ESCROW AGREEMENT
THIS
ESCROW AGREEMENT
(this
"Agreement") is made this 16th
day of
July, 2007, by and between Prairie Creek Ethanol, LLC an Iowa limited liability
company ("Prairie Creek Ethanol" or the “Company”) and Iowa State Bank, Algona,
Iowa as escrow agent (the “Escrow Agent”).
WITNESSETH:
WHEREAS,
Prairie
Creek Ethanol proposes to offer a minimum of 11,800 and a maximum of 27,600
of
its Membership Units (the "Units") at a price of $5,000 per Unit, in minimum
blocks of two (2) Units in an offering (the “Offering”) registered with the
Securities and Exchange Commission and in the states of Florida, Illinois,
Iowa,
Kansas, Missouri, South Dakota, Wisconsin, and possibly offered in other states
pursuant to state securities registration exemptions and under the provisions
of
the Securities Act of 1933, as amended;
WHEREAS,
Prairie
Creek Ethanol has filed a registration statement (the “Registration Statement”)
to register the Units with the Securities and Exchange Commission, the States
of
Florida, Illinois, Iowa, Kansas, Missouri, South Dakota, Wisconsin, and possibly
other states;
WHEREAS,
Prairie
Creek Ethanol will allow investors in the Offering to deliver the purchase
price
of the subscribed Units in installments; and
WHEREAS,
Prairie
Creek Ethanol desires to comply with the requirements of federal and state
securities laws and regulations, and desires to protect the investors in the
Offering by providing, under the terms and conditions herein set forth, for
the
return to subscribers of the money which they may pay on account of purchases
of
Units in the Offering if the Minimum Escrow Deposit (hereinafter defined) is
not
deposited with the Escrow Agent.
NOW,
THEREFORE,
in
consideration of the mutual covenants herein contained and for other good and
valuable consideration, the receipt and sufficiency of which is acknowledged,
the parties agree as follows:
1. Acceptance
of Appointment.
Iowa
State Bank, Algona, Iowa hereby agrees to act as escrow agent under this
Agreement. The Escrow Agent shall have no duty to enforce any provision hereof
requiring performance by any other party hereunder.
2. Establishment
of Escrow Account.
An
escrow account (the "Escrow Account") is hereby established with the Escrow
Agent for the benefit of the investors in the Offering. Except as specifically
provided in this Agreement, the Escrow Account shall be created and maintained
subject to the customary rules and regulations of the Escrow Agent pertaining
to
such accounts.
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3. Ownership
of Escrow Account.
Until
such time as the funds deposited in the Escrow Account (the "Deposited Funds")
shall equal the Minimum Escrow Deposit (as hereinafter defined), all funds
deposited in the Escrow Account by Prairie Creek Ethanol shall not become the
property of Prairie Creek Ethanol or be subject to the debts of Prairie Creek
Ethanol or any other person but shall be held by the Escrow Agent solely for
the
benefit of the investors who have purchased Units in the Offering.
4. Deposit
of Proceeds.
All
proceeds from sales of Units in the Offering shall be delivered by Prairie
Creek
Ethanol to the Escrow Agent, within forty-eight hours of the receipt thereof
from investors, endorsed (if appropriate) to the order of the Escrow Agent,
together with an appropriate written statement setting forth the name, address
and social security number of each person purchasing Units, the number of Units
purchased, and the amount paid by each such purchaser. Any such proceeds
deposited with the Escrow Agent in the form of uncollected checks shall be
promptly presented by the Escrow Agent for collection through customary banking
and clearing house facilities. As the proceeds of each sale are deposited with
the Escrow Agent, Prairie Creek Ethanol shall reserve the number of Units
confirmed to the purchaser thereof in connection with such sale. All such
deposited proceeds are referred to herein as the "Escrow Funds".
5. Investment
of Escrow Account.
The
Escrow Funds shall be credited by the Escrow Agent and recorded in the Escrow
Account. The Escrow Agent shall be permitted, and is hereby authorized to
deposit, transfer, hold and invest all funds received under this Agreement,
including principal and interest, in those investments directed, in writing
by
Prairie
Creek Ethanol.
The
Escrow Agent is hereby authorized to invest the Escrow Funds in Federated
Government Obligations Tax-Managed Fund for temporary investment without written
direction. Any interest received by the Escrow Agent with respect to the Escrow
Funds shall be paid to Prairie
Creek Ethanol,
the
investors or Escrow Agent, as indicated elsewhere in this Agreement.
6. Termination
of Escrow.
