FIRST SUPPLEMENT TO MASTER LOAN AGREEMENT (CONSTRUCTION AND TERM LOAN)
Exhibit 10.31
THIS FIRST SUPPLEMENT TO MASTER LOAN AGREEMENT (this “First Supplement”) is made and entered
into as of November 30, 2007, by and between HOME FEDERAL SAVINGS BANK (“Lender”) and HOMELAND
ENERGY SOLUTIONS, LLC, an Iowa limited liability company (“Borrower”), and supplements and
incorporates all of the provisions of that certain Master Loan Agreement, of even date herewith,
between Lender and Borrower (as the same may be amended, modified, supplemented, extended or
restated from time to time, the “MLA”).
1. Definitions. As used in this First Supplement, the following terms shall have the
following meanings. Capitalized terms used and not otherwise defined in this First Supplement
shall have the meanings attributed to such terms in the MLA. Terms not defined in either this
First Supplement or the MLA shall have the meanings attributed to such terms in the Uniform
Commercial Code, as enacted in the State of Minnesota, as amended from time to time.
“Amortization Date” shall have the meaning specified in Section 8(c).
“Construction Letters of Credit” shall have the meaning specified in Section 7(b).
“Construction Letter of Credit Liabilities” means, at any time, the aggregate
maximum amount available to be drawn under all outstanding Construction Letters of Credit
(in each case, determined without regard to whether any conditions to drawing could then be
met) and all unreimbursed drawings under Construction Letters of Credit.
“Construction Loan Commitment” shall have the meaning specified in Section 2.
“Draw Request” means a request for an advance against the Construction Note prior to
the Conversion Date, submitted by Borrower to Lender and the Disbursing Agent, in accordance
with the terms and conditions of the Disbursing Agreement.
“Monthly Payment Date” means the first day of each calendar month.
“Sworn Construction Statement” means a sworn construction statement, sworn to by
Borrower and the General Contractor, and of a form and substance acceptable to Lender, a
sample of which is attached hereto as Exhibit A.
2. The Construction Loan. On the terms and conditions set forth in the MLA and this
First Supplement, Lender agrees to make a Construction Loan to Borrower (the “Construction Loan”),
by means of multiple advances in an amount not to exceed $94,000,000.00 (the “Construction Loan
Commitment”). Under the Construction Loan, amounts borrowed and repaid or prepaid may not be
re-borrowed.
3. Purpose. Advances under the Construction Loan (the “Construction Advances”) may be
used to fund Project Costs, including closing costs and fees associated with
the Construction Loan. The Borrower agrees that the proceeds of the Construction Loan are to
be used only for the purposes set forth in this Section 3.
4. Construction Loan Interest Rate. Subject to the provisions of Sections 2.08 and
2.10 of the MLA and Sections 9 and 12 of this First Supplement, the Construction Loan shall bear
interest at a rate equal to the LIBOR Rate plus 350 basis points. The computation of interest,
amortization, maturity and other terms and conditions of the Construction Loan shall be as provided
in the Construction Note, provided, however, in no event shall the applicable rate exceed the
Maximum Rate.
5. Construction Loan Payments. Borrower will pay interest on the Construction Loan
monthly in arrears on the first day of each month commencing on the first Monthly Payment Date
following the date on which the first Advance is made on the Construction Loan, and continuing on
each Monthly Payment Date thereafter until the Conversion Date. If any Monthly Payment Date is not
a Business Day, then the interest payment then due shall be paid on the next Business Day and shall
continue to accrue interest until paid. On the Conversion Date, all outstanding accrued interest
shall be due and payable in full.
6. Construction Loan Term. The Construction Loan shall run for a period beginning on
the Closing Date and ending on the Conversion Date. On the Conversion Date, the amount of the
unpaid principal balance of the Construction Loan and all other amounts due and owing hereunder or
under any other Loan Document relating to the Construction Loan shall be due and payable, except
for that part, if any, of the Construction Loan which is converted into a Term Loan pursuant to the
terms of the MLA and this First Supplement, and into a Term Revolving Loan pursuant to the terms of
the MLA and the Second Supplement.
