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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 2010
or
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission File Number: 333-161187
RENEWABLE ENERGY GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
416 South Bell Avenue, Ames, Iowa
(Address of principal executive offices)
26-4785427
(I.R.S. Employer
Identification No.)
50010
(Zip Code)
Registrant’s telephone number, including area code: (515) 239-8000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large accelerated filer ¨
Non-accelerated filer x (Do not check if a smaller reporting company)
Accelerated filer
¨
Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of December 31, 2010, there was no public trading market for the registrant’s common stock. There were 33,129,553 shares of the
registrant’s $0.0001 par value common stock outstanding on February 28, 2011.
DOCUMENTS INCORPORATED BY REFERENCE
All or a portion of Items 10 through 14 in Part III of this Form 10-K are incorporated by reference to the Registrant’s definitive proxy
statement on Schedule 14A, which will be filed within 120 days after the close of the fiscal year covered by this report on Form 10-K, or if
the Registrant’s Schedule 14A is not filed within such period, will be included in an amendment to this Report on Form 10-K which will be
filed within such 120 day period.
TABLE OF CONTENTS
Table of Contents
PART I
ITEM 1.
Business
ITEM 1A. Risk Factors
ITEM 1B. Unresolved Staff Comments
ITEM 2.
Properties
ITEM 3.
Legal Proceedings
ITEM 4.
(Removed and Reserved)
PART II
ITEM 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
ITEM 6.
Selected Financial Data
ITEM 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
ITEM 8.
Financial Statements and Supplementary Data
ITEM 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
ITEM 9A. Controls and Procedures
ITEM 9B. Other Information
PART III
ITEM 10.
Directors, Executive Officers and Corporate Governance
ITEM 11. Executive Compensation
ITEM 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
ITEM 14.
Principal Accounting Fees and Services
PART IV
ITEM 15. Exhibits, Financial Statement Schedules
SIGNATURES
EXHIBIT INDEX
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PART I
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This annual report on Form 10-K contains, in addition to historical information, certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terms such
as “may,” “might,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “predict,” “potential,”
“plan,” “will” or the negative of these terms, and similar expressions intended to identify forward-looking statements. Forward-looking
statements include, but are not limited to, statements regarding:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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existing or proposed legislation affecting the biodiesel industry, including governmental incentives and tax credits;
our planned expansion strategies for our production and distribution of biodiesel, including through future acquisitions,
additional terminal leases, new facility construction, and existing facility upgrades;
our plans to diversify our business through the production of other renewable fuels, as well as developing and assisting in the
development of advanced feedstocks and renewable chemicals;
facilities currently under development progressing to the construction and operational stages, including capital expenditures and
our ability to obtain financing for such construction;
our ability to further develop our financial, managerial and other internal controls and reporting systems to correct current
material weaknesses and to accommodate future growth;
our utilization of forward contracting and hedging strategies to minimize feedstock and other input price risk;
anticipated future revenues from our operational management and facility construction services;
the impact of the termination of our Management Operations Services Agreements on our financial results;
the expected effect of current and future environmental laws and regulations on our business and financial condition;
our ability to renew existing contracts at similar or more favorable terms;
expected technological advances in biodiesel production methods;
our competitive advantage relating to input costs relative to our competitors;
the market for biodiesel and potential biodiesel consumers, including expected increases in the demand for biodiesel in
jurisdictions that adopt low carbon fuel standards;
expectations regarding our expenses and sales;
anticipated cash needs and estimates regarding capital requirements and needs for additional financing; and
anticipated trends and challenges in our business and the biodiesel market.
These statements reflect current views with respect to future events and are based on assumptions and subject to risks and
uncertainties. We note that a variety of factors could cause actual results and experience to differ materially from the anticipated results or
expectations expressed in our forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-
looking statements. Forward-looking statements are also subject to risks and uncertainties that could cause actual results to differ
materially from those expected. These risks and uncertainties include, but are not limited to, those risks discussed in Item 1A of this report.
Forward-looking statements contained in this report present management’s views only as of the date of this report. We undertake no
obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are
advised, however, to consult any further disclosures we make on related subjects in our 10-Q and 8-K reports filed with the Securities and
Exchange Commission.
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Item 1.
Business
General
Renewable Energy Group, Inc. is a leading marketer and producer of biodiesel in the United States. As of December 31, 2010, our
five operating biodiesel production facilities had an aggregate nameplate biodiesel production capacity of 182 million gallons per year, or
mmgy. During 2010, we sold approximately 67.9 million gallons of biodiesel, including 62.5 million gallons produced at our owned or
leased facilities and 5.4 million gallons produced by third party manufacturers and resold by us. Nearly all of the biodiesel we sold in 2010
was marketed under our own REG-9000™ brand. We had total revenues of approximately $216.5 million for the 2010 fiscal year.
Our biodiesel production capacity includes a 12 mmgy facility in Ralston, Iowa, a 35 mmgy facility near Houston, Texas, a 45 mmgy
facility in Danville, Illinois, and a 30 mmgy facility in Newton, Iowa. In April 2010, we signed a seven year lease with a 60 mmgy facility
in Seneca, Illinois, to bring total production capacity to 182 mmgy. In addition to these five plants, we began construction of two 60 mmgy
production capacity facilities in 2007, one near New Orleans, Louisiana and the other in Emporia, Kansas. In February 2008, we halted
construction of these facilities as a result of conditions in the biodiesel industry and our inability to obtain financing necessary to complete
construction. Construction of our New Orleans facility is approximately 50% complete and construction of our Emporia facility is
approximately 20% complete. In addition, in September 2010, we acquired a 15 mmgy biodiesel production facility in Clovis, New Mexico,
which is approximately 70% complete. We plan to complete these three facilities once we obtain project financing.
We are actively pursuing opportunities to diversify our business by becoming involved in the production of other types of renewable
fuels, as well as developing and assisting in the development of advanced feedstocks and renewable chemicals, to leverage our
experience in the biodiesel production process. We believe we are well suited to act as a development and commercialization partner for
other renewable fuel, advanced feedstock and renewable chemical developers and companies in need of further support and
capabilities. This diversification effort may result from any variety of business relationships including contracts, licensing, direct
investments, and joint ventures, as well as mergers and acquisitions.
History
Our predecessor, REG Biofuels, Inc., formerly named Renewable Energy Group, Inc., was formed under the laws of the State of
Delaware in August 2006 upon acquiring the assets and operations of the biodiesel division of West Central Cooperative, or West Central,
and two of West Central’s affiliated companies, InterWest, L.C. and REG, LLC. Through these predecessors, we have been producing and
selling biodiesel for more than 13 years and providing new facility construction and management services for over six years.
Prior to February 26, 2010, the “Company,” “REG,” “we,” “us,” “our” and similar references refer to the business, results of
operations and cash flows of REG Biofuels, Inc., formerly Renewable Energy Group, Inc., which is considered the accounting predecessor
to Renewable Energy Group, Inc., formerly, REG Newco, Inc. After February 26, 2010, such references refer to the business, results of
operations and cash flows of Renewable Energy Group, Inc., and its consolidated subsidiaries.
In June 2008, we acquired our Houston facility, which has access to deepwater ports, from United States Biodiesel Group, Inc., or
USBG, through a transaction which included an equity investment in the Company by USBG. We also acquired a terminal facility with the
option to build a biodiesel plant at the Port of Stockton in Stockton, California. In July 2009, we sold the Stockton terminal facility for $3.0
million in cash.
On February 26, 2010, we acquired our Danville facility by merger from Blackhawk Biofuels, LLC. On March 8, 2010, we acquired
our Newton Facility, through the purchase of substantially all of the assets and liabilities of Central Iowa Energy, LLC. On April 8, 2010,
we closed a transaction in which we agreed to lease and operate the Seneca facility and certain related assets.
On July 16, 2010, we acquired certain assets of Tellurian Biodiesel, Inc., or Tellurian, and American BDF, LLC, or ABDF. Tellurian
was a California-based biodiesel company and marketer. ABDF was a joint venture owned by Golden State Service Industries, Restaurant
Technologies, Inc., or RTI, and Tellurian. ABDF previously focused on building a national array of small biodiesel plants that would
convert used cooking oil into high quality, sustainable biodiesel. The purchase connects RTI’s national used cooking oil collection system,
with more than 16,000 installations, with our national network of biodiesel manufacturing facilities.
On September 21, 2010, we acquired for stock the partially constructed Clovis facility and $8.0 million in cash.
Organizational Structure
Our business is organized into two reportable operating segments: Biodiesel and Services.
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Biodiesel Segment
Products
Our primary source of revenue is derived from the sale of biodiesel. The Biodiesel segment had revenues of approximately $215.1
million for the 2010 fiscal year, which accounted for approximately 99% of total 2010 revenues. Our REG-9000™ biodiesel product line-
up offers more stringent standards than ASTM D 6751specifications. The REG-9000™ brand biodiesel product is available in all 48
continental states, Hawaii and beyond. We sell biodiesel predominantly to resellers, distributors and refiners who typically blend biodiesel
with petroleum-based diesel fuel before reselling to end-users. We offer training to distributors to educate their sales forces on the benefits
and characteristics of biodiesel in an effort to increase biodiesel demand from end users. All of our facilities are either certified BQ-9000 by
the National Biodiesel Accreditation Program or follow the BQ-9000 quality processes and assurance programs and are in the process of
obtaining certification.
We derive a small portion of our revenues from the sale of glycerin and fatty acids, which are co-products of the biodiesel production
process. In 2010, our revenues from the sale of co-products were less than five percent of our total Biodiesel segment revenues. A portion
of the selling price of a gallon of biodiesel may be attributable to Renewable Identification Numbers, or RINs, that are created to track
compliance with the Renewable Fuels Standard discussed further below. When we sell biodiesel, we generally attach RINs to each gallon.
We can attach from zero to two and one half RINs to any gallon of biodiesel.
We also continue to offer tolling services to the third parties through our facilities. During 2010, we provided tolling services in the
amount of 8.2 million gallons, which were produced from our Houston facility.
Inputs
There are three key inputs for biodiesel production: feedstock, including oils and fats, methanol and chemical catalysts. In 2010,
feedstock accounted for 76% of our costs of goods sold, while methanol and chemical catalysts accounted for 5% and 3% of our costs of
goods sold, respectively.
In the U.S., the predominant feedstocks used in biodiesel production currently are animal fats, inedible corn oil, used cooking oil and
soybean oil. Unlike our competitors, many of which must rely solely on refined soybean or other virgin vegetable oils, several of our
facilities are multi-feedstock capable, meaning that they can generate biodiesel from lower cost feedstock that include impurities and higher
free fatty acid levels like used cooking oil, animal fats or crude or degummed soybean oil, other vegetable oils and animal fats. Our
facilities are increasingly using higher free fatty acid level animal fats, used cooking oil and inedible corn oil rather than refined soybean
oil. For 2010, approximately 91% of our total feedstock usage was animal fat, used cooking oil or inedible corn oil and 9% was soybean
oil, compared to approximately 78% animal fat, used cooking oil or inedible corn oil and 22% soybean oil in 2009. We have produced
biodiesel that exceeds ASTM D6751 standards using various types of animal fat, used cooking oil, palm oil and corn oil inputs. We believe
it is important to be able to utilize alternative, lower-priced and lower carbon intensity feedstocks, such as animal fats, used cooking oil and
inedible corn oil when food grade, refined soybean oil prices are rising. We are also pursuing alternative feedstocks such as Camelina oil,
jatropha oil and algae oil.
Animal fats, used cooking oil and inedible corn oil are procured from many different vendors in small to medium volume quantities.
There is no established forward market for these purchases. We generally purchase animal fats on a freight delivered basis and purchase in
one to four week forward positions. Used cooking oil and inedible corn oil can be purchased in nearby forward positions or forward strips
of three to twelve months out, indexed to the New York Mercantile Exchange, or NYMEX, heating oil market.
Soybean oil is procured on a spot or fixed-price forward contract basis from large soybean oil producers such as Ag Processing Inc,
Archer Daniels Midland Company, Cargill, Incorporated, CHS Inc., De Bruce Grain, Inc., Minnesota Soy Processors and Bunge North
America, or Bunge. Fixed-price forward contracts specify the amount of soybean oil, the price and time period, which is typically one
month to three months, over which the soybean oil is to be delivered. Fixed-price forward contracts are at fixed prices or soybean oil prices
on the Chicago Board of Trade, or CBOT, plus or minus a basis adjustment reflecting price differentials between local and CBOT supply
and demand and the cost of delivery.
Our Ralston facility and our planned New Orleans and Emporia facilities are located near soybean oil or other feedstock producers, in
order to reduce or eliminate feedstock transportation costs. For our Ralston facility, we obtain most of our required soybean oil from West
Central. The soybean oil from West Central is piped directly from West Central’s crush facility located adjacent to our Ralston facility,
which eliminates feedstock transportation costs. We pay West Central based on CBOT daily prices plus or minus a negotiated provision
fee. We anticipate that a significant portion of any soybean oil we will use in the future will continue to be crude degummed soybean oil,
which will continue to reduce our input costs relative to our competitors whose facilities require refined soybean oil.
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We obtain methanol, chemical catalysts such as sodium methylate, and hydrochloric acid, under fixed-price contracts and formula-
indexed contracts based upon competitive bidding. These procurement contracts typically last from three months to one year. The price of
methanol is indexed to the monthly reported published price of methanol plus or minus a negotiated basis.
Risk Management
The prices for feedstocks and biodiesel are volatile and are not closely correlated. We are, therefore, exposed to commodity price risk
in our business. In addition, we have in the past, and expect in the future, to utilize forward contracting and hedging strategies, including
strategies using futures, options, and over-the-counter products.
However, the extent to which we engage in these risk management strategies varies substantially from time to time, depending on
market conditions and other factors. In establishing our risk management strategies, we draw from our own in-house risk management
expertise and we consult with industry experts, such as Bunge and ED&F Man Holdings Limited and affiliates, or ED&F Man, two of the
largest international commodity trading firms and investors in us. Bunge provides risk management services to us pursuant to a master
services agreement. We utilize research conducted by outside firms to provide additional market information and risk management
strategies. We believe combining these sources of knowledge, experience, and expertise gives us a more sophisticated and global view of
the fluctuating commodity markets for raw materials and energies, which we then can incorporate into our risk management strategies.
We manage feedstock supply risks related to biodiesel production through a combination of long-term supply contracts and spot-
traded feedstock contracts with animal fat suppliers, used cooking oil suppliers, inedible corn oil suppliers and soybean oil processors. The
purchase price for soybean oil under many of these agreements is indexed to prevailing market prices with a substantial percentage being
purchased at a fixed spread, or basis, from the prevailing CBOT prices. We utilize futures contracts and options to hedge, or lock in, the
cost of a portion of our future soybean oil requirements, generally for varying periods up to one year. We do not forward hedge our animal
fat requirements as there is no established market for animal fat futures.
Our ability to mitigate the risk of falling biodiesel prices is somewhat limited. We have entered into forward contracts to supply
biodiesel. However, pricing under these forward sales contracts generally has been indexed to prevailing market prices as fixed price
contracts for long periods have generally not been available on acceptable terms. There is no established market for biodiesel futures. Our
efforts to hedge against falling biodiesel prices generally involve entering into futures contracts and options on other commodity products,
such as diesel fuel and heating oil.
Distribution
We have created a national distribution system to supply biodiesel throughout the United States. Each of our facilities is equipped
with an on-site rail loading system and/or a truck loading system. We offer logistics and supply chain management services, including
leased rail cars for transportation and terminal space for distribution. We also manage some customers’ biodiesel storage tanks and
replenishment process. We lease more than 150 railcars for transportation and space in ten terminals, not including our terminals located at
our facilities. Typically, our terminals are co-located with petroleum diesel terminals so that fuel distributors and customers can create the
desired biodiesel blend at the terminal before further distribution. Terminal leases typically have one to three-year terms and are generally
renewable subject to certain terms and conditions. In the future, we plan to increase our number of terminal leases in strategic locations,
including on the coasts of the U.S. and other deep water access points, to create an extensive distribution system that enhances our ability to
market biodiesel in the U.S. and abroad. We have sold biodiesel in all 48 contiguous states and Hawaii.
Services Segment
Our Services segment provides biodiesel facility management and operational services to third party owners of biodiesel production
facilities as well as facility construction management services to third parties. In 2009, we made the decision to terminate substantially all
of our contracts for facility management and operational services for outside parties. We did not receive any new orders for new facility
construction services in 2009 or 2010. The Services segment had revenues of approximately $1.3 million in 2010, which accounted for 1%
of total 2010 revenues.
Operational Management
We have historically provided operational management services that have included:
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training of facility operations personnel and implementation of on-site testing, quality control and safety procedures;
procuring feedstocks, methanol and chemical inputs;
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monitoring and testing product quality;
advising on and executing risk management practices and strategies;
managing manufacturing facilities and employees;
logistics and supply chain management;
marketing and selling finished biodiesel and glycerin co-product; and
providing administrative services, such as accounting, information technology, insurance, human resources, payroll and
communications.
In 2009, we provided notice to five third party-owned facilities that we would be terminating our operational services twelve months
from the date notice was provided. As of December 31, 2010, we had acquired one of these facilities, had ceased providing services to three
of these facilities and remain in discussions to provide limited services to the other facility. While we continue to seek opportunities to
provide operational services, we anticipate revenues derived from these services will be minimal in 2011.
Facility Construction Management
We have historically provided a broad range of facility construction management services to the biodiesel industry. To date, we have
provided biodiesel facility construction management services for the construction of seven facilities and we significantly upgraded two
other facilities. For those projects, we acted as construction manager and general contractor along with providing various development
stage services, facility design and engineering services. We did not receive any new orders for new facility construction services in 2009 or
2010; however, we did upgrade two facilities, which we currently own or lease.
Governmental Programs Favoring Biodiesel Production and Use
The biodiesel industry benefits from economic incentives to produce biodiesel, including support from federal biodiesel programs.
The American Jobs Creation Act of 2004, the Energy Policy Act of 2005, or EPAct, and the Energy Independence and Security Act of
2007, or EISA, are the primary pieces of federal legislation that have established the groundwork for biodiesel market development. In
2010, we received approximately $7.2 million dollars in revenues from government sponsored biodiesel incentive programs, most of which
was attributable to the blenders’ tax credit discussed below.
Renewable Fuel Standard
In August 2005, the EPAct established a renewable fuel standard program, or RFS, requiring a specific amount of renewable fuel to
be used in motor vehicle fuel nationwide. This requirement has been imposed on refineries and importers in the 48 contiguous states.
Beginning in 2008, EISA amended the EPAct to increase the number gallons of renewable fuel required to be used in motor vehicle fuel
nationwide. The number of gallons of biomass-based diesel, such as biodiesel, is required to increase from 500 million gallons in 2009 to
1.0 billion gallons in 2012.
On July 1, 2010, an updated Renewable Fuel Standard program, or RFS2, was implemented. RFS2 requires certain volume
minimums for the amount of biomass-based diesel that must be utilized each year. Under the program, obligated parties, including
petroleum refiners and fuel importers, must show compliance with these standards. Currently, biodiesel meets two categories of an
obligated party’s required volume obligation—biomass-based diesel and advanced biofuel. Today, biodiesel is the only significant
commercially-available advanced biofuel produced in the United States that meets the RFS2 standard based on its greenhouse gas
emissions reductions score. Consistent with the RFS2 program, the Environmental Protection Agency, or EPA, announced it would require
the domestic use of 800 million gallons of biodiesel in 2011 and one billion gallons in 2012. After implementation of RFS2, the American
Petroleum Institute, or API, and National Petrochemical Refiners Association, or NPRA, filed a lawsuit against the EPA relating to timing
of enforcement of RFS2. On December 21, 2010, the U.S. District Court of Appeals for the District of Columbia issued a unanimous
decision to deny the petition by NPRA and API challenging the RFS2. Although the API and NPRA have appealed, we believe that this
decision removes significant uncertainty that has clouded the future of the biodiesel industry.
The Biodiesel Blenders’ Tax Credit
The American Jobs Creation Act of 2004 created the Federal Volumetric Ethanol Excise Tax Credit, referred to as the blenders’ tax
credit, which provided a $1.00 tax credit per gallon of pure biodiesel, or B100, to the first blender of biodiesel with petroleum based diesel
fuel. The blenders’ tax credit expired on December 31, 2009, but was restored on December 17, 2010, retroactively for 2010 and
prospectively for 2011. Because the blenders’ tax credit was not in effect for most of 2010, we elected to sell most of our production in
2010 as B100. During April 2010, we temporarily stopped producing biodiesel at our Newton facility and our Ralston facility due to
reduced demand for biodiesel because of the lack of reinstatement of the blender’s tax credit. At the end of April, our Newton facility
began production again. During May, our Ralston facility began producing at a reduced production level. During June 2010, we stopped
producing biodiesel at our Houston Facility, which began production again during March of 2011.
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State Legislation
Several states have laws on the books requiring and/or incentivizing the use of biodiesel and several are currently considering
legislation to enhance these programs. Numerous states have adopted incentives or requirements to encourage renewable fuel use, including
the use of biodiesel. For example, Illinois offers a 6.25% sales tax abatement for B11 (diesel fuel comprised of 11% biodiesel and 89%
petroleum-based diesel) blends and Iowa offers a $0.03 income tax credit to petroleum marketers of B2 (diesel fuel comprised of 2%
biodiesel and 98% petroleum-based diesel) blends. Many states have adopted and/or implemented biodiesel blend requirements. Oregon
has implemented B5 biodiesel blend requirements. Washington’s renewable fuels standard calls for two percent of all diesel fuel consumed
in the state to be biodiesel. Minnesota requires a B5 blend, which is scheduled to increase to B10 in 2012, for all diesel fuel. New Mexico,
Pennsylvania, Massachusetts and Louisiana have all adopted biodiesel blend requirements legislation. In addition, several Northeast states,
including Connecticut and Massachusetts, and the City of New York have adopted legislation to require biodiesel in home heating oil.
Several states provide tax incentives and grants for biodiesel-related studies and biodiesel production, blending, and use. In addition,
several state governors have issued executive orders directing state agencies to use biodiesel blends to fuel their fleets. In addition, several
states have adopted or are considering adopting low carbon fuel standards, or LCFS, requiring a reduction in the amount of carbon in their
transportation fuels. Biodiesel has lower carbon emissions than petroleum diesel and is thus expected to see increased demand in states like
California that have adopted a LCFS.
Competition in the Biodiesel Industry
We currently compete with large, multi-product companies and other biodiesel plants with varying capacities. Some of these
competitors have greater resources than we do. Archer Daniels Midland Company, LLC, Cargill, Incorporated, Louis Dreyfus
Commodities, Ag Processing Inc, Seaboard Farms and Owensboro Grain Company, LLC are major international agribusiness corporations
and biodiesel producers with the financial, sourcing and marketing resources to be formidable competitors in the biodiesel industry, without
geographical, funding or feedstock constraints. These agribusiness competitors tend to make biodiesel from soybean or canola oil, which
they produce as part of their integrated agribusinesses. We also face competition from biodiesel producers who primarily produce biodiesel
from lower cost, higher FFA, feedstocks like we do.
Currently, there is excess production capacity built in the U.S. biodiesel industry; however many of these facilities have not operated
or are not currently operating. According to the National Biodiesel Board, or NBB, 98 dues paying biodiesel production facilities with self
reported annual production capacity of approximately 2.0 billion gallons per year are registered under RFS2. Of these, we estimate that
approximately 65% of these capacity gallons are from operational plants that are producing today. The U.S. Census reports that
311 million gallons of biodiesel was produced in the United States during 2010.
The biodiesel industry generally is in competition with the petroleum industry, particularly the diesel fuel portion of the petroleum
industry. The size of the biodiesel industry is insignificant compared to the size of the diesel fuel industry and biodiesel producers are able
to compete with the assistance of government environmental regulations and incentives, assisted from time to time by high petroleum and
diesel fuel prices.
Seasonality
The operating results of biodiesel producers are influenced by seasonal fluctuations in the price of biodiesel and the price of
feedstocks. Biodiesel sales tend to be lower during the winter season in the northern part of the United States due to the potential for
biodiesel to gel in cold weather. The demand for animal fat based biodiesel in particular is lower in the colder months as it has a higher
cloud point than vegetable-based biodiesel. The decrease in demand for animal fat biodiesel generally leads to a reduction in the price of
animal fats in winter months. Inedible corn oil prices, because it produces a lower cloud point biodiesel, tend to be higher in the winter as
demand for that feedstock increases. Both of these feedstocks are primarily used for biodiesel production. Soybean oil is used for several
purposes other than biodiesel production so its seasonality is driven by factors other than biodiesel. In recent years, the spot price for
soybean oil has decreased during the late summer and early fall harvest season and increased during the early spring and the late fall and
winter months. As a result of seasonal fluctuations, comparisons of operations between consecutive quarters may not be as meaningful as
comparisons between longer reporting periods or the same period in previous years.
Feedstock and Technology Development
Our feedstock and technology development team consists of a director of business development, a PhD chemical engineer, a PhD oleo
chemist, a director of manufacturing operations, a Six Sigma Black Belt mechanical engineer and other technology support located at our
executive offices and resources located at each of our facilities. The team provides services to REG facilities in addition to distributors,
terminals and end customers. The team focuses on improving production volumes and quality, evaluating potential new feedstock sources
and new technologies, designing and improving equipment and process flow, enhancing the value of co-products, researching reaction
kinetics, troubleshooting and educating customers and strategic partners.
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Environmental Matters
We are subject to various federal, state and local environmental laws and regulations, including those relating to the discharge of
materials into the air, water and ground; the generation, storage, handling, use, transportation and disposal of hazardous materials; and the
health and safety of our employees. These laws and regulations require us to obtain and comply with numerous environmental permits to
construct and operate each facility. They can require expensive pollution control equipment or operational changes to limit actual or
potential impacts to the environment. A violation of these laws, regulations or permit conditions could result in substantial fines, natural
resource damage, criminal sanctions, permit revocations and/or facility shutdowns. We do not anticipate a material adverse effect on our
business or financial condition as a result of our efforts to comply with these requirements as presently in effect.
We also do not expect to incur material capital expenditures for environmental controls in this or the succeeding fiscal year. However,
new laws, new interpretations of existing laws, increased governmental enforcement of environmental laws or other developments could
require us to make additional significant expenditures. Continued government and public emphasis on environmental issues can be
expected to result in increased future investments for environmental controls at our ongoing operations. Future environmental laws and
regulations and related interpretations applicable to our operations, more vigorous enforcement policies and discovery of currently
unknown conditions may require substantial capital and other expenditures.
Employees
As of December 31, 2010, REG employed 170 full-time employees, including 125 in operations and services, 14 in sales and
marketing and 31 in administration. None of our employees are represented by a labor organization or under any collective bargaining
agreements.
Item 1A. Risk Factors
Risks Related to our Business
Loss of governmental requirements or incentives for biodiesel production or consumption could impair our ability to operate at a
profit and substantially harm our revenues and operating margins.
The biodiesel industry has been substantially aided by federal and state requirements, tax credits and incentives. Because biodiesel
has historically been more expensive to produce than diesel fuel, the biodiesel industry has depended on governmental incentives that have
effectively brought the price of biodiesel more in line with the price of diesel fuel to the end user. These incentives have supported a market
for biodiesel that might not exist without the incentives.
The most important of these government programs is the federal Renewable Fuel Standard, or RFS, which Congress enacted in the
Energy Independence and Security Act of 2007. The RFS requires that a specific amount of renewable fuel be used in motor vehicle fuel
nationwide. Beginning July 1, 2010, the RFS program began to require certain volumes of biomass-based diesel (a definition that includes
biodiesel and renewable diesel) to be used annually. The requirement for 2011 is 800 million gallons, increasing to one billion gallons in
2012. If Congress were to repeal or curtail the RFS program, or if the EPA is not able or willing to enforce the RFS requirements, demand
for our product would not increase as we expect under the RFS and revenues would be harmed.
Biodiesel prices are increasingly influenced by the price of the RFS RINs. Biodiesel has historically been priced in relation to ultra
low sulfur diesel, or ULSD, plus state and federal tax incentives. Since July 1, 2010, with the introduction of the biomass-based diesel
mandate, RINs have become a significant portion of the value of a gallon of biodiesel. Each gallon of biodiesel generates 1.5 biomass-based
diesel RINs. Biomass-based diesel RINs had a market value of $0.75 on December 31, 2010 as reported by Oil Price Information Service,
or OPIS. Accordingly, on December 31, 2010, approximately 25% of the price of our biodiesel was comprised of the RIN value.
The biodiesel industry is also aided by the federal Biodiesel Excise Tax Credit, referred to as the blenders’ tax credit. The blenders’
tax credit provides a $1.00 refundable tax credit per gallon of pure biodiesel, or B100, to the first blender of biodiesel with petroleum based
diesel fuel. The blenders’ tax credit is again set to expire on December 31, 2011, after the U.S. Congress allowed it to expire as of
December 31, 2009 and then re-enacted it in December 2010 for 2011 and retro-actively for 2010. It is uncertain what action, if any,
Congress may take with respect to the blenders’ credit beyond 2011 or when such action might be effective. If Congress decides to
eliminate or reduce the blenders’ credit, non-RFS2 related demand for our product could be significantly reduced and/or the price we are
able to charge for our product could be significantly reduced without a corresponding reduction in the price of feedstock, in either case,
harming revenues and profitability.
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Numerous states have adopted incentives or requirements to encourage renewable fuel use, including the use of biodiesel. For
example, Illinois offers a 6.25% sales tax abatement for B11 (diesel fuel comprised of 11% biodiesel and 89% petroleum-based diesel)
blends and Iowa offers a $0.03 income tax credit to petroleum marketers of B2 (diesel fuel comprised of 2% biodiesel and 98% petroleum-
based diesel) blends. Many states have adopted and/or implemented biodiesel blend requirements. Oregon has implemented B5 biodiesel
blend requirements. Washington’s renewable fuels standard calls for two percent of all diesel fuel consumed in the state to be biodiesel.
Minnesota requires a B5 blend, which is scheduled to increase to B10 in 2012, for all diesel fuel. New Mexico, Pennsylvania,
Massachusetts and Louisiana have all adopted biodiesel blend requirements legislation. In addition, several Northeast states, including
Connecticut and Massachusetts and the City of New York have adopted requirements for biodiesel in home heating oil.
Any repeal, expiration, non-renewal, substantial modification or waiver of the renewable fuels mandate or Federal or state incentive
programs could reduce the demand for biodiesel and result in our inability to produce and sell biodiesel profitably. Furthermore, our future
ability to raise debt or equity capital may be delayed, impaired or made impossible due to the lack of certainty around the continuation of
these government programs supporting biodiesel.
Our gross margins are dependent on the spread between feedstock costs and biodiesel prices. If the cost of feedstock increases and
the price of biodiesel does not proportionately increase or if the price of biodiesel decreases and the cost of feedstock does not
proportionately decrease, our gross margins will decrease and our results of operations will be harmed.
In addition to governmental incentives, our gross margins depend on the spread between feedstock costs and biodiesel prices. The
spread between biodiesel prices and feedstock prices has varied significantly during recent periods. Although actual yields vary depending
on the feedstock quality, the average monthly spread between the price per gallon of pure biodiesel, or B100, as reported by The Jacobsen
Publishing Company, or Jacobsen, and the price of choice white grease, a common animal fat used to make biodiesel, was $1.82 in 2008,
$1.21 in 2009 and $1.00 in 2010, assuming 8.0 pounds of choice white grease yields one gallon of biodiesel. The average monthly spread
for crude soybean oil used to make one gallon of biodiesel, based on the nearby futures contract as reported on the Chicago Board of Trade,
or CBOT, was $0.66 per gallon in 2008, $0.42 in 2009, and $0.26 per gallon in 2010.
For 2010, approximately 91% of our total feedstock usage was animal fat, used cooking oil or inedible corn oil and 9% was soybean
oil, compared to approximately 78% for animal fat, used cooking or inedible corn oil and 22% for soybean oil in 2009.
The supply of animal fat has historically been affected by the amount of slaughter kills in the United States and demand for animal
fat from other markets, such as animal feed rations. The market for used cooking oil, or UCO, as a feedstock for biodiesel is still
developing and supply is constrained. Inedible corn oil, which is extracted from distillers’ grain, is also not generally available in quantities
sufficient for our operations. At present, there are a limited number of ethanol plants with the corn oil extraction equipment necessary to
extract the corn oil that can be used in biodiesel production. If more ethanol plants do not implement the extraction equipment or if ethanol
plants remain idle, we may not have the ability to supplement our feedstock requirements with significant amounts of inedible corn oil.
These feedstock market dynamics may lead to supply constraints and/or volatile prices, which in turn could adversely affect our ability to
produce biodiesel and the profit margins on the biodiesel we do produce.
The competition for feedstocks utilized in the biodiesel industry is significant and we compete for feedstock with many different
companies, many of which have greater resources than we do. Furthermore, biodiesel mandates in other parts of the world have increased
global competition for feedstocks and for certain feedstocks in particular. Consequently, the price of feedstocks may rise and adversely
affect our profit margins and threaten the viability of our operations.
Biodiesel has traditionally been marketed primarily as an additive or alternative to petroleum-based diesel fuel, and as a result
biodiesel prices are primarily influenced by the price of petroleum-based diesel fuel and the government incentives and mandates
supporting renewable fuels, rather than biodiesel production costs. Any decrease in the spread between biodiesel prices and feedstock costs,
whether as a result of an increase in feedstock prices or a reduction in biodiesel prices, including, but not limited to, a reduction in the value
of RINs, would adversely affect our profitability and cash flow.
Certain subsidiaries have substantial indebtedness which could adversely affect our ability to raise additional capital to fund our
operations, limit our ability to react to changes in the economy or the biodiesel industry or may require us to dispose of some or all of
our assets.
Several of our subsidiaries have a significant amount of indebtedness, some of which we have guaranteed. At December 31, 2010, our
total term debt was $86.6 million, including consolidated term debt from Seneca Landlord, LLC of which $2.2 million is guaranteed by
Renewable Energy Group, Inc. and the remainder of which constitutes the sole obligation of certain subsidiaries. At December 31, 2010,
the borrowed amount on our lines of credit was $9.6 million all of which is guaranteed by
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Renewable Energy Group, Inc. Our level of indebtedness could restrict our operations and make it more difficult for us to satisfy our debt
obligations or obtain additional working capital borrowings to fund operations. In connection with the Seneca facility transaction, one of
our subsidiaries leases the Seneca facility from its owners under a lease agreement. If a termination of the Seneca facility lease is due to
breach by our subsidiary, then we would be required to issue to the Seneca facility owners a three year note in the principal amount of $4.0
million plus certain adjustments, which would add to our total debt outstanding.
The significant amount of indebtedness of these subsidiaries could:
•
•
•
•
require us to dedicate a substantial portion of our cash flow from operations to payments on indebtedness, thereby reducing the
availability of our cash flow to fund working capital and capital expenditures, and for other general corporate purposes. For
example, our subsidiaries are required to pay a certain portion of our excess cash flow at our Danville and Newton facilities to
their respective lenders annually, which will reduce the cash flow that we receive from these facilities;
increase our vulnerability to general adverse economic and biodiesel industry conditions;
limit our flexibility in planning for, or reacting to, changes in our business and the biodiesel industry, which may place us at a
competitive disadvantage compared to our competitors that have less debt; and
limit, along with the financial and other restrictive covenants in the indebtedness, among other things, our ability to borrow
additional funds.
Any failure on the part of our subsidiaries to make payments to their respective lenders would constitute a default under their
respective loan agreements and could lead to action on the part of the lenders to collect payment, accelerate the maturity of the loans,
foreclose on the biodiesel production facilities or other assets that serve as collateral for the debt and place our subsidiaries into
bankruptcy. The inability of these subsidiaries to operate profitably could lead to one or more of these consequences. As a result, our results
of operations and ability to operate our business may be harmed.
Despite our current debt levels, we and our subsidiaries may incur substantially more debt or take other actions which would
intensify the risks discussed above.
Despite our current debt levels, we and our subsidiaries may incur additional debt in the future, including secured debt. We and
certain of our subsidiaries are not currently restricted under the terms of our debt from incurring additional debt, pledging assets,
recapitalizing our debt or taking a number of other actions that are not limited by the terms of the debt but that could diminish our ability to
make payments thereunder.
We have guaranteed certain payment obligations and are subject to a put/call right related to the transaction involving the
production facility located in Seneca, Illinois that we lease and operate.
Under the terms of the agreements with the owners of a 60 million gallon per year biodiesel production facility located in Seneca,
Illinois, or the Seneca Facility, that we lease and operate, we have guaranteed the payments by REG Seneca, LLC of $150,000 per quarter
to the equity owners of the Seneca Facility. If Seneca Landlord, LLC does not have the financial resources to pay its obligations, we will
have to continue to fund future investment fees. Furthermore, the owners of the Seneca Facility have a right to put their ownership interest
to us after April 8, 2011, provided we have a minimum excess net working capital of 1.5 times the put/call price, which is the greater of
three times the initial investment or a 35% internal rate of return on the initial investment. If we are required to purchase the Seneca
Facility, pursuant to the put right, it will reduce our available cash on hand to use for other purposes, including debt repayment or payment
of other operating expenses.
We have limited working capital and a recent history of unprofitable operations; if we are unable to fund our operations and
unable to raise additional capital, it will limit our growth, may cause us to curtail our operations or sell or liquidate our Company or
some of our assets.
We have a limited amount of working capital to support our operations. With anticipated increased demand in 2011 for biodiesel due
to the RFS2, we believe our working capital requirements will increase. In order to meet this need for increased working capital, we will
need to raise additional capital to fund our operations. Rising commodity prices are further increasing our demand for working capital, as
both our feedstocks and finished product have increased in price requiring more working capital to manage the same volume of production.
If we are unable to increase our working capital, we may find it necessary to curtail operations or forgo sales, harming revenue and
profitability.
We became cash flow positive during fourth quarter 2010. If we do not remain cash flow positive, we will need to raise additional
working capital to continue our operations. If such capital is not available, we may need to curtail operations or sell or liquidate certain
assets.
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Our business is primarily dependent upon one product. As a consequence, we may not be able to adapt to changing market
conditions or endure any decline in the biodiesel industry.
Our business is currently focused almost entirely on the production and sale of biodiesel, with glycerin and fatty acid sales and the
operations of our Services segment representing only a small portion of revenues. Our reliance on biodiesel means that we may not be able
to adapt to changing market conditions or to withstand any significant decline in the biodiesel industry.
Technological advances and changes in production methods in the biodiesel industry could render the Company’s plants obsolete
and adversely affect the Company’s ability to compete.
The development and implementation of new technologies may result in a significant reduction in the costs of biodiesel production. If
we are unable to adopt or incorporate technological advances into our operations, our production facilities could become less competitive
or obsolete. It is expected that technological advances in biodiesel production methods will continue to occur and new technologies for
biodiesel production may develop. For example, development of processes to make the conversion of oils and fats into biodiesel faster and
more efficiently could significantly change the biodiesel production process. If improved technologies become available, it may be possible
to produce biodiesel at a substantially lower cost than is currently the case. This could require us to acquire new technology and retrofit our
plants so that they can remain competitive. There is no assurance that third-party licenses for any new proprietary technologies would be
available to us on commercially reasonable terms or that any new technologies could be incorporated into our plants. The costs of
upgrading our technology and facilities could be substantial. If we are unable to obtain, implement or finance new technologies, our
production facilities could be less efficient than our competitors and our results of operations could be substantially harmed.
If we are unable to respond to changes in ASTM or customer standards, our ability to sell biodiesel may be harmed.
We currently produce biodiesel to conform to or exceed standards established by the American Society of Testing and Materials, or
ASTM. ASTM standards for biodiesel and biodiesel blends are modified continuously in response to new observations from the industries
involved with diesel fuel. New tests, tighter test limits or higher standards may require us to make additional capital investments in, or
modify, plant operations to meet these standards. Many biodiesel customers have developed their own biodiesel standards which are stricter
than the ASTM standards. If we are unable to respond to new ASTM standards or our biodiesel customers’ standards, the market for our
product may become obsolete, and/or our ability to sell biodiesel may be harmed, negatively impacting our revenue and profitability.
We have partially constructed plants and planned plant upgrades that require capital that we may not be able to raise.
We have three partially constructed plants, one in New Orleans, Louisiana, one in Emporia, Kansas and one in Clovis, New Mexico,
that we expect to complete in order to commence production at these facilities. We also have various upgrades planned for our other
facilities. In order to complete construction of these facilities or upgrade our facilities as planned, we will require additional capital. While
we intend to finance a portion of these capital expenditures from our cash flow from operations, we will need to raise a significant amount
of capital for these projects in the form of new debt or equity. If market conditions prevent us from obtaining such capital on satisfactory
terms, or if such capital is otherwise unavailable, or if we encounter cost overruns on these projects such that we have insufficient capital,
we may have to postpone completion of these projects indefinitely, which may adversely affect our future revenue and cash flow.
Our success may depend on our ability to manage our growing and changing operations.
Since our formation, our business has grown significantly in size and complexity. This growth has placed, and is expected to continue
to place, significant demands on our management, systems, internal controls and financial and physical resources. In addition, we expect
that we will need to further develop our financial and managerial controls and reporting systems to accommodate future growth. This will
require us to incur expenses related to hiring additional qualified personnel, retaining professionals to assist in developing the appropriate
control systems and expanding our information technology infrastructure. Our inability to manage growth effectively could have a material
adverse effect on our results of operations, financial position and cash flows.
We may not realize the anticipated benefits of past or future acquisitions, and integration of these acquisitions may disrupt our
business and management.
In 2010, we acquired REG Biofuels, Inc, Blackhawk Biofuels, LLC, Central Iowa Energy, LLC, Tellurian Biodiesel, Inc., American
BDF, LLC, a partially complete facility in Clovis, New Mexico and entered into a seven year lease on the Seneca, Illinois Facility. We
may, in the future, acquire additional companies, products or technologies. We may not realize the anticipated benefits of any or all of
these transactions and each transaction has numerous risks. These risks include:
•
difficulty in integrating the operations and personnel of the acquired company;
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•
•
•
•
•
•
•
difficulty in effectively integrating the acquired technologies, products or services with our current technologies, products or
services;
disruption of our ongoing business and distraction of our management and employees from other opportunities and challenges;
inability to achieve the financial and strategic goals for the acquired and combined businesses;
incurring acquisition-related costs or amortization costs for acquired intangible assets that could impact our operating results;
potential failure of the due diligence processes to identify significant problems, liabilities or other shortcomings or challenges of
an acquired company or technology, including but not limited to, issues with the acquired company’s intellectual property,
product quality or product architecture, data back-up and security, revenue recognition or other accounting practices, employee,
customer or partner issues or legal and financial contingencies;
exposure to litigation or other claims in connection with, or inheritance of claims or litigation risk as a result of, an acquisition,
including but not limited to, claims from terminated employees, customers, former stockholders or other third parties; and
incurring significant exit charges if products or services acquired in business combinations are unsuccessful.
The aforementioned risks apply to our acquisitions mentioned above as well as acquisitions we may do in the future. Mergers and
acquisitions are inherently risky, and ultimately, if we do not complete transactions or integrate an acquired business successfully, we may
not realize the benefits of the acquisition to the extent anticipated.
We may not successfully identify and complete acquisitions on favorable terms or achieve anticipated synergies relating to any
acquisitions, and such acquisitions could result in unforeseen operating difficulties and expenditures and require significant
management resources.
We regularly review domestic and international acquisitions, joint ventures, licensing arrangements and other relationships with
complementary business, services or products. However, we may be unable to identify suitable acquisition candidates in the future. Even if
we identify appropriate acquisition candidates, we may be unable to complete such acquisitions on favorable terms, if at all. In addition, the
process of integrating an acquired business, service or product into our existing business and operations may result in unforeseen operating
difficulties and expenditures. Integration of an acquired company also may require significant management resources that otherwise would
be available for ongoing development of our business. Moreover, we may not realize the anticipated benefits of any acquisition or strategic
alliance and such transactions may not generate anticipated financial results. Future acquisitions could also require us to incur debt, assume
contingent liabilities or amortize expenses related to intangible assets, any of which could harm our business.
We are dependent upon our key management personnel and the loss of any of these persons could adversely affect our results of
operations.
We are highly dependent upon key members of our management team for execution of our business plan. We believe that our future
success is highly dependent on the contributions of these key employees. The loss of any of these key employees could have a material
adverse effect upon our results of operations and financial position. We do not maintain “key person” life insurance for any of our
executive officers. The loss of any of our key management personnel could delay or prevent the achievement of our business objectives.
Our business may suffer if we are unable to attract or retain talented personnel.
Our success depends on the abilities, expertise, judgment, discretion, integrity, and good faith of our management and employees to
manage the business and respond to economic, market and other conditions. We have a relatively small but very effective management
team and employee base, and the inability to attract suitably qualified replacements or additional staff could adversely affect our business.
No assurance can be given that our management team or employee base will continue their employment with the Company, or that
replacement personnel with comparable skills could be found. If we are unable to attract and retain key personnel and additional employees,
our business may be adversely affected.
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If we fail to maintain effective internal control over financial reporting, we might not be able to report our financial results
accurately or prevent fraud; in that case, our stockholders could lose confidence in our financial reporting, which would harm our
business and could negatively impact the value of our stock.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. The process of maintaining our
internal controls may be expensive and time consuming and may require significant attention from management. Although we have
concluded that our internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, because of its
inherent limitations, internal control over financial reporting may not prevent or detect fraud or misstatements. Failure to implement
required new or improved controls, or difficulties encountered in their implementation, could harm our results of operations or cause us to
fail to meet our reporting obligations. If we or our independent registered public accounting firm discover a material weakness, the
disclosure of that fact, even if quickly remedied, could harm the value of our stock and our business.
Our business is subject to seasonal fluctuations, which are likely to cause our revenues and operating results to fluctuate.
Our operating results are influenced by seasonal fluctuations in the price of biodiesel. Our sales tend to decrease during the winter
season due to concerns that biodiesel will not perform adequately in colder weather and a decrease in agricultural activities. Colder seasonal
temperatures can cause the higher cloud point biodiesel we make from animal fats to become cloudy and eventually to gel at a higher
temperature than petroleum diesel or lower cloud point biodiesel made from soybean, canola or inedible corn oil. Such gelling can lead to
plugged fuel filters and other fuel handling and performance problems for customers and suppliers. Reduced demand in the winter for our
higher cloud point biodiesel may result in excess supply of such high cloud point biodiesel and/or lower prices for such high cloud point
biodiesel. As a result of these seasonal fluctuations, comparisons of operating measures between consecutive quarters may not be as
meaningful as comparisons between longer reporting periods.
Risk management transactions could significantly increase our operating costs and working capital requirements if we incorrectly
estimate our feedstock demands and biodiesel sales as compared to market conditions.
In an attempt to partially offset the effects of volatility of feedstock costs and biodiesel fuel prices, we may enter into contracts that
establish market positions in feedstocks, such as animal fats and soybean oil, and related commodities, such as heating oil and ultra low
sulfur diesel. The financial statement impact of such market positions will depend on market prices at the time of performance and could
result in more or less favorable results. Risk management arrangements will also expose us to the risk of financial loss in situations where
the counter party to the contract defaults on its contract or, in the case of exchange-traded or over-the-counter futures or options contracts,
where there is a change in the expected differential between the underlying price in the contract and the actual prices paid or received by
us. Risk management activities can themselves result in losses when a position is purchased in a declining market or a position is sold in a
rising market. Changes in the value of these futures instruments are recognized in current income and may result in margin calls. We may
also vary the amount of risk management strategies we undertake, and we may choose not to engage in risk management transactions at all.
Further, our ability to reduce the risk of falling biodiesel prices and rising feedstock costs will be limited as there is not an established
futures market for biodiesel or the vast majority of our feedstocks, nor are fixed-price long-term contracts generally available. As a result,
our results of operations, working capital requirements and financial position may be adversely affected by increases in the price of
feedstocks, or decreases in the price of biodiesel that are not risk managed effectively.
A leak, fire or explosion at any of our production plants or natural disaster damage to our plants would increase our costs and
liabilities.
Because biodiesel and some of its inputs and outputs are combustible and flammable, a leak, fire or explosion may occur at a plant
which could result in damage to the plant and nearby properties, injury to employees and others, and interruption of operations. Our
Houston facility, due to its coastal location, may incur plant damage, injury to employees and others, and interruption of operations as a
result of a hurricane. All of our plants may incur damage from tornados, earthquakes or other natural disasters. If any of the foregoing
events occur, we may incur significant additional costs including, among other things, loss of profits from inability to operate, clean-up
costs, liability for damages or injuries, legal expenses, and reconstruction expenses, which would negatively affect our profitability.
We are reliant on certain strategic raw materials for our operations.
We are reliant on certain strategic raw materials for our operations. We have implemented certain risk management tools, as
appropriate, to mitigate short-term market fluctuations in raw material supply and costs. There can be no assurance, however, that such
measures will result in cost savings or that all market fluctuation exposure will be eliminated. In addition, natural disasters, changes in laws
or regulations, war or other outbreak of hostilities, or other political factors in any of the countries or regions in which we operate or do
business, or in countries or regions that are key suppliers of strategic raw materials, could affect availability and costs of raw materials.
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While temporary shortages of raw materials may occasionally occur, these items have historically been sufficiently available to cover
current requirements. However, their continuous availability and price are impacted by natural disasters, plant interruptions occurring
during periods of high demand, domestic and world market and political conditions, changes in government regulation, and war or other
outbreak of hostilities. In addition, as we increase our biodiesel production, we will require larger supplies of these materials which have
not yet been secured and may not be available for the foregoing reasons, or may be available only at prices higher than current levels. Our
operations may be adversely affected by these factors.
One customer accounted for a meaningful percent of revenue and a loss of this customer would have an adverse impact on our
total revenue.
One customer accounted for 24% of our total revenue in 2009 and 29% of our total revenue in the 2010. In the event we lose this
customer and cannot replace the lost revenue with revenue from other customers, our revenue would decline which would negatively affect
our profitability.
Confidentiality agreements with employees and others may not adequately prevent disclosures of trade secrets and other
proprietary information.
We rely in part on trade secret protection to protect our confidential and proprietary information and processes. However, trade
secrets are difficult to protect. We have taken measures to protect our trade secrets and proprietary information, but these measures may not
be effective. We require new employees and consultants to execute confidentiality agreements upon the commencement of an employment
or consulting arrangement with us. These agreements generally require that all confidential information developed by the individual or
made known to the individual by us during the course of the individual’s relationship with us be kept confidential and not disclosed to third
parties. These agreements also generally provide that know-how and inventions conceived by the individual in the course of rendering
services to us shall be our exclusive property. Nevertheless, these agreements may not be enforceable, our proprietary information may be
disclosed, third parties could reverse engineer our processes and others may independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to our trade secrets. Costly and time-consuming litigation could be necessary to
enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our
competitive business position.
We are a holding company and there are limitations on our ability to receive distributions from our subsidiaries.
We conduct substantially all of our operations through subsidiaries and many of these subsidiaries have entered into other agreements
that contractually restrict them from paying dividends, making distributions or making loans to our parent company or to any other
subsidiary. These limitations may restrict our ability to repay, from operations, indebtedness, finance capital projects or pay dividends to
stockholders.
Strategic relationships on which we may rely are subject to change.
Our ability to maintain commercial arrangements with biodiesel customers, feedstock suppliers, and transportation and logistics
services providers will depend on maintaining close working relationships with industry participants including some of our current
shareholders, particularly Bunge, ED&F Man, and West Central. As we continue to develop our business, we expect to use the business
relationships of management and our stockholders in order to form strategic relationships such as contractual arrangements, joint ventures,
financings or minority investments. There can be no assurance that we will be able to maintain or establish additional necessary strategic
relationships, in which case our business may be negatively affected.
Failure to comply with governmental regulations could result in the imposition of penalties, fines, or restrictions on operations
and remedial liabilities.
The biodiesel industry is subject to extensive federal, state and local laws and regulations related to the general population’s health and
safety and compliance and permitting obligations, including those related to the use, storage, handling, discharge, emission and disposal of
municipal solid waste and other waste, pollutants or hazardous substances, or discharges and air and other emissions as well as land use and
development. Existing laws also impose obligations to clean up contaminated properties or to pay for the cost of such remediation, often
upon parties that did not actually cause the contamination. Compliance with these laws, regulations, and obligations could require
substantial capital expenditures. Failure to comply could result in the imposition of penalties, fines or restrictions on operations and
remedial liabilities. These costs and liabilities could adversely affect our operations.
Changes in environmental laws and regulations occur frequently, and any changes that result in more stringent or costly waste
handling, storage, transport, disposal or cleanup requirements could require us to make significant expenditures to attain and maintain
compliance and may otherwise have a material adverse effect on our business in general and on our results of operations, competitive
position or financial condition. We are unable to predict the effect of additional environmental laws and regulations which may be adopted
in the future, including whether any such laws or regulations would materially adversely increase our cost of doing business or affect our
operations in any area.
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Under certain environmental laws and regulations, we could be held strictly liable for the removal or remediation of previously
released materials or property contamination regardless of whether we were responsible for the release or contamination, or if current or
prior operations were conducted consistent with accepted standards of practice. Such liabilities can be significant and, if imposed, could
have a material adverse effect on our financial condition or results of operations.
In addition to the regulations mentioned above, we are subject to various laws and regulations related to RFS2, most significantly
regulations related to the generation and dissemination of RINs. These regulations are highly complex and evolving, requiring us to
periodically update our compliance systems. Any violation of these regulations by us, inadvertent or otherwise, could result in significant
fines and harm our customer’s confidence in the RINs we issue, either of which could have a material adverse effect on our business.
Our insurance may not protect us against our business and operating risks.