This
Agreement and the Escrow created hereunder shall be terminated as provided
in
Section 7 hereof or as of the date in calendar year 2008 (the "Termination
Date"), which is one year and one day following the date in calendar year 2007
upon which the Securities and Exchange Commission authorizes the Offering (the
"Offering's Effective Date"). The Company shall notify Escrow Agent of the
Offering's Effective Date within thirty (30) days of the receipt of notice
of
the Offering's Effective Date from the Securities and Exchange Commission.
7. Disposition
of Escrow Funds.
The
Escrow Agent shall have the following duties and obligations under this
Agreement:
A. The
Escrow Agent shall send a written notice to the Company acknowledging the
receipt of the Deposited Funds each business day.
B. The
Escrow Agent shall give the Company prompt written notice when the Deposited
Funds equal $5,900,000 (exclusive of interest). Following receipt of such
notice, the Company will advise the purchasers of Units to remit to the Escrow
Agent the balance of the purchase price within twenty (20) days. The Escrow
Agent shall also give the Company prompt written notice when the Deposited
Funds
total $59,000,000 (exclusive of interest).
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C. At
the
time (and in the event) that: (a) the Deposited Funds shall, during the term
of
this Agreement, equal $59,000,000 in subscription proceeds (exclusive of
interest) (the "Minimum Escrow Deposit"); (b) the Escrow Agent
shall
have received written confirmation from the Company that the Company has
obtained a written debt financing commitment for debt financing ranging from
a
minimum of $56,670,000 to a maximum of $135,670,000; (c) the Company has
affirmatively elected in writing to terminate this Agreement; (d)
the
Escrow Agent shall have provided to each state securities department in which
the Company has registered its securities for sale, as communicated to the
Escrow Agent by the Company, an affidavit stating that the foregoing
requirements (a), (b) and (c) of this Subsection 7.C. have been
satisfied;
and
(e)
in each state in which consent is required, the state securities commissioners
have consented to release of the funds on deposit, then
this
Agreement shall terminate, and the Escrow Agent shall promptly disburse the
funds on deposit, including interest, to the Company to be used in accordance
with the provisions set forth in the Registration Statement. The Company will
deliver a copy of the Registration Statement to the Escrow Agent upon execution
of this Agreement. The Escrow Agent will have no responsibility to examine
the
Registration Statement with regard to the Escrow Account, the use of proceeds
by
the Company as described therein or otherwise and the Registration Statement
shall contain provisions to such effect. Upon the making of such disbursement,
the Escrow Agent shall be completely discharged and released of any and all
further responsibilities hereunder.
D. In
the
event the Deposited Funds do not equal or exceed the Minimum Escrow Deposit
on
or before the Termination Date or if the Company has not received a written
debt
financing commitment as described herein on or before the Termination Date,
the
Escrow Agent shall return to each of the purchasers of the Units in the
Offering, as promptly as possible after such Termination Date and on the basis
of its records pertaining to the Escrow Account: (a) the sum which each
purchaser initially paid in on account of purchases of the Units in the Offering
and (b) each purchaser's portion of the total interest earned on the Escrow
Account as of the Termination Date, (c) reduced by the transaction fees provided
in Section 10 hereof; provided that no such reduction shall be made from the
principal amounts paid by such purchasers. Computation of any purchaser's share
of the net interest earned will be a weighted average based on the proportion
of
such purchaser's deposit in the Escrow Account from the Offering to all such
purchasers' deposits held by the Escrow Agent and upon the length of time in
days such deposit was held in the Escrow Account as compared to all such
deposits. All computations with respect to each purchaser's allocable share
of
net interest shall be made by the Escrow Agent, which determinations shall
be
final and conclusive. Any amount paid or payable to a purchaser pursuant to
this
Section shall be deemed to be the property of such purchaser, free and clear
of
any and all claims of the Company or its agents or creditors; and the respective
purchases of the Units made and entered into in the Offering shall thereupon
be
deemed, ipso facto, to be cancelled without any further liability of the
purchasers or any of them to pay for the Units purchased. At such time as the
Escrow Agent shall have made all the payments called for in this Section, the
Escrow Agent shall be completely discharged and released of any and all further
responsibilities hereunder, and the Units reserved (as provided in Section
4
hereof) shall be released from such reservation, except that Escrow Agent shall
be required to prepare and issue a single IRS Form 1099 to each investor in
the
event that funds are returned to investors.
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8. Agreement
with Escrow Agent.
