the "MAXIMUM RATE") which may be
contracted for, charged, taken, received or reserved by Lender in accordance
with applicable law, the rate of interest payable in respect of such Loan
hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section shall be cumulated and the interest and
Charges payable to Lender in respect of other Loans or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated amount,
together with interest thereon at the Maximum Rate to the date of repayment,
shall have been received by Lender.
SECTION 9.13 INSPECTIONS. Borrower shall be responsible for making
inspections of the Real Estate and the Improvements during the course of
construction and shall determine to its own satisfaction that the work done or
materials supplied by the contractors to whom payment is to be made out of each
Draw Request has been properly done or supplied in accordance with the
applicable contracts with such contractors. If any work done or materials
supplied by a contractor are not satisfactory to Borrower, Borrower will
immediately notify Lender in writing of such fact. It is expressly understood
and agreed that Lender or its authorized representative may conduct such
inspections of the Real Estate and the Improvements as it may deem necessary for
the protection of Lender's interest, and, specifically, the Inspecting Architect
may, at the option of Lender and at the expense of Borrower, conduct such
periodic inspections, prepare such written progress reports during the period of
construction and prepare such written reports upon completion of the Project, as
Lender may request. Any inspections which may be made by Lender or its
representative will be made, and all certificates issued by Lender's
representative will be issued, solely for the benefit and protection of Lender,
and Borrower will not rely thereon.
SECTION 9.14 TERMINATION. Upon satisfaction of all of Borrower's
obligations hereunder and the related documents and instruments, Lender shall
(a) ▇▇▇▇ the Notes "PAID" and return the same to Borrower, and (b) release its
security interests and file appropriate documentations of the same.
SECTION 9.15 WAIVER. To the extent permitted by applicable law,
Borrower shall not assert, and Borrower hereby waives, any claim against Lender,
on any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to actual or direct damages)
46
arising out of, in connection with or as a result of, this Agreement or any
agreement or instrument contemplated hereby, the transactions contemplated
therein, any Loan or the use of proceeds thereof.
[Signature Page Follows]
47
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
BORROWER:
EAST KANSAS AGRI-ENERGY, L.L.C.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
LENDER:
HOME FEDERAL SAVINGS BANK
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President
-SIGNATURE PAGE-
Schedule 4.05
Environmental Matters
1. Asbestos Professional Attest. See attached asbestos inspection report
prepared by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Environmental Technical Services, ▇▇▇▇ ▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, in reference to the East Kansas
Agri-Energy L.L.C. (EKAE) property described as "Tract I."
2. Final Report for the Kansas, Nebraska & Dakota Railroad Dump Site
Southeast of Garnett, Kansas. See attached report prepared by BG
Consultants, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, in
reference to the EKAE property described as "Tract II."
[ICM Logo] 4.05(1)
310 North First -------
▇.▇. ▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Letter of Transmittal
Date: 10/18/2004
Re: Asbestos Professional Attest
To: East Kansas Agri-Energy
▇▇▇ ▇/▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇
We are sending you:
-a copy of letter.
Copy to: EKAE Signed: /s/ [not legible]
------------------------------------
Environmental Technical Services Received ▇▇-▇▇-▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇
SEPTEMBER 28, 2004
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
GEOSYSTEMS
▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
RE: Asbestos Professional Attest
ETHANOL LANDFILL PILOT TRENCH (NORTHEAST CORNER), GARNETT KS
ETS Project #04A09-1 Asbestos Inspection, Project Oversight
Visualization of the ETHANOL LANDFILL trenching operations for asbestos is
complete and no asbestos containing material was suspect over the full two days.
In a 2-stage process, visual inspections occurred 1) at the initial disturbance
of land and 2) at the dumping of a back-hoe bucket into truck-loaded waste bins.
Materials observed were soil, rock, concrete formations, roll of roofing, metal
cylinders & conduit, electrical wire, bricks and wood branches.
The visual inspection for this trenching project has been performed by an
individual with the required training to conduct asbestos inspection in Kansas
and in compliance with all applicable city, state and federal regulations.
If you have any questions, please contact me at (▇▇▇) ▇▇▇-▇▇▇▇.
Sincerely,
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ETS
Air Sampling Professional, #4293
Environmental Technical Service ->
(▇▇▇) ▇▇▇-▇▇▇▇ - ▇▇▇▇ ▇ ▇▇▇▇▇ ▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
Received Time Sep. 28. 2:10PM
ENVIRONMENTAL TECHNICAL SERVICE
DAILY SITE NARRATIVE
Date: 9/24/02 Project #: 04A09-
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Project: LANDFILL EXCAVATION - GARNETT KS ETHANOL
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Client: GEOSYSTEMS - ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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ETS Personnel: ▇▇▇▇ ▇▇▇▇▇▇▇ Time In: 7:30AM Out: 5:30 PM
------------------------------ ----------- ----------
Contractor: NA #Workers: NA
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Supervisor: ▇▇▇▇ ▇▇▇▇▇▇ - GEOSYSTEMS ▇▇▇▇ - PROJECT MGR.
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[X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X]
Visitors On Site:
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Location of
Work Area(s): EAST SIDE OF PLANNED ETHANOL-PLANT SITE: ▇▇▇▇ ▇. ▇▇▇▇ ▇▇.
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▇▇▇▇▇▇▇ ▇▇ [ICM]
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Containment/Barrier Descript: NONE NEEDED. SOIL ENCAPSULATES CONSTRUCTION
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MATERIAL.
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Removal or Work Performed:
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7-8AM GENERAL GRADING ON SITE. TWO BACK-HOES.
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9AM-NOON DEEPER DIGGING BETWEEN STA 15+50 F-54 TO
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[14+00 APPROX.] NORTHERN STA 13+50 F-68
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[15+00 APPROX] SOUTHERN
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1:30- DEEP DIGGING CONTINUES FROM EASTERN BOUNDRY TO THE WEST IN A SWATH
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AS WIDE AS THE TWO BACK-HOES
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EXAMPLES OF ITEMS FOUND: MANHOLE TOP SECTION, METAL CYLINDERS, BRICKS (RED),
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CONCRETE PIER FOUNDATIONS, SEA SHELL, GRANITE, ROLL OF ROOFING (SHINGLES).
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Air Monitoring Summary: NONE NEEDED
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Received Time Sep. 28. 2:10PM
ENVIRONMENTAL TECHNICAL SERVICE
DAILY SITE NARRATIVE
Date: 9/25/02 Project #: 04A09-
------------- -----------------
Project: LANDFILL EXCAVATION - GARNETT KS ETHANOL
------------------------------------------------------------------------
Client: GEOSYSTEMS - ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------------------------------------------
ETS Personnel: ▇▇▇▇ ▇▇▇▇▇▇▇ Time In: 7:30AM Out: 6:15 PM
------------------------------ ----------- ----------
Contractor: NA #Workers: NA
-------------------------------------------------- --------
Supervisor: ▇▇▇▇ ▇▇▇▇▇▇ - GEOSYSTEMS ▇▇▇▇ - PROJECT MGR.
---------------------------------------------------------------------
[X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X][X]
Visitors On Site:
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Location of Work Area(s): EAST, CENTRAL OF DEBRIS SWATH 14+00
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NORTHERN BOUNDRY INLINE WITH F-68-STAKE.
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Containment/Barrier Descript: NA
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NOTE: THE DEPTH OF DIGGING IS DEEPER TODAY BY 2X.
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NOTE: ▇▇▇▇ ESTIMATES A LINEAR 400FT PROGRESS @ 6PM, OVER 2 DAYS.
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Removal or Work Performed:
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7:45AM-11AM ONE BACK-HOE REMOVES MOSTLY CONCRETE AND SOIL AND
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ROCK WITH A FEW METAL PIPES, WOOD BRANCHES AND ELECTRICAL CABLES.
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11AM-NOON TWO BACK-HOES AND TWO EARTH MOVERS (EACH WITH 3 BINS) ARE USED.
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1:15PM-6PM TWO BACK-HOES CONTINUE PROGRESS TO WEST SIDE
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*ALL REMOVED DIRT APPEARS SMOOTH AND COMPACTED AT OFF-SET LOCATIONS.
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EXAMPLES OF ITEMS UNCOVERED: ROLL OF BARBED WIRE, ELECTRICAL COMPUTER WIRE,
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(PHONE WIRE), METAL CYLINDERS, METAL CONDUITS, BRICKS, CEDAR BRANCHES
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Air Monitoring Summary: NONE NEEDED
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Received Time Sep. 28. 2:10PM
TRANSMITTAL 4.05(2)
-------
To: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
East Kansas Agri-Energy Plan
FILE COPY
BG Job Number: 04-068L Received 9-27-04
City/County Project Number:
RE: Garnett Dump Site No. 2 Final Report
We are forwarding to you:
-Reports
1 copy of Final Report Dump Site No. 2
These are transmitted:
-For Your Use
/s/ ▇▇▇ ▇▇▇▇▇▇
By: ▇▇▇ ▇▇▇▇▇▇, P.E.
BG Consultants, Inc.
(785) 749-4474 ext. 103
Date: 9-23-04
BG CONSULTANTS, INC. [BG Logo]
------------------------------------
ENGINEERS-ARCHITECTS-SURVEYORS
LAWRENCE, KS HUTCHINSON, KS
MANHATTAN, KS EMPORIA, KS
Final Report
For the Kansas, Nebraska and Dakota
Railroad Dump Site Southeast of Garnett, Kansas
Garnett Dump Site No. 2
Restoration Project
[City of ▇▇▇▇▇▇▇ Logo]
Funded by a grant from the Kansas Solid Waste Tipping Fee City
Dump Grant Program Administered by the Kansas Department of
Health and Environment
Prepared by BG Consultants, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
August 2004
[City of Garnet Logo] [City of Garnet Logo]
Final Report
Who Performed the Work - The work was performed under contract with ▇▇▇ ▇▇▇▇▇
Construction. Do no confuse ▇▇▇ ▇▇▇▇▇ Construction with ▇▇▇▇▇ Construction Co.
Inc., which did the work on Garnett Dump Site No. 1. These are two separate and
distinct businesses owned by ▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ respectively. They are
unrelated.
Bid Selection Rational - ▇▇▇ ▇▇▇▇▇ Construction was selected to do the work
because ▇▇▇ ▇▇▇▇▇ Construction was the low bidder. The bid was a lump sum bid.
Dates Work Was Performed - The work was performed during May of 2004. The work
on this sit was completed on or about May 25, 2004.
Site Activity Summary - The work started when ▇▇▇ ▇▇▇▇▇ Construction mobilized
to the site on May 11, 2004. ▇▇▇ ▇▇▇▇▇ and ▇▇▇ ▇▇▇▇▇▇, P.E. had a phone pre
construction conference the next day to start the project. Using the track
loader and excavator, the Contractor removed the trees from the site, placing
them in a pile near the south end o the site and burning them. The ashes and
stumps were later buried with the waste. The track loader and the excavator were
used to consolidate the waste on the site. The waste was then buried with soil
excavated on site. Some of the waste was placed in holes created by the
excavation and some was placed in naturally low-lying areas. Other waste was
covered where it was located. The track loader was used to compact the waste.
The excavator with the thumb attachment on the bucket proved to be a very
valuable tool when it came to moving waste around on the site.
The placed cover soil was compacted by running over it with the track loader.
After the soil compaction was finished, there was a considerable amount of small
loose waste on the surface of the site. The Contractor manually collected this
waste and buried it on the site. At the conclusion of this work the Contractor
was instructed to blade the surface of the cover material to produce an even and
neat appearing surface. The Contractor completed this work the next working day.
The work was completed on May 25, 2004.
2
East Kansas Agri-Energy had an option to purchase the site and requested it not
be seeded as the area is to be used as a staging area for the construction of an
ethanol production plant across the road to the south. This parcel will become
part of a larger tract where the elevated rail access to the ethanol production
plant will be built. The site will be seeded when the rail access project is
seeded in 2005.
The east fence was partially removed to facilitate the recovery of waste from
the White property to the east. This fence was not replaced, as the remainder of
the fence will be removed during construction of the rail access to the ethanol
plant.
BG Consultants, Inc. is the city engineer for the City of ▇▇▇▇▇▇▇. ▇▇▇ ▇▇▇▇▇▇,
P.E. serves Garnett as the City Engineer by virtue of this contract. ▇▇▇ ▇▇▇▇▇▇,
P.E. represented the City's interest on this site. Initially ▇▇▇▇▇▇ had
reservations about the thickness of the placed cover material. He personally
cored the cover material in several locations. This work indicated the cover
depth to be between 18 and 24 inches in depth. Based on this finding the cover
was acceptable to the City of ▇▇▇▇▇▇▇.
How Many Cubic Yards of Material Were Reburied On-Site - About 9,100 cubic
yards. The area covered with trash was about 160 feet wide by about 550 feet
long and averaged about 4 feet in depth. The coverage rate was about 10 percent.
How Many Cubic Yards of Material Were Taken to a Landfill - None. No solid waste
was removed from the site.
How Many Cubic yards of Material Were Brought Onto the Site to Complete the
Closure Construction and at What Rate - There was no material brought to the
site from off site locations. The waste mass was buried using soil found on the
site.
Equipment used and at What Rate - The Contractor used a CAT 963 track loader, a
CAT 200 excavator with thumb, a truck and a CAT 120 motor grader to accomplish
the work. The actual hours each piece of equipment was utilized is not known
since the project was priced with a lump sum bid.
Amount of Seed Used and at What Rate - The site was not seeded as it is to be
used by East Kansas Agri-Energy as a staging area for the construction of an
ethanol plant and a railroad spur to serve the plant. The owner will be notified
that they must seed the area after the completion of this construction.
3
Total Cost of the Project -
Engineering Costs - $ 6,997.25
Publication Costs - $ 60.63
Construction Costs - $ 6,900.00
Total Costs - $13,957.88
Estimated cost per cubic yard of solid waste buried - $1.53.
4
[Photo appears here.]
Looking to the south from the north end of the site
Pre construction
5
[Photo appears here.]
Looking to the east near the north end of the site
Pre construction
6
[Photo appears here.]
Looking to the southwest from the north of the site
Pre construction
7
[Photo appears here.]
The view to the south from near mid site
Pre construction
8
[Photo appears here.]
The view to the north from near mid site on the west side
Pre construction
9
[Photo appears here.]
The view to the south from the north end. The East Kansas Agri-
Energy plant site is across the road.
Post construction
10
[Photo appears here.]
The view to the southeast from the north end
Post Construction
11
[Photo appears here.]
The View to the northwest from near mid site
Post construction
12
[Photo appears here.]
Wildflowers on the south end of the site
Post construction
13
[Photo appears here.]
The view to the west northwest from about 100 feet east of the
Southeast corner of the site.
Post Construction
14
[Map of City of ▇▇▇▇▇▇▇ appears here.]
Revised
WORK PLAN
March 29, 2004
FOR THE KANSAS, NEBRASKA AND DAKOTA
RAILROAD DUMP SITE SOUTHEAST OF GARNETT, KANSAS
GARNETT DUMP SITE NO. 2
Funded by the Kansas Solid Waste Tipping Fee City Dump Grant Program Fund
Administered by the Kansas Department of Health & Environment
March 2004
A. LEGAL DESCRIPTION
The Southwest Quarter of the Southwest Quarter of the
Southeast Quarter of Section 30, Township 20 South, Range 20
East of the 6th principal meridian.
B. OWNERSHIP
See attached warranty deed
C. HISTORY OF THE SITE
The area immediately east of the old Kansas, Nebraska and
Dakota railroad bed beginning at the south quarter corner of
section 30-20-30 became a place for the residents of Garnett
to dump their trash beginning in 1934 when the railroad ceased
operation. The area was closed to dumping about 40 years ago.
D. CURRENT CONDITIONS
The area has piles of degraded municipal solid waste located
directly east of the old railroad bed. Inspection of the waste
mass reveals that all of the organic material has been
consumed by microbial action. The only remaining waste is
iron, steel, other miscellaneous metals, glass, and tires.
Trees have grown up in the solid waste mass and on the old
railroad grade. It is estimated there is 2000 C.Y. of solid
waste collected and buried.
E. APPROXIMATE AREA TO BE REPAIRED
Generally an area immediately east of the old railroad bed
that is approximately 500 feet long by 100 feet wide. The
south end of the area is approximately the south quarter
corner of section 30-20-20.
F. HOW WILL THE REPAIR WORK BE ACCOMPLISHED?
The City of ▇▇▇▇▇▇▇ will hire a contractor to bury the waste
on the site with at least 18 inches of cover material.
Either a silt fence or a straw bale barrier will be built
around the area to be distributed to keep the work in
compliance with the federal Clean Water Act.
All areas will be graded to drain. The inadvertent
construction of ▇▇▇▇▇▇ and frog ponds will not be permitted.
G. WHAT WILL THE FINAL SITE USE BE?
The site is part of a larger tract on which the construction
of an ethanol plant will begin upon the completion of the work
detailed in this work plan.
H. HOW LONG TO COMPLETE THE WORK?
Work will be completed by June 30, 2004.
I. COST
It is estimated it will cost $7,500 to complete the work.
J. FEDERAL TAX IDENTIFICATION NUMBER
The ▇▇▇▇▇▇▇ federal tax identification number is ▇▇-▇▇▇▇-▇▇▇.
WORK PLAN
FOR THE KANSAS, NEBRASKA AND DAKOTA
RAILROAD DUMP SITE SOUTHEAST OF GARNETT, KANSAS
GARNETT DUMP SITE NO. 2
Funded by the Kansas Solid Waste Tipping Fee Fund
Administered by the Kansas Department of Health & Environment
March 2004
A. LEGAL DESCRIPTION
The Southwest Quarter of the Southwest Quarter of the
Southeast Quarter of Section 30, Township 20 South, Range 20
East of the 6th principal meridian.
B. OWNERSHIP
See attached warranty deed
C. HISTORY OF THE SITE
The area immediately east of the old Kansas, Nebraska and
Dakota railroad bed beginning at the south quarter corner of
section 30-20-30 became a place for the residents of Garnett
to dump their trash beginning in 1934 when the railroad ceased
operation. The area was closed to dumping about 40 years ago.
D. CURRENT CONDITIONS
The area has piles of degraded municipal solid waste located
directly east of the old railroad bed. Inspection of the waste
mass reveals that all of the organic material has been
consumed by microbial action. The only remaining waste is
iron, steel, other miscellaneous metals, glass, and tires.
Trees have grown up in the solid waste mass and on the old
railroad grade. It is estimated there is 2000 C.Y. of solid
waste collected and buried.
E. APPROXIMATELY AREA TO BE REPAIRED
Generally an area immediately east of the old railroad bed
that is approximately 500 feet long by 100 feet wide. The
south end of the area is approximately the south quarter
corner of section 30-20-20.
F. HOW WILL THE REPAIR WORK BE ACCOMPLISHED?
The City of ▇▇▇▇▇▇▇ will hire a contractor to consolidate the
municipal solid waste at the east base of the railroad grade
fill. Once relocated the entire waste mass
will buried there using soil from the old railroad grade. The cover
material will be seeded with the 120 pounds to the acre of tall fescue
seed. The seedbed shall be fertilized with 160 pound per acre
of 15-30-15 fertilizer.
Either a silt fence or a straw bale barrier will be built
around the area to be distributed to keep the work in
compliance with the federal Clean Water Act.
All areas will be graded to drain. The inadvertent
construction of ▇▇▇▇▇▇ and frog ponds will not be permitted.
G. WHAT WILL THE FINAL SITE USE BE?
The site will eventually become part of an industrial site.
H. HOW LONG TO COMPLETE THE WORK?
Work will be completed by June 30, 2004.
I. COST
It is estimated it will cost $7,500 to complete the work.
J. FEDERAL TAX IDENTIFICATION NUMBER
The Garnett federal tax identification number is ▇▇-▇▇▇▇-▇▇▇.
ADVERTISEMENT FOR BIDS
Sealed bids will be received by the City Clerk of the City of ▇▇▇▇▇▇▇, Kansas,
at the ▇▇▇▇▇▇▇ City Hall located at ▇▇▇ ▇. ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ until 3:30
P.M., THURSDAY APRIL 8, 2004 for the furnishing of all labor and the materials
specified and performed all the work in accordance with the Drawings and
Specifications for:
Kansas, Nebraska and Dakota Dump Site Cleanup
City of ▇▇▇▇▇▇▇ Dump Site No. 2
Project No. 030504
The project is located on the east side of the abandoned Kansas, Nebraska and
Dakota Railroad bed located just east of South Main Street and ▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, all on the southeast side of Garnett, Kansas.
The work will be bid on a lump sum basis.
All work is to be completed on or before JUNE 30, 2004.
Copies of the Drawings, Specifications and other Contract Documents may be
obtained from BG Consultants, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
upon payment of twenty dollars ($20.00) for each set.
A Bid Security made payable to the City of ▇▇▇▇▇▇▇, Kansas in the form of a
certified check on a solvent Kansas bank or a satisfactory bid bond in an amount
equal to five percent (5%) of the total bid price must accompany each Bid.
The Bidder to whom a Contract is awarded will be required to furnish acceptable
Performance and Statutory Bonds, each in the amount of the total contract price,
in conformity with the requirements of the Contract Documents.
The right is reserved by the City of ▇▇▇▇▇▇▇ to reject any and all bids and to
waive any irregularity therein, to determine which is the best responsible bid
most suitable to the City of ▇▇▇▇▇▇▇ and to approve the bonds.
The rejection of any bid by the City of ▇▇▇▇▇▇▇ shall create no liability on the
part of the City as a result of such rejection. It is understood by all bidders
that an unsuccessful bidder has no cause of action against the City for bid
preparation costs. The filing of any bid in response to this advertisement shall
constitute an agreement of the bidder to these conditions.
A Pre-bid conference will be held at ▇▇▇▇▇▇▇ City Hall at 11:00 P.M. MARCH 26,
2004:
By Garnett City Clerk
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
BID FORM
TO THE GARNETT CITY COMMISSION; THE UNDERSIGNED BIDDER, having examined the
contract documents, specifications, drawings and all addendum thereto; and being
acquainted with and fully understanding (a) the extent and character of the work
covered by this Bid Form: (b) the local, arrangement, and specified requirements
of the proposed work; (c) the location, character, and condition of existing
streets, roads, highways, railroads, pavements, surfacing, walks, driveways,
curbs, gutters, trees, sewers, utilities, drainage courses, and structures, and
other installations, both surface and underground, which may affect or be
affected by the proposed work; (d) the nature and extent of excavations to be
made, and the type, character, and general conditions of materials to be
excavated; (e) the necessary handling and rehandling of excavated materials,
including construction of fills and embankments; (f) the location and extent of
necessary or probable dewatering requirements; (g) the difficulties and hazards
to the work which might be caused by storm and flood water; (h) local conditions
relative to labor, transportation, hauling, and rail delivery facilities; and
(i) all other factors and conditions affecting or which may be affected by the
▇▇▇▇▇▇▇,
HEREBY PROPOSES to furnish all tools, equipment, supplies, superintendence,
transportation, and other construction accessories, services, and facilities;
furnish all materials, supplies, and equipment specified and required to be
incorporated in and form a permanent part of the completed work; provide and
perform all necessary labor; and in a good substantial and work like manner and
in accordance with the requirements, stipulations, provisions and conditions of
the proposed contract documents and to perform, execute, construct and complete
all work, for and in consideration of the following prices:
KANSAS, NEBRASKA AND DAKOTA DUMP SITE CLEANUP
PROJECT NO. 030504
1. KANSAS, NEBRASKA & DAKOTA RAILROAD DUMP SITE CLEANUP $6,900.00 The
breakdown of this bid into labor costs, individual equipment costs and
material costs is attached to this BID FORM and is part of this bid. The
individual equipment costs will serve as your hourly equipment cost bid for
the removal of trees from the Kansas, Nebraska, and Dakota Railroad bed. East
Kansas Agri-Energy will pay this cost and decide the scope of the work, if
any, to be accepted by East Kansas Agri-Energy.
The undersigned bidder agrees to furnish the required bonds and to enter into a
contract within ten (10) days after acceptance of this bid, and further agrees
to complete all work covered by the bid, in accordance with specified
requirements by JUNE 30, 2004.
In submitting this bid, it is understood that the right is reserved by the Owner
to reject any and all bids, and it is understood that this bid may not be
withdrawn during a period of 30 days after the scheduled time for the receipt of
bids. The undersigned bidder hereby certifies (a) that this bid is genuine and
is not made in the interest of, or in behalf of, any undisclosed person, firm,
or corporation, and is not submitted in conformity with any agreement or rules
of any group, association, organization, or corporation: (b) that the bidder has
not directly or indirectly induced or solicited any other bidder to put in a
false or sham bid; (c) that the bidder has not solicited or
induced any person, firm, or corporation to refrain from bidding; and (d) that
the bidder has not sought by collusion to obtain any advantage over any other
bidder or over the Owner.
The undersigned bidder, acknowledges receipt of the following addenda:
Addendum No. 1 dated MARCH 29, 2004
-----------------------------------------
Addendum No. 2 dated APRIL 5, 2004
-----------------------------------------
Addendum No. 3 dated
-----------------------------------------
Dated in GARNETT this 8TH day
-------------------------------- ---------------
of APRIL , 2004.