(i) the aggregate amount of outstanding Letter of Credit Liabilities under the Construction
Loan shall not at any time exceed $3,000,000.00;
(ii) the sum of the outstanding Construction Letters of Credit plus the outstanding
Construction Advances shall not at any time exceed the Construction Loan;
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(iii) the expiration date of a Construction Letter of Credit advanced under the Construction
Loan shall be no latter than the Conversion Date.
Any Construction Letter of Credit issued under this Section 7 is subject to the provisions of
Section 2.06 of the MLA.
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8. Conversion of Construction Loan Into Term Loan. Subject to the terms and
conditions contained in the MLA and this First Supplement, a portion of the Construction Loan may
be converted into a Term Loan.
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9. Default Interest. In addition to the rights and remedies set forth in the MLA:
(i) if Borrower fails to make any payment to Lender when due, then at Lender’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; (ii) upon the occurrence and during the continuance of an Event of Default beyond any
applicable cure period, if any, at Lender’s option in each instance, the unpaid balances of the
Construction Loan shall bear interest from the date of the Event of Default or such later date as
Lender shall elect at 2% per annum in excess of the rate(s) of interest that would otherwise be in
effect on the Construction Loan under the terms of the Construction Note; (iii) after the Maturity
Date, whether by reason of acceleration or otherwise, the unpaid principal balance of the
Construction 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 the terms of the Construction 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.
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10. Late Charge. If any payment of principal or interest due under this First
Supplement or the Construction Note is not paid within ten (10) days of the due date thereof,
Borrower shall, in addition to such amount, pay a late charge equal to five percent (5%) of the
amount of such payment.
11. Excess Cash Flow. In addition to all other payments of principal and interest
required under the MLA, the Supplements and the Notes, at the end of the first fiscal quarter
following the Conversion Date, and continuing each fiscal quarter thereafter until the Maturity
Date, Borrower shall remit to Lender, an amount equal to 100% of Borrower’s Excess Cash Flow,
calculated based upon that fiscal quarter’s interim financial statements, on or before 45 days
after the end of each fiscal quarter of Borrower (the “Excess Cash Flow Payment”), provided
however, that the total Excess Cash Flow Payments required hereunder shall not exceed $5,000,000.00
in any fiscal year (the “Maximum Excess Cash Flow Payment”). One hundred percent (100%) of the
Excess Cash Flow Payment shall be applied to the reduction of the outstanding principal of the Term
Loan. The Excess Cash Flow Payment shall be re-calculated annually based upon audited fiscal
year-end financial statements required by Section 5.01(c)(i) of the MLA. Borrower shall within 30
days of Lender’s request remit to Lender any additional amounts due Lender under this Section 11 in
an amount not to exceed the Maximum Excess Cash Flow Payment. In the event the re-calculation
determines that the Borrower has paid in excess of the required Excess Cash Flow Payment for the
applicable period, Borrower shall be given a credit in the amount of the excess to be applied to
the next quarterly Excess Cash Flow Payment due Lender. Any Excess Cash Flow Payment or any other
payment from Excess Cash Flow shall not constitute a prepayment with respect to which a prepayment
fee under Section 2.10 of the MLA is required to be paid. Notwithstanding the foregoing, the
Excess Cash Flow Payment shall not apply if Tangible Owner’s Equity is greater than or equal to
sixty-five percent (65%) but will be reinstated if Tangible Owner’s Equity falls below 65%,
measured for any fiscal quarter. Notwithstanding the foregoing, the Excess Cash Flow Payment shall
not exceed an aggregate amount of $25,000,000.00 during the term of the MLA.
12. Changes in Law Rendering Certain LIBOR Rate Loans Unlawful. In the event that any
change in any applicable law (including the adoption of any new applicable law) or any change in
the interpretation of any applicable law by any judicial, governmental or other regulatory body
charged with the interpretation, implementation or administration thereof, should make it (or in
the good-faith judgment of Lender should raise a substantial question as to whether it is) unlawful
for Lender to make, maintain or fund LIBOR Rate loans, then: (a) Lender shall promptly notify each
of the other parties hereto; and (b) the obligation of Lender to make LIBOR Rate loans of such type
shall, upon the effectiveness of such event, be suspended for the duration of such unlawfulness.