To
induce Escrow Agent to act hereunder, it is agreed by Prairie Creek Ethanol
and
Escrow Agent that acceptance by Escrow Agent of its duties under this Agreement
is subject to the following terms and conditions, which Escrow Agent and Prairie
Creek Ethanol hereby agree shall govern and control the rights, duties and
immunities of Escrow Agent.
A. the
Escrow Agent undertakes to perform such duties and only such duties as are
expressly set forth herein, and no implied agreements or obligations shall
be
read into this Escrow Agreement against the Escrow Agent; the Escrow Agent
shall
not be liable except for the performance of such duties and obligations as
are
expressly set out in this Agreement;
B. the
Escrow Agent shall be responsible for its own (including its officers,
directors, trustees, employees, agents or assigns) failure or inability to
honor
any of the provisions of this Agreement or any other agreement, where such
failure or inability arises as a result of bad faith, willful misconduct or
gross negligence, but shall not be responsible in any manner whatsoever for
any
failure or inability of the Company, or of anyone else, to honor any of the
provisions of this Agreement or any other agreement;
C. the
Company (and its successors and assigns) agrees to indemnify and hold the Escrow
Agent harmless against any and all losses, claims, damages, liabilities, and
expenses, including reasonable costs of investigation, counsel fees, including
allocated costs of in-house counsel and disbursements that may be imposed on
the
Escrow Agent or incurred by the Escrow Agent in connection with the performance
of its duties under this Agreement, including but not limited to any litigation
arising from this Agreement or involving its subject matter, unless such losses,
claims, damages, liabilities or expenses are the result of the bad faith,
willful misconduct or gross negligence of the Escrow Agent. In addition, the
Company agrees to pay to Escrow Agent any amounts due to it which may be in
excess of the interest earned on the Escrow Fund;
D. the
Escrow Agent shall be fully protected in acting on and relying upon any written
notice, direction, request, waiver, consent, receipt or other paper or document
which the Escrow Agent in good faith believes to have been signed or presented
by the proper party or parties;
E. the
Escrow Agent shall not be liable for any error of judgment, or for any act
done
or step taken or omitted by it in good faith or for any mistake of fact or
law,
or for anything which it may do or refrain from doing in connection herewith,
except its own bad faith, willful misconduct or gross negligence;
F. the
Escrow Agent may seek the advice of legal counsel in the event of any dispute
or
question as to the construction of any of the provisions of this Agreement
or
its duties hereunder, and it shall incur no liability and shall be fully
protected in respect of any action taken, omitted or suffered by it in good
faith in accordance with the opinion of such counsel;
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G. the
Escrow Agent makes no representation as to the validity, value, genuineness
or
collectibility of any security, document or instrument delivered to it;
H. no
provisions of this Escrow Agreement shall require the Escrow Agent to expend
or
risk its own funds or otherwise incur any financial liability in the performance
of its duties hereunder, or in the exercise of any of its rights or powers,
if
it shall have reasonable grounds for believing that repayment of such funds
or
adequate indemnity against such risk or liability is not reasonably assured
to
it;
I. in
the
event that (i) any dispute shall arise between the parties with respect to
the
disposition or disbursement of any of the assets held hereunder or (ii) the
Escrow Agent shall be uncertain as to how to proceed in a situation not
explicitly addressed by the terms of this Escrow Agreement whether because
of
conflicting demands by the other parties hereto or otherwise, the Escrow Agent
shall be permitted to interplead all of the assets held hereunder into a court
of competent jurisdiction, and thereafter be fully relieved from any and all
liability or obligation with respect to such interpleaded assets. The parties
hereto other than the Escrow Agent further agree to pursue any redress or
recourse in connection with such a dispute, without making the Escrow Agent
a
party to same; and
J. EXCEPT
IN
THE EVENT OF BAD FAITH, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART
OF
THE ESCROW AGENT, THE ESCROW AGENT SHALL NOT BE LIABLE, DIRECTLY OR INDIRECTLY,
FOR ANY SPECIAL, INDIRECT OR CONSEQUENTIAL LOSSES OR DAMAGES OF ANY KIND
WHATSOEVER (INCLUDING WITHOUT LIMITATION LOST PROFITS), EVEN IF THE ESCROW
AGENT
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH LOSSES OR DAMAGES AND REGARDLESS
OF
THE FORM OF ACTION.
9. Resignation
and Removal of Escrow Agent Successors.