---------------------------------
SIGNATURE OF BIDDER
If an Individual: /s/ ▇▇▇ ▇▇▇▇▇ , doing
---------------------------------------------
business as ▇▇▇ ▇▇▇▇▇ Construction
-----------------------------------------
If a Partnership:
---------------------------------------------
by , partner
--------------------------------------------------
If a Corporation:
---------------------------------------------
by
--------------------------------------------------
Title
-----------------------------------------------
Business Address of Bidder: ▇▇▇ ▇▇▇▇ ▇▇▇
----------------------------------
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-----------------------------------------------------
Telephone Number ▇▇▇-▇▇▇-▇▇▇▇
---------------------------
FAX Number 785-448-3806
------------------------------------------
E-Mail Address
--------------------------------------
Corporate Seal:
CERTIFICATION
This document is certified that ▇▇▇ ▇▇▇▇▇ CONSTRUCTION Complies with the
following:
1. The contractor or supplier shall observe the provisions of the Kansas Act
Against Discrimination (K.S.A. 44-1001 ET SEQ.) and shall not discriminate
against any person in the performance of work under the present contract because
of race, color, religion, sex, disability, national origin, or ancestry
unrelated to such person's ability to engage in the particular work.
2. Further, the contractor or supplier shall observe the provisions of the
Kansas Age Discrimination in Employment Act (K.S.A. 44-1111 ET SEQ.) and shall
not discriminate against any persons 18 years of age or older for employment
purposes while in the performance of work under the present contract.
3. In all solicitations or advertisements for employees, the contractor shall
include the phrase "Equal Opportunity Employer," or similar phrase to be
approved by the Kansas Human Rights Commission.
4. If the contractor or supplier fails to report to the Commission in accordance
with the provisions of K.S.A. 44-1031, as amended, the contractor or supplier
shall be deemed to have breached any present contract or agreement and it may be
canceled, terminated, or suspended, in whole or in part, by the City of ▇▇▇▇▇▇▇.
5. If the contract or supplier is found guilty of a violation of the Kansas Act
Against Discrimination (K.S.A. 44-1001 ET SEQ.) or the Kansas Age Discrimination
in Employment Act (K.S.A. 44-111 ET SEQ.) under decision or order of the Kansas
Human Rights Commission which has become final, the contractor or supplier shall
be deemed to have breached any present contract or agreement and it may be
canceled, terminated, or suspended, in whole or in part, by the City of ▇▇▇▇▇▇▇.
6. The contractor or supplier shall include the provisions of Paragraphs (1)
through (5), inclusively, or this Section, in every subcontract or purchase
order so that such provisions will be binding upon such subcontractor or vender.
▇▇▇ ▇▇▇▇▇ Construction
-------------------------------
Contractor or Supplier
By /s/ ▇▇▇ ▇▇▇▇▇
-----------------------------
Address ▇▇▇ ▇▇▇▇ ▇▇▇
------------------------
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
------------------------
State of Kansas )
County of ▇▇▇▇▇▇▇▇ )
-----------------
Subscribed and sworn to (or affirmed) before me this 8th day of April, 2004, by
▇▇▇ ▇▇▇▇▇.
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Notary Public
My appointment expires: July 19, 2006
[Seal]
Machinery-963 Loader and 200 Excavator with Thumb
65 hrs. @ $100.00 an Hr.
Replace Fence $400.00
APR-08-2004 10:56
[Logo]
AMERICAN CONTRACTORS INDEMNITY COMPANY
Bid Date: April 8, 2004
BID BOND
Know All Men By These Presents, that we, ▇▇▇ ▇▇▇▇▇ Construction Co.
(hereinafter called Principal), as Principal, and American Contractors Indemnity
Company, a corporation organized and existing under the laws of the State of
California and authorized to transact a general surety business in the State of
Kansas (hereinafter called Surety), as Surety, are held and firmly bound unto
City of ▇▇▇▇▇▇▇, ▇▇▇ ▇. ▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (hereinafter called Obligee) in
the penal sum of five percent (5%) not to exceed one thousand dollars and 00/100
dollars ($1000.00) for the payment of which the Principal and the Surety bind
themselves, their heirs, executors, administrators, successors an assigns,
jointly and severally, firmly by these presents.
THE CONDITION OF THIS OBLIGATION IS SUCH, That, whereas the Principal has
submitted or is about to submit a proposal to the Obligee on a contract for
Kansas, Nebraska & DAKOTA RAILROAD DUMP SITE CLEANUP-GARNETT CITY DUMP NO. 2,
PROJECT #030504
Now, therefore, if the said contract be awarded to the Principal and the
Principal shall, within such time as may be specified, enter into the contract
in writing, and give bond with surety acceptable to Obligee for the faithful
performance of said contract; or if the Principal shall fail to do so, pay the
Obligee the damages which the Obligee may suffer by reason of such failure, not
exceeding the penalty of this bond, then this obligation shall be void;
otherwise to remain in full force and effect.
Signed, Sealed, and Dated this 8th day of April, 2004.
Principal: ▇▇▇ ▇▇▇▇▇ Construction Co.
----------------------------------
By: /s/ ▇▇▇ ▇▇▇▇▇
-----------------------------------------
▇▇▇ ▇▇▇▇▇
American Contractors Indemnity Company [Seal]
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇ Attorney-in-Fact
AMERICAN CONTRACTORS INDEMNITY COMPANY
Los Angeles, California
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That AMERICAN CONTRACTORS INDEMNITY COMPANY, a
California Corporation (the "Company"), and having its principal office in Los
Angeles, California does hereby constitute and appoint:
▇▇▇▇ ▇▇▇▇▇▇
As its true and lawful Attorney(s)-in-fact, in amount of $30,000.00 to execute,
seal and deliver for and on its behalf as surety, any and all bonds and
undertakings, recognizances, contracts or indemnity and other writings
obligatory in the nature thereof, which are or may be allowed, required or
permitted by law, statute, rule, regulation, contract or otherwise, and the
execution of such instrument(s) in pursuance of these presents, shall be as
binding upon the said AMERICAN CONTRACTORS INDEMNITY COMPANY, as fully and
amply, to all intents and purposes, as if the same had been duly executed and
acknowledged by its regularly elected officers at its principal office.
This Power of Attorney is executed and may be [illegible] to and may be revoked,
pursuant to and by authority of resolutions adopted by the Board of Directors of
AMERICAN CONTRACTORS INDEMNITY COMPANY, at a meeting called and held on the 6th
day of December, 1990.
RESOLVED that the Chief Executive Officer, President or any Vice President,
Executive Vice President, Secretary or Assistant Secretary, shall have power and
authority
1. To appoint Attorney(s)-in-fact and to authorize them to execute on
behalf of the Company, and attach the Seal of the Company thereto,
bonds and undertakings, contracts of indemnity and other writings
obligatory in the nature thereof and,
2. To remove at any time, any such Attorney-in-fact and revoke the
authority given.
RESOLVED FURTHER, that the signature of such officers and the seal of the
Company may be affixed to any such power-of-attorney or any certificate relating
thereto by facsimile, and any such power-of-attorney or certificate bearing such
facsimile signatures or facsimile seal shall be valid and binding upon the
Company and any such power so executed and certified by facsimile signatures and
facsimile seal shall be valid and binding upon the Company in the future with
respect to any bond or undertaking to which it is attached.
IN WITNESS WHEREOF, AMERICAN CONTRACTORS INDEMNITY COMPANY has caused this
instrument to be signed and its corporate seal to be affixed by its authorized
officer this 9th day of September, 1999.
[Seal] AMERICAN CONTRACTORS INDEMNITY COMPANY
By: /s/ ▇▇▇▇ ▇▇▇▇▇
--------------------------------------
▇▇▇▇ ▇▇▇▇▇, President
STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
On September 9, 1999 before me, ▇▇▇▇▇▇▇ ▇▇▇▇▇, personally appeared ▇▇▇▇ ▇▇▇▇▇
personally known to me to be the person whose name is subscribed in the within
instrument and acknowledges to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the person, or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS my hand and official seal
[SEAL]
/s ▇▇▇▇▇▇▇ ▇▇▇▇▇ CERTIFICATION
------------------------------------
I, the undersigned officer of AMERICAN CONTRACTORS INDEMNITY COMPANY do hereby
certify that I have compared the foregoing copy of the Power of Attorney and
affidavit, and the copy of the resolution adopted by the Board of Directors of
said Company as set forth in said Power of Attorney, with the ORIGINALS ON FILE
IN THE HOME OFFICE OF SAID COMPANY, and that same are correct transcripts
thereof and of the whole of the said originals, and that the said Power of
Attorney has not been revoked and is now in full force and effect.
IN TESTIMONY WHEREOF, I have hereunto set my hand this 8th day of April, 2004.
/s ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Secretary
MAR-29-04 10:47 AM BG CONSULTANTS INC FAX NO. ▇▇▇▇▇▇▇▇▇▇ P. 1
BG CONSULTANTS, INC. / Engineers-Architects-Surveyors
--------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇: (785) ▇▇▇-▇▇▇▇-▇▇▇.▇▇▇▇▇▇.▇▇▇
ADDENDUM NO. 1
Project: City of ▇▇▇▇▇▇▇, Kansas
Kansas, Nebraska & Dakota Railroad Sump Site Cleanup
Dump No. 2
Garnett, Kansas
City Project No. 030504
04-068L
Date Issued: March 29, 2004
Bid Date & Time: April 8, 2004, 3:30 P.M.
The following items shall amend, or in case of conflict, supersede the
contract documents for the above reference project.
ITEM 1 - SPECIAL CONDITIONS
Delete the special conditions and substitute the attached special
conditions.
ITEM 2 - PROJECT PLANS
Delete the project plans. There are no substitute plans.
Sincerely,
BG CONSULTANTS, INC.
/s/ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, P.E.
Project Manager
ACKNOWLEDGE RECEIPT OF ADDENDUM AND INCLUDE ADDENDUM IN PROPOSAL:
NATURE SAVER FAX MEMO 01616 Date # of
3-29 pages > 5
To ▇▇▇ ▇▇▇▇▇ From BG Consultants
Co/Dept Co
Phone # Phone #
Fax # ▇▇▇-▇▇▇-▇▇▇▇ Fax #
/s/ ▇▇▇ ▇▇▇▇▇
---------------------------
Contractor's Signature
▇▇▇ ▇▇▇▇▇ Construction
---------------------------
Company
[Logo] Also
-----------------------------------------------
Emporia, Ks. - Manhattan, Ks. - Hutchinson, Ks.
BG CONSULTANTS, INC. / Engineers-Architects-Surveyors
--------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇: (785) ▇▇▇-▇▇▇▇-▇▇▇.▇▇▇▇▇▇.▇▇▇
ADDENDUM NO. 2
Project: City of ▇▇▇▇▇▇▇, Kansas
Kansas, Nebraska & Dakota Railroad Sump Site Cleanup
Dump No. 2
Garnett, Kansas
City Project No. 030504
04-068L
Date Issued: April 5, 2004
Bid Date & Time: April 8, 2004, 3:30 P.M.
The following items shall amend, or in case of conflict, supersede the
contract documents for the above referenced project.
ITEM 1 - CERTIFICATION
Delete the certification and substitute the attached certification.
ITEM 2 - SITE MAP
Delete the Site Map #1 and insert Site Map.
ITEM 3 - SPECIAL CONDITIONS
Delete the Special Conditions SC-4-12 and replace with "The Kansas,
Nebraska and Dakota Railroad fill is not to be disturbed unless
directed by East Kansas Agri-Energy to do so."
ITEM 4 - SPECIAL CONDITIONS
Add SC-4-13 which reads, "Ashes and stumps from burned trees are to be
buried on site with the buried waste."
ITEM 5 - SPECIAL CONDITIONS
Add SC-4-14 which reads, "There is a waterline that runs diagonally
from the southwest corner of the waste to the northeast corner of the
waste. Please contact the City of ▇▇▇▇▇▇▇ for the exact location of the
waterline prior to digging in the waste, removing trees from the waste
or digging the waste burial pit."
[Logo] Also
-----------------------------------------------
Emporia, Ks. - Manhattan, Ks. - Hutchinson, Ks.
ITEM 6 - BID FORM
Delete the Bid Form and substitute the attached Bid Form. Use the
attached Bid Form to make your bid. DO NOT use the first Bid Form to
make your bid.
ITEM 7 - EAST KANSAS AGRI-ENERGY SITE PLAN
Include the East Kansas Agri-Energy Site Plan. The area west of the new
rail spur and the Old Kansas Nebraska & Dakota Railroad line is the
area where the waste may be buried.
Sincerely,
BG CONSULTANTS, INC.
/s/ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, P.E.
Project Manager
ACKNOWLEDGE RECEIPT OF ADDENDUM AND INCLUDE ADDENDUM IN PROPOSAL:
/s/ ▇▇▇ ▇▇▇▇▇
---------------------------
Contractor's Signature
▇▇▇ ▇▇▇▇▇ Construction
---------------------------
Company
Inspection Report
Garnett Dump Site #2
Date of Inspection: May 21, 2004
By: ▇▇▇ ▇▇▇▇▇▇, P.E.
I inspected the site the morning of May 21, 2004 with ▇.▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ City
Manager and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ representing East Kansas Agri-Energy. The area had
been cleared of all trees. The trees were burned on site and the stumps were
being buried that morning on the site.
The require 18 inches of final cover over the site. There were places were the
cover appeared to be less than the specified 18 inches.
The site is part of a larger parcel assembled by East Kansas Agri-Energy. East
Kansas Agri-Energy plans to build a railroad spur and ethanol production plant
on the site. East Kansas Agri-Energy preferred to leave the site as it is
covered rather than borrow the additional cover needed from the rest of the
site. The covered site will become a staging area for the construction of the
East Kansas Agri-Energy facilities.
▇▇▇ ▇▇▇▇▇ Construction representatives were advised to pick up the loose trash
that was on the surface and bury it, and to take a motor grader and gently drag
the site to get rid of the equipment tracks on the site. The dragging should be
gently done so as not to bring waste to the surface.
On Monday, May 24, 2004 I advised ▇▇▇ ▇▇▇▇▇▇▇ of the Kansas Department of Health
and Environment of the status of the project. ▇▇. ▇▇▇▇▇▇▇ advised that if after
the completion of the ethanol plant construction the construction work could
"pump" the site sufficiently to cause some of the waste to come to the top of
the cover. If this happens, the Kansas Department of Health and Environment
expects the waste on the surface to reburied.
Memo
To: Garnett Dump Site no. 2 file
From: ▇▇▇ ▇▇▇▇▇▇
Date: 28 May 2004
Re: Inspection report
Visited the no. 2 dump site the morning of 28 May 2004. The loose waste on the
surface was had been collected and buried. The site had been dragged with a
motor grader and smoothed out. The site had drained well during after the rains
of the past week.
Called ▇▇▇ ▇▇▇▇▇▇▇ for the Kansas Department of Health and Environment
inspection. ▇▇▇ cannot inspect until the Kansas Department of Health and
Environment/Garnett contract is signed.
04-068L
#15,000
CONTRACT TO EMPLOY CITY ENGINEER
Agreement made, effective on the 3 day of MARCH , 2004 by and between
the City of ▇▇▇▇▇▇▇, a municipal corporation, acting by and through its
authorized officers, and located in the County of ▇▇▇▇▇▇▇▇, State of Kansas,
referred to as "City", and BG Consultants, Inc., of Lawrence, Kansas, referred
as "Engineer".
The parties agree as follows:
SECTION ONE
NATURE OF EMPLOYMENT
City retains and employs, pursuant to the authority conferred by it and
its authorized officers of the City of ▇▇▇▇▇▇▇ Kansas, such BG Consultants, Inc.
to act, under the title of City Engineer, as the Engineer for the City and to
render to City and its authorized officers all engineering advice for the City
and to represent City and its authorized officers in related matters upon the
City or any of its authorized officers request.
SECTION TWO
ACCEPTANCE OF EMPLOYMENT
Engineer accepts the employment as set forth in this agreement and will
render to the best of Engineer's ability the services described in and during
the continuance of this agreement. As a partner and experienced municipal
engineer, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, P.E. will personally supervise the City Engineering
services. He and ▇▇▇ ▇▇▇▇▇▇, P.E. are the point of contact. The Engineer
reserves the right to appoint such special assistants and consultants as
necessary to assist in the employment with the City. However, the Engineer will
not proceed with any service(s) without prior approval, request or instructions
from the City.
SECTION THREE
COMPENSATION
As compensation for civil services to be rendered by Engineer under and
pursuant to this agreement, City will pay to Engineer the current standard
hourly rates as discounted and attached. BG Consultants performs annual employee
evaluation and reviews in December of each year and minimal salary adjustments
take place in January of each year. The current rate breakdown will be provided
in January of each year.
BG Consultants, Inc. will not charge mileage to the City. Direct expenses for
printing, plots and etc. will be calculated at minimal rates. The engineering
staff will be available to discuss problems or possible projects at no charge.
SECTION FOUR
TERMINATION
This agreement may be terminated at any time after signing, on 30 days
written notice from either party to the other party that Engineer's employment
under and pursuant to this agreement is to be so terminated.
SECTION FIVE
GOVERNING LAW
This agreement shall be governed by, construed, and enforced in
accordance with the laws of the State of Kansas.
SECTION SIX
ENTIRE AGREEMENT
This agreement constitutes the entire agreement between the parties,
and any prior understanding or representation of any kind preceding the date of
this agreement shall not be binding on either party except to the extent
incorporated in this agreement.
SECTION SEVEN
MODIFICATION OF AGREEMENT
Any modification of this agreement or additional obligation assumed by
either party in connection with this agreement shall be binding only if in
writing signed by each party or an authorized representative of each party.
SECTION EIGHT
PARAGRAPH HEADINGS
The titles to the paragraphs of this agreement are solely for the
convenience of the parties and shall not be used to explain, modify, simplify or
aid in the interpretation of the provisions of this agreement.
IN WITNESS WHEREOF, each party to this agreement has caused it to be
executed at Garnett on the 3 day of March, 2004.
/s/ [Illegible] ▇▇▇▇▇ /s/ ▇▇▇▇ ▇. K[illegible]
-------------------------------------- -----------------------------------
Manger, City of ▇▇▇▇▇▇▇, Kansas BG Consultants, Inc./Engineer
[SEAL]
ATTEST: My Appt. Exp. 4-11-2004
----------
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------- -----------------------------------
City Clerk of Garnett, Kansas Notary
CITY ENGINEERING CONTRACT ATTACHMENT
BG CONSULTANTS HOURLY RATES FOR 2004
POSITION PER HOUR DISCOUNTED
-------- -------- ----------
PRINCIPAL $139.00 $104.00
ASSOCIATE $127.50 $99.50
PROJECT ENGINEER III $115.00 $94.50
PROJECT ENGINEER II $95.00 $82.00
PROJECT ENGINEER I $81.50 $75.50
SENIOR DESIGN ENGINEER $92.50 $77.00
DESIGN ENGINEER $77.50 $68.00
ASSISTANT DESIGN ENGINEER $64.50 $59.00
ARCHITECT II $130.50 $103.00
ARCHITECT I $110.00 $91.50
ASSISTANT ARCHITECT $62.50 $57.00
TECHNICIAN II $68.00 $64.50
TECHNICIAN I $58.50 $56.00
SENIOR CONSTRUCTION INSPECTOR $68.00 $61.00
CERTIFIED CONSTRUCTION INSPECTOR $54.50 $53.00
CONSTRUCTION INSPECTOR $48.00 $47.00
SENIOR PROJECT SURVEYOR $106.50 $90.00
PROJECT SURVEYOR $90.50 $83.00
4-MAN SURVEY CREW $151.50 $126.00
3-MAN SURVEY CREW $123.00 $103.00
2-MAN SURVEY CREW $94.50 $86.00
CAD SYSTEM AND OPERATOR $75.50 $66.00
DRAFTSPERSON $56.50 $51.00
CLERICAL $39.50 $37.50
Note: These rates are subject to a small annual adjustment due to salary
adjustments.
Special Note: "Discounted" rates are only applicable for
City Engineering Contracts
KANSAS DEPARTMENT OF HEALTH AND ENVIRONMENT
BUREAU OF ENVIRONMENT REMEDIATION
AFFIDAVIT OF EXPENDITURES
1. GRANTEE NAME: City of ▇▇▇▇▇▇▇ See completion
--------------------------- instructions on reverse
PHONE: ▇▇▇-▇▇▇-▇▇▇▇ side.
-----------------------------
2. REPORT PERIOD: April, 2004 through September 2004
-----------------------------------
3. GRANT TITLE: Garnett Dump Site #1
----------------------
SUBMIT 2 COPIES
EXPENDITURE CLASSIFICATION LOCAL MATCH GRANT TOTAL
AMOUNT AMOUNT AMOUNT
--------------------------------------------------------------------------------------------------
4. SALARIES
(Including Fringe Benefits)
--------------------------------------------------------------------------------------------------
5. TRAVEL
--------------------------------------------------------------------------------------------------
6. SUPPLIES
--------------------------------------------------------------------------------------------------
7. CAPITAL EQUIPMENT
(List each item make, model, serial #,
include copy of invoice).
----------------------------------------------------------------------------------------
Sub-total Capital Equipment:
--------------------------------------------------------------------------------------------------
8. OTHER (LIST EACH ITEM/COSTS)
A. Engineering $6,053.25 $6,053.25
B. Clean-up (▇▇▇▇▇ Constr.) 93,108.17 93,108.17
----------------------------------------------------------------------------------------
Sub-Total Other: $99,161.42 $99,161.42
--------------------------------------------------------------------------------------------------
9. AFFIDAVIT TOTAL $99,161.42 $99,161.42
(Add Lines 4-8)
--------------------------------------------------------------------------------------------------
The above amounts are in agreement with the agency official accounting records.
Individual Employee time reports are maintained and are on file documenting time
charged on this project.
10. AUTHORIZED SIGNATURE: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇, City Clerk
DATE: 9-22-04
-----------------------
---------------------------------
KDHE USE ONLY:
AUDITED BY:
---------------------------------
Form Revised 2/3/04
Schedule 4.17(a)
Management Contracts
1. Management Agreement. See attached Management Agreement with United Bio
Energy, LLC, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. The agreement
was entered into on November 12, 2004. The Management Agreement
provides that UBE will supervise and direct the general operations of
our ethanol plant for an anticipated period of at least 5 years.
4.17(a) - 1
MANAGEMENT AGREEMENT*
THIS MANAGEMENT AGREEMENT is made and entered into this 12th day of
November, 2004, by and between East Kansas Agri-Energy, LLC, a Kansas limited
liability company ("OWNER") and UNITED BIO ENERGY MANAGEMENT, LLC, a Kansas
limited liability company ("MANAGER").
WHEREAS, OWNER intends to own and operate an ethanol production
facility located in or near Garnett, Kansas (the "Plant");
WHEREAS, MANAGER is in the business of managing and operating ethanol
production facilities such as the Plant; and
WHEREAS, OWNER desires to engage MANAGER as its managing agent at the
Plant, and MANAGER desires to accept such engagement upon all of the terms and
conditions hereinafter described.
NOW, THEREFORE, in consideration of mutual covenants contained herein,
the parties agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "ACCOUNTS" shall mean the account(s) established in accordance
with paragraph 12.
(b) "AGREEMENT" and the words "herein", "hereof", "hereby"
"hereunder", and words of similar import shall refer to this Management
Agreement as a whole and not to any particular provision unless expressly so
limited.
(c) "DAY", "QUARTER" and "YEAR" shall refer to a calendar day,
quarter and year, respectively, unless expressly provided otherwise.
(d) "EFFECTIVE DATE" shall mean the date on which MANAGER hires
the General Manager to provide the services described herein, which date shall
not be earlier than January 1, 2005.
(e) "GENERAL MANAGER" shall mean that Person who is employed by
MANAGER, from time to time, to act as the General Manager of the Plant and
perform the duties set forth in paragraph 13.
(f) "INCENTIVE BONUS" shall mean the amounts payable by OWNER to
MANAGER under paragraph 9.
*Portion omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
1
(g) "MANAGEMENT FEE" shall mean the amounts payable by OWNER to
MANAGER under paragraph 8.
(h) "MANAGER" shall mean United Bio Energy Management, LLC, a
Kansas limited liability company.
(i) "NET INCOME" shall mean the amount (if any) by which
Operational Revenues exceed Operational Costs, as determined using Generally
Accepted Accounting Principles applied on a consistent basis, as agreed to by
and between OWNER and MANAGER.
(j) "OPERATIONAL COSTS" shall mean all normal and reasonable costs
and expenses directly and indirectly associated with the daily operation of the
Plant including, without limitation, administration costs, the Management Fee,
legal and accounting, interest expense, book depreciation (not tax) and
amortization (as determined by an independent accounting firm approved by the
parties), utilities, production inputs, supplies, transportation, employee
salaries and benefits, maintenance, general supplies, raw material acquisitions,
and equipment maintenance. All Operational Costs are the direct obligation of
the OWNER and ultimately are to be paid by the OWNER. Operational Costs do not
include those expenses to be borne by MANAGER and not reimbursed by the terms of
this Agreement. Operational Costs do not include the Incentive Bonus to be paid
by OWNER to MANAGER, nor do they include costs incurred for capital
expenditures, including, but not limited to, purchases of equipment, hardware or
software technology, or expansion of the Plant, or any other costs or expenses
incurred that are associated, directly or indirectly, with items not included in
the definition of Operational Revenues.