We maintain insurance for some, but not all, of the potential risks and liabilities associated with our business. For some risks, we may
not obtain insurance if we believe the cost of available insurance is excessive relative to the risks presented. As a result of market
conditions, premiums and deductibles for certain insurance policies can increase substantially and, in some instances, certain insurance
policies may become unavailable or available only for reduced amounts of coverage. As a result, we may not be able to renew our existing
insurance policies or procure other desirable insurance on commercially reasonable terms, if at all. Although we will maintain insurance at
levels we believe are appropriate for our business and consistent with industry practice, we will not be fully insured against all risks. In
addition, pollution and environmental risks generally are not fully insurable. Losses and liabilities from uninsured and underinsured events
and delay in the payment of insurance proceeds could have a material adverse effect on our financial condition and results of operations.
Increased biodiesel industry penetration by petroleum companies, agribusiness companies or other multinational companies may
adversely impact our margins.
We operate in a very competitive environment. The biodiesel industry is primarily comprised of smaller entities that engage
exclusively in biodiesel production and large integrated agribusiness companies that produce biodiesel along with their soybean crush
businesses. We face competition for capital, labor, feedstocks and other resources from these companies. Petroleum companies and diesel
retailers have not been engaged in biodiesel production to a large extent. These companies, however, form the primary distribution
networks for marketing biodiesel through blended petroleum diesel. If these companies seek to engage in direct or indirect biodiesel
production, there will be less of a need to purchase biodiesel from independent biodiesel producers like us. Such a structural change in the
market could have a material adverse effect on our operations, cash flows and financial position.
We operate in a highly competitive industry.
In the United States, we compete with other soybean processors and refiners, including Archer-Daniels-Midland Company, LLC,
Cargill, Inc. and Louis Dreyfus Commodities. Some of our competitors are divisions of larger enterprises and have greater financial
resources than we do. Although some of our competitors are larger than we are, we also have many smaller competitors. In 2010, the top
ten domestic biodiesel producers accounted for approximately 80% of all biodiesel production. If our competitors consolidate or otherwise
grow and we are unable to similarly increase our size and scope, our business and prospects may be significantly and adversely affected.
Risks Related to the Biodiesel Industry
The market price of biodiesel is strongly influenced by the price of petroleum distillate fuels, such as ultra-low sulfur diesel, and
decreases in the price of petroleum-based distillate fuels would very likely decrease the price we can charge for our biodiesel, which
could harm our revenues and profitability.
Historically, biodiesel prices have generally been strongly correlated to petroleum diesel prices and in particular ultra low sulfer
diesel. Petroleum prices are volatile due to global factors such as the impact of wars and other political events, OPEC production quotas,
worldwide economic conditions, changes in refining capacity and natural disasters. Just as a small reduction in the real or anticipated
supply of crude oil can have a significant upward impact on the price of petroleum-based fuels, a perceived reduction of such threats can
result in a significant reduction in petroleum fuel prices. A reduction in petroleum-based fuel prices may have a material adverse affect on
our revenues and profits if such price decrease reduces the price we are able to charge for our biodiesel and the cost of our feedstocks do
not decrease proportionately.
There is currently excess production capacity and low utilization in the biodiesel industry and if demand does not significantly
increase, the price at which we sell biodiesel may be depressed and our revenues and ability to operate may be harmed.
Many biodiesel plants do not operate, and of those that do, many do not operate at full capacity. The EPA reports that 2.2 billion
gallons per year of biodiesel production capacity in the United States is registered with them under the RFS program. Further, plants under
construction and expansion in the U.S. as of December 2010, if completed, could add an additional
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several hundred million gallons of annual biodiesel production capacity. The annual production capacity of existing plants and plants under
construction far exceeds the annual consumption of biodiesel in the U.S. This excess production capacity, if it were to come into
production, would increase competition for our feedstocks and could increase the volume of biodiesel on the market beyond that mandated
by the RFS, either of which would harm our revenues and profitability.
The development of alternative fuels and energy sources may reduce the demand for biodiesel, resulting in a reduction in our
profitability.
Our ability to increase our revenues depends on increased demand for biodiesel. If adoption of biodiesel as a diesel fuel additive or
alternative does not occur to the extent we anticipate, our business and results of operations will not reach anticipated levels.
Alternative fuels, including a variety of energy alternatives to biodiesel, are continually under development. The construction of
several renewable diesel plants has been announced. Petroleum-based fuels and non-petroleum based fuels like renewable diesel that can
compete with biodiesel in the marketplace are already in use and in the future more efficient or environmentally friendly alternatives may
be developed, which may decrease the demand for biodiesel or the type of biodiesel that we produce. Technological advances in engine and
exhaust system design and performance could reduce the use of and demand for biodiesel. Further advances in power generation
technologies, based on cleaner hydrocarbon-based fuels, renewable diesel, fuel cells and hydrogen are actively being researched and
developed. If these technological advances and alternatives to biodiesel prove to be economically feasible, environmentally superior and
accepted in the marketplace, the market for biodiesel could be significantly diminished or replaced, which would substantially reduce our
revenues and profitability.
The development of alternative fuels and renewable chemicals also puts pressure on feedstock supply and availability to the biodiesel
industry. If these emerging technologies are more profitable or have greater governmental support than biodiesel does, then the biodiesel
industry and REG in particular, may have difficulty in procuring necessary feedstocks to be successful.
We face competition from outside the biodiesel industry, including, for example, from manufacturers of renewable diesel and
potential alternative clean power engines under development.
The biodiesel industry is in competition with the diesel fuel segment of the petroleum industry. Biodiesel is generally more expensive
to produce than diesel fuel, and is able to compete with diesel fuel largely as a result of government environmental regulations and
economic incentives. If the diesel fuel industry is able to produce diesel fuel with acceptable environmental characteristics or if
governmental regulations and tax incentives cease to favor renewable fuels, we would find it difficult, if not impossible, to compete with
petroleum-based diesel fuel. Renewable diesel, which can be made at existing petroleum refineries from renewable feedstocks and may be
mixed with crude oil through a thermal de-polymerization process, is eligible for federal blenders’ tax credits and other governmental
incentives offered to producers of biodiesel. Renewable diesel made from 100% renewable feedstocks benefits from the same $1.00 per
gallon tax credit that biodiesel receives and co-processed renewable diesel made from a combination of renewable feedstocks and petroleum
crude is eligible for a $0.50 per gallon tax credit. Under the RFS rules, renewable diesel made from biomass meets the definition of
biomass-based diesel and thus is eligible, along with biodiesel to satisfy the RFS biomass-based diesel mandate. Furthermore, under the
RFS rules, renewable diesel receives 1.7 RINs per gallon, where biodiesel receives 1.5 RINs. As the value of RINs increase, this 0.2 RIN
advantage that renewable diesel has over biodiesel may make renewable diesel more cost-effective, both as a petroleum diesel substitute
and for meeting the RFS mandate. In addition, the petroleum industry is lobbying states to make renewable diesel eligible for their
incentives and mandates. If renewable diesel proves to be more cost-effective than biodiesel, our revenues and results of operations would
be adversely impacted.
The biodiesel industry will also face increased competition resulting from the advancement of technology by automotive, industrial
and power generation manufacturers which are developing more efficient engines, hybrid engines and alternative clean power systems.
Improved engines and alternative clean power systems offer a technological solution to address increasing worldwide energy costs, the
long-term availability of petroleum reserves and environmental concerns. If and when these clean power systems are able to offer
significant efficiency and environmental benefits and become widely available, the biodiesel industry may not be able to compete
effectively with these technologies. This additional competition could reduce the demand for biodiesel, which would negatively impact our
revenues.
Concerns about “food vs. fuel” and biodiesel emissions could impair our ability to operate at a profit and substantially harm our
revenues and operating margins.
The biodiesel industry has been substantially aided by federal and state mandates, tax credits and incentives. Because biodiesel has
historically been more expensive to produce than diesel fuel, the biodiesel industry has depended on governmental incentives that have
effectively brought the price of biodiesel more in line with the price of diesel fuel to the end user. These incentives have supported a market
for biodiesel that might not exist without the incentives.
Some people believe that biodiesel may increase the cost of food as some feedstocks used to make biodiesel can also be used for
animal feed and other food products. This debate is often referred to as food vs. fuel. This controversy is dangerous to the biodiesel industry
because biodiesel demand is heavily influenced by government policy and if public opinion were to erode, it is possible that these policies
will lose political support. These views could also negatively impact public perception
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of biodiesel and acceptance of biodiesel as an alternative fuel. Such claims have led some, including members of Congress, to urge the
modification of current government policies which affect the production and sale of biofuels in the United States. To the extent that such
state or federal laws were modified or public perception harms acceptance of biodiesel, the demand for biodiesel may be reduced, which
could negatively and materially affect our ability to operate profitably.
In some instances biodiesel may increase emissions of nitrogen oxide, which could harm air quality. Texas currently requires that
biodiesel blends contain an additive to eliminate this perceived nitrogen oxide increase. California is in the process of formulating biodiesel
regulations that may also require such an additive. In such states where an additive is required to sell biodiesel, the additional cost of the
additive may make biodiesel less cost competitive against petroleum diesel or renewable diesel, which would negatively impact our
revenues and profitability.
Problems with product performance, in cold weather or otherwise, could cause consumers to lose confidence in the reliability of
biodiesel which, in turn, would have an adverse impact on our ability to successfully market and sell biodiesel.
Concerns about the performance of biodiesel could result in a decrease in customers and revenues and an unexpected increase in
expenses. For example, cold temperatures can cause biodiesel to become cloudy and eventually to gel, and this phenomena can lead to
plugged fuel filters and other problems. Cloud point is defined as the temperature below which a fuel exhibits a noticeable cloudiness and is
the conventional indicator of a fuel’s potential for cold weather problems. The lower the cloud point, the better the fuel should perform in
cold weather. The cloud point of biodiesel is typically between 30 °F and 60 °F, while the cloud point of No. 2 petroleum diesel fuel is
typically less than 20 °F. When diesel is mixed with biodiesel to make a two percent biodiesel blend, the cloud point of the blended fuel
can be 2 °F to 6 °F higher than petroleum diesel and the cloud point of a twenty percent biodiesel blend is 15 °F to 30 °F higher than
petroleum diesel, depending on the individual cloud points of the biodiesel and petroleum diesel. These increased cloud points may cause
demand for biodiesel in northern and eastern U.S. markets to diminish during the colder months.
The tendency of biodiesel to gel in colder weather may also result in long-term storage problems. In cold climates, fuel may need to
be stored in a heated building or heated storage tanks, which result in higher storage costs. This and other performance problems, including
the possibility of particulate formation above the cloud point of a blend of biodiesel and petroleum diesel, may also result in increased
expenses as we try to remedy the performance problem. Remedying these performance problems may result in decreased yields, lower
process throughput or both, as well as substantial capital costs. Any reduction in the demand for, or production capacity of, our biodiesel
product will reduce our revenue and have an adverse effect on our cash flows and results of operations.
Growth in the sale and distribution of biodiesel is dependent on the expansion of related infrastructure which may not occur on a
timely basis, if at all, and our operations could be adversely affected by infrastructure limitations or disruptions.
Growth in the biodiesel industry depends on substantial development of infrastructure for the distribution of biodiesel by persons and
entities outside our control. Expansion of the distribution system includes, among other things:
•
•
•
additional terminal and storage facilities for biodiesel;
growth in the number of service stations offering biodiesel; and
growth in the manufacture of clean diesel vehicles.
Substantial investment required for these infrastructure changes and expansions may not be made or may not be made on a timely
basis. The scope and timing of any infrastructure expansion are generally beyond our control. Also, we compete with other biofuel
companies for access to some of the key infrastructure components such as pipeline and terminal capacity. As a result, increased production
of biodiesel or other biofuels will increase the demand and competition for necessary infrastructure. Any delay or failure in making the
changes to or expansion of distribution infrastructure could hurt the demand for or prices of biodiesel, impede delivery of our biodiesel, and
impose additional costs, each of which would have a material adverse effect on our results of operations and financial condition. Our
business will be dependent on the continuing availability of infrastructure for the distribution of increasing volumes of biodiesel and any
infrastructure disruptions could have a material adverse effect on our business.
The European Commission has imposed anti-dumping and countervailing duties on biodiesel blends of B20 or higher imported
into Europe, which have effectively eliminated our ability to sell those biodiesel blends in Europe; the European Commission is
considering imposing anti-dumping and countervailing duties on biodiesel blends below B20, which would effectively eliminate our
ability to sell these lower blends in Europe as well.
In March 2009, the European Commission imposed anti-dumping and anti-subsidy tariffs on biodiesel produced in the U.S. These
tariffs have effectively eliminated European demand for biodiesel blends of B20 or higher from the U.S. The European Commission has
extended these tariffs beyond their July 2009 expiration until 2014. These duties significantly increase the
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price at which we and other U.S. biodiesel producers will be able to sell such biodiesel blends in European markets, making it difficult or
impossible to compete in the European biodiesel market. The European Commission is considering imposing similar anti-dumping and
countervailing duties on biodiesel blends below B20. If such anti-dumping and countervailing duties are imposed, it would likely increase
the price for such biodiesel blends to the point where such biodiesel blends are not competitive in the European market. These anti-
dumping and countervailing duties decrease the demand for biodiesel produced in the United States and increase the supply of biodiesel
available in the U.S. market. Such market dynamics may negatively impact our revenues and profitability.
We may face competition from imported biodiesel, which may reduce demand for biodiesel produced by us and cause our revenues
to decline.
Biodiesel produced in Canada, South America, Eastern Asia, the Pacific Rim, or other regions may be imported into the U.S. market
to compete with U.S. produced biodiesel. These regions may benefit from biodiesel production incentives or other financial incentives in
their home countries that offset some of their biodiesel production costs and enable them to profitably sell biodiesel in the U.S. at lower
prices than U.S. based biodiesel producers. Under the RFS rules, imported biodiesel may be eligible and, therefore, may compete to meet
the volumetric requirements. This could make it more challenging for us to market or sell biodiesel in the U.S., which would harm our
revenues.
If automobile manufacturers and other industry groups express reservations regarding the use of biodiesel, our ability to sell
biodiesel will be negatively impacted.
Because it is a relatively new product, the research on biodiesel use in automobiles and its effect on the environment is ongoing. Some
industry groups, including the World Wide Fuel Charter, have recommended that blends of no more than 5% biodiesel be used for
automobile fuel due to concerns about fuel quality, engine performance problems and possible detrimental effects of biodiesel on rubber
components and other parts of the engine. Although some manufacturers have encouraged use of biodiesel fuel in their vehicles, cautionary
pronouncements by other manufacturers or industry groups may impact our ability to market our biodiesel.
In addition, certain studies have shown that nitrogen oxide emissions increase when biodiesel is used. Nitrogen oxide is the chief
contributor to ozone and smog. New engine technology is available and is being implemented to eliminate this problem. However, these
emissions may decrease the appeal of biodiesel to environmental groups and agencies who have been historic supporters of the biodiesel
industry, potentially harming our ability to market our biodiesel.
Several biofuels companies throughout the country have filed for bankruptcy over the last several years due to industry and
economic conditions.
Unfavorable worldwide economic conditions, lack of credit and volatile biofuel prices and feedstock costs have likely contributed to
the necessity of bankruptcy filings by biofuel producers. Our business has been and in the future may be negatively impacted by the
industry conditions that influenced the bankruptcy proceedings of other biofuel producers, or we may encounter new competition from
buyers of distressed biodiesel properties who enter the industry at a lower cost than original plant investors.
Risks Related to our Stock
There is no public market for our stock and approximately 75% of our shares are subject to transfer restrictions, which limits the
ability of our stockholders to sell their stock.
There is currently no public market for our stock and we do not know when, if ever, our stock will be listed on a public exchange. As a
result, a stockholder’s ability to sell our stock is limited and our stockholders may not be able to sell their stock at all. Approximately 75%
of our combined Preferred Stock and Common Stock is subject to the Stockholder Agreement which restricts transfer of their shares. If a
market were to develop in the remaining unrestricted shares, there is no assurance that the market price would be at a level stockholders
perceive reflects the full value of our stock.
In the event we are sold, the holders of our Series A Preferred Stock will be entitled to receive a significant preference
payment prior to any distribution to the holders of our common stock.
In the event of a merger, consolidation, sale of all or substantially all of the assets or liquidation of our Company, which are referred
to as liquidation events, the holders of our Series A Preferred Stock are entitled to receive a preferential distribution of $13.75 per share,
plus any accrued but unpaid dividends up to an aggregate per share preference amount of $16.50. Upon any of the liquidation events
described above, the holders of our Series A Preferred Stock collectively would be entitled to receive approximately $222 million
(assuming accrued but unpaid dividends existed to the maximum amount) prior to the distribution of any amounts to the holders of our
common stock. In addition, the holders of shares of Series A Preferred
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Stock are also entitled to share ratably with the holders of our common stock, on an as converted to our common stock basis, following the
preferential distribution. As a result of this liquidation preference, the holders of our common stock will receive less than their pro rata
share upon the occurrence of a liquidation event and would receive nothing in the event that the amount involved does not exceed the
aggregate liquidation preference of our Series A Preferred Stock.
We are a party to a Stockholder Agreement with certain of our principal stockholders pursuant to which these stockholders are
able to elect all or substantially all of our directors and give these stockholders the right to cause the sale of control of us, all without the
vote or consent of our other stockholders.
A few of our stockholders who collectively hold a majority of our voting power are party to a Stockholder Agreement pursuant to
which these stockholders have agreed to vote their shares in favor of four board nominees designated by NGP Energy Technology Partners,
LP and Natural Gas Partners, VIII, LP, or NGP, ED&F Man, Bunge, USRG and West Central, with West Central having the right to
designate five board nominees to be supported by this group of stockholders. So long as the parties to the Stockholder Agreement
collectively hold a majority of our voting power, they will have the power to elect all of our directors, without regard to the vote of other
stockholders. In addition, the Stockholder Agreement provides that after August 1, 2011, a majority of our Series A Preferred Stockholders
that are party to the Stockholder Agreement may under certain circumstances cause all parties to the Stockholder Agreement to sell all of
their shares in response to a third party offer for all of our shares or to vote their shares in favor of a third party acquisition proposal. As a
result, these parties to the Stockholder Agreement may have the ability to cause a future change of control of our Company, without the
consent of non-parties to the Stockholder Agreement.
We may be obligated to redeem our Series A Preferred Stock beginning in 2014.
At any time after February 26, 2014, certain holders of our outstanding shares of our Series A Preferred Stock may require that all or
part of any of our issued and outstanding shares of Series A Preferred Stock be redeemed by us out of funds lawfully available at a price per
share equal to the greater of the then fair market value of their shares, or $13.75 plus accrued interest in an aggregate amount not to exceed
$16.50 per share. If all of our holders of Series A Preferred Stock elect to have their shares redeemed, our obligation would be
approximately $222 million. In the event we do not have funds available to satisfy any redemption request, we are obligated under our
corporate charter to use commercially reasonable efforts to obtain funds for the redemption during the subsequent 18 month time period. In
order to satisfy any redemption request, we may be required to borrow money, issue equity securities or sell assets to meet this obligation,
which could impair our ability to raise the funds necessary to operate our business, involve significant dilution to our holders of Common
Stock or require the disposition of our key assets.
We are not able to take certain corporate actions without the prior consent of certain holders of our Series A Preferred Stock,
which places significant control in the hands of these stockholders who may have interests that conflict with our interests and the
interests of our common stockholders.
We have to obtain the consent of certain holders of our Series A Preferred Stock before we may:
•
•
•
•
•
•
•
•
•
•
•
•
•
issue equity securities on parity with or having a preference over the Series A Preferred Stock;
increase or decrease the number of authorized shares of any series of preferred stock;
amend our certificate of incorporation or bylaws;
alter or change the rights, preferences or privileges of the shares of any series of preferred stock;
issue, or cause any subsidiary to issue, any indebtedness, other than certain indebtedness incurred in the ordinary course of
business;
amend, renew, increase or otherwise alter in any material respect the terms of any indebtedness previously approved or required
to be approved by the holders of preferred stock, other than the incurrence of debt solely to fund the payment of accrued
dividends on our Preferred Stock or solely to fund the redemption of our Series A Preferred Stock;
increase the authorized number of directors constituting our Board of Directors;
redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any of our shares of capital
stock subject to certain exceptions;
declare or pay dividends or otherwise make distributions with respect to any shares of our capital stock, other than dividends on
our Series A Preferred Stock;
declare bankruptcy, dissolve, liquidate or wind up our affairs or any subsidiary;
modify or change the nature of our business such that a material portion of our business is devoted to any business other than the
business of (A) designing, constructing or operating facilities for biofuels, chemicals or by-products thereof and
(B) procurement, manufacturing, selling, distribution, logistics, marketing or risk management related to biofuels, chemicals or
by-products thereof;
make or permit any subsidiary to make any capital expenditure in excess of $500,000 which is not otherwise included in the
annual budget previously approved by our board of directors;
effect any sale of assets in excess of $500,000 or merge into another entity;
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•
•
acquire directly, or through a subsidiary, the stock or any material assets of another corporation, partnership or other person or
entity for consideration valued at more than ten percent of our total assets; or
agree or commit to do any of the foregoing.
The interests of these holders of our Series A Preferred Stock may differ significantly from the interests of the holders of our
Common Stock or other holders of Series A Preferred Stock. The holders of our Series A Preferred Stock may not take into consideration
any interests other than their own when voting on any of the matters referred to above and, as a result, we and the holders our Common
Stock or other holders of Series A Preferred Stock may be harmed.
If we issue additional shares in the future, it will result in dilution to our existing stockholders.
If we issue additional shares of preferred or common stock or securities convertible into common stock, our stockholders may be
unable to maintain their pro rata ownership of our capital stock. The issuance of additional securities may result in a reduction of the book
value of the outstanding shares of our common stock and preferred stock. If we issue any such additional shares or securities convertible
into or exercisable into common shares, such issuance will cause a reduction in the proportionate ownership and voting power of all current
stockholders who do not purchase such shares. Further, such issuance may result in a change of control of our Company. There is no
assurance that further dilution will not occur in the future.
We do not intend to pay dividends on our common stock and thus stockholders must look solely to appreciation of our common
stock to realize a gain on their investments.
Our Series A Preferred Stock accrues dividends at a rate of $0.88 per share per annum, compounded annually. So long as any accrued
dividends on the Series A Preferred Stock have not been paid, we may not pay or declare any dividend or make any distribution upon or in
respect of our Common Stock or other capital stock ranking on a parity with or junior to our Series A Preferred Stock. Furthermore, we
currently intend to retain any future earnings for funding growth and, therefore, do not expect to pay any dividends on our common stock in
the foreseeable future. Our future dividend policy is within the discretion of our board of directors and will depend upon various factors,
including our business, financial condition, results of operations, capital requirements, and investment opportunities. Accordingly,
stockholders must look solely to appreciation of our common stock to realize a gain on their investment. This appreciation may not occur.
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Item 1B. Unresolved Staff Comments
None.
Item 2.
Properties
The following table lists each of our biodiesel production facilities and its location, use, and nameplate production capacity. Each facility
listed below is used by our Biodiesel Segment.
Location
Ralston, Iowa
Newton, Iowa
Seabrook, Texas
Danville, Illinois
Seneca, Illinois
FACILITIES IN OPERATION
Use
Leased or
Owned
Biodiesel production Owned
Biodiesel production Owned
Biodiesel production Owned
Biodiesel production Owned
Leased
Biodiesel production
Production
Capacity
(mmgy)
12
30
35
45
60
Operations
Commenced
March 2003
May 2007
July 2008
January 2009
August 2010
The following table lists each of our partially constructed biodiesel production facilities, the planned nameplate capacity and the
approximate level of completion.
PARTIALLY CONSTRUCTED FACILITIES
Location
St. Rose, Louisiana
Emporia, Kansas
Clovis, New Mexico
Item 3.
Legal Proceedings
Use
Biodiesel production
Biodiesel production
Biodiesel production
Current
Owner
REG
REG
REG
Production
Capacity
(mmgy)
60
60
15
Approximate
Completion
Level
50%
20%
70%
We believe there is no pending litigation that would have a material adverse effect on our financial position, operations or liquidity.
Item 4.
(Removed and Reserved)
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PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market For Our Common Equity
There is currently no public trading market for our common stock.
Holders
As of March 15, 2011, there were approximately 1,202 registered holders of our common stock.
Dividends
We have never paid, and do not intend to pay in the future, a cash dividend on our common stock. In addition, we conduct
substantially all of our operations through subsidiaries and are dependent on dividends or other intercompany transfers of funds from our
subsidiaries to meet our obligations. We have entered into agreements that contractually restrict our subsidiaries from paying dividends,
making distributions or making loans to our parent company or to any other subsidiary. In addition, our Series A Preferred Stock accrues
dividends at a rate of $0.88 per share per annum, compounded annually. As long as any accrued dividends on the Series A Preferred Stock
have not been paid, we may not pay or declare any dividend or make any distribution upon or in respect of our common stock or other
capital stock ranking on a parity with or junior to our Series A Preferred Stock. See Note 4 – Redeemable Preferred Stock to our financial
statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital
Resources” filed with this annual report for a discussion of the limitations and restrictions on our ability to pay dividends to our
shareholders.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides certain information as of December 31, 2010, with respect to our equity compensation plans:
PLAN CATEGORY
Equity compensation plans approved
by security holders
Equity compensation plans not
approved by security holders
Total
NUMBER OF SECURITIES
TO BE ISSUED UPON
EXERCISE OF
OUTSTANDING OPTIONS,
WARRANTS AND RIGHTS
WEIGHTED AVERAGE
EXERCISE PRICE OF
OUTSTANDING OPTIONS,
WARRANTS AND RIGHTS
NUMBER OF SECURITIES
REMAINING AVAILABLE
FOR FUTURE ISSUANCE
UNDER EQUITY
COMPENSATION PLANS
2,845,504
1
$
258,535
3
3,104,039
9.50
2
—
2
9.50
2,772,812
—
2,772,812
1
2
3
Includes stock options of 218,816 and restricted stock units of 2,626,688
Restricted Stock Units do not have an exercise price and therefore have not been included in the calculation of weighted average
exercise price.
Represents restricted stock units for our common stock issued in exchange for services.
Issuer Purchases of Equity Securities
There are currently no authorized repurchase programs in effect under which we may repurchase shares of our outstanding common
stock.
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Item 6.
Selected Financial Data
The following selected consolidated financial data should be read together with “Management’s Discussion and Analysis of Financial
Condition” beginning on page 23 and our financial statements and related notes included elsewhere in this annual report. The selected
consolidated balance sheet data as of December 31, 2010 and 2009, and the selected consolidated statements of operations data for each
year ended December 31, 2010, 2009 and 2008, have been derived from our audited consolidated financial statements which are included
elsewhere in this annual report. The selected consolidated balance sheet data as of December 31, 2008, 2007 and 2006, and the selected
consolidated statements of operations data for the years ended December 31, 2007 and 2006 have been derived from our audited
consolidated financial statements not included in this annual report.
2010 (1)
2009
Year Ended December 31,
2008 (2)
(In thousands)
2007
2006
Consolidated Statement of Operations Data:
Revenues:
Biodiesel sales
Biodiesel government incentives
Total biodiesel
Services
Total revenues
Costs of goods sold:
Biodiesel
Services
Total costs of goods sold
Gross profit
Total operating expenses
Income (loss) from operations
Total other income (expense), net
Income (loss) before income tax benefit (expense) and income (loss)
from equity investments
Income tax benefit (expense)
Income (loss) from equity investments
Net income (loss)
Less: Net (income) loss attributable to noncontrolling interests
Net income (loss) attributable to the company
Effects of recapitalization
Less: accretion of preferred stock to redemption value
Net income (loss) attributable to the company’s common stockholders
Consolidated Balance Sheet Data:
Total assets
Long-term obligations
Redeemable preferred stock
$207,902 $ 109,027 $ 69,509 $130,562 $ 93,649
8,915
102,564
75,465
178,029
19,465
128,492
3,009
131,501
6,564
76,073
9,379
85,452
7,240
215,142
1,313
216,455
9,970
140,532
94,018
234,550
194,016
807
194,823
21,632
29,681
(8,049)
(16,102)
(24,151)
3,252
(689)
(21,588)
—
(21,588)
8,521
(27,239)
127,373
1,177
128,550
2,951
24,144
(21,193)
(1,364)
(22,557)
(45,212)
(1,089)
(68,858)
7,953
(60,905)
—
(44,181)
78,736
4,470
83,206
2,246
24,208
(21,962)
(2,318)
(24,280)
9,414
(1,013)
(15,879)
2,788
(13,091)
—
(26,692)
141,748
71,258
213,006
21,544
29,453
(7,909)
36,623
28,714
3,198
113
32,025
(141)
31,884
—
(4,434)
92,423
70,751
163,174
14,855
11,688
3,167
(377)
2,790
745
493
4,028
—
4,028
—
—
4,028
$ (40,306) $(105,086) $ (39,783) $ 27,450 $
2010 (1)
2009
Year Ended December 31,
2008 (2)
(In thousands)
2007
2006
$369,643 $ 200,558 $251,984 $169,706 $143,606
34,076
20,934
25,749
149,122
41,251
104,607
6,424
43,707
61,024
122,436
(1) Reflects the deconsolidation of Blackhawk as of January 1, 2010, the acquisition of Blackhawk as of February 26, 2010, acquisition of
CIE as of March 8, 2010, acquisition and consolidation of Seneca Landlord as of April 8, 2010, acquisition of Tellurian and ABDF as
of July 16, 2010, and the acquisition of Clovis as of September 21, 2010.
(2) Reflects the consolidation of Blackhawk as of May 9, 2008 and the acquisition of USBG as of June 26, 2008.
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Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto that
appear elsewhere in this report. This discussion contains forward-looking statements reflecting our current expectations that involve risks
and uncertainties. Actual results may differ materially from those discussed in these forward-looking statements due to a number of factors,
including those set forth in the section entitled “Risk Factors” and elsewhere in this report.
Overview
We own four operating biodiesel production facilities: a 12 million gallon per year, or mmgy, facility in Ralston, Iowa, a 35 mmgy
facility near Houston, Texas, or the Houston Facility, a 45 mmgy facility in Danville, Illinois and a 30 mmgy facility in Newton, Iowa. In
April 2010, we signed a seven year lease for a 60 mmgy facility in Seneca, Illinois bringing our total production capacity to 182 mmgy. In
addition to these five plants, we began construction of two 60 mmgy production capacity facilities in 2007, one in New Orleans, Louisiana
and the other in Emporia, Kansas. In February 2008, we halted construction of these facilities as a result of conditions in the biodiesel
industry and our inability to obtain financing necessary to complete construction of the facilities. Construction of the New Orleans facility
is approximately 50% complete and construction of the Emporia facility is approximately 20% complete. In addition, during third quarter
2010, we acquired a 15 mmgy biodiesel production facility in Clovis, New Mexico which is approximately 70% complete. We continue to
pursue a variety of options with respect to financing the completion of construction of these facilities and we plan to complete these
facilities once we obtain project financing.
Recent Developments
Prior to February 26, 2010, the “Company,” “we” “us” “our” and similar references refer to the business, results of operations and
cash flows of REG Biofuels, Inc., formerly Renewable Energy Group, Inc., which is considered the accounting predecessor to Renewable
Energy Group, Inc., formerly, REG Newco, Inc. After February 26, 2010, such references refer to the business, results of operations and
cash flows of Renewable Energy Group, Inc., and its consolidated subsidiaries, including REG Biofuels, Inc., REG Danville, LLC, or REG
Danville, and REG Newton, LLC or REG Newton.
On February 26, 2010, we acquired by merger all of the equity interests in Blackhawk Biofuels, LLC, referred to as the Blackhawk
Merger, and REG Biofuels, Inc., referred to as the Biofuels Merger. Subsequent to the Blackhawk Merger, Blackhawk Biofuels, LLC
changed its name to REG Danville. On March 8, 2010, one of our wholly owned subsidiaries, REG Newton, acquired substantially all of
the assets and liabilities of Central Iowa Energy, LLC, or CIE, which is referred to as the CIE Asset Acquisition.
In connection with these transactions, we issued 29,881,258 shares of our Common Stock and 13,455,522 shares of our Series A
Preferred Stock excluding shares issued to one of our subsidiaries relating to our pre-existing ownership interest in CIE. For additional
information regarding these transactions, see “Note 6 – Acquisitions and Equity Transactions” to our consolidated financial statements.
On April 8, 2010, our wholly-owned subsidiary REG Seneca, LLC, or REG Seneca, agreed to lease and operate a 60 mmgy biodiesel
production facility located in Seneca, Illinois and certain related assets. The facility is owned by Seneca Landlord, LLC, or Landlord, an
entity controlled by certain of our stockholders, and because of the lease and put/call option, it is considered a variable interest entity and is
consolidated for financial statement purposes. For additional information regarding this transaction, which is referred to as the Seneca
Transaction, see “Note 6 – Acquisitions and Equity Transactions” and “Note 7 – Variable Interest Entities” to our consolidated financial
statements.
On July 16, 2010, we issued 598,295 shares of Common Stock and agreed to issue up to an additional 731,250 shares of Common
Stock in connection with our acquisition of certain assets of Tellurian and ABDF. Tellurian was a California-based biodiesel company and
marketer. ABDF was a joint venture owned by Golden State Service Industries, Restaurant Technologies, Inc., or RTI, and Tellurian and
previously focused on building a national array of small biodiesel plants that would convert used cooking oil into high quality, sustainable
biodiesel. The purchase connects RTI’s national used cooking oil collection system, with more than 16,000 installations, and our biodiesel
manufacturing facilities. For additional information regarding this transaction, see “Note 6 – Acquisitions and Equity Transactions” to our
consolidated financial statements.
On September 21, 2010, we acquired a partially constructed 15 mmgy biodiesel production facility in Clovis, New Mexico, or the
Clovis Facility. In exchange for the Clovis Facility and $8 million in cash, we issued 2,150,000 shares of Common Stock. Construction of
the Clovis Facility is approximately 70% complete. For additional information regarding this transaction, see “Note 6 – Acquisitions and
Equity Transactions” to our consolidated financial statements.
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The Federal Volumetric Ethanol Excise Tax Credit, referred to as the blenders’ tax credit, provides a $1.00 tax credit per gallon of
pure biodiesel, or B100, to the first blender of biodiesel with petroleum based diesel fuel. The blenders’ tax credit expired on December 31,
2009, but was reenacted on December 17, 2010, retroactively for 2010 and prospectively for 2011. As a result of the uncertainty about the
blenders’ tax credit for most of 2010; we elected to sell mostly unblended biodiesel, or B100. Accordingly, we are not entitled to claim the
tax credit for these gallons on a retroactive basis. The absence of the blenders’ tax credit during most of 2010 also affected our ability to
cost effectively sell biodiesel and as a consequence, during April 2010, we temporarily stopped producing biodiesel at our Newton facility
and our Ralston facility. At the end of April, our Newton facility began production again. During May, our Ralston facility began
producing at a reduced production level. During June, we stopped producing biodiesel at our Houston Facility, which began production
again during March 2011.
The Energy Independence and Security Act of 2007 created the Renewable Fuel Standard. On July 1, 2010, an updated Renewable
Fuel Standard program, or RFS2, was implemented. RFS2 mandates volume requirements for the amount of biomass-based diesel that must
be utilized each year. Under the program, obligated parties—including petroleum refiners and fuel importers—must show compliance with
these standards. Currently, biodiesel meets two categories of an obligated party’s required volume obligation—biomass-based diesel and
advanced biofuel. Today, biodiesel is the only significant commercially-available advanced biofuel that meets the RFS2 standard based on
its greenhouse gas emissions reductions score. Consistent with the RFS2 program, the Environmental Protection Agency, or EPA,
announced it would require the domestic use of 800 million gallons of biodiesel in 2011 and one billion gallons by 2012. After
implementation of RFS2, the American Petroleum Institute, or API, and National Petrochemical Refiners Association, or NPRA, filed a
lawsuit against the EPA relating to timing of enforcement of RFS2. On December 21, 2010, the U.S. District Court of Appeals for the
District of Columbia rendered a unanimous decision to deny the petition by NPRA and the API challenging the RFS2. We believe that this
decision removes a significant uncertainty that has clouded the future of the biodiesel industry.
Segments
We derive revenue from two reportable business segments: Biodiesel and Services.
Biodiesel Segment
Our Biodiesel segment includes:
•
the operations of the following biodiesel production facilities:
•
•
•
•
•
our wholly-owned 12 mmgy biodiesel production facility located in Ralston, Iowa;
our wholly-owned 35 mmgy biodiesel production facility located in Houston, Texas;
beginning February 26, 2010, our wholly-owned 45 mmgy biodiesel production facility located in Danville, Illinois;
beginning March 8, 2010, our wholly-owned 30 mmgy biodiesel production facility located in Newton, Iowa; and,
beginning April 8, 2010, our 60 mmgy biodiesel production facility located in Seneca, Illinois, which began production in
August 2010;
•
•
purchases and resale of biodiesel produced by third parties; and
toll manufacturing activities we provide to third parties.
We derive a small portion of our revenues from the sale of glycerin and fatty acids, which are co-products of the biodiesel production
process. In 2009 and 2010, our revenues from the sale of co-products were less than five percent of our total Biodiesel segment revenues.
A portion of the selling price of a gallon of biodiesel may be attributable to Renewable Identification Numbers, or RINs, that are
created to track compliance with RFS2. When we sell biodiesel, we generally attach RINs to each gallon. We can attach from zero to two
and one half RINs to any gallon of biodiesel.
Services Segment
Our Services segment includes:
•
•
biodiesel facility management and operational services, whereby we provide day-to-day management and operational services to
biodiesel production facilities; and
construction management services, whereby we act as the construction manager and general contractor for the construction of
biodiesel production facilities.
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Historically, we provided facility operations management services to owners of biodiesel production facilities. Pursuant to a
Management Operations Services Agreement, or MOSA, with a facility owner, we provided a broad range of management and operations
services, typically for a monthly fee based on gallons of biodiesel produced or marketed and a contingent payment based on the facility’s
net income. We do not recognize revenue from the sale of biodiesel produced at managed facilities, which we sold for the account of the
third party owner. In 2009, we provided notice of termination of our five remaining third party MOSAs and, as of December 31, 2010, we
had ceased providing services to three of these facilities, acquired one and continue to provide limited services to the other facility. We do
not anticipate the termination of our MOSAs will have a significant impact on our financial statements.
In addition, historically we have provided construction management services to the biodiesel industry, including assistance with pre-
construction planning, such as site selection and permitting, facility and process design and engineering, engagement of subcontractors to
perform construction activity and supply biodiesel processing equipment and project management services. Because we do not have
internal construction capabilities and do not manufacture biodiesel processing equipment, we rely on our prime subcontractors, Todd &
Sargent and its joint venture with the Weitz Company, TSW, to fulfill the bulk of our obligations to our customers. Payments to these prime
subcontractors historically represented most of the costs of goods sold for our Services segment.
Demand for our construction management and facility management and operational services depends on capital spending by potential
customers and existing customers, which is directly affected by trends in the biodiesel industry. Due to the current economic climate,
overcapacity in the biodiesel industry and reduced demand for biodiesel, we did not receive any orders for new facility construction services
in 2009 or 2010. During the first quarter of 2009, we were completing our engagement to upgrade the facility in Danville, Illinois. This
revenue was eliminated for financial reporting purposes, in 2009, as a result of our consolidation of Blackhawk’s financial statements – see
“Note 5 – Blackhawk” in our consolidated financial statements. During second quarter of 2010, we agreed to manage construction of the
upgrades to the Seneca Facility. This revenue was eliminated for financial reporting purposes in 2010 as a result of our consolidation of
Seneca Landlord – see “Note 7 – Variable Interest Entities” in our consolidated financial statements. We anticipate revenues derived from
construction management services will be minimal in future periods until conditions in the biodiesel industry improve.
Components of Revenues and Expenses
We derive revenues in our Biodiesel segment from the following sources:
•
•
•
•
•
•
sales of biodiesel produced at our wholly-owned facilities, including transportation, storage and insurance costs to the extent
paid for by our customers;
fees from toll manufacturing arrangements with ED&F Man at our Houston Facility;
revenues from our sale of biodiesel produced by third parties through toll manufacturing arrangements with us;
resale of finished biodiesel acquired from others;
sales of glycerin, other co-products of the biodiesel production process and RINs; and
incentive payments from federal and state governments, including the federal biodiesel blenders’ tax credit, which we receive
directly when we sell our biodiesel blended with petroleum diesel, primarily as B99.9, a less than one percent petroleum diesel
mix with biodiesel, rather than in pure form or B100.
We derive revenues in our Services segment from the following sources:
•
•
fees received from operations management services that we provide for biodiesel production facilities, typically based on
production rates and profitability of the managed facility; and
amounts received for services performed by us in our role as general contractor and construction manager for biodiesel
production facilities.
Cost of goods sold for our Biodiesel segment includes:
•
•
•
•
with respect to our wholly-owned production facilities, expenses incurred for feedstocks, catalysts and other chemicals used in
the production process, leases, utilities, depreciation, salaries and other indirect expenses related to the production process, and,
when required by our customers, transportation, storage and insurance;
with respect to biodiesel acquired from third parties produced under toll manufacturing arrangements, expenses incurred for
feedstocks, transportation, catalysts and other chemicals used in the production process and toll processing fees paid to the
facility producing the biodiesel;
changes during the applicable accounting period in the market value of derivative and hedging instruments, such as exchange
traded contracts, related to feedstocks and commodity fuel products; and
the purchase price of finished biodiesel acquired from third parties on the spot market, and related expenses for transportation,
storage, insurance, labor and other indirect expenses.
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Cost of goods sold for our Services segment includes:
•
•
our facility management and operations activities, primarily salary expenses for the services of management employees for each
facility and others who provide procurement, marketing and various administrative functions; and
our construction management services activities, primarily our payments to subcontractors constructing the production facility
and providing the biodiesel processing equipment, and, to a much lesser extent, salaries and related expenses for our employees
involved in the construction process.
Selling, general and administrative expense consists of expenses generally involving corporate overhead functions and operations at
our Ames, Iowa headquarters.
Other income (expense), net is primarily comprised of the changes in fair value of the embedded derivative related to the Series A
Preferred Stock conversion feature, changes in fair value of interest rate swap, interest expense, interest income, the impairment of
investments we made in biodiesel plants owned by third parties and the changes in valuation of the Seneca Holdco liability associated with
the put and call options on the equity interest in Landlord.
Accounting for Investments
We use the equity method of accounting to account for the operating results of entities over which we have significant influence.
Significant influence may be reflected by factors such as our significant operational influence due to our management of biodiesel
operations at a third party owned facility and participation by one of our employees on the facility’s board of directors. We currently
account for our interest in SoyMor Biodiesel, LLC under the equity method and in the past used this method to account for our interests in
other entities where we had a significant management roll under a MOSA and had board participation. Additionally, we use the equity
method of accounting to account for the operating results of 416 S Bell, LLC, which owns our headquarters building. Under the equity
method, we recognize our proportionate share of the net income (loss) of each entity in the line item “Loss from equity method investees.”
We use the cost method of accounting to account for our minority investment in three previously managed plants, East Fork
Biodiesel, LLC, or EFB, Western Iowa Energy, LLC, or WIE, since May, 2010, and Western Dubuque Biodiesel, LLC, or WDB since
August 2010. Because we do not have the ability to influence the operating and financial decisions of EFB, WIE, or WDB, and do not
maintain a position on the board of directors, the investment is accounted for using the cost method. Under the cost method, the initial
investment is recorded at cost and assessed for impairment. There was $0.4 million impairment recorded during 2010, relating to the wind
up and liquidation of EFB, which fully impaired the remaining investment. We have not recorded any impairment of our investments in
WIE or WDB.
In June 2009, the Financial Accounting Standards Board, or “FASB”, amended its guidance on accounting for variable interest
entities, or VIEs. As of January 1, 2010, we evaluated each investment and determined we do not hold a controlling interest in any of our
investments in third party owned plants that would empower us to direct the activities that most significantly impact economic
performance. As a result, we are not the primary beneficiary and do not consolidate these VIE’s. See “Note 7 – Variable Interest Entities”
to our consolidated financial statements for more information.
For additional information with regards to prior accounting treatment for now acquired investments including Blackhawk and CIE,
please see “Note 5 – Blackhawk”, “Note 6 – Acquisitions and Equity Transactions” and “Note 7 – Variable Interest Entities” to our
consolidated financial statements.
On April 8, 2010, we determined that Landlord was a VIE and was consolidated into our financial statements as we are the Primary
Beneficiary, or PB. See “Note 6 – Acquisitions and Equity Transactions” for a description of the transaction. We have a put/call option
with Seneca Holdco to purchase Landlord and currently lease the plant for production of biodiesel, both of which represent a variable
interest in Landlord that are significant to the VIE. Although we do not have an ownership interest in Seneca Holdco, it was determined that
we are the PB due to the related party nature of the entities involved, our ability to direct the activities that most significantly impact
Landlord’s economic performance and the design of Landlord that ultimately gives us the majority of the benefit from the use of Seneca’s
assets.
Risk Management
The profitability of the biodiesel production business largely depends on the spread between prices for feedstocks and for biodiesel
fuel. We actively monitor changes in prices of these commodities and attempt to manage a portion of the risks of these price fluctuations.
However, the extent to which we engage in risk management activities varies substantially from time to time, depending on market
conditions and other factors. Adverse price movements for these commodity products directly affect our operating results. As a result of our
recent acquisitions, our exposure to these risks has increased. In making risk management decisions, we receive input from others with risk
management expertise and utilize research conducted by outside firms to provide additional market information.
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We manage feedstock supply risks related to biodiesel production in a number of ways, including through long-term supply contracts.
For example, most of the feedstock requirements for our Ralston facility are supplied under a three year agreement with West Central
Cooperative, or West Central, that expired on July 8, 2010; although we continue to purchase under, and expect to renegotiate terms similar
to, the expired agreement. The purchase price for soybean oil under this agreement is indexed to prevailing Chicago Board of Trade, or
CBOT, soybean oil market prices with a negotiated market basis. We utilize futures contracts and options to hedge, or lock in, the cost of
portions of our future soybean oil requirements generally for varying periods up to one year.
Animal fat is the primary feedstock that we used to produce biodiesel in 2010. We have increased our use of animal fat as a result of
the tolling arrangements with plants with animal fat processing capabilities and our acquisition of the Danville and Newton facilities. We
utilize several varieties of animal fat, including but not limited to poultry fat, choice white grease, tallow and yellow grease. We manage
animal fat supply risks related to biodiesel production through supply contracts with animal fat suppliers/producers. There is no established
futures market for animal fat. The purchase price for animal fat is generally set on a negotiated flat price basis or spread to a prevailing
market price reported by the USDA price sheet. Our limited efforts to hedge against changing animal fat prices have involved entering into
futures contracts or options on other commodity products, such as soybean oil or heating oil. However, these products do not always
experience the same price movements as animal fats, making risk management for these feedstocks challenging.
Our ability to mitigate our risk of falling biodiesel prices is limited. We have entered into forward contracts to supply biodiesel.
However, pricing under these forward sales contracts generally has been indexed to prevailing market prices, as fixed price contracts for
long periods on acceptable terms have generally not been available. There is no established market for biodiesel futures. Our efforts to
hedge against falling biodiesel prices, which have been relatively limited to date, generally involve entering into futures contracts and
options on other commodity products, such as diesel fuel and heating oil. However, these products do not always experience the same price
movements as biodiesel.
Changes in the value of these futures or options instruments are recognized in current income or loss.
See “Critical Accounting Policies—Derivative Instruments and Hedging Activities”.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have
been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amount of assets, liabilities, equities, revenues and expenses and
related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis. We base our estimates on historical
experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis
for judgments we make about the carrying values of assets and liabilities that are not readily apparent from other sources. Because these
estimates can vary depending on the situation, actual results may differ from the estimates.
We believe the following critical accounting policies affect our more significant judgments used in the preparation of our
consolidated financial statements:
Revenue recognition.
We recognize revenues from the following sources:
•
•
•
•
•
the sale of biodiesel and its co-products including RINs – both purchased and produced by us at owned manufacturing facilities,
and leased manufacturing facilities;
fees received under toll manufacturing agreements with third parties;
fees received from federal and state incentive programs for renewable fuels;
fees from construction and project management; and
fees received for the marketing and sales of biodiesel produced by third parties.
Biodiesel sales revenues are recognized when there is persuasive evidence of an arrangement, delivery has occurred, the price has
been fixed or is determinable, and collectability can be reasonably assured.
Fees received under toll manufacturing agreements with third parties are generally established as an agreed upon amount per gallon of
biodiesel produced. The fees are recognized where there is persuasive evidence of an arrangement, delivery has occurred, the price has
been fixed or is determinable, and collectability can be reasonably assured.
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Revenues associated with the governmental incentive programs are recognized when the amount to be received is determinable,
collectability is reasonably assured and the sale of product giving rise to the incentive has been recognized.
Historically, we have provided consulting and construction services under turnkey contracts. These jobs require design and
engineering effort for a specific customer purchasing a unique facility. We record revenue on these fixed-price contracts on the percentage
of completion basis using the ratio of costs incurred to estimated total costs at completion as the measurement basis for progress toward
completion and revenue recognition. The total contract price includes the original contract plus any executed change orders only when the
amounts have been received or awarded.
Contract cost includes all direct labor and benefits, materials unique to or installed in the project and subcontract costs. Contract
accounting requires significant judgment relative to assessing risks, estimating contract costs and making related assumptions for schedule
and technical issues. We routinely review estimates related to contracts and reflect revisions to profitability in earnings on a current basis. If
a current estimate of total contract cost indicates an ultimate loss on a contract, we would recognize the projected loss in full when it is first
determined. We recognize additional contract revenue related to claims when the claim is probable and legally enforceable.
Changes relating to executed change orders, job performance, construction efficiency, weather conditions, and other factors affecting
estimated profitability may result in revisions to costs and revenues and are recognized in the period in which the revisions are determined.
Billings in excess of costs and estimated earnings on uncompleted contracts represents amounts billed to customers prior to providing
related construction services.
Fees for managing ongoing operations of third party plants, marketing biodiesel produced by third party plants and from other
services are recognized as services are provided. We also have performance-based incentive agreements that are included as management
service revenues. These performance incentives are recognized as revenues when the amount to be received is determinable and
collectability is reasonably assured.
We act as a sales agent for certain third parties and recognize revenues on a net basis in accordance with ASC Topic 605-45,
“Revenue Recognition”.
Impairment of Long-Lived Assets and Certain Identifiable Intangibles. We review long-lived assets, including property, plant and
equipment and definite-lived intangible assets, for impairment in accordance with ASC Topic 360-10, “Property, Plant, and Equipment”.
Asset impairment charges are recorded for long-lived assets and intangible assets subject to amortization when events and circumstances
indicate that such assets may be impaired and the undiscounted net cash flows estimated to be generated by those assets are less than their
carrying amounts. If estimated future undiscounted cash flows are not sufficient to recover the carrying value of the assets, an impairment
charge is recorded for the amount by which the carrying amount of the assets exceeds its fair value. Fair value is determined by
management estimates using discounted cash flow calculations. The estimate of cash flows arising from the future use of the asset that are
used in the impairment analysis requires judgment regarding what we would expect to recover from the future use of the asset. Changes in
judgment that could significantly alter the calculation of the fair value or the recoverable amount of the asset may result from, but are not
limited to, significant changes in the regulatory environment, the business climate, management’s plans, legal factors, commodity prices,
and the use of the asset or the physical condition of the asset. There were $7.5 million and $0.8 million of asset impairments recorded
during 2010 and 2009, respectively.
Goodwill asset valuation. While goodwill is not amortized, it is subject to periodic reviews for impairment. As required by ASC Topic
350, “Intangibles—Goodwill and Other”, we review the carrying value of goodwill for impairment annually on July 31 or when we believe
impairment indicators exist. The analysis is based on a comparison of the carrying value of the reporting unit to its fair value, determined
utilizing a discounted cash flow methodology. Additionally, we review the carrying value of goodwill whenever events or changes in
business circumstances indicate that the carrying value of the assets may not be recoverable. Changes in estimates of future cash flows
caused by items such as unforeseen events or sustained unfavorable changes in market conditions could negatively affect the fair value of
the reporting unit’s goodwill asset and result in an impairment charge. There has been no goodwill impairment recorded in the last three
fiscal years.
Income taxes. We recognize deferred taxes by the asset and liability method. Under this method, deferred income taxes are
recognized for differences between the financial statement and tax bases of assets and liabilities at enacted statutory tax rates in effect for
the years in which differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date. In addition, valuation allowances are established if necessary to reduce deferred tax assets to
amounts expected to be realized.
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On December 31, 2009, we determined that it is unlikely that our deferred tax assets will be fully realized in the future based on
available evidence; therefore, a full valuation allowance was established against the assets. On a quarterly basis, any deferred tax assets are
reviewed to determine the probability of realizing the assets. At December 31, 2010, we had net deferred income tax assets of
approximately $39.2 million with a valuation allowance of $37.7 million, which resulted in a net deferred tax asset of $1.5 million and is
offset by an accrued liability for uncertain tax benefits. We believe there is a reasonable basis in the tax law for all of the positions we take
on the various federal and state tax returns we file. However, in recognition of the fact that various taxing authorities may not agree with
our position on certain issues, we expect to establish and maintain tax reserves. As of December 31, 2010, we had a net deferred tax asset of
$1.5 million relating to uncertain tax benefits.
Prior to the Blackhawk Merger, Blackhawk was treated as a partnership for federal and state income tax purposes and generally did
not incur income taxes. Instead, its earnings and losses were included in the income tax returns of its members. Therefore, no provision or
liability for federal or state income taxes was included in our consolidated financial statements aside from our pro-rata share included on
our Schedule K-1 determined based on our ownership interest for the year ending December 31, 2009 and the period ending February 26,
2010 prior to acquisition.
Consolidations. As of June 30, 2010, we determined the acquisition price of Blackhawk and CIE. For the Blackhawk Merger and CIE
Asset Purchase Agreement, the allocation of the recorded amounts of consideration transferred and the recognized amounts of the assets
acquired and liabilities assumed are based on the final appraisals and evaluation and estimations of fair value as of the acquisition date. We
determined the goodwill recorded was $44.2 million and $24.6 million for REG Danville and REG Newton, respectively.