During the period of any suspension, Lender
shall make loans to Borrower that are deemed lawful and that as closely as possible reflect the
terms of the MLA.
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13. Maximum Amount Limitation. Anything in the MLA, this First Supplement, or the
other Loan Documents to the contrary notwithstanding, Borrower shall not be required to pay
unearned interest on the Construction Note or any of the Loan Obligations, or ever be required to
pay interest on the Construction Note or any of the Loan Obligations at a rate in excess of the
Maximum Rate, if any. If the effective rate of interest which would otherwise be payable under the
MLA, this First Supplement, the Construction Note, or any of the other Loan Documents would exceed
the Maximum Rate, if any, then the rate of interest which would otherwise be contracted for,
charged, or received under the MLA, this First Supplement, the Construction Note, or any of the
other Loan Documents shall be reduced to the Maximum Rate, if any. If any unearned interest or
discount or property that is deemed to constitute interest (including, without limitation, to the
extent that any of the fees payable by Borrower for the Loan Obligations to Lender under the MLA,
this First Supplement, the Construction Note, or any of the other Loan Documents are deemed to
constitute interest) is contracted for, charged, or received in excess of the Maximum Rate, if any,
then such interest in excess of the Maximum Rate shall be deemed a mistake and canceled, shall not
be collected or collectible, and if paid nonetheless, shall, at the option of the holder of the
Construction Note, be either refunded to Borrower, or credited on the principal of the Construction
Note. It is further agreed that, without limitation of the foregoing and to the extent permitted
by applicable law, all calculations of the rate of interest or discount contracted for, charged or
received by Lender under the Construction Note, or under any of the Loan Documents, that are made
for the purpose of determining whether such rate exceeds the Maximum Rate applicable to Lender, if
any, shall be made, to the extent permitted by applicable laws (now or hereafter enacted), by
amortizing, prorating and spreading during the period of the full terms of the Advances evidenced
by the Construction Note, and any renewals thereof all interest at any time contracted for, charged
or received by Lender in connection therewith.
14. Construction of Project. As a further condition to Lender’s funding of Project
Costs pursuant to the terms of the MLA and this First Supplement, Borrower will:
(i) diligently proceed with construction of the Project in accordance with the Plans and
Specifications and in accordance with all applicable laws and ordinance and will complete the
Project on or before the Completion Date;
(ii) use the proceeds of all Advances solely to pay the Project Costs as specified in the
Project Sources and Uses Statement;
(iii) use its reasonable best efforts to require the Contractor(s) to comply with all rules,
regulations, ordinances and laws relating to work on the Project;
(iv) obtain Lender’s prior written approval of any change in the Plans and Specifications for
the Project approved by Lender which might materially adversely affect the value of Lender’s
security, and has a cost of $25,000.00 or greater. The Lender will have a reasonable time to
evaluate any requests for its approval of any changes referred to in this paragraph. The Lender may
approve or disapprove changes in its discretion, subject to the foregoing provisions of this
Section 19(iv). If it reasonably appears to Lender that any change
may increase the Project Costs, Lender may require Borrower to deposit additional funds with
Lender pursuant to the provisions of this MLA and this First Supplement in an amount sufficient to
cover the increased costs as a condition to giving its approval;
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(v) comply with and keep in effect all necessary permits and approvals obtained from any
Governmental Authority relating to the lawful construction of the Project. Borrower will comply
with all applicable existing and future laws, regulations, orders, and requirements of any
Governmental Authority, judicial, or legal authorities having jurisdiction over the Real Property
or Project, and with all recorded restrictions affecting the Real Property;
(vi) furnish to Lender from time to time on request by Lender, in a form reasonably acceptable
to Lender, correct lists of all contractors and subcontractors employed in connection with
construction of the Project and true and correct copies of all executed contracts and subcontracts.