(k) "OPERATIONAL REVENUES" shall mean all revenues from the
operation of the Plant. Operational Revenues shall not include any revenues from
the sale of the entire Plant, or any land adjacent thereto, or payments from the
federal, state and local government made directly to OWNER.
(l) "OWNER" shall have the meaning set forth above.
(m) "PERSON" shall mean any individual, corporation, partnership,
limited liability company, trust or other legal entity.
(n) "PLANT" shall have the meaning set forth above and shall
include the physical plant and equipment used for production of the Products.
(o) "PLANT CONTROLLER" shall mean that Person who is employed by
OWNER, from time to time, to act as the primary accountant of the Plant.
(p) "PRODUCTS" shall mean all items produced at the Plant
including, without limitation, ethanol and distillers grains.
(q) "PROPRIETARY INFORMATION" shall have the meaning set forth in
paragraph 14.
2
2. ENGAGEMENT OF MANAGER. OWNER hereby engages and designates MANAGER,
and MANAGER hereby accepts such engagement and designation, on the terms and
conditions hereinafter set forth, as OWNER's managing agent to direct,
supervise, operate, maintain and manage the Plant.
3. DUTIES OF MANAGER. MANAGER is hereby authorized and directed by
OWNER to do all of the following and agrees, in each case on behalf of and at
the expense of OWNER, to:
(a) supervise and direct the general operations of the Plant and
operate it efficiently and effectively;
(b) hire, pay, supervise and discharge all employees necessary to
properly maintain and operate the Plant in accordance with OWNER's terms and
conditions of employment, provided, however, that MANAGER shall obtain the
approval of OWNER prior to reassigning or terminating the Plant Controller,
which approval shall not be unreasonably withheld, and cause to be prepared and
timely filed and paid all necessary returns, forms and payments in connection
with unemployment insurance, withholding, social security and other like
benefits and taxes, all such employees to be employees of OWNER and not of
MANAGER (notwithstanding the above, OWNER shall retain the right to unilaterally
terminate the services of the Plant Controller);
(c) prepare or cause to be prepared for review and approval of
OWNER an annual operating budget setting forth the anticipated income and
expenses for the Plant for the ensuing year, a comparison of such budget to the
income and expenses of the preceding and current years, and any required
explanations with respect thereto;
(d) set up and keep in good order separate, accurate and adequate
accounting records to be maintained for OWNER, and maintain orderly files
containing income records, insurance policies, leases and subleases,
correspondence, receipted bills and vouchers, and all other documents pertaining
to the Plant or the operation thereof, and prepare or cause to be prepared for
OWNER monthly and annual statements of account as of the end of each month and
year, all in accordance with paragraph 28;
(e) check all bills received for services, work and supplies
ordered in connection with maintaining and operating the Plant and pay, with
OWNER's funds, or cause to be paid all such expenses, mortgage interest and
amortization, ground rent, water charges, sewer rent, assessments, real estate
taxes, and other taxes assessed against the Plant as and when the same shall
become due and payable;
(f) establish and maintain the Accounts; collect payments from
customers of the Plant and take any and all actions MANAGER deems necessary or
desirable to collect such payments; deposit such payments into, and withdraw or
disburse such amounts from, the Accounts; all in accordance with paragraph 12.
(g) comply with all covenants of OWNER under the terms of any
mortgage loan
3
affecting the Plant, subject to OWNER's duties in paragraph 6(a);
(h) cause to be effected and maintained on the Plant the insurance
referred to in paragraph 29;
(i) notify OWNER and applicable insurance carriers of policies
under paragraph 29 of any serious bodily injury (including death) to any Person
and any substantial property damage, or claims as to either, that MANAGER has
knowledge of or should have knowledge of, and deliver to OWNER any legal process
received by it which affects or may affect OWNER or the Plant;
(j) contract for and cause the purchase of all services, grains,
supplies and other materials necessary for the Plant to produce the Products and
contract for and cause the marketing and sale of the Products; provided,
however, MANAGER shall not contract with an affiliate of MANAGER for any of the
items stated in this paragraph 3(j), without the prior approval of OWNER;
(k) contract for electricity, natural gas, water, waste water,
fuel oil, rubbish and snow removal, vermin extermination and such other services
or such of them as MANAGER deems necessary or advisable, provided, however,
MANAGER shall not contract for electricity, natural gas, water and waste water
without the prior approval of OWNER;
(l) contract for and cause the Plant and all fixtures,
furnishings, equipment, supplies, tools, and other materials and facilities
thereof to be maintained in good order and condition; to cause all routine
repairs, replacements and alterations to be made thereto; and to purchase such
items MANAGER deems necessary or desirable for the operation and maintenance of
the Plant; provided, however, that MANAGER shall not contract for any particular
item involving an expenditure in excess of $15,000, other than budgeted items,
without the prior approval of OWNER except in circumstances which MANAGER
reasonably believes constitutes an emergency requiring immediate action for the
preservation or safety of the Plant or its occupants or to avoid the suspension
of any necessary service;
(m) use its best efforts to cause the Plant and its operations to
comply with all applicable laws and regulations;
(n) act in compliance with OWNER's Operating Agreement and other
governing documents provided that (i) MANAGER has actual knowledge of OWNER's
Operating Agreement and other governing documents, and any amendments thereto,
and (ii) the terms of this Agreement shall not altered or amended by any of the
terms of OWNER's Operating Agreement and other governing documents and any
amendments thereto;
(o) reasonably cooperate with OWNER and its attorneys and
accountants in making any disclosures required by the Securities Act of 1933 and
the Securities Exchange Act of 1934 or any other securities laws;
(p) recommend and, subject to the approval of OWNER, cause all
such acts and
4
things to be done in or about the Plant as shall be necessary to comply with any
and all orders or violations affecting the Plant placed thereon by any federal,
state or municipal authority having jurisdiction thereover, subject to OWNER's
duties in paragraph 6(a);
(q) cooperate with OWNER's accountants in regard to the
preparation and filing on behalf of OWNER of any income or other tax return; and
(r) provide benchmarking services to OWNER as described on EXHIBIT
A attached hereto.
4. AUTHORITY OF MANAGER. OWNER authorizes MANAGER, for OWNER's account
and on its behalf, to enter into contracts and perform any act or do anything
MANAGER deems necessary or desirable in order to carry out MANAGER's duties
under this Agreement, and everything done by MANAGER under the provisions of
this Agreement shall be done as agent of OWNER.
5. LIMITATIONS ON AUTHORITY OF MANAGER. Notwithstanding any other
provision in this Agreement to the contrary, MANAGER shall have no authority to
engage or discharge any accountants, auditors or attorneys without the written
consent of OWNER. Further, MANAGER shall have no authority to pay to itself the
Incentive Bonus until MANAGER and OWNER approve the financial statements for the
applicable quarter, in accordance with paragraph 9 below. Unless otherwise
authorized by OWNER and except as provided in paragraphs 3 and 4, MANAGER shall
have no authority regarding any matter not provided for under this Agreement.
6. DUTIES OF OWNER. OWNER shall act in good faith and do all things
reasonably requested by MANAGER to aid and assist MANAGER in the performance of
its duties under this Agreement including, without limitation, to provide:
(a) an accurate and complete copy of any and all contracts and
other obligatory instruments of OWNER necessary for MANAGER to perform its
duties under this Agreement;
(b) a comprehensive written semi-annual review and evaluation of
MANAGER's performance hereunder, within thirty (30) days after the end of the
second and fourth fiscal quarters of each year; and
(c) such executive office space, furniture, telephone, computer,
printer and other office equipment, including high speed internet services, for
the General Manager as may be reasonably agreed to by MANAGER and OWNER.
7. INDEPENDENT CONTRACTOR. MANAGER shall perform its duties under this
Agreement as an independent contractor. Nothing contained herein shall be
construed as creating a partnership or joint venture, nor construed as making
MANAGER an employee of OWNER. MANAGER shall have no right or power to act for
OWNER other than as contemplated in this Agreement or otherwise expressly
authorized by OWNER.
5
8. MANAGEMENT FEE. OWNER shall pay to MANAGER an annual management fee
of $250,000.00 payable at a monthly rate of $20,833.33, which shall be due and
payable in advance on the 1st day of each month during the term of this
Agreement. If the Effective Date of this Agreement is on a day other than the
first day of a calendar month or ends on a day other than the last day of a
calendar month, then the Management Fee will be appropriately prorated by
MANAGER based on the actual number of calendar days in such month.
9. INCENTIVE BONUS. In addition to the Management Fee, OWNER shall pay
to MANAGER an annual Incentive Bonus based on the Net Income for each year
during the term of this Agreement or, in the event the term of this Agreement
includes a part of a year, such partial year. The Incentive Bonus shall be due
and payable in quarterly installments. The amount of the Incentive Bonus payable
to the MANAGER for the first, second and third quarters of each year shall be
calculated under Table 1 below and shall be due and payable within thirty (30)
days after the end of each quarter or, if later, approval of the monthly
financial statements for that quarter by MANAGER and OWNER; provided, however,
that in no event shall the quarterly installment of the Incentive Bonus be made
more than sixty (60) days after the end of such quarter. The amount of Incentive
Bonus payable to MANAGER for the final quarter of each year shall equal the
amount calculated under Table 2 below less the aggregate amount of the Incentive
Bonus paid to MANAGER for the prior quarters in such year. In no event shall the
annual aggregate amount of the Incentive Bonus paid to MANAGER for any year
exceed $[*]. In the event the aggregate amount of Incentive Bonus paid to
MANAGER for the prior quarters of any year exceeds the amount calculated under
Table 2 for the final quarter of such year, MANAGER shall refund the amount of
such excess to OWNER. The payment or refund, as the case may be, for the final
quarter of each year shall be made within thirty (30) days after the annual
audit for such year; provided, however, that in no event shall the final payment
or refund of the Incentive Bonus be made more than one hundred twenty (120) days
after the end of such year.
Table 1
[*]
Table 2
[*]
The calculation for the quarterly payment of the Incentive Bonus under Table 1
above shall be based on [*] for the applicable quarter. The calculation for the
final payment or refund of the Incentive Bonus under Table 2 above shall be [*]
for the applicable year. In the event the term of this Agreement is terminated
prior to the end of any year, the [*] for such year shall be determined through
the date of termination and the Incentive Bonus for the quarter which includes
such date of termination shall be calculated as if such quarter was the final
quarter for such year (i.e., the amount calculated under Table 2 above less the
aggregate amount of the Incentive Bonus paid to MANAGER for the prior quarters
in such year).
*Portion omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
6
As an example, if [*] for the first quarter of the year is $[*], the Incentive
Bonus payable to MANAGER for that quarter under Table 1 above would be $[*]
(i.e., [*] of $[*] [$[*] less $[*]]). If [*] for the second quarter of the year
is $[*], the Incentive Bonus payable to MANAGER for that quarter under Table 1
above would be $[*] (i.e., [*] of $[*] [$[*] less $[*]]). If [*] for the third
quarter of the year is $[*], the Incentive Bonus payable to MANAGER for that
quarter under Table 1 above would be $[*] (i.e., [*] of $[*] [$[*] less $[*]]).
If the [*] for the year is $[*] for purposes of calculating the final payment or
refund under Table 2 above, the Incentive Bonus payable to MANAGER for the final
quarter would be $[*] (i.e., [*] of $[*] less aggregate payments of $[*] for the
prior fiscal quarters in such year). In contrast, if the [*] for the year is
$[*] for purposes of calculating the final payment or refund under Table 2
above, the Incentive Bonus to be refunded by MANAGER would be $[*] (i.e., [*] of
$[*] [$[*] less $[*]]) less aggregate payments of $[*] for the prior quarters in
such year).
10. REIMBURSEMENT FOR EXPENSES. All reasonable and necessary costs and
expenses incurred by MANAGER in connection with the performance of its duties
hereunder shall be paid by OWNER except as otherwise provided in paragraph 11.
OWNER shall reimburse MANAGER within ten (10) days after notice of such
expenses.
11. NON-REIMBURSABLE EXPENSES. MANAGER shall be responsible for payment
of, and shall not be entitled to any reimbursement from OWNER for, the following
costs and expenses:
(a) all compensation payable to the General Manager including
related payroll taxes and benefits;
(b) all fees (if any) normally charged by MANAGER for providing
access to any group pricing for yeast, enzymes, chemicals, spare parts, or other
products or services used at the Plant;
(c) all fees (if any) charged by ICM, Inc. and ▇▇▇▇▇ Engineering,
LLC for consultations and engineering services concerning the design of, and
equipment used in the design of, the Plant, provided however, OWNER shall be
responsible for all fees associated with such services for the construction and
start up of the Plant and for any such fees associated with any improvement or
expansion of the Plant;
(d) all fees (if any) normally charged by MANAGER for providing
its basic level of bench marking services described on Exhibit A attached
hereto; provided, however, in the event OWNER desires bench marking services in
addition to those provided under such basic level, OWNER shall pay all fees
associated with such additional services;
(e) all travel expenses incurred by MANAGER unless previously
approved by OWNER;
*Portion omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
7
(f) all moving expenses incurred by MANAGER shall be reimbursable
by OWNER pursuant to Section 10 above; provided, however, that if aggregate
moving expenses exceed $20,000 for any given year, the amount in excess of
$20,000 shall not be reimbursable by OWNER; and
(g) all expenses incurred in connection with the engagement of any
headhunter agency or other employee retention agency shall be divided equally
between OWNER and MANAGER with one-half payable by OWNER and one-half payable by
MANAGER.
12. ESTABLISHMENT OF ACCOUNTS. MANAGER shall establish and maintain one
or more accounts with banks or other financial institutions designated by OWNER
and:
(a) all funds of OWNER relating to the Plant shall be deposited
in OWNER's name in the Accounts and shall be held in trust;
(b) no funds of OWNER shall be commingled with any other funds of
MANAGER or of others;
(c) withdrawals from the Accounts shall be made only in the
regular course of MANAGER's services in operating the Plant and shall be made
upon such signature or signatures as OWNER may designate; provided, however,
MANAGER shall be authorized to draw checks and make withdrawals from the
Accounts to pay any particular cost or expenditure in order to carry out its
duties under this Agreement;
(d) MANAGER shall be entitled to withdraw from the Accounts and
retain its (i) Management Fee, and (ii) Incentive Bonus after the approval of
OWNER and MANAGER of the financial statements for the applicable quarter, in
accordance with paragraph 9 above, and if the Accounts shall be insufficient to
withdraw such amounts, MANAGER shall be entitled to be reimbursed by OWNER
within ten (l0) days after written request therefor; and
(e) Any cost or expense made by MANAGER hereunder shall be made
out of such funds as MANAGER may from time to time hold in the Accounts or as
may be provided by OWNER. MANAGER shall not be obligated to make any advance to
or for the account of OWNER or to pay any amount except out of the funds so held
or provided, nor shall MANAGER be obligated to incur any liability or obligation
unless OWNER shall furnish MANAGER with the necessary funds for the discharge
thereof. If MANAGER shall advance out of its own funds for OWNER's account any
amount for the payment of any obligation of OWNER or ordinary and necessary cost
or expenses directly related to the Plant, OWNER shall promptly reimburse
MANAGER therefor within ten (l0) days after written request therefor or MANAGER
may reimburse itself therefor out of the Accounts and Operating Revenues as
collected.
13. DUTIES OF GENERAL MANAGER. MANAGER shall provide the full time
services of a General Manager. The General Manager shall work exclusively for
the Plant and shall be based at the location of the Plant. MANAGER will endeavor
in good faith to keep the General
8
Manager at the Plant and to refrain from transferring the General Manager from
the Plant prior to the termination of this Agreement, provided, however, that
nothing in this paragraph shall be construed or interpreted as restricting
MANAGER's right and authority to terminate, remove, reprimand or replace a
General Manager if, in its sole discretion, MANAGER deems such action necessary
or advisable for the proper performance of its duties hereunder. Subject to the
policies set by the OWNER, the General Manager's responsibilities include the
following:
(a) To manage all business operations, Plant operations,
purchasing operations, marketing operations, personnel operations, safety and
any and all other items relating to Plant operations and profitability.
(b) To timely report such information to OWNER on a regular and
reasonable basis;
(c) To promote, and refrain from any act that would adversely
impact, a positive image of the Plant in the community;
(d) To use his or her best efforts to ensure that the Plant
complies with all applicable orders, rules, laws and regulations;
(e) To administer the wage and benefit package of OWNER
recommended by MANAGER and approved by OWNER;
(f) To cause all repairs and all purchases of replacement items,
chemicals, enzymes, supplies, and other items necessary for the operations of
the Plant and to review all invoices regarding the same;
(g) To use his or her best efforts to minimize Operational Costs;
(h) To administer the purchasing of grains and the marketing of
the Products to ensure the best pricing scenarios for such grain and Products,
to the extent MANAGER does not delegate such responsibilities to, or contracted
for such services with, another Person; and
(i) To perform any and all other duties assigned by MANAGER or,
with the prior approval of MANAGER, perform any and all other duties assigned by
OWNER in connection with MANAGER's duties hereunder.
14. PROPRIETARY INFORMATION. During the term of this Agreement, the
parties may furnish, to each other information including, but not limited to,
specifications, photocopies, magnetic tapes, drawings, sketches, models,
samples, tools, technical information, data, knowhow, customer and market
information, financial reports, precontractual negotiations, engineering
studies, consultants' studies, options for site purchases, and relationships
established with experts, consultants and governmental agencies (all hereinafter
designated as "Proprietary Information") in connection with the operations of
the Plant. The party furnishing such Proprietary Information to the other party
shall have the exclusive right and interest in and to such Proprietary
Information and the goodwill associated therewith. A party will not directly or
indirectly contest the ownership of Proprietary Information furnished by the
other party in writing or furnished verbally and then documented in writing
within seven (7) days. The use of the Proprietary Information of a party in the
operations of the Plant does not give the other party
9
any ownership interest or other interest in or to such information; provided,
however, the MANAGER, upon termination of this Agreement, shall grant to OWNER
at no additional cost (other than the license fee payable by OWNER to MANAGER
under paragraph 17 below) a nonexclusive perpetual limited license to use,
solely for the continued operations of the Plant, such Proprietary Information
of MANAGER that is then utilized in the operation of the Plant and necessary for
the continued operations of the Plant. Any modifications or additions to the
Proprietary Information of a party made by the other party will only be property
of such other party if the modifications or addition stands alone separately
without any portion of such Proprietary Information. Nothing in this Paragraph
shall be construed as requiring any party to furnish any Proprietary Information
to the other party. Proprietary Information developed by MANAGER or any of its
employees or agents during the term of this Agreement or the operations of the
Plant shall not be considered "work for hire" and, between the parties hereto,
MANAGER shall have the exclusive right and interest in and to such Proprietary
Information and the goodwill associated therewith. Notwithstanding the
foregoing, if any Proprietary Information is jointly developed by the parties,
such Proprietary Information shall be jointly owned by the parties. For purposes
of this paragraph, Proprietary Information shall not include:
(a) Information of a party that at the time furnished to the other
party is in the public domain or becomes part of the public domain by
publication or otherwise through no fault of the other party or its employees or
agents;
(b) Information of a party that at the time furnished to the other
party was in the possession of the other party as shown by written records and
was independently developed by the other party or obtained from a source on a
non-confidential basis by a Person entitled to disclose it; or
(c) Information concerning the operations of the Plant that is
furnished to MANAGER for purposes of its performance of any bench marking
services.
Proprietary Information is confidential and proprietary. Each party
shall keep the Proprietary Information of the other party confidential and shall
use all reasonable efforts to maintain the Proprietary Information as secret and
confidential. Failure to so maintain the Proprietary Information of a party as
confidential shall entitle such party to any damages stemming from such failure,
to include without limitation, reasonable attorneys' fees. A party shall not at
any time without the prior written consent of the other party, copy, duplicate,
record or otherwise reproduce the Proprietary Information of such other party,
in whole or in part for any unauthorized Persons, or otherwise make the same
available to any unauthorized Person. Each party agrees that the other party
would be irreparably damaged by reason of any violation of the confidentiality
provisions contained herein and that any remedy at law for a breach of such
provisions would be inadequate. Therefore, a party shall be entitled to seek
injunctive or other equitable relief in a court of competent jurisdiction
against the other party, its agents, employees, officers or other associates,
for any breach or threatened breach of the confidentiality covenants contained
herein without the necessity of proving actual monetary loss. It is expressly
understood that the remedy described herein shall not be the exclusive remedy of
a party for any breach of such covenants, and such party shall be entitled to
seek such other relief or remedy, at law or in equity, to which it may be
entitled as a consequence of any breach of such covenants. Nothing in
10
this paragraph shall be construed so as to inhibit OWNER's ability to make
necessary disclosures as required by the Securities Act of 1933 or the
Securities Exchange Act of 1934 or any other applicable securities laws,
provided, however, any disclosure of Proprietary Information of MANAGER shall
require the prior written consent of MANAGER, which shall not be unreasonably
withheld.
15. TERM. This Agreement shall commence on the Effective Date and shall
terminate on the fifth anniversary of that date, unless earlier terminated
pursuant to paragraph 16. Unless earlier terminated in accordance with this
Agreement, this Agreement shall be automatically extended for successive one (1)
year terms thereafter unless either party gives written notice to the other
party of its election not to renew, not later than ninety (90) days prior to the
expiration of the then current term.
16. EARLY TERMINATION. This Agreement shall be subject to earlier
termination during the term hereof as follows:
(a) by OWNER upon a default by MANAGER which remains uncured for
more than twenty (20) days after written notice thereof, unless the same is
susceptible to being cured but not within a period of twenty (20) days and due
and diligent efforts to effect such cure have been commenced during such twenty
(20) day period and are continuing;
(b) by MANAGER upon a default by OWNER in (i) the due and punctual
payment of any installment of the Management Fee or Incentive Bonus to MANAGER
unless such default is cured by OWNER within ten (10) days after written notice
thereof, (ii) reimbursing MANAGER for any cost or expense under paragraph 10,
unless such default is cured by OWNER within ten (10) days after written notice
thereof, or (iii) any persistent instruction or order by OWNER to operate the
Plant in a way in which a violation of any applicable law or regulation is
likely to occur;
(c) by either party upon not less than five (5) days notice to the
other in the event a petition is filed against the other party to declare it
bankrupt or to require an arrangement or its reorganization under the Bankruptcy
Act or any similar insolvency statute and, if involuntary, such petition is not
dismissed within sixty (60) days;
(d) immediately and without further action by either party upon
the occurrence of (i) a taking by condemnation or similar proceeding of the
Plant, or (ii) the damage or destruction of all or substantially all of the
Plant by fire or other casualty.
17. LICENSE FEE. In order to compensate MANAGER for OWNER's
continued use of MANAGER's Proprietary Information (including, without
limitation, the management system(s) established and implemented by MANAGER
at the Plant during the term of this Agreement), OWNER shall pay to MANAGER a
license fee of $250,000 at a monthly rate of $10,417 for twenty-four (24)
months after the termination of this Agreement, for any reason, and whether
during the initial term or any renewal term thereof. The first monthly
installment shall be due and payable on the date of termination of this
Agreement and each successive monthly
11
installment shall be due and payable on the same day of each month thereafter
during such twenty-four (24) month period after termination.
18. DISPUTE RESOLUTION. The parties shall attempt to settle amicably
any dispute or difference of any kind whatsoever, arising out of or in
connection with the validity or invalidity, construction, execution, meaning,
operation or effect or breach of this Agreement (exept for any such dispute or
difference involving paragraph 14). If the parties do not promptly do so, either
party may, by written notice to the other party, call for private mediation of
the issue before a mediator to be agreed upon by the parties. The parties agree
to conclude such private mediation within thirty (30) days of the filing by a
party of a request for such mediation. In the event of a dispute between the
parties that is not resolved by such mediation, either party may, by written
notice to the other party, call for private binding non-appealable arbitration
of the issue before a single arbitrator agreed upon by the parties. In the event
a single arbitrator cannot be agreed upon, each party shall appoint a third
party arbitrator from a list provided by the American Arbitration Association
(AAA) (not a principal of a party) and the two arbitrators thus selected by the
parties shall select a third arbitrator. The arbitrators shall meet as
expeditiously as possible to resolve the dispute, and a majority decision of the
arbitrators shall be controlling. While each party is free to select an
arbitrator of its own choosing from the list provided by the AAA, either party
by written notice to the other may require that all arbitrators chosen have
sufficient expertise in the subject matter of the arbitration that they would
qualify as "expert witnesses" in a judicial proceeding.
The arbitrators so chosen shall conduct the arbitration in accordance with the
Rules of the AAA as applicable in the State of Kansas. Such arbitration shall
take place at a mutually agreed upon location. The arbitrators shall be
governed, in their determinations hereunder, by the intention of the parties as
evidenced by the terms of this Agreement. The decision of the arbitrator shall
be rendered in writing and shall be final and binding upon the parties and shall
be non-appealable. Judgment upon the award rendered may be entered by either
party and enforced in any court having competent jurisdiction. The parties shall
share the procedural costs of the mediation and arbitration equally. Each party
shall pay its own attorney's fees and costs incurred by it relating to the
mediation and arbitration. Notwithstanding the foregoing sentences, the parties
hereby authorize the abritrators to award costs and fees to the prevailing party
as the arbitrators deem appropriate.