On April 8, 2010, we determined that Landlord was a Variable Interest Entity, or VIE, and will be consolidated into our financial
statements as we are the primary beneficiary (ASC Topic 810, “Consolidations”). We have a put/call option with Seneca Holdco, LLC, or
Seneca Holdco to purchase Landlord and we currently lease the plant for production of biodiesel, both of which represent a variable interest
in Landlord that are significant to the VIE. Although we do not have an ownership interest in Seneca Holdco, we determined that we are the
primary beneficiary because the equity owners are our stockholders; our ability to direct the activities that most significantly impact
Landlord’s economic performance; and the design of the leasing arrangement that ultimately gives us the majority of the benefit from the
use of Landlord’s assets. We have elected the fair value option available under ASC Topic 825, “Financial Instruments” on the $4.0
million investment made by Seneca Holdco and the associated put and call options. Changes in the fair value after the date of the
transaction are recorded in earnings. Those assets are owned by and those liabilities are obligations of Landlord, which we have
consolidated as the primary beneficiary.
See “Note 6 – Acquisitions and Equity Transactions” to our consolidated financial statements for a description of the acquisitions.
Valuation of Preferred Stock Embedded Derivatives. The terms of our Series A Preferred Stock provide for voluntary and, under
certain circumstances, automatic conversion of the Series A Preferred Stock to Common Stock based on a prescribed formula. In addition,
shares of Series A Preferred Stock are subject to redemption at the election of the holder beginning February 26, 2014. The redemption
price is equal to the greater of (i) an amount equal to $13.75 per share of Series A Preferred Stock plus any and all accrued dividends, not
exceeding $16.50 per share, and (ii) the fair market value of the Series A Preferred Stock. Under ASC Topic 815-40, we are required to
bifurcate and account for as a separate liability certain derivatives embedded in our contractual obligations. An “embedded derivative” is a
provision within a contract, or other instrument, that affects some or all of the cash flows or the value of that contract, similar to a
derivative instrument. Essentially, the embedded terms contain all of the attributes of a free-standing derivative, such as an underlying
market value, a notional amount or payment provision, and can be settled “net,” but the contract, in its entirety, does not meet the ASC 815-
40 definition of a derivative. For a description of the redemption and liquidation rights associated with Series A Preferred Stock, see “Note
4 – Redeemable Preferred Stock” to our consolidated financial statements.
We have determined that the conversion feature of Series A Preferred Stock is an embedded derivative because the redemption
feature allows the holder to redeem Series A Preferred Stock for cash at a price which can vary based on the fair market value of the Series
A Preferred Stock, which effectively provides the holders of the Series A Preferred Stock with a mechanism to “net settle” the conversion
option. Consequently, the embedded conversion option must be bifurcated and accounted for separately because the economic
characteristics of this conversion option are not considered to be clearly and closely related to the economic characteristics of the Series A
Preferred Stock, which is considered more akin to a debt instrument than equity.
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Upon issuance of Series A Preferred Stock, we recorded a liability representing the estimated fair value of the right of preferred
holders to receive the fair market value of the Common Stock issuable upon conversion of the Series A Preferred Stock on the redemption
date. This liability is adjusted each quarter based on changes in the estimated fair value of such right, and a corresponding income or
expense is recorded as Other Income in our statements of operations.
We use the option pricing method to value the embedded derivative. We use the Black-Scholes options pricing model to estimate the
fair value of the conversion option embedded in the Series A Preferred Stock. The Black-Scholes options pricing model requires the
development and use of highly subjective assumptions. These assumptions include the expected volatility of the value of our equity, the
expected conversion date, an appropriate risk-free interest rate, and the estimated fair value of our equity. The expected volatility of our
equity is estimated based on the volatility of the value of the equity of publicly traded companies in a similar industry and general stage of
development as us. The expected term of the conversion option is based on the period remaining until the contractually stipulated
redemption date of February 26, 2014. The risk-free interest rate is based on the yield on U.S. Treasury STRIPs with a remaining term
equal to the expected term of the conversion option. The development of the estimated fair value of our equity is discussed below in the
“Valuation of the Company’s Equity.”
The significant assumptions utilized in our valuation of the embedded derivative are as follows:
Expected volatility
Risk-free rate
December 31,
2010
40.00%
4.10%
February 26,
2010
40.00%
4.40%
December 31,
2009
December 31,
2008
50.00%
4.11%
55.00%
4.39%
June 30,
2008
55.00%
4.58%
The estimated fair values of the conversion feature embedded in the Series A Preferred Stock is recorded as a derivative liability. The
derivative liability is adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in
results of operations as change in fair value of Series A Preferred Stock embedded derivative. The impact of the change in the value of the
embedded derivative is not included in the determination of taxable income.
Valuation of Seneca Holdco Liability. In connection with the agreements under which we lease the Seneca facility (See “Note 6 –
Acquisitions and Equity Transactions” to our consolidated financial statements), we have the option to purchase (Call Option) and Seneca
Holdco has the option to require us to purchase (Put Option) the membership interest of Landlord whose assets consist primarily of a
biodiesel plant located in Seneca, Illinois. Both the Put Option and the Call Option have a term of seven years and are exercisable by either
party at a price based on a pre-defined formula. We have valued the amounts financed by Seneca Holdco, the Put Option, and the Call
Option using an option pricing model. The fair values of the Put Option and the Call Option were estimated using an option pricing model,
and represent the probability weighted present value of the gain that is realized upon exercise of each option. The option pricing model
requires the development and use of highly subjective assumptions. These assumptions include (i) the value of our equity, (ii) expectations
regarding future changes in the value of our equity, (iii) expectations about the probability of either option being exercised, including the
our ability to list our securities on an exchange or complete a public offering, and (iv) an appropriate risk-free rate. We considered current
public equity markets, relevant regulatory issues, biodiesel industry conditions and our position within the industry when estimating the
probability that we will raise additional capital. Differences in the estimated probability and timing of this event may significantly impact
the fair value assigned to the Seneca Holdco liability as we determined it is not likely that the Put Option will become exercisable in the
absence of this event.
The significant assumptions utilized in our valuation of the Seneca Holdco liability are as follows:
Expected volatility
Risk-free rate
Probability of IPO
December 31,
2010
50.00%
4.10%
70.00%
April 9,
2010
50.00%
4.60%
60.00%
Preferred Stock Accretion. Beginning October 1, 2007, the date that we determined that there was a more than remote likelihood that
our then outstanding preferred stock would become redeemable, we commenced accretion of the carrying value of the preferred stock over
the period until the earliest redemption date, which was August 1, 2011, to the preferred stock’s redemption value, plus accrued but unpaid
dividends using the effective interest method. This determination was based upon the current state of the public equity markets which
restricted our ability to execute a qualified public offering, our historical
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operating results, and the volatility in the biodiesel and renewable fuels industries which have resulted in lower projected profitability. Prior
to October 1, 2007, we had determined that it was not probable that the preferred stock would become redeemable; therefore, the carrying
value was not adjusted in accordance with ASC Topic 480-10-S99, “Classification and Measurement of Redeemable Securities”.
On February 26, 2010, after issuance of the Series A Preferred Stock, we determined that there was a more than remote likelihood
that the Series A Preferred Stock would become redeemable, we commenced accretion of the carrying value of the Series A Preferred
Stock over the period until the earliest redemption date (February 26, 2014) to the Series A Preferred Stock’s redemption value, plus
dividends using the effective interest method. This determination was based upon the current state of the public equity markets which has
restricted our ability to execute a qualified public offering, our historical operating results, and the volatility in the biodiesel and renewable
fuels industries.
Accretion of $27.2 million and $44.2 million for 2010 and 2009, respectively, has been recognized as a reduction to income available
to common stockholders in accordance with paragraph 15 of ASC Topic 480-10-S99.
Valuation of the Company’s Equity. We considered three generally accepted valuation approaches to estimate the fair value of our
aggregate equity: the income approach, the market approach, and the cost approach. Ultimately, the estimated fair value of our aggregate
equity is developed using the Income Approach – Discounted Cash Flow, or DCF, method. The value derived using this approach is
supported by a variation of the Market Approach, specifically comparisons of the implied multiples derived using the DCF method to the
multiples of various metrics calculated for guideline public companies.
Material underlying assumptions in the DCF analysis include the gallons produced and managed, gross margin per gallon, expected
long-term growth rates, and an appropriate discount rate. Gallons produced and managed as well as the gross margin per gallon were
determined based on historical and forward-looking market data.
The discount rate used in the DCF analysis is based on macroeconomic, industry, and company-specific factors and reflects the
perceived degree of risk associated with realizing the projected cash flows. The selected discount rate represents the weighted average rate
of return that a market participant investor would require on an investment in our debt and equity. The percent of total capital assumed to be
comprised of debt and equity when developing the weighted average cost of capital was based on a review of the capital structures of our
publicly traded industry peers. The cost of debt was estimated utilizing the adjusted average 20-Year B-rated corporate bond rate during the
previous 12 months representing a reasonable market participant rate based on our publicly traded industry peers. Our cost of equity was
estimated utilizing the capital asset pricing model, which develops an estimated market rate of return based on the appropriate risk-free rate
adjusted for the risk of the industry relative to the market as a whole, an equity risk premium, and a company specific risk premium. The
risk premiums included in the discount rate were based on historical and forward looking market data.
Discount rates utilized in our DCF model are as follows:
Discount rate
December 31,
2010
16.00%
February 26,
2010
15.00%
December 31,
2009
December 31,
2008
13.00%
15.00%
June 30,
2008
13.50%
Valuations derived from this model are subject to ongoing internal and external verification and review. Selection of inputs involves
management’s judgment and may impact net income. This analysis is done on a regular basis and takes into account factors that have
changed from the time of the last Common Stock issuance. Other factors affecting our assessment of price include recent purchases or sales
of Common Stock, if available.
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Results of Operations
Fiscal year ended December 31, 2010 and fiscal year ended December 31, 2009
Set forth below is a summary of certain financial information (in thousands) for the periods indicated:
Revenues
Biodiesel
Biodiesel government incentives
Total Biodiesel
Services
Total
Cost of Goods Sold
Biodiesel
Services
Total
Gross Profit
Selling, general and administrative expenses
Gain on sale of assets – related party
Impairment of assets
Operating Loss
Other income (expense)
Income tax benefit (expense)
Loss from equity investments
Net Loss
Net loss attributable to non-controlling interests
Net Loss Attributable to REG
Effects of recapitalization
Less - accretion of preferred stock to redemption value
Net Loss Attributable to the Company’s Common Shareholders
Twelve Months Ended
December 31,
2010
2009
$207,902
7,240
215,142
1,313
216,455
194,016
807
194,823
21,632
22,187
—
7,494
(8,049)
(16,102)
3,252
(689)
(21,588)
—
(21,588)
8,521
(27,239)
$ (40,306)
$ 109,027
19,465
128,492
3,009
131,501
127,373
1,177
128,550
2,951
25,565
(2,254)
833
(21,193)
(1,364)
(45,212)
(1,089)
(68,858)
7,953
(60,905)
—
(44,181)
$(105,086)
During 2009, Blackhawk was consolidated in our financial results. During first quarter 2010, Blackhawk was excluded from our
financial results until the date of the Blackhawk Merger, February 26, 2010. After February 26, 2010, Blackhawk was included in our
financial results. See “Note 5 – Blackhawk” and “Note 7 – Variable Interest Entities” on the consolidated financial statements for
additional information relating to the Blackhawk consolidation.
Revenues. Our total revenues increased $85.0 million, or 65%, to $216.5 million in 2010, from $131.5 million in 2009. This increase
was due to an increase in biodiesel revenues, offset by a small decrease in services revenues, as follows:
Biodiesel. Biodiesel revenues including government incentives increased $86.6 million, or 67%, to $215.1 million during the year
ended December 31, 2010, from $128.5 million for the year ended December 31, 2009. This increase in biodiesel revenues was due to
an increase in both average selling price and gallons sold. As a result of higher energy prices during 2010, the average sales price per
gallon increased $0.57, or 22%, to $3.16, compared to $2.59 during 2009. Total gallons sold increased 34% to 59.5 million gallons
during 2010 from 44.5 million gallons during 2009. The increase in gallons sold was primarily the result of additional demand. We
produced and sold 54.1 million gallons at our owned or leased facilities during 2010; compared to 41.5 million gallons at our owned or
tolling facilities during 2009, which represents an increase of 12.6 million gallons, or 30.4%. We also purchase third party product of
5.4 million gallons and 3.0 million gallons in 2010 and 2009, respectively. During 2010 under a tolling arrangement, our Houston
facility shipped 8.2 million gallons compared to 14.0 million gallons during 2009. As a result of these shipments, we earned toll fee
revenues $3.8 million during 2010, and $5.6 million during 2009. We had biodiesel government incentives revenue of $3.6 million
during fourth quarter 2010 due to the reenactment of the blenders’ tax credit on December 17, 2010. We expect to continue to increase
production based on anticipated additional demand for our product as a result of the implementation of RFS2.
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Services. Services revenues decreased $1.7 million, or 56%, to $1.3 million for the year ended December 31, 2010, from $3.0
million for the year ended December 31, 2009. Our revenues generated from management services decreased during 2010 due to
decreased production at the third party plants driven by the expiration of the blender’s tax credit and due to the termination of the
MOSA arrangements.
Cost of goods sold. Our cost of goods sold increased $66.2 million, or 51%, to $194.8 million for the year ended December 31, 2010,
from $128.6 million for the year ended December 31, 2009. This increase was primarily due to costs associated with the increase in gallons
sold in the 2010 period as follows:
Biodiesel. Biodiesel cost of goods sold increased $66.6 million, or 52%, to $194.0 million for the year ended December 31, 2010,
compared to $127.4 million for the year ended December 31, 2009. The increase in cost of goods sold is primarily the result of
additional gallons sold in the 2010 period as outlined above and an increase in feedstock prices. Average animal fat costs for 2010 and
2009 were $0.30 and $0.24 per pound, respectively. Average soybean oil costs for 2010 and 2009 were $0.38 and $0.33 per pound,
respectively. We had losses of $1.2 million from hedging activity during 2010, compared to a loss of $1.1 million from hedging
activities in 2009. Hedge gains and losses are generally offset by other corresponding changes in gross margin through changes in
either biodiesel sales price and/or feedstock price.
Services. Cost of services decreased $0.4 million, or 33%, to $0.8 million for the year ended December 31, 2010, from $1.2
million for the year ended December 31, 2009. We had limited construction activity during 2010 and minimal associated costs. Costs
incurred to perform services under the MOSAs decreased due to reduced employee costs stemming from the termination of our MOSAs
during 2010.
Selling, general and administrative expenses. Our selling, general and administrative, or SG&A, expenses were $22.2 million for the
year ended December 31, 2010, compared to $25.6 million for the year ended December 31, 2009. The decrease was primarily due to our
2009 expenses including the consolidation of Blackhawk SG&A expenses, which although still included in expenses during 2010, have
been greatly reduced due to the completion of the Blackhawk Merger and start up of the facility. SG&A was further reduced by other cost
cutting measures undertaken by management during 2010, which reduced wages by $1.4 million and reduced information technology
expenses by $0.6 million during 2010.
Gain on sale of assets – related party. In July 2009, we sold the Stockton, California terminal facility to Westway for $3.0 million in
cash. We recognized a gain on the sale of this asset of $2.3 million. We had no similar sales in 2010.
Impairment of Long Lived and Intangible Assets. During 2010, the raw material supply agreements for the New Orleans and Emporia
facilities were cancelled. The original agreements were recorded as an intangible asset in the amount of $7.0 million. As a result of the
cancellations the full amount was charged off during the three months ended December 31, 2010. We also impaired deferred financing
costs related to the New Orleans project because we determined that it was unlikely that the previously contemplated GoZone bond
financing would be completed prior to the deadline. The amount of the impairment for 2010 was $0.3 million.
Other income (expense), net. Other expense was $16.1 million for the year ended December 31, 2010 and $1.4 million during the
year ended December 31, 2009. Other income and expense is primarily comprised of the changes in fair value of the Series A Preferred
Stock conversion feature embedded derivative, changes in fair value of the Seneca Holdco liability, interest expense, interest income, and
the other non-operating items. The change in fair value of the Series A Preferred Stock conversion feature embedded derivative resulted in
$8.2 million expense for year ended December 31, 2010, compared $2.3 million expense for the year ended December 31, 2009. The
change in the fair value of the Seneca Holdco liability for the year ending December 31, 2010, was an expense of $4.2 million. Interest
expense increased $2.5 million to $4.9 million for the year ended December 31, 2010, from $2.4 million for the year ended December 31,
2009. This increase was primarily attributable to the Seneca Transaction during the second quarter of 2010, the $49.4 million of debt
assumed in connection with the Blackhawk Merger and the CIE Asset Acquisition during the first quarter of 2010. Other income and
expense during 2009 included $1.4 million of miscellaneous income from the release of an escrow related to our Stockton terminal facility
that occurred in the first half of 2009 and grant income of $1.0 million. In addition, during 2010 we fully wrote off our investment in East
Fork Biodiesel, LLC for an additional expense of $0.4 million.
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Income tax benefit (expense). We recorded income tax expense for the year ended December 31, 2009 due to the full valuation
allowance against the income tax expense. Income tax benefit was $3.3 million for the year ending December 31, 2010, compared to
income tax expense of $45.2 million for the year ended December 31, 2009. Deferred tax liabilities were recorded as a result of the
Blackhawk Merger and CIE Asset Purchase. As the deferred tax liabilities were recorded, the resulting decrease in net deferred tax assets
required a lower valuation allowance. The release of the associated valuation allowance resulted in an income tax benefit. The income tax
expense for the year ended December 31, 2009 was the result of our recording a full valuation allowance for our deferred tax assets.
Loss from equity investments. Loss from equity investments was $0.7 million for the year ended December 31, 2010 and $1.1 million
for the year ended December 31, 2009.
Non-controlling interest. Net benefit from the removal of non-controlling interests was $8.0 million for the year ended December 31,
2009, resulting from the consolidation of Blackhawk in 2009. In 2010, there was no income or loss from non-controlling interest due to our
acquisition of Blackhawk.
Effects of Recapitalization. Net effects of recapitalization were $8.5 million for the year ended December 31, 2010. This is a one-time
item due to the Biofuels Merger share issuances.
Preferred stock accretion. Preferred stock accretion was $27.2 million for the year ended December 31, 2010, compared to $44.2
million for the year ended December 31, 2009. The accretion amount increases as the redemption date becomes closer due to the use of the
effective interest rate method. Accretion during 2009 was higher based on the previous redemption date of August 1, 2011. During 2010,
we accreted two months of the previously issued REG Biofuels, Inc. preferred stock (redemption date of August 1, 2011) and ten months of
newly issued Series A Preferred Stock (redemption date February 26, 2014). Monthly accretion expense decreased after issuance of our
new Series A Preferred Stock as a result of the new redemption amount and redemption date.
Fiscal year ended December 31, 2009 and fiscal year ended December 31, 2008
Set forth below is a summary of certain financial information (in thousands) for the periods indicated:
Revenues
Biodiesel
Biodiesel government incentives
Total Biodiesel
Services
Total
Cost of Goods Sold
Biodiesel
Services
Total
Gross Profit
Selling, general and administrative expenses
Gain on sale of assets – related party
Impairment of assets
Operating Loss
Other income (expense)
Income tax benefit (expense)
Loss from equity investments
Net Loss
Net loss attributable to non-controlling interests
Net Loss Attributable to REG
Less - accretion of preferred stock to redemption value
Net Loss Attributable to the Company’s Common Shareholders
34
Twelve Months Ended
December 31,
2009
2008
$
109,027
19,465
128,492
3,009
131,501
127,373
1,177
128,550
2,951
25,565
(2,254)
833
(21,193)
(1,364)
(45,212)
(1,089)
(68,858)
7,953
(60,905)
(44,181)
$ (105,086)
$
69,509
6,564
76,073
9,379
85,452
78,736
4,470
83,206
2,246
24,048
—
160
(21,962)
(2,318)
9,414
(1,013)
(15,879)
2,788
(13,091)
(26,692)
$ (39,783)
Table of Contents
During 2008 and 2009, Blackhawk was consolidated in our financial results.
Revenues. Our total revenues increased $46.0 million, or 54%, to $131.5 million for the year ended December 31, 2009 from $85.5
million for the year ended December 31, 2008. This increase was due to an increase in revenues from the Biodiesel segment and a decrease
in revenues from the Services segment, as follows:
Biodiesel. Biodiesel revenues including government incentives increased $52.4 million, or 69%, to $128.5 million for the year ended
December 31, 2009 from $76.1 million for the year ended December 31, 2008. This increase in biodiesel revenue was primarily due to
an increase in gallons sold. Gallons sold increased 220% from 13.9 million gallons during 2008 to 44.5 million gallons during 2009,
excluding gallons tolled at our Houston facility. The increase in gallons sold is primarily the result of finished biodiesel produced by
CIE and Blackhawk for us under tolling arrangements of 23.7 million gallons during 2009. Our acquisition of the Houston facility in
June 2008 resulted in 6.0 million gallons of production for our account during 2009, compared to 8.8 million gallons during 2008.
These increases in gallons sold were partially offset by a reduction in our average B100 sales price from $4.07 in 2008 to $2.59 in 2009,
reflecting lower market pricing. Under the Houston facility’s tolling arrangement we produced 14.0 million gallons, during 2009, at
our Houston facility compared to 1.4 million gallons during the same period of 2008. As a result of this production, revenues include
an average toll fee of $0.40 per gallon.
Services. Services revenues decreased $6.4 million, or 68%, to $3.0 million for the year ended December 31, 2009 from $9.4 million
for the year ended December 31, 2008 almost entirely as a result of lower construction management services revenues due to decreased
construction activity. The consolidation of Blackhawk as of May 9, 2008 resulted in the elimination for financial reporting purposes of
all construction revenue related to the Blackhawk construction project, which, prior to the elimination represented substantially all of
our construction revenues in 2009. In first nine months of 2008, REG recognized $2.5 million of revenue from construction services
including completion activities related to one other facility. Revenues generated from management services we provided to third party
owned facilities were $1.6 million for the year ended December 31, 2009, compared to $3.7 million for the year ended December 31,
2008. This decrease was due to decreased production at the third party plants driven by the narrowing of the spread between feedstock
and biodiesel prices.
Cost of goods sold. Our cost of goods sold increased $45.4 million, or 55%, to $128.6 million for the year ended December 31, 2009
from $83.2 million for the year ended December 31, 2008. This increase is due to an increase in cost of goods sold in the Biodiesel
segment, partially offset by lower cost of services, as follows:
Biodiesel. Biodiesel costs of goods sold increased $48.7 million, or 62%, to $127.4 million for the year ended December 31, 2009 from
$78.7 million for the year ended December 31, 2008. The increase in cost of goods sold is primarily the result of additional gallons
sold in the 2009 periods as outlined above. Cost of goods during 2009 includes $59.4 million of cost of goods for 23.7 million gallons
produced through tolling arrangements with others. Increases in gallons were offset mostly by average feedstock price reductions.
Average feedstock cost for the year ended December 31, 2008 was $0.50 per pound, reflecting high soybean oil prices as we did not
process a significant amount of animal fat in 2008. Average feedstock cost for the year ended December 31, 2009 was $0.33 per pound
for soybean oil, which represents an approximate 34% cost reduction for soybean oil compared to 2008. Average animal fat cost during
2009 was $0.24 per pound. The remaining feedstock cost reduction was due to use of animal fat under the tolling arrangements during
2009, which is generally a lower cost feedstock. Risk management gains, which offset costs of goods sold, were approximately $1.1
million for 2009, compared to $0.4 million for 2008. Hedge gains and losses are generally offset by other corresponding changes in
gross margin through changes in either biodiesel sales price and/or feedstock price.
Services. Cost of services decreased $3.3 million, or 73%, to $1.2 million for the year ended December 31, 2009 from $4.5 million for
the year ended December 31, 2008. The decrease in cost of services revenue was attributable to decreased construction activity in 2009.
Costs incurred to perform services under the MOSAs were consistent for both periods as we provided services to the same number of
third party facilities in each period.
Selling, general and administrative expenses. Our general and administrative expense increased $1.6 million, or 7%, to $25.6 million
for the year ended December 31, 2009 from $24.0 million for the year ended December 31, 2008. The increase was attributable to a $4.3
million increase in professional expenses for the year ending December 31, 2009 compared to year ending December 31, 2008. This
increase is almost entirely related to the consolidation transactions during 2009. Costs also increased due to the inclusion of $2.8 million in
expenses relating to Blackhawk in 2009 compared to $1.3 million during 2008. Also, during the first quarter of 2009, we collected a
doubtful receivable account which was accounted for as a $1.5 million decrease to selling, general and administrative expenses.
Gain on sale of assets – related party. In July 2009, we sold the Stockton terminal facility to Westway for $3.0 million in cash. We
recognized a gain on the sale of this asset of $2.3 million. We had no similar sale in 2008.
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Impairment of Long Lived and Intangible Assets. Impairment of long lived assets increased $0.6 million, to $0.8 million for the year
ended December 31, 2009 from $0.2 million for the year ended December 31, 2008. The $0.8 million impairment in 2009 related to a write
off of construction inventory. The $0.2 million impairment in 2008 related to a partial write off of abandoned capital assets.
Other income (expense), net. Other income and expense was $1.4 million of expense for the year ended December 31, 2009 and $2.3
million of expense for the year ended December 31, 2008. Other expense is primarily comprised of the changes in fair value of the
preferred stock conversion feature embedded derivative, interest expense, interest income, and the other non-operating items. The change in
fair value of the preferred stock conversion feature embedded derivative resulted in expense of $2.3 million for the year ending
December 31, 2009, compared to income of $2.1 million for the year ending December 31, 2008. The expense was recorded as a result of a
net increase in the fair market value of our Common Stock. The change in fair value of interest rate swap recognized a gain of $0.4 million
for the year ended December 31, 2009 and a loss of $1.4 million for the year ended December 31, 2008 as a result of the consolidation of
Blackhawk into our financial statements. Interest expense increased $0.5 million, to $2.4 million for the year ended December 31, 2009
from $1.9 million for the year ended December 31, 2008. This increase was primarily attributable to new debt of $1.8 million for 2009 and
interest paid to TSW during 2009 and the consolidation of Blackhawk into our financial statements, which accounted for $0.2 million in
interest expense for 2008. We incurred impairment of investments of $0.2 million for the year ended December 31, 2009 versus $1.4
million for the year ended December 31, 2008 related to a write down of our investment in East Fork Biodiesel, LLC. Other income during
2009 included $1.4 million of miscellaneous income relating to release of an escrow related to REG’s Stockton terminal facility that
occurred in the first quarter and $1.0 million of grant income.
Income tax (expense) benefit. Income tax expense was $45.2 million for the year ended December 31, 2009 compared to an income
tax benefit of $9.4 million for the year ended December 31, 2008. The expense was a result of our conclusion as of December 31, 2009 that
we were required to establish a valuation allowance for the entire amount of the net deferred tax assets since evidence was not available to
prove that it was more likely than not that we would be able to realize these assets.
Loss from equity investments. Loss from equity investments was $1.1 million for the year ended December 31, 2009 compared to a
loss of $1.0 million for the year ended December 31, 2008. The loss from equity investments was primarily attributable to losses sustained
by partially owned facilities.
Non-controlling interest. Non-controlling interest was $8.0 million for the year ended December 31, 2009 compared to a loss of $2.8
million for the year ended December 31, 2008. The increase in non-controlling interest was primarily attributable to the losses sustained by
Blackhawk which were consolidated.
Preferred stock accretion. Preferred stock accretion was $44.2 million for the year ended December 31, 2009, compared to $26.7
million for the year ended December 31, 2008. Accretion of preferred stock to redemption value increased during 2009 due to the full year
impact of issuances of preferred stock during 2008, as well as the impact of using the effective interest rate method. As the redemption date
becomes closer, the accretion amount increases.
Liquidity and Capital Resources
Sources of liquidity. Since inception, a significant portion of our operations have been financed through the sale of our capital stock.
From 2006 through December 31, 2010, we received cash proceeds of $136.8 million from private sales of preferred stock and Common
Stock. At December 31, 2010, we had cash and cash equivalents of $4.3 million, total assets of $369.6 million, and debt of $96.1 million.
Our borrowings (in millions) are as follows:
Revolving Lines of Credit
REG Danville term loan
REG Newton term loan
Revenue bond
Other
Total Notes Payable
Seneca Landlord term loan
$
2010
9.5
23.6
23.6
2.0
1.1
2009
$ —
24.4
—
2.4
1.7
$
59.8
$ 28.5
$ 36.3
$ —
On February 26, 2010, in connection with the Blackhawk Merger, one of our subsidiaries, REG Danville, assumed a $24.6 million
term loan and a $5.0 million revolving credit line with Fifth Third Bank. As of December 31, 2010, there was $23.6 million of principal
outstanding under the term loan and none outstanding under the revolving credit line. The Illinois Finance Authority guarantees 61% of the
term loan and the loan is secured by our Danville facility. The term loan bears interest at a fluctuating rate per annum equal to LIBOR plus
the applicable margin of 4%. Until June 30, 2010, REG Danville was required to make only monthly payments of accrued interest.
Beginning on July 1, 2010, REG Danville was required to make monthly principal payments equal to $135,083 plus accrued interest. In
addition to these monthly payments, as a result of the amendment to the loan agreement, REG Danville is required to make annual principal
payments equal to 50% of REG Danville’s Excess Cash Flow, or the 50% Excess Payment, with respect to each fiscal year until $2.5
million has been paid from the Excess Cash Flow. Thereafter, REG Danville is required to make annual payments equal to 25% of its
Excess Cash Flow. Excess Cash Flow is equal to EBITDA less certain cash payments made during the period including principal payments,
lease payments, interest payments, tax payments, approved distributions and capital expenditures. REG Danville did not have excess Cash
Flow during 2010; therefore, no amounts have been accrued or paid. REG Danville is subject to various loan covenants that restrict its
ability to take certain actions, including prohibiting it from paying any dividend to us until the 50% Excess Payment is made and certain
financial ratios are met. On November 30, 2010, the revolving credit line expired. As of December 31, 2010, REG Danville was not in
compliance with certain term loan covenants. On March 30, 2011, REG Danville received a waiver from Fifth Third relating to these loan
covenants and REG Danville’s Excess Cash Flow requirements. The term loan matures on November 3, 2011.
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On March 8, 2010, in connection with the CIE acquisition, one of our subsidiaries, REG Newton, refinanced a $23.6 million term
loan, or the AgStar Loan, and obtained a $2.4 million line of credit, or the AgStar Line, with AgStar Financial Service, PCA, or AgStar. As
of December 31, 2010, there was $23.6 million of principal outstanding under the AgStar Loan and $0.6 million of principal outstanding
under the AgStar Line. These amounts are secured by our Newton facility. We have guaranteed the obligations under the AgStar Line and
have a limited guarantee related to the obligations under the AgStar Loan; which provides that we will not be liable for more than the
unpaid interest, if any, on the AgStar Loan that has accrued during an 18-month period beginning on March 8, 2010. The AgStar Loan
bears interest at 3% plus the greater of (i) LIBOR or (ii) two percent. Beginning on October 1, 2011, month principal payments of
approximately $120,000 and accrued interest are due based on a 12-year amortization period. Under the AgStar Loan, REG Newton is
required to maintain a debt service reserve account, or the Debt Reserve, equal to 12-monthly payments of principal and interest on the
AgStar Loan. Beginning on January 1, 2011 and at each fiscal year end thereafter until such time as the balance in the Debt Reserve
contains the required 12-months of payments, REG Newton must deposit an amount equal to REG Newton’s Excess Cash Flow, which is
defined in the AgStar Loan agreement as EBITDA, less the sum of required debt payments, interest expense, any increase in working
capital from the prior year until working capital exceeds $6.0 million, up to $0.5 million in maintenance capital expenditure, allowed
distributions and payments to fund the Debt Reserve. REG Newton does not require a Debt Reserve deposit for 2010. In the event any
amounts are past due, AgStar may withdraw such amounts from the Debt Reserve. Also beginning on January 1, 2011, provided that REG
Newton is in compliance with the working capital ratios and the Debt Reserve is funded, REG Newton must make an annual payment equal
to 50% of its Excess Cash Flow calculated based upon the prior year’s audited financial statements within 120 days of the fiscal year end
and each fiscal year end thereafter until such time as the balance in the Debt Reserve contains the required 12-months of payments. REG
Newton is subject to various standard loan covenants that restrict its ability to take certain actions, including prohibiting REG Newton from
making any cash distributions to us in excess of 35% of REG Newton’s net income for the prior year. On November 15, 2010, REG
Newton amended the loan agreement to revise certain financial covenants. In exchange for these revisions, REG Newton agreed to begin
reduced principal payments of approximately $60,000 per month within two months after the enactment of the reinstated tax credit, which
is March 1, 2011. The AgStar Loan matures on March 8, 2013 and the AgStar Line expires on March 5, 2012, which was extended for one
year on March 7, 2011. The AgStar Line is secured by REG Newton’s account receivable and inventory.
During July 2009, we and certain subsidiaries entered into an agreement with Bunge for Bunge to provide services related to the
procurement of raw materials and the purchase and resale of biodiesel produced. The agreement provides for Bunge to purchase up to $10.0
million in feedstock for, and biodiesel from, us. In September 2009, we entered into an extended payment terms agreement with West
Central to provide up to $3.0 million in outstanding payables for up to 45 days. Both of these agreements provided additional working
capital resources to us. As of December 31, 2010 we had $3.4 million outstanding under these agreements.
We and certain of our subsidiaries entered into a Revolving Credit Agreement, or the WestLB Revolver, dated as of April 8, 2010,
with WestLB, AG. We guarantee the WestLB Revolver. The initial available credit amount under the WestLB Revolver is $10 million with
additional lender increases up to a maximum commitment of $18 million. Advances under the WestLB Revolver are limited to the amount
of certain of our qualifying assets that secure amounts borrowed. The WestLB Revolver requires that we maintain compliance with certain
financial covenants. The term of the WestLB Revolver is two years. The interest rate varies depending on the loan type designation and is
either 2.0% over the higher of 50 basis points above the Federal Funds Effective Rate or the WestLB prime rate for Base Rate loans or
3.0% over adjusted LIBOR for Eurodollar loans. The WestLB Revolver is secured by assets and ownership interests of our subsidiaries.
See “Note 14 - Borrowings” to our consolidated financial statements for additional information. As of December 31, 2010, we had
approximately $9.0 million outstanding under the WestLB Revolver.
In connection with our agreement to lease the Seneca facility, we received from Seneca Holdco, which is owned by three of our
investors, an investment of $4.0 million in Landlord, the company that owns the Seneca biodiesel production facility, the Seneca Facility,
at closing to pay for repairs to the Seneca facility. Landlord leases the Seneca Facility to REG Seneca, LLC, on a triple net basis with rent
being set at an amount to cover debt service and other expenses. REG Seneca, LLC will pay Seneca Landlord a $600,000 per year fee,
payable quarterly, which is guaranteed by us. See “Note 7 – Variable Interest Entities” to our consolidated financial statements for
additional information.
On April 8, 2010, Landlord entered into a note payable agreement with West LB. The note requires that interest be accrued at
different rates based on whether it is a Base Rate Loan or Eurodollar loan. Interest is at either 2.0% over the higher of 50 basis points above
the Federal Funds Effective Rate or the WestLB prime rate for Base Rate loans or 3.0% over adjusted LIBOR for Eurodollar loans. The
loan was a Eurodollar loan as of December 31, 2010. The effective rate at December 31, 2010 was 3.26%. Interest is paid monthly.
Principal payments have been deferred until February 2012. At that time, Landlord will be
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required to make monthly principal payments of $201,389 with remaining unpaid principal due at maturity on April 8, 2017. The note
payable is secured by the property located at the Seneca, Illinois location. The balance of the note as of December 31, 2010 is $36.3
million.
The credit agreements of our subsidiaries contain various customary affirmative and negative covenants. Many of the agreements, but
not all, also contain certain financial covenants, including a current ratio, net worth ratio, fixed charge coverage ratio, maximum funded
debt to earnings before interest depreciation and amortization ratio and a maximum capital expenditure limitation. Negative covenants
include restrictions on incurring certain liens; making certain payments, such as distributions and dividend payments; making certain
investments; transferring or selling assets; making certain acquisitions; and incurring additional indebtedness. The agreements generally
provide that the payment of obligations may be accelerated upon the occurrence of customary events of default, including, but not limited
to, non-payment, change of control, or insolvency.
REG Danville was not in compliance with certain of its financial covenants as of December 31, 2010 on the Fifth Third term loan.
Subsequently, Fifth Third agreed to a waiver of the financial covenants that were not in compliance as of December 31, 2010. We expect
that REG Danville will not be in compliance as of March 31, 2011, which will require us to obtain another waiver. With that exception, we
and our subsidiaries were in compliance with all covenants associated with the borrowings as of December 31, 2010.
Cash flow. The following table presents information regarding our cash flows and cash and cash equivalents for the years ended
December 31, 2010, 2009 and 2008:
Net cash flows from operating activities
Net cash flows from investing activities
Net cash flows from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents, end of period
Year Ended
December 31,
2009
(in thousands)
$(8,209)
371
(1,618)
(9,456)
$ 5,855
2010
$(14,593)
(4,562)
17,559
(1,596)
$ 4,259
2008
$ (3,636)
(26,173)
26,155
(3,654)
$ 15,311
Operating activities. Net cash used in operating activities was $14.6 million and $8.2 million for the year ended December 31, 2010
and 2009, respectively. For 2010, net loss was $21.6 million which includes non-cash charges for impairment of intangible assets of $7.3
million, depreciation and amortization expense of $5.9 million, non-cash change in the preferred stock embedded derivative liability of $8.2
million and non-cash change in the Seneca Holdco liability of $3.7 million. These charges were offset by non-cash benefits including a $3.3
million increase for changes in the deferred tax benefit. We also used $17.8 million to fund net working capital requirements, which
resulted in a net cash use from operations of $14.6 million. The net use of cash from operating activities during 2009, of $8.2 million
resulted primarily from a $68.9 million net loss from operations, a $2.3 million gain on the sale of property, and changes in allowance for
doubtful accounts of $1.4 million. Those were primarily offset by a charge to deferred taxes of $45.2 million. In addition, they were
partially offset by net working capital decrease of $5.9 million, non-cash depreciation and amortization of $5.8 million and stock-based
compensation expenses totaling $2.5 million. Cash used in operating activities in 2008 was $3.6 million, as a net loss of $15.9 million and
$8.3 million in non-cash deferred tax benefits were partially offset by positive working capital changes of $13.6 million.
Investing activities. Net cash used for investing activities for the year ended December 31, 2010 was $4.6 million, consisting mostly
of cash used to pay for Seneca construction of $4.0 million. Net cash provided from investing activities for the year ended December 31,
2009 was $0.4 million, as $7.4 million in facility construction costs for Danville were partially offset by receipt of $4.7 million from a
construction escrow fund related to construction of the Danville facility. We also received $3.0 million for the sale of our Stockton terminal
facility to Westway. Net cash used in investing activities for the year ended December 31, 2008 was $26.2 million. In 2008, we invested
$67.2 million in construction of facilities, which includes $15.9 million from a construction escrow fund related to the Danville facility and
$16.9 million related to the acquisition of USBG.
Financing activities. Net cash provided from financing activities for the year ended December 31, 2010 was $17.6 million, which
represents $8.0 million cash investment from ARES Corporation, $4.0 million cash proceeds received from the Seneca investors and $9.4
million in borrowings on our line of credit. This was partially offset by principal payments in connection with the note payable and cash
paid for debt issuance. Net cash used in financing activities for the year ended December 31, 2009 was $1.6 million, which consisted of the
payoff of the WestLB borrowings of $1.8 million, pay down of notes payable of $0.8 million and changes in the balance of the REG
Danville line of credit for a net result of $0.9 million. Net cash provided by financing activities was $26.2 million in 2008. In 2008, cash
provided by financing activities related primarily to the issuance of the Blackhawk notes payable. In February 2008, we through two of our
subsidiaries obtained the first line of credit from WestLB. Borrowings ranged from $1.3 million to $4.2 million during the one year loan
period.
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Table of Contents
Capital expenditures. We plan to make significant capital expenditures when debt or equity financing becomes available to complete
construction of three facilities, one in New Orleans, Louisiana, one in Emporia, Kansas and one in Clovis, New Mexico, with aggregate
production capacity of 135 mmgy. We estimate completion of the New Orleans facility will require approximately $60 million in
additional capital. Completion of the Emporia facility will require an additional $54 million and completion of the Clovis Facility will
require an estimated $15 million. Additional construction expenditures will be required for the Seneca facility, most of which have been
funded through the cash provided by the Seneca investors, but some will be funded through the operation of the facility. We also plan to
undertake various facility upgrades when funding becomes available to further expand processing capabilities at our existing facilities, most
significantly the Houston Facility.
We continue to be in discussions with lenders in an effort to obtain financing for facilities under construction and capital improvement
projects for our operating facilities. Since these discussions are ongoing, we are uncertain when or if financing will be available. We are
seeking to enter into equity and debt financing arrangements to meet our projected financial needs for operations, upgrades to existing
plants and for completion of the New Orleans, Louisiana facility, the Emporia, Kansas facility and the Clovis, New Mexico facility. The
financing may consist of common or preferred stock, debt, project financing or a combination of these financing techniques. Additional
debt would likely increase our leverage and interest costs and would likely be secured by certain of our assets. Additional equity or equity-
linked financings would likely have a dilutive effect on our existing shareholders. It is likely that the terms of any project financing would
include customary financial and other covenants on our project subsidiaries, including restrictions on the ability to make distributions, to
guarantee indebtedness, and to incur liens on the plants of such subsidiaries.
Contractual Obligations
The following table describes our commitments to settle contractual obligations in cash as of December 31, 2010:
Payments Due by Period
Total
Less Than 1
Year
Years 1-3 Years 4-5
More Than 5
Years
(in thousands)
Long Term Debt (1)
Operating Lease Obligation (2)
Purchase Obligation (3)
Other Long-Term Liabilities (4)
$
99,774 $ 30,097 $ 36,660 $
7,268
89,214
10,039
18,087
160
2,201
7,974 $ 25,043
43,142
—
160
$ 209,276 $ 47,564 $ 68,808 $ 23,059 $ 68,345
23,799
8,048
301
15,005
—
80
(1) See footnotes to the financial statements for additional detail. Includes fixed interest associated with these obligations.
(2) Operating lease obligations consist of terminals, rail cars, vehicles, ground leases and the Ames office lease.
(3) Purchase obligations for our production facilities and partially completed facilities.
(4)
Includes incentive compliance and other facility obligations. Also, represents $1,500 of liability for unrecognized tax benefits as the
timing and amounts of cash payments are uncertain the amounts have not been classified by period.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Recent Accounting Pronouncements
In June 2009, the FASB issued ASU No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable
Interest Entities, which amends ASC Topic 810, “Consolidations”. This Statement requires a qualitative analysis to determine the primary
beneficiary of a VIE. The analysis identifies the primary beneficiary as the enterprise that has both the power to direct the activities of a
VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits that
could be significant to the VIE. The Statement also requires additional disclosures about an enterprise’s involvement in a VIE. The
effective date is the beginning of fiscal year 2010. We adopted this statement effective January 1, 2010, which resulted in the
deconsolidation of Blackhawk and additional disclosure requirements. See “Note 7 – Variable Interest Entities” to our consolidated
financial statements for additional information.
In January 2010, the FASB issued Accounting Standards Update, or ASU, No. 2010-06, “Fair Value Measurements and
Disclosures”, ASU 2010-06, which amends ASC Topic 820, adding new requirements for disclosures for Levels 1 and 2, separate
disclosures of purchases, sales issuances, and settlements related to Level 3 measurements and clarification of existing fair value
disclosures. ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the requirement to
provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning
after December 15, 2010. The adoption of this guidance did not have a material effect on our financial statements and we do not anticipate
the remaining disclosures will have a material effect on the our financial statements.
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The primary objectives of our investment activity are to preserve principal, provide liquidity and maximize income without
significantly increasing risk. Some of the securities we invest in are subject to market risk. This means that a change in prevailing interest
rates may cause the principal amount of the investment to fluctuate. To minimize this risk, we maintain a portfolio of cash equivalents in
short-term investments in money market funds.
Over the period from January 2007 through December 2010, average diesel prices based on Platts reported pricing for Group 3
(Midwest) have ranged from approximately $3.81 per gallon reported in June 2008 to approximately $1.22 per gallon in February 2009,
with prices averaging $2.26 per gallon during this period. Over the period from January 2005 through December 2010, soybean oil prices
(based on closing sales prices on the CBOT nearby futures, for crude soybean oil) have ranged from $0.6395 per pound in June 2008 to
$0.1972 per pound in January 2005, with closing sales prices averaging $0.3545 per pound during this period. Over the period from January
2005 through December 2010, animal fat prices (based on prices from The Jacobsen Missouri River, for choice white grease) have ranged
from $0.4892 per pound in July 2008 to $0.1226 per pound in May 2006, with sales prices averaging $0.2333 per pound during this period.
Higher feedstock prices or lower biodiesel prices result in lower profit margins and, therefore, represent unfavorable market
conditions. Traditionally, we have not been able to pass along increased feedstock prices to our biodiesel customers. The availability and
price of feedstocks are subject to wide fluctuations due to unpredictable factors such as weather conditions during the growing season, kill
ratios, carry-over from the previous crop year and current crop year yield, governmental policies with respect to agriculture, and supply and
demand.
We have prepared a sensitivity analysis to estimate our exposure to market risk with respect to our soybean oil requirements, animal
fat requirements and sales contracts and the related exchange-traded contracts for 2010. Market risk is estimated as the potential loss in fair
value, resulting from a hypothetical 10.0% adverse change in the fair value of our soybean oil and animal fat requirements and biodiesel
sales. The results of this analysis, which may differ from actual results, are as follows:
Biodiesel
Animal Fats
Soybean Oil
Interest Rate Risk
2010
Volume
(in
millions)
67.9
398.3
40.5
Units
gallons
pounds
pounds
Hypothetical
Adverse
Change in
Price
10.0%
10.0%
10.0%
Change in
Annual
Gross Profit
(in millions)
19.2
$
11.8
$
1.6
$
Percentage
Change in
Gross Profit
87.2%
53.5%
7.1%
We are subject to interest rate risk in connection with our $2.0 million loan from the proceeds of Variable Rate Demand Industrial
Development Revenue Bonds, or the IFA Bonds, issued by the Iowa Finance Authority to finance our Ralston facility. The IFA Bonds bear
interest at a variable rate determined by the remarketing agent from time to time as the rate necessary to produce a bid for the purchase of
all of the Bonds at a price equal to the principal amount thereof plus any accrued interest at the time of determination, but not in excess of
10% per annum. The interest rate on the bonds was 0.54% for the last week of December 2010. A hypothetical increase in interest rate of
10% would not have a material effect on our annual interest expense.
We are subject to interest rate risk relating to REG Danville’s $24.6 million term debt financing with Fifth Third Bank. The term loan
bears interest at a fluctuating rate based on a range of rates above 30-day LIBOR and will mature on November 3, 2011. Interest will accrue
on the outstanding balance of the term loan at the 30 day LIBOR plus 400. Interest accrued on the outstanding balance of the loan at
December 31, 2010 at 4.26 %.
Blackhawk entered into an interest rate swap agreement in connection with the aforementioned term loan in May 2008. The
agreement was assumed by REG Danville. The swap agreement effectively fixes the interest rate at 3.67% on a notional amount of
approximately $20.7 million of REG Danville’s term loan through November 2011. The fair value of the interest rate swap agreement was
$0.6 million and $1.0 million at December 31, 2010 and 2009, respectively, and is recorded in the other noncurrent liabilities. The interest
rate swap agreement is not designated as a cash flow or fair value hedge. Gains and losses based on the fair value change in the interest rate
swap agreement are recognized in the statement of operations as a change in the fair value of interest rate swap agreement. A hypothetical
increase in interest rate of 10% would not have a material effect on our annual interest expense.
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REG Newton is subject to interest rate risk relating to its $23.6 million term debt financing and its $2.4 million revolving line of credit
both from AgStar. Interest will accrue on the outstanding balance of the term loan at 30 day LIBOR or 2.00%, whichever is higher, plus
300 basis points (effective rate at December 31, 2010 of 5.00%). The revolving line of credit accrues interest at 30 day LIBOR or 2.00%,
whichever is higher, plus 300 basis points (effective rate at December 31, 2010 of 5.00%). A hypothetical increase in interest rate of 10%
would not have a material effect on our annual interest expense.
REG Seneca, LLC is subject to interest rate risk relating to its lease payments for the facility. The lease provides that REG Seneca,
LLC will pay rent in the amount of the interest payments due to WestLB from Seneca Landlord, LLC. The note requires that interest be
accrued at different rates based on whether it is a Base Rate Loan or Eurodollar loan. Each Base Rate Loan shall accrue interest at a rate per
annum equal to 2% plus the higher of (i) the Federal Funds Effective Rate plus 0.5% and (ii) the rate of interest in effect for such day as
publicly announced from time to time by WestLB as its “prime rate”. Each Eurodollar Loan shall accrue interest at a rate per annum equal
to 3.0% plus the greater of (a) one and one half percent (1.5%) per annum, and (b) the rate per annum obtained by dividing (x) LIBOR for
such Interest Period and Eurodollar Loan, by (y) a percentage equal to (i) 100% minus (ii) the Eurodollar Reserve Percentage for such
Interest Period. The loan is a Eurodollar Loan through December 31, 2010 (effective rate at December 31, 2010 of 3.26%). Interest is paid
monthly. A hypothetical increase in interest rate of 10% would not have a material effect on our annual interest expense.
REG Marketing and Logistics Group, LLC and REG Services Group, LLC, together the WestLB Loan Parties, are subject to interest
rate risk relating to their $10.0 million revolving line of credit from WestLB. The note requires that interest be accrued at different rates
based on whether it is a Base Rate Loan or Eurodollar loan. Each Base Rate Loan shall accrue interest at a rate per annum equal to 2% plus
the higher of (i) the Federal Funds Effective Rate plus 0.5% and (ii) the rate of interest in effect for such day as publicly announced from
time to time by WestLB as its “prime rate”. Each Eurodollar Loan shall accrue interest at a rate per annum equal to 3.0% plus the greater of
(a) one and one half percent (1.5%) per annum, and (b) the rate per annum obtained by dividing (x) LIBOR for such Interest Period and
Eurodollar Loan, by (y) a percentage equal to (i) 100% minus (ii) the Eurodollar Reserve Percentage for such Interest Period. The loan is a
Eurodollar Loan through December 31, 2010 (effective rate at December 31, 2010 of 3.26%). Interest is paid monthly. A hypothetical
increase in interest rate of 10% would not have a material effect on our annual interest expense.
Inflation
To date, inflation has not significantly affected our operating results, though costs for construction, labor, taxes, repairs, maintenance
and insurance are all subject to inflationary pressures. Inflationary pressure in the future could affect our ability to maintain our production
facilities adequately, build new biodiesel production facilities and expand our existing facilities as well as the demand for our facility
construction management and operations management services.
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Table of Contents
Item 8.
Financial Statements and Supplementary Data
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Renewable Energy Group, Inc.
Ames, Iowa
We have audited the accompanying consolidated balance sheets of Renewable Energy Group, Inc. and subsidiaries (the “Company”)
as of December 31, 2010 and 2009, and the related consolidated statements of operations, redeemable preferred stock and equity (deficit),
and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule
listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s
management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free
of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal
control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Renewable
Energy Group, Inc. and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
Des Moines, Iowa
March 31, 2011
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Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2010 AND 2009
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Restricted cash
Accounts receivable, net (includes amounts owed by related parties of $1,146 and $2,328 as of
December 31, 2010 and 2009, respectively)
Inventories
Prepaid expenses and other assets (includes amounts paid to related parties of $269 as of
December 31, 2009)
Total current assets
Property, plant and equipment, net
Property, plant and equipment, net - Seneca Landlord, LLC
Goodwill
Intangible assets, net
Deferred income taxes
Investments
Other assets
Restricted cash
TOTAL ASSETS
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Revolving line of credit
Current maturities of notes payable
Accounts payable (includes amounts owed to related parties of $3,827 and $5,415 as of
December 31, 2010 and 2009, respectively)
Accrued expenses and other liabilities
Deferred revenue
Total current liabilities
Unfavorable lease obligation
Preferred stock embedded conversion feature derivatives
Seneca Holdco liability, at fair value
Notes payable
Notes payable - Seneca Landlord, LLC
Other liabilities
Total liabilities
COMMITMENTS AND CONTINGENCIES (NOTE 23)
Redeemable preferred stock ($.0001 par value; 60,000,000 shares authorized; 13,455,522 and 12,464,357
shares outstanding at December 31, 2010 and 2009, respectively; redemption amount $222,016 and
$247,587 at December 31, 2010 and 2009, respectively)
EQUITY (DEFICIT):
Company stockholders’ equity (deficit):
Common stock ($.0001 par value; 140,000,000 shares authorized; 33,129,553 and 19,575,117
shares outstanding at December 31, 2010 and 2009, respectively)
Common stock - additional paid-in-capital
Warrants - additional paid-in-capital
Accumulated deficit
Total stockholders’ equity (deficit)
Noncontrolling interests
Total equity (deficit)
TOTAL LIABILITIES AND EQUITY (DEFICIT)
See notes to consolidated financial statements.