The
Escrow Agent may resign upon thirty (30) days advance written notice to Prairie
Creek Ethanol. If a successor escrow agent is not appointed within the 30-day
period following such notice, Escrow Agent may petition any court of competent
jurisdiction to name a successor escrow agent. Any commercial banking
institution or trust company with which Escrow Agent may merge or consolidate,
and any commercial banking institution or trust company to which Escrow Agent
transfers all or substantially all of its corporate trust business shall be
the
successor to all of Escrow Agent’s rights, obligations and immunities hereunder,
without further act, deed or conveyance on the part of any of the parties
hereto, anything herein to the contrary notwithstanding.
10. Fees
and Expenses of Escrow Agent.
Prairie
Creek Ethanol agrees to pay to the Escrow Agent the fees specified in the Escrow
Agent’s fee schedule attached hereto as Exhibit A, in the manner set forth
therein, unless otherwise agreed to by the parties in writing. The parties
further agree that such fees shall be paid from interest on the escrow account
only and not from principal. In the event the interest on the escrow account
is
insufficient to satisfy the full amount of fees payable hereunder, Prairie
Creek
Ethanol shall be solely responsible for the payment of such fees and the Escrow
Agent shall not seek payment of the fees from investors or apply any principal
deposited by investors in the escrow account against such fees. The fee agreed
upon herein is intended as full consideration for the Escrow Agent's services
as
contemplated by this Agreement; provided,
however,
that in
the event the Escrow Agent renders any material service not contemplated in
this
Agreement or there is any assignment of interest in the subject matter of this
Agreement, or any material modification hereof; or if any material controversy
arises hereunder, or the Escrow Agent is made a party to any litigation
pertaining to this Agreement, or the subject matter hereof, then the Escrow
Agent shall be reasonably compensated for such extraordinary services and
reimbursed for all costs and expenses, including reasonable attorney's fees,
occasioned by any delay, controversy, litigation or event, and the same shall
be
recoverable from Prairie Creek Ethanol as more specifically set forth in Section
8.C above.
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11. Notices.
All
notices, requests, demands, and other communications under this Agreement shall
be in writing and shall be deemed to have been duly given (a) on the date of
service if served personally on the party to whom notice is to be given, (b)
on
the day of transmission if sent by facsimile transmission to the facsimile
number given below, and telephonic confirmation of receipt is obtained promptly
after completion of transmission, (c) on the next day on which such deliveries
are made in Goldfield, Iowa, when delivery is to Federal Express or similar
overnight courier or the Express Mail service maintained by the United States
Postal Service, (d) upon receipt of confirmation from the other party’s server
of receipt of such communication in the case of ZixMail (encrypted e-mail)
sent
return receipt requested; or (e) on the fifth day after mailing, if mailed
to
the party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed, return receipt requested,
to
the party as follows:
If
to
Escrow Agent:
Iowa
State Bank
0
X. Xxxx
Xxxxxx
Xxxxxx,
Xxxx 00000
Attn:
Xxxxxxx X. Xxxxx
Fax:
(000) 000-0000
Phone
(000) 000-0000:
If
to
Prairie Creek Ethanol:
Prairie
Creek Ethanol, LLC
000
X.
Xxxxxx Xxxxxx
XX
Xxx
000
Xxxxxxxxx,
Xxxx 00000
Attn:
Xxxx Xxxxx
Phone:
(000)
000-0000
with
a
required copy to:
Brown,
Winick, Graves, Gross, Xxxxxxxxxxx and Xxxxxxxxxxx, P.L.C.
000
Xxxxx
Xxxxxx, Xxxxx 0000
Xxx
Xxxxxx, XX 00000
Attention:
Xxxxxxx X. Xxxxxxxx
Fax:
(000) 000-0000
Phone:
(000)-000-0000
6
12. Governing
Law.
This
Agreement shall be construed, performed, and enforced in accordance with, and
governed by, the internal laws of the State of Iowa, without giving effect
to
the principles of conflict of laws thereof.
13. Successors
and Assigns.
Except
as otherwise provided in this Agreement, no party hereto shall assign this
Agreement or any rights or obligations hereunder without the prior written
consent to the other parties hereto and any such attempted assignment without
such prior written consent shall be void and of no force and effect. This
Agreement shall inure to the benefit of and shall be binding upon the successors
and permitted assigns of the parties hereto.
14. Severability.
In the
event that any part of this Agreement is declared by any court or other judicial
or administrative body to be null, void, or unenforceable, said provision shall
survive to the extent it is not so declared, and all of the other provisions
of
this Agreement shall remain in full force and effect.
15. Further
Assurances.