The Lender may contact any contractor or subcontractor to verify any facts disclosed in the lists,
Borrower must consent to the disclosure of such information by the contractors and subcontractors
to Lender or its agents upon Lender’s request, and Borrower must assist Lender or its agents in
obtaining such information upon Lender’s request;
(vii) upon completion of the building foundation of the Project, deliver to Lender an
“as-built” survey of the Real Property which: (a) sets forth the location and exterior lines and
egress and other improvements completed on the Real Property and demonstrates compliance with all
applicable setback requirements; (b) demonstrates that the Project is entirely within the exterior
boundaries of the Real Property and any building restriction lines and does not encroach upon any
easements or rights-of-way; and (c) contains such other information as Lender may reasonably
request;
(viii) not purchase any materials, equipment, fixtures, or articles of personal property
placed in the Project prior to the Conversion Date under any security agreement or other agreement
where the seller reserves or purports to reserve title or the right of removal or repossession, or
the right to consider them personal property after their incorporation in the work of construction,
unless authorized by Lender in writing;
(ix) provide Lender and its representatives with access to the Real Property and the Project
at any reasonable time and upon reasonable notice to enter the Real Property and inspect the work
or construction and all materials, plans, specifications, and other matters relating to the
construction. The Lender will also have the right to, at any reasonable time and upon reasonable
notice, examine, copy, and audit the books, records, accounting data, and other documents of
Borrower and its contractors relating to the Real Property or construction of the Project;
(x) pay and discharge all claims and liens for labor done and materials and services furnished
in connection with the construction of the Project. Borrower will have the right to contest in
good faith any claim or lien, provided that it does so diligently and without prejudice to Lender
or the ability to obtain title insurance in the manner required by the MLA, this First Supplement
and the Disbursing Agreement. Upon Lender’s request, Borrower will
promptly provide a bond, cash deposit, or other security reasonably satisfactory to Lender to
protect Lender’s interest and security should the contest be unsuccessful;
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(xi) at Lender’s request and expense, post signs on the Real Property for the purpose of
identifying Lender and participating local banks as the “Lender.” At the request of Lender, or the
participating local community banks, Borrower will use its best efforts to identify Lender and the
participating local banks as the lender in publicity concerning the Project;
(xii) maintain in force until full payment of the Loan builder’s risk and all other insurance
required by law, public liability insurance, and property insurance. The policies must be approved
by Lender as to amounts, form, risk coverage, deductibles, insurer, and loss payable and
cancellation provision as reasonably required by Lender. Lender’s approval, however, will not be a
representation of the solvency of any insurer or the sufficiency of any amount of insurance;
(xiii) cooperate at all times with Lender in bringing about the timely completion of the
Project, and resolve all disputes arising during the work of construction in a manner which will
allow work to proceed expeditiously. With respect to such disputes, Borrower will have the right
to contest in good faith claims resulting in disputes, provided that it does so diligently and
without prejudice to Lender. Upon Lender’s request, Borrower will promptly provide a bond, cash
deposit, or other security reasonably satisfactory to Lender to protect Lender’s interest and
security should the contest be unsuccessful;
(xiv) pay Lender’s and the Disbursing Agent’s reasonable out-of-pocket costs and expenses
incurred in connection with the making or disbursement of the Loans or in the exercise of any of
its rights or remedies under the MLA, this First Supplement and the Disbursing Agreement, including
but not limited to title insurance and escrow charges, disbursing agent fees, recording charges,
and mortgage taxes, reasonable legal fees and disbursements, and reasonable fees and costs for
services which are not customarily performed by Lender’s salaried employees and are not
specifically covered by the fees charged to originate the Loan, if any. The provision of this
paragraph will survive the termination of the MLA, this First Supplement and the repayment of the
Loans;
(xv) keep true and correct financial books and records on a cash basis for the construction of
the Project and maintain adequate reserves for all contingencies. If required by Lender, Borrower
will submit to Lender at such times as it reasonably requires (which will in no event be more often
than monthly) a statement which accurately shows the application of all funds expended to date for
construction of the Project and the source of those funds as well as Borrower’s best estimate of
the funds needed to complete the Project and the source of those funds. Borrower will promptly
supply Lender with any financial statements or other information concerning its affairs and
properties as Lender may reasonably request, and will promptly notify Lender of any material
adverse change in its financial condition or in the physical condition of the Property or Project;
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(xvi) comply with the requirements of any commitment or agreement entered into by Borrower
with any Governmental Authority to assist the construction or financing of the Real Property and/or
Project and with the terms of all applicable laws, regulations, and requirements governing such
assistance;
(xvii) indemnify and hold Lender harmless from and against all liabilities, claims, damages,
reasonable costs, and reasonable expenses (including but not limited to reasonable legal fees and
disbursements) arising out of or resulting from any defective workmanship or materials occurring in
the construction of the Project. Upon demand by Lender, Borrower will defend any action or
proceeding brought against Lender alleging any defective workmanship or materials, or Lender may
elect to conduct its own defense at the reasonable expense of Borrower. The provisions of this
paragraph will survive the termination of the MLA, this First Supplement and the repayment of the
Loan; and
(xviii) obtain and deliver to Lender copies of all necessary occupancy certificates relating
to the Project.