43
2010
2009
$
4,259
2,667
$
5,855
2,156
$
$
18,801
28,985
3,933
58,645
166,391
42,692
84,864
3,169
1,500
4,259
7,821
302
369,643
9,550
25,551
14,237
3,549
9,339
62,226
11,293
61,761
10,406
24,774
36,250
5,381
212,091
$
$
12,162
12,840
4,689
37,702
124,429
—
16,080
7,203
1,500
6,149
7,495
—
200,558
350
2,756
14,133
4,197
5,480
26,916
11,783
4,104
—
25,749
—
10,015
78,567
122,436
149,122
3
82,634
4,820
(52,341)
35,116
—
35,116
$ 369,643
2
15,676
4,619
(60,905)
(40,608)
13,477
(27,131)
$ 200,558
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(IN THOUSANDS)
REVENUES:
Biodiesel sales
Biodiesel sales - related parties
Biodiesel government incentives
Services
Services - related parties
COSTS OF GOODS SOLD:
Biodiesel
Biodiesel - related parties
Services
Services - related parties
GROSS PROFIT
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
(includes related party amounts of $1,601, $1,836 and $1,946 for the years ended December 31,
2010, 2009 and 2008, respectively)
GAIN ON SALE OF ASSETS - related party
IMPAIRMENT OF ASSETS
LOSS FROM OPERATIONS
OTHER INCOME (EXPENSE), NET:
2010
2009
2008
$203,641 $ 91,870 $ 58,786
10,723
6,564
76,073
4,143
5,236
85,452
17,157
19,465
128,492
1,888
1,121
131,501
4,261
7,240
215,142
653
660
216,455
81,125
112,891
516
291
194,823
21,632
73,994
53,379
1,177
—
128,550
2,951
39,387
39,349
4,470
—
83,206
2,246
22,187
—
7,494
(8,049)
25,565
(2,254)
833
(21,193)
24,048
—
160
(21,962)
Change in fair value of preferred stock conversion feature embedded derivatives
Change in fair value of interest rate swap
Change in fair value of Seneca Holdco liability
Other income (includes related party amounts of $355 for the year ended December 31, 2009)
Interest expense (includes related party amounts of $334 and $26 for the years ended
December 31, 2010 and 2009, respectively)
Interest income (includes related party amounts of $180 for the year ended December 31,
(8,208)
469
(4,179)
956
(2,339)
382
—
3,147
2,118
(1,413)
—
—
(4,940)
(2,414)
(1,902)
2010)
Impairment of investments
LOSS BEFORE INCOME TAXES AND LOSS FROM EQUITY INVESTMENTS
INCOME TAX BENEFIT (EXPENSE)
LOSS FROM EQUITY INVESTMENTS
NET LOSS
LESS - NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST
NET LOSS ATTRIBUTABLE TO THE COMPANY
EFFECTS OF RECAPITALIZATION
LESS - ACCRETION OF PREFERRED STOCK TO REDEMPTION VALUE
NET LOSS ATTRIBUTABLE TO THE COMPANY’S COMMON STOCKHOLDERS
See notes to consolidated financial statements.
44
200
(400)
(16,102)
(24,151)
3,252
(689)
(21,588)
—
(21,588)
8,521
(27,239)
279
(1,400)
(2,318)
(24,280)
9,414
(1,013)
(15,879)
2,788
(13,091)
—
(26,692)
$ (40,306) $(105,086) $(39,783)
60
(200)
(1,364)
(22,557)
(45,212)
(1,089)
(68,858)
7,953
(60,905)
—
(44,181)
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008 (IN THOUSANDS EXCEPT SHARE AMOUNTS)
Redeemable
Preferred
Stock
Shares
Redeemable
Preferred
Stock
Common
Stock
Shares
Company Stockholders’ Equity (Deficit)
Warrants -
Additional
Paid-in
Capital
Common Stock -
Additional
Paid-in Capital
Stock
Common
Retained
Earnings
(accumulated
deficit)
Noncontrolling
Interest
Total
807 $ 93,716
BALANCE, January 1, 2008
8,578,945 $
43,707 13,334,874 $
1 $
62,629 $
4,556 $
25,723 $
Issuance of preferred stock, net of $246
of issuance cost and $302 for
embedded derivative
3,855,059
34,208
—
—
—
—
—
— —
—
—
—
—
—
—
—
— 5,970,243
—
—
—
—
—
—
26,692
—
—
—
—
—
12,434,004
30,353
—
—
104,607 19,305,117
—
270,000
—
334
—
—
1
—
—
—
—
—
—
2
—
—
—
5,080
(63)
—
—
3,574
(14,060)
—
57,160
—
1,368
2,522
—
63
—
—
—
—
—
4,619
—
—
—
—
—
—
—
—
(12,632)
(13,091)
—
—
—
—
—
5,081
— —
22,820 22,820
(602)
—
(602)
3,574
— (26,692)
(2,788) (15,879)
20,237 82,018
— —
1,368
—
2,522
—
—
44,181
—
—
(44,181)
—
—
— (44,181)
BALANCE, December 31, 2009
12,464,357
149,122 19,575,117
—
—
—
—
—
—
—
—
2
(1,193)
—
—
—
—
(60,905)
1,193 —
(7,953) (68,858)
15,676
4,619
(60,905)
13,477 (27,131)
Derecognition of REG Holdco
preferred stock, common stock, and
common stock warrants
(12,464,357)
(158,475) (19,575,117)
(2)
(6,323)
(4,619)
—
— (10,944)
13,164,357
102,287 18,875,117
2
14,221
4,619
—
— 18,842
—
— 13,754,436
1
79,304
—
—
— 79,305
291,165
—
—
2,263
—
—
—
—
500,000
—
—
—
—
—
3,015
—
1,269
—
—
—
—
— —
1,269
—
3,015
—
—
—
—
—
1,068
(1,068)
—
— —
—
—
—
—
—
—
27,239
—
—
—
—
—
—
—
—
—
1,192
1,720
(27,239)
—
—
—
—
—
30,152
—
(13,477) 17,867
1,720
—
—
(21,588)
— (27,239)
— (21,588)
— $ 35,116
BALANCE, December 31, 2010
13,455,522 $
122,436 33,129,553 $
3 $
82,634 $
4,820 $
(52,341) $
See notes to consolidated financial statements.
45
Issuance of common stock, net of $234
of issuance costs
Issuance of warrants
Contributions
Removal of noncontrolling interest as a
result of deconsolidation
Stock compensation expense
Accretion of preferred stock to
redemption value
Net loss
BALANCE, December 31, 2008
Issuance of preferred stock
Issuance of common stock
Stock compensation expense
Accretion of preferred stock to
redemption value
Increase in Blackhawk Biofuels LLC
members’ equity from issuance of
common stock
Net loss
Issuance of preferred stock, common
stock, and common stock warrants
to REG Holdco, net of $52,394 for
embedded derivatives
Issuance of common stock in
acquisitions, net of $862 for issue
cost
Issuance of preferred stock in
acquisitions, net of $1,158 for
embedded derivatives
Issuance of warrants in acquisitions
Issuance of common stock
Conversion of warrants to restricted
stock units
Blackhawk Biofuels LLC
deconsolidation and transition
adjustment
Stock compensation expense
Accretion of preferred stock to
redemption value
Net loss
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Adjustments to reconcile net loss to net cash flows from operating activities:
Depreciation expense
Amortization expense of assets and liabilities, net
Gain on sale of property, plant & equipment
Provision (benefit) for doubtful accounts
Stock compensation expense
Loss from equity method investees
Deferred tax expense (benefit)
Impairment of intangible assets
Impairment of investments
Impairment of long lived assets
Change in fair value of preferred stock conversion feature embedded derivatives
Change in fair value of Seneca Holdco liability
Distributions received from equity method investees
Expense settled with stock issuance
Changes in asset and liabilities, net of effects from mergers and acquisitions:
Accounts receivable
Inventories
Prepaid expenses and other assets
Accounts payable
Accrued expenses and other liabilities
Deferred revenue
Billings in excess of costs and estimated earnings on uncompleted contracts
Net cash flows from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for purchase of property, plant and equipment
Proceeds from the sale of fixed assets
Change in restricted cash
Cash received from escrow for purchase of investments
Cash provided through Blackhawk transaction
Cash provided through USBG acquisition
Return of investment in Bell, LLC
Deconsolidation of Blackhawk
Cash provided through Blackhawk acquisition
Cash provided through Central Iowa Energy acquisition
Net cash flows from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line of credit
Repayments on line of credit
Cash received for issuance of note payable
Cash paid on notes payable
Cash proceeds from investment in Seneca Landlord
Cash received from issuance of common stock to ARES Corporation
Cash paid for issuance cost of common and preferred stock
Cash paid for debt issuance costs
Net cash flows from financing activities
NET CHANGE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, Beginning of period
CASH AND CASH EQUIVALENTS, End of period
2010
2009
2008
$(21,588) $(68,858) $(15,879)
5,291
637
—
105
1,376
689
(3,252)
7,336
400
158
8,208
3,742
100
—
4,438
1,334
(2,254)
(1,432)
2,522
1,089
45,212
—
200
833
2,339
—
110
334
1,798
(716)
(127)
740
3,574
1,013
(8,268)
—
1,400
160
(2,118)
—
363
867
(4,876)
(3,671)
10,585
(15,937)
1,866
(3,378)
671
3,859
—
(14,593)
(4,550)
303
(513)
—
—
—
—
(206)
1
403
(4,562)
(1,045)
2,915
3,443
(1,087)
5,480
(111)
(8,209)
(7,350)
3,032
4,689
—
—
—
—
—
—
—
371
9,400
(750)
—
(2,109)
4,000
8,000
880
(1,822)
100
(776)
—
—
2,162
362
(1,346)
2,718
—
(924)
(3,636)
(67,235)
1,315
15,904
500
2,225
16,895
4,223
—
—
—
(26,173)
5,522
(4,230)
28,821
(3,270)
—
—
(280)
(702)
17,559
(1,596)
5,855
(480)
(208)
26,155
(3,654)
18,965
$ 4,259 $ 5,855 $ 15,311
—
—
(1,618)
(9,456)
15,311
(continued)
46
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(IN THOUSANDS)
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash received for income taxes
Cash paid for interest
2010
2009
2008
$
584 $ 2,827 $ 2,535
$ 4,226 $ 2,128 $ 2,582
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Effects of recapitalization
Accretion of preferred stock to redemption value
Amounts included in period-end accounts payable for:
Purchases of property, plant and equipment
Equity method investment received from REG, LLC
Removal of cost method investee as a result of consolidation
Issuance of common stock for debt financing cost
Reduction of accounts payable in exchange for assets
Removal of equity method investee as a result of consolidation
Property, plant and equipment acquired through the assumption of liabilities
Issuance of restricted stock units for equity issuance cost
Assets (liabilities) acquired through the issuance of stock:
$ 8,521
$ 27,239 $44,181 $ 26,692
$
192 $
38 $ 1,020
63
$
$ 1,000
$ 3,015
$ 3,969
$ 39,314
582
$
$
773
$ 2,000
Cash
Restricted cash
Other current assets
Property, plant, and equipment
Goodwill
Intangible assets
Deferred tax assets
Other noncurrent assets
Line of credit
Other current liabilities
Debt
Unfavorable lease obligation
Noncontrolling interest
Other noncurrent liabilities
$ 8,404 $ — $ —
22,749
61
9,420
—
410
27,383
67
—
(3,059)
—
(12,128)
(24,820)
—
$ 83,117 $ 1,359 $ 20,083
2,302
1,342
89,597
68,784
3,027
—
231
(900)
(5,548)
(72,668)
—
—
(11,454)
—
—
—
—
—
—
1,359
—
—
—
—
—
—
See “Note 7 - Variable Interest Entities” for noncash items related to the deconsolidation of Blackhawk
(concluded)
See notes to consolidated financial statements.
47
Table of Contents
RENEWABLE ENERGY GROUP, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For The Three Years Ended December 31, 2010, 2009 and 2008
(In Thousands, Except Share and Per Share Amounts)
NOTE 1 — ORGANIZATION, PRESENTATION, AND NATURE OF THE BUSINESS
On February 26, 2010, Renewable Energy Group, Inc. (the Company) (formerly known as REG Newco, Inc.) completed its
acquisitions of REG Biofuels, Inc. (Biofuels) (formerly known as Renewable Energy Group, Inc. and REG Intermediate Holdco, Inc.) and
Blackhawk Biofuels, LLC (Blackhawk) and on March 8, 2010 the Company completed its asset purchase of Central Iowa Energy, LLC
(CIE) (collectively, the Acquisitions).
On February 26, 2010, a wholly owned subsidiary of the Company was merged with and into Biofuels (the Biofuels Merger). As a
result of the Biofuels Merger, each share of Biofuels’ common stock issued and outstanding immediately prior to the effective time was
converted into the right to receive one share of the Company’s common stock, $0.0001 par value per share (the Common Stock), and each
share of the Biofuels’ preferred stock issued and outstanding immediately prior to the effective time was converted into the right to receive
one share of the Company’s Series A Preferred Stock, $0.0001 par value per share (the Series A Preferred Stock).
Also on February 26, 2010, a wholly owned subsidiary of the Company was merged with and into Blackhawk (the Blackhawk
Merger). Blackhawk was renamed REG Danville, LLC (REG Danville) immediately following the merger. As a result of the Blackhawk
Merger, each outstanding Blackhawk Series A Unit (other than such units held by Biofuels or any affiliate of Biofuels) was converted into
0.4479 shares of Common Stock and 0.0088 shares of Series A Preferred Stock. Each outstanding warrant for the purchase of series A units
of Blackhawk became a warrant for the purchase of shares of Common Stock, with the number of shares and exercise price per share
adjusted based on the 0.4479 common shares exchange ratio. The former members of Blackhawk received 132,680 shares of Series A
Preferred Stock, 6,753,311 shares of Common Stock and 335,924 warrants. See “Note 6 – Acquisitions and Equity Transactions” for a
description of the acquisition and its accounting treatment.
On March 8, 2010, the Company acquired substantially all of the assets and liabilities of CIE (CIE Asset Purchase) in exchange for an
aggregate of 4,252,830 shares of Common Stock and 158,485 shares of Series A Preferred Stock. The assets and liabilities were acquired
from CIE by REG Newton, LLC (REG Newton), a wholly owned subsidiary of the Company. See “Note 6 – Acquisitions and Equity
Transactions” for a description of the acquisition and its accounting treatment.
On April 9, 2010, the Company entered into a series of agreements related to the asset purchase agreement with Nova Biosource
Fuels, Inc. See “Note 6 – Acquisitions and Equity Transactions” for a description of the acquisition and its accounting treatment.
On July 16, 2010, the Company acquired certain assets from Tellurian Biodiesel, Inc. (Tellurian) and American BDF, LLC (ABDF).
ABDF was a joint venture owned by Golden State Service Industries, Restaurant Technologies, Inc. (RTI) and Tellurian Biodiesel. See
“Note 6 – Acquisitions and Equity Transactions” for a description of the acquisition and its accounting treatment.
On September 21, 2010, the Company acquired substantially all of the assets of Clovis Biodiesel, LLC (Clovis), a wholly owned
subsidiary of ARES Corporation, and received $8,000 cash in exchange for the Company’s Common Stock. See “Note 6 – Acquisitions and
Equity Transactions” for a description of the acquisition and its accounting treatment.
Prior to February 26, 2010, the Company refers to the business, results of operations and cash flows of Biofuels, which is considered
the accounting predecessor to the Company. For the period after February 26, 2010, the Company refers to the business, results of
operations and cash flows of Renewable Energy Group, Inc. (formerly, REG Newco, Inc.) and its consolidated subsidiaries, including
Biofuels, REG Danville, and REG Newton.
Nature of Business
As of December 31, 2010, the Company owned biodiesel production facilities with a total of 182 million gallons per year (mmgy) of
production capacity, which includes a 60 mmgy biodiesel facility in Seneca, Illinois leased by the Company from a consolidated variable
interest entity (see Note 6 – Acquisitions and Equity Transactions).
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Table of Contents
In 2007, the Company commenced construction of a 60 mmgy production capacity facility near New Orleans, Louisiana and a 60
mmgy production capacity facility in Emporia, Kansas. In 2008, the Company halted construction of these facilities as a result of
conditions in the biodiesel industry and the credit markets. The Company continues to pursue financing and intends to finish the New
Orleans, Louisiana facility, which is approximately 50% complete, and the facility in Emporia, Kansas, which is approximately 20%
complete, when industry conditions improve and financing becomes available. In September 2010, the Company purchased the assets of
Clovis which includes a partially completed 15 mmgy biodiesel plant located in Clovis, New Mexico. The plant is approximately 70%
complete. The Company continues to be in discussions with lenders in an effort to obtain financing for facilities under construction and
capital improvement projects. The city incentive package for the Emporia construction project has been renewed for an additional three
years starting July 1, 2010. Additionally, as a result of halting construction, the Company performed an analysis to evaluate if the assets
under construction were impaired. Based on the projected gross cash flows of the projects the Company determined that no impairment has
occurred.
As of December 31, 2010, the Company managed one other biodiesel production facility owned primarily by an independent
investment group with an aggregate of 30 mmgy capacity (hereafter referred to as Network Plant). For this facility, the Company has
entered into an agreement to manage the facility while the investment group determines how to raise capital for production facility
upgrades. In 2009, the Company provided notice to five networks facilities that it would be terminating services under the Management and
Operational Services Agreement (MOSA) twelve months from the date notice was provided as permitted by the MOSAs. Of the five
cancellation notices given in 2009, three facilities did not renew their MOSA, the Company is managing one while the facility is working
on raising capital and another facility was purchased through an asset purchase agreement.
The biodiesel industry and the Company’s business have relied on the continuation of certain federal and state incentives and
mandates. On December 17, 2010, Congress reinstated the federal biodiesel tax credit retroactive to January 1, 2010 with an expiration date
of December 31, 2011. Current incentives to the biodiesel industry may not continue beyond their scheduled expiration date or, if they
continue, the incentives may not be at the same level. The revocation or amendment of any one or more of those laws, regulations or
programs could adversely affect the financial results of the Company. Revenues include amounts related to federal subsidies and regulatory
support totaling $7,240, $19,465 and $6,564 for the years ended December 31, 2010, 2009 and 2008, respectively.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
The accompanying consolidated financial statements include the accounts of the Company, consolidated with the accounts of all of
its subsidiaries and affiliates in which the Company holds a controlling financial interest as of the financial statement date. Normally, a
controlling financial interest reflects ownership of a majority of the voting interests. Other factors considered in determining whether a
controlling financial interest is held include whether the Company possesses the authority to purchase or sell assets or make other operating
decisions that significantly affect the entity’s results of operations and whether the Company is the primary beneficiary of the economic
benefits and financial risks of the entity. Intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents consists of money market funds and demand deposits with financial institutions. The Company considers
all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.
49
Table of Contents
Restricted Cash
Restricted cash consists of project funds and debt reserve funds that are invested in money market mutual funds related to various
Company entities totaling $2,969 and $2,156 as of December 31, 2010 and 2009, respectively, which have been restricted in accordance
with the terms of loan agreements. The Company classifies restricted cash between current and non-current assets based on the length of
time of the restricted use.
Accounts Receivable
Accounts receivable are carried on a gross basis, less allowance for doubtful accounts. Management estimates the allowance for
doubtful accounts based on existing economic conditions, the financial conditions of customers, and the amount and age of past due
accounts. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are generally
written off against the allowance for doubtful accounts only after reasonable collection attempts have been exhausted. A significant portion
of the reserves as of December 31, 2008 was established as a result of past due receivables with a single customer. During 2009, the
Company settled the outstanding receivable. Activity regarding the allowance for doubtful accounts was as follows:
Balance, January 1, 2008
Amount charged to selling, general and administrative expenses
Charge-offs, net of recovery
Balance, December 31, 2008
Amount charged (benefited) to selling, general and administrative expenses
Charge-offs, net of recovery
Balance, December 31, 2009
Amount charged to selling, general and administrative expenses
Charge-offs, net of recovery
Balance, December 31, 2010
$ 1,955
740
(165)
2,530
(1,432)
(885)
213
103
—
316
$
Inventories
Inventories consist of raw materials, work in process and finished goods and are valued at the lower of cost or market. Inventory
values as of December 31, 2010 and 2009 include adjustments to reduce inventory to the lower of cost or market in the amount of $35 and
$194, respectively. Cost is determined based on the first-in, first-out method.
Derivative Instruments and Hedging Activities
The Company has entered into derivatives to hedge its exposure to price risk related to feedstock inventory and biodiesel finished
goods inventory. Additionally, the Company has entered into an interest rate swap with the objective of managing risk caused by
fluctuations in interest rates associated with the REG Danville note payable.
These derivative contracts are accounted for in accordance with ASC Topic 815, Derivatives and Hedging (ASC Topic 815). ASC
Topic 815 requires that an entity recognize and record all derivatives on the balance sheet at fair value. All of the Company’s derivatives
are designated as non-hedge derivatives and are utilized to manage cash flow. Although the contracts may be effective economic hedges of
specified risks, they are not designated as, nor accounted for, as hedging instruments. Unrealized gains and losses on commodity futures,
swaps, and options contracts used to hedge feedstock purchases or biodiesel inventory are recognized as a component of biodiesel costs of
goods sold reflected in current results of operations. Unrealized gains and losses on the interest rate swap are recorded in change in fair
value of interest rate swap in the Company’s statements of operations.
Valuation of Preferred Stock Conversion Feature Embedded Derivatives
As stated in “Note 1 – Organization, Presentation and Nature of the Business”, in connection with the Biofuels Merger, all
outstanding shares of Biofuels preferred stock were converted into Company Series A Preferred Stock.
The Series A Preferred Stock terms provide for voluntary and, under certain circumstances, automatic conversion of the Series A
Preferred Stock to Common Stock based on a prescribed formula. In addition, shares of Series A Preferred Stock are subject to redemption
at the election of the holder beginning February 26, 2014. The redemption price is equal to the greater of (i) an amount equal to $13.75 per
share of Series A Preferred Stock plus
50
Table of Contents
any and all accrued dividends, not to exceed $16.50 per share, or (ii) the fair market value of the Series A Preferred Stock. Under ASC
Topic 815, the Company is required to bifurcate and account for as a separate liability certain derivatives embedded in its contractual
obligations. An “embedded derivative” is a provision within a contract, or other instrument, that affects some or all of the cash flows or the
value of that contract, similar to a derivative instrument. Essentially, the embedded provision within the contract contains all of the
attributes of a free-standing derivative, such as an underlying market variable, a notional amount or payment provision, and can be settled
“net,” but the contract, in its entirety, does not meet the ASC Topic 815 definition of a derivative.
The Company has determined that the conversion feature of the Series A Preferred Stock is an embedded derivative because the
redemption feature allows the holder to redeem Series A Preferred Stock for cash at a price which can vary based on the fair market value
of the Series A Preferred Stock, which effectively provides the holders with a mechanism to “net settle” the conversion option.
Consequently, the embedded conversion option must be bifurcated and accounted for separately because the economic characteristics of
this conversion option are not considered to be clearly and closely related to the economic characteristics of the Series A Preferred Stock,
which is considered more akin to a debt instrument than equity.
Upon issuance of the Series A Preferred Stock, the Company recorded a liability representing the estimated fair value of the right of
holders of the Series A Preferred Stock to receive the fair market value of the Common Stock issuable upon conversion of the Series A
Preferred Stock on the redemption date. This liability is adjusted each quarter based on changes in the estimated fair value of such right,
and a corresponding income or expense is recorded in change in fair value of the Series A Preferred Stock conversion feature embedded
derivatives in the Company’s statements of operations.
The Company uses the option pricing method to value the embedded derivative. The Company used the Black-Scholes options
pricing model to estimate the fair value of the conversion option embedded in each series of Biofuels preferred stock prior to February 26,
2010 and the Series A Preferred Stock as of and subsequent to February 26, 2010. The Black-Scholes options pricing model requires the
development and use of highly subjective assumptions. These assumptions include the expected volatility of the value of the Company’s
equity, the expected conversion date, an appropriate risk-free interest rate, and the estimated fair value of the Company’s equity. The
expected volatility of the Company’s equity is estimated based on the volatility of the value of the equity of publicly traded companies in a
similar industry and general stage of development as the Company. The expected term of the conversion option is based on the period
remaining until the contractually stipulated redemption date of February 26, 2014. The risk-free interest rate is based on the yield on U.S.
Treasury STRIPs with a remaining term equal to the expected term of the conversion option. The development of the estimated fair value
of the Company’s equity is discussed below in “Valuation of the Company’s Equity.”
The significant assumptions utilized in the Company’s valuation of the embedded derivative are as follows:
Expected volatility
Risk-free rate
Valuation of Seneca Holdco Liability
December 31,
2010
40.00%
4.10%
February 26,
2010
40.00%
4.40%
December 31,
2009
December 31,
2008
50.00%
4.11%
55.00%
4.39%
June 30,
2008
55.00%
4.58%
Associated with the Company’s transaction with Nova Biosource Fuels, LLC (See Note 6 – Acquisitions and Equity Transactions),
the Company has the option to purchase (Call Option) and Seneca Holdco, LLC has the option to require the Company to purchase (Put
Option) the membership interest of Seneca Landlord, LLC (Landlord) whose assets consist primarily of a biodiesel plant located in Seneca,
Illinois. Both the Put Option and the Call Option have a term of seven years and are exercisable by either party at a price based on a pre-
defined formula. The Company has determined the fair value of the amounts financed by Seneca Holdco, LLC, the Put Option, and the
Call Option using an option pricing model. The fair value represents the probability weighted present value of the gain, or loss, that is
realized upon exercise of each option. The option pricing model requires the development and use of highly subjective assumptions. These
assumptions include (i) the value of the Landlord’s equity, (ii) expectations regarding future changes in the value of the Landlord’s equity,
(iii) expectations about the probability of either option being exercised, including the Company’s ability to list its securities on an exchange
or complete a public offering, and (iv) an appropriate risk-free rate. Company management considered current public equity markets,
relevant regulatory issues, industry conditions and the Company’s position within the industry when estimating the probability that the
Company will raise additional capital. Differences in the estimated probability and timing of this event may significantly impact the fair
value assigned to the Seneca Holdco Liability as management has determined it is not likely that the Put Option will become exercisable in
the absence of this event.
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The significant assumptions utilized in the Company’s valuation of the Seneca Holdco liability are as follows:
Expected volatility
Risk-free rate
Probability of IPO
Preferred Stock Accretion
December 31,
2010
50.00%
4.10%
70.00%
April 9,
2010
50.00%
4.60%
60.00%
Beginning October 1, 2007, the date that the Company determined that there was a more than remote likelihood that the then issued
and outstanding preferred stock would become redeemable, the Company commenced accretion of the carrying value of the preferred stock
over the period until the earliest redemption date, which was August 1, 2011, to the Biofuels preferred stock’s redemption value, plus
accrued but unpaid dividends using the effective interest method. This determination was based upon the current state of the public equity
markets which was restricting the Company’s ability to execute a qualified public offering, the Company’s historical operating results, and
the volatility in the biodiesel and renewable fuels industries which have resulted in lower projected profitability. Prior to October 1, 2007,
the Company had determined that it was not probable that the preferred stock would become redeemable; therefore, the carrying value was
not adjusted in accordance with ASC Topic 480-10-S99, Classification and Measurement of Redeemable Securities.
On February 26, 2010, the date the Company determined that there was a more than remote likelihood that the Series A Preferred
Stock would become redeemable, the Company commenced accretion of the carrying value of the Series A Preferred Stock over the period
until the earliest redemption date (February 26, 2014) to the Series A Preferred Stock’s redemption value, plus accrued but unpaid
dividends using the effective interest method. This determination was based upon the current state of the public equity markets which is
restricting the Company’s ability to execute a qualified public offering, the Company’s historical operating results, and the volatility in the
biodiesel and renewable fuels industries which have resulted in lower projected profitability.
Accretion of $27,239, $44,181 and $26,692 for the years ended December 31, 2010, 2009 and 2008, respectively, has been
recognized as a reduction to income available to common stockholders in accordance with paragraph 15 of ASC Topic 480-10-S99.
Valuation of the Company’s Equity
The Company considered three generally accepted valuation approaches to estimate the fair value of the aggregate equity of the
Company: the income approach, the market approach and the cost approach. Ultimately, the estimated fair value of the aggregate equity of
the Company was developed using the Income Approach - Discounted Cash Flow (DCF) method.
Material underlying assumptions in the DCF analysis include the gallons produced and managed, gross margin per gallon, expected
long-term growth rates and an appropriate discount rate. Gallons produced and managed as well as the gross margin per gallon were
determined based on historical and forward-looking market data.
The discount rate used in the DCF analysis is based on macroeconomic, industry and Company-specific factors and reflects the
perceived degree of risk associated with realizing the projected cash flows. The selected discount rate represents the weighted average rate
of return that a market participant investor would require on an investment in the Company’s debt and equity. The percent of total capital
assumed to be comprised of debt and equity when developing the weighted average cost of capital was based on a review of the capital
structures of the Company’s publicly traded industry peers. The cost of debt was estimated utilizing the adjusted average Baa-rated
corporate bond rate during the previous 12 months representing a reasonable market participant rate based on the Company’s publicly
traded industry peers. The Company’s cost of equity was estimated utilizing the capital asset pricing model, which develops an estimated
market rate of return based on the appropriate risk-free rate adjusted for the risk of the alternative energy industry relative to the market as
a whole, an equity risk premium and a company specific risk premium. The risk premiums included in the discount rate were based on
historical and forward looking market data.
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Discount rates utilized in the Company’s DCF model are as follows:
Discount rate
December 31,
2010
16.00%
February 26,
2010
15.00%
December 31,
2009
December 31,
2008
13.00%
15.00%
June 30,
2008
13.50%
Valuations derived from this model are subject to ongoing verification and review. Selection of inputs involves management’s
judgment and may impact net income. This analysis is performed on a regular basis and takes into account factors that have changed from
the last measurement date or the time of the last Common Stock issuance. Other factors affecting our assessment of price include recent
purchases or sales of our Common Stock, if available.
Non-monetary Exchanges
The Company records assets acquired and liabilities assumed through the exchange of non-monetary assets based on the fair value of
the assets and liabilities acquired or the fair value of the consideration exchanged, whichever is more readily determinable.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost, including applicable construction-period interest, less accumulated depreciation.
Maintenance and repairs are expensed as incurred. Depreciation expense is computed on a straight-line method based upon estimated useful
lives of the assets. Estimated useful lives are as follows:
Automobiles and trucks
Computers and office equipment
Office furniture and fixtures
Machinery and equipment
Leasehold improvements
Buildings and improvements
5 years
5 years
7 years
5-30 years
the lesser of the lease term or 30 years
30-40 years
The Company capitalizes interest incurred on debt during the construction of assets in accordance with ASC Topic 838, Interest. For
the years ended December 31, 2010, 2009 and 2008, the Company capitalized $713, $0 and $876, respectively, of interest primarily
resulting from the construction of the Blackhawk and Seneca biodiesel production facilities.
Goodwill
The Company accounts for goodwill in accordance with ASC Topic 350, Intangibles – Goodwill and Other. Goodwill is reviewed for
impairment by reporting unit annually on July 31 or between annual periods when management believes impairment indicators exist. If the
carrying value of the reporting unit goodwill is considered impaired, a loss is recognized based on the amount by which the carrying value
exceeds the fair market value of the reporting unit goodwill. Fair value is determined using a discounted cash flow methodology involving
a significant level of judgment in the assumptions used. Changes to the Company’s strategy or market conditions could significantly impact
these judgments and require adjustments to recorded amounts of goodwill. There was no impairment of goodwill recorded in the periods
presented.
The following table summarizes goodwill for the Company’s business segments:
Beginning balance - January 1, 2009
Acquisitions
Ending balance - December 31, 2009
Blackhawk Biofuels acquisition
CIE acquisition
Ending balance - December 31, 2010
53
Biodiesel
$ —
—
—
44,191
24,593
$68,784
Services
$16,080
—
16,080
—
—
$16,080
Total
$16,080
—
16,080
44,191
24,593
$84,864
Table of Contents
Impairment of assets
The Company reviews long-lived assets, including property, plant and equipment and definite-lived assets, for impairment in
accordance with ASC Topic 360, Property, Plant and Equipment. Asset impairment charges are recorded for long-lived assets and
intangible assets subject to amortization when events and circumstances indicate that such assets may be impaired and the undiscounted net
cash flows estimated to be generated by those assets are less than their carrying amounts. If estimated future undiscounted cash flows are
not sufficient to recover the carrying value of the assets, an impairment charge is recorded for the amount by which the carrying amount of
the assets exceeds its fair value. Fair value is determined by management estimates using discounted cash flow calculations.
During 2010, the raw material supply agreements for the New Orleans and Emporia facilities were cancelled. The original agreements
were recorded as an intangible asset in the amount of $7,025. As a result of the cancellations, the full amount was charged off during the
year ended December 31, 2010.
The Company also impaired deferred financing cost related to the New Orleans project GoZone bonds. The Company determined that
it was not probable that the GoZone bonds allocation would be extended past the December 14, 2010 deadline or that the bonds would be
issued prior to the deadline, and accordingly, the Company returned its allocation prior to the deadline. The amount of the impairment for
the year ended December 31, 2010 was $311.
Total asset impairment charges of $7,494, $833 and $160 were recorded for the years ended December 31, 2010, 2009 and 2008,
respectively.
Investments
In connection with the construction of biodiesel production facility for SoyMor Biodiesel, LLC (SoyMor) (collectively with Bell,
LLC referred to as “Equity Method Investees”), the Company made an equity investment in this entity. Because the Company has the
ability to influence the operating and financial decisions and maintains a position on the board of directors of the Equity Method Investees,
the investments are accounted for using the equity method in accordance with ASC Topic 323, Investments – Equity Method and Joint
Ventures (ASC Topic 323). Under the equity method, the initial investment is recorded at cost and adjusted to recognize the Company’s
ratable share of earnings of the Equity Method Investees. The Company made equity investments in connection with the construction of
biodiesel production facilities for Central Iowa Energy, LLC (CIE), Western Iowa Energy, LLC (WIE), Western Dubuque Biodiesel, LLC
(WDB) and East Fork Biodiesel, LLC (EFB). Because the Company does not have the ability to influence the operating and financial
decisions and does not maintain a position on the board of directors, these investments are accounted for using the cost method in
accordance with ASC Topic 323. During 2010, the Company changed its method of accounting for investments in WIE and WDB from the
equity method to the cost method due to the Company no longer having the ability to influence the operating and financial decisions of
these entities. Under the cost method, the initial investment is recorded at cost and assessed for impairment. The equity investment related
to CIE was removed during the purchase price allocation process on March 8, 2010. During the years ended December 31, 2010, 2009 and
2008, the Company recorded impairments in the amount of $400, $200 and $1,400, respectively, on its investment in EFB that was
determined to have been other-than-temporarily impaired.
Other Noncurrent Assets
Other noncurrent assets include costs related to the issuance of debt, spare parts inventory and raw material supply agreement. The
debt issuance costs are amortized to interest expense over the life of the related debt agreement. The supply agreement is amortized over
the term of the agreement according to the volume of feedstock used in operation.
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Revenue Recognition
The Company recognizes revenues from the following sources:
•
•
•
the sale of biodiesel and its co-products — both purchased and produced by the Company
fees received from federal and state incentive programs for renewable fuels
fees received for the marketing and sales of biodiesel produced by third parties and from managing operations of third party
facilities
Biodiesel sales revenues are recognized where there is persuasive evidence of an arrangement, delivery has occurred, the price has
been fixed or is determinable and collectability can be reasonably assured.
Revenues associated with the governmental incentive programs are recognized when the amount to be received is determinable,
collectability is reasonably assured, and the sale of product giving rise to the incentive has been recognized.
Fees for managing ongoing operations of third party plants, marketing biodiesel produced by third party plants and from other
services are recognized as services are provided. The Company also has performance based incentive agreements that are included as
management service revenues. These performance incentives are recognized as revenues when the amount to be received is determinable
and collectability is reasonably assured.
The Company acts as a sales agent for certain third parties, thus the Company recognizes revenues on a net basis in accordance with
ASC Topic 605-45, Revenue Recognition (ASC Topic 605-45).
Freight
The Company accounts for shipping and handling revenues and costs in accordance with ASC Topic 605-45. The Company presents
all amounts billed to the customer for freight as a component of biodiesel sales. Costs incurred for freight are reported as a component of
costs of goods sold – biodiesel.
Advertising Costs
Advertising and promotional expenses are charged to earnings during the period in which they are incurred. Advertising and
promotional expenses were $80, $235 and $798 for the years ended December 31, 2010, 2009 and 2008, respectively.
Research and Development
The Company expenses research and development costs as incurred. Research and development costs totaled $89, $187 and $59 for
the years ended December 31, 2010, 2009 and 2008, respectively.
Employee Benefits Plan
The Company sponsors an employee savings plan under Section 401(k) of the Internal Revenue Code. The Company makes
matching contributions equal to 50% of the participant’s pre-tax contribution up to a maximum of 6% of the participant’s eligible earnings.
Total expense related to the Company’s defined contribution plan was approximately $245, $218 and $186 for the years ended
December 31, 2010, 2009 and 2008, respectively.
Stock-Based Compensation
The Company has two stock incentive plans. On July 31, 2006, the Biofuels Board of Directors (Biofuels Board) approved the 2006
Stock Incentive Plan. On May 6, 2009, the Company Board of Directors (Company Board) approved the 2009 Stock Incentive Plan.
Eligible award recipients are employees, non-employee directors and advisors who provide service to the Company. The Company
accounted for stock-based compensation in accordance with ASC Topic 718, Stock Compensation (ASC Topic 718). Compensation
expense is measured at the grant-date fair value of the award and recognized as compensation expense over the vesting period.
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Income Taxes
The Company recognizes deferred taxes by the asset and liability method. Under this method, deferred income taxes are recognized
for differences between the financial statement and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in
which differences are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that
includes the enactment date. In addition, the carrying amount of deferred tax assets are reviewed to determine whether the establishment of
a valuation allowance is necessary. If it is more-likely-than-not that all or a portion of the Company’s deferred tax assets will not be
realized, based on all available evidence, a deferred tax valuation allowance would be established. Consideration is given to positive and
negative evidence related to the realization of the deferred tax assets. Significant judgment is required in making this assessment.
Deferred tax liabilities were recorded during the year ended December 31, 2010 as a result of the Blackhawk Merger and CIE Asset
Purchase. As the deferred tax liabilities were recorded, the resulting decrease in net deferred tax assets required a lower valuation
allowance. The release of the associated valuation allowance resulted in an income tax benefit.
Prior to deconsolidation on January 1, 2010 and the Blackhawk Merger, Blackhawk was treated as a partnership for federal and state
income tax purposes and generally did not incur income taxes. Instead, its earnings and losses were included in the income tax returns of its
members. Therefore, no provision or liability for federal or state income taxes was included in the consolidated financial statements of the
Company aside from its pro-rata share determined based on its ownership interest.
Warrants
The Company estimates the fair value of warrants issued and records that balance in additional paid-in-capital in the consolidated
balance sheet. Because the warrants relate to the common and preferred stock issued, additional paid-in-capital of common and preferred
stock was decreased by a like amount. Subsequent changes in the fair value of the warrants are not recognized in accordance with ASC
Topic 815-40, Derivatives and Hedging.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
(GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the dates of the financial statements and reported amounts of revenues and expenses during the reporting
periods. These estimates are based on information that is currently available to management and on various assumptions that the Company
believes to be reasonable under the circumstances. Actual results could differ from those estimates.
New Accounting Pronouncements
In June 2009, the FASB issued ASU No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable
Interest Entities, which amends ASC Topic 810, Consolidations (ASU No. 2009-17). This Statement requires a qualitative analysis to
determine the primary beneficiary of a Variable Interest Entity (VIE). The analysis identifies the primary beneficiary as the enterprise that
has both the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance and the obligation to
absorb losses or the right to receive benefits that could be significant to the VIE. The Statement also requires additional disclosures about
an enterprise’s involvement in a VIE. The effective date is the beginning of fiscal year 2010. The Company adopted this statement effective
January 1, 2010 which resulted in the deconsolidation of Blackhawk and additional disclosure requirements. See “Note 7 – Variable
Interest Entities” for additional information.
In January 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-06, Fair Value Measurements and Disclosures
(ASU 2010-06), which amends ASC Topic 820, adding new requirements for disclosures for Levels 1 and 2, separate disclosures of
purchases, sales issuances, and settlements related to Level 3 measurements and clarification of existing fair value disclosures. ASU 2010-
06 is in effect for interim and annual periods beginning after December 15, 2009, except for the requirement to provide Level 3 activity of
purchases, sales, issuances, and settlements on a gross basis, which will be effective for fiscal years beginning after December 15, 2010.
The adoption of this guidance did not have a material effect on the Company’s financial statements and the Company does not anticipate
the remaining disclosures will have a material effect on the Company’s financial statements.
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NOTE 3 — STOCKHOLDERS’ EQUITY OF THE COMPANY
Common Stock
On February 26, 2010, the Company filed its restated certificate of incorporation with the Secretary of State of Delaware. The restated
certificate of incorporation authorized 140,000,000 shares of Common Stock at a par value of $0.0001 per share. See “Note 6 –
Acquisitions and Equity Transactions” for information related to Common Stock issued in connection with the Acquisitions.
Each holder of Common Stock is entitled to one vote for each share of Common Stock held on all matters submitted to a vote of
stockholders. Subject to preferences that may apply to shares of outstanding Series A Preferred Stock as outlined below, the holders of
outstanding shares of the Common Stock are entitled to receive dividends. After the payment of all preferential amounts required to the
holders of Series A Preferred Stock, all of the remaining assets of the Company available for distribution shall be distributed ratably among
the holders of Common Stock.
Common Stock Issued During 2008:
On May 9, 2008, the Company issued 1,980,488 shares of common stock in conjunction with Blackhawk’s purchase of a 45 mmgy
biodiesel plant in Danville, Illinois. See “Note 5 – Blackhawk” for information related to the Blackhawk transaction.
On June 26, 2008 and October 21, 2008, the Company issued 3,726,830 and 136,585 shares of common stock, respectively, in
connection with the acquisition of a 35 mmgy biodiesel production facility located in Houston, Texas from U.S. Biodiesel Group. See
“Note 6 – Acquisitions and Equity Transactions” for information related to the acquisition.
On October 21, 2008, the Company issued 126,340 shares of common stock to a third party in exchange for certain manufacturing
equipment. The shares issued were then transferred from the third party to U.S. Biodiesel Group.
Common Stock Issued During 2009:
On August 3, 2009, the Company issued 10,000 and 10,000 shares of common stock to Todd & Sargent, Inc. and The Weitz Group,
LLC, respectively, in exchange for renegotiating a note payable.
On August 17, 2009, the Company issued 250,000 shares of common stock to GATX Corporation in conjunction with renegotiating
rail car leases.
Common Stock Issued During 2010:
On February 26, 2010, the Company issued 6,753,311 shares of Common Stock to the shareholders of Blackhawk in exchange for
outstanding shares of Blackhawk.
On March 8, 2010, the Company issued 4,252,830 shares of Common Stock to CIE and to Houlihan Smith & Company in connection
with the purchase of substantially all CIE company assets.
On April 9, 2010, the Company issued 500,000 shares of Common Stock to West LB in connection with the issuance of a Revolving
Credit Agreement to the Company.
On July 16, 2010, the Company issued 598,295 shares of Common Stock in connection with the purchase of substantially all
Tellurian and ABDF assets.
On September 21, the Company issued 2,150,000 shares of Common Stock to ARES Corporation in connection with the purchase of
substantially all the assets held by Clovis and cash.
Common Stock Warrants
Under the Company’s outstanding warrants, the holder may purchase the number of shares of Common Stock underlying each
warrant held for a purchase price ranging from $2.23 to $11.00 per share. The warrant holder may “net exercise” the warrants and use the
common shares received upon exercise of the warrants outstanding as the consideration for payment of the exercise price.
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Table of Contents
The warrant holders are generally protected from anti-dilution by adjustments for any stock dividends, stock split, combination, or
other recapitalization.
The following table summarizes the number of shares reserved for the exercise of common stock purchase warrants as of
December 31:
Issued to
Viant
Viant
Viant
Viant
Viant
Natural Gas Partners VIII
Entities affiliated with NGP Energy Technology
Partners
Natural Gas PartnersVIII
Entities affiliated with NGP Energy Technology
Partners
Viant
Natural Gas Partners VIII
NGP Energy Technologies
West Central
E D & F Man
Bunge
U.S. Biodiesel Group
Blackhawk warrant holders
Exercise
Price Per
Issuance Date
*August 1, 2006
*August 11, 2006
*September 15, 2006
*December 22, 2006
April 25, 2008
August 1, 2006
Share
Expiration Date
$ 9.50
August 1, 2011
August 11, 2011
$ 9.50
September 15, 2011 $ 9.50
December 22, 2011 $ 9.50
$ 10.00
April 25, 2018
$ 9.50
August 1, 2014
Warrants
Outstanding
2009
41,474
10,526
26,956
69,053
100,000
70,313
Warrants
Outstanding
2010
—
—
—
—
—
70,313
August 1, 2006
December 22, 2006
August 1, 2014
$ 9.50
December 22, 2014 $ 9.50
70,312
117,187
70,312
117,187
December 22, 2006
June 26, 2007
July 18, 2007
July 18, 2007
July 18, 2007
July 18, 2007
July 18, 2007
June 26, 2008
February 26, 2010
December 22, 2014 $ 9.50
$ 11.00
June 26, 2015
$ 11.00
July 18, 2015
$ 11.00
July 18, 2015
$ 11.00
July 18, 2015
$ 11.00
July 18, 2015
$ 11.00
July 18, 2015
June 26, 2018
$ 10.25
February 25, 2015 $ 2.23
117,188
10,526
22,727
22,727
22,727
22,727
9,090
243,902
—
977,435
117,188
—
22,727
22,727
22,727
22,727
9,090
243,902
335,924
1,054,824
* The Company reissued these warrants on April 25, 2008 at terms not substantially different from the original date noted here.
The fair value of the warrants issued in April and June 2008 and February 2010 was determined using the common stock value as of
June 30, 2008 and February 26, 2010. The deemed fair value of the underlying common stock on June 30, 2008 and February 26, 2010 was
$0.89 and $6.03, respectively. The methodology used to determine the fair value of the Company’s common stock on those dates is further
discussed in “Note 2 – Summary of Significant Accounting Policies”. Because the Company’s stock is not publicly traded, the Company
used the average historical volatility rate for publicly traded companies that are engaged in similar alternative fuel activities to those of the
Company for a similar time period as the expected life of the warrants. The expected life of the warrants was determined based upon the
contractual term of the agreements.
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No common stock warrants were issued during 2009. For purposes of determining the fair value of common stock warrants issued,
the Company used the Black-Scholes option pricing model and the assumptions set forth in the table below:
The weighted average fair value of warrants issued (per warrant)
Dividend yield
Weighted average risk-free interest rate
Weighted average expected volatility
Expected life in years
2010
$3.28 - $3.86
2008
$ 0.19
0%
2.2%
45%
0%
3.0%
55%
1.00 - 6.00
10.00
Stock Issuance Costs
In addition to the warrants, other direct costs of obtaining capital by issuing the common and preferred stock were deducted from
related proceeds with the net amount recorded as preferred stock or stockholders’ equity. Direct costs incurred for the years ended
December 31, 2010 and 2008 were $862 and $480, respectively. There were no stock issuance costs during 2009.
NOTE 4 — REDEEMABLE PREFERRED STOCK
The Company’s restated certificate of incorporation filed on February 26, 2010 authorizes 60,000,000 shares of preferred stock with a
par value of $0.0001. The Company’s Board of Directors has discretion, subject to the approval of certain shareholders, as to the
designation of voting rights, dividend rights, redemption price, liquidation preference and other provisions of each issuance. See “Note 6 –
Acquisitions and Equity Transactions” for information related to the cancellation of all outstanding Biofuels preferred stock on
February 26, 2010 and the issuance of Series A Preferred Stock in connection with the Acquisitions.
The following summarizes each series of Preferred Stock as of December 31:
Shares outstanding
Carrying amount
Redemption amount
Series A
Preferred
Stock
6,578,947
71,870
$
$ 146,850
Series B
Preferred
Stock
2,236,361
36,721
$
55,405
$
2009
Series AA
Preferred
Stock
558,140
4,994
$
6,000
$
Series BB
Preferred
Stock
3,090,909
35,537
$
39,332
$
Total
12,464,357
149,122
$
247,587
$
In connection with the Company’s acquisition of Biofuels and Blackhawk, the Company cancelled the four outstanding series of
preferred stock and each share of Biofuels preferred share was converted into a share of Series A preferred stock.
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The following summarizes the changes in outstanding shares for each series of Preferred Stock for fiscal years ended December 31:
Series A
Preferred
Stock
Series B
Preferred
Stock
Series AA
Preferred
Stock
Series BB
Preferred
Stock
Total
January 1, 2008
Issuances
December 31, 2008
Issuances
December 31, 2009
Exchange of REG Holdco preferred stock
Issuances
December 31, 2010
—
—
—
6,578,947 1,999,998
— 8,578,945
206,010 558,140 3,090,909 3,855,059
6,578,947 2,206,008 558,140 3,090,909 12,434,004
30,353
6,578,947 2,236,361 558,140 3,090,909 12,464,357
(6,578,947) (2,236,361) (558,140) (3,090,909) (12,464,357)
— 13,455,522
13,455,522
— 13,455,522
13,455,522
—
—
—
—
30,353
—
—
The rights, preferences, privileges and restrictions granted to and imposed on the Preferred Stock are set forth below. The holders of
Preferred Stock are generally protected from anti-dilution by adjustments for any stock dividends, stock split, combination or other
recapitalization.
Dividend Provisions
The holders of the Series A Preferred Stock accrue dividends at the rate of $0.88 per share per annum. Dividends are cumulative,
accrue on a daily basis from the date of issuance and compound annually from the date of issuance. If dividends on the Series A Preferred
Stock have not been paid or declared, the deficiency shall be paid or declared before any dividend is declared for Common Stock.
Dividends in arrears do not bear interest. Holders of the Series A Preferred Stock are allowed to participate in the dividends to common
stockholders in the event that dividends on Common Stock exceed that of the Series A Preferred Stock as if the Series A Preferred Stock
had been converted to Common Stock at the beginning of the year. Holders of at least seventy-five percent of the outstanding shares of the
Series A Preferred Stock that were issued in exchange for shares of the Series A, Series AA, Series B or Series BB Biofuels Preferred
Stock, pursuant to the Biofuels Merger agreement (Preferred Supermajority) may vote to waive the timing or amount of any dividend
payment. The Company has not declared any dividends on the Series A Preferred Stock outstanding. Dividends previously accrued on the
Biofuels preferred stock were forgone in connection with the Biofuels Merger and issuance of the Series A Preferred Stock. There were
$10,027 of the Series A Preferred Stock dividends in arrears as of December 31, 2010 and $33,388 of Biofuels preferred stock dividends in
arrears as of December 31, 2009.
Liquidation Rights
Upon the occurrence of a voluntary or involuntary liquidation (including consolidations, mergers or sale of assets as defined by the
preferred stock agreement), if the remaining net assets of the Company are sufficient, the holders of the Series A Preferred Stock shall be
paid no less than liquidation value plus all dividends in arrears (whether or not declared), out of the assets of the Company legally available
for distribution to its stockholders, before any payment or distribution is made to any holders of Common Stock.
If upon any liquidation or dissolution, the remaining net assets of the Company are insufficient to pay the amount that the Series A
Preferred Stock holders are due as indicated above, the holders of Series A Preferred Stock will share ratably in any distribution of the
remaining assets of the Company.
Conversion Rights
All shares of the Series A Preferred Stock will be converted into shares of Common Stock at a 1 to 1 conversion ratio:
a)
of a closing of the sale of shares of Common Stock at a level at or exceeding $22.00, in a Qualified Public Offering (QPO),
requiring aggregate proceeds to the Company of at least $40 million, or
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b)
c)
specified in a written contract or agreement of the Preferred Supermajority, or
the shares of Common Stock have a closing price on NASDAQ or any national securities exchange in excess of $24.75 per share
for ninety (90) consecutive trading days with an average daily trading volume on such trading days of at least US $8,000.
Voting Rights
Each holder of the Series A Preferred Stock is entitled to the number of votes equal to the number of shares of Common Stock into
which the Series A Preferred Stock held by such holder are convertible.
Additionally, the Company is prohibited, without obtaining the approval of the Preferred Supermajority from performing certain
activities including, but not limited to, amending shareholder agreements, redeeming or purchasing any outstanding shares of the Company,
declaring dividends, making certain capital expenditures and merging or consolidating with other entities.
Redemption Rights
On or after February 26, 2014, the Preferred Supermajority may require that the Company redeem all or part of the issued and
outstanding shares of the Series A Preferred Stock out of funds lawfully available; provided, however, that any such redemptions equal in
the aggregate $5,000. The redemption price is the greater of the fair market value per share at the date of the redemption election or $13.75
per share of the Series A Preferred Stock, plus accrued and unpaid preferred stock dividends, not to exceed $16.50 per share.
The following table demonstrates certain preferred stock attributes. All amounts are per share:
Original issue price
Dividend rate per annum
Common stock price to trigger automatic conversion
Series A Preferred Stock holders required for super majority
Redemption option price
Liquidation price
Series A
Preferred
Stock
$ 11.00
$ 0.88
$ 22.00
75%
$ 13.75
$ 13.75
The following table demonstrates the redemption requirements for each of the next five fiscal years ended December 31:
2011
2012
2013
2014
2015
Series A
Preferred
Stock
$ —
—
—
222,016
—
Preferred Stock Issued During 2008:
On May 9, 2008, the Company issued 127,273 shares of Series B Preferred Stock to Bunge as part of the Blackhawk Biofuels, LLC
acquisition of a biodiesel facility in Danville, Illinois.
On June 26, 2008, the Company issued 558,140 and 3,090,909 shares of Series AA Preferred and Series BB Preferred, respectively,
as part of the Company’s acquisition of a 35 mmgy biodiesel production facility in Houston, Texas and a terminal facility in Stockton,
California.
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During 2008, the Company issued 78,737 shares of Series B Preferred Stock to West Central as payment for administrative services.
Preferred Stock Issued During 2009:
On April 8, 2009, the Company issued 30,353 shares of Series B Preferred to West Central for payment of administrative services.
Preferred Stock Issued During 2010:
On February 26, 2010, the Company exchanged 700,000 shares of Common Stock issued to USRG HoldCo V LLC, Ohana Holdings
LLC, ED&F Man Holdings B.V. and others for 700,000 shares of Series A Preferred Stock.