Pending resolution of such dispute or difference and without prejudice to their
rights, the parties shall continue to respect all their obligations and to
perform all their duties under this Agreement; provided, however, the parties
shall not be obligated to perform their obligations after this Agreement has
been terminated by any party pursuant to paragraph 16, or if such termination is
the dispute being arbitrated.
After signing this Agreement, each party understands that it will not be able to
bring a lawsuit concerning any dispute that may arise that is covered by this
arbitration provision (other than to enforce the arbitration decision). The
parties hereby agree that any dispute or difference involving paragraph 14 shall
not be subject to this mediation or arbitration provision.
12
19. ASSIGNMENT. This Agreement and the duties and obligations
hereunder may not be assigned by either party without the prior written
consent of the other party and, if applicable, the primary lender of OWNER.
20. HEADINGS. The paragraph headings contained herein are for
convenience only and are not intended to define or limit the scope or intent of
any provisions of this Agreement.
21. GOVERNING LAW. The validity of this Agreement, the construction of
its terms and the interpretation of the rights and duties of the parties hereto
shall be governed by the laws of the State of Kansas.
22. NOTICES. Any notice required or permitted herein to be given shall
be given in writing and shall be delivered by United States registered or
certified mail, return receipt requested, to MANAGER or OWNER, as the case may
be, to the Person and at the address set forth below, or to such other Person or
other address as MANAGER or OWNER shall provide notice of from time to time
during the term of this Agreement, and notice shall be deemed to have been given
to the party to whom it is addressed forty-eight (48) hours after such delivery:
OWNER: East Kansas Agri-Energy, LLC
Attn: ▇▇. ▇▇▇▇ ▇▇▇▇▇▇, President
210 1/2 East 4th Avenue, ▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
MANAGER: United Bio Energy Management, LLC
Attention: ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
23. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of the respective parties and their permitted assigns and successors in
interest.
24. SEVERABILITY. Should any term or provision hereof be deemed
invalid, void, or unenforceable either in its entirety or in a particular
application, the remainder of this Agreement shall nonetheless remain in full
force and effect and, if the subject term or provision is deemed to be invalid,
void or unenforceable only with respect to a particular application, such term
or provision shall remain in full force and effect with respect to all other
applications. If, however, any court of competent jurisdiction or any
arbitration proceeding should render a final judgment that the authority granted
to MANAGER from OWNER exceeds the bounds of permissible delegation under
applicable law, the parties agree that this Agreement shall be deemed amended,
modified and reformed to the extent necessary to reduce the scope of authority
so delegated to that deemed legal by written legal opinion of special counsel to
OWNER. The parties agree that in no event shall any determination that the
discretion and authority granted to MANAGER hereunder exceeds permissible bounds
result in this Agreement being declared or adjudged invalid, void, or
unenforceable in its entirety; rather, the parties request that any court or
arbitration proceeding examining such issue employ great latitude in reforming
the Agreement so as to make the Agreement as reformed valid and enforceable.
13
25. INDEMNIFICATION BY OWNER. OWNER shall indemnify, hold harmless and
defend MANAGER, its employee and agents from and against any and all actual
claims, losses, damages, liabilities and expenses (including reasonable
attorneys' fees) resulting from or arising out of MANAGER's performance of its
duties hereunder; provided, however, OWNER shall not be liable to MANAGER, its
employees or agents for any actual claims, losses, damages, liabilities or
expenses resulting from or arising out of the grossly negligent acts or willful
misconduct of MANAGER in the performance of its duties hereunder unless such
acts were performed by MANAGER at the express instruction of OWNER.
26. INDEMNIFICATION BY MANAGER. MANAGER shall indemnify, hold harmless
and defend OWNER, its employees and agents from and against any and all actual
claims, losses, damages, liabilities and expenses (including reasonable
attorneys' fees) resulting from or arising out of the grossly negligent acts or
willful misconduct of MANAGER in the performance of its duties hereunder;
provided, however, MANAGER shall not be liable to OWNER, its employees and
agents for any actual claims, losses, damages, liabilities or expenses resulting
from or arising out of acts performed by MANAGER at the express instruction of
OWNER.
27. [*]. MANAGER hereby acknowledges that OWNER is entering into
separate service agreements with certain affiliates of MANAGER (i.e., United Bio
Energy Trading, LLC, United Bio Energy Ingredients, LLC, and United Bio Energy
Fuels, LLC), and that the services provided by one or more of those affiliates
to MANAGER under such agreements may include acting on behalf of and/or
performing certain duties or obligations of OWNER under the terms and provisions
of this Agreement. [*]
28. WAIVER OF CONSEQUENTIAL DAMAGES. Notwithstanding any other provison
of this Agreement, the parties agree to waive any and all claims against each
other for consequential losses or damages whether arising in contract, warranty,
tort (including negligence), strict liability or otherwise (other than any
consequential losses or damages resulting from a breach of the covenants set
forth in paragrah 14), including, but not limited to, losses of use, profits,
business, reputation or financing.
29. BOOK AND RECORDS. During the Term of the Agreement, MANAGER
shall:
(a) keep or cause to be kept full and true books of account in
which shall be entered fully and accurately each transaction relating to the
Plant;
(b) maintain or cause to be maintained all books of account,
together with all records, bills, receipts, vouchers, correspondence and
files relating to the management and operation of the Plant at the Plant and,
at MANAGER's discretion, MANAGER may maintain a copy of the aforementioned
items at the principal office of MANAGER, and the Plant shall be open during
reasonable business hours to the inspection of OWNER or its representative,
who shall be entitled to make copies or extracts thereof and, with the
cooperation of MANAGER, inquire
*Portion omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
14
directly with or request the assistance of the Plant Controller relating to
OWNER's inspection in accordance with this paragraph; such books of account,
together with all records, bills, receipts, vouchers, correspondence and files
relating to the management and operation of the Plant to remain at all times
during the term of this Agreement or thereafter the sole property of OWNER;
(c) make the Plant Controller available for any requests of OWNER
related to inquiries regarding the books and records and the preparation and
submission of financial reports to OWNER; and
(d) prepare or cause to be prepared each year in reasonable detail
and sent to OWNER within a reasonable period of time after the close of such
year (a) annual reports of the Plant, including an annual balance sheet and
profit and loss statement and (b) all federal, state and local income tax
returns and information returns, if any, which OWNER is required to file.
30. INSURANCE. At all times during the Term of this Agreement, MANAGER
shall, at OWNER's expense, procure and maintain insurance against such hazards,
in such amounts, and with such carriers as the parties may mutually determine
from time to time. MANAGER shall be named as an additional insured on all such
policies. All such policies shall contain provisions to the effect that in the
event of payment of any loss or damage the insurers will have no rights of
recovery against any of the insureds or additional insureds thereunder. OWNER
waives all rights against MANAGER and its employees and agents for all losses
and damages caused by, arising out of or resulting from any of the perils or
causes of loss covered by such policies and any other insurance applicable to
the Plant maintained by OWNER.
Also during the term of this Agreement, MANAGER shall purchase and maintain
commercial general liability insurance, with combined single limits of not less
than $2,000,000 which shall be endorsed to require at least thirty (30) days
notice to OWNER prior to the effective date of any termination or cancellation
of coverage. OWNER shall be named as an additional insured on all such policies
and MANAGER shall provide a certificate of insurance to OWNER to establish the
coverage maintained by the commencement date of this Agreement.
31. FORCE MAJEURE. Any delays in or failure of performance of any of
the respective obligations of this Agreement of either party hereto shall not
constitute default or give rise to any claims for damages if and to the extent
such delays or failure of performance are caused by occurrences not within the
reasonable control or at the fault of the party affected, which, by exercise of
due diligence and foresight, could not reasonably have been avoided, including,
but not limited to: acts of God or the public enemy; expropriation or
confiscation of facilities; compliance with any order or decree of any
governmental authority; cable cut; acts of war or terrorism, abnormal severe
weather, rebellion or sabotage or damage resulting therefrom; fires; floods;
explosion; riots; strikes or other concerted acts of workmen; accidents or other
casualty. The party rendered unable to fulfill any obligation by reason of Force
Majeure shall exercise due diligence to remove such inability with all
reasonable speed and diligence and in accordance with prudent industry
practices. However, the obligation to use due diligence shall not be interpreted
to require resolution of labor disputes be acceding to demands of the opposition
when such course is inadvisable in the discretion of the party having such
difficulty.
15
32. WAIVERS. No waiver of any breach of any of the terms or conditions
of this Agreement shall be held to be a waiver of any other subsequent breach;
nor shall any waiver be valid or binding unless the same shall be in writing and
signed by the party alleged to have granted the waiver.
33. COUNTERPARTS. This Agreement may be executed in multiple
counterparts all of which shall constitute but one Agreement.
34. AMENDMENT. This Agreement is the entire Agreement between the
parties relating to the subject matter hereof. Any amendment hereto must be in
writing and signed by both parties hereto to come into full force and effect.
35. SURVIVAL. All provisions of this Agreement, including, without
limitation, all covenants of confidentiality and indemnity contained in this
Agreement, shall survive and remain in full force and effect notwithstanding any
termination or expiration of this Agreement.
36. PRONOUNS. All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine or neuter, singular or plural, as the
identity of the Person or Persons may require.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
East Kansas Agri-Energy, LLC
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
By: ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Title: Chairman
----------------------------------
"OWNER"
United Bio Energy Management, LLC
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Title: President
----------------------------------
"MANAGER"
In consideration of OWNER entering into this Agreement and other
valuable consideration, the undersigned, being the sole owner of MANAGER, hereby
unconditionally guaranties the full and prompt performance by MANAGER of all of
its duties and obligations under the terms and provisions of this Agreement.
Dated this 12th day of November, 2004.
16
United Bio Energy, LLC, a Kansas limited
liability company
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Title: President
17
EXHIBIT A
BASIC LEVEL BENCHMARKING SERVICES
On a weekly basis, the General Manager shall be responsible for
compiling data regarding the information below:
Laboratory Data Production Data
--------------- ---------------
Milling Grain processed
▇▇▇▇ system Ethanol produced
Fermentation Dried Distiller's Grains produced
Distillation Wet Distiller's Grains produced
Evaporation Energy consumption
Centrifuges Water Usage
Dryer Chemical Usage
Wet Feed
On Friday of each week, the General Manager shall be responsible for
forwarding such data to MANAGER in an electronic format. The data shall be
reviewed and analyzed and an estimate will be prepared showing the Plant's
operating costs based on the data provided. On the first Friday after the last
day of the preceding month, or as soon thereafter as practicable, MANAGER shall
provide to OWNER a report which summarizes the data from the Plant and evaluates
the performance of the same, based on the Plant's operating costs, and compares
the Plant's data and performance to:
1. The average figures, for the data listed above, and the average
operating costs determined from all plants who receive benchmarking services
through MANAGER; and
2. The plant with the best data and performance among those plants who
receive benchmarking services through MANAGER.
MANAGER shall not be required to disclose to OWNER the identity of the
plant with the best performance in any particular period, although, MANAGER may
disclose to OWNER the identity of those plants who receive benchmarking services
from MANAGER.
At the discretion of the parties, MANAGER or OWNER may change the
specific days, of the week or month, on which the data is compiled, analyzed and
presented to OWNER
18
SCHEDULE 4.17(b)
SUPPLY CONTRACTS
1. Raw Grains Agreement. See attached Raw Grains Agreement with United Bio
Energy Ingredients, LLC, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. The
agreement was entered into on November 12, 2004. The Raw Grains Agreement
provides for the purchase of all raw grains necessary for ethanol
production from UBEI for a period of at least 5 years.
4-17(b)-1
4.17(b)(1)
RAW GRAINS AGREEMENT*
THIS RAW GRAINS MARKETING AGREEMENT (this "Agreement"), made and
entered into this 12TH of NOVEMBER, 2004, by and among East Kansas Agri-Energy,
LLC, a Kansas limited liability company ("EKAE"), and United Bio Energy
Ingredients, LLC, a Kansas limited liability company ("UBEI").
W I T N E S S E T H :
WHEREAS, EKAE intends to construct and own an ethanol plant, located
near Garnett, Kansas (the "Plant");
WHEREAS, EKAE desires to buy and UBEI desires to sell all raw grains
required for any ethanol production at the Plant (the "Raw Grains");
WHEREAS, the parties desire to purchase and sell Raw Grains, and
receive and provide such services, in accordance with the fees, price formula,
payment, delivery and other terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by both parties, it is hereby agreed:
1. COMMITMENT AND TERM. Subject to the terms of this Agreement, UBEI hereby
agrees to sell, and EKAE hereby agrees to purchase, all Raw Grains required for
ethanol production at the Plant. The initial term of this Agreement shall be for
five (5) years. The parties shall execute a memorandum setting forth the actual
date of commencement of the term, which shall be approximately 6 months before
substantial completion of the Plant. Unless earlier terminated in accordance
with this Agreement, this Agreement shall be automatically renewed for
successive one (1) year terms thereafter unless either party gives written
notice to the other party of its election not to renew, not later than ninety
(90) days prior to the expiration of the then current term.
2. PRICE AND PAYMENT.
A. PRICE. For all Raw Grains delivered to the Plant by UBEI, EKAE shall
pay UBEI a price equal to the F.O.B. Plant Price plus [*] ($[*]) per bushel. For
purposes of this provision, the "F.O.B. Plant Price" shall mean the actual cash
procurement price of Raw Grains, plus all reasonable and necessary expenses
incurred by UBEI in delivering the Raw Grains to the Plant, whether incurred
prior to or during the term of this Agreement, less any quality discounts using
the Price Discount Schedule contained in Exhibit A.
*Portion omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
1
B. PAYMENT. On a daily basis, weekends and holidays excluded, EKAE shall
provide UBEI with certified weight certificates for the previous day's receipts
of Raw Grains. Transmittal of said weight certificates may be electronically
transmitted in a medium acceptable to the parties. The certificates shall
determine the quantity and quality of Raw Grains received at the Plant for each
delivery. UBEI shall invoice EKAE, via the agreed to electronic medium, the
F.O.B. Plant Price defined in paragraph 2.A above for all properly documented
deliveries. Invoices shall be due two (2) business days after receipt of said
invoice by EKAE, and EKAE shall make payment of funds to UBEI via wire transfer
into an account designated by UBEI. Unless EKAE has provided prior written
notice to UBEI of a dispute with respect to said invoice, failure to pay in
accordance with such terms shall entitle UBEI to impose a late payment fee of
Two Tenths of One Cent ($.002) per bushel per calendar day until such invoice is
paid in full. EKAE shall have the right to inspect copy and/or audit UBEI's
expense records and Raw Grains invoices and contracts during normal business
hours at the corporate offices of UBEI. If any such inspection or audit shall
reveal an overpayment made to UBEI, UBEI shall immediately pay EKAE the amount
of the overpayment together with interest from the date that such overpayment
was made at the prime rate in effect on the date of the overpayment as reported
in the Wall Street Journal. The expense of any such inspection or audit shall be
borne by EKAE unless a material overpayment is revealed, then, in such case, the
reasonable expense of such inspection or audit shall be borne by UBEI.
C. BEST EFFORTS. UBEI agrees to use best efforts to achieve the lowest
price for Raw Grains available under prevailing market conditions.
4. ON-SITE MERCHANDISER NOT INCLUDED. The provisions of this Agreement do
not include a grain merchandiser on-site at the Plant during the term of this
Agreement.
5. DELIVERY AND TITLE.
A. PLACE. The place of delivery for all Raw Grains sold by UBEI pursuant
to this Agreement shall be F.O.B. Plant. UBEI and its agents shall be given
access to the Plant in a manner and at all times reasonably necessary and
convenient for UBEI to make delivery as provided herein. EKAE shall direct the
unloading and receiving of all Raw Grains purchased hereunder. All labor and
equipment necessary to load or unload trucks or rail cars shall be supplied by
EKAE without charge to UBEI. EKAE agrees to handle the unloading and receiving
of the Raw Grains in a good and workmanlike manner in accordance with UBEI's
reasonable requirements and in accordance with normal industry practice. EKAE
shall maintain the truck/rail unloading facilities in safe operating condition
in accordance with normal industry standards.
B. UNLOADING SCHEDULE. On Friday of each week during the term of this
Agreement, UBEI shall give EKAE a schedule of quantities of Raw Grains to be
delivered by rail by UBEI during the next receiving week (Monday through
Sunday). In the event UBEI delivers some or all of the Raw Grains by truck, UBEI
shall give EKAE sufficient advance notice to allow EKAE to provide the required
unloading services. EKAE shall provide the labor,
2
equipment and facilities necessary to meet UBEI's unloading schedule and shall
be responsible for UBEI's additional costs resulting from EKAE's failure to do
so; provided, however, if UBEI has not given notice as provided herein, EKAE is
obligated only to use its best efforts to accommodate UBEI's unloading schedule
and EKAE shall not be responsible for any additional costs incurred by UBEI
resulting from EKAE's failure to do so. All freight charges shall be the
responsibility of UBEI and shall be billed directly to UBEI, and said charges
shall be included in the price charged to EKAE. UBEI shall order and supply
trucks as scheduled for truck shipments.
C. PRODUCTION SCHEDULE. UBEI shall provide Raw Grains in quantities
necessary to permit EKAE to maintain its usual production schedule; provided,
however, that UBEI shall not be responsible for failure to schedule receipts of
Raw Grains unless EKAE shall have provided to UBEI, at least five (5) days prior
to the beginning of the next month, notice of the estimated schedule for
production for such month. On Wednesday of each week, EKAE shall provide UBEI
notice of the schedule for actual production for the following production week
(Monday through Sunday). EKAE shall inform UBEI daily of inventory and
production status by 8:30 a.m. CDT.
For purposes of this paragraph, notification of such production schedules
will be sufficient if made by facsimile or electronically as follows:
UBEI, to the attention of ▇▇▇ ▇▇▇▇▇▇, Facsimile number
▇▇▇-▇▇▇-▇▇▇▇, Email address: ▇▇▇.▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇;
and
EKAE, to the attention of General Manager, Facsimile
number ________________, Email address:____________________.
Or to such other representatives of UBEI and EKAE as they may designate to
the other in writing.
D. TITLE. Title, risk of loss and responsibility for the quality of
Raw Grains shall pass to EKAE upon unloading the Raw Grains at the Plant. Prior
to unloading, EKAE shall have the right to inspect and reject any Raw Grain
delivery that does not meet the quality standards set forth in this Agreement.
6. QUANTITY AND WEIGHTS.
A. NO REPRESENTATION. It is understood that the Raw Grains required for
the production of the ethanol shall be determined by EKAE's production schedule
and that no warranty or representation has been made by EKAE as to the exact
quantities of Raw Grains required.
B. ESTIMATE. The estimated amount of Raw Grains required for the
production of ethanol at the Plant is thirteen million (13,000,000) bushels per
year.
▇. ▇▇▇▇▇▇. The weight of Raw Grains delivered by UBEI to the Plant shall
3
be established by weight certificates. EKAE shall obtain truck and rail weights
on the scales at the Plant, which shall be maintained by EKAE as required by
applicable laws, rules and regulations. Whenever EKAE's scales are unavailable
or inoperable, any certified scales may be used, at EKAE's sole cost and
expense, until EKAE's scales are available and operable. These inbound weight
certificates shall be determinative of the quantity of Raw Grains for which EKAE
is obligated to pay pursuant to paragraph 2 above, except that Raw Grains
procured by UBEI on the basis of origin weights shall be invoiced at the actual
origin weight, with an allowance for shrinkage not greater than three percent
(3%), as measured against the destination weight.
D. RAIL CARS. Except as otherwise consented to by EKAE, all rail cars
for Raw Grains shall be grain ▇▇▇▇▇▇ cars.
7. QUALITY.
A. STANDARDS. UBEI understands that EKAE intends to utilize the Raw
Grains purchased from UBEI as primary base stock for ethanol production and that
said Raw Grains are subject to minimum quality standards for such use. UBEI
warrants that Raw Grains delivered to the Plant shall meet the Corn
Specification contained in the Quality Standards in EXHIBIT A attached hereto or
the Sorghum Specification contained in the Quality Standards in EXHIBIT B
attached hereto and shall be acceptable under current industry standards in the
ethanol production industry. The Quality Standards in EXHIBIT A and EXHIBIT B
are subject to change as may be mutually agreed in writing by and between the
parties, provided, however, that such changes shall be in conformance with
generally acceptable industry standards.
B. COMPLIANCE. UBEI warrants that at the time of delivery the Raw Grains
will not be adulterated or misbranded within the meaning of the Federal Food,
Drug and Cosmetic Act and that the Raw Grains may lawfully be introduced into
interstate commerce under said Act. Unless otherwise agreed between the parties
to this Agreement, and in addition to other remedies permitted by law, EKAE may,
without obligation to pay, reject any Raw Grains before unloading for the
failure of the Raw Grains to comply with the representations and warranties in
this paragraph. Actual unloading of Raw Grains at the Plant shall waive EKAE's
rights to reject Raw Grains on the grounds of noncompliance with the
representations and warranties in this Agreement. Should any of the Raw Grains
be seized or condemned by any federal or state department or agency for any
reason, except noncompliance by EKAE with applicable federal or state
requirements, such seizure or condemnation shall operate as a rejection by EKAE
of the Raw Grains seized or condemned and EKAE shall not be obligated to offer
any defense in connection with the seizure or condemnation. If UBEI fails to
deliver Raw Grains as required by this Agreement, or EKAE rejects in good faith
any tender of delivery of Raw Grains, EKAE may in good faith and without
unreasonable delay, make any reasonable purchase of Raw Grains in substitution
of the amount due from UBEI and credit any costs incurred in obtaining the
substitute Raw Grains against any amounts owed by EKAE to UBEI.
C. PRODUCT TESTING. If UBEI knows, should know or reasonably suspects
that any Raw Grains delivered by UBEI to the Plant do not meet the standards set
forth in this Agreement, UBEI shall promptly so notify EKAE so that such Raw
Grains can be tested
4
before being unloaded at the Plant. If EKAE knows or reasonably suspects that
any Raw Grains delivered by UBEI to the Plant do not meet the standards set
forth in this Agreement, then EKAE may obtain independent laboratory tests of
the affected Raw Grains. If such Raw Grains are tested and found to comply with
all warranties made by UBEI herein, then EKAE shall pay all reasonable testing
costs and if the Raw Grains are found not to comply with such warranties, UBEI
shall pay all reasonable testing costs and EKAE shall be allowed to reject such
delivery regardless of whether the affected Raw Grains have been unloaded.
D. NON-SPECIFICATION PRODUCTS. If UBEI delivers Raw Grains which do not
meet the Corn Specification contained in EXHIBIT A or the Sorghum Specification
contained in EXHIBIT B, then EKAE agrees to purchase such Raw Grains in
accordance with the Price Discount Schedule contained in EXHIBIT A or EXHIBIT B,
unless such Raw Grains may be rejected in accordance with EXHIBIT A or EXHIBIT B
and this Agreement.
8. INSURANCE.
A. POLICIES. EKAE warrants to UBEI that all EKAE's employees engaged in
the acquisition of Raw Grains for the Plant shall be covered as required by law
by worker's compensation and unemployment compensation insurance. UBEI warrants
to EKAE that all UBEI's employees or agents of UBEI present at the Plant shall
be covered as required by law by worker's compensation and unemployment
compensation insurance.
B. COVERAGES. During the term of this Agreement, EKAE shall purchase and
maintain insurance in such amounts as it may reasonably determine. UBEI shall be
named as an additional insured on all such policies. All such policies shall
contain provisions to the effect that in the event of payment of any loss or
damage the insurers will have no rights of recovery against any of the insureds
or additional insureds thereunder. EKAE waives all rights against UBEI and its
employees and agents for all losses and damages caused by, arising out of or
resulting from any of the perils or causes of loss covered by such policies and
any other property insurance applicable to the Plant. Also during the term of
this Agreement, UBEI shall purchase and maintain commercial general liability
insurance, with combined single limits of not less than $2,000,000 which shall
be endorsed to require at least thirty (30) days notice to EKAE prior to the
effective date of any termination or cancellation of coverage. EKAE shall be
named as an additional insured on all such policies and UBEI shall provide a
certificate of insurance to EKAE to establish the coverage maintained by the
commencement date of this Agreement.
C. UBEI VEHICLES. UBEI agrees to carry such insurance on its vehicles
and personnel operating on EKAE's property as UBEI reasonably deems appropriate
or as required by law. The parties acknowledge that UBEI may elect to self
insure its vehicles. Upon request, UBEI shall provide a certificate of insurance
to EKAE to establish the coverage maintained by UBEI.