15. Security. The Borrower’s obligations hereunder and, to the extent related
thereto, the MLA, shall be secured as provided in the MLA and the other Loan Documents.
{SIGNATURE PAGE TO FOLLOW}
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SIGNATURE PAGE TO
FIRST SUPPLEMENT
BY AND BETWEEN
HOMELAND ENERGY SOLUTIONS, LLC
AND
HOME FEDERAL SAVINGS BANK
DATED: November 30, 2007
FIRST SUPPLEMENT
BY AND BETWEEN
HOMELAND ENERGY SOLUTIONS, LLC
AND
HOME FEDERAL SAVINGS BANK
DATED: November 30, 2007
IN WITNESS WHEREOF, the parties have caused this First Supplement to Master Loan Agreement to
be executed by their duly authorized officers as of the date shown above.
HOMELAND ENERGY SOLUTIONS, LLC, an Iowa limited liability company | HOME FEDERAL SAVINGS BANK, a federally chartered stock savings bank organized under the laws of the United States |
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By:
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/s/ Xxxxxxx X. Xxxxxxx
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By: | /s/ Xxxx Xxxxxxxx
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Title: President | Its: Vice President |
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EXHIBIT A
SWORN CONSTRUCTION STATEMENT
SWORN CONSTRUCTION STATEMENT
SWORN CONSTRUCTION STATEMENT
OWNER:
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PROPERTY AT: |
IMPORTANT NOTICE: This statement must be complete as to names of all persons and companies furnishing
labor and/or material on the premises herein. Any increase in cost, from changes in construction or
otherwise, must be forthwith reported to
the DISBURSING AGENT with additional deposits to cover such increase in cost.
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ITEMS | FURNISH BY | TOTAL COST | AMT PAID | BALANCE | ||||||||||||
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SUBTOTAL | 0 | |||||||||||||||
STATE OF ) | ||||
>
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SS. | |||
COUNTY OF ) |
The undersigned being first duly sworn, each for himself, as General Contractor and Borrower, deposes and says that the foregoing
are the names of all parties having contracts or subcontracts for specified portions of the work on said property and building or
material entering into the construction thereof, and the amounts due and to become due to each of said parties, that the items
mentioned include all labor and material required to complete said buildings according to plans and specifications, that there are
no other contracts outstanding; and that there is not due or to become due to any person for material, labor or other work of any
kind done upon said building other than as above stated.
The undersigned further deposes and says that no increase in the cost of construction will be made under any circumstances
without furnishing information on same to the DISBURSING AGENT with additional deposits to cover such increase; that, in the
event of any such increase, no orders or claims will be made to said company until such information and additional deposits shall
have been completed; that the purpose of said statement is to induce said company to pay out the proceeds of a loan of
$94,000,000.00 secured by a leasehold mortgage on said property; and that, upon payment of the specific unpaid items listed
herein, the undersigned General Contractor hereby agrees to waive all claims of priority to said leasehold mortgage and
both parties herein will save said company harmless as to any claims of priority of lien for any labor or material, furnished or
to be furnished, for completion of construction
General Contractor
HOMELAND ENERGY SOLUTIONS, LLC
The foregoing instrument was acknowledged before me this
_____
day of , 20 .
by |
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NOTARY STAMP: | ||||||
Signature of Notary Public |
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