The Company applied the guidance in EITF Topic No. D-42: The Effect on the Calculation of Earnings per Share for the Redemption
or Induced Conversion of Preferred Stock (codified to ASC 260-10 S99-2) in regards to the exchange of common shares for preferred
shares and the exchange of one series of preferred shares for a different series of preferred shares.
The Company compared the fair value of the preferred shares issued to the carrying amount of the preferred and common shares that
were redeemed. The excess of the carrying amount of preferred and common shares that were redeemed over the fair value of the preferred
shares issued was recorded as an increase in additional paid-in capital and was added to net earnings available to common shareholders.
On February 26, 2010, the Company issued 132,680 shares of Series A Preferred Stock to the shareholders of Blackhawk in exchange
for the outstanding Series A Units of Blackhawk.
On March 8, 2010, the Company issued 158,485 shares of Series A Preferred Stock to CIE and to Houlihan Smith & Company in
connection with the purchase of substantially all of CIE company assets.
NOTE 5 — BLACKHAWK
On May 9, 2008 the Company was party to a transaction, whereby Blackhawk purchased a 45 mmgy biodiesel production facility
under construction located in Danville, Illinois from Biofuels Company of America, LLC. Blackhawk received the plant assets under
construction and assumed a term construction loan with principal outstanding of $24,650 in exchange for $5,250 in cash and 1,980,488
shares of Common Stock of the Company set forth in the purchase agreement at $10.25 per share. Additionally, the Company issued
127,273 shares of Series B Preferred Stock with a per share value of $11.00 as established in the purchase agreement, to Bunge North
America, Inc. (Bunge) on behalf of Blackhawk. In exchange for the Series B Preferred Stock Blackhawk entered into a soy oil supply
agreement with Bunge. In exchange for the Biofuels Common and Biofuels Preferred Stock issued, the Company received a subordinated
convertible note from Blackhawk with a par value of $21,700.
Simultaneously with this transaction the Company entered into a MOSA with Blackhawk to manage the operations of the newly
acquired plant as well as a design-build agreement to perform construction services retrofitting the plant to produce biodiesel using
alternative feedstocks. Finally, the Company received 51,563 warrants to purchase membership units in Blackhawk at $0.01 per share at
anytime with no scheduled expiration. The warrants were received by the Company as compensation for providing a guarantee of $1.5
million in indebtedness of Blackhawk under the term construction loan and they vest 20% per year after the date of issuance until fully
vested.
The Company held 1,000,000 membership units of Blackhawk as of May 9, 2008 and subsequently received an additional 327,017
units, 658,052 units and 145,307 units in 2008, 2009 and 2010, respectively, in lieu of interest on the subordinated convertible note. The
Company’s interest represents ownership interests in Blackhawk of 11.6% and 12.4% as of December 31, 2009 and February 26, 2010,
respectively.
Prior to January 1, 2010, the Company consolidated Blackhawk according to the then requirements of ASC Topic 810 as they were
determined to be the primary beneficiary (PB). The Company determined it was the PB as it holds significant variable interests resulting in
it receiving the majority of Blackhawk’s expected losses or the majority of its expected residual returns. Variable interests in Blackhawk
held by the Company are the subordinated convertible note, membership units, guaranty of indebtedness of up to $1,500, warrants, MOSA,
and the design-build agreement.
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As a result of the consolidation, all accounts of Blackhawk have been included with the Company’s financial statements as of May 9,
2008, the date of the transaction. As required by ASC Topic 810 the assets, including cash of $2,225, and liabilities consolidated by the
Company were recorded at their relative fair values. The fair value of the Biofuels Common and Biofuels Preferred Stock transferred as
consideration was determined as further discussed in “Note 2 – Summary of Significant Accounting Policies” and is summarized as
follows:
Common
Series B Preferred
Total
Fair Value
Per Share
0.89
$
9.67
$
Fair Value
$ 1,763
1,231
$ 2,994
The assets and liabilities consolidated by the Company from Blackhawk did not represent a business as defined in ASC Topic 805,
Business Combinations, therefore no goodwill was recorded. Accordingly, the Company consolidated Blackhawk and accounts for the
membership units not held by the Company as a noncontrolling interest.
On January 1, 2010, the Company deconsolidated Blackhawk as a result of adopting ASU No. 2009-17, as it was determined that the
Company was no longer the PB (Blackhawk Deconsolidation). Although the financial arrangements mentioned above resulted in the
Company holding substantial variable interests in Blackhawk, they did not give the Company the power to direct the activities that most
significantly impact Blackhawk’s economic performance. Consequently, subsequent to adopting this accounting pronouncement, the
Company deconsolidated Blackhawk. See “Note 7 – Variable Interest Entities” for additional information. Upon deconsolidation, an equity
investment in Blackhawk of $3,969 and a subordinated convertible note receivable of $24,298 were recognized at fair value using the
option available under ASC Topic 825, Financial Instruments, and the previously consolidated amounts were removed from the
consolidated balance sheet. The difference between the amounts recognized at fair value and the removal of the previously consolidated
amounts was recorded to retained earnings (accumulated deficit).
On February 26, 2010, the Company completed the Blackhawk Merger. See “Note 6 – Acquisitions and Equity Transactions” for
additional information regarding the accounting for the Blackhawk Merger.
NOTE 6 — ACQUISITIONS AND EQUITY TRANSACTIONS
On February 26, 2010, the Company completed its mergers with Biofuels and Blackhawk and on March 8, 2010 the Company
completed the asset purchase of CIE. The Company also completed the asset purchase of Nova Biosource Fuels, Inc. on April 8, 2010, an
asset purchase of Tellurian and ABDF on July 16, 2010 and an asset purchase of Clovis on September 21, 2010.
REG Biofuels, Inc.
On February 26, 2010, the Company completed its merger with Biofuels.
Pursuant to the Second Amended and Restated Agreement and Plan of Merger, executed November 20, 2009, dated and effective as
of the original execution date, May 11, 2009, REG Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company
was merged with and into Biofuels. Upon consummation of the merger, Biofuels became a wholly owned subsidiary of the Company. At
the closing, each share of Biofuels’ Common Stock issued and outstanding immediately prior to the effective time was converted into the
right to receive one share of the Common Stock, $0.0001 par value per share, and each share of Biofuels’ preferred stock issued and
outstanding immediately prior to the effective time was converted into the right to receive one share of the Series A Preferred Stock,
$0.0001 par value per share.
The Company accounted for the Biofuels Merger as a business combination in accordance with ASC Topic 805. When accounting for
the exchange of shares between entities under common control, the entity that receives the net assets shall initially recognize the assets and
liabilities transferred at their carrying amounts in the accounts of the transferring entity at the date of transfer.
As the transaction was accounted for with carryover basis, no goodwill was recognized in conjunction with the Biofuels Merger, and
no significant contingent assets or liabilities were acquired or assumed in the Biofuels Merger.
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Blackhawk Biofuels LLC
On February 26, 2010, the Company completed the Blackhawk Merger.
Pursuant to the Second Amended and Restated Agreement and Plan of Merger, executed November 21, 2009, dated and effective as
of the original execution date, May 11, 2009, REG Danville, LLC, a wholly owned subsidiary of the Company, was merged with and into
Blackhawk. Upon consummation of the merger, Blackhawk became a wholly owned subsidiary of the Company and changed its name to
REG Danville, LLC. Pursuant to the Blackhawk Merger, each outstanding Blackhawk Series A Units (other than such units held by
Biofuels or any affiliate of Biofuels) was converted into 0.4479 shares of Common Stock and 0.0088 shares of Series A Preferred Stock.
Each outstanding warrant for the purchase of series A units of Blackhawk became exercisable for the purchase of shares of Common
Stock, with the number of shares and exercise price per share adjusted appropriately based on the 0.4479 shares exchange ratio. The former
members of Blackhawk have received 132,680 shares of Series A Preferred Stock and 6,753,311 shares of Common Stock.
The following table summarizes the final allocations of the purchase price to the fair values of the assets acquired and liabilities
assumed at the date of acquisition:
Assets (liabilities) acquired:
Cash
Restricted cash
Other current assets
Property, plant and equipment
Goodwill
Other noncurrent assets
Line of credit
Other current liabilities
Notes payable
Other noncurrent liabilities
Fair value of common and preferred stock issued
The acquisition price is summarized as follows:
Fair value of stock issued:
Warrants
Common Stock
Series A Preferred Stock
Total
Allocation at
February 26, 2010
$
$
1
2,002
859
55,253
44,191
231
(350)
(3,621)
(48,743)
(6,802)
43,021
Value at February 26, 2010
Fair Value
per
Share
$
$
$
3.78
6.03
7.77
Fair Value
$ 1,269
40,721
1,031
$ 43,021
Since all of REG Danville’s revenues for the period from February 26, 2010 through December 31, 2010 consisted entirely of tolling
fees from REG Marketing & Logistics Group, LLC (REG Marketing), they were eliminated on a consolidated basis.
Central Iowa Energy LLC
On March 8, 2010, the Company completed its acquisition of substantially all of the assets of CIE.
Pursuant to the Second Amended and Restated Asset Purchase Agreement, executed November 20, 2009, dated and effective as of the
original execution date, May 8, 2009, REG Newton, LLC, a wholly owned subsidiary of the Company, acquired substantially all assets and
liabilities of CIE. At closing, the Company delivered to CIE an aggregate of 158,485 shares of Series A Preferred Stock and 4,252,830
shares of Common Stock.
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The following table summarizes the final allocation of the purchase price to the fair values of the assets acquired and liabilities
assumed at the date of acquisition:
Assets (liabilities) acquired:
Cash
Restricted cash
Other current assets
Property, plant and equipment
Goodwill
Line of credit
Other current liabilities
Notes payable
Other noncurrent liabilities
Fair value of common and preferred stock issued
The acquisition price is summarized as follows:
Fair value of stock issued:
Common Stock
Series A Preferred Stock
Total
Allocation at
March 8, 2010
$
$
403
300
483
32,153
24,593
(550)
(1,927)
(23,925)
(4,652)
26,878
Final Value at March 8, 2010
Fair Value per
Share
$
$
6.03
7.77
Fair Value
$ 25,645
1,233
$ 26,878
Since all of REG Newton’s revenues for the period from March 8, 2010 through December 31, 2010 consisted entirely of contract
manufacturing fees from REG Marketing, they were eliminated on a consolidated basis.
The following pro forma condensed combined results of operations assume that the Blackhawk Merger and CIE Asset Acquisition
were completed as of January 1, 2010, 2009, and 2008, respectively:
Revenues
Net loss
Nova Biosource Fuels, Inc.
2010
$216,609
$ (24,633)
2009
$135,216
$ (74,890)
2008
$157,901
$ (18,613)
On April 8, 2010, the Company entered into a series of agreements related to the asset purchase agreement with Nova Biosource
Fuels, Inc. In September 2009, the United States Bankruptcy Court for the District of Delaware entered an order authorizing the sale of
assets by Nova Biofuels Seneca, LLC (Nova Seneca) and Nova Biosource Technologies, LLC, (Nova Technologies), to a wholly owned
subsidiary of Biofuels, pursuant to terms of an Asset Purchase Agreement, dated as of September 23, 2009 (the Nova Asset Purchase
Agreement). The assets of Nova Seneca and Nova Technologies (the Seneca Assets), including the 60 mmgy biodiesel facility located in
Seneca, Illinois (Seneca Facility) was acquired from Chapter 11 debtors in possession initially by the Company and immediately thereafter
was sold to an entity named Seneca Landlord, LLC (Landlord) which is indirectly owned by three significant stockholders of the Company
or their affiliates: Bunge North America, Inc., USRG Holdco V, LLC and West Central Cooperative. These stockholder parties facilitated
the transactions described above by, among other things, creating Landlord, agreeing to invest $4,000 for repairs to the Seneca Facility and
in consideration therefore received guarantees of certain payments and other obligations from the Company described below.
REG Seneca and Landlord entered into a Lease Agreement that governs REG Seneca’s lease of the Seneca Facility from Landlord.
The Lease has a term of 7 years on a net lease basis covering the debt service on $36,250 of mortgage indebtedness against the Seneca
Facility, as well as taxes, utilities, maintenance and other operating expenses.
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REG Seneca will pay Landlord a $600 per year fee (Fee), payable $150 per quarter, which is guaranteed by the Company. During the
term of the lease, Seneca Holdco has a put option to the Company of the Landlord equity interests after one year, April 8, 2011, provided
the Company has a minimum excess net working capital (as defined) of 1.5 times the put/call price. During this time, the Company also has
a call option of the Landlord equity interests. The put/call price is the greater of three times the initial investment or an amount yielding a
35% internal rate of return. If the put/call is exercised within three years, the Fee and distributions in the first three years are credited to the
put/call price. At the time the put or call is exercised, the Company will issue 150,000 shares of Common Stock to Seneca Holdco.
The Company determined that the Seneca Assets do not constitute a business as defined under ASC Topic 805 on the basis that the
Seneca Assets are not an integrated set of activities or assets that are capable of being conducted or managed in a manner that would
provide any economic benefit or return to the Company. As a result, the Company accounted for the purchase of the Seneca Assets as an
asset acquisition. Neither goodwill nor a gain from a bargain purchase was recognized in conjunction with the acquisition, and no
significant contingent assets or liabilities were acquired or assumed in the acquisition.
See “Note 7 – Variable Interest Entities” for information on the accounting of the aforementioned transaction.
Tellurian Biodiesel, Inc. and American BDF, LLC
On July 16, 2010, the Company issued 598,295 shares and up to an additional 731,250 shares of Common Stock for certain assets of
Tellurian and ABDF. Tellurian was a California-based biodiesel company and marketer. ABDF was a joint venture owned by Golden State
Service Industries, RTI and Tellurian had previously focused on building a national array of small biodiesel plants that would convert used
cooking oil into high quality, sustainable biodiesel. The purchase connects RTI’s national used cooking oil collection system, with more
than 16,000 installations, with the Company’s national network of biodiesel manufacturing facilities. The fair value of the Common Stock
issued as consideration, of $3,027, was allocated to a supply agreement intangible.
Clovis Biodiesel, LLC
On September 21, 2010, REG Clovis, LLC, a wholly owned subsidiary of the Company, acquired substantially all assets of Clovis
Biodiesel, LLC, a wholly owned subsidiary of the ARES Corporation. At closing, the Company delivered to ARES Corporation 2,150,000
shares of Common Stock in exchange for the assets of Clovis and $8,000 cash.
The Company determined that the Clovis assets do not constitute a business as defined under ASC Topic 805 on the basis that the
Clovis assets are not an integrated set of activities or assets that are capable of being conducted or managed in a manner that would provide
any economic benefit or return to the Company. As a result, the Company accounted for the purchase of the Clovis assets as an asset
acquisition. Neither goodwill nor a gain from a bargain purchase was recognized in conjunction with the acquisition, and no significant
contingent assets or liabilities were acquired or assumed in the acquisition.
The following table summarizes the final allocation of the purchase price to the fair values of the assets acquired and liabilities
assumed at the date of acquisition:
Assets acquired:
Cash
Property, plant and equipment
Fair value of common stock issued
66
Final
Allocation at
September 21,
2010
$
$
8,000
2,191
10,191
Table of Contents
The final acquisition price is summarized as follows:
Fair value of stock issued:
Common Stock
NOTE 7 — VARIABLE INTEREST ENTITIES
Final Value at September 21, 2010
Fair Value
Fair Value per
Share
$ 10,191
$
4.74
In June 2009, the FASB amended its guidance on accounting for VIEs through the issuance of ASU No. 2009-17. The new
accounting guidance resulted in a change in our accounting policy effective January 1, 2010. Among other things, the new guidance
requires a qualitative analysis to determine the PB of a VIE, requires continuous assessments of whether an enterprise is the PB of a VIE
and amends certain guidance for determining whether an entity is a VIE. Under the new guidance, a VIE must be consolidated if the
enterprise has both (a) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and
(b) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. This new
accounting guidance was effective for the Company on January 1, 2010 and was applied prospectively.
On January 1, 2010, the Company deconsolidated Blackhawk after performing a reassessment under this new guidance. Blackhawk
had previously been consolidated due to the variable interests held by the Company. Variable interests in Blackhawk held by the Company
as of January 1, 2010 included a subordinated convertible note, membership units, guaranty of indebtedness of up to $1,500, warrants and
the MOSA. Although these financial arrangements resulted in the Company holding substantial variable interests in Blackhawk, they did
not empower the Company to direct the activities that most significantly impact Blackhawk’s economic performance. Consequently,
subsequent to this change in accounting policy, the Company deconsolidated Blackhawk.
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The Company accounted for its interests in Blackhawk using the fair value options available under ASC Topic 825, Financial
Instruments, from the date of deconsolidation on January 1, 2010 until the date of merger on February 26, 2010. The following table
represents the deconsolidating entries as of January 1, 2010:
ASSETS
CURRENT ASSETS:
Cash
Restricted cash
Current assets
Total current assets
Property, plant and equipment, net
Goodwill
Noncurrent assets
TOTAL ASSETS
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Revolving line of credit
Current maturities of notes payable
Current liabilities
Total current liabilities
Notes payable
Other liabilities
Total liabilities
Redeemable preferred stock
EQUITY (DEFICIT):
Company stockholders’ equity (deficit):
Common stock
Common stock - additional paid-in-capital
Warrants - additional paid-in-capital
Retained earnings (accumulated deficit)
Total stockholders’ equity (deficit)
Noncontrolling interests
Total equity (deficit)
TOTAL LIABILITIES AND EQUITY (DEFICIT)
As Reported
January 1,
2010
$
5,855
2,156
29,691
37,702
124,429
16,080
22,347
$ 200,558
$
350
2,756
23,810
26,916
25,749
25,902
78,567
149,122
2
15,676
4,619
(60,905)
(40,608)
13,477
(27,131)
$ 200,558
Adjustment
As Adopted
$
(206)
(2,002)
1,098
(1,110)
(43,209)
—
27,731
$ (16,588)
$
(350)
(815)
(1,144)
(2,309)
(23,630)
(8,516)
(34,455)
—
—
1,192
—
30,152
31,344
(13,477)
17,867
$ (16,588)
$
5,649
154
30,789
36,592
81,220
16,080
50,078
$183,970
$ —
1,941
22,666
24,607
2,119
17,386
44,112
149,122
2
16,868
4,619
(30,753)
(9,264)
—
(9,264)
$183,970
The Company has invested in four network plants owned by independent investment groups. Those companies are SoyMor Biodiesel,
LLC (SoyMor), Western Iowa Energy, LLC (WIE), Western Dubuque Biodiesel, LLC (WDB) and East Fork Biodiesel, LLC (EFB). See
“Note 11 – Investments” for the investment amounts and the related condensed financial information of these investments. The Company
evaluated each investment and determined we do not hold an interest in any of our investments in network plants that would give us the
power to direct the activities that most significantly impact the economic performance of the network plant. As a result, the Company is not
the PB and does not consolidate these VIE’s.
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The Company has 50% ownership in 416 S. Bell, a joint venture where control is equally shared. The Company determined that
neither partner in the joint venture has the power to direct the activities that most significantly impact the economic performance of the
joint venture individually. As a result, the Company is not the PB and does not consolidate this VIE.
The carrying values and maximum exposure for all unconsolidated VIE’s as of December 31, 2010 are as follows:
Investment:
SoyMor
WIE
WDB
416 S Bell
Investments
$
$
1,107
576
2,005
571
4,259
Maximum
Exposure
$ 1,119
576
2,005
2,949
$ 6,649
On April 8, 2010, the Company determined that Landlord was a VIE and was consolidated into the Company’s financial statements
as it is the PB. See “Note 6 – Acquisitions and Equity Transactions” for a description of the acquisition. The Company has a put/call option
with Seneca Holdco to purchase Landlord and currently leases the plant for production of biodiesel, both of which represent a variable
interest in Landlord that are significant to the VIE. Although the Company does not have an ownership interest in Seneca Holdco, it was
determined that the Company is the PB due to the related party nature of the entities involved, the Company’s ability to direct the activities
that most significantly impact Landlord’s economic performance and the design of Landlord that ultimately gives the Company the
majority of the benefit from the use of Seneca’s assets. The Company has elected the fair value option available under ASC Topic 825 on
the $4,000 investment made by Seneca Holdco and the associated put and call options (the Seneca Holdco Liability). Changes in the fair
value after the date of the transaction are recorded in earnings. Those assets are owned by, and those liabilities are obligations of, Landlord,
not the Company.
As of December 31, 2010, the Company has finalized the allocation of fair value in the Seneca transaction to the assets acquired and
liabilities assumed. There was no change in valuation between the preliminary and final allocation. The following table summarizes the
allocation of the purchase price to the fair values of the assets and liabilities recorded by the Company as a result of the transaction and
subsequent consolidation of Landlord:
Assets (liabilities) acquired:
Restricted cash
Property, plant and equipment
Current liabilities
Seneca Holdco liability
Notes payable
Fair value of consideration
69
Final
Allocation at
April 8, 2010
$
$
4,000
39,314
(400)
(6,664)
(36,250)
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Table of Contents
NOTE 8 — INVENTORIES
Inventories consist of the following at December 31:
Raw materials
Work in process
Finished goods
Total
NOTE 9 — PROPERTY, PLANT AND EQUIPMENT
Company owned property, plant and equipment consists of the following at December 31:
Land
Building and improvements
Leasehold improvements
Machinery and equipment
Accumulated depreciation
Construction in process
Total
Seneca Landlord property, plant and equipment consists of the following at December 31:
Building and improvements
Leasehold improvements
Machinery and equipment
Accumulated depreciation
Construction in process
Total
NOTE 10 — INTANGIBLE ASSETS
Intangible assets consist of the following at December 31:
Raw material supply agreement intangibles
Ground lease
Accumulated amortization
Total intangible assets
2010
$ 7,297
281
21,407
$28,985
2009
$
743
22
12,075
$12,840
2010
704
$
21,834
6,556
82,007
111,101
(12,647)
98,454
67,937
$166,391
2009
$ —
12,122
4,932
51,801
68,855
(10,488)
58,367
66,062
$124,429
2010
$18,445
6
24,824
43,275
(723)
42,552
140
$42,692
2009
$—
—
—
—
—
—
—
$—
2010
$3,027
200
(58)
$3,169
2009
$7,025
200
(22)
$7,203
The raw material supply agreement acquired during 2010 (see “Note 6 – Acquisitions and Equity Transactions”) is amortized over its
15 year term based on actual usage under the agreement. The Company determined the estimated amount of raw materials to be purchased
over the life of the agreement to calculate a per pound rate of consumption. The rate is then multiplied by the actual usage each period for
expense reporting purposes. As discussed in Note 2 – Summary of Significant Accounting Policies, the raw material supply agreement
intangible recorded as of December 31, 2009 was charged off during 2010.
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Amortization expense of $36, $22 and $0 for intangible assets is include in cost of goods – biodiesel in the statement of operations for
the years ended December 31, 2010, 2009 and 2008, respectively.
Estimated amortization expense for fiscal years ended December 31 is as follows:
2011
2012
2013
2014
2015
Thereafter
Total
$
125
125
173
181
189
2,376
$ 3,169
NOTE 11 — INVESTMENTS
Investments consist of the following at December 31:
Investment and accumulated earnings in:
SoyMor
WIE (a)
WDB (b)
416 S Bell
CIE (c)
EFB (d)
Total (e)
2010
2009
Ownership
Balance
Ownership
Balance
9%
2%
8%
50%
$
1,107
576
2,005
571
—
—
$ 4,259
9%
2%
8%
50%
4%
4%
$
1,354
602
2,195
598
1,000
400
$ 6,149
(a) As of May 2010, the accounting method for this investment changed from the equity method to the cost method due to the Company no
longer having the ability to significantly influence the operations of WIE.
(b) As of August 2010, the accounting method for this investment was changed from the equity method to the cost method due to the
Company no longer having the ability to significantly influence the operations of WDB.
(c) During the first quarter of 2010, the Company purchased Central Iowa Energy LLC (See Note 6 – Acquisitions and Equity
Transactions). Through the purchase price allocation, the Company eliminated its investment in Central Iowa Energy.
(d) As of June 2010, the Company impaired the remaining investment amount of $400. On December 28, 2010, East Fork Biodiesel (EFB)
filed its Articles of Dissolution with the Iowa Secretary of State.
(e) The investments include deferred tax assets of $942 and $677 as of December 31, 2010 and 2009, respectively, fully offset by a
valuation allowance.
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The condensed financial information of equity method investments as of and for the years ended December 31, is as follows:
CONDENSED BALANCE SHEET:
Total current assets
Total noncurrent assets
Total current liabilities
Total noncurrent liabilities
CONDENSED STATEMENT OF OPERATIONS:
Sales
Costs of goods sold
Operating and other expenses
Net loss
2010
2009
$
$
352
23,407
$
585
$ 5,270
$
$
15,530
90,846
$
31,260
$ 9,303
2010
6,895
(5,970)
(6,838)
(5,913)
$
$
2009
74,164
(70,859)
(6,551)
(3,246)
$
$
2008
$ 144,734
(139,515)
(10,753)
$ (5,534)
NOTE 12 – OTHER ASSETS
Prepaid expense and other current assets consist of the following at December 31:
Income taxes receivable
Commodity derivatives and related collateral, net
Prepaid insurance
Prepaid service contracts
Prepaid raw materials
Deposits
Network Plant notes receivable (a)
Other
Total
2010
$ —
1,636
1,088
215
—
306
—
688
$ 3,933
2009
$
553
1,774
1,105
272
325
—
483
177
$ 4,689
a)
The Company has certain arrangements with the Network Plants that require funds to be remitted to the Network Plant upon sale of
product to the end customer before amounts have been collected by the Company. In exchange, the Network Plant agrees to pay the
Company a fee equal to 50 basis points in excess of the Company’s cost of working capital as computed from time to time.
Other noncurrent assets consist of the following at December 31:
Debt issuance costs (net of accumulated amortization of $1,381 in 2010 and
$318 in 2009)
Spare parts inventory
Prepaid taxes
Other
Total
72
2010
2009
$
2,790
4,498
—
533
$ 7,821
$
1,420
4,726
412
937
$ 7,495
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NOTE 13 — ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following at December 31:
Accrued property taxes
Accrued employee compensation
Accrued interest
Unfavorable lease obligation, current portion
Other
Total
Other noncurrent liabilities consist of the following at December 31:
Fair value of interest rate swap
Liability for unrecognized tax benefits
Deferred grant revenue
Straight-line lease liability
Deferred credit related to investment in Blackhawk
Total
2010
$
916
987
249
1,129
268
$ 3,549
2009
$
792
858
193
1,829
525
$ 4,197
2010
$
612
1,500
745
2,524
—
$ 5,381
2009
$
1,031
1,500
—
—
7,484
$ 10,015
As a result of the merger with Blackhawk on February 26, 2010, the Company recognized a deferred tax asset and an associated
deferred credit related to excess taxable basis over book basis on its investment in Blackhawk. The Company reflected the related amounts
on its consolidated balance sheet as of December 31, 2009 as the acquisition represented a recognizable subsequent event that will reverse
in the foreseeable future. The deferred credit was reversed through retained earnings (accumulated deficit) on January 1, 2010 upon
adoption of ASU 2009-17 resulting in the deconsolidation of Blackhawk.
The unfavorable lease obligation is amortized over the contractual period the Company is required to make rental payments under the
lease. The amount expected to be amortized in 2011 of $1,129 is presented in accrued expenses and other liabilities.
The unfavorable lease obligation consists of the following:
Unfavorable lease obligation
Accumulated amortization
Total unfavorable lease obligation
Current portion
$
2010
13,612
(1,190)
12,422
(1,129)
$ 11,293
$
2009
13,612
—
13,612
(1,829)
$ 11,783
The unfavorable lease obligation is amortized over the contractual period the Company is required to make rental payments under the
lease.
An amortization benefit of $1,190 and $0 for the years ended December 31, 2010 and 2009, respectively, for noncurrent liabilities is
included in the cost of biodiesel sales.
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Estimated amortization benefit for the fiscal years ending December 31 is as follows:
2011
2012
2013
2014
2015
Thereafter
$
1,129
1,129
1,129
1,129
1,129
6,777
$ 12,422
On May 1, 2010, the Company amended its lease of a terminal facility in Houston, Texas. The amended agreement is through
December 2021 and changes the monthly lease payment. For the year ending December 31, 2010, the fixed payment is reduced from $515
to $165. For the year ending December 31, 2011, the fixed monthly lease payment will increase on a quarterly basis throughout the year
resulting in monthly lease payments of $215, $275, $350 and $450. From January 1, 2012, and continuing thereafter, the monthly lease
payment will be $515, subject to escalation, on an annual basis, utilizing the producer price index. Due to the scheduled increase in lease
payments over the life of the lease, the Company is recording a straight-line lease liability related to the monthly payments pursuant to ASC
Topic 840, Leases. The straight-line lease liability is recorded in other liabilities on the consolidated balance sheet.
NOTE 14 — BORROWINGS
The Company’s borrowings are as follows:
REG Danville term loan
REG Newton term loan
Revenue bond
Other
Total Notes Payable
Seneca Landlord term loan
$
2010
23,634
23,611
2,030
1,050
$
50,325
$ 36,250
2009
$ 24,445
—
2,360
1,700
$
$
28,505
—
On February 26, 2010, in connection with the Blackhawk Merger, one of the Company’s subsidiaries, REG Danville, assumed a
$24,600 term loan. The term loan matures November 2011. The Illinois Finance Authority guarantees 61% of the term loan and the
remaining amount is secured by the Danville facility. The term loan bears interest at a fluctuating rate per annum equal to the LIBOR rate
plus the applicable margin of 400 basis points through December 31, 2010 and 2009 (effective rate at December 31, 2010 and 2009 was
4.26% and 4.23%, respectively). Amounts outstanding on the term loan were $23,634 and $24,445 as of December 31, 2010 and 2009,
respectively. Until June 30, 2010, REG Danville was required to make only monthly payments of accrued interest. Beginning on July 1,
2010, REG Danville is required to make monthly principal payments equal to $135 plus accrued interest. In addition to these monthly
payments, as the result of an amendment to the loan agreement, REG Danville is required to make annual principal payments equal to 50%
of REG Danville’s Excess Cash Flow, or the 50% Excess Payment, with respect to each fiscal year until $2,500 has been paid from the
Excess Cash Flow. Excess Cash Flow is equal to EBITDA less certain cash payments made during the period including principal payments,
lease payments, interest payments, tax payments, approved distributions and capital expenditures. Excess Cash Flow is measured annually;
therefore, no amounts have yet been paid. Thereafter, REG Danville is required to make annual payments equal to 25% of its Excess Cash
Flow.
REG Danville also had a revolving line-of-credit with a borrowing capacity of $190 which expired on November 30, 2010. The
revolving line of credit accrues interest at the prime rate plus 25 basis points or the 30 day LIBOR plus 300 basis points as determined at
the election of REG Danville at the time of borrowing and is secured by all plant assets owned by REG Danville. Borrowings outstanding
under the line-of-credit were $0 and $350 as of December 31, 2010 and 2009, respectively.
In March 2010, as part of the CIE Asset Purchase, REG Newton assumed the term debt of CIE and refinanced the term debt (AgStar
Loan). Amounts outstanding as of December 31, 2010 of $23,611 require interest to be accrued based on 30 day LIBOR or 2.00%,
whichever is higher, plus 300 basis points (effective rate at December 31, 2010 was 5.00%). The debt is secured by all plant assets owned
by REG Newton. The Company has a limited guarantee related to the obligations under the AgStar Loan, which provides that the company
will not be liable for more than the unpaid interest on the AgStar Loan that has accrued during an 18-month period beginning on March 8,
2010. REG Newton is required to make interest only payments on a monthly basis through February 2011. Beginning in March 2011, REG
Newton will be required to make reduced principal payments of $60 plus interest through September 2011. Beginning in October 2011,
REG Newton will be required to make principal payments of $120 plus interest until the maturity date of March 8, 2013. Beginning on
January 1, 2011, under the AgStar Loan, REG Newton is required to maintain a debt service reserve account (Debt Reserve) equal to 12-
monthly payments of principal and interest on the AgStar Loan. At each fiscal year end thereafter until such time as the balance in the Debt
Reserve contains the required 12-months of payments, REG Newton must deposit an amount equal to its Excess Cash Flow. The AgStar
Loan agreement defines Excess Cash Flow as EBITDA, less the sum of required
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debt payments, interest expense, any increase in working capital from the prior year until working capital exceeds $6,000, up to $500 in
maintenance capital expenditure, allowed distributions and payments to fund the Debt Reserve. Also beginning on January 1, 2011,
provided that REG Newton is in compliance with the working capital ratios and the Debt Reserve is funded, REG Newton must make an
annual payment equal to 50% of its Excess Cash Flow calculated based upon the prior year’s audited financial statements within 120 days
of the fiscal year end.
In March 2010, REG Newton obtained a revolving line-of-credit (AgStar Line) with an aggregate borrowing capacity of $2,350 which
expired on March 7, 2011. The debt is secured by REG Newton’s account receivable and inventory. The Company has guaranteed the
obligations under the AgStar Line. The revolving line of credit accrues interest at 30 day LIBOR or 2.00%, whichever is higher, plus 300
basis points (effective rate at December 31, 2010 was 5.00%). Borrowings outstanding under the line-of-credit were $550 as of
December 31, 2010.
On April 9, 2010, Landlord entered into a note payable agreement with West LB. The balance of the note as of December 31, 2010 is
$36,250. The note requires that interest be accrued at different rates based on whether it is a Base Rate Loan or Eurodollar Loan at either
2.0% over the higher of 50 basis points above the Federal Funds Effective Rate or the WestLB prime rate for Base Rate Loans or 3.0% over
adjusted LIBOR for Eurodollar Loans. The loan was a Eurodollar Loan through December 31, 2010 (effective rate at December 31, 2010
was 3.26%). Interest is paid monthly. Principal payments have been deferred until April 2012. At that time, Landlord will be required to
make estimated monthly principal payments of $201 with remaining unpaid principal due at maturity on April 8, 2017. The note payable is
secured by the property located at the Seneca location.
On April 9, 2010, REG Marketing & Logistics Group, LLC and REG Services, together with the Company as guarantor, (the WestLB
Loan Parties) entered into a Revolving Credit Agreement (WestLB Revolver) with WestLB AG (WestLB). The initial available credit
amount under the WestLB Revolver is $10,000 with additional lender increases up to a maximum commitment of $18,000. Advances under
the WestLB Revolver are limited to the amount of certain qualifying assets of the WestLB Loan Parties that secure amounts borrowed. The
WestLB Revolver requires the WestLB Loan Parties to maintain compliance with certain financial covenants. The term of the WestLB
Revolver is two years. The interest rate varies depending on the loan type designation and is either 2.0% over the higher of 50 basis points
above the Federal Funds Effective Rate or the WestLB prime rate for base rate loans or 3.0% over adjusted LIBOR for Eurodollar loans
(effective rate at December 31, 2010 was 3.26%). The WestLB Revolver is secured by assets and ownership interests of REG Marketing
and REG Services. Borrowings outstanding under the line-of-credit were $9,000 as of December 31, 2010.
The credit agreements of the subsidiaries mentioned above contain various customary affirmative and negative covenants. Many of
the agreements, but not all, also contain certain financial covenants, including a current ratio, net worth ratio, fixed charge coverage ratio,
maximum funded debt to earnings before interest depreciation and amortization ratio and a maximum capital expenditure
limitation. Negative covenants include restrictions on incurring certain liens; making certain payments, such as distributions and dividend
payments; making certain investments; transferring or selling assets; making certain acquisitions; and incurring additional indebtedness.
The agreements generally provide that the payment of obligations may be accelerated upon the occurrence of customary events of default,
including, but not limited to, non-payment, change of control, or insolvency.
The Company was in compliance with all restrictive financial covenants associated with its borrowings as of December 31, 2010 with
the exception to the REG Danville bank debt. REG Danville received a waiver from the bank that cured the financial covenants
noncompliance on the bank debt as of December 31, 2010. We expect that REG Danville will not be in compliance as of March 31, 2011,
which will require us to obtain another waiver.
Maturities of the borrowings are as follows for the years ending December 31:
2011
2012
2013
2014
2015
Thereafter
Total
Less: current portion
75
$
25,551
3,740
24,234
2,766
2,757
27,527
86,575
(25,551)
$ 61,024
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NOTE 15 — INCOME TAXES
The tax effects of temporary differences that give rise to the Company’s deferred tax assets and liabilities at December 31 are as
follows:
Deferred Tax Assets:
Property, plant and equipment
Goodwill
Net operating loss carryforwards
Tax credit carryforwards
Alternative minimum tax carryforwards
Start-up costs
Stock-based compensation
Investment in Blackhawk
Seneca Holdco liability
Notes payable - Seneca Landlord, LLC
Deferred revenue
Houston terminal lease
Other
Deferred tax assets
Deferred Tax Liabilities:
Prepaid expenses
Property, plant and equipment
Property, plant and equipment - Seneca Landlord, LLC
Deferred revenue cost of goods sold
Other
Deferred tax liabilities
Net deferred tax assets
Valuation allowance
Net deferred taxes
2010
2009
Current
Noncurrent
Current
Noncurrent
$ —
—
—
—
—
—
—
—
—
—
3,599
—
1,248
4,847
(536)
—
—
(3,450)
(67)
(4,053)
794
(794)
$ —
$ —
14,028
24,029
3,068
—
1,580
1,725
—
4,014
13,983
287
1,673
579
64,966
—
(10,022)
(16,477)
—
(41)
(26,540)
38,426
(36,926)
1,500
$
$ —
—
—
—
—
—
—
—
—
—
2,192
—
600
2,792
(534)
—
—
(1,279)
—
(1,813)
979
(979)
$ —
$
4,932
15,720
12,057
3,068
211
—
5,332
6,163
—
—
—
823
559
48,865
—
—
—
—
(141)
(141)
48,724
(47,224)
1,500
$
The Company reviews the carrying amount of its deferred tax assets to determine whether the establishment of a valuation allowance
is necessary. If it is more-likely-than-not that all or a portion of the Company’s deferred tax assets will not be realized, based on all
available evidence, a deferred tax valuation allowance would be established. Consideration is given to positive and negative evidence
related to the realization of the deferred tax assets. Significant judgment is required in making this assessment.
In evaluating the available evidence, management considers, among other factors, historical financial performance, expectation of
future earnings, length of statutory carry forward periods, experience with operating loss and tax credit carry forwards not expiring unused,
tax planning strategies and time of reversals of temporary differences. In evaluating losses, management considers the nature, frequency
and severity of losses in light of the conditions giving rise to those losses. As of December 31, 2010, management concluded that the book
and tax losses that result in cumulative losses represent negative evidence. This evidence provides negative evidence that cannot be
overcome by positive and objectively verifiable evidence. Based on this evaluation, management has concluded a valuation allowance was
required for the entire amount of the Company’s net deferred tax assets since positive, objectively verifiable evidence was not available to
prove that it was more-likely-that-not that the Company would be able to realize these assets.
If future results provide positive, objectively verifiable evidence, that evidence will be considered in determining whether some or all
of the valuation allowance will be reversed.
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Income tax benefit (expense) for the years ended December 31 is as follows:
Current income tax (expense) benefit
Federal
State
Deferred income tax (expense) benefit
Federal
State
Net operating loss carryforwards
Other
Income tax benefit before valuation allowances
Deferred tax valuation allowances
Income tax benefit (expense)
2010
2009
2008
$
$
—
—
—
$
—
—
—
628
518
1,146
(9,419)
(962)
11,972
(481)
1,110
1,110
2,142
$ 3,252
(3,267)
(467)
7,041
(316)
2,991
2,991
(48,203)
$ (45,212)
(219)
(79)
8,566
—
8,268
9,414
—
$ 9,414
Income tax expense attributable to operations differed from the expense computed using the federal statutory rate primarily as a result
of the change in tax status of the Company from its predecessors, state income taxes, net of federal income tax effects, income or loss from
the change in fair value of embedded conversion feature of preferred stock, incentive stock options and various tax credits available to the
Company as a result of its manufacture and sale of biodiesel. A comparison of the statutory and effective income tax benefits and reasons
for related differences follows:
U.S. Federal income tax benefit at a statutory rate of 35 percent
Minority interest taxed at member level
State taxes, net of federal income tax benefit
(Gain)/loss on embedded derivative
Transaction costs
Conversion of stock options to restricted stock units
Other, net
Total benefits for income taxes before valuation allowances
Valuation allowances
Total (benefits) expenses for income taxes
$
2010
(8,452)
—
(863)
3,166
386
3,917
736
(1,110)
(2,142)
$ (3,252)
$
2009
(7,895)
3,177
(1,128)
936
1,210
—
709
(2,991)
48,203
$ 45,212
$
2008
(8,853)
976
(981)
(834)
—
—
278
(9,414)
—
$ (9,414)
In accordance with ASC Topic 740, Income Taxes, the Company periodically reviews its portfolio of uncertain tax positions. An
uncertain tax position represents the Company’s expected treatment of a tax position taken in a filed tax return, or planned to be taken in a
tax return not yet filed, that has not been reflected in measuring income tax expense for financial reporting purposes. The Company does
not recognize income tax benefits associated with uncertain tax positions where it is determined that it is not more-likely-than-not, based on
the technical merits, that the position will be sustained upon examination.
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A reconciliation of the total amounts of unrecognized tax benefits at December 31 is as follows:
Beginning of year balance
Increases to tax positions expected to be taken
Increases to tax positions taken during prior years
Decreases to tax positions taken during prior years
Decreases due to lapse of statute of limitations
End of year balance
$
2010
1,500
—
—
—
—
$ 1,500
$
2009
1,500
—
—
—
—
$ 1,500
2008
$ —
1,500
—
—
—
$ 1,500
The amount of unrecognized tax benefits at December 31, 2010, 2009 and 2008 that would affect the effective tax rate if the tax
benefits were recognized was $1,028. The remaining liability was related to tax positions for which there is a related deferred tax asset. The
Company does not believe it is reasonably possible that the amounts of unrecognized tax benefits will significantly increase or decrease
over the next twelve months. Interest and penalties related to unrecognized tax benefits are recognized in income tax expense. The
Company has not recorded any such amounts in the periods presented.
The Company files it’s tax returns according to the tax laws of the jurisdictions in which it operates, which includes the U.S. federal
jurisdictions, and various state jurisdictions. The U.S. Internal Revenue Service has completed its examination of the Company’s federal
income tax returns for all periods through 2008. Various state income tax returns also remain subject to examination by taxing authorities.
NOTE 16 — STOCK-BASED COMPENSATION
Renewable Energy Group:
On July 31, 2006, the Biofuels Board approved the 2006 Stock Incentive Plan (the 2006 Plan). The 2006 Plan provides for 2,500,000
shares of Biofuels Common Stock to be available for option grants. Option grants are awarded at the discretion of the Board. Options
expire ten years from the date of the grant. There are no performance conditions associated with the options.
The Biofuels Common Stock options are generally protected from anti-dilution via adjustments for any stock dividends, stock split,
combination or other recapitalization.
On May 6, 2009, the Company’s Board approved the 2009 Stock Incentive Plan (the 2009 Plan). The 2009 Plan provides for
5,400,000 shares of Company Common Stock to be made issuable under the plan. Restricted stock or restricted stock units may be awarded
under the plan at the discretion of the Board. Restricted stock units may not be sold, transferred, pledged, assigned, or otherwise alienated
until the lapse of the period of restriction. The restrictions will lapse with respect to the restricted stock units upon vesting, at which point
each restricted stock unit (RSU) will be immediately converted into one share of common stock. The restricted stock units have no
conversion price.
In connection with a change of control, Biofuels, at its discretion, may cancel options in exchange for a payment per share in cash of
an amount equal to the excess, if any, of the change of control price per share over the exercise price of the option. On August 18, 2010, the
Biofuels Board cancelled the stock options held by company employees. This cancellation was concurrent with the issuance of the
restricted stock units under the 2009 Plan. The remaining options held by non-employees were assumed by the Company and will remain
outstanding under the 2009 Plan with the same conditions as under the 2006 Plan.
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There were no newly issued stock options granted during 2009 or 2010. For purposes of determining the fair value of stock options
awarded in 2008, the Company used a Black-Scholes option pricing model and the assumptions set forth in the table below:
Weighted average fair value of options granted (per option)
Dividend yield
Range of risk-free interest rates
Weighted average risk-fee interest rate
Weighted average expected volatility
Weighted average expected life in years
Weighted average fair value of common stock
2008
$ 0.06
0%
2.94 - 4.96%
4.78%
88%
5.6
$ 0.89
As provided for by ASC Topic 718, the Company applied the simplified method in estimating the average expected life of the
options. The simplified method assumes that early exercise of the option will occur between the vesting date and expiration date of the
option.
Because the Company’s stock is not publicly traded, the Company used the average historical volatility rate for publicly traded
companies that are engaged in similar alternative fuel activities to those of the Company. In order to estimate the expected volatility as of
the grant date, the Company used a simple average of the volatility for a similar time period as the expected life of the options and the
current implied volatility of exchange traded options.
The following table summarizes information about Common Stock options granted, exercised, forfeited, vested and exercisable:
Options outstanding - January 1, 2008
Granted
Exercised
Forfeited
Options outstanding - December 31, 2008
Granted
Exercised
Forfeited
Options outstanding - December 31, 2009
Granted
Exercised
Forfeited
Cancelled
Options outstanding - December 31, 2010
Options exercisable - December 31, 2010
Amount of
Options
2,303,052
35,000
—
(53,500)
2,284,552
—
—
(76,000)
2,208,552
—
—
(30,500)
(1,959,236)
218,816
218,816
Weighted
Average Exercise
Price
$
$
$
$
$
$
$
$
$
$
9.54
10.25
9.78
9.55
9.93
9.54
9.50
9.55
9.50
9.50
Weighted
Average
Contractual
Term
9.2 years
7.7 years
6.8 years
7.1 years
6.5 years
5.6 years
5.6 years
The following table summarizes additional information about stock options as of December 31:
Estimated unrecognized compensation cost for nonvested
options
Weighted average term the expense will be recognized
2010
2009
2008
$
—
0.0 years
$
144
0.7 years
$
1,989
0.9 years
All stock options that remain outstanding are fully vested and exercisable.
There was no intrinsic value of options granted, exercised or outstanding during the periods presented.
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On August 18, 2010, the Company Board approved the distribution of restricted stock units to employees of the Company. The
cancellation of the 2006 Plan stock options and issuance of the restricted stock units was accounted for in accordance with ASC Topic 718.
We followed modification accounting which requires the Company to recognize expense based upon the excess fair value of the new
awards over the original awards as determined on the modification date. The excess fair value was calculated based upon the difference
between the fair value of the restricted stock unit price at issuance and the fair value of the stock options cancelled utilizing the Black-
Scholes options pricing model as of the same date. The Company used the assumptions set forth in the table below for the Black-Scholes
options pricing model:
The weighted average fair value of restricted stock units issued (per unit)
Dividend yield
Weighted average risk-free interest rate
Weighted average expected volatility
Expected life in years
2010
$0.13 - $0.75
0%
0.5% - 1.4%
40% - 50%
1.25 - 4.00
The 2009 Plan is generally protected from anti-dilution via adjustments for any stock dividends, stock split, combination or other
recapitalization.
The following table summarizes information about the Company’s Common Stock restricted stock units granted, exercised, forfeited,
vested and exercisable:
Awards outstanding - December 31, 2009
Issued
Forfeited
Awards outstanding - December 31, 2010
Amount of
Awards
—
2,890,723
(5,500)
2,885,223
Weighted
Average Issue
Price
$
$
$
5.00
4.74
5.00
The restricted stock units issued will cliff vest at the earlier of expressly provided service or performance conditions. The service
period for these RSU awards is a three year period from the grant date. The performance conditions provide for immediate vesting upon
various conditions including a change in control or other common stock liquidity events. The Company is recording the stock
compensation expense over the three year service period.
Stock-based compensation cost relating to the stock options and restricted stock units was $1,376, $2,522 and $3,574 for the years
ended December 31, 2010, 2009 and 2008, respectively. The stock-based compensation costs were included as a component of selling,
general and administrative expenses. The remaining expense yet to be recorded for the restricted stock unit awards is $10,580 over a period
of 2.7 years.
Blackhawk:
Blackhawk had an equity-based compensation plan which provided for the issuance of options to purchase an aggregate of 650,000
units of Blackhawk to members of the Blackhawk Board of Managers, for the purpose of providing services to facilitate the construction
and planned future operations of the plant. Options to purchase the entire 650,000 units were issued on June 30, 2006. The options are
exercisable at a purchase price of $1.00 per unit at any time from and after the date on which the plant commences operations (vesting date)
and will continue for a period of one year following such date, after which all such rights shall terminate. During December 2008,
Blackhawk commenced operations and at that time the unit options were fully vested.
On May 9, 2008, Blackhawk issued an option for the purchase of an additional 100,000 units to an outside consultant for services
related to the project. This option is exercisable at a purchase price of $2.00 per unit at any time from and after the date on which the plant
commences operations and will continue for a period of seven years following such date, after which all such rights shall terminate.
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The following table presents the weighted average assumptions used to estimate the fair values of the units underlying the options
granted to members of the board of managers and consultant in the periods presented, using the Black-Scholes option pricing model. The
risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of
grant.
Weighted average fair value of options granted (per option)
Dividend yield
Weighted average - risk fee interest rate
Weighted average - expected volatility
Weighted average - expected life in years
2008
$1.00
0%
5%
25%
3
On February 26, 2010, the Blackhawk stock-based compensation plan was cancelled due to the merger with the Company. The
outstanding options at the time of the merger were converted into Common Stock warrants of the Company.
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NOTE 17 — RELATED PARTY TRANSACTIONS
Related parties include certain investors as well as entities in which the company has an equity method investment or an investment
combined with a MOSA or board seat. Investors defined as related parties include (i) the investor having ten percent or more ownership,
including convertible preferred stock, in the Company or (ii) the investor holding a board seat on the Company’s Board of Directors.
Summary of Related Party Transactions
Revenues - Biodiesel sales
Revenues - Services
Cost of goods sold - Biodiesel
Cost of goods sold - Services
Selling, general, and administrative expenses
Other income
Interest expense
Interest income
Purchase of property, plant and equipment
Proceeds from the sale of long lived assets
(a) Represents transactions with related parties as follows:
West Central
E D & F Man
Bunge
Network Plants
(b) Represents transactions with related parties as follows:
Network Plants
E D & F Man
(c) Represents transactions with related parties as follows:
West Central
Network plants
Bunge
E D & F Man
(d) Represents transactions with Network Plants
(e)
Represents transactions with related parties as follows:
West Central
416 S. Bell, LLC
Bunge
E D & F Man
(f) Represents transactions with ED&F Man
(g) Represents transactions with related parties as follows:
West Central
Bunge
(h) Represents transactions with Blackhawk Biofuels
(i) Represents transactions with West Central
(j) Represents transactions with ED&F Man
82
2010
4,261 (a)
$
$
660 (b)
$ 112,891 (c)
291 (d)
$
1,601 (e)
$
— (f)
$
334 (g)
$
180 (h)
$
— (i)
$
— (j)
$
2009
$ 17,157 (a)
$
1,121 (b)
$ 53,379 (c)
$ — (d)
1,836 (e)
$
355 (f)
$
26 (g)
$
$ — (h)
$ — (i)
3,032 (j)
$
2008
$ 10,723 (a)
$
5,236 (b)
$ 39,349 (c)
$ — (d)
$
1,946 (e)
$ — (f)
$ — (g)
$ — (h)
$
416 (i)
$ — (j)
$
$
$
$
20
4,241
—
—
4,261
660
—
660
$
14,739
1,493
96,659
—
$ 112,891
$
$
$
$
174
344
993
90
1,601
123
211
334
11
$
14,299
2,807
40
$ 17,157
$
$
1,121
—
1,121
$ 21,893
—
31,183
303
$ 53,379
$
$
328
688
617
203
1,836
$ —
26
26
$
30
$
10,023
—
670
$ 10,723
$
$
4,843
393
5,236
$ 38,851
—
—
498
$ 39,349
$
$
1,309
603
—
34
1,946
$ —
—
$ —
Table of Contents
Summary of Related Party Balances
Accounts receivable
Prepaid inventory
Accounts payable
(a) Represents balances with related parties as follows:
West Central
Network Plants
Bunge
E D & F Man
(b) Represents balances with Bunge
(c) Represents balances with related parties as follows:
West Central
Network Plants
Bunge
E D & F Man
West Central Cooperative
2010
$
1,146 (a) $
$ — (b) $
3,827 (c) $
$
2009
2,328 (a)
269 (b)
5,415 (c)
$
$
22
12
46
1,066
1,146
$
$
123
1,065
24
1,116
2,328
$
2,539
2
1,286
—
$ 3,827
$
2,951
2,293
127
44
$ 5,415
The Company purchases once-refined soy oil from West Central. Purchases from West Central were $14,739 $21,893 and $38,848
for the years ended December 31, 2010, 2009 and 2008, respectively. The Company also had biodiesel and co-product sales which totaled
$20, $11 and $30 for the years ended December 31, 2010, 2009 and 2008, respectively.
West Central leases the land under the Company’s production facility at Ralston, Iowa to the Company at an annual cost of one
dollar. The Company is responsible for the property taxes, insurance, utilities and repairs for the facility relating to this lease. The lease has
an initial term of twenty years and the Company has options to renew the lease for an additional thirty years.
At the time of the signing of the contribution agreement, the Company executed an asset use agreement with West Central to provide
the use of certain assets, such as office space, maintenance equipment and utilities. The agreement requires the Company to pay West
Central its proportionate share of certain costs incurred by West Central. This agreement has the same term as the land lease. Selling,
general and administrative expenses included in the statement of operations related to this agreement totaled $40, $40 and $40 for the years
ended December 31, 2010, 2009 and 2008, respectively.