D. CONSEQUENTIAL DAMAGES. EACH PARTY TO THIS AGREEMENT UNDERSTANDS THAT NO OTHER
PARTY MAKES ANY GUARANTEE, EXPRESS OR IMPLIED, TO ANY OTHER OF PROFIT, OR OF ANY
PARTICULAR ECONOMIC RESULTS FROM TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. IN
NO
5
EVENT SHALL ANY PARTY BE LIABLE FOR SPECIAL, COLLATERAL, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES FOR ANY ACT OR OMISSION COMING WITHIN THE SCOPE OF THIS
AGREEMENT, OR FOR BREACH OF ANY OF THE PROVISIONS OF THIS AGREEMENT, EVEN IF IT
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, SUCH EXCLUDED DAMAGES
INCLUDE, BUT ARE NOT LIMITED TO, LOSS OF GOOD WILL, LOSS OF PROFITS, LOSS OF
USE, AND INTERRUPTION OF BUSINESS.
E. OTHER CLAIMS. Except as provided in paragraph 8.D above, nothing
herein shall be construed as a waiver by either party against the other party of
claims, causes of action or other rights which either party may have or
hereafter acquire against the other party for damage or injury to its agents,
employees, invitees, property, equipment or inventory, or third party claims
against the other party for damage or injury to other persons or the property of
others.
9. REPRESENTATIONS AND WARRANTIES.
A. Each party represents and warrants that it is an entity in good
standing under the laws that it is organized and has all the requisite power and
authority to carry on its business as it has been and to own, lease, and operate
the properties and assets used in connection therewith.
B. In addition to the representations and warranties herein regarding
the quality of Raw Grains, UBEI represents and warrants that the Raw Grains
delivered to EKAE shall be free and clear of liens and encumbrances.
C. Each individual executing this Agreement in a representative
capacity, by his or her execution hereof, represents and warrants that such
person is fully authorized to do so on behalf of the respective party hereto,
and that no further action or consent on the part of the party for whom such
signatory is acting is required for the effectiveness and enforceability of this
Agreement against such party, following such execution.
10. TERMINATION.
A. FOR CAUSE. Either party may terminate this Agreement without
liability for cause by providing thirty (30) days prior written notice to the
other party. For purposes of this paragraph, "cause" shall include, but not be
limited to, the happening of an event of default discussed in paragraph 11
below, or any other material breach of any provision of this Agreement, or
material violation of any applicable law, regulation or ruling.
B. WITHOUT CAUSE. Either party may terminate this Agreement without
cause by providing ninety (90) days prior written notice to the other party. If
EKAE terminates this Agreement without cause during the initial term, then EKAE
shall pay to UBEI, within thirty (30) days of termination, an amount equal to
the product of three (3) multiplied by the average monthly fee paid to UBEI,
under paragraph 2.A above, for the six (6) months prior to the termination date,
or if the fee has been paid for less than six (6) months, by the average of the
6
monthly fee for the number of months such monthly fee has been paid to UBEI.
11. EVENTS OF DEFAULT. The occurrence of any of the following shall be
an event of default under this Agreement: (1) failure of either party to make
payment to the other when due, if such nonpayment has not been cured within five
(5) days of written notice thereof; (2) default by either party in the
performance of any material covenant, condition or agreement imposed upon that
party by this Agreement, if such nonperformance has not been cured within five
(5) days of written notice thereof; or (3) if either party shall become
insolvent, or make a general assignment for the benefit of creditors or to an
agent authorized to liquidate any substantial amount of its assets, or be
adjudicated bankrupt, or file a petition in bankruptcy and such petition is not
dismissed within ninety (90) days following the date of filing, or apply to a
court for the appointment of a receiver for any of its assets or properties with
or without consent, and such receiver shall not be discharged within sixty (60)
days following appointment.
12. REMEDIES. Upon the happening of an event of default under paragraph
11, the parties hereto shall have all remedies available under applicable law
with respect to an event of default by the other party, including but not
limited to the recovery of attorneys' fees and other costs and expenses. Without
limiting the foregoing, the parties shall have the following remedies whether in
addition to or as one of the remedies otherwise available to them: (1) to
declare all amounts owed immediately due and payable; and (2) to terminate this
Agreement in accordance with the provisions of paragraph 10.
13. FORCE MAJEURE. Neither EKAE nor UBEI will be liable to the other
for any failure or delay in the performance of any obligation under this
Agreement due to events beyond its reasonable control, including, but not
limited to, fire, storm, flood, earthquake, explosion, act of the public enemy
or terrorism, riots, civil disorders, public emergency, sabotage, strikes,
lockouts, labor disputes, labor shortages, war, stoppages or slowdowns initiated
by labor, transportation embargoes, acts of God, or acts or regulations or
priorities of the federal, state or local government or branches or agencies
thereof; provided, however, both parties agree to use reasonable efforts to
correct any failure or delay in performance.
14. INDEMNIFICATION.
A. Except as otherwise provided in this Agreement, EKAE shall
indemnify, defend and hold UBEI and its officers, directors, employees and
agents harmless, from any and all losses, liabilities, damages, expenses
(including reasonable attorneys' fees), costs, claims, demands, that UBEI or its
officers, directors, employees or agents may suffer, sustain or become subject
to, or as a result of (i) any misrepresentation or breach of warranty, covenant
or agreement of EKAE contained herein or (ii) EKAE's gross negligence or willful
misconduct.
B. Except as otherwise provided in this Agreement, UBEI shall
indemnify, defend and hold EKAE and its officer, directors, employees and agents
harmless, from any and all losses, liabilities, damages, expenses (including
reasonable attorneys' fees), costs, claims, demands, that EKAE or its officers,
directors, employees or agents may suffer, sustain or become subject to, or as a
result of (i) any misrepresentation or breach of warranty, covenant or agreement
of UBEI contained herein or (ii) UBEI's negligence or willful misconduct.
7
C. Where such personal injury or death is the result of negligence on
the part of both EKAE and UBEI, each party's duty of indemnification shall be in
proportion to the percentage of that party's negligence or faults.
15. [*]. UBEI hereby acknowledges that EKAE is entering into separate
service agreements with certain affiliates of UBEI (i.e., United Bio Energy
Trading, LLC, United Bio Energy Management, LLC, and United Bio Energy Fuels,
LLC), and that the services provided by one or more of those affiliates to EKAE
under such agreements may include acting on behalf of EKAE and/or performing
certain duties or obligations of EKAE under the terms and provisions of this
Agreement. [*]
16. RELATIONSHIP OF PARTIES. This Agreement creates no relationship
other than those of seller and buyer between the parties hereto. Specifically,
there is no agency, partnership, joint venture or other joint or mutual
enterprise or undertaking created hereby. Nothing contained in this Agreement
authorizes one party to act for or on behalf of the other and neither party is
entitled to commissions from the other.
17. TRADE RULES. As may be applicable, all purchases and sales of Raw
Grains made hereunder shall be governed by the Grain Trade Rules of the National
Grain and Feed Association, unless otherwise specified. Said Trade Rules, shall
to the extent applicable, be a part of this Agreement as if fully set forth
herein. Notwithstanding the foregoing, the Arbitration Rules of the National
Grain and Feed Association shall not be applicable to this Agreement and nothing
herein contained shall be construed to constitute an agreement between the
parties to submit disputes arising hereunder to arbitration before any
organization or tribunal.
18. CONFIDENTIALITY. The parties agree to execute a Confidentiality and
Nondisclosure Agreement. Such Agreement shall remain in full force and effect
and shall apply and govern all disclosure and use of confidential information
hereunder, in accordance with the terms of such Agreement.
19. MISCELLANEOUS.
A. This Agreement, together with any attachments or other information
which is expressly incorporated herein and made an integral part of this
Agreement, is the complete understanding of the parties to this Agreement with
respect to the subject matter of this Agreement, and no other representations or
agreements shall be binding upon the parties, or shall be effective to
interpret, change or restrict the provisions of this Agreement.
B. No course of prior dealings between the parties and no usage of
trade, except where expressly incorporated by reference, shall be relevant or
admissible to supplement, explain, or vary any of the terms of this Agreement.
*Portion omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
8
C. Acceptance of, or acquiescence in, a course of performance rendered
under this or any prior agreement shall not be relevant or admissible to
determine the meaning of this Agreement even though the accepting or acquiescing
party has knowledge of the nature or the performance and an opportunity to make
objection.
D. This Agreement may be executed in multiple counterparts, all of
which shall constitute but one and the same instrument. Facsimile signatures
shall be deemed as originals as between the parties.
E. This Agreement can only be modified by a writing signed by all of
the parties or their duly authorized agents.
F. The paragraph headings herein are for reference purposes only and
shall not in any way control or affect the meaning or construction of any
provisions of this Agreement.
G. This Agreement shall be construed and performed in accordance with
the laws of the State of Kansas.
H. The respective rights, obligations and liabilities of the parties
under this Agreement are not assignable or delegable without the prior written
consent of the other party, which shall not be unreasonably withheld.
I. Time shall be of the essence in the performance of this Agreement.
J. This Agreement shall be binding upon, and shall inure to the benefit
of the parties hereto and their respective successors and assigns.
20. NOTICES. Unless a different method of notice is provided herein,
notice shall be deemed to have been given to the party to whom it is addressed
forty-eight (48) hours after it is deposited in certified U. S. mail, postage
prepaid, return receipt requested, addressed as follows:
EKAE: East Kansas Agri-Energy, LLC
▇▇▇▇/▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇
UBEI: United Bio Energy Ingredients, LLC
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Either party may change the address for notices hereunder by giving
notice of such change to the other party in the manner above provided.
9
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the
day and year first above written.
East Kansas Agri-Energy, LLC
/s/ ▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
By: ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Title: Chairman
------------------------------
United Bio Energy Ingredients, LLC
/s/ ▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
By: ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Title: President
------------------------------
In consideration of EKAE entering into this Agreement and other
valuable consideration, the undersigned, being the sole owner of UBEI, hereby
unconditionally guaranties the full and prompt performance by UBEI of all of its
duties and obligations under the terms and provisions of this Agreement.
Dated this 12th day of NOVEMBER, 2004.
United Bio Energy, LLC, a Kansas
limited liability company
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
Title: President
------------------------------
10
EXHIBIT A
QUALITY STANDARDS
CORN SPECIFICATION:
GRADE: U.S. No. 2 Yellow Corn
MOISTURE: 15.5%
AFLATOXIN: None
PRICE DISCOUNT SCHEDULE:
MOISTURE: -a shrink factor of 1.35% for each 1% of moisture
above 15.5%;
AFLATOXIN: -Greater than 0 is subject to rejection
BROKEN KERNEL AND/OR FOREIGN MATERIAL -$0.02 each 1% from 3.1% to 5.0%
-$0.03 each 1% from 5.1% to 7.0%
-Over 7.0% May Be Subject to
Rejection
DAMAGE: -$0.01 each 1% over 5.0%
HEAT DAMAGE: -$0.01 each 1/10 of 1% over 2/10 of 1%
-Over 3% subject to rejection
TEST WEIGHT: -$0.01 each lb. under 54# to 50#
-$0.02 each lb. under 50#
-Less than 45 lbs subject to rejection
Corn that has a moisture content above 17.5% may be rejected.
Corn that is found to be musty, heating, sour or possessing a commercially
objectionable foreign odor may be rejected.
Corn containing 2 or more live weevils or 10 or more live grain insects per
sample will be discounted $0.05 per bushel. Corn containing rodent or bird
contamination, stones, glass or other commercially undesirable foreign material
will be rejected.
11
SCHEDULE 4.17(C)
OFF-TAKE CONTRACTS
1. Ethanol Agreement. See attached Ethanol Agreement with United Bio Energy
Fuels, LLC, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. The agreement was
entered into on November 12, 2004. The Ethanol Agreement provides that
UBEF will market all fuel-grade ethanol produced at the plant for a period
of at least 5 years.
2. Distiller's Grains Marketing Agreement. See attached Distiller's Grains
Marketing Agreement with United Bio Energy Ingredients, LLC, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. The agreement was entered into on November
12, 2004. The Distiller's Grains Marketing Agreement provides that UBEI
will purchase all dried and wet distillers grains produced at the plant
for a period of at least 5 years.
4.17(c) - 1
4.17(c)(1)
ETHANOL AGREEMENT*
THIS ETHANOL AGREEMENT (this "Agreement"), made and entered into this
12th day of November, 2004, by and among East Kansas Agri-Energy, LLC, a Kansas
limited liability company ("EKAE"), and United Bio Energy Fuels, LLC, a Kansas
limited liability company ("UBEF").
W I T N E S S E T H :
WHEREAS, EKAE intends to construct and own an ethanol plant, located
near Garnett, Kansas (the "Plant");
WHEREAS, EKAE desires to sell and UBEF desires to buy all the fuel
grade ethanol ("Ethanol") produced at the 35 MGY dry grind ethanol plant located
near Garnett, Kansas ("Plant");
WHEREAS, the parties desire to purchase and sell the Ethanol, and
receive and provide such services, in accordance with the fees, price formula,
payment, delivery and other terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and conditions herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
both parties, it is hereby agreed:
1. FEES. During the term of this Agreement, EKAE shall pay UBEF a fee
of [*] ($[*]) for each gallon of Ethanol produced at the Plant and shipped by
UBEF (the "Marketing Fee").
2. TERM. The initial term of this Agreement shall be for five (5)
years. The parties shall execute a memorandum setting forth the actual date of
commencement of the term, which shall be approximately 6 months before
substantial completion of the Plant. Unless earlier terminated in accordance
with this Agreement, this Agreement shall be automatically renewed for
successive one (1) year terms thereafter unless either party gives written
notice to the other party of its election not to renew, not later than ninety
(90) days prior to the expiration of the then current term.
3. PRICE AND PAYMENT.
A. PRICE.
UBEF agrees to pay EKAE for all Ethanol shipped by UBEF from the
Plant, a price equal to the F.O.B. Plant Price. For purposes of this provision,
the "F.O.B. Plant Price" shall mean the actual sales price of the Ethanol
charged by UBEF to its customers, less the
*Portion omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
1
Marketing Fee and all reasonable expenses incurred by UBEF in connection with
the sale and delivery of the Ethanol to its customers, including, but not
limited to, all freight costs. Revenues realized from exchanges made on behalf
of EKAE will be paid to EKAE.
B. PAYMENT.
On a daily basis, Weekends and Holidays excluded, EKAE shall
provide UBEF with certified meter or weight certificates for the previous day's
shipments of Ethanol. UBEF shall pay EKAE the F.O.B. Plant Price defined in
paragraph 3.A above, for all properly documented shipments. UBEF shall deliver
to EKAE payment for such shipments on or before the second following Friday of
each one week shipment period (Sunday through Saturday). UBEF agrees to maintain
accurate sales and expense records and to provide such records to EKAE upon
request. EKAE shall have the right to inspect, copy and/or audit UBEF's sales
invoices and expense records at any time during normal business hours at the
corporate office of UBEF. If any such inspection or audit shall reveal a
deficiency in a payment due to EKAE, UBEF shall immediately pay EKAE the amount
of the deficiency together with interest from the date that such payment should
have been made at the prime rate in effect on the date of the underpayment as
reported in the Wall Street Journal. The expense of any such inspection or audit
shall be borne by EKAE unless a material deficiency in payment is revealed,
then, in such case, the reasonable expense of such inspection or audit shall be
borne by UBEF.
C. BEST EFFORTS. UBEF agrees to use its best efforts to achieve the
highest price of Ethanol available under prevailing market conditions as judged
in good faith by UBEF and agrees to communicate to EKAE the terms and conditions
of ethanol sales.
D. COLLECTION. UBEF shall be responsible for all customer billing
and account servicing, including, but not limited to, the collection of amounts
owed UBEF by its customers, UBEF shall bear all costs associated with such
billing and collection activities, and UBEF shall assume all losses due to
failure of its customers to pay their account.
E. FUTURE SALES BY UBEF. UBEF shall not contract for the sale of
Ethanol to its customers more than one hundred eighty (180) days in advance,
unless EKAE explicitly approves the price and terms of any such contract and
provides notice of such approval to UBEF. Upon notice of termination, UBEF shall
not contract for the sale of Ethanol to its customers more than ninety (90) days
in advance, unless EKAE explicitly approves the price and terms of any such
contract and provides notice of such approval to UBEF. UBEF will advise EKAE
weekly and update EKAE monthly on all outstanding contractual obligations, and
the terms thereof.
4. FEES AND EXPENSES. Unless otherwise specifically provided for
herein, and to the extent not already included in the price of the Ethanol, EKAE
shall be responsible for any and all fees and expenses, including but not
limited to fees assessed by any State or other regulatory agency, incurred or
assessed on any Ethanol, whether for licensing, dues, branding, packaging,
inspecting, or otherwise. EKAE shall, as a result of its responsibility for such
expenses, retain all rights to any name, branding, and packaging of the Ethanol
upon termination of this Agreement.
2
5. DELIVERY AND TITLE.
A. PLACE. The place of delivery for all Ethanol purchased by UBEF
pursuant to this Agreement shall be F.O.B. Plant. UBEF and its agents shall be
given access to the Plant in a manner and at all times reasonably necessary and
convenient for UBEF to take delivery as provided herein. UBEF shall schedule the
loading and shipping of all Ethanol purchased hereunder, whether shipped by
truck or rail. All labor and equipment necessary to load or unload trucks or
rail cars shall be supplied by EKAE without charge to UBEF. The parties agree to
handle the Ethanol in a good and workmanlike manner in accordance with the
other's reasonable requirements and in accordance with normal industry practice.
EKAE shall maintain the truck/rail loading facilities in safe operating
condition in accordance with normal industry standards.
B. STORAGE.
EKAE shall provide storage space for not less than seven (7) full
days of production of Ethanol, based on normal operating capacity.
C. REMOVAL. UBEF warrants and agrees to remove Ethanol before the
aforementioned storage limits are exceeded. EKAE shall be responsible at all
times for the quantity, quality and condition of any Ethanol in storage at the
Plant.
D. LOADING AND UNLOADING SCHEDULE.
UBEF shall give to EKAE a schedule of quantities of Ethanol to be
removed by truck and rail respectively with sufficient advance notice reasonably
to allow EKAE to provide the required services described herein. EKAE shall
provide the labor, equipment and facilities necessary to meet UBEF's loading
schedule and EKAE shall be responsible for UBEF's actual costs or damages
resulting from EKAE's failure to do so.
UBEF shall order and supply trucks as scheduled for truck
shipments. All freight charges shall be the responsibility of UBEF and shall be
billed directly to UBEF.
E. PRODUCTION SCHEDULE.
1. UBEF shall provide loading orders as necessary to permit EKAE
to maintain its usual production schedule, provided, however, that UBEF shall
not be responsible for failure to schedule removal of Ethanol unless EKAE shall
have provided to UBEF production schedules as follows: At least five (5) days
prior to the beginning of each calendar month during the term hereof, EKAE shall
provide to UBEF a tentative schedule for production in the next calendar month.
On Wednesday of each week, EKAE shall provide to UBEF a schedule for actual
production for the following production week (Monday through Sunday). EKAE shall
inform UBEF daily of inventory and production status by 8:30 a.m. CDT.
2. NOTICE. For purposes of this paragraph 5.E, notification will
be sufficient if made by facsimile or electronically as follows:
If to UBEF to the attention of ▇▇▇▇▇ ▇▇▇▇▇▇▇, Facsimile number
▇▇▇-▇▇▇-▇▇▇▇, Email address: ▇▇▇▇▇.▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
3
and
If to EKAE, to the attention of ___________________, Facsimile
number ________________, Email address:____________________, or
to such other representatives of UBEF and EKAE as they may designate
to the other in writing.
F. TITLE. Title and risk of loss shall pass to UBEF at the point in
time when loading the Ethanol into trucks or rail cars has been completed and
delivery to UBEF of the ▇▇▇▇ of lading for each such shipment.
G. RAIL CAR LEASES. UBEF shall be responsible for estimating the
number of rail car leases required to handle the transportation of the Ethanol
and for negotiating the terms of and executing such rail car leases; provided,
however, that any and all rail car leases executed by UBEF shall be in
substantially the same form as a standard rail car lease previously approved by
EKAE for this purpose. Upon the termination of this Agreement, any and all
existing rail car leases for the transport of Ethanol will be assigned to EKAE,
who will assume and be obligated to the terms and conditions of said leases.
EKAE shall reimburse UBEF for any reasonable expenses incurred by UBEF
associated with such rail car leases, to the extent such expenses are not
already accounted for in the price of the Ethanol.
H. RAIL CONTRACTS. UBEF shall negotiate, in consultation with EKAE,
the terms of rail contracts and rates on behalf of EKAE. The rail contracts
shall be placed in the sole name of EKAE.
6. QUANTITY AND WEIGHTS.
A. PRODUCTION AMOUNT. EKAE represents and warrants that it will sell
to UBEI and UBEI represents and warrants that it will purchase from EKAE all
Ethanol produced at the Plant. However, it is understood that total production
amount of Ethanol shall be determined by EKAE's production schedule and that no
warranty or representation has been made by EKAE as to the exact quantities or
timing of Ethanol to be produced pursuant to this Agreement.
B. ESTIMATE. The estimated production of Ethanol at the Plant by
EKAE, to be sold to UBEF, is approximately 35 million (35,000,000) gallons of
Ethanol per year on a ratable production schedule per month, and EKAE shall use
its best efforts to produce such amount of Ethanol.
▇. ▇▇▇▇▇▇.
The quantity of Ethanol delivered to UBEF from the Plant shall be
established by meter or weight certificates, obtained from meters or scales at
the Plant, which shall be maintained by EKAE as required by applicable laws,
rules and regulations. The outbound meter or weight certificates shall be
determinative of the quantity of the Ethanol for which UBEF is obligated to pay
pursuant to paragraph 3 above, and such quantity shall be
4
measured using net 60 degree Fahrenheit compensated gallons.
D. RAIL CARS.
All rail cars for Ethanol shall be the largest allowable tank
cars as determined by UBEF. With respect to Ethanol, all such cars shall meet
all applicable Department of Transportation and Federal Railroad Administration
specifications for shipping ethanol. EKAE agrees that such tank cars for Ethanol
shall be loaded to full visible capacity at the Plant. If not loaded to full
visible capacity, EKAE shall pay in full the portion of freight charges
allocable to the unused capacity of the car.
7. QUALITY.
A. STANDARDS. EKAE understands that UBEF intends to sell the Ethanol
purchased from EKAE as a gasoline blending component and that the same is
subject to minimum quality standards for such use. EKAE warrants that the
Ethanol produced by the Plant and delivered to UBEF shall conform to the minimum
quality standards outlined in EXHIBIT A or EXHIBIT B (ETHANOL FOR CALIFORNIA) as
may be applicable, attached hereto, as each may be amended from time to time.
Notwithstanding anything in this Agreement to the contrary, EKAE provides no
warranty greater than those received from ICM, Inc. pursuant to the Design-Build
Contract dated August 9, 2004.
B. COMPLIANCE. Unless otherwise agreed between the parties to this
Agreement, and in addition to other remedies permitted by law, UBEF may, without
obligation to pay, reject any of the Ethanol before loading for the failure of
the Ethanol to comply with the representations and warranties in this paragraph.
Actual loading of Ethanol shall not waive UBEF's rights to reject Ethanol on the
grounds of noncompliance with the representations and warranties in this
Agreement unless UBEF had actual knowledge of such noncompliance prior to
loading. Should any of the Ethanol be seized or condemned by any federal or
state department or agency for any reason, except noncompliance by UBEF with
applicable federal or state requirements, such seizure or condemnation shall
operate as a rejection by UBEF of the Ethanol seized or condemned and UBEF shall
not be obligated to offer any defense in connection with the seizure or
condemnation. However, UBEF agrees to cooperate with EKAE in connection with the
defense of any quality or other product claims, or any claims involving
governmental seizure or condemnation. UBEF shall be fully responsible for, and
shall indemnify EKAE against any liability for, or claims arising from, any
failure by UBEF to deliver Ethanol to its customers, except to the extent that
delivery fails due to the fault of EKAE. When rejection occurs pursuant to this
paragraph, at its option, UBEF may:
(1) Dispose of the rejected Ethanol after first offering EKAE a
reasonable opportunity of examining and taking possession thereof, if the
condition of the Ethanol reasonably appears to UBEF to permit such delay in
making disposition; or
(2) Dispose of the rejected Ethanol in any manner directed by
EKAE which UBEF can accomplish without violation of applicable laws, rules,
regulations or property rights; or
5
(3) If any of the Ethanol is seized or condemned by any federal
or state department or agency or if UBEF has no available means of disposal of
rejected Ethanol and EKAE fails to direct UBEF to dispose of it as provided
herein, UBEF may return the rejected Ethanol to EKAE, upon which event UBEF's
obligations with respect to said rejected Ethanol shall be deemed fulfilled.
Title and risk of loss shall pass to EKAE promptly upon such seizure or
condemnation or rejection by UBEF.
(4) EKAE shall reimburse UBEF for all costs reasonably incurred
by UBEF in storing, transporting, returning and disposing of the rejected
Ethanol. UBEF shall have no obligation to pay EKAE for rejected Ethanol and may
deduct reasonable costs and expenses to be reimbursed by EKAE from amounts
otherwise owed by UBEF to EKAE.
