Exhibit 10.18
CONVERTIBLE NOTE
$12,000,000.00 May 2, 2007
1. FOR VALUE RECEIVED, SOUTHWEST IOWA RENEWABLE ENERGY, LLC, an Iowa
limited liability company (the "Borrower"), hereby promises to pay to the order
of MONUMENTAL LIFE INSURANCE COMPANY (the "Bank"), the principal sum of Twelve
Million and No/100ths ($12,000,000.00) Dollars, or so much thereof as may be
advanced to, or for the benefit of, the Borrower and be outstanding, with
interest thereon, to be computed on each advance from the date of its
disbursement as set forth herein pursuant to that certain Credit Agreement of
even date herewith by and between the Borrower, the Bank and the other
commercial, banking or financial institutions from time to time parties thereto,
and AgStar Financial Services, PCA, as agent (the "Agent") (as it may be
amended, modified, supplemented, extended or restated from time to time, the
"Credit Agreement"), and which remains unpaid, in lawful money of the United
States and immediately available funds. This Convertible Note is issued pursuant
to the terms and provisions of the Credit Agreement and is entitled to all of
the benefits provided for in the Credit Agreement. All capitalized terms used
and not defined herein shall have the meanings assigned to them in the Credit
Agreement.
2. The outstanding principal balance of this Convertible Note shall bear
interest at a variable rate determined by Agent to be 315 basis points above the
LIBOR Rate in effect on the date of the first Advance made to Borrower under
this Convertible Note. Notwithstanding the foregoing, the rate of interest under
this Convertible Note may be adjusted by Agent pursuant to the provisions of the
Credit Agreement and this Convertible Note. On the Conversion Date, a portion
not to exceed 50% of the outstanding principal balance of all Advances made
under this Convertible Note may at Borrower's option be converted to a fixed
rate of interest at a rate acceptable to Agent in its sole reasonable discretion
pursuant to the terms and conditions of the Credit Agreement.
3. The "LIBOR Rate" (London Interbank Offered Rate) means the rate (rounded
upward to the nearest sixteenth and adjusted for reserves required on
Eurocurrency Liabilities (as hereinafter defined) for banks subject to FRB
Regulation D (as hereinafter defined) or required by any other federal law or
regulation), quoted by the British Bankers Association (the "BBA") at 11:00 a.m.
London time two Banking Days (as hereinafter defined) before the commencement of
the Interest Period for the offering of U.S. Dollar deposits in the London
interbank market for an Interest Period of one month, as published by Bloomberg
or another major information vendor listed on BBA's official website. "Banking
Day" shall mean a day on which Agent is open for business, dealings in U.S.
Dollar deposits are being carried out in the London interbank market, and banks
are open for business in New York City and London, England. "Eurocurrency
Liabilities" has the meaning as set forth in FRB Regulation D. "FRB Regulation
D" means Regulation D as promulgated by the Board of Governors of the Federal
Reserve System, 12 C.F.R. Part 204, as amended from time to time.
4. The rate of interest due hereunder shall initially be determined as of
the date hereof and shall thereafter be adjusted, as and when, the LIBOR Rate
changes. All such adjustments to the rate of interest shall be made and become
effective as of the first day of the month following the date of any change in
the LIBOR Rate and shall remain in effect until and including the day
immediately preceding the next such adjustment (each such day hereinafter
being referred to as an "Adjustment Date"). All such adjustments to said rate
shall be made and become effective as of the Adjustment Date, and said rate as
adjusted shall remain in effect until and including the day immediately
preceding the next Adjustment Date. Interest hereunder shall be computed on the
basis of a year of three hundred sixty-five (365) days, but charged for actual
days principal is outstanding.
5. Advances may only be made under this Convertible Note until the
Conversion Date after which no further Advances may be made hereunder. No
amounts may be readvanced under this Convertible Note. Any principal repayment
by the Borrower will reduce the Bank's commitment on the Construction Loan.
6. Prior to the Conversion Date, all interest accrued under this
Convertible Note shall be payable monthly, on the first day of each month (each
such date, a "Monthly Payment Date"), commencing on the first Monthly Payment
Date following the date on which the first Advance is made hereunder, and
continuing on each Monthly Payment Date thereafter until the Conversion Date. On
the Conversion Date, all outstanding accrued interest shall be paid in full.
7. On the Conversion Date, the remaining outstanding principal balance of
this note shall be converted into a Term Loan pursuant to the Credit Agreement
and this Convertible Note.
8. Subject to the terms and conditions of the Credit Agreement, following
the Conversion Date, the portion of the Term Loan that has not been converted to
a Fixed Rate Loan shall bear interest at a variable rate equal to the LIBOR Rate
plus 295 basis points or as otherwise provided in the Credit Agreement.
9. The Borrower shall have the option to convert a portion of the loan
evidenced by this Note into a Fixed Rate Loan, as provided in the Credit
Agreement, which shall bear interest at a rate equal to 275 basis points in
excess of a known fixed rate benchmark rate as set forth in the Credit
Agreement, which is in effect on the Conversion Date, or such other rate of
interest as agreed upon by the Agent and Borrower. Should the Borrower elect
such fixed rate option, such rate of interest shall not be subject to any
adjustments as provided for in the Credit Agreement.