At the time of the signing of the contribution agreement, the Company entered into a contract for services with West Central, to
provide certain corporate and administrative services such as human resources, information technology, and accounting. The agreement
requires the Company to pay West Central the proportionate share of the costs associated with the provision of services, plus a 15%
margin. The agreement had an initial one-year term and is cancellable thereafter upon six months notice by either party. Selling, general,
and administrative expenses included in the statement of operations related to this agreement totaled $134, 288 and $1,269 for the years
ended December 31, 2010, 2009 and 2008, respectively.
In addition to the amounts above, the Company recorded $0, $0 and $3 of other costs of goods sold for the years ended December 31,
2010, 2009 and 2008, respectively.
The Company also acquired $0, $0 and $416 of property, plant and equipment from West Central during the years ended
December 31, 2010, 2009 and 2008, respectively.
In addition to the amounts above, the Company recorded interest expense of and $123, $0 and $0 for the December 31, 2010, 2009
and 2008, respectively.
Accounts receivable includes net balances due from West Central of $22 and $123 at December 31, 2010 and 2009, respectively.
Accounts payable includes net balances due to West Central of $2,539 and $2,951 at December 31, 2010 and 2009, respectively.
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Bunge North America
The Company purchases feedstocks for the production of biodiesel. Purchases from Bunge were $96,659, $31,183 and $0 for the
years ended December 31, 2010, 2009 and 2008, respectively. The Company also made sales of biodiesel and raw materials to Bunge of $0,
$2,807 and $0 for the years ended December 31, 2010, 2009 and 2008, respectively.
During July 2009, the Company entered into an agreement for Bunge to provide services related to the procurement of raw materials
and the purchase and resale of biodiesel produced by the Company. The agreement is a three-year term and either party has the ability to
cancel the agreement after the term ends. Selling, general and administrative expenses included in the statement of operations related to this
agreement totaled $480 and $461 for the years ended December 31, 2010 and 2009, respectively. The Company incurred $211 and $26 in
interest expense for the years ended December 31, 2010 and 2009, respectively, related to the purchase and resale of biodiesel. Also, as part
of the agreement, the Company is required to pay an incentive fee to Bunge for meeting certain hedging goals utilizing Bunge’s advice.
Selling, general and administrative expenses included in the statement of operations include incentive fees of $513 and $156 for the years
ended December 31, 2010 and 2009, respectively.
The Company has accounts receivable due from Bunge of $46 and $24 as of December 31, 2010 and 2009, respectively. The
Company has prepaid inventory balance of $0 and $269 as of December 31, 2010 and 2009, respectively. The Company has accounts
payable due to Bunge of $1,286 and $127 as of December 31, 2010 and 2009, respectively.
E D & F Man Holdings Ltd.
In August 2006, at the time of the initial closing of its preferred stock investment, the Company entered into a glycerin marketing
agreement and various terminal lease agreements with one of E D & F’s then wholly owned subsidiaries, Westway Feed Products, Inc.
(Westway). Under the glycerin marketing agreement, Westway has an exclusive right to market the glycerin produced at each of the
Company’s owned and managed facilities. For the years ended December 31, 2010, 2009 and 2008, fees of $90, $203 and $34, respectively,
were paid according to the agreement. This contract has a term of five years and automatically renews in one-year periods thereafter unless
terminated by either party. The Company also has entered into a master terminal lease agreement and several leases for terminals with
another wholly-owned subsidiary of E D & F, Westway Terminal Company, Inc. These leases have terms ranging from one month to four
years. The Company leased two terminals for aggregate fees of $0, $303 and $498 during the years ended December 31, 2010, 2009 and
2008, respectively. Additionally, the Company received $0, $355 and $393 in terminal lease revenue from Westway during the years ended
December 31, 2010, 2009 and 2008, respectively, related to its terminal facility located in Stockton, California. In July 2009, the Company
sold the Stockton terminal facility to Westway for $3,032, resulting in a gain of $2,254.
The Company also entered into a tolling agreement with E D & F for biodiesel to be produced out of the Company’s Houston, Texas
biodiesel production facility. Revenues on biodiesel from this toll agreement and from other biodiesel sales were $4,241, $12,659 and
$10,023 for the years ended December 31, 2010, 2009 and 2008, respectively. Additionally, revenues from raw material sales totaled $0,
$1,640 and $0 for the years ended December 31, 2010, 2009 and 2008, respectively.
The Company had accounts receivable due from E D & F Man of $1,066 and $1,116 as of December 31, 2010 and 2009, respectively.
The Company had accounts payable due to E D & F Man of $0 and $44 as of December 31, 2010 and 2009, respectively.
Network Plants
The Company receives certain fees for the marketing and sale of product produced by and the management of the Network Plants’
operations, in which the Company has also invested. As an additional incentive to the Company and additional compensation for the
marketing, sales and management services being rendered, the Network Plants pay a bonus to the Company on an annual basis equal to a
percentage of the net income of the Network Plant, as defined by the management agreement. Total related party management service
revenues recognized by the Company related to investees were $660, $1,121 and $4,843 for the years ended December 31, 2010, 2009 and
2008, respectively. Additionally, revenues from biodiesel sales totaled $0, $40 and $670 for the years ended December 31, 2010, 2009 and
2008, respectively. The Company also incurred fees related to the production of biodiesel in the amount of $1,493 for the year ended
December 31, 2010.
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The Company had accounts receivable due from the Network Plants of $12 and $1,065 at December 31, 2010 and 2009, respectively.
The Company had accounts payable due to the Network Plants of $2 and $2,293 at December 31, 2010 and 2009, respectively.
416 S. Bell, LLC
The Company rents a building for administrative uses under an operating lease from 416 S. Bell, LLC. Rent payments made under
this lease totaled $344, $688 and $603 for the years ended December 31, 2010, 2009 and 2008, respectively.
NOTE 18 — OPERATING LEASES
The Company acts as a lessee for certain land and equipment under operating leases. Total rent expense under operating leases was
$5,950, $8,171 and $4,361 for the years ended December 31, 2010, 2009 and 2008, respectively. For each of the next five calendar years
and thereafter, future minimum lease payments under operating leases that have initial or remaining noncancelable lease terms in excess of
one year are as follows:
2011
2012
2013
2014
2015
Thereafter
Total minimum payments
Related
Party
Payments
690
$
690
690
690
690
1,379
$ 4,829
Other
$
Payments
6,578
7,508
7,183
7,038
6,843
49,235
$ 84,385
$
Total
Payments
7,268
8,198
7,873
7,728
7,533
50,614
$ 89,214
The Company leases consist primarily of: accesses to distribution terminals, biodiesel storage facilities, railcars and vehicles. At the
end of the lease term the Company, generally, has the option to (a) return the leased equipment to the lessor, (b) purchase the property at
its then fair value or (c) renew its lease at the then fair rental value on a year-to-year basis or for an agreed upon term. Certain leases allow
for adjustment to minimum rentals in future periods as determined by the Consumer Price Index.
NOTE 19 — DERIVATIVE INSTRUMENTS
From time to time the Company enters into derivative transactions to hedge its exposure to interest rate and commodity price
fluctuations. The Company does not enter into derivative transactions for trading purposes.
As of December 31, 2010, the Company has entered into heating oil and soy oil derivative instruments and an interest rate swap
agreement. The Company has entered into heating oil and soy oil commodity-based derivatives in order to protect gross profit margins
from potentially adverse effects of price volatility on biodiesel sales where the prices are set at a future date. As of December 31, 2010, the
Company had 269 open commodity contracts. In addition, the Company manages interest rate risk associated with the REG Danville
variable interest rate note payable using a fixed rate swap. The interest rate swap agreement has an outstanding notional value of $20,747 as
of December 31, 2010. The agreement effectively fixes the variable component of the interest rate on the Term Loan at 3.67% through
November 2011. The fair value of the interest rate swap agreement was $612 and $1,031 at December 31, 2010 and 2009, respectively, and
is recorded in the other noncurrent liabilities. The interest rate swap was not designated as an accounting hedge under ASC Topic 815 and
thus all gains and losses are recorded currently in earnings.
ASC 815 requires all derivative financial instruments to be recorded on the balance sheet at fair value. The Company’s derivatives
are not designated as hedges and are utilized to manage cash flow. The changes in fair value of the derivative instruments are recorded
through earnings in the period of change.
REG Danville’s interest rate swap contains a credit support arrangement that is directly linked to the notes payable with the same
counterparty. Therefore, the interest rate swap counterparty would have access to the debt service fund or other collateral posted by REG
Danville as a result of any failure to perform under the interest rate swap agreement. As of December 31, 2010, the Company posted $2,119
of collateral associated with its commodity-based derivatives with a net liability position of $483.
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Table of Contents
The Company’s preferred stock embedded conversion feature is further discussed in “Note 2 – Summary of Significant Accounting
Policies”.
The following tables provide details regarding the Company’s derivative financial instruments:
Embedded derivative
Interest rate swap
Commodity derivatives
Total derivatives
Embedded derivative
Interest rate swap
Commodity derivatives
Total derivatives
Embedded derivative
Interest rate swap
Commodity derivatives
Total
Asset Derivatives
Liability Derivatives
As of December 31, 2009
Balance Sheet
Location
Fair
Value
Balance Sheet
Location
Preferred stock embedded
conversion feature
derivatives
Other liabilities
Prepaid expenses and other
assets
$
$
47
47
Prepaid expenses and other
assets
As of December 31, 2010
Fair
Value
$
$
4,104
1,031
300
5,435
Asset Derivatives
Balance Sheet
Location
Fair
Value
Liability Derivatives
Balance Sheet
Location
Preferred stock embedded
conversion feature
derivatives
Other liabilities
Prepaid expenses and other
assets
$
78
$ 78
Prepaid expenses and other
assets
Location of Gain (Loss)
Recognized in Income
Change in fair value of preferred stock
conversion feature embedded derivatives
Change in fair value of interest rate swap
Cost of goods sold - Biodiesel
2010
Amount of
Gain (Loss)
Recognized
in Income on
Derivatives
$
(8,208)
469
(1,213)
$ (8,952)
Fair
Value
$
61,761
612
561
$ 62,934
2009
Amount of
Gain (Loss)
Recognized
in Income on
Derivatives
$
(2,339)
382
(1,086)
$ (3,043)
NOTE 20 — FAIR VALUE MEASUREMENT
ASC Topic 820 establishes a framework for measuring fair value in GAAP and expands disclosures about fair market value
measurements. ASC Topic 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that
should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering
assumptions, ASC Topic 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as
follows:
•
Level 1 — Quoted prices for identical instruments in active markets.
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•
•
Level 2 — Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets
that are not active and model-derived valuations, in which all significant inputs are observable in active markets.
Level 3 — Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own
assumptions.
In addition, ASC Topic 820 requires disclosures about the use of fair value to measure assets and liabilities to enable the assessment
of inputs used to develop fair value measures, and for unobservable inputs, to determine the effects of the measurements on earnings.
A summary of assets (liabilities) measured at fair value as of December 31, 2009 and 2010 is as follows:
Preferred stock embedded derivatives
Interest rate swap
Commodity derivatives
Preferred stock embedded derivatives
Interest rate swap
Seneca Holdco liability
Restricted cash
Commodity derivatives
Total
(4,104)
(1,031)
(253)
(5,388)
$
$
$
$
Total
(61,761)
$
(612)
$
(10,406)
$
401
$
$
(483)
$ (72,861)
$
As of December 31, 2009
Level 1
Level 2
$ —
—
—
—
$
—
(1,031)
(253)
(1,284)
$
$
As of December 31, 2010
Level 1
Level 2
$ —
—
—
401
—
$ 401
—
(612)
—
—
(483)
$ (1,095)
Level 3
(4,104)
—
—
(4,104)
$
$
$
Level 3
(61,761)
—
(10,406)
—
—
$ (72,167)
The following is a reconciliation of the beginning and ending balances for liabilities measured at fair value on a recurring basis using
significant unobservable inputs (Level 3) during the years ended December 31, 2010 and 2009:
Ending balance - December 31, 2008
Total unrealized gains (losses)
Purchases, issuance, and settlements, net
Ending balance - December 31, 2009
Total unrealized gains (losses)
Deconsolidation of Blackhawk
Purchases, issuance, and settlements, net
Purchase accounting consolidation
Ending balance - December 31, 2010
Preferred
Stock
Embedded
Derivatives
$
(1,765)
(2,339)
—
(4,104)
—
(8,208)
(49,448)
(1)
$ (61,761)
Seneca
Holdco
Liability
$
—
—
—
—
(4,179)
—
437
(6,664)
$ (10,406)
Blackhawk
Subordinated
Debt
$
—
—
—
—
—
24,298
—
(24,298)
$ —
Blackhawk
Unit Interest
—
$
—
—
—
—
3,678
291
(3,969)
$ —
The company used the following methods and assumptions to estimate fair value of its financial instruments:
Valuation of Preferred Stock embedded conversion feature derivatives : The estimated fair value of the derivative instruments
embedded in the Company’s outstanding preferred stock is determined using the option pricing method to allocate the fair value of the
underlying stock to the various components comprising the security, including the embedded derivative. The allocation was performed
based on each class of preferred stock’s liquidation preference and relative seniority. Derivative liabilities are adjusted to reflect fair
value at each period end. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the
overall fair value of the financial instruments.
Interest rate swap: The fair value of the interest swap was determined based on a discounted cash flow approach using market
observable swap curves.
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Table of Contents
Restricted cash: This instrument consists of money market mutual funds whose fair value is based on quoted prices of identical
assets in an active exchange-traded market and are reflected in Level 1.
Commodity derivatives: The instruments held by the Company consist primarily of futures contracts, swap agreements,
purchased put options, and written call options. The fair value of contracts based on quoted prices of identical assets in an active
exchange-traded market is reflected in Level 1. Contracts whose fair value is determined based on quoted prices of similar contracts in
over-the-counter markets are reflected in Level 2.
Seneca Holdco liability: The liability represents the combination of the Call Option and the Put Option related to the purchase of
membership interest of Seneca Landlord, LLC. The fair value of the Seneca Holdco liability is determined using an option pricing
model and represents the probability weighted present value of the gain that is realized upon exercise of each option.
Notes payable and lines of credit: The fair value of long-term debt and lines of credit was established using discounted cash flow
calculations and current market rates.
The estimated fair values of the Company’s financial instruments, which are not recorded at fair value are as follows as of
December 31, 2010 and 2009:
2010
2009
Asset (Liability)
Carrying Amount
Estimated
Fair Value
Asset (Liability)
Carrying Amount
Estimated
Fair Value
Financial Liabilities:
Notes payable and lines of credit
(96,125)
(96,228)
(28,855)
(29,124)
NOTE 21 — BUSINESS CONCENTRATIONS
Certain customers represented greater than 10% of the total consolidated revenues of the Company for the three years ended
December 31, 2010, 2009 and 2008. All customer amounts disclosed in the table are related to biodiesel sales:
Customer A
Customer B
Customer C
2010
2009
$ 4,241
62,632
$14,299
31,947
2008
$10,779
10,023
The Company maintains cash balances at financial institutions, which may at times exceed the $250 coverage by the U.S. Federal
Deposit Insurance Company.
NOTE 22 — OPERATING SEGMENTS
The Company reports its operating segments based on services provided to customers, which includes Biodiesel, Services and
Corporate and Other activities. The accounting policies of the segments are the same as those described in the summary of significant
accounting policies. The Company has chosen to differentiate the operating segments based on the products and services each segment
offers.
The Biodiesel segment processes waste vegetable oils, animal fats, virgin vegetable oils and other feedstocks and methanol into
biodiesel. The Biodiesel segment also includes the Company’s purchases and resale of biodiesel produced by third parties. Revenue is
derived from the sale of the processed biodiesel, related byproducts and renewable energy government incentive payments. The Services
segment offers services for managing the construction of biodiesel production facilities and managing ongoing operations of third party
plants and collects fees related to the services provided. The Company does not allocate items that are of a non-operating nature or
corporate expenses to the business segments. Intersegment revenues are reported by the Services segment which manages the construction
and operations of facilities included in the Biodiesel segment. Revenues are recorded by the Services segment at cost. Corporate expenses
consist of corporate office expenses including compensation, benefits, occupancy and other administrative costs, including management
service expenses.
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Table of Contents
The following table represents the significant items by operating segment for the results of operations for the years ended
December 31, 2010, 2009 and 2008:
Net sales:
Biodiesel
Services
Intersegment revenues
Loss before income taxes and loss from equity investments:
Biodiesel
Services
Corporate and other (a)
Depreciation and amortization expense, net:
Biodiesel
Purchases of property, plant, and equipment:
Biodiesel
Goodwill:
Biodiesel
Services
Assets:
Biodiesel
Services
Corporate and other (b)
2010
2009
2008
$
$
$
$
$
$
$
$
215,142
9,484
(8,171)
216,455
21,126
506
(45,783)
(24,151)
5,928
4,550
2010
68,784
16,080
84,864
$
$
$
$
$
$
$
$
128,492
5,396
(2,387)
131,501
1,119
1,832
(25,508)
(22,557)
5,772
$
$
$
$
$
76,073
34,472
(25,093)
85,452
(2,663)
4,909
(26,526)
(24,280)
1,082
7,350
$ 67,235
2009
—
16,080
16,080
$
310,021
20,799
38,823
$ 369,643
$
147,807
17,829
34,922
$ 200,558
(a) Corporate and other includes income/(expense) not associated with the business segments, such as corporate general and administrative
expenses, shared service expenses, interest expense and interest income, all reflected on an accrual basis of accounting.
(b) Corporate and other includes cash and other assets not associated with the business segments, including investments.
NOTE 23 — COMMITMENTS AND CONTINGENCIES
On May 8, 2009 the Company entered into a series of agreements with one of its shareholders, Bunge, whereby Bunge would
purchase raw material inputs for later resale to the Company and use in producing biodiesel. Additionally, the agreements provide for
Bunge to purchase biodiesel produced by the Company for resale to the Company’s customers. These agreements provide financing for the
Company’s raw material and finished goods inventory not to exceed aggregate amounts outstanding of $10,000. In exchange for this
financing, Bunge will receive fees equal to the greater of 30 day LIBOR plus 7.5% or 10% as determined based on the amount of inventory
financed, plus a monthly service fee of $40 and incentive fees not to exceed $1,500 per annum. As of December 31, 2010 and 2009, there
was $280 and $86, respectively, in incentive fees due to Bunge.
The Company is involved in legal proceedings in the normal course of business. The Company currently believes that any ultimate
liability arising out of such proceedings will not have a material adverse effect on the Company’s financial position, results of operations or
cash flows.
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NOTE 24 — SUPPLEMENTAL INFORMATION
The following table represents the significant items for the results of operations on a quarterly basis for the years ended December 31,
2010 and 2009:
Revenues
Gross profit
Selling, general, and administrative expenses
Income (loss) from operations
Other income (expense), net
Net loss attributable to noncontrolling interest
Net income (loss) attributable to the Company
Revenues
Gross profit (loss)
Selling, general, and administrative expenses
Loss from operations
Other income (expense), net
Net loss attributable to noncontrolling interest
Net loss attributable to the Company
NOTE 25 — SUBSEQUENT EVENTS
$
Three Months
Ended
March 31,
2010
37,489
2,250
5,086
(2,977)
(55)
—
3,081
$
Three Months
Ended
March 31,
2009
18,964
(2,016)
5,073
(7,089)
1,970
2,951
(1,223)
$
Three Months
Ended
June 30,
2010
46,337
5,094
5,731
(637)
3,011
—
(392)
$
Three Months
Ended
June 30,
2009
30,132
(859)
7,200
(8,059)
160
1,941
(4,026)
$
Three Months
Ended
September 30,
2010
63,122
6,485
5,782
(6,633)
(811)
—
(7,617)
$
Three Months
Ended
September 30,
2009
42,689
1,976
7,643
(3,413)
(2,988)
1,448
(3,515)
$
Three Months
Ended
December 31,
2010
69,507
7,803
5,588
2,198
(18,247)
—
(16,660)
$
Three Months
Ended
December 31,
2009
39,716
3,850
5,649
(2,632)
(506)
1,613
(52,141)
Total
$216,455
21,632
22,187
(8,049)
(16,102)
—
(21,588)
Total
$131,501
2,951
25,565
(21,193)
(1,364)
7,953
(60,905)
The Company has performed an evaluation of subsequent events through the date the financial statements were issued.
The AgStar Line expired on March 7, 2011. The Company was able to extend the terms of the line of credit with the bank. The
borrowing capacity of the line of credit remained at $2,350 and matures on March 5, 2012.
* * * * * *
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Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision of and with the participation of the Chief Executive Officer, or CEO, and Chief Financial
Officer, or CEO, performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report,
December 31, 2010.
In connection with our evaluation of disclosure controls and procedures, we have concluded that the Company’s disclosure controls
and procedures are effective as of December 31, 2010.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide
reasonable assurance regarding the reliability of our financial reporting and the preparation of our consolidated financial statements for
external purposes in accordance with United States Generally Accepted Accounting Principles (“US GAAP”). Under the supervision of,
and with the participation of our CEO and CFO, management assessed the effectiveness of internal control over financial reporting as of
December 31, 2010. Management based its assessment on criteria established in “Internal Control Integrated Framework” issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation, management concluded that its
internal control over financial reporting was effective as of December 31, 2010.
Changes in Internal Control over Financial Reporting
As previously disclosed, management has implemented remediation activities, described below, related to a series of material
weaknesses identified in our assessment of internal control over financial reporting as of December 31, 2009 and reported in our Quarterly
Report on Form 10-Q for the quarter ended March 31, 2010. The material weaknesses as of December 31, 2009 related to:
1.
Our financial close and reporting system were not designed and operating effectively;
2. We did not perform or document a formal entity-level risk assessment to evaluate the implications of relevant risks on financial
reporting from operating and other activities, including the impact of our increasing complexity as a result of rapidly expanding
the number of our wholly-owned and member-owned facilities in our network and non-routine transactions such as the issuance
of debt and equity, accounting for acquisitions, and accounting for the accretion of the discount on preferred stock; and
3. We did not have a comprehensive set of information systems policies including information security and change control. We did
not followed a consistent process for documenting, testing, approving and implementing changes to the information systems
environments and maintenance of the system was not effectively restricted.
During 2010 and prior, we implemented the following measures to remediate the material weaknesses identified above:
1.
To remediate the material weaknesses related to our financial close and reporting system and our accounting for non-routine
transactions, the Company has:
•
•
•
Added experienced personnel to the accounting function to improve controls over the financial close and reporting
process, including hiring a CFO in 2009, and in 2010, adding a Controller, a Tax Manager and an Accounting Manager.
Engaged third party experts to assist management in its evaluation of complex valuation, derivative analysis, tax matters,
impairment assessments, purchase accounting and merger and acquisition accounting matters.
Established cross-functional collaboration across management to facilitate effective communication of potential impacts
of business decisions and impacts on the accounting and reporting processes.
2.
The Company has developed and implemented a formal cross-functional fraud risk assessment process led by the CEO, Chief
Operating Officer, and CFO and including other members of executive management. This cross-functional risk assessment
encompassed substantially all facets of the internal control environment and potential fraud risk factors.
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Table of Contents
3.
During 2009 and 2010, the Company has converted from the legacy IT environment to an ERP solution which has resulted in
remediation of our information security and change control weakness. Additionally, we have added internal technical resources
and engaged third party providers to support the system. Further, as described above, the Company has added resources to the
accounting function that provide guidance to the organization regarding the control environment remediation activities. These
additional resources have also allowed the Company to design and implement compensating manual controls within the business
cycles to remediate our control weakness related to system access.
As of December 31, 2010, management has concluded that the remediation activities are properly designed and have been in place for
a sufficient amount of time to conclude that controls were operating effectively as of December 31, 2010. Therefore, management has
determined that these material weaknesses have been remediated during the fourth quarter of 2010.
Except for the changes described above, there have been no changes during the Company’s quarter ended December 31, 2010 in our
internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) that have materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
This Item is incorporated by reference to our definitive proxy statement on Schedule 14A, which will be filed within 120 days after the
close of the fiscal year covered by this report on Form 10-K, or if our proxy statement is not filed by that date, will be included in an
amendment to this Report on Form 10-K.
Item 11.
Executive Compensation
This Item is incorporated by reference to our definitive proxy statement on Schedule 14A, which will be filed within 120 days after the
close of the fiscal year covered by this report on Form 10-K, or if our proxy statement is not filed by that date, will be included in an
amendment to this Report on Form 10-K.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
This Item is incorporated by reference to our definitive proxy statement on Schedule 14A, which will be filed within 120 days after the
close of the fiscal year covered by this report on Form 10-K, or if our proxy statement is not filed by that date, will be included in an
amendment to this Report on Form 10-K.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
This Item is incorporated by reference to our definitive proxy statement on Schedule 14A, which will be filed within 120 days after the
close of the fiscal year covered by this report on Form 10-K, or if our proxy statement is not filed by that date, will be included in an
amendment to this Report on Form 10-K.
Item 14.
Principal Accounting Fees and Services
This Item is incorporated by reference to our definitive proxy statement on Schedule 14A, which will be filed within 120 days after the
close of the fiscal year covered by this report on Form 10-K, or if our proxy statement is not filed by that date, will be included in an
amendment to this Report on Form 10-K.
PART IV
ITEM 15. Exhibits, Financial Statement Schedules
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Table of Contents
FINANCIAL STATEMENTS
Our consolidated financial statements are listed in the Index to Financial Statements and Schedules under Item 8 of this report.
FINANCIAL STATEMENT SCHEDULES
Our consolidated financial statement schedules are listed in the Index to Financial Statements and Schedules under (b) below.
EXHIBITS
Exhibits are listed in the Exhibit Index.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
RENEWABLE ENERGY GROUP, INC.
(Registrant)
By
/s/ JEFFREY STROBURG
Jeffrey Stroburg
Chairman and Chief Executive Officer
Date: March 31, 2011
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that the individuals whose signatures appear below constitute and appoint Natalie
Lischer and Chad Stone, and each of them, his or her true and lawful attorney-in-fact and agents with full and several power of substitution,
for him or her and his or her name, place and stead, in any and all capacities, to sign this Annual Report on Form 10-K (including any and
all amendments), and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in fact and agents, and each of them full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agents or any of them, or their substitutes, may
lawfully do or cause to be done.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
BY
BY
BY
/s/ JEFFREY STROBURG
Jeffrey Stroburg
Chairman and Chief Executive Officer
(Principal Executive Officer)
/s/ CHAD STONE
Chad Stone
Chief Financial Officer
(Principal Financial Officer)
/s/ NATALIE LISCHER
Natalie Lischer
Treasurer
(Principal Accounting Officer)
/s/ PAUL CHATTERTON
Paul Chatterton
/s/ SCOTT P. CHESNUT
Scott P. Chesnut
/s/ DELBERT CHRISTENSEN
Delbert Christensen
/s/ RANDOLPH L. HOWARD
Randolph L. Howard
/s/ ERIC HAKMILLER
Eric Hakmiller
Director
Director
Director
Director
Director
94
Date
March 31, 2011
March 31, 2011
March 31, 2011
March 31, 2011
March 31, 2011
March 31, 2011
March 31, 2011
March 31, 2011
Table of Contents
/s/ MICHAEL A. JACKSON
Michael A. Jackson
/s/ JONATHAN KOCH
Jonathan Koch
/s/ CHRISTOPHER SORRELLS
Christopher Sorrells
/s/ DON HUYSER
Don Huyser
/s/ RONALD MAPES
Ronald Mapes
Director
Director
Director
Director
Director
95
March 31, 2011
March 31, 2011
March 31, 2011
March 31, 2011
March 31, 2011
Table of Contents
EXHIBIT INDEX
Exhibit No.
2.1
2.2
2.3
3.1
3.2
3.3
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
10.1
10.2
DESCRIPTION
Second Amended and Restated Agreement and Plan of Merger, executed November 21, 2009, dated and effective as of the
original execution date, May 11, 2009, by and among REG Newco, Inc., a Delaware corporation, REG Danville, LLC, a
Delaware limited liability company, Blackhawk Biofuels, LLC, a Delaware limited liability company and Renewable
Energy Group, Inc., a Delaware corporation (the “Registrant”) (incorporated by reference to Annex A of the Registrant’s
Registration Statement on Form S-4 (Commission File No. 333-161187)).
Second Amended and Restated Agreement and Plan of Merger, executed November 20, 2009, dated and effective as of the
original execution date, May 11, 2009, by and among REG Newco, Inc., a Delaware corporation, REG Merger Sub, Inc., a
Delaware corporation, and Renewable Energy Group, Inc., a Delaware corporation (incorporated by reference to Annex B
of the Registrant’s Registration Statement on Form S-4 (Commission File No. 333-161187)).
Second Amended and Restated Asset Purchase Agreement by and among REG Newco, Inc., REG Newton, LLC, Central
Iowa Energy, LLC and Renewable Energy Group, Inc., executed November 20, 2009, dated and effective as of the original
execution date, May 8, 2009 (incorporated by reference to Annex C of the Registrant’s Registration Statement on Form S-4
(Commission File No. 333-161187)).
Restated Certificate of Incorporation of Renewable Energy Group, Inc., effective as of February 26, 2010, (incorporated by
reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed March 4, 2010).
Bylaws of the Registrant.
Certificate of Designation of Series and Determination of Rights and Preferences of Series A Convertible Preferred Stock
of the Registrant.
Specimen certificate of common stock of the Registrant (incorporated by reference to Exhibit 4.1 to the Registrant’s
Registration Statement on Form S-4/A filed November 23, 2009).
Specimen certificate of Series A Preferred Stock of the Registrant (incorporated by reference to Exhibit 4.2 to the
Registrant’s Registration Statement on Form S-4/A filed November 23, 2009).
Form of warrant issued by the Registrant to entities affiliated with Natural Gas Partners (incorporated by reference to
Exhibit 4.3 to the Registrant’s Registration Statement on Form S-4/A filed August 10, 2009).
Schedule of warrants issued by the Registrant to Natural Gas Partners VIII, L.P. and entities affiliated with NGP Energy
Technology Partners (incorporated by reference to Exhibit 4.4 to the Registrant’s Registration Statement on Form S-4/A
filed August 10, 2009).
Form of warrant issued by the Registrant to the purchasers of the Registrant’s Series B Convertible Preferred Stock
(incorporated by reference to Exhibit 4.5 to the Registrant’s Registration Statement on Form S-4/A filed August 10, 2009).
Schedule of warrants issued by the Registrant to the purchasers of the Registrant’s Series B Convertible Preferred Stock
(incorporated by reference to Exhibit 4.6 to the Registrant’s Registration Statement on Form S-4/A filed August 10, 2009).
Form of warrant issued by the Registrant to the purchasers of the Registrant’s Series AA and Series BB Convertible
Preferred Stock (incorporated by reference to Exhibit 4.7 to the Registrant’s Registration Statement on Form S-4/A filed
August 10, 2009).
Schedule of warrants issued by the Registrant to the purchasers of the Registrant Series AA and Series BB Convertible
Preferred Stock (incorporated by reference to Exhibit 4.8 to the Registrant’s Registration Statement on Form S-4/A filed
August 10, 2009).
Form of warrant issued by the Registrant to ED&F Man Holdings B.V. (incorporated by reference to Exhibit 4.9 to the
Registrant’s Registration Statement on Form S-4/A filed August 10, 2009).
Schedule of warrants issued by the Registrant to ED&F Man Holdings B.V. (incorporated by reference to Exhibit 4.10 to
the Registrant’s Registration Statement on Form S-4/A filed August 10, 2009).
Form of warrant issued by REG to members of the former board of managers and executive officers of Blackhawk.
Schedule of warrants issued by REG to members of the former board of managers and executive officers of Blackhawk.
Master Loan Agreement, dated as of March 8, 2010, between AgStar Financial Services, PCA and REG Newton, LLC.
(incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the three months ended
March 31, 2010).
First Supplement to the Master Loan Agreement, dated as of March 8, 2010, between AgStar Financial Services, PCA and
REG Newton, LLC. (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the
three months ended March 31, 2010).
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Table of Contents
10.3
10.4
10.5
10.6
Second Supplement to the Master Loan Agreement, dated as of March 8, 2010, between AgStar Financial Services, PCA and REG
Newton, LLC. (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the three months
ended March 31, 2010).
REG Newton, LLC Revolving Line of Credit Note, dated March 8, 2010. (incorporated by reference to Exhibit 10.4 to the
Registrant’s Quarterly Report on Form 10-Q for the three months ended March 31, 2010).
REG Newton, LLC Term Note, dated March 8, 2010. (incorporated by reference to Exhibit 10.5 to the Registrant’s Quarterly
Report on Form 10-Q for the three months ended March 31, 2010).
First Amendment to Second Supplement to the Master Loan Agreement, dated as of March 8, 2010, between AgStar Financial
Services, PCA and REG Newton, LLC.
10.7
First Allonge to Revolving Line of Credit Note, dated March 8, 2010.
10.8
10.9
10.10
10.11
10.12
10.13
10.14
Corporate Guaranty (Revolving Line of Credit Loan), dated March 8, 2010 (incorporated by reference to Exhibit 10.8 to the
Registrant’s Quarterly Report on Form 10-Q for the three months ended March 31, 2010).
Corporate Guaranty (Term Loan), dated March 8, 2010 (incorporated by reference to Exhibit 10.9 to the Registrant’s Quarterly
Report on Form 10-Q for the three months ended March 31, 2010).
Loan Agreement, dated May 9, 2008, between Blackhawk Biofuels, LLC and Fifth Third Bank (incorporated by reference to
Exhibit 10.3 to the Quarterly Report on Form 10-Q filed by Blackhawk Biofuels, LLC for the quarter ended March 31, 2008).
Second Amendment to Loan Agreement by and among Fifth Third Bank and Blackhawk Biofuels, LLC dated November 25, 2009
(incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Blackhawk Biofuels, LLC on December 3,
2009).
Third Amendment to Loan Agreement, dated February 26, 2010, by and between Fifth Third Bank and Blackhawk Biofuels, LLC
(incorporated by reference to Exhibit 10.12 to the Registrant’s Quarterly Report on Form 10-Q for the three months ended March
31, 2010).
Fourth Amendment to Loan Agreement, dated February 26, 2010, by and between Fifth Third Bank and Blackhawk Biofuels, LLC.
Stockholder Agreement by and among REG Newco, Inc., certain holders of REG Newco, Inc. common stock and certain holders of
REG Newco, Inc. Series A Preferred Stock (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form
8-K filed March 4, 2010).
10.15
First Amendment to the Stockholder Agreement of REG Newco, Inc. dated June 29, 2010.
10.16
10.17
10.18
10.19
10.20
10.21
Registration Rights Agreement, dated February 26, 2010, by and among REG Newco, Inc., certain holders of REG Newco, Inc.
common stock and certain holders of REG Newco, Inc. Series A Preferred Stock.
Amended and Restated Credit Agreement, dated as of April 8, 2010, among Seneca Landlord, LLC and WestLB AG, New York
Branch.
Lease Agreement, dated as of April 8, 2010, by and between Seneca Landlord, LLC and REG Seneca, LLC (incorporated by
reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed April 15, 2010).
Funding, Investor Fee and Put/Call Agreement, dated as of April 8, 2010, by and among Seneca Biodiesel Holdco, LLC, Seneca
Landlord, LLC, Renewable Energy Group, Inc., REG Intermediate Holdco, Inc., and REG Seneca, LLC (incorporated by reference
to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed April 15, 2010).
Accounts Agreement, dated as of April 8, 2010, by and among Seneca Landlord, LLC, REG Seneca, LLC, Sterling Bank, WestLB
AG, New York Branch (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed April 15,
2010).
Revolving Credit Agreement dated as of April 8, 2010, by and among REG Marketing and Logistics Group, LLC, REG Services
Group, LLC, Renewable Energy Group, Inc. and WestLB AG, New York Branch (incorporated by reference to Exhibit 10.4 to the
Registrant’s Current Report on Form 8-K filed April 15, 2010).
10.22 BCA Registration Rights Agreement.
10.23
10.24
10.25
Master Services Agreement between the Registrant and Bunge dated May 8, 2009 (incorporated by reference to Exhibit 10.6 to the
Registrant’s Registration Statement on Form S-4/A filed November 12, 2009).
Contract for Services by and between West Central and the Registrant dated August 1, 2006 (incorporated by reference to Exhibit
10.8 to the Registrant’s Registration Statement on Form S-4/A filed October 5, 2009).
Ground Lease by and between West Central and the Registrant dated July 31, 2006 (incorporated by reference to Exhibit 10.9 to
the Registrant’s Registration Statement on Form S-4/A filed October 5, 2009).
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Table of Contents
10.26
10.27
10.28
1
10.29
1
10.30
Asset Use Agreement by and between West Central and the Registrant dated August 1, 2006 (incorporated by reference to
Exhibit 10.10 to the Registrant’s Registration Statement on Form S-4/A filed October 5, 2009).
Extended Payment Terms Agreement by and between West Central Cooperative and the Registrant dated June 2009
(incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on Form S-4/A filed November 12, 2009).
Indemnification Agreement executed by each of the Registrant’s executive officers and directors (incorporated by reference to
Exhibit 10.13 to the Registrant’s Registration Statement on Form S-4/A filed November 23, 2009).
2009 Stock Incentive Plan. (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the
three months ended June 30, 2010).
Agreement for Purchase and Sale of Assets and Common Stock by and among ARES Corporation, Clovis Biodiesel, LLC, REG
Clovis, LLC and the Registrant dated August 24, 2010 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly
Report on Form 10-Q for the three months ended September 30, 2010).
21
23
24
31
32
1
Renewable Energy Group, Inc. Subsidiaries.
Consent of Independent Registered Public Accounting Firm.
Powers of Attorney (included in the signature page to this Annual Report on Form 10-K).
Rule 13a-14(a)/15d-14(a) Certifications.
Furnished statements of the Chief Executive Officer and Chief Financial Officer under 18 U.S.C. Section 1350.
Management contract or compensatory plan, contract or arrangement.
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(b) Financial Statement Schedules
RENEWABLE ENERGY GROUP, INC.
FINANCIAL INFORMATION OF PARENT COMPANY
CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 2010 AND 2009
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Restricted cash
Notes receivables
Prepaid expenses and other assets
Total current assets
Property, plant and equipment, net
Property, plant and equipment, net - Seneca Landlord, LLC
Intangible assets, net
Deferred income taxes
Investment in subsidiaries
Notes receivable
Intercompany receivables
Other assets
TOTAL ASSETS
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities of notes payable
Accounts payable
Accrued expenses
Preferred stock embedded conversion feature derivatives
Seneca Holdco liability, at fair value
Notes payable
Intercompany payables
Other liabilities
Total liabilities
SCHEDULE I
2010
2009
$
1,457 $
—
4,664
2
6,123
2,191
2,497
3,006
1,500
211,679
—
844
17
$227,857
168
155
—
10,639
10,962
69,810
—
7,025
1,500
54,066
21,700
—
2,467
167,530
$ — $
201
—
201
61,761
6,843
—
—
1,500
70,305
10
3,590
229
3,829
4,104
—
89
28,533
8,984
45,539
COMMITMENTS AND CONTINGENCIES
Redeemable preferred stock ($.0001 par value; 60,000,000 shares authorized; 13,455,522 and 12,464,357 shares
outstanding at December 31, 2010 and 2009, respectively; redemption amount $222,016 and $247,587 at
December 31, 2010 and 2009, respectively)
EQUITY (DEFICIT):
Company stockholders’ equity (deficit):
Common stock ($.0001 par value; 140,000,000 shares authorized; 33,129,553 and 19,575,117 shares
outstanding at December 31, 2010 and 2009, respectively)
Common stock - additional paid-in-capital
Warrants - additional paid-in-capital
Accumulated deficit
Total stockholders’ equity (deficit)
Noncontrolling interest
Total equity (deficit)
TOTAL LIABILITIES AND EQUITY (DEFICIT)
122,436
149,122
3
82,634
4,820
(52,341)
35,116
—
35,116
2
15,676
4,619
(60,905)
(40,608)
13,477
(27,131)
$227,857 $167,530
See notes to the Renewable Energy Group, Inc. and subsidiaries consolidated financial statements included elsewhere herein.
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RENEWABLE ENERGY GROUP, INC.
FINANCIAL INFORMATION OF PARENT COMPANY
CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(IN THOUSANDS)
REVENUES:
Equity in losses of subsidiaries of continuing operations
Services
Operating loss
GENERAL AND ADMINISTRATIVE EXPENSES
IMPAIRMENT ON LONG LIVED ASSET
CHANGE IN FAIR VALUE OF PREFERRED STOCK CONVERSION FEATURE EMBEDDED
DERIVATIVES
CHANGE IN FAIR VALUE OF SENECA HOLDCO LIABILITY
OTHER INCOME
INTEREST EXPENSE
INTEREST INCOME
LOSS BEFORE INCOME TAXES AND LOSS FROM EQUITY INVESTMENTS
INCOME TAX BENEFIT (EXPENSE)
LOSS FROM EQUITY INVESTMENTS
NET LOSS
LESS - NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST
NET LOSS ATTRIBUTABLE TO THE COMPANY
EFFECTS OF RECAPITALIZATION
LESS - ACCRETION OF PREFERRED STOCK TO REDEMPTION VALUE
NET LOSS ATTRIBUTABLE TO THE COMPANY’S COMMON STOCKHOLDERS
SCHEDULE I
2010
2009
2008
$ (9,218) $ (11,305) $(15,014)
2,770
(12,244)
(16,632)
—
490
(8,728)
(3,951)
—
2,771
(8,534)
(13,117)
(833)
(8,208)
(4,179)
19
(2)
209
(24,840)
3,252
—
(21,588)
—
(21,588)
8,521
(27,239)
2,118
—
334
—
1,131
(25,293)
9,414
—
(15,879)
2,788
(13,091)
—
(26,692)
$(40,306) $(105,086) $(39,783)
(2,339)
—
405
(7)
1,178
(23,247)
(45,212)
(399)
(68,858)
7,953
(60,905)
—
(44,181)
See notes to the Renewable Energy Group, Inc. and subsidiaries consolidated financial statements included elsewhere herein.
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RENEWABLE ENERGY GROUP, INC.
FINANCIAL INFORMATION OF PARENT COMPANY
CONDENSED STATEMENTS OF REDEEMABLE PREFERRED STOCK AND EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008 (IN THOUSANDS EXCEPT SHARE AMOUNTS)
SCHEDULE I
Company Stockholders’ Equity (Deficit)
Redeemable
Preferred
Stock
Shares
Redeemable
Preferred
Stock
Common
Stock
Shares
Common
Stock
Common
Stock -
Additional
Paid-in
Capital
Warrants -
Additional
Paid-in
Capital
Retained
Earnings
(accumulated
deficit)
Noncontrolling
Interest
Total
807 $ 93,716
BALANCE, January 1, 2008
8,578,945 $
43,707
13,334,874 $
1 $
62,629 $
4,556 $
25,723 $
Issuance of preferred stock, net of $246 of
issuance cost and $302 for embedded
derivative
Issuance of common stock, net of $234 of
issuance costs
Issuance of warrants
Contributions
Removal of noncontrolling interest as a
result of deconsolidation
Stock compensation expense
Accretion of preferred stock to redemption
value
Net loss
BALANCE, December 31, 2008
Issuance of preferred stock
Issuance of common stock
Stock compensation expense
Accretion of preferred stock to redemption
value
Increase in Blackhawk Biofuels LLC
members’ equity from issuance of
common stock
Net loss
3,855,059
34,208
—
—
—
—
—
—
—
—
—
—
—
—
—
5,970,243
—
—
—
—
26,692
—
—
—
—
—
12,434,004
30,353
—
—
104,607
334
—
—
19,305,117
—
270,000
—
1
—
—
—
—
—
—
2
—
—
—
5,080
(63)
—
—
3,574
(14,060)
—
57,160
—
1,368
2,522
—
—
63
—
—
—
—
—
4,619
—
—
—
—
44,181
—
—
(44,181)
—
—
—
—
—
—
—
—
—
(1,193)
—
—
—
BALANCE, December 31, 2009
12,464,357
149,122
19,575,117
2
15,676
4,619
—
—
—
—
—
—
(12,632)
(13,091)
—
—
—
—
—
—
(60,905)
(60,905)
—
—
—
—
22,820
5,081
—
22,820
(602)
—
(602)
3,574
—
(2,788)
(26,692)
(15,879)
20,237
—
—
—
82,018
—
1,368
2,522
—
(44,181)
1,193
(7,953)
—
(68,858)
13,477
(27,131)
(12,464,357)
(158,475)
(19,575,117)
(2)
(6,323)
(4,619)
—
—
(10,944)
net of $862 for issue cost
—
—
13,754,436
13,164,357
102,287
18,875,117
Issuance of preferred stock in acquisitions,
net of $1,158 for embedded derivatives
Issuance of warrants in acquisitions
Issuance of common stock
Conversion of warrants to restricted stock
units
Blackhawk Biofuels LLC deconsolidation
and transition adjustment
Stock compensation expense
Accretion of preferred stock to redemption
value
Net loss
291,165
—
—
—
—
—
—
—
2,263
—
—
—
—
—
27,239
—
2
1
—
—
—
14,221
4,619
79,304
—
—
—
3,015
—
1,269
—
—
—
500,000
—
—
1,068
(1,068)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
1,192
1,720
(27,239)
—
—
—
—
—
30,152
—
—
(21,588)
BALANCE, December 31, 2010
13,455,522 $
122,436
33,129,553 $
3 $
82,634 $
4,820 $
(52,341) $
See notes to the Renewable Energy Group, Inc. and subsidiaries consolidated financial statements included elsewhere herein.
101
—
—
18,842
—
79,305
—
—
—
—
1,269
3,015
—
—
(13,477)
—
17,867
1,720
—
—
(27,239)
(21,588)
— $ 35,116
Derecognition of REG Holdco preferred
stock, common stock, and common
stock warrants
Issuance of preferred stock, common stock,
and common stock warrants to REG
Holdco, net of $52,394 for embedded
derivatives
Issuance of common stock in acquisitions,
Table of Contents
RENEWABLE ENERGY GROUP, INC.
FINANCIAL INFORMATION OF PARENT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
Adjustments to reconcile net loss to net cash flows from operating activities:
Equity in losses of continuing operations
Depreciation expense
Amortization expense
Stock compensation expense
Loss from equity method investees
Impairment of long-lived assets
Deferred tax expense (benefit)
Change in fair value of preferred stock conversion feature embedded derivatives
Change in fair value of Seneca Holdco liability
Expense settled with stock issuance
Changes in asset and liabilities, net of effects from mergers and acquisitions:
Accounts receivable
Prepaid expenses and other assets
Accounts payable
Accrued expenses
Net cash flows from operating activities
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in investments in subsidiaries
Cash paid for purchase of property, plant and equipment
Cash provided through Blackhawk acquisition
Cash provided through USBG acquisition
Net cash flows from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash received for issuance of note payable
Cash paid on note payable
Cash paid on note receivables to subsidiaries
Cash received from issuance of common stock to ARES Corporation
Cash paid for issuance cost of common and preferred stock
Net cash flows from financing activities
NET CHANGE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, Beginning of period
CASH AND CASH EQUIVALENTS, End of period
SCHEDULE I
2010
2009
2008
$(21,588) $(68,858) $(15,879)
9,218
241
92
1,376
—
—
(3,252)
8,208
4,179
—
11,305
389
175
2,522
399
833
45,212
2,339
—
334
15,014
90
—
3,574
—
—
(8,268)
(2,118)
—
—
(633)
536
1,728
—
105
—
(6,245)
3,980
(845)
(8,460)
—
521
8
1,673
(5,385)
(1,855)
(15)
—
—
(1,870)
9,439
(1,426)
(155)
—
7,858
(18,476)
(1,434)
—
16,895
(3,015)
—
(2)
(4,664)
8,000
(280)
3,054
1,289
168
100
(1)
—
—
—
99
(503)
671
168 $
—
—
—
—
(480)
(480)
(8,880)
9,551
671
$ 1,457 $
See notes to the Renewable Energy Group, Inc. and subsidiaries consolidated financial statements included elsewhere herein.
102
Exhibit 3.2
AMENDED AND RESTATED
BYLAWS
OF
RENEWABLE ENERGY GROUP, INC.
(a Delaware corporation)
As of February 26, 2010
TABLE OF CONTENTS
ARTICLE 1 Offices
1.1 Principal Office
1.2 Additional Offices
ARTICLE 2 Meeting of Stockholders
2.1 Place of Meeting
2.2 Annual Meeting
2.3 Special Meetings
2.4 Notice of Meetings
2.5 Business Matter of a Special Meeting
2.6 List of Stockholders
2.7 Organization and Conduct of Business
2.8 Quorum and Adjournments
2.9 Voting Rights
2.10 Majority Vote
2.11 Record Date
2.12 Proxies
2.13 Inspectors of Election
2.14 Action Without Meeting by Written Consent
ARTICLE 3 Directors
3.1 Number; Qualifications; Election
3.2 Resignation and Vacancies
3.3 Removal of Directors
3.4 Powers
3.5 Place of Meetings
3.6 Annual Meetings
3.7 Regular Meetings
3.8 Special Meetings
3.9 Quorum and Adjournments
3.10 Action Without Meeting
3.11 Telephone Meetings
3.12 Waiver of Notice
3.13 Fees and Compensation of Directors
3.14 Rights of Inspection
3.15 Action with Respect to Securities of Other Corporations
ARTICLE 4 Committees of Directors
4.1 Selection
4.2 Power
4.3 Committee Minutes
RENEWABLE ENERGY GROUP, INC.
AMENDED AND RESTATED BYLAWS
-i-
Page
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ARTICLE 5 Officers
5.1 Officers Designated
5.2 Appointment of Officers
5.3 Subordinate Officers
5.4 Removal and Resignation of Officers
5.5 Vacancies in Offices
5.6 Compensation
5.7 The Chairman of the Board
5.8 Chief Executive Officer
5.9 The President, Chief Operating Officer, Chief Financial Officer
5.10 The Vice President
5.11 The Secretary
5.12 The Assistant Secretary
5.13 The Treasurer
5.14 The Assistant Treasurer
ARTICLE 6 Indemnification of Directors, Officers, Employees and Other Agents
6.1 Indemnification of Directors And Officers
6.2 Indemnification of Others
6.3 Payment Of Expenses In Advance
6.4 Indemnity Not Exclusive
6.5 Insurance
6.6 Conflicts
ARTICLE 7 Stock Certificates
7.1 Certificates for Shares
7.2 Signatures on Certificates
7.3 Transfer of Stock
7.4 Registered Stockholders
7.5 Lost, Stolen or Destroyed Certificates
ARTICLE 8 Notices
8.1 Notice
8.2 Waiver
ARTICLE 9 General Provisions
9.1 Dividends
9.2 Dividend Reserve
9.3 Checks
9.4 Corporate Seal
9.5 Execution of Corporate Contracts and Instruments
ARTICLE 10 Amendments
RENEWABLE ENERGY GROUP, INC.
AMENDED AND RESTATED BYLAWS
-ii-
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AMENDED AND RESTATED
BYLAWS
OF
RENEWABLE ENERGY GROUP, INC.
(a Delaware corporation)
As of February 26, 2010
ARTICLE 1
Offices
1.1 Principal Office. The Board of Directors (the “Board”) shall fix the location of the principal executive office of the corporation at
any place within or outside the State of Delaware.
1.2 Additional Offices. The Board may at any time establish branch or subordinate offices at any place or places.
ARTICLE 2
Meeting of Stockholders
2.1 Place of Meeting. Meetings of stockholders may be held at such place, either within or without Delaware, as determined by the
Board. The Board may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by
means of remote communication as authorized by Delaware law. If authorized by the board of directors in its sole discretion, and subject to
such guidelines and procedures as the board of directors may adopt, stockholders and proxy holders not physically present at a meeting of
stockholders may, by means of remote communication: (i) participate in a meeting of stockholders; and (ii) be deemed present in person
and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote
communication, provided that (A) the Corporation shall implement reasonable measures to verify that each person deemed present and
permitted to vote at the meeting by means of remote communication is a stockholder or proxy holder, (B) the Corporation shall implement
reasonable measures to provide such stockholders and proxy holders a reasonable opportunity to participate in the meeting and to vote on
matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently
with such proceedings, and (C) if any stockholder or proxy holder votes or takes other action at the meeting by means of remote
communication, a record of such vote or other action shall be maintained by the Corporation.
2.2 Annual Meeting. Annual meetings of stockholders shall be held at such date and time as shall be designated from time to time by
the Board and stated in the notice of the meeting.
RENEWABLE ENERGY GROUP, INC.
AMENDED AND RESTATED BYLAWS
-1-
At such annual meetings, the stockholders shall elect the members of the Board which shall be determined by a plurality of votes cast and
transact such other business as may properly be brought before the meetings.
2.3 Special Meetings. Special meetings of the stockholders, for any purpose or purposes, may, unless otherwise prescribed by the
statute or by the Certificate of Incorporation, be called by the Chairman of the Board or the President and shall be called by the President or
Secretary at the request in writing of a majority of the Board or of the holders of shares entitled to cast not less than ten percent (10%) of
the votes at the meeting and by additional persons as may be provided in the Certificate of Incorporation or these Bylaws. Such request
shall state the purpose or purposes of the proposed meeting. Upon request in writing that a special meeting of stockholders be called for
any proper purpose, directed to the Chairman of the Board of Directors, the President, the Chief Executive Officer, the Vice President or
the Secretary, by any person (other than the board of directors) entitled to call a special meeting of stockholders, the person forthwith shall
cause notice to be given to the stockholders entitled to vote that a meeting will be held at a time requested by the person or persons calling
the meeting, such time not to be less than thirty-five (35), nor more than sixty (60), days after receipt of the request. Such request shall
state the purpose or purposes of the proposed meeting.
2.4 Notice of Meetings. Written notice of stockholders’ meetings, stating the place, if any, date and time of the meeting, the means of
remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting,
and the purpose or purposes for which the meeting is called, shall be given to each stockholder entitled to vote at such meeting not less
than ten (10), nor more than sixty (60), days prior to the meeting.
When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, if
any, date and time thereof and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be
present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken; provided, however,
that if the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place, date and time of the adjourned meeting shall be given in
conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting.