C. PRODUCT TESTING. If EKAE knows or reasonably suspects that any
Ethanol produced by the Plant is adulterated or misbranded, or, are outside of
minimum quality standards set forth in EXHIBIT A or EXHIBIT B, EKAE shall
promptly so notify UBEF so that such Ethanol can be independently tested before
entering interstate commerce. If UBEF knows or reasonably suspects that any
Ethanol produced by the Plant is adulterated or misbranded, or, is outside of
minimum quality standards set forth in EXHIBIT A or EXHIBIT B, then UBEF may
obtain independent laboratory tests of the affected Ethanol. If such Ethanol is
independently tested and found to comply with all warranties made by EKAE
herein, then UBEF shall pay all testing costs, and if the Ethanol is found not
to comply with such warranties, EKAE shall pay all testing costs.
D. CHANGES IN STANDARDS. Upon written notice to UBEF, said minimum
quality standards are subject to change at the discretion of EKAE. Sufficient
notice of any such change shall be deemed to be given to UBEF if EKAE gives
written notification to UBEF at least thirty (30) days prior to such change.
Such changes must be in conformance to generally acceptable industry standards.
8. RETENTION OF SAMPLES. EKAE will take an origin sample of the
Ethanol from each truck or rail car before each shipment leaves the Plant, using
industry standard sampling methodology. EKAE will label these samples to
indicate the date of shipment of the truck, rail car, or pickup number involved.
EKAE shall also retain the samples and labeling information for no less than six
(6) months after shipment of the Ethanol.
9. INSURANCE.
A. POLICIES. EKAE warrants to UBEF that all EKAE's employees engaged
in the removal of Ethanol from the Plant shall be covered as required by law by
worker's compensation and unemployment compensation insurance.
B. COVERAGES. During the term of this Agreement, EKAE shall purchase
and maintain such insurance in such amounts as it may reasonably determine. UBEF
shall be named as an additional insured on all such policies. All such policies
shall contain provisions to the effect that in the event of payment of any loss
or damage the insurers will have no rights of recovery against any of the
insureds or additional insureds thereunder. EKAE waives all rights against UBEF
and its employees and agents for all losses and damages caused by, arising out
of or resulting from any of the perils or causes of loss covered by such
policies and any other property insurance applicable to the Plant. Also during
the term of this Agreement, UBEF shall
6
purchase and maintain commercial general liability insurance, with combined
single limits of not less than $2,000,000 which shall be endorsed to require at
least thirty (30) days notice to EKAE prior to the effective date of any
termination or cancellation of coverage. EKAE shall be named as an additional
insured on all such policies and UBEF shall provide a certificate of insurance
to EKAE to establish the coverage maintained by the commencement date of this
Agreement.
C. UBEF VEHICLES. UBEF agrees to carry such insurance on its
vehicles and personnel operating on EKAE's property as UBEF reasonably deems
appropriate or as required by law. The parties acknowledge that UBEF may elect
to self insure its vehicles. UBEF shall provide a certificate of insurance to
EKAE to establish the coverage maintained by UBEF.
D. CONSEQUENTIAL DAMAGES. EACH PARTY TO THIS AGREEMENT UNDERSTANDS
THAT NO OTHER PARTY MAKES ANY GUARANTEE, EXPRESS OR IMPLIED, TO ANY OTHER OF
PROFIT, OR OF ANY PARTICULAR ECONOMIC RESULTS FROM TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT. IN NO EVENT SHALL ANY PARTY BE LIABLE FOR SPECIAL, COLLATERAL,
INCIDENTAL, OR CONSEQUENTIAL DAMAGES FOR ANY ACT OR OMISSION COMING WITHIN THE
SCOPE OF THIS AGREEMENT, OR FOR BREACH OF ANY OF THE PROVISIONS OF THIS
AGREEMENT, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, SUCH
EXCLUDED DAMAGES INCLUDE, BUT ARE NOT LIMITED TO, LOSS OF GOOD WILL, LOSS OF
PROFITS, LOSS OF USE, AND INTERRUPTION OF BUSINESS.
E. OTHER CLAIMS. Except as provided in paragraph 9.D above, nothing
herein shall be construed as a waiver by either party against the other party of
claims, causes of action or other rights which either party may have or
hereafter acquire against the other party for damage or injury to its agents,
employees, invitees, property, equipment or inventory, or third party claims
against the other party for damage or injury to other persons or the property of
others.
10. REPRESENTATIONS AND WARRANTIES.
A. Each party represents and warrants that it is an entity in good
standing under the laws that it is organized and has all the requisite power and
authority to carry on its business as it has been and to own, lease, and operate
the properties and assets used in connection therewith.
B. In addition to the representations and warranties herein
regarding the quality of Ethanol, EKAE represents and warrants that the Ethanol
delivered to UBEF shall be free and clear of liens and encumbrances.
Notwithstanding the foregoing, UBEF acknowledges that EKAE's senior lender has a
security interest in all of the assets of EKAE subject to EKAE's ability to make
sales in the ordinary course of business.
C. Each individual executing this Agreement in a representative
capacity, by his or her execution hereof, represents and warrants that such
person is fully authorized to do so on behalf of the respective party hereto,
and that no further action or consent on the part of the party for whom such
signatory is acting is required for the effectiveness and enforceability of this
Agreement against such party, following such execution.
7
D. Each party warrants that it is now in material compliance, and
during the entire term of this Agreement will remain in material compliance,
with all applicable federal, state, local, and foreign laws, ordinances, orders,
rules, and regulations ("Laws"). The definition of Laws set out above includes,
but is not limited to, the Toxic Substances Control Act ("TOSCA"), and all other
laws related to the protection of the environment ("Environmental Laws").
E. Each party now has, or will obtain, and will have at all times
during the term of this Agreement, all of the licenses and permits necessary to
perform its obligations under this Agreement.
F. UBEF warrants that, to the best of its knowledge, all of the
Ethanol produced by its other customers and sold by UBEF will be of merchantable
quality, and will be fit for its intended purpose. All such Ethanol must meet
all applicable ASTM Standards, must meet the standards established by the
▇▇▇▇▇▇▇▇ Pipeline test and must meet ethanol standards established by all other
standard industry tests.
G. NO ADDITIONAL WARRANTY. EXCEPT AS SPECIFICALLY STATED IN THIS
AGREEMENT, THE PARTIES MAKE NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
11. TERMINATION.
A. FOR CAUSE. Either party may terminate this Agreement without
liability for cause by providing thirty (30) days prior written notice to the
other party. For purposes of this paragraph, "cause" shall include, but not be
limited to, the happening of an event of default discussed in paragraph 12
below, or any other material breach of any provision of this Agreement, or
material violation of any applicable law, regulation or ruling.
B. WITHOUT CAUSE. Either party may terminate this Agreement without
cause by providing at least ninety (90) days prior written notice to the other
party. If EKAE terminates this Agreement without cause during the initial term,
then EKAE shall pay to UBEF, within thirty (30) days of termination, an amount
equal to the product of the following: the average monthly production of Ethanol
for the three (3) months prior to the termination date (if Ethanol has been
produced for less than three months prior to the termination date, then the
average monthly production of Ethanol for the number of months of such
production) multiplied by the Marketing Fee.
12. EVENTS OF DEFAULT. The occurrence of any of the following shall
be an event of default under this Agreement: (1) failure of either party to make
payment to the other when due, if such nonpayment has not been cured within five
(5) days of written notice thereof; (2) default by either party in the
performance of any material covenant, condition or agreement imposed upon that
party by this Agreement, if such nonperformance has not been cured within five
(5) days of written notice thereof, unless such obligation cannot be reasonably
performed within such five (5) day period, then within a reasonable time; or (3)
if either party shall become insolvent, or make a general assignment for the
benefit of creditors or to an agent authorized to
8
liquidate any substantial amount of its assets, or be adjudicated bankrupt, or
file a petition in bankruptcy and such petition is not dismissed within ninety
(90) days following the date of filing, or apply to a court for the appointment
of a receiver for any of its assets or properties with or without consent, and
such receiver shall not be discharged within sixty (60) days following
appointment.
13. REMEDIES. Upon the happening of an event of default under
paragraph 12, the parties hereto shall have all remedies available under
applicable law with respect to an event of default by the other party, including
but not limited to the recovery of reasonable attorneys' fees and other costs
and expenses. Without limiting the foregoing, the parties shall have the
following remedies whether in addition to or as one of the remedies otherwise
available to them: (1) to declare all amounts owed immediately due and payable;
and (2) to terminate this Agreement within thirty (30) days following the giving
of notice of default and opportunity to cure. Notwithstanding any other
provision of this Agreement, UBEF may offset against amounts otherwise owed to
EKAE the price of any Ethanol which fails to conform to any requirements of this
Agreement.
14. OPEN CONTRACTS. Upon the termination of this Agreement, for
whatever reason, EKAE shall assume and be responsible for delivering any
remaining quantities of Ethanol required to be delivered by UBEF to its
customers pursuant to UBEF's contracts with the same, provided such contracts
are to be delivered by UBEF from the Plant. Prior to the termination of this
Agreement, UBEF shall provide EKAE with a listing of all such contracts and the
quantities of Ethanol to be delivered pursuant to the same to assist EKAE in
completing deliveries under these open contracts. EKAE agrees to assist UBEF in
the collection of amounts owed to UBEF from those customers receiving deliveries
of Ethanol from UBEF prior to the termination of this Agreement.
15. FORCE MAJEURE. Neither EKAE nor UBEF will be liable to the other
for any failure or delay in the performance of any obligation under this
Agreement due to events beyond its reasonable control, including, but not
limited to, fire, storm, flood, earthquake, explosion, act of the public enemy
or terrorism, riots, civil disorders, public emergency, sabotage, strikes,
lockouts, labor disputes, labor shortages, war, stoppages or slowdowns initiated
by labor, transportation embargoes, failure or shortage of materials, acts of
God, or acts or regulations or priorities of the federal, state or local
government or branches or agencies thereof.
16. INDEMNIFICATION.
A. BY EKAE. Except as otherwise provided in this Agreement, EKAE
shall indemnify, defend and hold UBEF and its officers, directors, employees and
agents harmless, from any and all losses, liabilities, damages, expenses
(including reasonable attorneys' fees), costs, claims, demands, that UBEF or its
officers, directors, employees or agents may suffer, sustain or become subject
to, or as a result of (i) any misrepresentation or breach of warranty, covenant
or agreement of EKAE contained herein or (ii) EKAE's negligence or willful
misconduct.
B. BY UBEF. Except as otherwise provided in this Agreement, UBEF
shall indemnify, defend and hold EKAE and its officers, directors, employees and
agents harmless, from any and all losses, liabilities, damages, expenses
(including reasonable attorneys' fees),
9
costs, claims, demands, that EKAE or its officers, directors, employees or
agents may suffer, sustain or become subject to, or as a result of (i) any
misrepresentation or breach of warranty, covenant or agreement of UBEF contained
herein or (ii) UBEF's negligence or willful
misconduct.
C. Where such personal injury or death is the result of negligence
on the part of both EKAE and UBEF, each party's duty of indemnification shall be
in proportion to the percentage of that party's negligence or faults.
17. [*]. UBEF hereby acknowledges that EKAE is entering into
separate service agreements with certain affiliates of UBEF (i.e., United Bio
Energy Ingredients, LLC, United Bio Energy Management, LLC, and United Bio
Energy Ingredients, LLC), and that the services provided by one or more of those
affiliates to EKAE under such agreements may include acting on behalf of EKAE
and/or performing certain duties or obligations of EKAE under the terms and
provisions of this Agreement. [*]
18. RELATIONSHIP OF PARTIES. This Agreement creates no relationship
other than those of seller and buyer between the parties hereto. Specifically,
there is no agency, partnership, joint venture or other joint or mutual
enterprise or undertaking created hereby. Nothing contained in this Agreement
authorizes one party to act for or on behalf of the other and neither party is
entitled to commissions from the other.
19. CONFIDENTIALITY. The parties agree to execute a Confidentiality
and Nondisclosure Agreement. Such Agreement shall remain in full force and
effect and shall apply and govern all disclosure and use of confidential
information hereunder, in accordance with the terms of such Agreement.
20. MISCELLANEOUS.
A. This Agreement, together with any attachments or other
information which is expressly incorporated herein and made an integral part of
this Agreement, is the complete understanding of the parties to this Agreement
with respect to the subject matter of this Agreement, and no other
representations or agreements shall be binding upon the parties, or shall be
effective to interpret, change or restrict the provisions of this Agreement.
B. No course of prior dealings between the parties and no usage of
trade, except where expressly incorporated by reference, shall be relevant or
admissible to supplement, explain, or vary any of the terms of this Agreement.
C. Acceptance of, or acquiescence in, a course of performance
rendered under this or any prior agreement shall not be relevant or admissible
to determine the meaning of this Agreement even though the accepting or
acquiescing party has knowledge of the nature or the performance and an
opportunity to make objection.
*Portion omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
10
D. This Agreement may be executed in multiple counterparts, all of
which shall constitute but one and the same instrument. Facsimile signatures
shall be deemed as originals as between the parties.
E. This Agreement can only be modified by a writing signed by all of
the parties or their duly authorized agents.
F. The paragraph headings herein are for reference purposes only and
shall not in any way control or affect the meaning or construction of any
provisions of this Agreement.
G. This Agreement shall be construed and performed in accordance
with the laws of the State of Kansas.
H. The respective rights, obligations and liabilities of the parties
under this Agreement are not assignable or delegable without the prior written
consent of the other party, which shall not be unreasonably withheld.
I. Time shall be of the essence in the performance of this
Agreement.
J. This Agreement shall be binding upon, and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
21. NOTICES. Unless a different method of notice is provided herein,
notice shall be deemed to have been given to the party to whom it is addressed
forty-eight (48) hours after it is deposited in certified U. S. mail, postage
prepaid, return receipt requested, addressed as follows:
EKAE: East Kansas Agri-Energy, LLC
Attn: ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇/▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
UBEI: United Bio Energy Fuels, LLC
Attn: ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Either party may change the address for notices hereunder by giving
notice change to the other party in the manner above provided.
11
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the
day and year first above written.
East Kansas Agri-Energy, LLC
/s/ ▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
By: ▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman
United Bio Energy Fuels, LLC
/s/ ▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
By: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
In consideration of EKAE entering into this Agreement and other
valuable consideration, the undersigned, being the sole owner of UBEF, hereby
unconditionally guaranties the full and prompt performance by UBEF of all of its
duties and obligations under the terms and provisions of this Agreement.
Dated this 12TH day of NOVEMBER, 2004.
United Bio Energy, LLC, a Kansas
limited liability company
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
Title: President
------------------------------
12
EXHIBIT A
ASTM D4806-99 SPECIFICATION:
CATEGORY EXPECTED RESULT ASTM TEST METHOD
-----------------------------------------------------------------------------------------------
Ethanol, volume percent, 92.1 D 5501
minimum
-----------------------------------------------------------------------------------------------
Methanol, volume percent, 0.5 D 1152
maximum
-----------------------------------------------------------------------------------------------
Solvent-washed gum, mg/100 5.0 D 381
ml, maximum
-----------------------------------------------------------------------------------------------
Water content, volume .80 E 203 or E 1064
percent, maximum
-----------------------------------------------------------------------------------------------
Denaturant content, volume 1.96 minimum D 86
percent, minimum and 4.76 maximum
maximum.
The only denaturants shall be
low sulfur natural gasoline,
gasoline components,
or unleaded gasoline.
-----------------------------------------------------------------------------------------------
Inorganic Chloride content, 40 D 512
mass PPM (mg/L), maximum
-----------------------------------------------------------------------------------------------
Copper content, mg/kg, 0.1 D 1688
maximum
-----------------------------------------------------------------------------------------------
Acidity (as acetic acid), mass 0.007 D 1613
percent (mg/L), maximum
-----------------------------------------------------------------------------------------------
PHE Percent 6.5 - 9.0 D 6423
-----------------------------------------------------------------------------------------------
Appearance Visibly free of suspended or
precipitated contaminants
(clear and bright)
-----------------------------------------------------------------------------------------------
▇▇
▇▇▇▇▇▇▇ ▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇ SPECIFICATION FOR E-100 FUEL ETHANOL:
CATEGORY EXPECTED RESULT ASTM TEST METHOD
-------------------------------------------------------------------------------------------------------
Ethanol, volume percent, 92.1 D 5501
minimum
-------------------------------------------------------------------------------------------------------
Methanol, volume percent, 0.5 D 1152
Maximum
-------------------------------------------------------------------------------------------------------
Solvent-washed gum, mg/100 5.0 D 381, air jet apparatus
ml, maximum
-------------------------------------------------------------------------------------------------------
Water content, volume 1.00 E 203 or E 1064
percent, maximum
-------------------------------------------------------------------------------------------------------
Denaturant content, volume 1.96 minimum D 86
percent, minimum and 4.76 maximum
maximum
The only denaturants shall be
low sulfur natural gasoline,
gasoline components, or
unleaded gasoline.
-------------------------------------------------------------------------------------------------------
Inorganic Chloride content, 40 D 512. Procedure C
mass PPM (mg/L), maximum
-------------------------------------------------------------------------------------------------------
Copper content, mg/kg, 0.1 D 1688. Test method A.
maximum
-------------------------------------------------------------------------------------------------------
Acidity (as acetic acid), mass 0.007 D 1613
percent (mg/L), maximum
-------------------------------------------------------------------------------------------------------
PHE Percent 6.5 - 9.0 D 6423
-------------------------------------------------------------------------------------------------------
Sulfur content, PPM, 10
maximum
-------------------------------------------------------------------------------------------------------
Benzene content, volume 0.06
percent, maximum
-------------------------------------------------------------------------------------------------------
Olefins content, volume 0.5
percent, maximum
-------------------------------------------------------------------------------------------------------
Aromatic hydrocarbon 1.7
content, volume percent,
maximum
-------------------------------------------------------------------------------------------------------
Appearance Visibly free of suspended or
precipitated contaminants
(clear and bright)
-------------------------------------------------------------------------------------------------------
14
4.17(c)(2)
DISTILLER'S GRAINS MARKETING AGREEMENT*
THIS AGREEMENT (this "Agreement"), made and entered into this 12th of
November, 2004, by and between East Kansas Agri-Energy, LLC, a Kansas limited
liability company ("EKAE"), and United Bio Energy Ingredients, LLC, a Kansas
limited liability company ("UBEI").
W I T N E S S E T H :
WHEREAS, EKAE intends to construct and own an ethanol plant, located
in Garnett, Kansas (the "Plant");
WHEREAS, EKAE desires to sell and UBEI desires to buy all the dried
distiller's grains ("DDG") and wet distiller's grains ("WDG") produced at the
Plant (collectively the "Distiller's Grains");
WHEREAS, the parties desire to purchase and sell the Distiller's
Grains, and receive and provide such services, in accordance with the fees,
price formula, payment, delivery and other terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and conditions herein contained, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by both parties, it is hereby agreed:
1. TERM. The initial term of this Agreement shall be for five (5)
years. The parties shall execute a memorandum setting forth the actual date of
commencement of the term, which shall be approximately 6 months before
substantial completion of the Plant. Unless earlier terminated in accordance
with this Agreement, this Agreement shall be automatically renewed for
successive one (1) year terms thereafter unless either party gives written
notice to the other party of its election not to renew not later than ninety
(90) days prior to the expiration of the then current term.
2. PRICE AND PAYMENT.
A. PRICE. UBEI agrees to pay EKAE for all DDG removed by UBEI from
the Plant, a price equal to [*] ([*]) of the FOB Plant price actually charged by
UBEI to its customers. For purposes of this provision, the FOB Plant price shall
be the actual sale price, less all reasonable freight costs incurred by UBEI in
delivering the Distiller's Grains to its customers. UBEI also agrees to pay EKAE
for all WDG removed by UBEI from the Plant, a price equal to [*] ([*]) of the
FOB Plant price actually charged by UBEI to its customers. If EKAE desires the
additional services of a distiller's marketer on-site at the Plant, and employed
by UBEI, then UBEI agrees to pay EKAE for all WDG a price equal to [*] ([*]) of
the FOB Plant price actually charged by UBEI.
B. PAYMENT. On a daily basis, Weekends and Holidays excluded, EKAE
*Portion omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
1
shall provide UBEI with certified weight certificates for the previous day's
shipments of Distiller's Grains. UBEI shall pay EKAE the F.O.B. Plant Price
defined in paragraph 2.A. above, for all properly documented shipments. UBEI
shall deliver to EKAE payment for such shipments on or before the second
following Friday of each one week shipment period (Sunday through Saturday).
UBEI agrees to maintain accurate sales and expense records and to provide such
records to EKAE upon request. EKAE shall also have the right to inspect, copy
and audit UBEI's sales invoices and expense records at any time during normal
business hours at the corporate office of UBEI. If any such inspection or audit
shall reveal a deficiency in a payment due to EKAE, UBEI shall immediately pay
EKAE the amount of the deficiency together with interest from the date that such
payment should have been made at the prime rate in effect on the date of the
underpayment as reported in the Wall Street Journal. The expense of any such
inspection or audit shall be borne by EKAE unless a material deficiency in
payment is revealed, then, in such case, the reasonable expense of such
inspection or audit shall be borne by UBEI.
C. BEST EFFORTS. UBEI agrees to use its best efforts to achieve the
highest resale price of Distiller's Grains available under prevailing market
conditions.
D. COLLECTION. UBEI shall be responsible for all customer billing
and account servicing, including, but not limited to, the collection of amounts
owed UBEI by its customers, shall bear all costs associated with such billing
and collection activities, and shall assume all losses due to failure of its
customers to pay their account.
E. FUTURE SALES BY UBEI. UBEI shall not contract for the sale of
Distiller's Grains, to its customers, more than one hundred eighty (180) days in
advance, unless EKAE explicitly approves the price and terms of any such
contract and provides notice of such approval to UBEF. Upon notice of
termination, UBEF shall not contract for the sale of Distiller's Grains to its
customers more than more than ninety (90) days in advance, unless EKAE
explicitly approves the price and terms of any such contract and provides notice
of such approval to UBEI. UBEI will advise EKAE weekly and update EKAE monthly
on all outstanding contractual obligations, and the terms thereof.
3. FEES AND EXPENSES. Unless otherwise specifically provided for
herein, and to the extent not already included in the price of the Distiller's
Grains, EKAE shall be responsible for any and all fees and expenses, including
but not limited to fees assessed by any State or other regulatory agency,
incurred or assessed on any Distiller's Grains, whether for licensing, dues,
branding, packaging, inspecting, or otherwise. EKAE shall, as a result of its
responsibility for such expenses, retain all rights to any name, branding, and
packaging of the Distiller's Grains upon termination of this Agreement.
4. DELIVERY AND TITLE.
A. PLACE. The place of delivery for all Distiller's Grains purchased
by UBEI pursuant to this Agreement shall be F.O.B. Plant. UBEI and its agents
shall be given access to the Plant in a manner and at all times reasonably
necessary and convenient for UBEI to take delivery as provided herein. UBEI
shall schedule the loading and shipping of all Distiller's Grains purchased
2
hereunder, whether shipped by truck or rail. All labor and equipment necessary
to load or unload trucks or rail cars shall be supplied by EKAE without charge
to UBEI. The parties agree to handle the Distiller's Grains in a good and
workmanlike manner in accordance with the other's reasonable requirements and in
accordance with normal industry practice. EKAE shall maintain the truck/rail
loading facilities in safe operating condition in accordance with normal
industry standards.
B. STORAGE. EKAE shall provide storage space or not less than ten
(10) full days combined production of WDG and DDG, based on normal operating
capacity.
C. REMOVAL. UBEI warrants and agrees to use its best efforts to
remove Distiller's Grains before the aforementioned storage limits are exceeded.
EKAE shall be responsible at all times for the quantity, quality and condition
of any Distiller's Grains in storage at the Plant.
D. LOADING AND UNLOADING SCHEDULE. UBEI shall give to EKAE a
schedule of quantities of Distiller's Grains to be removed by truck and rail
respectively with sufficient advance notice reasonably to allow EKAE to provide
the required services. EKAE shall provide the labor, equipment and facilities
necessary to meet UBEI's loading schedule and EKAE shall be responsible for
UBEI's actual costs or damages resulting from EKAE's failure to do so. UBEI
shall order and supply trucks as scheduled for truck shipments. All freight
charges shall be the responsibility of UBEI and shall be billed directly to
UBEI. Demurrage charges will be for the account of UBEI if UBEI fails to provide
railcars in accordance with the production schedule provided to EKAE. Demurrage
charges will be for the account of EKAE if EKAE fails to load railcars in
accordance with said schedule.
E. PRODUCTION SCHEDULE.
1. UBEI shall provide loading orders as necessary to permit EKAE
to maintain its usual production schedule, provided, however, that UBEI shall
not be responsible for failure to schedule removal of Distiller's Grains unless
EKAE shall have provided to UBEI production schedules as follows: At least five
(5) days prior to the beginning of each calendar month during the term hereof,
EKAE shall provide to UBEI a tentative schedule for production in the next
calendar month. On Wednesday of each week during the term of this Agreement,
EKAE shall provide to UBEI a schedule for actual production for the following
production week (Monday through Sunday). EKAE shall inform UBEI daily of
inventory and production status by 8:30 a.m. CDT.