Each of
the parties shall execute such documents and other papers and take such further
actions, as may be reasonably required or desirable to carry out the provisions
hereof and the transactions contemplated hereby.
16. Amendments.
This
Agreement may be amended or modified, and any of the terms, covenants,
representations, warranties, or conditions hereof may be waived, only by a
written instrument executed by the parties hereto, or in the case of a waiver,
by the party waiving compliance. Any waiver by any party of any condition,
or of
the breach of any provision, term, covenant, representation, or warranty
contained in the Agreement, in any one or more instances, shall not be deemed
to
be nor construed as further or continuing waiver of any such conditions, or
of
the breach of any other provision, term, covenant, representation, or warranty
of this Agreement.
17. Entire
Agreement.
This
Agreement contains the entire understanding among the parties hereto with
respect to the escrow contemplated hereby and supersedes and replaces all prior
and contemporaneous agreements and understandings, oral or written, with regard
to such escrow.
18. Section
Headings.
The
section headings in this Agreement are for reference purposes only and shall
not
affect the meaning or interpretation of this Agreement.
19. Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original but all of which together shall constitute one and the same
instrument.
20. Non-Endorsement.
(i)
The
Company represents and agrees that it has not made nor will it in the future
make any representation that states or implies that the Escrow Agent has
endorsed, recommended or guaranteed the purchase, value, or repayment of the
Units offered for sale by the Company. The Company further agrees that it will
insert in the Registration Statement and any prospectus, offering circular
or
subscription agreement made available to prospective investors of the Units
the
following statement in bold face type: “Iowa
State Bank is
acting only as an Escrow Agent in connection with the Offering described herein,
and has not endorsed, recommended or guaranteed the purchase, value or repayment
of such Units,”
and will
furnish to the Escrow Agent a copy of the Registration Statement and each such
prospectus, offering circular or subscription agreement at least five (5)
business days prior to its distribution to prospective investors.
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(ii) In
addition, each subscription agreement executed and delivered by a prospective
investor in the Units shall contain the following acknowledgment: “The
undersigned acknowledges that Iowa State Bank is acting only as an escrow agent
in connection with the offering of the Units described herein, and has not
endorsed, recommended or guaranteed the purchase, value or repayment of such
Units.”
[SIGNATURE
PAGE FOLLOWS]
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IN
WITNESS WHEREOF, the parties hereto have hereunto affixed their signatures
as of
the day and year first written above.
| PRAIRIE CREEK ETHANOL: | ESCROW AGENT: | ||
| PRAIRIE CREEK ETHANOL, LLC | IOWA STATE BANK, ALGONA, IOWA | ||
| By: /s/ Xxxx Xxxxxx | By: /s/ Xxxxxxx X. Xxxxx, VP & TO | ||
|
|
|
||
| Printed Name: Xxxxxxx X. Xxxxx | |||
|
|
|||
| Title: Vice President & Trust Officer | |||
|
|
[SIGNATURE
PAGE TO ESCROW AGREEMENT]
9
Exhibit
A
Iowa
State Bank, Algona, Iowa
Escrow
Agent Fee Schedule
Prairie
Creek Ethanol,
LLC
Escrow
Account Fees:
Escrow
Agent shall be paid a one-time setup fee of $1,000 within thirty (30) days
of
the date of the Escrow Agreement.
If
the
Deposited Funds are disbursed to Prairie Creek Ethanol in accordance with
Section 7.C. of the Escrow Agreement, Escrow Agent shall be paid 0.12% (12
basis
points) of the principal value of the account as of the date the Deposited
Funds
are disbursed to Prairie Creek Ethanol, which amount shall be deducted by Escrow
Agent from the funds disbursed (but only to the extent of the interest earned
thereon).
If
the
Deposited Funds are not disbursed to Prairie Creek Ethanol and the Deposited
Funds are returned to subscribers in accordance with Section 7.D. of the Escrow
Agreement, such subscribers shall be entitled to the interest earned on the
Deposited Funds at the interest rate obtained from time to time on investments
of the Deposited Funds less one percent (1%), which such one percent (1%) shall
be paid to Escrow Agent as a fee for its services; and shall be deducted by
Escrow Agent from the amounts to be returned to subscribers. Amounts to be
deducted shall be determined in accordance with Section 7.D.
If
Escrow
Agent is required to provide IRS Form 1099 to subscribers for interest paid
to
such subscribers, Escrow Agent shall be paid a fee by Prairie Creek Ethanol
of
$12 per each such subscriber, payable following the preparation of such
forms.
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