2.5 Business Matter of a Special Meeting. Business transacted at any special meeting of stockholders shall be limited to the purposes
stated in the notice.
2.6 List of Stockholders. The officer in charge of the stock ledger of the Corporation or the transfer agent shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting arranged in
alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such
list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information
required to gain access to such list is provided with the notice of the meeting, or
RENEWABLE ENERGY GROUP, INC.
AMENDED AND RESTATED BYLAWS
-2-
(ii) during ordinary business hours, at the principal place of business of the Corporation. In the event that the Corporation determines to
make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only
to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by
means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the
meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of
the meeting.
2.7 Organization and Conduct of Business. The Chairman of the Board or, in his or her absence, the President of the Corporation or,
in their absence, such person as the Board may have designated or, in the absence of such a person, such person as may be chosen by the
holders of a majority of the shares entitled to vote who are present, in person or by proxy, shall call to order any meeting of the
stockholders and act as Chairman of the meeting. In the absence of the Secretary of the Corporation, the Secretary of the meeting shall be
such person as the Chairman appoints.
The Chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such
regulation of the manner of voting and the conduct of discussion as seems to him or her in order.
2.8 Quorum and Adjournments. Except where otherwise provided by law or in the Certificate of Incorporation or these Bylaws, the
holders of a majority of the stock issued and outstanding and entitled to vote, present in person or represented in proxy, shall constitute a
quorum at all meetings of the stockholders. The stockholders present at a duly called or held meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to have less than a quorum if any action
taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum. At such adjourned meeting
at which a quorum is present or represented, any business may be transacted which might have been transacted at the meeting as originally
noticed. If, however, a quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote
thereat who are present in person or represented by proxy shall have the power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or represented.
2.9 Voting Rights. Unless otherwise provided in the Certificate of Incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder.
2.10 Majority Vote. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power
present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which, by
express provision of the statutes or of the Certificate of Incorporation or of these Bylaws, a different vote is required, in which case such
express provision shall govern and control the decision of such question.
RENEWABLE ENERGY GROUP, INC.
AMENDED AND RESTATED BYLAWS
-3-
2.11 Record Date. For purposes of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend
or other distribution or allotment of any rights, or to exercise any rights in respect of any change, conversion, or exchange of stock or for the
purpose of any lawful action, the Board may fix, in advance, a record date which shall not be more than sixty (60), nor less than ten (10),
days prior to the date of such meeting, nor more than sixty (60) days prior to the date of any other action. A determination of stockholders
of record entitled to notice or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that
the Board may fix a new record date for the adjourned meeting.
If the Board does not so fix a record date, (i) the record date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived,
at the close of business on the business day next preceding the day on which the meeting is held and (ii) the record date for any other
purpose shall be the close of business at the Corporation’s principal office on the day on which the Board adopts the resolution relating to
such purpose.
2.12 Proxies. Every person entitled to vote for directors or on any other matter shall have the right to do so either in person or by one
or more agents authorized by a written proxy signed by the person and filed with the Secretary of the Corporation. A proxy shall be deemed
signed if the stockholder’s name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission, electronic
transmission or otherwise) by the stockholder or the stockholder’s attorney-in-fact. A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless (a) revoked by the person executing it, before the vote pursuant to that proxy, by a
writing delivered to the Corporation stating that the proxy is revoked or by a subsequent proxy executed by the maker of the proxy, or by
that person’s attendance and vote at the meeting; or (b) written notice of the death or incapacity of the maker of that proxy is received by
the Corporation before the vote pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of
eleven months from the date of the proxy, unless otherwise provided in the proxy.
2.13 Inspectors of Election. Before any meeting of stockholders, the Board may appoint any person other than nominees for office to
act as inspectors of election at the meeting or its adjournment. If no inspectors of election are so appointed, the Chairman of the meeting
may, and on the request of any stockholder or a stockholder’s proxy shall, appoint inspectors of election at the meeting. The number of
inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting on the request of one or more stockholders or proxies,
the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be
appointed. If any person appointed as inspector fails to appear or fails or refuses to act, the Chairman of the meeting may, and upon the
request of any stockholder or a stockholder’s proxy shall, appoint a person to fill that vacancy.
2.14 Action Without Meeting by Written Consent. All actions required to be taken at any annual or special meeting may be taken
without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum number of votes that would be
RENEWABLE ENERGY GROUP, INC.
AMENDED AND RESTATED BYLAWS
-4-
necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, and shall be
delivered to the Corporation by delivery to its registered office, its principal place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of meetings or stockholders are recorded. A telegram, cablegram or other electronic
transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, or by a person or persons authorized to
act for a stockholder or proxyholder, shall be deemed to be written, signed and dated for the purposes of this Section to the extent permitted
by law. Any such consent shall be delivered in accordance with Section 228(d)(1) of the Delaware General Corporation Law.
ARTICLE 3
Directors
3.1 Number; Qualifications; Election. The authorized number of directors shall initially be not less than one (1) nor more than
fourteen (14), the exact number within such range to be determined by the Board, but no reduction in the number of directors shall have the
effect of reducing the terms of office of any directors then in office. All directors shall be elected at the annual meeting or at any special
meeting of the stockholders, except as provided in Section 3.2 hereof, and each director so elected shall hold office until the next annual
meeting or any special meeting, or until his successor is elected and qualified, or until his earlier resignation or removal. Directors need not
be stockholders.
3.2 Resignation and Vacancies. A vacancy or vacancies in the Board shall be deemed to exist in the case of the death, resignation or
removal of any director, or if the authorized number of directors is increased. Vacancies may be filled by a majority of the remaining
directors, though less than a quorum, or by a sole remaining director, unless otherwise provided in the Certificate of Incorporation. The
stockholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors. If the Board accepts the
resignation of a director tendered to take effect at a future time, the Board shall have power to elect a successor to take office when the
resignation is to become effective. If there are no directors in office, then an election of directors may be held in the manner provided by
statute.
3.3 Removal of Directors. Unless otherwise restricted by statute, or by the Certificate of Incorporation or these Bylaws, any director
or the entire Board may be removed, with or without cause, by the holders of at least a majority of the shares entitled to vote at an election
of directors.
3.4 Powers. The business of the Corporation shall be managed by or under the direction of the Board which may exercise all such
powers of the Corporation and do all such lawful acts and things which are not by statute or by the Certificate of Incorporation or by these
Bylaws directed or required to be exercised or done by the stockholders.
3.5 Place of Meetings. The Board may hold meetings, both regular and special, either within or without the State of Delaware.
RENEWABLE ENERGY GROUP, INC.
AMENDED AND RESTATED BYLAWS
-5-
3.6 Annual Meetings. The annual meeting of the Board shall be held immediately following the annual meeting of stockholders, and
no notice of such meeting shall be necessary to the Board, provided a quorum shall be present. The annual meetings shall be for the
purposes of organization, for an election of officers, and for the transaction of other business.
3.7 Regular Meetings. Regular meetings of the Board may be held without notice at such time and place as may be determined from
time to time by the Board.
3.8 Special Meetings. Special meetings of the Board may be called by one-third (1/3) of directors then in office (rounded up to the
nearest whole number) or by the Chairman of the Board or the President and shall be held at such place, and on such date, and at such time
as they or he or she shall fix. Except as otherwise required by statute, notice of each special meeting shall be given to each director, if by
mail, when addressed to him or her at his or her residence or usual place of business, unless he or she shall have filed with the Secretary a
written request that notices intended for him or her be mailed to some other address, in which case it shall be mailed to the address
designated in such request, on at least two (2) days’ notice prior to the time of the meeting, or shall be sent to him or her at such place by
telegram, radiogram or cablegram, or other electronic means, or delivered to him or her personally, not later than four (4) hours before the
time the meeting is to be held. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting.
3.9 Quorum and Adjournments. At all meetings of the Board, a majority of the total number of the whole Board shall constitute a
quorum for the transaction of business, and the act of a majority of the directors present at any meeting at which there is a quorum shall be
the act of the Board, except as may otherwise be specifically provided by law or by the Certificate of Incorporation. If a quorum is not
present at any meeting of the Board, the directors present may adjourn the meeting from time to time, without notice other than
announcement at the meeting at which the adjournment is taken, until a quorum shall be present. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved of by at least a
majority of the required quorum for that meeting.
3.10 Action Without Meeting. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board or of any committee thereof may be taken without a meeting, if all members of the Board
or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic
transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the
minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
3.11 Telephone Meetings. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any member of the Board
or of any committee may participate in a meeting by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at
the meeting.
RENEWABLE ENERGY GROUP, INC.
AMENDED AND RESTATED BYLAWS
-6-
3.12 Waiver of Notice. Notice of a meeting need not be given to any director who signs a waiver of notice or provides a waiver by
electronic transmission or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or
who attends the meeting without protesting, either prior thereto or at its commencement, the lack of notice to such director. All such
waivers, consents and approvals or any waiver by electronic transmission shall be filed with the corporate records or made a part of the
minutes of the meeting.
3.13 Fees and Compensation of Directors. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board
shall have the authority to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting
of the Board, and may be paid a fixed sum for attendance at each meeting of the Board or a stated salary as director. No such payment shall
preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or
standing committees may be allowed like compensation for attending committee meetings.
3.14 Rights of Inspection. Every director shall have the absolute right at any reasonable time to inspect and copy all books, records
and documents of every kind, and to inspect the physical properties of the Corporation and also of its subsidiary corporations, domestic or
foreign. Such inspection by a director may be made in person or by agent or attorney, and includes the right to copy and obtain extracts.
3.15 Action with Respect to Securities of Other Corporations. Unless otherwise directed by the Board, the President or any officer of
the Corporation authorized by the President shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy,
at any meeting of stockholders of or with respect to any action of stockholders of any other corporation in which this Corporation may hold
securities and otherwise to exercise any and all rights and powers which this Corporation may possess by reason of its ownership of
securities in such other corporation.
ARTICLE 4
Committees of Directors
4.1 Selection. The Board may, by resolution passed by a majority of the entire Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or she or they constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of any such absent or disqualified member.
4.2 Power. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise all the powers and
authority of the Board in the management
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of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require
it; but no such committee shall have the power or authority in reference to amending the Certificate of Incorporation (except that a
committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board
as provided in Section 151(a) of the General Corporation Law of Delaware, fix any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation), adopting an
agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the
Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of dissolution,
removing or indemnifying directors or amending the Bylaws of the Corporation; and, unless the resolution or the Certificate of
Incorporation expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance
of stock or to adopt a certificate of ownership and merger. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board.
4.3 Committee Minutes. Each committee shall keep regular minutes of its meetings and report the same to the Board when required.
ARTICLE 5
Officers
5.1 Officers Designated. The officers of the Corporation shall be chosen by the Board and shall be a President, a Secretary and a
Treasurer. The Board may also choose a Chairman of the Board, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer,
and one or more assistant Secretaries and assistant Treasurers. The Board or any duly authorized committee may also choose one or more
Vice Presidents. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these Bylaws otherwise
provide.
5.2 Appointment of Officers. The officers of the Corporation, except such officers as may be appointed in accordance with the
provisions of Section 5.3 or 5.5 hereof, shall be appointed by the Board, and each shall serve at the pleasure of the Board, subject to the
rights, if any, of an officer under any contract of employment.
5.3 Subordinate Officers. The Board or any duly authorized committee may appoint, and may empower the President to appoint, such
other officers and agents as the business of the Corporation may require, each of whom shall hold office for such period, have such
authority and perform such duties as are provided in the Bylaws or as the Board or duly authorized committee may from time to time
determine.
5.4 Removal and Resignation of Officers. Subject to the rights, if any, of an officer under any contract of employment, any officer
may be removed, either with or without cause, by an affirmative vote of the majority of the Board or authorized committee, at any regular
or
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special meeting of the Board or such committee, or, except in case of an officer chosen by the Board or authorized committee, by any
officer upon whom such power of removal may be conferred by the Board or authorized committee.
Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take effect at the date of the
receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the
resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under
any contract to which the officer is a party.
5.5 Vacancies in Offices. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be
filled in the manner prescribed in these Bylaws for regular appointment to that office.
5.6 Compensation. The salaries of all officers of the Corporation shall be fixed from time to time by the Board, and no officer shall be
prevented from receiving a salary because he is also a director of the Corporation.
5.7 The Chairman of the Board. The Chairman of the Board, if such an officer be elected, shall, if present, perform such other powers
and duties as may be assigned to him from time to time by the Board. Unless otherwise separately filled by the Board, the Chairman of the
Board shall also be the Chief Executive Officer of the Corporation and shall have the powers and duties prescribed in Section 5.8 hereof.
5.8 Chief Executive Officer. Subject to such supervisory powers, if any, as may be given by the Board to the Chairman of the Board,
if there be such an officer, the Chief Executive Officer of the Corporation shall preside at all meetings of the stockholders and in the
absence of the Chairman of the Board, or if there be none, at all meetings of the Board, shall have general and active management of the
business of the Corporation, and shall see that all orders and resolutions of the Board are carried into effect. He or she shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise
signed and executed, and except where the signing and execution thereof shall be expressly delegated by the Board to some other officer or
agent of the Corporation.
5.9 The President, Chief Operating Officer, Chief Financial Officer . In the absence of the Chief Executive Officer, the President
shall perform the duties of the Chief Executive Officer, and when so acting shall have the powers of and be subject to all the restrictions
upon the Chief Executive Officer. The Chief Operating Officer and the Chief Financial Officer shall perform such duties and have such
powers as may be from time to time be prescribed for them by the Board, the Chairman of the Board or these Bylaws.
5.10 The Vice President. The Vice President (or in the event there be more than one, the Vice Presidents in the order designated by
the directors, or in the absence of any designation, in the order of their election), shall, in the absence of the President or in the event of his
disability or refusal to act, perform the duties of the President, and when so acting, shall have the powers of and be subject to all the
restrictions upon the President. The Vice President(s) shall
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perform such other duties and have such other powers as may from time to time be prescribed for them by the Board, the President, the
Chairman of the Board or these Bylaws.
5.11 The Secretary. The Secretary shall attend all meetings of the Board and the stockholders and record all votes and the proceedings
of the meetings in a book to be kept for that purpose, and shall perform like duties for the standing committees, when required. The
Secretary shall give, or cause to be given, notice of all meetings of stockholders and special meetings of the Board, and shall perform such
other duties as may from time to time be prescribed by the Board, the Chairman of the Board or the President, under whose supervision he
or she shall act. The Secretary shall have custody of the seal of the Corporation, and the Secretary, or an Assistant Secretary, shall have
authority to affix the same to any instrument requiring it, and, when so affixed, the seal may be attested by his or her signature or by the
signature of such Assistant Secretary. The Board may give general authority to any other officer to affix the seal of the Corporation and to
attest the affixing thereof by his or her signature. The Secretary shall keep, or cause to be kept, at the principal executive office or at the
office of the Corporation’s transfer agent or registrar, as determined by resolution of the Board, a share register, or a duplicate share
register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of
certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation.
5.12 The Assistant Secretary. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order designated
by the Board (or in the absence of any designation, in the order of their election) shall, in the absence of the Secretary, or in the event of his
or her inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have
such other powers as may from time to time be prescribed by the Board.
5.13 The Treasurer. The Treasurer shall have the custody of the Corporate funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation, and shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such depositories as may be designated by the Board. The Treasurer shall disburse the funds of
the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President and the
Board, at its regular meetings, or when the Board so requires, an account of all his or her transactions as Treasurer and of the financial
condition of the Corporation. The Treasurer may also be known as the Chief Financial Officer.
5.14 The Assistant Treasurer. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order
designated by the Board (or in the absence of any designation, in the order of their election) shall, in the absence of the Treasurer or in the
event of his or her inability or refusal to act, perform the duties and exercise the powers of the Treasurer, and shall perform such other
duties and have such other powers as may from time to time be prescribed by the Board.
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ARTICLE 6
Indemnification of Directors, Officers, Employees and Other Agents
6.1 Indemnification of Directors And Officers. The Corporation shall, to the maximum extent and in the manner permitted by the
General Corporation Law of Delaware, indemnify each of its directors and officers against expenses (including attorneys’ fees), judgments,
fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that
such person is or was an agent of the Corporation. For purposes of this Section 6.1, a “director” or “officer” of the Corporation includes
any person (a) who is or was a director or officer of the Corporation, (b) who is or was serving at the request of the Corporation as a
director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (c) who was a director or officer of a
corporation which was a predecessor corporation of the Corporation or of another enterprise at the request of such predecessor corporation;
provided, however, that, except with respect to proceedings to enforce rights to indemnification, the Corporation shall indemnify any such
director or officer in connection with a proceeding (or part thereof) initiated by such director of officer only if such proceeding (or part
thereof) was authorized by the Board.
6.2 Indemnification of Others. The Corporation shall have the power, to the maximum extent and in the manner permitted by the
General Corporation Law of Delaware, to indemnify each of its employees and agents (other than directors and officers) against expenses
(including attorneys’ fees), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any
proceeding, arising by reason of the fact that such person is or was an agent of the Corporation. For purposes of this Section 6.2, an
“employee” or “agent” of the Corporation (other than a director or officer) includes any person (a) who is or was an employee or agent of
the Corporation, (b) who is or was serving at the request of the Corporation as an employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, or (c) who was an employee or agent of a corporation which was a predecessor corporation of the
Corporation or of another enterprise at the request of such predecessor corporation.
6.3 Payment Of Expenses In Advance. Expenses incurred in defending any action or proceeding for which indemnification is required
pursuant to Section 6.1 hereof, or for which indemnification is permitted pursuant to Section 6.2 hereof, following authorization thereof by
the Board, shall be paid by the Corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking
by or on behalf of the indemnified party to repay such amount, if it shall ultimately be determined that the indemnified party is not entitled
to be indemnified as authorized in this Article 6.
6.4 Indemnity Not Exclusive. The indemnification provided by this Article 6 shall not be deemed exclusive of any other rights to
which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the Certificate of Incorporation.
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6.5 Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him
or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify
him or her against such liability under the provisions of the General Corporation Law of Delaware.
6.6 Conflicts. No indemnification or advance shall be made under this Article 6, except where such indemnification or advance is
mandated by law or the order, judgment or decree of any court of competent jurisdiction, in any circumstance where it appears:
(a) That it would be inconsistent with a provision of the Certificate of Incorporation, these Bylaws, a resolution of the stockholders or
an agreement in effect at the time of the accrual of the alleged cause of the action asserted in the proceeding in which the expenses were
incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement.
ARTICLE 7
Stock Certificates
7.1 Certificates for Shares. The shares of the Corporation shall be represented by certificates or shall be uncertificated. Certificates
shall be signed by, or be in the name of the Corporation by, the Chairman of the Board, or the President or a Vice President and by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation.
Within a reasonable time after the issuance or transfer of uncertificated stock, the Corporation shall send to the registered owner
thereof a written notice containing the information required by the General Corporation Law of the State of Delaware or a statement that
the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative
participating, optional or other special rights of each class of stock or series thereof, and the qualifications, limitations or restrictions of such
preferences and/or rights.
7.2 Signatures on Certificates. Any or all of the signatures on a certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue.
7.3 Transfer of Stock. Subject to any transfer restrictions in the Certificate of Incorporation of the Corporation or which may
otherwise be imposed by law or noted on the share certificate, upon surrender to the Corporation or the transfer agent of the Corporation of
a
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certificate of shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty
of the Corporation to issue a new certificate to the person entitled thereto, to cancel the old certificate and record the transaction upon its
books. Upon receipt of proper transfer instructions from the registered owner of uncertificated shares, such uncertificated shares shall be
canceled, and issuance of new equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto, and the
transaction shall be recorded upon the books of the Corporation.
7.4 Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, a person registered on its books as the owner of shares, and shall not be
bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws of Delaware.
7.5 Lost, Stolen or Destroyed Certificates. The Board may direct that a new certificate or certificates be issued to replace any
certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing the issue of a new
certificate or certificates, the Board may, in its discretion and as a condition precedent to the issuance thereof, require the owner of the lost,
stolen or destroyed certificate or certificates, or his or her legal representative, to advertise the same in such manner as it shall require,
and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.
ARTICLE 8
Notices
8.1 Notice. Whenever, under the provisions of the statutes or of the Certificate of Incorporation or of these Bylaws, notice is required
to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by
mail, addressed to such director or stockholder, at his or her address as it appears on the records of the Corporation, with postage thereon
prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Without
limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders may be given by
electronic transmission in the manner provided in Section 232 of the Delaware General Corporation Law. Notice to directors may also be
given by telegram or telephone.
8.2 Waiver. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or
of these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, or waiver by electronic transmission by
such person, whether before or after the time stated therein, shall be deemed equivalent thereto. Neither the business nor the purpose of any
meeting need be specified in such a waiver.
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ARTICLE 9
General Provisions
9.1 Dividends. Dividends upon the capital stock of the Corporation, subject to any restrictions contained in the General Corporation
Laws of Delaware or the provisions of the Certificate of Incorporation, if any, may be declared by the Board at any regular or special
meeting. Dividends may be paid in cash, in property or in shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
9.2 Dividend Reserve. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for
dividends, such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the
directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in
which it was created.
9.3 Checks. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other
person or persons as the Board may from time to time designate.
9.4 Corporate Seal. The Board may provide a suitable seal, containing the name of the Corporation, which seal shall be in charge of
the Secretary. If and when so directed by the Board or a committee thereof, duplicates of the seal may be kept and used by the Treasurer or
by an Assistant Secretary or Assistant Treasurer.
9.5 Execution of Corporate Contracts and Instruments. The Board, except as otherwise provided in these Bylaws, may authorize any
officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation;
such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board or within the agency power of
an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement, or to
pledge its credit or to render it liable for any purpose or for any amount.
In addition to the right of the stockholders of the Corporation to make, alter, amend, change, add to or repeal the bylaws of the
Corporation, the Board shall have the power (without the assent or vote of the stockholders) to make, alter, amend, change, add to or repeal
the bylaws of the Corporation, subject to applicable provisions of the Certificate of Incorporation.
ARTICLE 10
Amendments
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I, the undersigned, hereby certify:
CERTIFICATE OF SECRETARY
1. That I am the duly elected, acting and qualified Secretary of Renewable Energy Group, Inc., a Delaware corporation; and
2. That the foregoing Bylaws, comprising 14 pages (excluding this Certificate), constitute the Bylaws of such corporation as duly
adopted by the Board of Directors of such corporation on May 5, 2009 and amended and restated on February 26, 2010 solely to reflect the
change of name of REG Newco, Inc. to Renewable Energy Group, Inc.
IN WITNESS WHEREOF, I have hereunto subscribed my name as of this 26 day of February, 2010.
th
/s/ Natalie Lischer
Natalie Lischer, Secretary
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CERTIFICATE OF DESIGNATION OF SERIES
AND DETERMINATION OF RIGHTS AND PREFERENCES
SERIES A CONVERTIBLE PREFERRED STOCK
OF
OF
REG NEWCO, INC.
Exhibit 3.3
REG Newco, Inc., a Delaware corporation (the “Company”), acting pursuant to Section 151 of the General Corporation Law of
Delaware, does hereby submit the following Certificate of Designation of Series and Determination of Rights and Preferences of its Series
A Preferred Stock.
FIRST: The name of the Company is REG Newco, Inc.
SECOND: By approval of the Board of Directors of the Company dated February 15, 2010, the following resolutions were duly
adopted:
WHEREAS, the Certificate of Incorporation of the Company authorizes preferred stock consisting of sixty million
(60,000,000) shares, par value $0.0001 per share, issuable from time to time in one or more series;
WHEREAS, the Board of Directors of the Company is authorized, subject to limitations prescribed by law and by the provisions of
Article IV of the Company’s Certificate of Incorporation, to establish and fix the number of shares to be included in any series of preferred
stock and the designation, rights, preferences, powers, restrictions and limitations of the shares of such series;
WHEREAS, it is the desire of the Board of Directors to establish and fix the number of shares to be included in a new series of
Preferred Stock and the designation, rights, preferences and limitations of the shares of such new series.
NOW, THEREFORE, BE IT RESOLVED that pursuant to Article IV of the Certificate of Incorporation, there is hereby established a
series of fourteen million (14,000,000) shares of cumulative convertible preferred stock of the Company designated as the “Series A
Preferred Stock” which shall have the rights, preferences, powers, restrictions and limitations set forth as follows.
1. Relative Seniority. The Series A Preferred Stock shall, with respect to payment of dividends or in the case of redemption,
liquidation, dissolution or winding up of the Company, rank (a) senior and prior to the Common Stock of the Company and to any other
class or series of capital stock issued by the Company not designated as ranking senior to or pari passu with the Series A Preferred Stock
with respect to payment of dividends or in the case of redemption, liquidation, dissolution or winding up of the Company (collectively, the
“Junior Stock”); (b) pari passu with any other class or series of capital stock of the Company, the terms of which specifically provide that
such class or series shall rank pari passu with the Series A Preferred Stock with respect to payment of dividends or in the case of
redemption, liquidation, dissolution or winding up of the Company (such other class or series of capital stock and the Series A Preferred
Stock together, the “Parity Stock”); and (c) junior to any other class or series of capital stock of the Company, the terms of which
specifically provide that such class or series shall rank senior to the Series A Preferred Stock with respect to payment of dividends or in the
case of redemption, liquidation, dissolution or winding up of the Company (the “Senior Stock”).
2. Dividends.
(a) General. The holders of the Series A Preferred Stock shall accrue dividends at the rate of $.88 per share per annum (subject
to appropriate adjustments in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such
shares) calculated on the basis of a 360-day year, consisting of twelve 30-day months, and shall accrue on a daily basis from the date of
issuance thereof, compounded annually from the date of issuance, whether or not declared and shall be cumulative (the “Accrued
Dividends”); provided, however, that except as set forth in Sections 3, 5 and 6, the Company shall be under no obligation to pay such
Accrued Dividends; and, provided further, the holders’ right to receive dividends pursuant to this Section 2(a) shall terminate (other than
with respect to Accrued Dividends as of the date of conversion) upon the conversion of the shares of Series A Preferred Stock into
Common Stock pursuant to Section 5 below. In the event that, during any calendar year, dividends are paid on
both the Series A Preferred Stock and the Common Stock, and the amount of dividends each share of Series A Preferred Stock would have
received had it been converted into Common Stock on the first day of such calendar year exceeds the amount of dividends per share paid to
the holders of Series A Preferred Stock during such year, then, within five (5) business days following the end of such calendar year, the
holders of Series A Preferred Stock shall receive an amount per share equal to the difference between the amount of dividends each share
of Series A Preferred Stock would have received had it been converted to Common Stock as of the first day of such year and the amount of
dividends paid with respect to each share of Series A Preferred Stock during such year (the “Participating Dividend Payment”), and the
amount of the Participating Dividend Payment will be subtracted from the Accrued Dividends with respect to each outstanding share of
Preferred Stock as of the date the Participating Dividend Payment is made.
(b) Dividends in Arrears. If any Accrued Dividends on the Series A Preferred Stock shall not have been paid, or declared and
set apart for payment, the deficiency shall be fully paid or declared and set apart for payment before any dividend (other than dividends on
shares of Common Stock payable in shares of Common Stock) shall be paid or declared or set apart for Junior Stock and before any
purchase or acquisition of any Junior Stock is made by the Company, except the repurchase of Junior Stock from employees of the
Company upon termination of employment. At the earlier of: (i) the redemption of the Series A Preferred Stock; (ii) the conversion of the
Series A Preferred Stock pursuant to Section 5; or (iii) the liquidation, dissolution or winding up of the Company (including in connection
with an Acquisition as defined in Subsection 3(c) below), all Accrued Dividends shall be paid to the holders of record of outstanding shares
of Series A Preferred Stock as provided in Section 6 in the event of a redemption of the Series A Preferred Stock, Sections 2(c) or 5, as
applicable, in the event of the conversion of the Series A Preferred Stock and Section 3(a) in the event of a liquidation, dissolution or
winding up of the Company (including an Acquisition). No accumulation of dividends on the Series A Preferred Stock shall bear interest.
(c) Manner of Payment. Except as set forth in Subsection 5(a) or Subsection 5(b) below, dividends on the Series A Preferred
Stock shall be paid in cash at the time specified in Subsection 2(b) above; provided, however, in the event of a conversion pursuant to
Subsection 5(a) or Subsection 5(b), as applicable, in which the Company and such holder do not jointly elect to include the amount of
Accrued Dividends in the conversion, and such conversion occurs prior to February 26, 2014, then the Company may elect to postpone the
cash payment of any or all Accrued Dividends until up to the earliest to occur of (i) a QPO (as defined in Subsection 5(a)(i) below), (ii) the
liquidation, dissolution or winding up of the Company (including in connection with an Acquisition deemed to be a liquidation pursuant to
Subsection 3(c) below) or (iii) February 26, 2014. When payable hereunder, each dividend shall be mailed to the holders of record of the
Series A Preferred Stock as their names and addresses appear on the share register of the Company or at the office of the transfer agent.
(a) Waiver of Dividend. Notwithstanding anything herein to the contrary, the timing or amount of any payment of Accrued
Dividends owing to the holders of Series A Preferred Stock hereunder may be waived by the written consent or affirmative vote of the
Preferred Supermajority (as hereinafter defined in Section 3(c) below).
3. Liquidation, Dissolution or Winding Up.
(a) General. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, (i) the holders
of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution
to its stockholders, after and subject to the payment in full of all amounts required to be distributed to the holders of any Senior Stock, but
before any payment shall be made to the holders of Junior Stock by reason of their ownership thereof, an amount equal to $13.75 per share
of Series A Preferred Stock (subject to appropriate adjustments in the event of any stock dividend, stock split, combination or other similar
recapitalization affecting such shares) (“Series A Base Value”) plus any and all Accrued Dividends accrued but unpaid thereon (whether or
not declared), together with any other dividends declared but unpaid thereon in an amount which together for such Series A Base Value
plus Accrued Dividends and any other dividends declared but unpaid thereon shall not exceed $16.50 per share (the “Series A Accreted
Value”) and (ii) the holders of previously converted shares of Series A Preferred Stock shall be entitled to be paid out of the assets of the
Company available for distribution to its stockholders, after and subject to the payment in full of all amounts required to be distributed to
the holders of any Senior Stock, but before any payment shall be made to the holders of Junior Stock by reason of their ownership thereof,
any accrued and unpaid dividends on such previously converted shares of Series A Preferred Stock, in an amount which does not exceed the
Series A Accreted Value less the Series A Base Value. If upon any such liquidation, dissolution or winding up of the Company the
remaining assets of the Company available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series A
Preferred Stock and the holders of previously converted shares of Series A Preferred Stock the full amount to which they shall be entitled,
the holders of Parity Stock shall first share ratably in any distribution of the remaining assets and funds of the Company in proportion to the
respective amounts which would otherwise be payable in respect of the Parity Stock held by them upon such distribution if all amounts
payable on or with respect to such shares were paid in full, and the holders of previously converted shares of Parity Stock shall then share
ratably in any distribution of any remaining assets and funds of the Company in proportion to the respective amounts which would
otherwise be
payable in respect of any accrued and unpaid dividends on such shares previously held by them upon such distribution if all amounts
payable on or with respect to such shares were paid in full.
(b) Participation. After the payment of all preferential amounts required to be paid to the holders of Preferred Stock upon the
dissolution, liquidation, or winding up of the Company, all of the remaining assets and funds of the Company available for distribution to
its stockholders shall be distributed ratably among the holders of the Common Stock and the holders of the Series A Preferred Stock as if
the Series A Preferred Stock has been converted pursuant to Section 5.
(c) Treatment of Consolidations, Mergers, and Sales of Assets. The merger or consolidation of the Company into or with
another corporation which results in the exchange of outstanding shares of the Company, the sale of all or substantially all the assets of the
Company, or the license of all or substantially all of the assets of the Company, including without limitation any sale (whether by merger
or otherwise) of all or substantially all of the assets or the license of all or substantially all of the assets of one or more subsidiaries (the
“Subject Subsidiaries”) of the Company if substantially all of the assets of the Company and its subsidiaries taken as a whole are held by
the Subject Subsidiaries shall be deemed to be a liquidation, dissolution or winding up of the Company for purposes of this Section, unless
the Company’s stockholders of record as constituted immediately prior to any such transaction, by virtue of securities issued as
consideration for such transaction hold at least 50% of the voting power of the surviving or acquiring entity in approximately the same
relative percentages after such transaction as before (any transaction so deemed to be a liquidation, dissolution or winding up, an
“Acquisition”). The amount deemed distributed to the holders of Series A Preferred Stock upon any such merger or consolidation shall be
the cash or the value of the property, rights and/or securities distributed to such holders by the acquiring person, firm or other entity;
provided, however, that if the holders of at least seventy-five percent (75%) of the then outstanding shares of Series A Preferred Stock that
were issued in exchange for shares of the series A, series AA, series B or series BB preferred stock of Renewable Energy Group, Inc. a
Delaware corporation (“REG”), pursuant to the Second Amended and Restated Agreement and Plan of Merger executed November 20,
2009 by and among the Company, REG and REG Merger Sub, Inc. (the “Preferred Supermajority”), affirmatively approve by written
consent an Acquisition in accordance with Section 4 below and, in connection with such approval, expressly agree in writing that the cash,
securities or other property shall be distributed among the holders of Preferred Stock and Common Stock in accordance with the applicable
agreement or agreements setting forth the terms and conditions of such Acquisition, the holders of Preferred Stock and Common Stock
shall be entitled to receive upon the closing of such Acquisition only such amounts as are set forth in such agreement or agreements. The
value of such property, rights or other securities shall be determined in good faith by the Board of Directors of the Company, taking into
consideration the relevant terms of any underlying transaction documents. In the event the Company continues to exist following an
Acquisition, after payment in full of the liquidation preference as provided for in this Section 3, the certificates representing shares of the
Series A Preferred Stock issued and outstanding immediately prior to the consummation of the Acquisition shall be cancelled and
extinguished and the holders of such shares of Series A Preferred Stock shall have no further rights in the Company.
4. Voting.
(a) Each holder of outstanding shares of Series A Preferred Stock shall be entitled to the number of votes equal to the number of
whole shares of Common Stock into which the shares of Series A Preferred Stock held by such holder are convertible (as adjusted from
time to time pursuant to Section 5 hereof), at each meeting of stockholders of the Company (and written actions of stockholders in lieu of
meetings) with respect to any and all matters presented to the stockholders of the Company for their action or consideration. Except as
provided by law, by the provisions of Subsection 4(b) below or by the provisions establishing any other series of Preferred Stock, holders
of Series A Preferred Stock and of any other outstanding series of Preferred Stock shall vote together with the holders of Common Stock as
a single class.
(b) Protective Provisions. Subject to the rights of series of Preferred Stock that may from time to time come into existence and
any contractual agreements or restrictions which may be then in effect in any agreement of stockholders or other organizational document
to which the holders of Series A Preferred Stock and the Company may be a party, the approval by written consent of the Preferred
Supermajority (in addition to any other applicable stockholder approval requirements required by law) shall be required for the Company to
take the following actions:
(i) authorize or issue, or obligate itself to issue, any shares of Preferred Stock or any other equity security on parity with
or having a preference over any series of Preferred Stock with respect to dividends, liquidation, redemption or voting, including any
security convertible into or exercisable for any such equity security, or authorize any subsidiary to issue any equity security or any such
securities convertible or exercisable therefor;
(ii) increase or decrease the number of authorized shares of any series of Preferred Stock;
(iii) amend the Certificate of Incorporation or Bylaws of the Company, including the amendment of the Certificate of
Incorporation by the adoption or amendment of any Certificate of Designation or similar document, or amend the organizational documents
of any subsidiary, in any such case other than amendments solely to the extent required to authorize the issuance of any Junior Stock or any
security convertible into or exercisable for any Junior Stock;
(iv) alter or change the rights, preferences or privileges of the shares of any series of the Preferred Stock;
(v) issue, or cause any subsidiary to issue, any indebtedness, other than trade accounts payable and/or letters of credit,
performance bonds or other similar credit support incurred in the ordinary course of business, or amend, renew, increase or otherwise alter
in any material respect the terms of any indebtedness previously approved or required to be approved by the holders of the Preferred Stock
other than the incurrence of debt solely to fund the payment of Accrued Dividends on the Preferred Stock or solely to fund the redemption
of the Preferred Stock pursuant to Section 6;
(14) directors;
(vi) increase the authorized number of directors constituting the Board of Directors of the Company from fourteen
(vii) redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any share or
shares of capital stock of the Company; provided, however, that this restriction shall not apply to the repurchase of shares of Preferred
Stock pursuant to Section 6 or the repurchase of shares of Junior Stock from employees, officers, directors, consultants or other persons
performing services for the Company or any subsidiary pursuant to agreements under which the Company has the option to repurchase
such shares at cost upon the occurrence of certain events, such as the termination of employment;
Company, other than dividends on the Preferred Stock;
(viii) declare or pay dividends or otherwise make distributions with respect to any shares of capital stock of the
(ix) declare bankruptcy, dissolve, liquidate or wind up the affairs of the Company or any subsidiary;
(x) modify or change the nature of the Company’s business such that a material portion of the Company’s business is
devoted to any business other than the business of (A) designing, constructing or operating facilities for biofuels, chemicals or by-products
thereof and (B) procurement, manufacturing, selling, distribution, logistics, marketing or risk management related to biofuels, chemicals or
by-products thereof;
in the annual budget previously approved by the Board of Directors of the Company;
(xi) make or permit any subsidiary to make any capital expenditure in excess of $500,000 which is not otherwise included
(xii) effect any Acquisition;
(xiii) acquire directly or through a subsidiary the stock or any material assets of another corporation, partnership or other
person or entity for consideration valued at more than ten percent (10%) of the total assets of the Company as of the most recent month-end
prior to such acquisition as reflected on the balance sheet of the Company prepared in accordance with generally accepted accounting
principles consistently applied; or
(xiv) agree or commit to do any of the foregoing;
provided, however, that nothing in this Section 4(b) shall be deemed to alter any statutory provision entitling a particular class or series of
shares to vote as a class or series with respect to such matter.
5. Conversion Rights.
The holders of the Series A Preferred Stock shall have conversion rights as follows (the “ Conversion Rights”):
(a) Automatic Conversion.
(i) Each of the issued and outstanding shares of Series A Preferred Stock shall be automatically converted into such
number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Series A Issue Price (as defined
below), plus (to the extent the Company and such holder jointly elect to include the amount of Accrued Dividends in the conversion)
Accrued Dividends, by the Conversion Price (as defined below) in effect at the time of conversion, upon (A) the closing of the sale of
shares of Common Stock, at a price per share to the public (before deducting any commissions or other expenses) of at least two times the
Original Series A Issue Price (as defined below) (subject to appropriate adjustments in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares), in a firm commitment underwritten public
offering pursuant to an effective registration statement on Form S-1 (or any such successor form) under the Securities Act of 1933, as
amended (the “Act”), underwritten by a nationally recognized and reputable investment bank, resulting in an aggregate proceeds to the
Company of at least $40,000,000 (a “QPO”), or (B) the date specified in a written contract or agreement of the Preferred Supermajority, or
(C) if the shares of Common Stock have a closing price on NASDAQ or any national securities exchange in excess of $24.75 per share for
ninety (90) consecutive trading days with an average daily trading volume on such trading days of at least US $8,000,000.
(ii) All holders of record of shares of Series A Preferred Stock then outstanding will be given at least 10 days’ prior
written notice of the date fixed and the place designated for automatic conversion of all such shares of Series A Preferred Stock pursuant to
this Section 5(a). Such notice will be sent by first class or registered mail, postage prepaid, to each record holder of Series A Preferred
Stock at such holder’s address last shown on the records of the transfer agent for the Series A Preferred Stock (or the records of the
Company, if it serves as its own transfer agent).
(b) Optional Right to Convert. Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at
any time and from time to time, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing
$11.00 per share of Series A Preferred Stock (the “Original Series A Issue Price”), plus (to the extent the Company and such holder jointly
elect to include the amount of Accrued Dividends in the conversion) Accrued Dividends, by the Conversion Price (as defined below) in
effect at the time of conversion. The Conversion Price at which shares of Common Stock shall be deliverable upon conversion of Series A
Preferred Stock without the payment of additional consideration by the holder thereof (the “Conversion Price”) shall initially be the
Original Series A Issue Price. Such initial Conversion Price, and the rate at which shares of Series A Preferred Stock may be converted into
shares of Common Stock, shall be subject to adjustment as provided below.
In the event of a liquidation of the Company, the Conversion Rights shall terminate at the close of business on the first full day
preceding the date fixed for the payment of any amounts distributable on liquidation to the holders of Series A Preferred Stock.
(c) Mechanics of Conversion.
(i) In order to convert shares of Series A Preferred Stock into shares of Common Stock in accordance with this Section 5,
the holder shall (A) in the event of a conversion pursuant to Subsection 5(a)(i)(B) or Subsection 5(b) (an “Elective Conversion”), provide
written notice to the Company that such holder elects to convert all or any number of the shares represented by such certificate or
certificates and the date of conversion which notice, if notice is provided after February 26, 2014, must be received by the Company at least
sixty (60) days prior to the date selected by the holder for conversion (the “Conversion Notice”), (B) surrender the certificate or certificates
for such shares of Series A Preferred Stock at the office of the transfer agent (or at the principal office of the Company if the Company
serves as its own transfer agent), and (C) state in writing such holder’s name or the names of the nominees in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued. If required by the Company, certificates surrendered for conversion
shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Company, duly executed by
the registered holder or his or its attorney duly authorized in writing. The conversion date shall be the date for conversion specified in the
Conversion Notice in the case of an Elective Conversion or in any other case on the date of receipt of such certificates by the transfer agent
or the Company following the occurrence of the event (other than an Elective Conversion) giving rise to conversion. The Company shall,
as soon as practicable after the conversion date, issue and deliver at such office to such holder, or to his nominees, a certificate or
certificates for the number of shares of Common Stock to which such holder shall be entitled, together with cash in lieu of any fraction of a
share and, except as provided in Section 2(c), cash in the amount of any Accrued Dividends (through the date one day prior to the date the
shares of Series A Preferred Stock were converted) payable in respect of the shares of Series A Preferred Stock converted pursuant to this
Section 5.
(ii) The Company shall at all times during which the Series A Preferred Stock shall be outstanding, reserve and keep
available out of its authorized but unissued stock, for the purpose of effecting the conversion of the Series A Preferred Stock, such number
of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Series A
Preferred Stock (including any Accrued Dividends). Before taking any action which would cause an adjustment reducing the Conversion
Price below the then par value of the shares of Common Stock issuable upon conversion of the Series A Preferred Stock, the Company will
take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price.
(iii) All shares of Series A Preferred Stock which shall have been surrendered for conversion as herein provided shall no
longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate on the applicable
conversion date, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor. Any shares of Series
A Preferred Stock so converted shall be retired and cancelled and shall not be reissued, and the Company may from
time to time take such appropriate action as may be necessary to reduce the number of shares of authorized Series A Preferred Stock
accordingly.
(iv) If the conversion is in connection with an underwritten offer of securities registered pursuant to the Act, the
conversion may at the option of any holder tendering Series A Preferred Stock for conversion be conditioned upon the closing with the
underwriter of the sale of securities pursuant to such offering, in which event the person(s) entitled to receive the Common Stock issuable
upon such conversion of the Series A Preferred Stock shall not be deemed to have converted such Series A Preferred Stock until
immediately prior to the closing of the sale of securities.
(d) Conversion Price Adjustments of Series A Preferred Stock for Certain Dilutive Issuances, Splits and Combinations.
(i) The Conversion Price of the Series A Preferred Stock, as applicable, shall be subject to adjustment from time to time
as follows:
(A) If the Company shall issue, after the date upon which any shares of Series A Preferred Stock were first issued
(the “Purchase Date”), any Additional Stock (as defined below) without consideration or for a consideration per share less than the
Conversion Price for Series A Preferred Stock in effect immediately prior to the issuance of such Additional Stock, the Conversion Price
for such Series A Preferred Stock in effect immediately prior to each such issuance shall forthwith (except as otherwise provided in this
clause (i)) be adjusted to a price determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issuance (including shares of Common Stock deemed to be
issued pursuant to subsection 5(d)(i)(E)(1) or (2)) plus the number of shares of Common Stock that the aggregate consideration received by
the Company for such issuance would purchase at such Conversion Price; and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issuance (including shares of Common Stock deemed to be issued pursuant to
subsection 5(d)(i)(E)(1) or (2)) plus the number of shares of such Additional Stock; provided, however, for purposes of such calculation
(1) it shall not include any additional shares of Common Stock issuable with respect to shares of Preferred Stock, convertible securities, or
exercisable options, warrants or other rights for the purchase of shares of stock or convertible securities, solely as a result of the adjustment
of such Series A Conversion Price (or other conversion ratios) resulting from the issuance of Additional Stock causing such adjustment and
(2) the grant, issue or sale of Additional Stock consisting of the same class of security, and warrants to purchase such security and notes
convertible into such security, issued or issuable at the same price at two or more closings within a six month period shall be aggregated
and shall be treated as one sale of Additional Stock occurring on the earliest date on which such securities were granted, issued or sold.
(B) No adjustment of the Conversion Price for the Series A Preferred Stock shall be made in an amount less than
one cent per share, provided that any adjustments that are not required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to three (3) years from the date of the event giving rise to the
adjustment being carried forward, or shall be made at the end of three (3) years from the date of the event giving rise to the adjustment
being carried forward. Except to the limited extent provided for in subsections (E)(3) and (E)(4), no adjustment of such Conversion Price
pursuant to this subsection 5(d)(i) shall have the effect of increasing the Conversion Price above the Conversion Price in effect immediately
prior to such adjustment.
(C) In the case of the issuance of Common Stock for cash, the consideration shall be deemed to be the amount of
cash paid therefor before deducting any discounts, commissions or other expenses allowed, paid or incurred by the Company for any
underwriting or otherwise in connection with the issuance and sale thereof.
(D) In the case of the issuance of the Common Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair value thereof as determined in good faith by the Board of Directors irrespective
of any accounting treatment, taking into consideration the relevant terms of any underlying transaction documents.
(E) In the case of the issuance (whether before, on or after the applicable Purchase Date) of options to purchase or
rights to subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common Stock or options to purchase
or rights to subscribe for such convertible or exchangeable securities, the following provisions shall apply for all purposes of this
subsection 5(d)(i) and subsection 5(d)(ii):
(1) The aggregate maximum number of shares of Common Stock deliverable upon exercise (assuming the
satisfaction of any conditions to exercisability, including without limitation, the passage of time, but without taking into account potential
antidilution adjustments) of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in subsections
5(d)(i)(C) and (d)(i)(D)), if any, received by the Company upon the issuance of such options or rights plus the
minimum exercise price provided in such options or rights (without taking into account potential antidilution adjustments) for the Common
Stock covered thereby.
(2) The aggregate maximum number of shares of Common Stock deliverable upon conversion of, or in
exchange (assuming the satisfaction of any conditions to convertibility or exchangeability, including, without limitation, the passage of
time, but without taking into account potential antidilution adjustments) for, any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by the Company for any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued dividends), plus the minimum additional consideration, if any, to be received by
the Company (without taking into account potential antidilution adjustments) upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each case to be determined in the manner provided in subsections 5(d)(i)(C)
and (d)(i)(D)).
(3) In the event of any change in the number of shares of Common Stock deliverable or in the consideration
payable to the Company upon exercise of such options or rights or upon conversion of or in exchange for such convertible or exchangeable
securities, including, but not limited to, a change resulting from the antidilution provisions thereof, the Conversion Price of the Series A
Preferred Stock to the extent in any way affected by or computed using such options, rights or securities, shall be recomputed to reflect such
change, but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the
exercise of any such options or rights or the conversion or exchange of such securities.
(4) Upon the expiration of any such options or rights, the termination of any such rights to convert or
exchange or the expiration of any options or rights related to such convertible or exchangeable securities, the Conversion Price of the Series
A Preferred Stock, to the extent in any way affected by or computed using such options, rights or securities or options or rights related to
such securities shall be recomputed to reflect the issuance of only the number of shares of Common Stock (and convertible or exchangeable
securities that remain in effect) actually issuable upon the exercise of such options or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to such securities.
pursuant to subsections 5(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any change, termination or expiration of the type
described in either subsection 5(d)(i)(E)(3) or (4).
(5) The number of shares of Common Stock deemed issued and the consideration deemed paid therefor
subsection 5(d)(i)(E)) by the Company after the Purchase Date other than:
(ii) “Additional Stock” shall mean any shares of capital stock issued (or deemed to have been issued pursuant to
(A) Common Stock issued pursuant to a transaction described in subsection 5(d)(iii) hereof;
(B) Shares of Common Stock issuable or issued to employees, consultants, directors, officers, advisors or vendors
(if in transactions with primarily non-financing purposes) of the Company or directors of West Central Cooperative, directly or pursuant to
a stock option plan, stock purchase or restricted stock plan, or other arrangement or agreement approved by the Board of Directors of the
Company, in an aggregate amount not to exceed 5,400,000 shares;
(C) Shares of Common Stock issued, issuable or deemed to have been issued by the Company upon conversion of
Preferred Stock;
(D) shares of Common Stock issued or issuable (I) in a public offering before or in connection with which all
outstanding shares of Preferred Stock will be converted to Common Stock or (II) upon exercise of warrants or rights granted to underwriters
in connection with such a public offering;
(E) Shares of Common Stock issued, issuable or deemed to have been issued in connection with the acquisition by
the Company of the stock or assets of another corporation, partnership or other entity, provided that such issuances are first approved by
the Board of Directors and for purposes other than primarily equity financing for the Company; and
(F) Shares of Common Stock issued, issuable or deemed to have been issued to a vendor, lender or equipment
lessor or in connection with strategic or licensing transactions, joint ventures or similar transactions, provided that such issuances are first
approved by the Board of Directors (including the affirmative approval of a majority of the directors designated by
NGP, Westway and Bunge and the affirmative approval of the director designated by the USBG Group as provided in the Stockholder
Agreement dated on or about February 26, 2010 by and between the Company and certain of its stockholders);
February 26, 2010 at the exercise prices specified therein (subject to anti-dilution adjustments provided therein); and
(G) The issuance up to 1,313,359 shares of Common Stock upon the exercise of warrants outstanding as of
(H) Shares of Common Stock issued, issuable or deemed to have been issued in connection with any borrowings by
the Company, direct or indirect, from financial institutions, whether or not presently authorized, including any type of loan or payment
evidenced by any type of debt instrument, provided that such issuances are approved by the Board of Directors (including the affirmative
approval of a majority of the directors designated by NGP, Westway and Bunge and the affirmative approval of the director designated by
the USBG Group as provided in the Stockholder Agreement dated on or about February 26, 2010 by and between the Company and certain
of its stockholders.)
(iii) In the event the Company should at any time or from time to time after a Purchase Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common Stock or the determination of holders of Common Stock entitled
to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock (hereinafter referred to as “Common Stock
Equivalents”) without payment of any consideration by such holder for the additional shares of Common Stock or the Common Stock
Equivalents (including the additional shares of Common Stock issuable upon conversion or exercise thereof), then, as of such record date
(or the date of such dividend distribution, split or subdivision if no record date is fixed), the Conversion Price of the Series A Preferred
Stock shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series
shall be increased in proportion to such increase of the aggregate of shares of Common Stock outstanding and those issuable with respect to
such Common Stock Equivalents with the number of shares issuable with respect to Common Stock Equivalents determined from time to
time in the manner provided for deemed issuances in subsection 5(d)(i)(E).
(iv) If the number of shares of Common Stock outstanding at any time after a Purchase Date is decreased by a
combination of the outstanding shares of Common Stock, then, following the record date of such combination, the Conversion Price for the
Series A Preferred Stock shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of each
share of such series shall be decreased in proportion to such decrease in outstanding shares.
(e) Other Distributions. In the event the Company shall declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Company or other persons, assets (excluding cash dividends) or options or rights not referred to in subsection
5(d)(iii), then, in each such case for the purpose of this subsection 5(e), the holders of the Series A Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders of the number of shares of Common Stock of the Company
into which their shares of Preferred Stock are convertible as of the record date fixed for the determination of the holders of Common Stock
of the Company entitled to receive such distribution.
(f) Recapitalizations. If at any time or from time to time there shall be a recapitalization of the Common Stock (other than a
subdivision, combination or merger or sale of assets transaction provided for elsewhere in this Section 5 or Section 3) provision shall be
made so that the holders of the Series A Preferred Stock shall thereafter be entitled to receive upon conversion of such Preferred Stock the
number of shares of stock or other securities or property of the Company or otherwise, to which a holder of Common Stock deliverable
upon conversion would have been entitled on such recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 5 with respect to the rights of the holders of such Preferred Stock after the recapitalization to
the end that the provisions of this Section 5 (including adjustment of the Conversion Price then in effect and the number of shares
purchasable upon conversion of such Preferred Stock) shall be applicable after that event as nearly equivalent as may be practicable.
(g) No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 5 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the Series A Preferred Stock against impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
(i) No fractional shares shall be issued upon the conversion of any share or shares of the Series A Preferred Stock, and
the number of shares of Common Stock to be issued shall be rounded to the nearest whole share (with one-half being rounded upward). The
calculation of the number of shares to be issued shall be determined on the basis of the total number of shares of Series A Preferred Stock
the holder is at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate
conversion.
(ii) Upon the occurrence of each adjustment or readjustment of the Conversion Price of Series A Preferred Stock
pursuant to this Section 5, the Company, at its expense, shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and prepare and furnish to each holder of such series of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Company shall, upon the written
request at any time of any holder of Series A Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth
(A) such adjustment and readjustment, (B) the Conversion Price and (C) the number of shares of Common Stock and the amount, if any, of
other property that at the time would be received upon the conversion of a share of Series A Preferred Stock.
(i) Notices of Record Date. In the event of any taking by the Company of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any
right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property, or to receive any
other right, the Company shall mail to each holder of Series A Preferred Stock, at least ten (10) business days prior to the date specified
therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the
amount and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of the Series A Preferred
Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares
of Series A Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of Series A Preferred Stock, in addition to such other remedies as shall be available to
the holder of Series A Preferred Stock, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including,
without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate of
Incorporation, and shall not, until such action is taken to increase the authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose, issue any shares of Common Stock.