2. NOTICE. For purposes of this paragraph 6.E, notification will
be sufficient if made by facsimile as follows:
If to UBEI for Distiller's Grain, to the attention of ▇▇▇▇▇ ▇▇▇▇,
Facsimile number ▇▇▇-▇▇▇-▇▇▇▇, Email address:
▇▇▇▇▇.▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ and
If to EKAE, to the attention of __________________, Facsimile
number __________________.
3
Or to such other representatives of UBEI and EKAE as they may
designate to the other in writing.
F. TITLE. Title and risk of loss shall pass to UBEI at the point in
time when loading the Distiller's Grains into trucks or rail cars has been
completed.
G. RAIL CAR LEASES. UBEI shall be responsible for estimating the
number of rail car leases required to handle the transportation of the
Distiller's Grains and for negotiating the terms of and executing such rail car
leases; provided, however, that any and all rail car leases executed by UBEI
shall be in substantially the same form as a standard rail car lease previously
approved by EKAE for this purpose. Upon the termination of this Agreement, any
and all existing rail car leases for the transport of Distiller's Grains will be
assigned to EKAE, who will assume and be obligated to the terms and conditions
of said leases. EKAE shall reimburse UBEI for any expenses incurred by UBEI
associated with such rail car leases, to the extent such expenses are not
already accounted for in the price of the Distiller's Grains.
H. RAIL CONTRACTS. UBEI shall negotiate, in consultation with EKAE,
the terms of rail contracts and rates on behalf of EKAE. The rail contracts
shall be placed in the sole name of EKAE.
5. QUANTITY AND WEIGHTS.
A. PRODUCTION AMOUNT. EKAE represents and warrants that it will sell
to UBEI and UBEI represents and warrants that it will purchase from EKAE all
Distiller's Grains produced at the Plant; provided, however, that UBEI shall
locally market a portion of the Distiller's Grains produced at the Plant. Any
locally marketed Distiller's Grains shall be subject to a minimum pick-up
requirement of 5 tons per customer for wet Distiller's Grains and 2 tons per
customer for dry Distiller's Grains and shall require afternoon pickup with
forty-eight (48) hours prior notice. UBEI agrees to provide any and all
customers of locally marketed Distiller's Grains truck and/or wagon access to
the Distiller's Grains at the Plant. It is understood that total production
amount of Distiller's Grains shall be determined by EKAE's production schedule
and that no warranty or representation has been made by EKAE as to the exact
quantities or timing of Distiller's Grains to be produced pursuant to this
Agreement.
B. ESTIMATE. The estimated production of Distiller's Grains at the
Plant by EKAE, to be sold to UBEI, is approximately eight thousand five hundred
(8,500) tons of DDG per month on a dry matter basis, and EKAE shall use its best
efforts to produce such amount of Distiller's Grains.
▇. ▇▇▇▇▇▇. The quantity of Distiller's Grains delivered to UBEI from
the Plant shall be established by weight certificates, obtained from scales at
the Plant, which shall be maintained by EKAE as required by applicable laws,
rules and regulations. These outbound weight certificates shall be determinative
of the quantity of the Distiller's Grains for which UBEI is obligated to pay
pursuant to paragraph 2 above.
D. RAIL CARS. All rail cars for Distiller's Grains shall be grain
▇▇▇▇▇▇ cars. EKAE agrees that such cars for Distiller's Grains shall be loaded
to full visible capacity at the
4
Plant. If not loaded to full visible capacity, EKAE shall pay in full the
portion of freight charges allocable to the unused capacity of the car. It is
agreed and understood that all railcars, when not loaded to full visible
capacity, shall be defined as having a light weight.
6. QUALITY.
A. STANDARDS. EKAE understands that UBEI intends to sell the
Distiller's Grains purchased from EKAE as a primary animal feed ingredient and
that the same are subject to minimum quality standards for such use and each
shall be of merchantable quality. EKAE warrants that the Distiller's Grains
produced by the Plant and delivered to UBEI shall be acceptable under current
industry standards in the feed trade industry and that at the time of delivery,
the Distiller's Grains shall conform to the minimum quality standards outlined
in Exhibit A attached hereto, as may be amended from time to time.
Notwithstanding anything in this Agreement to the contrary, EKAE provides no
warranty greater than those received from ICM, Inc. pursuant to the Design-build
Contract dated August 9, 2004.
B. COMPLIANCE. EKAE represents and warrants that at the time of
loading, the Distiller's Grains will not be adulterated or misbranded within the
meaning of the Federal Food, Drug and Cosmetic Act and that each shipment may
lawfully be introduced into interstate commerce under said Act. Unless otherwise
agreed between the parties to this Agreement, and in addition to other remedies
permitted by law, UBEI may, without obligation to pay, reject any Distiller's
Grains before loading for the failure of the Distiller's Grains to comply with
the representations and warranties in this paragraph. Actual loading of
Distiller's Grains shall not waive UBEI's rights to reject Distiller's Grains on
the grounds of noncompliance with the representations and warranties in this
Agreement unless UBEI had actual knowledge of such noncompliance prior to
loading. Should any of the Distiller's Grains be seized or condemned by any
federal or state department or agency for any reason, except noncompliance by
UBEI with applicable federal or state requirements, such seizure or condemnation
shall operate as a rejection by UBEI of the Distiller's Grains seized or
condemned and UBEI shall not be obligated to offer any defense in connection
with the seizure or condemnation. However, UBEI agrees to cooperate with EKAE in
connection with the defense of any quality or other product claims, or any
claims involving governmental seizure or condemnation. UBEI shall be fully
responsible for, and shall indemnify EKAE against any liability for, or claims
arising from, any failure by UBEI to deliver Distiller's Grains to its
customers, except to the extent that delivery fails due to the fault of EKAE.
When rejection occurs pursuant to this paragraph, at its option, UBEI may:
(1) Dispose of the rejected Distiller's Grains after first
offering EKAE a reasonable opportunity of examining and taking possession
thereof, if the condition of the Distiller's Grains reasonably appears to UBEI
to permit such delay in making disposition;
(2) Dispose of the rejected Distiller's Grains in any manner
directed by EKAE which UBEI can accomplish without violation of applicable laws,
rules, regulations or property rights; or
(3) If any of the Distiller's Grains is seized or condemned by
any federal or state department or agency or if UBEI has no available means of
disposal of rejected Distiller's Grains and EKAE fails to direct UBEI to dispose
of it as provided herein, UBEI may return the
5
rejected Distiller's Grains to EKAE, upon which event UBEI's obligations with
respect to said rejected Distiller's Grains shall be deemed fulfilled. Title and
risk of loss shall pass to EKAE promptly upon such seizure or condemnation or
rejection by UBEI.
(4) EKAE shall reimburse UBEI for all costs reasonably incurred
by UBEI in storing, transporting, returning and disposing of the rejected
Distiller's Grains. UBEI shall have no obligation to pay EKAE for rejected
Distiller's Grains and may deduct reasonable costs and expenses to be reimbursed
by EKAE from amounts otherwise owed by UBEI to EKAE.
C. NON-STANDARD PRODUCTS. If EKAE produces Distiller's Grains which
comply with the warranties in this paragraph 6.B but which do not meet
applicable industry standards, UBEI agrees to purchase such Distiller's Grains
for resale but makes no representation or warranty as to the price at which such
Distiller's Grains can be sold.
D. PRODUCT TESTING. If EKAE knows or reasonably suspects that any
Distiller's Grains produced by the Plant are adulterated or misbranded, or, are
outside of minimum quality standards set forth in Exhibit A, EKAE shall promptly
so notify UBEI so that such Distiller's Grains can be tested before entering
interstate commerce. If UBEI knows or reasonably suspects that any Distiller's
Grains produced by the Plant are adulterated or misbranded, or, are outside of
minimum quality standards set forth in Exhibit A, then UBEI may obtain
independent laboratory tests of the affected Distiller's Grains. If such
Distiller's Grains are tested and found to comply with all warranties made by
EKAE herein, then UBEI shall pay all testing costs and if the Distiller's Grains
are found not to comply with such warranties, EKAE shall pay all testing costs.
E. CHANGES IN STANDARDS. Upon notice to UBEI, said minimum quality
standards are subject to change at the discretion of EKAE. Sufficient notice of
any such change shall be deemed to be given to UBEI if EKAE gives written
notification to UBEI at least thirty (30) days prior to such change. Such
changes must be in conformance to generally acceptable industry standards.
7. RETENTION OF SAMPLES.
A. SAMPLING. EKAE will take an origin sample of the Distiller's
Grains from each truck or rail car before each shipment leaves the Plant, using
industry standard sampling methodology. EKAE will label these samples to
indicate the date of shipment that the truck, rail car, or pickup number
involved. EKAE shall also retain the samples and labeling information for no
less than six (6) months for DDG samples and no less than fourteen (14) days for
WDG.
B. ANALYSIS. For the first year of operation of ethanol production
at the Plant, EKAE shall, on a weekly basis, furnish UBEI with a composite
analysis on all Distiller's Grains produced at the Plant. Thereafter, at a
minimum, a composite analysis on all Distiller's Grains produced at the Plant
shall be sent once a month to UBEI. It is understood that said analysis is a
composite and may or may not be indicative of the current analysis.
8. INSURANCE.
6
A. POLICIES. EKAE warrants to UBEI that all EKAE's employees engaged
in the removal of Distiller's Grains from the Plant shall be covered as required
by law by worker's compensation and unemployment compensation insurance.
B. COVERAGES. During the term of this Agreement, EKAE shall purchase
and maintain insurance in such amounts as it may reasonably determine. UBEI
shall be named as an additional insured on all such policies. All such policies
shall contain provisions to the effect that in the event of payment of any loss
or damage the insurers will have no rights of recovery against any of the
insureds or additional insureds thereunder. EKAE waives all rights against UBEI
and its employees and agents for all losses and damages caused by, arising out
of or resulting from any of the perils or causes of loss covered by such
policies and any other property insurance applicable to the Plant. Also during
the term of this Agreement, UBEI shall purchase and maintain commercial general
liability insurance, with combined single limits of not less than $2,000,000
which shall be endorsed to require at least thirty (30) days notice to EKAE
prior to the effective date of any termination or cancellation of coverage. EKAE
shall be named as an additional insured on all such policies and UBEI shall
provide a certificate of insurance to EKAE to establish the coverage maintained
by the commencement date of this Agreement.
C. UBEI VEHICLES. UBEI agrees to carry such insurance on its
vehicles and personnel operating on EKAE's property as UBEI reasonably deems
appropriate or as required by law. The parties acknowledge that UBEI may elect
to self insure its vehicles. Upon request, UBEI shall provide a certificate of
insurance to EKAE to establish the coverage maintained by UBEI.
D. CONSEQUENTIAL DAMAGES. EACH PARTY TO THIS AGREEMENT UNDERSTANDS
THAT NO OTHER PARTY MAKES ANY GUARANTEE, EXPRESS OR IMPLIED, TO ANY OTHER OF
PROFIT, OR OF ANY PARTICULAR ECONOMIC RESULTS FROM TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT. IN NO EVENT SHALL ANY PARTY BE LIABLE FOR SPECIAL, COLLATERAL,
INCIDENTAL, OR CONSEQUENTIAL DAMAGES FOR ANY ACT OR OMISSION COMING WITHIN THE
SCOPE OF THIS AGREEMENT, OR FOR BREACH OF ANY OF THE PROVISIONS OF THIS
AGREEMENT, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, SUCH
EXCLUDED DAMAGES INCLUDE, BUT ARE NOT LIMITED TO, LOSS OF GOOD WILL, LOSS OF
PROFITS, LOSS OF USE, AND INTERRUPTION OF BUSINESS.
E. OTHER CLAIMS. Except as provided in paragraph 8.D above, nothing
herein shall be construed as a waiver by either party against the other party of
claims, causes of action or other rights which either party may have or
hereafter acquire against the other party for damage or injury to its agents,
employees, invitees, property, equipment or inventory, or third party claims
against the other party for damage or injury to other persons or the property of
others.
9. REPRESENTATIONS AND WARRANTIES.
7
A. Each party represents and warrants that it is an entity in good
standing under the laws that it is organized and has all the requisite power and
authority to carry on its business as it has been and to own, lease, and operate
the properties and assets used in connection therewith.
B. In addition to the representations and warranties herein
regarding the quality of Distiller's Grains, EKAE represents and warrants that
the Distiller's Grains delivered to UBEI shall be free and clear of liens and
encumbrances. Notwithstanding the foregoing, UBEI acknowledges that EKAE's
senior lender has a security interest in all of the assets of EKAE subject to
EKAE's ability to make sales in the ordinary course of business.
C. Each individual executing this Agreement in a representative
capacity, by his or her execution hereof, represents and warrants that such
person is fully authorized to do so on behalf of the respective party hereto,
and that no further action or consent on the part of the party for whom such
signatory is acting is required for the effectiveness and enforceability of this
Agreement against such party, following such execution.
D. Each party now has, or will obtain, and will have at all times
during the term of this Agreement, all of the licenses and permits necessary to
perform its obligations under this Agreement.
E. UBEI warrants that, to the best of its knowledge, all of the
Distiller's Grains produced by its other customers and sold by UBEI will be of
merchantable quality, and will be fit for its intended purpose.
F. NO ADDITIONAL WARRANTY. EXCEPT AS SPECIFICALLY STATED IN THIS
AGREEMENT, THE PARTIES MAKE NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR
IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
10. TERMINATION.
A. FOR CAUSE. Either party may terminate this Agreement without
liability for cause by providing thirty (30) days prior written notice to the
other party. For purposes of this paragraph, "cause" shall include, but not be
limited to, the happening of an event of default discussed in paragraph 11
below, or any other material breach of any provision of this Agreement, or
material violation of any applicable law, regulation or ruling.
B. WITHOUT CAUSE. Either party may terminate this Agreement without
cause by providing ninety (90) days prior written notice to the other party. If
EKAE terminates this Agreement without cause during the initial term, then EKAE
shall pay to UBEI, within thirty (30) days of termination, an amount equal to
the product of three (3) multiplied by the average monthly fee paid to UBEI,
under paragraph 2.A above, for the six (6) months prior to the termination date,
or if the fee has been paid for less than six (6) months, by the average of the
monthly fee for the number of months such monthly fee has been paid to UBEI.
8
11. EVENTS OF DEFAULT. The occurrence of any of the following shall
be an event of default under this Agreement: (1) failure of either party to make
payment to the other when due, if such nonpayment has not been cured within five
(5) days of written notice thereof; (2) default by either party in the
performance of any material covenant, condition or agreement imposed upon that
party by this Agreement, if such nonperformance has not been cured within five
(5) days of written notice thereof; or (3) if either party shall become
insolvent, or make a general assignment for the benefit of creditors or to an
agent authorized to liquidate any substantial amount of its assets, or be
adjudicated bankrupt, or file a petition in bankruptcy and such petition is not
dismissed within ninety (90) days following the date of filing, or apply to a
court for the appointment of a receiver for any of its assets or properties with
or without consent, and such receiver shall not be discharged within sixty (60)
days following appointment.
12. REMEDIES. Upon the happening of an event of default under
paragraph 11, the parties hereto shall have all remedies available under
applicable law with respect to an event of default by the other party, including
but not limited to the recovery of attorneys' fees and other costs and expenses.
Without limiting the foregoing, the parties shall have the following remedies
whether in addition to or as one of the remedies otherwise available to them:
(1) to declare all amounts owed immediately due and payable; and (2) to
terminate this Agreement within thirty (30) days following the giving of notice
of default and opportunity to cure. Notwithstanding any other provision of this
Agreement, UBEI may offset against amounts otherwise owed to EKAE the price of
any Distiller's Grain which fail to conform to any requirements of this
Agreement.
13. OPEN CONTRACTS. Upon the termination of this Agreement, for
whatever reason, EKAE shall assume and be responsible for delivering any
remaining quantities of Distiller's Grains required to be delivered by UBEI to
its customers pursuant to UBEI's contracts with the same, provided such
contracts are to be delivered by UBEI from the Plant. Prior to the termination
of this Agreement, UBEI shall provide EKAE with a listing of all such contracts
and the quantities of Distiller's Grains to be delivered pursuant to the same to
assist EKAE in completing deliveries under these open contracts. EKAE agrees to
assist UBEI in the collection of amounts owed to UBEI from those customers
receiving deliveries of Distiller's Grains from UBEI prior to the termination of
this Agreement.
14. FORCE MAJEURE. Neither EKAE nor UBEI will be liable to the other
for any failure or delay in the performance of any obligation under this
Agreement due to events beyond its reasonable control, including, but not
limited to, fire, storm, flood, earthquake, explosion, act of the public enemy
or terrorism, riots, civil disorders, sabotage, strikes, lockouts, labor
disputes, labor shortages, war, stoppages or slowdowns initiated by labor,
transportation embargoes, failure or shortage of materials, acts of God, or acts
or regulations or priorities of the federal, state or local government or
branches or agencies thereof.
15. INDEMNIFICATION.
A. BY EKAE. Except as otherwise provided in this Agreement, EKAE
shall indemnify, defend and hold UBEI and its officers, directors, employees and
agents harmless, from any and all losses, liabilities, damages, expenses
(including reasonable attorneys' fees), costs,
9
claims, demands, that UBEI or its officers, directors, employees or agents may
suffer, sustain or become subject to, or as a result of (i) any
misrepresentation or breach of warranty, covenant or agreement of EKAE contained
herein or (ii) EKAE's negligence or willful misconduct.
B. BY UBEI. Except as otherwise provided in this Agreement, UBEI
shall indemnify, defend and hold EKAE and its officer, directors, employees and
agents harmless, from any and all losses, liabilities, damages, expenses
(including reasonable attorneys' fees), costs, claims, demands, that EKAE or its
officers, directors, employees or agents may suffer, sustain or become subject
to, or as a result of (i) any misrepresentation or breach of warranty, covenant
or agreement of UBEI contained herein or (ii) UBEI's negligence or willful
misconduct.
C. Where such personal injury or death is the result of negligence
on the part of both EKAE and UBEI, each party's duty of indemnification shall be
in proportion to the percentage of that party's negligence or faults.
16. [*]. UBEI hereby acknowledges that EKAE is entering into
separate service agreements with certain affiliates of UBEI (i.e., United Bio
Energy Trading, LLC, United Bio Energy Management, LLC, and United Bio Energy
Fuels, LLC), and that the services provided by one or more of those affiliates
to EKAE under such agreements may include acting on behalf of EKAE and/or
performing certain duties or obligations of EKAE under the terms and provisions
of this Agreement. [*]
17. RELATIONSHIP OF PARTIES. This Agreement creates no relationship
other than those of seller and buyer between the parties hereto. Specifically,
there is no agency, partnership, joint venture or other joint or mutual
enterprise or undertaking created hereby. Nothing contained in this Agreement
authorizes one party to act for or on behalf of the other and neither party is
entitled to commissions from the other.
18. TRADE RULES. As may be applicable, all purchases and sales of
Distiller's Grains made hereunder shall be governed by the Feed Trade Rules of
the National Grain and Feed Association unless otherwise specified. Said Trade
Rules, shall to the extent applicable, be a part of this Agreement as if fully
set forth herein. Notwithstanding the foregoing, the Arbitration Rules of the
National Grain and Feed Association shall not be applicable to this Agreement
and nothing herein contained shall be construed to constitute an agreement
between the parties to submit disputes arising hereunder to arbitration before
any organization or tribunal.
19. CONFIDENTIALITY. The parties agree to execute a Confidentiality
and Nondisclosure Agreement. Such Agreement shall remain in full force and
effect and shall apply and govern all disclosure and use of confidential
information hereunder, in accordance with the terms of such Agreement.
*Portion omitted pursuant to a request for confidential treatment and filed
separately with the Securities and Exchange Commission.
10
20. MISCELLANEOUS.
A. This Agreement, together with any attachments or other
information which is expressly incorporated herein and made an integral part of
this Agreement, is the complete understanding of the parties to this Agreement
with respect to the subject matter of this Agreement, and no other
representations or agreements shall be binding upon the parties, or shall be
effective to interpret, change or restrict the provisions of this Agreement.
B. No course of prior dealings between the parties and no usage of
trade, except where expressly incorporated by reference, shall be relevant or
admissible to supplement, explain, or vary any of the terms of this Agreement.
C. Acceptance of, or acquiescence in, a course of performance
rendered under this or any prior agreement shall not be relevant or admissible
to determine the meaning of this Agreement even though the accepting or
acquiescing party has knowledge of the nature or the performance and an
opportunity to make objection.
D. This Agreement may be executed in multiple counterparts, all of
which shall constitute but one and the same instrument. Facsimile signatures
shall be deemed as originals as between the parties.
E. This Agreement can only be modified by a writing signed by all of
the parties or their duly authorized agents.
F. The paragraph headings herein are for reference purposes only and
shall not in any way affect the meaning or interpretation of this Agreement.
G. This Agreement shall be construed and performed in accordance
with the laws of the State of Kansas.
H. The respective rights, obligations and liabilities of the parties
under this Agreement are not assignable or delegable without the prior written
consent of the other party, which shall not be unreasonably withheld.
I. Time shall be of the essence in the performance of this
Agreement.
J. This Agreement shall be binding upon, and shall inure to the
benefit of the parties hereto and their respective successors and assigns.
21. NOTICES. Unless a different method of notice is provided herein,
notice shall be deemed to have been given to the party to whom it is addressed
forty-eight (48) hours after it is deposited in certified U. S. mail, postage
prepaid, return receipt requested, addressed as follows:
EKAE: East Kansas Agri-Energy, LLC
Attn: ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇/▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
11
UBEI: United Bio Energy Ingredients, LLC
Attn: ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Either party may change the address for notices hereunder by giving
notice change to the other party in the manner above provided.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the
day and year first above written.
East Kansas Agri-Energy, LLC
-----------------------------------
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
By: ▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman
United Bio Energy Ingredients, LLC
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------
By: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
In consideration of EKAE entering into this Agreement and other valuable
consideration, the undersigned, being the sole owner of UBEI, hereby
unconditionally guaranties the full and prompt performance by UBEI of all of its
duties and obligations under the terms and provisions of this Agreement.
Dated this 12th day of November, 2004.
United Bio Energy, LLC, a Kansas
limited liability company
By:/s/ ▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Title: President
-----------------------------
12
EXHIBIT A
DISTILLERS GRAIN
Minimum Quality standards by product:
PLANT COMPONENT MINIMUM MAXIMUM
-----------------------------------------------------------------------------------------------
EKAE DDGS Protein 28% --
Fat 7.5% --
Fiber -- 15%
Ash -- 5%
PLANT COMPONENT MINIMUM MAXIMUM
-----------------------------------------------------------------------------------------------
EKAE WDGS Protein 10.5% --
Fat 3% --
Fiber -- 5%
Ash -- 2.5%
PLANT COMPONENT MINIMUM MAXIMUM
-----------------------------------------------------------------------------------------------
Modified WDGS Protein 15.0% --
Fat 4.5% --
Fiber -- 9.0%
Ash -- 4.0%
MINIMUM QUALITY STANDARDS FOR ALL "PRODUCTS" SHALL ALSO BE DEEMED TO BE "COOL
AND SWEET, FREE FLOWING, WITH AFLATOXIN LEVELS LESS THAN 20 PPB MAXIMUM, AND IF
FROM ALL CORN RAW GRAINS, GOLDEN."
13
SCHEDULE 4.17(D)
TRANSPORTATION CONTRACTS
None.
4.17(d)-1
SCHEDULE 4.17(E)
UTILITY CONTRACTS
None.
4.17(d)-1
SCHEDULE 4.18
PERMITS
1. Kansas Department of Health and Environment Construction Stormwater
Permit, Kansas Water Pollution Control General Permit ▇▇.
▇-▇▇▇▇-▇▇▇▇-▇, ▇▇ ▇▇▇▇▇▇ ▇▇. ▇-▇▇▇▇-▇▇▇▇, issued 07/21/2003.
2. Kansas Department of Health and Environment Air Emission Source
Construction Approval, Source ID No.: 0030030, effective date,
06/03/2003, revised and approved for modifications 08/05/2004.
3. Environmental Permits required: see attached listing of all known
local, state and federal environmental permits for East Kansas
Agri-Energy L.L.C.
A-1
4.18(3)
ENVIRONMENTAL PERMITS REQUIRED. Below is a list of all known local, state and
federal environmental permits for East Kansas Agri-Energy, LLC.