10. Beginning on the first (1st) day of the month following the month in
which the Conversion Date occurs, and continuing on the first (1st) day of each
succeeding month thereafter until the seventh month after the Conversion Date,
the Borrower shall make monthly payments of accrued interest under the Term
Loan. Beginning on the first (1st) day of the seventh month following the
Conversion Date (the "Amortization Date"), and continuing on the first (1st) day
of each succeeding month thereafter until the Maturity Date, the Borrower shall
make equal monthly payments of principal and accrued interest in such amounts as
would be required to fully amortize the entire outstanding principal balance of
the Term Loan, together with accrued interest thereon, over a period of 114
months from the Amortization Date. The outstanding principal balance, together
with all accrued interest, if not paid sooner, shall be due and payable in full
on the Maturity Date. Following the Conversion Date, and in addition to all
other payments of principal and interest required under the Credit Agreement,
the Borrower shall annually remit to Agent for the account of the Bank the
Excess Cash Flow Payment pursuant to terms and conditions of the Credit
Agreement.
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11. The outstanding principal balance hereof, together with all accrued
interest, if not paid sooner, shall be due and payable in full on the fifth
(5th) annual anniversary of the Conversion Date (the "Maturity Date").
12. All payments and prepayments shall, at the option of the Agent for the
account of the Bank, be applied first to any costs of collection, second to any
late charges, third to accrued interest and the remainder thereof to principal.
13. This Convertible Note may be prepaid at any time, at the option of the
Borrower, either in whole or in part, subject to the obligations of the Borrower
to compensate the Bank for any loss, cost or expense as a result of such
prepayment as set forth in the Credit Agreement. This Convertible Note is
subject to mandatory prepayment, at the option of the Agent, as provided in the
Credit Agreement.
14. In addition to the rights and remedies set forth in the Credit
Agreement: (i) if the Borrower fails to make any payment to Bank when due under
this Convertible Note, then at Agent's option in each instance, such obligation
or payment shall bear interest from the date due to the date paid at 2% per
annum in excess of the rate of interest that would otherwise be applicable to
such obligation or payment under this Convertible Note; (ii) upon the occurrence
and during the continuance of an Event of Default beyond any applicable cure
period, if any, at Agent's option in each instance, the unpaid balances under
this Convertible Note shall bear interest from the date of the Event of Default
or such later date as Agent shall elect at 2% per annum in excess of the rate(s)
of interest that would otherwise be in effect under the terms of this
Convertible Note; (iii) after the Maturity Date, whether by reason of
acceleration or otherwise, the unpaid principal balance of this Convertible Note
(including without limitation, principal, interest, fees and expenses) shall
automatically bear interest at 2% per annum in excess of the rate of interest
that would otherwise be in effect under this Convertible Note. Interest payable
at the Default Rate shall be payable from time to time on demand or, if not
sooner demanded, on the last day of each calendar month.
15. If the Borrower fails to make any payment to Agent within ten (10) days
of the due date thereof, the Borrower shall, in addition to such amount, pay a
late charge equal to five percent (5%) of the amount of such payment.
16. This Convertible Note is secured by, among other instruments, a
Mortgage, Security Agreement and Financing Statement covering various parcels of
real property, fixtures, and personal property located in Pottawattamie County,
Iowa. In the event any such security is found to be invalid for whatever reason
in accordance with the terms of the Credit Agreement such invalidity shall
constitute an event of default hereunder. All of the agreements, conditions,
covenants, provisions, and stipulations contained in the Mortgage, or any
instrument securing this Convertible Note are hereby made a part of this
Convertible Note to the same extent and with the same force and effect as if
they were fully set forth herein. It is agreed that time is of the essence of
this Convertible Note.
17. Upon the occurrence at any time of an Event of Default or at any time
thereafter, the outstanding principal balance hereof plus accrued interest
hereon plus all other amounts due hereunder shall, at the option of the Agent,
be immediately due and payable, without notice or
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demand and Agent shall be entitled to exercise all remedies provided in this
Convertible Note, the Credit Agreement or any of the Loan Documents.
18. Upon the occurrence at any time of an Event of Default or at any time
thereafter, the Banks shall have the right to set off any and all amounts due
hereunder by the Borrower to the Banks against any indebtedness or obligation of
the Banks to the Borrower.
19. The Borrower promises to pay all reasonable costs of collection of this
Convertible Note, including, but not limited to, reasonable attorneys' fees paid
or incurred by the Agent on account of such collection, whether or not suit is
filed with respect thereto and whether or not such costs are paid or incurred,
or to be paid or incurred, prior to or after the entry of judgment.
20. Demand, presentment, protest and notice of nonpayment and dishonor of
this Construction Note are hereby waived.
21. This Convertible Note shall be governed by and construed in accordance
with the laws of the State of Minnesota.
22. The Borrower hereby irrevocably submits to the jurisdiction of any
Minnesota state court or federal court over any action or proceeding arising out
of or relating to this Note, the Credit Agreement and any instrument, agreement
or document related hereto or thereto, and the Borrower hereby irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined in such Minnesota state or federal court. The Borrower hereby
irrevocably waives, to the fullest extent it may effectively do so, the defense
of an inconvenient forum to the maintenance of such action or proceeding.
Nothing in this Convertible Note shall affect the right of the Agent to bring
any action or proceeding against the Borrower or its property in the courts of
any other jurisdiction to the extent permitted by law.
SOUTHWEST IOWA RENEWABLE ENERGY, LLC,
an Iowa limited liability
company
By /s/ ▇▇▇▇ ▇▇▇▇▇
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Its: General Manager
By /s/ ▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇
Its: Board Chairman
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