------------------------------------------------------------------------------------------------------------
UNIT OF TYPE OF PERMIT STATUS ANTICIPATED
GOVERNMENT APPLICATION OR APPROVAL ISSUANCE
------------------------------------------------------------------------------------------------------------
KDHE Bureau of Water National Pollutant Discharge Submitted Issued
Elimination System (NPDES) 7/3/2003 7/21/2003
Construction Storm Water
Notice of intent
------------------------------------------------------------------------------------------------------------
KDHE Bureau of NPDES Industrial Storm Water See comment 1 Prior to start-up
Water
------------------------------------------------------------------------------------------------------------
KDHE/EPA NPDES Industrial Storm Water See comment 2 Prior to start-up
--------------------------------------------------------------------------
Pretreatment (Discharge to See comment 3 Prior to start-up
Municipal Wastewater
Treatment Facility)
------------------------------------------------------------------------------------------------------------
KDHE Bureau of Environmental Above Ground Storage Tank To be submitted at Prior to start-up
Remediation System Application least 20 days before
tank installation
------------------------------------------------------------------------------------------------------------
KDHE Bureau of Waste RCRA Hazardous Waste Part A To be completed prior Prior to start-up
Management/EPA Permit Application to activities bozo
(lubricants and parts hazardous waste
cleaning) Small Quantity
Generator
------------------------------------------------------------------------------------------------------------
KDHE Bureau of Air and Radiation Air Emissions Construction Submitted 9/11/2002 Issued 6/1/2003
Permit
------------------------------------------------------------------------------------------------------------
KDHE Bureau of Air and Radiation Air Emissions Operating To be submitted After start-up
Permit within 180 days after
start-up
------------------------------------------------------------------------------------------------------------
KDA Division of Water Resources Surface Water Appropriation See comment 4 Prior to
Permit commencing
appropriation
------------------------------------------------------------------------------------------------------------
KDHE - Kansas Department of Health and Environment
EPA - United States Environmental Protection Agency
RCRA - Resource Conservation and Recovery Act
KDA - Kansas Department of Agriculture
Comments:
1 - Application in progress; to be submitted upon finalization of site plans.
2 - The need for an industrial discharge permit is pending final project
design. If permit is needed, application will be made before construction
begins.
3 - The need for an industrial discharge pretreatment permit is pending final
project design. If permit is
needed, application will be made prior to start-up.
4 - The need for a surface water appropriation permit is pending final project
design. If permit is needed, application would be made at least 120 days
before construction of water appropriation device.
EXHIBIT A
NOTE A
$5,000,000 Rochester. Minnesota
November ___, 2004
FOR VALUE RECEIVED, the undersigned, East Kansas Agri-Energy, L.L.C., a
Kansas limited liability company ("Borrower"), hereby promises to pay to Home
Federal Savings Bank (together with any subsequent holder hereof, "Lender") or
its successors and assigns, at Post Office Box 6947, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇.▇., ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, (i) on the Loan A Maturity Date (as
defined in the
Credit Agreement dated as of November ___, 2004 (as the same may
be amended, restated, supplemented or otherwise modified from time to time, the
"
Credit Agreement"), between Borrower and Lender, the principal sum of Five
Million and No/100 Dollars ($5,000,000.00) or so much of Loan A (as defined in
the
Credit Agreement) as shall be advanced by Lender to Borrower pursuant to the
Credit Agreement, and (ii) on each date specified in the
Credit Agreement prior
to the Loan A Maturity Date, the principal amount of Loan A payable to Lender on
such date as specified therein, in lawful money of the United States of America
in immediately available funds, and to pay interest from the date hereof on the
principal amount thereof from time to time outstanding, in like funds, at said
office, at the rate or rates per annum and payable on such dates as provided in
the
Credit Agreement. In addition, should legal action or an attorney-at-law be
utilized to collect any amount due hereunder, Borrower further promises to pay
all costs of collection, including the reasonable attorneys' fees of Lender.
Borrower promises to pay Default Interest (as defined in the
Credit
Agreement), on demand, on the terms and conditions set forth in the Credit
Agreement.
All borrowings evidenced by this Note A and all payments and
prepayments of the principal hereof and the date thereof shall be recorded by
Lender in its internal records; provided, that the failure of Lender to make
such a notation or any error in such notation shall not affect the obligations
of the Borrower to make the payments of principal and interest in accordance
with the terms of this Note A and the Credit Agreement.
This Note A is issued in connection with, and is entitled to the
benefits of, the Credit Agreement which, among other things, contains provisions
for the acceleration of the maturity hereof upon the happening of certain
events, and for the amendment or waiver of certain provisions of the Credit
Agreement, all upon the terms and conditions therein specified.
THIS LOAN NOTE A SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF MINNESOTA AND ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA.
EAST KANSAS AGRI-ENERGY, L.L.C.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
A-1
EXHIBIT B
NOTE B
$21,000,000 Rochester, Minnesota
November , 2004
FOR VALUE RECEIVED, the undersigned, East Kansas Agri-Energy,
L.L.C., a Kansas limited liability company ("Borrower"), hereby promises to
pay to Home Federal Savings Bank (together with any subsequent holder hereof,
"Lender") or its successors and assigns, at Post Office Box 6947, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇.▇., ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, (i) on the Loan B
Maturity Date (as defined in the Credit Agreement dated as of November ,
2004 (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "Credit Agreement"), between Borrower and
Lender, the principal sum of Twenty-One Million and No/100 Dollars
($21,000,000.00) or so much of Loan B (as defined in the Credit Agreement) as
shall be advanced by Lender to Borrower pursuant to the Credit Agreement, and
(ii) on each date specified in the Credit Agreement prior to the Loan B
Maturity Date, the principal amount of Loan B payable to Lender on such date
as specified therein, in lawful money of the United States of America in
immediately available funds, and to pay interest from the date hereof on the
principal amount thereof from time to time outstanding, in like funds, at
said office, at the rate or rates per annum and payable on such dates as
provided in the Credit Agreement. In addition, should legal action or an
attorney-at-law be utilized to collect any amount due hereunder, Borrower
further promises to pay all costs of collection, including the reasonable
attorneys' fees of Lender.
Borrower promises to pay Default Interest (as defined in the Credit
Agreement), on demand, on the terms and conditions set forth in the Credit
Agreement.
All borrowings evidenced by this Note B and all payments and
prepayments of the principal hereof and the date thereof shall be recorded by
Lender in its internal records; PROVIDED, that the failure of Lender to make
such a notation or any error in such notation shall not affect the obligations
of the Borrowers to make the payments of principal and interest in accordance
with the terns of this Note B and the Credit Agreement.
This Note B is issued in connection with, and is entitled to the
benefits of, the Credit Agreement which, among other things, contains provisions
for the acceleration of the maturity hereof upon the happening of certain
events, and for the amendment or waiver of certain provisions of the Credit
Agreement, all upon the terms and conditions therein specified.
THIS LOAN NOTE B SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE STATE OF MINNESOTA AND ANY APPLICABLE LAWS OF THE UNITED STATES
OF AMERICA.
EAST KANSAS AGRI-ENERGY, L.L.C.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
B-1
EXHIBIT 2.03
DRAW REQUEST
[Date]
Home Federal Savings Bank
Post Office Box 6947
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention:____________________________________
Dear Sir:
Reference is made to the Credit Agreement dated as of
________________, 2004 (as may have been amended and in effect on the date
hereof, the "Credit Agreement"), between the undersigned, as Borrower and Home
Federal Savings Bank as Lender. Terms defined in the Credit Agreement are used
herein with the same meanings. This notice constitutes a Draw Request, and
Borrower hereby requests a Borrowing under the Credit Agreement, and in that
connection Borrower specifies the following information with respect to the
Borrowing requested hereby:
(A) Principal amount of Borrowing(1):___________________________________
(B) Date of Borrowing (which is a Business Day)_________________________
Attached hereto are each of the documents requested by Lender in
support of satisfaction of the requirements specified in Sections 7, 8 and 9 (as
applicable) of the Disbursing Agreement.
The Borrower hereby represents and warrants that the conditions
specified in Section 3.02 and 3.03 of the Credit Agreement are satisfied.
Very truly yours,
EAST KANSAS AGRI-ENERGY, L.L.C.
By:
----------------------------
Name
---------------------------
Title:
-------------------------
--------------------------
(1) Not less than $100,000.
2.03-1
EXHIBIT 3.01(d)(xi)
FORM OF SECRETARY'S CERTIFICATE
Reference is made to the Credit Agreement dated as of , 2004 (the
"Credit Agreement"), by and between East Kansas Agri-Energy, L.L.C.
("Borrower") and Home Federal Savings Bank ("Lender"). Terms defined in the
Credit Agreement are used herein with the same meanings. This certificate is
being delivered pursuant to Section 3.01(d)(xi) of the Credit Agreement.
I, ________________________, the _________________ of Borrower, DO
HEREBY CERTIFY that:
(a) no proceeding have been instituted or are pending or contemplated
with respect to the dissolution, liquidation or sale of all or substantially all
the assets of Borrower or threatening its existence or the forfeiture or any of
its organizational rights;
(b) annexed hereto as Exhibit A is a true and correct copy of the
Articles of Organization of Borrower as in effect on ______________,
___________, and at all times thereafter through the date hereof;
(e) annexed hereto as Exhibit B is a true and correct copy of the
Operating Agreement of Borrower as in effect on _____________, _____________,
and at all times thereafter through the date hereof;
(d) annexed hereto as Exhibit C is a true and correct copy of the
unanimous written consent of the board of managers of Borrower, which consent is
the only consent adopted by the board of managers of Borrower or any committee
thereof relating to the Credit Agreement and the other Loan Documents to which
Borrower is a party and the transactions contemplated therein and have not been
revoked, amended, supplemented or modified and are in full force and effect on
the date hereof; and
301(d)(xi)-1
(e) each of the persons named below is and has been at all times since
[date] a duly elected and qualified officer of Borrower holding the respective
office set forth opposite his or her name and the signature set forth opposite
of each such person is his or her genuine signature:
Name Title Specimen Signature
---- ----- ------------------
--------------------------- ----------------- -----------------------
--------------------------- ----------------- -----------------------
IN WITNESS WHEREOF, I have hereunto signed my name this _______________
day of ________________, 2004.
------------------------
[Title]
I, ____________________, the _________________ of Borrower, do hereby
certify that [ ] has been duly elected, is duly qualified and is the of
Borrower, that the signature set forth above is [his/her] genuine signature and
that [he/she] has held such office at all times since [______].
IN WITNESS WHEREOF, I have hereunto signed my name this ______________
day of __________________, 2004.
------------------------
[Title]
301(d)(xi)-2
EXHIBIT A
ARTICLES OF ORGANIZATION
3.01(d)(xi) - 3
EXHIBIT B
OPERATING AGREEMENT
301(d)(xi)-4
EXHHIBIT C
BOARD OF MANAGERS' CONSENT
301(d)(xi)-5
EXHIBIT 3.01(d)(xii)
FORM OF OPINION OF BORROWER'S COUNSEL
[Letterhead of Counsel]
__________, 2004
Home Federal Savings Bank
Post Office Box 6947
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Re: Credit Agreement (the "Credit Agreement") dated as of ____________,
2004, between East Kansas Agri-Energy, L.L.C., as Borrower and Home
Federal Savings Bank, as Lender.
Ladies and Gentlemen:
This opinion is furnished pursuant to Section 3.01(d)(xviii) of the
Credit Agreement. Terms used herein which are defined in the Credit Agreement
shall have the respective meanings set forth or referred to in the Credit
Agreement unless otherwise defined herein.
We have acted as counsel for East Kansas Agri-Energy, L.L.C., a Kansas
limited liability company ("Borrower"), in connection with the preparation,
negotiation, execution and delivery of the Credit Agreement and each of the
documents described in Part I of Exhibit A hereto (the "Credit Documents"), each
of the documents described in Part II of Exhibit A (the "Real Estate
Documents"), all UCC-1 Financing Statements naming Borrower as debtor and Lender
as secured party, describing the Collateral covered by the Security Agreement or
any Collateral Assignment (the "Financing Statements") and all UCC-1 Financing
Statements naming Borrower as debtor and Lender as secured party, describing the
Collateral covered by the Mortgage (the "Fixture Financing Statements").
In connection with our opinion we have examined the Credit Documents,
the Real Estate Documents, the Financing Statements and the Fixture Financing
Statements (collectively, the "Opinion Documents"), the other documents and
certificates executed in connection therewith, the company proceedings of the
members of Borrower, and the corporate minutes of Coop. We have also examined
originals or copies, certified or otherwise identified to our satisfaction, of
such documents, records, certificates of public officials and other instruments
and have conducted such other investigations of fact and law as we have deemed
necessary or advisable for purposes of this opinion.
We have assumed the genuineness of all signatures (other than those on
behalf of the Borrower) on, and authenticity of, all documents submitted to us
as originals and the conformity to original documents of all documents submitted
to us as copies.
3.01(d)(xii)-1
Based on the foregoing, we are of the opinion that:
1. Borrower (i) is a limited liability company duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
organization, and (ii) has the power and authority and the legal right to own
and operate its property and to conduct its business.
2. Borrower has the power and authority to execute, deliver and perform
the Opinion Documents to which it is a party and has taken all necessary
corporate or other organizational action to authorize the execution, delivery
and performance of the Opinion Documents to which it is a party.
3. No consent, approval or authorization of, or registration or filing
with, any Person (including, without limitation, any Governmental Authority) is
required in connection with the execution, delivery or performance by any Loan
Party of the Opinion Documents or in connection with the operation of Borrower's
ethanol plant as contemplated pursuant to the Construction Plans, other than
such consents, authorizations or filings which have been made or obtained.
4. Borrower has duly executed and delivered the Opinion Documents to
which it is a party, and the Credit Documents constitute, legal, valid and
binding obligations of Borrower, enforceable against it in accordance with their
respective terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity.
5. The execution, delivery and performance by Borrower of the Opinion
Documents to which it is a party will not (i) violate the articles of
organization or the operating agreement of Borrower, (ii) violate any law
applicable to Borrower, (iii) insofar as known to us, violate any determination
of an arbitrator or a court or other Governmental Authority applicable to
Borrower, (iv) cause a breach or default under any contractual obligation of
Borrower, or (v) result in the creation or imposition of any Lien on any of the
property or revenues of Borrower.
6. To the best of our knowledge, no litigation, investigations or
proceedings of or before any Governmental Authority are pending or threatened by
or against Borrower, or against any of its respective properties or revenues,
existing or future (a) with respect to any Opinion Document or any of the
transactions contemplated thereby, or (b) which, if adversely determined, would
reasonably be expected to have a Material Adverse Effect.
7. Borrower is not an "investment company" or a company "controlled"
by an "investment company" (as each of the quoted terms is defined or used in
the Investment Company Act of 1940, as amended). Borrower is not subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, or any foreign, federal or local statute or regulation limiting
its ability to incur indebtedness for money borrowed, guarantee such
indebtedness, or pledge its assets to secure such indebtedness, as
contemplated by any Opinion Document.
3.01(d)(xii)-2
8. Assuming the proceeds of the Loans are used solely for the purposes
set forth in the Credit Agreement, the proceeds of the Loans will not be used
for any purpose which violates, or which would be inconsistent or not in
compliance with, the provisions of the applicable Margin Regulations.
9. The rates of interest and the fees provided for in the Credit
Agreement and the description thereof provided in the Credit Agreement and the
Notes do not violate any laws of the State of Kansas relating to interest and
usury, and will not violate any such law by virtue of any fluctuations in any
base, prime, index or equivalent rate or rates on which interest charges may be
based under such agreements.
10. Under the laws of the State of Kansas, the Credit Documents will be
governed by the internal laws, and not the law of conflicts, of the State of
Minnesota, including all such laws relating to interest and usury.
11. The provisions of the Security Agreement and the Collateral
Assignments are sufficient to grant to Lender, a security interest in all right,
title and interest of the Borrower in those items and types of Collateral in
which a security interest may be created under Article 8 or Article 9 of the
UCC. To the extent that Borrower has rights in the "Collateral" described in the
Security Agreement and the Collateral Assignments and to the extent that such
Collateral consists of types of items of property in which a security interest
may be perfected by the filing of financing statements in the State of Kansas,
such security interests will be duly perfected by the filing of the Financing
Statements in the offices of the Secretary of State of Kansas.
12. The offices and records described in Schedule I are the only
offices and records of the State of Kansas which must be searched to determine
if there are any Uniform Commercial Code financing statements or judgment, tax,
environmental or ERISA Liens of record against Borrower.
13. No taxes, including, without limitation, intangible or documentary
stamp taxes, mortgage taxes, transfer taxes or similar charges, are payable to
the State of Kansas or to any jurisdiction therein on account of the execution
or delivery of the Opinion Documents, or the creation of the indebtedness
evidenced or secured by any of the Opinion Documents, or the recording or filing
of any of the Opinion Documents, except for nominal filing or recording fees.
14. The Mortgage, upon due recordation in the office of
[the county recorder] in ____________ County, Kansas, shall constitute in
favor of Lender, a valid and continuing lien on the property described
therein as security for the Obligations and shall be enforceable in
accordance with their terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency and other similar laws, and
equity principles of general application, relating to or affecting the
enforcement of creditors' rights generally.
15. The forms of acknowledgment attached to the Mortgage are
satisfactory for use in the State of Kansas, and upon execution and delivery of
the Mortgage, the Mortgage will be in a form suitable for recordation in the
office of [the county recorder] in County, Kansas, without any further
affidavit, County Clerk certificate, certified resolutions or other
certificates.
16. The Mortgage, the Financing Statements and the Fixture Financing
Statements conform to all requirements of the laws of the State of Kansas, and
the Mortgage contains
3.01(d)(xii)-3
substantially all of the remedial, waiver and other provisions normally
contained in mortgages, deeds of trust and assignment of leases and rents
used in connection with transactions of the type and value described in the
Credit Agreement.
17. The Mortgage, upon execution and delivery, shall constitute valid
and enforceable security agreements with respect to the personal property
described therein under the Uniform Commercial Code as adopted in the State of
Kansas, and, upon the recordation in the office of [the county recorder] in
County, Kansas, will be effective as a fixture financing statement.
18. To the extent that Borrower has rights in the personal property and
fixtures described in the Mortgage and to the extent that such personal property
consists of types or items of property in which a security interest may be
perfected by filing or recording of financing statements or fixture financing
statements in the State of Kansas, such security interests will be duly
perfected by the filing or recording of the Fixture Financing Statements in the
office of the Secretary of State of Kansas and in the real estate records of
County, Kansas.
19. The Lender has the power to exercise the remedies available under
the Mortgage, the Security Agreement, the Collateral Assignments and the Control
Agreement for the realization of any collateral described thereunder in its own
name. Enforcement of the remedies provided in the Mortgage, the Security
Agreement, the Collateral Assignments and the Control Agreement will not deprive
Lender of its right to seek a deficiency judgment nor will it limit Lender's
right to foreclose on other collateral securing the obligations described
therein until such obligations have been paid and performed in full.
20. The State of Kansas has no state "superlien" law pursuant to
which a lien against the properties encumbered by the Mortgage could arise
after the recordation of the Mortgage and the Fixture Financing Statements as
a result of a violation of the environmental laws or regulations of the State
of Kansas and be superior to the liens created by the Mortgage. No
environmental law or regulation of the State of Kansas would require any
remedial or removal action or certification of non-applicability as a
condition to the granting of the Mortgage, foreclosure or other enforcement
of the Mortgage or the sale of any of the property encumbered by the Mortgage
and foreclosed upon by Lender.
We are admitted to practice in the State of Kansas, and we express no
opinion as to matters under or involving the laws of any jurisdiction other than
Federal laws and the laws of the State of Kansas and their political
subdivisions.
This opinion has been delivered solely for the benefit of Lender, its
counsel, and their permitted successors and assigns under the Credit Agreement,
and may not be relied upon by any other person or entity or for any other
purpose without the express written permission of the undersigned.
Very truly yours,
3.01(d)(xii)-4
EXHIBIT A
I. CREDIT DOCUMENTS
1. Credit Agreement between Borrower and Lender dated as of the date
hereof.
2. Note A by Borrower in favor of Lender dated as of the date hereof.
3. Note B by Borrower in favor of Lender dated as of the date hereof.
4. Security Agreement between Borrower and Lender dated as of the date
hereof.
5. The following Collateral Assignments by Borrower in favor of Lender
dated as of the date hereof:
[ADD]
II. Real Estate Documents
1. Future Advance Mortgage and Security Agreement and Fixture Financing
Statement and Assignment of Leases and Rents, by Borrower in favor of
Lender dated as of the date hereof.
2. Disbursing Agreement between the Escrow Company, Borrower and Lender
dated as of the date hereof.
3.01(d)(xii)-5
SCHEDULE I
3.01(d)(xii)-6
EXHIBIT 3.01(d)(xiii)
FORM OF OFFICER'S CERTIFICATE
Reference is made to the Credit Agreement dated as of ________________,
2004 (the "Credit Agreement"), by and between East Kansas Agri-Energy, L.L.C.
("Borrower") and Home Federal Savings Bank ("Lender"). Terms defined in the
Credit Agreement are used herein with the same meanings. This certificate
is being delivered pursuant to Section 3.01(d)(xiii) of the Credit Agreement.
I, ____________, the _____________ of Borrower, DO HEREBY CERTIFY that:
(a) the representations and warranties of Borrower set forth in the
Credit Agreement are true and correct on and as of the date hereof; and
(b) no Default or Event of Default has occurred and is continuing at
the date hereof: and
(c) since , which is the date of the most recent financial statements
described in Section 5.01(a) of the Credit Agreement, there has been no change
which has had or could reasonably be expected to have a Material Adverse Effect.
IN WITNESS WHEREOF, I have hereunto signed my name this _____ day of
______________, 2004.
--------------------------------
[Name]
[Title]
3.01(d)(xiii)-1
EXHIBIT 3.01(d)(xix)
CERTIFICATE REGARDING SOLVENCY
The undersigned, as a Responsible Officer familiar with the financial
condition, business and affairs of East Kansas Agri-Energy, L.L.C., a Kansas
limited liability company ("Borrower") hereby gives this certificate to induce
Home Federal Savings Bank ("Lender") to consummate certain financial
accommodations with Borrower pursuant to the terms of the Credit Agreement,
dated as of the date hereof, between Borrower and Lender (the "Credit
Agreement"). Capitalized teams used herein and not otherwise defined herein
shall have the meanings ascribed to such terms in the Credit Agreement.
The undersigned hereby certifies that:
1. He is the President of Borrower's Board of Managers and is
authorized and empowered to issue this certificate for and on behalf of
Borrower;
2. He is familiar with the business and financial affairs of
Borrower, including, without limiting the generality of the foregoing, the
transactions contemplated by the Credit Agreement and the other Loan Documents
and all of the matters hereinafter described.
3. He has reviewed the Independent Auditors Report dated _______,
Balance Sheets dated ___________, Statements of Operations dated ______________,
and Statement of Changes in Members' Equity for ________________, which are
attached hereto as Exhibit A, and the Balance Sheet (unaudited) dated _________,
Statements of Operations (unaudited) dated _______________, Statements of
Changes in Members' Equity (unaudited) dated ________________, and Statements of
Cash Flows (unaudited) dated ________________, of Borrower which are attached
hereto as Exhibit B, respectively; and he is familiar with the process through
which the Projections and the financial statements were generated.
4. The financial statements attached as EXHIBITS A and B fairly
presents the financial condition of Borrower, and no material adverse change has
occurred in Borrower's financial condition, operations or prospects since the
dates of such financial statements.
5. On and as of the date hereof, both before and after giving
effect to the consummation of the transactions contemplated by the Credit
Agreement and the other Loan Documents, Borrower (i) is and will be Solvent (as
defined below); (ii) is and will continue to be able to pay its debts as they
mature; and (iii) has and will continue to have capital sufficient (and will not
be left with unreasonably small capital) to conduct its business and all
businesses in which it is engaged. "Solvent" means that (x) Borrower will have
assets with a present fair saleable value greater than the amount of its total
liabilities (including contingent liabilities);
3.01(d)(xix)-1
(y) the sum of Borrower's assets at book value exceeds the sum of its debts; and
(z) on Borrower's balance sheet, the sum of its assets exceeds the sum of its
liabilities. In making this statement, the undersigned has considered the
current and anticipated future capital requirements of Borrower for the current
and currently anticipated future conduct of the business of Borrower, based upon
presently known facts.
6. The transactions contemplated by the Credit Agreement and the
other Loan Documents are not being entered into with an intent on the part of
Borrower to hinder, delay or defraud its present or future creditors. In making
this statement the undersigned has considered the current and anticipated future
capital requirements of Borrower for the current and currently anticipated
future conduct of the business of Borrower, based upon presently known facts.
7. The Credit Agreement and the other Loan Documents are being
entered into by Borrower in good faith, and the obligations incurred thereunder
and the security interests granted thereunder were incurred and granted in
exchange for fair equivalent value.
8. Borrower does not intend to incur, nor does it believe it will
incur, debts beyond its ability to pay as such debts mature.
9. All trade and other accounts payable of Borrower are being
paid in accordance with their terms, and the consummation of the transactions
contemplated under the Credit Agreement and other Loan Documents to occur on the
Closing Date will not impair the ability of Borrower to pay its trade and other
accounts payable in accordance with their terms.
10. Borrower does not contemplate filing a petition in bankruptcy
or for reorganization under the federal Bankruptcy Code, nor does the
undersigned have any knowledge of any threatened bankruptcy or insolvency
proceedings against Borrower.
11. The undersigned hereby acknowledges that Lender has relied
upon the statements contained herein, and consents to such reliance.
IN WITNESS WHEREOF, the undersigned has executed this certificate
in his aforesaid capacity this day of _________________, 2004.
By:
---------------------------------------
President, East Kansas Agri-Energy, L.L.C.
3.01(d)(xix)-2
EXHIBIT A
3.01(d)(xix)-3
EXHIBIT B
3.01(d)(xix)-4