(k) Notices. Any notice required by the provisions of this Section 5 to be given to the holders of shares of Series A Preferred
Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at his address
appearing on the books of the Company or by electronic transmission in the manner permitted by the General Corporation Law of the State
of Delaware.
(l) Waiver of Adjustment of Conversion Price. Notwithstanding anything herein to the contrary, any downward adjustment of
the Conversion Price of any series of Preferred Stock may be waived by the consent or vote of the holders of the majority of the
outstanding shares of such series either before or after the issuance causing the adjustment.
6. Redemption of the Preferred Stock.
(a) At any time and from time to time on or after February 26, 2014, the Preferred Supermajority may require, by providing
written notice thereof to the Company (a “Redemption Election”), that all or part of the issued and outstanding shares of Preferred Stock be
redeemed by the Company out of funds lawfully available therefor; provided, however, that any such redemptions shall be for an aggregate
Redemption Price, as defined below, of at least $5,000,000. Within fourteen (14) days following the receipt by the Company of a
Redemption Election, the Company shall provide written notice to all holders of Preferred Stock of the Redemption Election (a
“Redemption Notice”) which shall set forth the date of such redemption (the “Redemption Date”) and shall allow all other holders of
Preferred Stock the opportunity to participate in the redemption transaction by providing written notice to the Company (an “Election
Notice”) within ten (10) days following the receipt of the Redemption Notice of such holder’s election to participate and the number and
series of shares held by such holder to be redeemed by the Company. The Redemption Date shall be determined by the Company and shall
be (i) a date not less than forty-five (45) days and not more than one hundred and eighty (180) days after the date of the Redemption Notice
(a “Standard Redemption Date ”), or (ii) a date that is more than one hundred and eighty (180) days after the date of the Redemption
Election but prior to the date which is eighteen months following such date (a “Delayed Redemption Date”). On the applicable Redemption
Date, concurrently with surrender by the holders of the certificates representing such shares to be redeemed, the Company shall, to the
extent it may lawfully do so, redeem all issued and outstanding
shares of Series A Preferred Stock to be redeemed by paying an amount per share therefor equal to (i) in the event such redemption occurs
on a Standard Redemption Date, the greater of (A) the Fair Market Value (as defined in Section 6(d) below) per share of Series A Preferred
Stock, as of the date of the Redemption Election or (B) the Series A Accreted Value; or (ii) in the event such redemption occurs on a
Delayed Redemption Date, the greater of (x) the Fair Market Value per share of Series A Preferred Stock, as of the date which is sixty
(60) days prior to the Delayed Redemption Date, or (y) the Series A Accreted Value, (in each case, the “Redemption Price”). Each holder
of Preferred Stock to be redeemed shall surrender to the Company the certificate or certificates representing such shares, in the manner and
at the place designated in the Redemption Notice, and thereupon the applicable Redemption Price of such shares shall be payable to the
order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be
cancelled. In the event less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares. If the Company does not have sufficient funds legally available to redeem on any Redemption Date all
shares of Preferred Stock to be redeemed on such Redemption Date, (i) the Company shall redeem a pro rata portion of each holder’s
redeemable shares of Preferred Stock out of funds legally available therefor, based on the respective amounts which would otherwise be
payable in respect of the shares to be redeemed if the legally available funds were sufficient to redeem all such shares, and shall redeem the
remaining shares to have been redeemed as soon as practicable after the Company has funds legally available therefore, and (ii) the
Company shall use commercially reasonable efforts to obtain sufficient legally available funds in order to effectuate the complete
redemption of all shares of Preferred Stock to be redeemed on the Redemption Date as soon as practicable after the Redemption Date.
(b) In the event the Company sets a Delayed Redemption Date, upon written notice to the Company not less than thirty
(30) days prior to the Delayed Redemption Date, each holder of shares of Preferred Stock electing to redeem shares pursuant to an Election
Notice shall have the right, by written notice to the Company, to revoke their election to have such shares redeemed.
(c) From and after a Redemption Date, all rights of the holders of the shares of Preferred Stock designated for redemption as
holders of Preferred Stock (except the right to receive the Redemption Price, without interest, upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of the Company or be
deemed to be outstanding for any purpose whatsoever. The shares of Preferred Stock covered by an Election Notice but not redeemed due
to the Company’s having insufficient funds legally available for redemption thereof shall remain outstanding and entitled to all the rights
and preferences provided herein until redeemed as provided in Section 7(a) above.
(d) For purposes of calculating the Redemption Price, the “ Fair Market Value” per share of Series A Preferred Stock, shall be
determined in good faith by the Board of Directors (other than those directors affiliated with or nominated by any holder of Preferred Stock
that has submitted an Election Notice) as of the applicable date and in making such determination it shall not give consideration to any
discount related to shares representing minority interest or related to any illiquidity or lack of marketability of shares arising from
restrictions on transfer under applicable federal or state securities laws, but shall take into consideration the rights and preferences of the
Preferred Stock. If the holders of a majority of the Preferred Stock to be redeemed disagree with such determination of Fair Market Value,
such holders shall provide written notice to the Company thereof (a “Value Dispute”) and the Fair Market Value per share of the Series A
Preferred Stock, shall be determined by the following procedures. Each of the Company, on the one hand, and the holders of Series A
Preferred Stock submitting the Value Dispute, on the other hand, shall appoint an independent appraiser, each of whom shall independently
determine the Fair Market Value per share of Series A Preferred Stock (the “Appraised Values”). If the higher of the Appraised Values is
not more than 25% higher than the lower of the Appraised Values, then the Fair Market Value per share will be the average of the two
Appraised Values. If the higher of the Appraised Values is more than 25% higher than the lower of the Appraised Values, then the parties
shall appoint a third independent appraiser who shall, within thirty (30) days following receipt of the Appraised Values, select one of the
two Appraised Values as the Fair Market Value per share which is closest to the Fair Market Value per share determined by such third
party appraiser (the “Third Party Determination”). The Third Party Determination shall be binding on and non-appealable by the Company
and the holders of the shares of Preferred Stock to be redeemed. Following the receipt of the Third Party Determination, the Redemption
Date shall be deemed to be the date which is ten (10) days thereafter. All costs of the appraisers pursuant to this Section 6(d) shall be split
equally by the Company on the one hand and the holders of Preferred Stock to be redeemed on the other hand.
7. Sinking Fund.
There shall be no sinking fund for the payment of dividends, or liquidation preferences on the Series A Preferred Stock or the
redemption of any shares thereof.
8. Amendment.
This Certificate of Designation constitutes an agreement between the Company and the holders of the Series A Preferred Stock. It
may be amended by vote of the Board of Directors of the Company and the written consent of the Preferred Supermajority;
provided, however, that nothing in this Section 8 shall be deemed to alter any statutory provision entitling a particular class or series of
shares to vote as a class or series with respect to such amendment; provided further, however, any such amendment that would have a
material adverse effect on the rights of a particular holder of shares of Preferred Stock provided in this Certificate of Designation, but
would not have a similar material adverse effect on all holders of Preferred Stock generally, shall require the consent of such materially
adversely affected holder.
[SIGNATURE PAGE TO FOLLOW]
IN WITNESS WHEREOF, the Company has caused this Certificate to be executed by its Chief Executive Officer and attested to by
its Treasurer this 26 day of February, 2010.
th
ATTEST:
/s/ Natalie Lischer
Natalie Lischer, Secretary and Treasurer
SERIES A CERTIFICATE OF DESIGNATION SIGNATURE PAGE
By: /s/ Daniel J. Oh
Daniel J. Oh, President
EXCEPT AS PROVIDED IN THE REGISTRATION STATEMENT OF THE COMPANY ON FORM S-4 EFFECTIVE
JANUARY 19, 2010, THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO (1) REGISTRATION IN COMPLIANCE WITH SUCH ACT AND SUCH STATE
LAWS OR (2) AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT
SUCH REGISTRATION IS NOT REQUIRED.
Exhibit 4.11
WARRANT
To Purchase Shares of
Common Stock of
RENEWABLE ENERGY GROUP, INC.
February 26, 2010
THIS CERTIFIES THAT, for good and valuable consideration, the receipt of which is hereby acknowledged, or his lawful
assignee (the “Holder”) is entitled to subscribe for and purchase from Renewable Energy Group, Inc., a Delaware corporation (the
“Company”), shares of the common stock of the Company pursuant to the terms and subject to the conditions hereof. The shares of
common stock that may be acquired upon exercise of this Warrant are referred to herein as the “Warrant Shares.” As used herein, the term
“Holder” means the Holder, any party who acquires all or part of this Warrant as a registered transferee of the Holder, or any record holder
or holders of the Warrant Shares issued upon exercise, whether in whole or in part, of the Warrant. This Warrant is being issued in
substitution for that warrant previously issued to the Holder by Blackhawk Biofuels, LLC (the “Blackhawk Warrant”).
This Warrant is subject to the following provisions, terms and conditions:
1. Exercise and Term.
(a) The right to purchase the Warrant Shares at the Warrant Exercise Price shall be exercisable at any time from and after the date
hereof until June 8, 2011 (the “Exercise Period”), after which date all such rights shall terminate.
(b) The rights represented by this Warrant may be exercised by the Holder hereof, in whole or in part (but not as to a fractional
share), by written notice of the Holder’s irrevocable election to exercise the purchase right represented by such Warrant (in the form
attached hereto) delivered to the Company at its principal offices prior to the expiration of this Warrant along with or preceded by (i) a
certified or bank cashier’s check in payment of the Warrant Exercise Price for such shares, and (ii) the surrender of this Warrant.
2. Warrant Exercise Price. The Warrant Shares shall be exercisable at a price of $ per share (the “Warrant Exercise Price”).
1
3. Issuance of Securities. The Company agrees that the Warrant Shares purchased hereby shall be and are deemed to be issued to the
record holder hereof as of the close of business on the date on which this Warrant shall have been surrendered and the payment made for
such Warrant Shares as aforesaid. Within a reasonable time, not exceeding ten (10) days after the rights represented by this Warrant shall
have been so exercised, and, unless this Warrant has expired, a new Warrant representing the number of Warrant Shares, if any, with
respect to which this Warrant shall not then have been exercised shall also be delivered to the holder hereof.
4. Status as Accredited Investor. The Holder represents and warrants to the Company that as of the date the Blackhawk Warrant was
issued, the Holder was an “accredited investor” as that term is defined under Rule 501 of Regulation D of the Securities Act of 1933, as
amended, and Holder understands that the Company is relying upon this representation in connection with the issuance of this Warrant to
the Holder.
5. Covenants of Company. The Company agrees that all Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be duly authorized and issued, fully paid and nonassessable. The Company further agrees
that during the period within which the rights represented by this Warrant may be exercised, in the event this Warrant is exercised, the
Company will have authorized, and reserved for the purpose of issue or transfer upon exercise of the subscription rights evidenced by this
Warrant, a sufficient number of such Warrant Shares, to provide for the exercise of the rights represented by this Warrant.
6. Anti-dilution Adjustments. The above provisions are, however, subject to the following:
(a) In case the Company shall at any time hereafter subdivide or combine its outstanding shares of common stock, the Warrant
Exercise Price, in effect immediately prior to the subdivision or combination shall forthwith be proportionately increased, in the case of
combination, or decreased, in the case of subdivision, and each Warrant Share purchasable upon exercise of the Warrant shall be
changed to the number determined by dividing the then current Warrant Exercise Price by the exercise price as adjusted after the
subdivision or combination.
(b) If any merger, capital reorganization or reclassification of the outstanding capital stock of the Company, or consolidation or
merger of the Company with another entity, or the sale of all or substantially all of its assets to another entity shall be effected in such a
way that holders of the Company’s shares of common stock shall be entitled to receive securities or assets with respect to or in
exchange for their shares of common stock (an “Exchange Event”), then, from and after such Exchange Event, the Warrant will be
exercisable, upon the terms and conditions specified in this Warrant, for an amount of such securities or assets to which a holder of the
number of shares of common stock purchasable upon exercise of the Warrant at the time of such Exchange Event would have been
entitled to receive upon such Exchange Event. Appropriate provisions will be made with respect to the rights and interests of the Holder
to ensure that the provisions of this Warrant (including without limitation the provisions to adjust the Warrant Exercise Price and the
number of shares of common stock purchasable upon the exercise of this Warrant) will be applicable, as nearly as may be, in relation to
any such securities or assets deliverable upon the exercise of this Warrant after an Exchange Event. The Company will not effect any
Exchange Event unless, prior to the consummation thereof, the successor or purchasing corporation (if other than the Company) with
respect to such Exchange Event, assumes by written instrument executed and delivered to the Holder at the address of such Holder as
shown on the books of the Company, the obligation to deliver to such Holder such securities or assets as, in accordance with the
foregoing provisions, such Holder may be entitled to purchase.
2
(c) Upon any adjustment of the Warrant Exercise Price in accordance with this Section 6, then and in each such case, the
Company shall give written notice thereof, by first class mail, postage prepaid, addressed to the registered Holder of this Warrant at the
address of such Holder as shown on the books of the Company, which notice shall state the Warrant Exercise Price resulting from such
adjustment and the increase or decrease, if any, in the number of shares of common stock purchasable at such price upon the exercise of
this Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based.
7. No Voting Rights. This Warrant shall not entitle the holder hereof to any voting rights or other rights as a shareholder of the
Company.
8. Transfer of Warrant or Resale. The Holder acknowledges that it has obtained this Warrant for investment and not with the intention
of making any resale or distribution. Except as provided in the Registration Statement of the Company on Form S-4 effective January 19,
2010, the Holder further acknowledges (a) that neither this Warrant nor any of the securities obtainable under it have been registered under
the Securities Act of 1933, as amended, or any state securities statutes and (b) that neither this Warrant nor any securities obtained under it
may be transferred without such registration or an opinion of legal counsel acceptable to the Company that such transfer may be made
without registration.
9. Successors and Assigns. This Warrant shall inure to the benefit of and be binding upon the successors and permitted assigns of the
parties hereto. The Holder of this Warrant may assign any of its rights under this Warrant to his or her heirs to the extent permitted by this
Warrant and applicable law (including, without limitation, federal and state securities laws and regulations).
10. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware, without
regard to the principles of conflicts of law thereof.
IN WITNESS WHEREOF, Renewable Energy Group, Inc. has caused this Warrant to be signed by its duly authorized officer.
RENEWABLE ENERGY GROUP, INC.
By:
Its:
3
WARRANT EXERCISE
(To be signed only upon exercise of Warrant)
The undersigned, the Holder of a Warrant to purchase shares of common stock of Renewable Energy Group, Inc., hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to purchase thereunder, of the shares of common stock to
which such Warrant relates and herewith makes payment of $ therefor in cash or by check and requests that the certificates for such
shares of common stock be issued in the name of, and be delivered to , whose address is set forth below the signature of the
undersigned. This Warrant Exercise form is accompanied by the original Warrant, which is hereby surrendered to the extent necessary to
effect the exercise.
Dated:
(Signature)
(Print Name)
(Address)
4
SCHEDULE OF WARRANTS ISSUED BY REG TO MEMBERS OF THE FORMER BOARD OF MANAGERS AND EXECUTIVE
OFFICERS OF BLACKHAWK.
Exhibit 4.12
Date Issued
February 26, 2010
February 26, 2010
February 26, 2010
February 26, 2010
February 26, 2010
February 26, 2010
February 26, 2010
February 26, 2010
February 26, 2010
February 26, 2010
February 26, 2010
February 26, 2010
February 26, 2010
February 26, 2010
Warrant Holder
Number of Shares
of REG Common
Stock
Gary Bocker
Jon Rosenstiel
Karl Lawfer
Marvin Wurster
Quentin Davis
Ronald Fluegel
Ronald Mapes
Terry Sweitzer
Brad Smith
Criss Davis
David Shockey
Dennis Hamilton
Dennis Wilke
Ebenezer Management, LLC
22,395
22,395
22,395
22,395
22,395
22,395
22,395
22,395
22,395
22,395
22,395
22,395
22,395
44,790
Exercise Prices
2.23264
$
2.23264
$
2.23264
$
2.23264
$
2.23264
$
2.23264
$
2.23264
$
2.23264
$
2.23264
$
2.23264
$
2.23264
$
2.23264
$
2.23264
$
4.46528
$
Expiration Date
June 8, 2011
June 8, 2011
June 8, 2011
June 8, 2011
June 8, 2011
June 8, 2011
June 8, 2011
June 8, 2011
June 8, 2011
June 8, 2011
June 8, 2011
June 8, 2011
June 8, 2011
February 25, 2017
FIRST AMENDMENT
TO THE SECOND SUPPLEMENT TO THE MASTER LOAN AGREEMENT
(REVOLVING LINE OF CREDIT LOAN)
Exhibit 10.6
This FIRST AMENDMENT TO THE SECOND SUPPLEMENT TO THE MASTER LOAN AGREEMENT (REVOLVING LINE
OF CREDIT LOAN) (this “Amendment”) is made to be effective as of March 7, 2011, by and between REG NEWTON, LLC, an Iowa
limited liability company (the “Borrower”) and AGSTAR FINANCIAL SERVICES, PCA, a United States instrumentality (the “Lender”).
RECITALS
A. The Borrower and the Lender previously entered into that certain Second Supplement to the Master Loan Agreement (Revolving
Line of Credit Loan), dated March 8, 2010 (the “Second Supplement”) and that certain Master Loan Agreement dated March 8, 2010, and
related supplements as amended, modified or restated from time to time (together with the Second Supplement, the “Loan Agreement”)
under which the Lender agreed to extend certain financial accommodations to the Borrower.
B. The Borrower has requested that the Lender extend the maturity date of the Revolving Line of Credit Note to March 5, 2012. The
Lender is willing to so amend the loan, in accordance with the terms and conditions of this Amendment.
C. All terms used and not otherwise defined herein shall have the meanings assigned to them in the Loan Agreement.
AGREEMENT
NOW THEREFORE, in consideration of the facts set forth in the foregoing Recitals which the parties agree are true and correct, and
in consideration for entering into this Amendment and the related documents to be executed concurrently with or pursuant hereto, the
parties agree as follows:
1. Amendment to Defined Term. Except as amended by this Amendment, all terms used and not otherwise defined herein shall have
the meanings assigned to them in the Loan Agreement. The following defined term in the Second Supplement is hereby amended and
restated to read as follows:
“Revolving Line of Credit Loan Maturity Date” shall mean March 5, 2012.
2. Effect on Loan Agreement . Except as expressly amended by this Amendment, all of the terms of the Loan Agreement shall be
unaffected by this Amendment and shall remain in full force and effect. Nothing contained in this Amendment shall be deemed to constitute
a waiver of any default, Event of Default, right
or remedy of the Lender, or to affect, modify, or otherwise impair any of the rights of Lender as provided in the Loan Agreement.
3. Representations and Warranties of Borrower. Borrower hereby agrees with, reaffirms, and acknowledges:
a. the representations and warranties in the Loan Agreement, the Loan Documents and the Related Documents. Furthermore,
Borrower represents that the representations and warranties contained in the Loan Agreement, the Loan Documents and the Related
Documents continue to be true and correct and in full force and effect.
b. that Borrower has the power and authority to execute, deliver, and perform this Amendment and each other document required
under this Amendment and that all documents contemplated herein when executed and delivered to Lender will constitute the valid,
binding and legally enforceable obligations of Borrower in accordance with their respective terms and conditions, except as
enforceability may be limited by any applicable bankruptcy or insolvency laws.
4. Conditions Precedent to Effectiveness and Continuing Effectiveness of this Amendment. The obligations of the Lender
hereunder are subject to the conditions precedent that Lender shall have received the following, in form and substance satisfactory to the
Lender:
a. this Amendment duly executed by Borrower and the Lender;
b. on or before March 7, 2011, an Allonge to the Revolving Line of Credit Note duly executed by the Borrower and the Lender;
c. written consents to this Amendment from Jasper County, Iowa, REG Marketing & Logistics Group, LLC, REG Services
Group, LLC, Renewable energy Group, Inc. in form and substance substantially similar to Exhibit A to this Amendment
d. all other documents, instruments, or agreements required to be delivered to Lender under the Loan Agreement and not
previously delivered to Lender; and
e. payment for all cost and expenses (including attorney’s fees) of Lender associated with the documentation, execution and
delivery of this Amendment.
5. Counterparts. It is understood and agreed that this Amendment may be executed in several counterparts, each of which shall, for
all purposes, be deemed an original, and all of such counterparts, taken together, shall constitute one and the same agreement, even though
all of the parties hereto may not have executed the same counterpart of this Amendment.
[SIGNATURE PAGE IMMEDIATELY FOLLOWS]
SIGNATURE PAGE TO
FIRST AMENDMENT
TO THE SECOND SUPPLEMENT
TO THE MASTER LOAN AGREEMENT
(REVOLVING LINE OF CREDIT LOAN)
BY AND BETWEEN
REG NEWTON, LLC
AND
AGSTAR FINANCIAL SERVICES, PCA
DATED: MARCH 7, 2011
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers and duly
authorized, as of the date first above written.
BORROWER:
REG NEWTON, LLC, an Iowa
limited liability company
/s/ Daniel J. Oh
By: Daniel J. Oh
Its: President
LENDER:
AGSTAR FINANCIAL SERVICES, PCA,
a United States corporation
/s/ Mark Schmidt
By: Mark Schmidt
Its: Vice President
Exhibit 10.7
FIRST ALLONGE
(to the Revolving Line of Credit Note Dated March 8, 2010)
THIS FIRST ALLONGE (the “Allonge”) is made and entered into as of the 7 day of March, 2011, by and between REG NEWTON,
th
LLC, an Iowa limited liability company (the “Borrower”) and AGSTAR FINANCIAL SERVICES, PCA, a United States instrumentality,
its successors and assigns (the “Lender”).
A. The Borrower previously executed and delivered to the Lender a Revolving Line of Credit Note in the original principal amount of
$2,350,000.00, dated March 8, 2010 (the “Note”). This Allonge is permanently attached to said Note.
B. The Borrower and Lender have agreed to make certain modifications to the Note, all in accordance with the terms and conditions
of this Allonge.
RECITALS
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained in this Allonge and for other
good and valuable consideration, the receipt and sufficiently of which are hereby acknowledged by the Borrower and the Lender, the
parties agree as follows:
1. Modification of Note. Notwithstanding any of the provisions of that certain Master Loan Agreement dated March 8, 2010 and that
certain Second Supplement to the Master Loan Agreement and the Note to the contrary, paragraph #6 of the Note is hereby amended and
restated to read as follows:
6. The outstanding principal balance hereof, together with all accrued interest, if not paid sooner, shall be due and payable in full on
March 5, 2012 (the “Revolving Line of Credit Loan Maturity Date”).
IN WITNESS WHEREOF, the parties hereto have caused this Allonge to be duly executed and delivered as of the date and year first
above written.
BORROWER:
LENDER:
REG NEWTON, LLC, an Iowa limited liability company
AGSTAR FINANCIAL SERVICES, PCA, a United States
instrumentality
/s/ Daniel J. Oh
By: Daniel J. Oh
Its: President
/s/ Mark Schmidt
By: Mark Schmidt
Its: Vice President
FOURTH AMENDMENT TO LOAN AGREEMENT AND FIRST AMENDMENT TO
REVOLVING CREDIT LOAN NOTE
THIS FOURTH AMENDMENT TO LOAN AGREEMENT AND FIRST AMENDMENT TO REVOLVING CREDIT LOAN
NOTE (this “Amendment”) is executed as of the 30 day of September, 2010 and made effective as of December 31, 2009 (the “Effective
Date”), by and between FIFTH THIRD BANK, an Ohio banking corporation, successor by merger with FIFTH THIRD BANK, a Michigan
banking corporation (“Lender”), having an address at 8000 Maryland Avenue, Suite 1400, St. Louis, Missouri 63105, and REG
DANVILLE, LLC, a Delaware limited liability company, formerly known as BLACKHAWK BIOFUELS, LLC (“Borrower”), with its
office at 416 S. Bell Ave., Ames, Iowa 50010.
Exhibit 10.13
The following recitals are a material part of this Amendment:
Recitals
A. Lender and Borrower are parties to that certain Loan Agreement dated as of May 9, 2008, as amended by that certain First
Amendment to Loan Agreement dated December 23, 2008, as further amended by that certain Second Amendment to Loan Agreement
dated November 25, 2009, and as further amended by that certain Third Amendment to Loan Agreement dated February 26, 2010 (as
further amended, modified and/or restated from time to time, the “Loan Agreement”). Capitalized terms used herein and not otherwise
defined shall have the meanings given them in the Loan Agreement.
B. Lender has provided Loans to Borrower in the aggregate maximum principal amount of $29,650,000.00 pursuant to the Loan
Agreement, which Loans are evidenced by (i) that certain Construction/Term Loan Note dated May 9, 2008 in the amount of
$24,650,000.00 executed by Borrower in favor of Lender and (ii) that certain Revolving Credit Loan Note dated May 9, 2008 in the amount
of $5,000,000.00 executed by Borrower in favor of Lender (“Line of Credit Note”).
C. Lender and Borrower hereby agree that the Loan Agreement and Revolving Credit Note are hereby amended under the terms and
conditions contained herein.
Contractual Provisions
NOW, THEREFORE, in consideration of the mutual promises and agreements hereinafter contained and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Amendments to Loan Agreement.
(a) From and after the Effective Date, the Revolving Credit Loan shall no longer be deemed a revolving line of credit, and
amounts repaid under the Revolving Credit Loan may not be reborrowed. Notwithstanding anything in the Loan Agreement to the
contrary, Borrower shall no longer have the right to request advances under the
Revolving Credit Loan, and Lender shall be under no further obligation to make advances under the Revolving Credit Loan. The
aggregate outstanding principal balance of the Revolving Credit Loan shall be repaid in accordance with the terms of the Loan
Agreement, as amended hereby.
(b) Section 1.1 of the Loan Agreement is hereby amended as follows:
(i) The definition of “Change of Control” is hereby added in its entirety as follows:
“Change of Control shall mean the occurrence of any of the following: (i) a sale of all or substantially all of the assets
of Borrower; (ii) a merger or consolidation involving Borrower, excluding a merger or consolidation after which 50% or more of
the outstanding voting equity interests of Borrower continue to be held by the same holders that held 50% of more of the
outstanding voting equity interests of Borrower immediately before such merger or consolidation; or (iii) any issuance and/or
acquisition of voting equity interests of Borrower that results in a person or entity holding 50% or more of the outstanding voting
equity interests of Borrower, excluding any underwriter in any firmly underwritten offering and excluding any persons or entities
that collectively held 50% of more of the outstanding voting equity interests of Borrower immediately before such issuance or
acquisition.”
(ii) The definition of “Operation Documents” is hereby deleted in its entirety and replaced with the following:
“Operation Documents shall mean, collectively, the Management and Operational Services Agreement and the
Services Agreement.”
(iii) The definition of “Revolving Credit Loan Termination Date” is hereby deleted in its entirety and replaced with the
following:
“Revolving Credit Loan Termination Date shall mean November 30, 2010.”
(c) The following sentence is hereby added in its entirety to the end of Section 2.2(a) of the Loan Agreement as follows:
“Notwithstanding the foregoing, after December 31, 2009 Lender shall be under no further obligation to make any
additional Revolving Credit Loans to Borrower under this Agreement, and after such date Borrower shall not be entitled to
reborrow any amounts previously repaid pursuant to the terms of this Agreement.”
(d) Section 3.2(b) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
2
“(b) Revolving Credit Loans. The principal amount and accrued interest of the Revolving Credit Loan Note shall be due and
payable on the dates and in the manner hereinafter set forth:
(i) Borrower shall make payments of accrued interest monthly on the first (1st) day of each calendar month for the
immediately preceding month’s accrued interest (computed through the last calendar day of the preceding month), with the
first of such payments commencing on the first (1st) day of the first month after the first Advance under the Revolving
Credit Loan,
(ii) Borrower shall make a one-time payment of principal in the amount of $40,000 on or before September 30, 2010,
and then Borrower shall make weekly payments of principal on each Wednesday of each calendar week thereafter in the
amount of $20,000 per week with the first such payment due on October 6, 2010, and
(iii) On the Revolving Credit Loan Termination Date, the remaining outstanding principal balance and accrued
interest on the Revolving Credit Loan Note shall be due and payable.”
(e) Section 3.4 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
“3.4 Reserved.”
(f) Section 3.5(e) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
“(e) Reserved.”
(g) Section 7.48 of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
“7.48 Change of Control. Without the prior written consent of Lender, Borrower shall not take any action that would trigger
a Change of Control.”
(h) Section 8.1(x) of the Loan Agreement is hereby deleted in its entirety and replaced with the following:
“(x)(i) If there shall occur any default or event of default by Borrower under any of the Operation Documents which default
or event of default is not waived, or (ii) any termination of any such Operation Agreements without prior written consent by
Lender.”
3
SECTION 2. Amendment to Line of Credit Note. The Line of Credit Note is hereby amended by reducing the amount of the Line of
Credit Note from “$5,000,000.00” to “$190,000.00”. Therefore, any place where “$5,000,000.00” appears in the Line of Credit Note it
shall be replaced with “$190,000.00”.
SECTION 3. Amendments to Loan Documents. The Loan Documents are hereby modified as necessary to reflect the amendments
set forth in Sections 1 and 2 hereof.
SECTION 4. Amendment Fee. The Borrower hereby agrees to pay to Lender a non-refundable amendment fee in the aggregate
amount of $15,000.00, which shall be deemed fully earned upon Lender’s receipt thereof and payable upon the execution of this
Amendment.
SECTION 5. Consent to Cancellation of Oil Feedstock Supply Agreement and Oil Supply Cure Rights Agreement. The Lender
hereby consents and agrees to Borrower’s cancellation of both the Oil Feedstock Supply Agreement and Oil Supply Cure Rights
Agreement, and therefore all the Loan Documents, as applicable, are hereby revised to reflect such consent and cancellation.
SECTION 6. No Claims. Borrower acknowledges that there are no existing claims, defenses (personal or otherwise) or rights of set-
off or recoupment whatsoever with respect to any of the Loan Documents. Borrower agrees that this Amendment in no way acts as a
release or relinquishment of any liens in favor of the Lender securing payment of obligations and indebtedness between Borrower and
Lender.
SECTION 7. References. All references in the Loan Agreement to “this Agreement” shall be deemed to refer to the Loan Agreement
as amended hereby; and any and all references in the other Loan Documents to the Loan Agreement shall be deemed to refer to the Loan
Agreement as amended hereby.
SECTION 8. Representations and Warranties. Borrower hereby represents and warrants to Lender as follows:
(a) The Recitals in this Amendment are true and correct in all respects.
(b) Borrower has the company power, and has been duly authorized by all requisite company action, to execute and deliver this
Amendment and to perform its obligations hereunder and thereunder. This Amendment has been duly executed and delivered by
Borrower.
(c) This Amendment is the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance with its
terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws of
general application affecting the rights of creditors and (ii) applicable laws and regulations and principles of equity which may restrict
the enforcement of certain remedies or the availability of certain equitable remedies.
4
(d) Borrower’s execution, delivery and performance of this Amendment does not and will not (i) violate any law, rule, regulation
or court order to which Borrower is subject; (ii) conflict with or result in a breach of Borrower’s Certificate of Formation or Operating
Agreement or any agreement or instrument to which Borrower is party or by which Borrower or its properties is bound, or (iii) result in
the creation or imposition of any lien, security interest or encumbrance on any property of Borrower, whether now owned or hereafter
acquired, other than liens in favor of Lender.
(e) The obligation of Borrower to repay the Obligations, together with all interest accrued thereon, is absolute and unconditional,
and there exists no right of set off or recoupment, counterclaim or defense of any nature whatsoever to payment of the Obligations.
SECTION 9. Effect and Construction of Amendment. Except as expressly provided herein, the Loan Documents shall remain in full
force and effect in accordance with their respective terms, and this Amendment shall not be construed to:
(a) impair the validity, perfection or priority of any lien or security interest securing the Obligations; or
(b) waive or impair any rights, powers or remedies of Lender under the Loan Documents.
In the event of any inconsistency between the terms of this Amendment and the Loan Agreement or any of the Loan Documents,
this Amendment shall govern. Borrower acknowledges that it has consulted with counsel and with such other experts and advisors as it
has deemed necessary in connection with the negotiation, execution and delivery of this Amendment. This Amendment shall be
construed without regard to any presumption or rule requiring that it be construed against the party causing this Amendment or any
part hereof to be drafted.
SECTION 10. Conditions Precedent to Effectiveness of Amendment. This Amendment shall not be effective until:
(a) Lender shall have received this Amendment duly executed along with both Consents of Guarantor attached hereof;
(b) Lender shall have received notification from the IFA that the IFA has agreed and consented, without reservation, to all the
terms of this Amendment to the extent the IFA’s consent and agreement is required under the IFA Guaranty Documents;
(c) Lender shall have received payment of the fees and costs required herein and under the Loan Agreement; and
(d) Lender has received such other and further documents as Lender shall have reasonably requested prior to the date hereof, all
in form and substance satisfactory to Lender and its counsel.
5
SECTION 11. Costs and Expenses. Borrower hereby reaffirms its agreement under the Loan Agreement to pay or reimburse the
Lender on demand for all costs and expenses incurred by the Lender in connection with the Loan Agreement, the Loan Documents and all
other documents contemplated thereby, including without limitation all reasonable fees and disbursements of legal counsel. Without
limiting the generality of the foregoing, Borrower specifically agrees to pay all fees and disbursements of counsel to the Lender for the
services performed by such counsel in connection with the preparation of this Amendment and the documents and instruments incidental
hereto.
SECTION 12. Miscellaneous.
(a) Borrower agrees to execute such other and further documents and instruments as Lender may reasonably request to implement
the provisions of this Amendment and to perfect and protect the liens and security interests created by the Loan Agreement.
(b) This Amendment shall be binding upon and inure to the benefit of and be enforceable by the parties hereto, their respective
successors and assigns. No other person or entity shall be entitled to claim any right or benefit hereunder, including, without limitation,
the status of a third-party beneficiary of this Amendment.
(c) The provisions of this Amendment are intended to be severable. If any provisions of this Amendment shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such
invalidity or enforceability without in any manner affecting the validity or enforceability of such provision in any other jurisdiction or
the remaining provisions of this Amendment in any jurisdiction.
(d) This Amendment may be executed in any number of counterparts and by different parties to this Amendment on separate
counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same
agreement. Any signature delivered by a party by facsimile transmission shall be deemed to be an original signature hereto.
(e) Any notices with respect to this Amendment shall be given in the manner provided for in the Loan Agreement.
(f) This Amendment shall be governed by and construed in accordance with the internal laws of the State of Missouri.
(g) All representations, warranties, covenants, agreements, undertakings, waivers and releases of Borrower contained herein shall
survive until the Obligations are paid in full.
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(h) Incorporation by Reference; Statement Required By Mo. Rev. Stat. Section 432.047. All of the terms, covenants and
conditions of the Loan Documents are incorporated in, restated by, and made part of this Amendment by reference. Pursuant to Mo.
Rev. Stat. Section 432.047, Lender hereby gives the following notice to Borrowers:
“Oral agreements or commitments to loan money, extend credit or to forbear from enforcing repayment of a debt
including promises to extend or renew such debt are not enforceable, regardless of the legal theory upon which it is based
that is in any way related to the Loan Agreement. To protect you (borrower(s)) and us (creditor) from misunderstanding
or disappointment, any agreements we reach covering such matters are contained in this writing, which is the complete
and exclusive statement of the agreement between us, except as we may later agree in writing to modify it.”
[Remainder of Page Intentionally Left Blank]
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the Effective Date.
BORROWER:
LENDER:
REG DANVILLE, LLC, a Delaware
limited liability company, formerly known
as Blackhawk Biofuels, LLC
FIFTH THIRD BANK, an Ohio banking
corporation, successor by merger with FIFTH
THIRD BANK, a Michigan banking corporation
By: /s/ Daniel Oh
Daniel Oh, President
By: /s/ Mary Ann Lemonds
Mary Ann Lemonds, Vice President
8
CONSENT OF GUARANTOR
Renewable Energy Group, Inc., a Delaware corporation (“Guarantor”), has executed in favor of Fifth Third Bank, an Ohio banking
corporation, successor by merger with Fifth Third Bank, a Michigan banking corporation (“Lender”), those certain Guaranties dated as of
May 9, 2008 and November 25, 2009 (the “Guaranties”) in which Guarantor guaranteed certain obligations of Borrower to Lender. The
undersigned Guarantor does hereby consent to the terms of this Amendment and does hereby ratify and reaffirm the Guaranties as amended
as of the date hereof, and agrees that the Guaranties shall remain in full force and effect in accordance with its terms as amended hereby.
The undersigned Guarantor further agrees that its consent to this Amendment is not required, and that the Lender’s obtaining such consent
shall in no way imply any requirement for obtaining such a consent in similar circumstances in the future.
Date: September 30, 2010
RENEWABLE ENERGY GROUP, INC.
/s/ Daniel J. Oh
By:
Name: Daniel J. Oh
Title:
President
9
CONSENT OF GUARANTOR
The Illinois Finance Authority (“Guarantor”), has executed in favor of Fifth Third Bank, an Ohio banking corporation, successor by
merger with Fifth Third Bank, a Michigan banking corporation (“Lender”), that certain Guaranty dated May 9, 2008 (the “Guaranty”) in
which Guarantor guaranteed certain obligations of Borrower to Lender. The undersigned Guarantor does hereby consent to the terms of the
Loan Agreement as further amended by this Amendment and does hereby ratify and reaffirm the Guaranty as amended as of the date
hereof, and agrees that the Guaranty shall remain in full force and effect in accordance with its terms as amended hereby.
Date: September 30, 2010
ILLINOIS FINANCE AUTHORITY
/s/ Christopher B. Meister
By:
Name: Christopher B. Meister
Executive Director
Title:
10
FIRST AMENDMENT TO
STOCKHOLDER AGREEMENT
Exhibit 10.15
This First Amendment (this “Amendment”) to the Stockholder Agreement of REG Newco, Inc. (now known as Renewable Energy
Group, Inc.), a Delaware corporation (the “Company”), is made and entered into effective as of June 29, 2010. Capitalized terms used but
not otherwise defined in this Amendment shall have the respective meanings assigned to such terms in the Stockholder Agreement (as
defined below).
WHEREAS, the Company, NGP Energy Technology Partners L.P., a Delaware limited partnership (“NGP Energy”), Natural Gas
Partners, VIII, L.P., a Delaware limited partnership (collectively with NGP Energy, “NGP”) and certain other Stockholders entered into
that certain Stockholder Agreement of the Company, dated as of February 26, 2010 (the “Stockholder Agreement”);
WHEREAS, pursuant to Section 2(a)(ii) of the Stockholder Agreement, subject to certain conditions, NGP is entitled to nominate and
elect two representatives to the Company’s Board of Directors; and
WHEREAS, it is the desire of the undersigned to amend the Stockholder Agreement to modify the number of directors of the
Company to be nominated and elected by NGP, and to provide NGP with an observer right with respect to Board meetings, upon the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises of the parties, the parties agree and acknowledge as follows:
Section 1. Amendments.
(a) The Stockholder Agreement is amended, as of the date hereof, by replacing the existing Section 2(a)(ii) of the Stockholder
Agreement with the following provision:
“(ii) the nomination and election to the Board of (A) for so long as NGP holds at least 2,105,263 shares of Series A
Preferred Stock (and/or Common Stock issued or issuable upon conversion of such Series A Preferred Stock) (subject to
appropriate adjustments in the event of any stock dividend, stock split, combination or other similar recapitalization affecting
such shares), one (1) representative designated by NGP, which number may be increased at any time in the sole discretion of NGP
to two (2) representatives effective upon the written request of NGP, (B) for so long as Westway holds at least 657,895 shares of
Series A Preferred Stock (and/or Common Stock issued or issuable upon conversion of such Series A Preferred Stock) (subject to
appropriate adjustments in the event of any stock dividend, stock split, combination or other similar recapitalization affecting
such shares), one (1) representative designated by Westway, (C) for so long as Bunge holds at least 526,316 shares of Series A
Preferred Stock (and/or Common Stock issued or issuable upon conversion of such Series A Preferred Stock) (subject to
appropriate adjustments in the event of any stock dividend, stock split,
combination or other similar recapitalization affecting such shares), one (1) representative designated by Bunge and (D) for so
long as the members of the USBG Group collectively hold at least 1,277,167 shares of Series A Preferred Stock (and/or Common
Stock issued or issuable upon conversion of such Series A Preferred Stock) (subject to appropriate adjustments in the event of any
stock dividend, stock split, combination or other similar recapitalization affecting such shares), one (1) representative designated
by the members of the USBG Group holding a majority of the shares of Series A Preferred Stock (and/or Common Stock issued
or issuable upon conversion of the shares of such Series A Preferred Stock) held by members of the USBG Group (Westway,
Bunge and the USBG Group are collectively referred to herein as the “Strategic Investors”); provided, however, in the event any
of NGP, Westway, Bunge or USBG Group has elected to have all of its shares of Series A Preferred Stock redeemed by the
Company pursuant to the Series A Certificate of Designation (a “Redeeming Stockholder”), and the Company is not able to
redeem all the shares of Series A Preferred Stock held by the Redeeming Stockholder, then the Redeeming Stockholder shall not
lose the right to have its representative(s) nominated and elected to the Board pursuant to this Subsection 2(a)(ii) until such
redemption is complete.”
(b) The Stockholder Agreement is amended, as of the date hereof, by replacing the existing Section 7(c) of the Stockholder
Agreement with the following provision:
“(c) Observer Rights. The Company shall permit up to four (4) non-voting observers to attend each meeting of the Board
and of any committees of the Board, consisting of the President of the Company, an observer appointed by West Central, an
observer appointed by Energy Technology Partners, L.L.C. and, for so long as only (1) director has been appointed to the Board
by NGP as contemplated in Section 2(a)(ii) above, an observer appointed by NGP; provided however that NGP shall not have the
right to appoint an observer pursuant to this Section 7 during the period in which NGP has appointed two (2) directors to the
Board as contemplated in Section 2(a)(ii) above. Such observers shall receive advance notice of all such meetings and all
materials provided to the directors before and during such meetings. The Company may remove or exclude such observers from
any meeting of the Board and of any committees of the Board when such observers’ presence would reasonably be expected to
compromise attorney-client confidentiality, would be reasonably necessary to protect highly confidential information or for other
similar bona fide corporate reasons. The decision of the Board with respect to the privileged or confidential nature of such
information shall be final and binding.”
Section 2. Effect. This Amendment constitutes an amendment to the Stockholder Agreement. The terms and provisions of the
Stockholder Agreement and all other documents and instruments relating and pertaining to the Stockholder Agreement shall continue in full
force and effect, as amended hereby. In the event of any conflict between the provisions of the Stockholder Agreement and the provisions
of this Amendment, the provisions of this Amendment shall control.
2
Section 3. Counterparts. This Amendment may be executed in any number of counterparts, each of which shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
[Signature Page Follows]
3
IN WITNESS WHEREOF, the parties hereto have executed this Amendment effective as of the day first above written.
COMPANY:
RENEWABLE ENERGY GROUP, INC.
/s/ Jeffrey Stroburg
By:
Name: Jeffrey Stroburg
Chairman / CEO
Title:
COMMON STOCKHOLDERS:
WEST CENTRAL COOPERATIVE
/s/ Jeffrey Stroburg
By:
Name: Jeffrey Stroburg
President / CEO
Title:
BLUE MARBLE INVESTORS LLC
/s/ Kendell Enebrit
By:
Name: Kendell Enebrit
Secretary
Title:
WEST CENTRAL BIODIESEL INVESTORS, LLC
/s/ Susan Tronchetti
By:
Name: Susan Tronchetti
Manager
Title:
ENERGY TECHNOLOGY PARTNERS, L.L.C.
/s/ Chris Sorrells
By:
Name: Chris Sorrells
Title:
Managing Director
FIRST AMENDMENT TO STOCKHOLDER AGREEMENT
SIGNATURE PAGE
BUNGE NORTH AMERICA, INC.
/s/ Eric Hakmiller
By:
Name: Eric Hakmiller
Title:
Vice-President Bunge Biofuels
BIOFUELS COMPANY OF AMERICA, LLC
/s/ Mark A. Barke
By:
Name: Mark A. Barke
President
Title:
GATX CORPORATION
/s/ Eric P. Herkness
By:
Name: Eric P. Herkness
Title:
Vice President
TODD & SARGENT, INC.
/s/ Lee Sargent
By:
Name: Lee Sargent
Title:
CEO & Chair
SARGECO, INC.
/s/ Lee Sargent
By:
Name: Lee Sargent
Title:
President
FIRST AMENDMENT TO STOCKHOLDER AGREEMENT
SIGNATURE PAGE
NATURAL GAS PARTNERS VIII, L.P.
By: G.F.W. Energy VIII, L.P., General Partner
By: GFW VIII, L.L.C., General Partner
/s/ William J. Quinn
By:
Name: William J. Quinn
Authorized Member
E D & F MAN HOLDINGS BV
/s/ Paul Chatterton
By:
Name: Paul Chatterton
Title:
Appointed Representative
USBG MEMBERS:
USRG HOLDCO V, LLC
/s/ Jonathan Koch
By:
Name: Jonathan Koch
Title:
OHANA HOLDINGS, LLC
/s/ Jonathan Koch
By:
Name: Jonathan Koch
Title:
JYCO, LLC
/s/ Jonathan Koch
By:
Name: Jonathan Koch
Title:
FIRST AMENDMENT TO STOCKHOLDER AGREEMENT
SIGNATURE PAGE
SUPREME OIL COMPANY, INC.
/s/ Jonathan Koch
By:
Name: Jonathan Koch
Title:
PADMA RAG DATTA TRUST
/s/ Lois-Ellin G. Datta
By:
Name: Lois-Ellin G. Datta
Title:
Trustee
JANE SU AND RICHARD CHOW REVOCABLE
TRUST
/s/ Richard Chow
By:
Name: Richard Chow
Trustee
Title:
FIRST AMENDMENT TO STOCKHOLDER AGREEMENT
SIGNATURE PAGE
SERIES A STOCKHOLDERS:
NGP ENERGY TECHNOLOGY PARTNERS, L.P.
By NGP ETP, L.L.C., its General Partner
/s/ Chris Sorrells
By:
Name: Chris Sorrells
Title:
Managing Director
NATURAL GAS PARTNERS VIII, L.P.
By: G.F.W. Energy VIII, L.P., General Partner
By: GFW VIII, L.L.C., General Partner
/s/ William J. Quinn
By:
Name: William J. Quinn
Authorized Member
E D & F MAN HOLDINGS BV
/s/ Paul Chatterton
By:
Name: Paul Chatterton
Title:
Appointed Representative
BUNGE NORTH AMERICA, INC.
/s/ Eric Hakmiller
By:
Name: Eric Hakmiller
Title:
Vice-President Bunge Biofuels
WEST CENTRAL COOPERATIVE
/s/ Jeffrey Stroburg
By:
Name: Jeffrey Stroburg
President / CEO
Title:
FIRST AMENDMENT TO STOCKHOLDER AGREEMENT
SIGNATURE PAGE
USBG MEMBERS:
USRG HOLDCO V, LLC
/s/ Jonathan Koch
By:
Name: Jonathan Koch
Manager
Title:
OHANA HOLDINGS, LLC
/s/ Jonathan Koch
By:
Name: Jonathan Koch
Manager
Title:
JYCO, LLC
/s/ Jonathan Koch
By:
Name: Jonathan Koch
Manager
Title:
SUPREME OIL COMPANY, INC.
/s/ Jonathan Koch
By:
Name: Jonathan Koch
Manager
Title:
PADMA RAG DATTA TRUST
/s/ Lois-Ellin G. Datta
By:
Name: Lois-Ellin G. Datta
Title:
Trustee
JANE SU AND RICHARD CHOW
REVOCABLE TRUST
/s/ Richard Chow
By:
Name: Richard Chow
Trustee
Title:
FIRST AMENDMENT TO STOCKHOLDER AGREEMENT
SIGNATURE PAGE
REGISTRATION RIGHTS AGREEMENT
Exhibit 10.16
THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) is made and entered into as of February 26, 2010, by and
among REG Newco, Inc., a Delaware corporation (together with its successors and assigns, the “Company”), the holders of the
Company’s Series A Convertible Preferred Stock as listed on Exhibit A hereto (the “Series A Stockholders” ), and the holders of the
Company’s Common Stock as listed on Exhibit A hereto (the “Common Stockholders”). The Series A Stockholders and Common
Stockholders are collectively referred to herein as the “Stockholders.”
1. Background. Pursuant to (a) the Second Amended and Restated Asset Purchase Agreement executed November 20, 2009 by and
among the Company, REG Newton, LLC, Renewable Energy Group, Inc. (“REG”) and Central Iowa Energy, LLC , (b) the Second
Amended and Restated Asset Purchase Agreement executed November 20, 2009 by and among the Company, REG Wall Lake, LLC, REG
and Western Iowa Energy, LLC, (c) the Second Amended and Restated Merger Agreement executed November 21, 2009 by and among the
Company, REG Danville, LLC, REG and Blackhawk Biofuels, LLC and (d) the Second Amended and Restated Merger Agreement
executed November 20, 2009 by and among the Company, REG and REG Merger Sub, Inc. (collectively, such Asset Purchase Agreements
and Merger Agreements are referred to herein as the “Acquisition Agreements”), the Company is obligated to enter into this Agreement in
order to provide the Stockholders with certain registration rights regarding the Company’s equity securities. Certain terms used herein are
defined in Section 2 of this Agreement.
2. Definitions. As used herein, unless the context otherwise requires, the following terms have the following respective meanings:
Commission: The Securities and Exchange Commission or any other Federal agency at the time administering the Securities Act.
Exchange Act: The Securities Exchange Act of 1934, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Exchange Act
of 1934 shall include a reference to the comparable section, if any, of any such similar Federal statute.
Form S-3: Such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act
subsequently adopted by the Commission that permits inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the Commission.
Holder: Any Stockholder owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with
Section 8 hereof.
1
Initial Offering: The Company’s first firm commitment underwritten public offering of its Common Stock under the Securities
Act.
Junior Registrable Securities: (i) The shares of Common Stock issued to the Common Stockholders other than Senior Registrable
Securities; and (ii) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or
other security that is issued as) a dividend or other distribution with respect to, or in exchange for, or in replacement of, the shares
referenced in (i) above, excluding in all cases, however, any Junior Registrable Securities sold by a person in a transaction in which his
rights under this Agreement are not assigned.
Person: A corporation, an association, a partnership, a limited liability company, a business, an individual, a governmental or
political subdivision thereof or a governmental agency.
Preferred Stock: Series A Preferred Stock
Registrable Securities: Any Senior Registrable Securities and Junior Registrable Securities.
Registration Expenses: All expenses incident to the Company’s performance of or compliance with Sections 3.1, 3.2 and 3.3
below, including, without limitation, all registration, filing and National Association of Securities Dealers fees, all fees and expenses of
complying with applicable laws (including securities or blue sky laws), all word processing, duplicating and printing expenses,
messenger and delivery expenses, the fees and disbursements of counsel for the Company and of its independent public accountants,
including, without limitation, the expenses of any special audits or “cold comfort” letters required by or incident to such performance
and compliance, the fees and disbursements of one special counsel for the selling Holders selected by the selling Holders with the
approval of the Company, which approval shall not be unreasonably withheld, which fees and disbursements shall not exceed $50,000,
premiums and other costs of policies of insurance against liabilities arising out of the public offering of the Registrable Securities being
registered, the fees and expenses of any special experts retained by the Company in connection with such offering, the fees and
expenses of any qualified independent underwriter or other independent appraiser participating in any offering pursuant to the Conduct
Rules of the National Association of Securities Dealers, Inc., all printing, mailing courier and overnight delivery charges (except to the
extent borne by underwriters), all travel expenses of the Company’s officers and employees and any other expenses of the Company in
connection with attending or hosting meetings with prospective purchasers of the offered securities, and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities, but excluding Selling Expenses, if any; provided, that, in any case
where Registration Expenses are not to be borne by the Company, such expenses shall not include salaries of Company personnel or
general overhead expenses of the Company, auditing fees, premiums or other expenses
2
relating to liability insurance required by underwriters of the Company or other expenses for the preparation of financial statements or
other data normally prepared by the Company in the ordinary course of its business or which the Company would have incurred in any
event.
Securities Act: The Securities Act of 1933, or any similar Federal statute, and the rules and regulations of the Commission
thereunder, all as shall be in effect at the time. References to a particular section of the Securities Act of 1933 shall include a reference
to the comparable section, if any, of any such similar Federal statute.
Selling Expenses: Underwriting discounts and commissions and stock transfer taxes relating to Registrable Securities covered by
such registration.
Senior Registrable Securities: (i) The shares of Common Stock issuable or issued upon conversion of the Series A Preferred
Stock of the Company, (ii) the shares of Common Stock issued and outstanding following the exercise of any warrant to purchase
shares of Common Stock issued by the Company to any Series A Stockholder or its affiliates, (iii) any other shares of Common Stock
held by a Series A Stockholder, (iv) 1,409,053 shares of Common Stock issued to West Central Biodiesel Investors, LLC and 696,210
shares of the Common Stock issued to Blue Marble Investors, LLC, (v) the shares of Common Stock issued pursuant to any of the
Acquisition Agreements, and (vi) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for, or in replacement
of, the shares referenced in (i), (ii), (iii), (iv) and (v) above, excluding in all cases, however, any Senior Registrable Securities sold by a
person in a transaction in which his rights under this Agreement are not assigned.
3. Registration under Securities Act, etc.
3.1 Demand Registration.
(a) Demand Rights. Subject to the conditions of this Section 3.1, if the Company shall receive a written request from the holders
of at least seventy-five percent (75%) of the issued and outstanding shares of Preferred Stock that were issued in exchange for shares of
series A, series AA, series B or series BB preferred stock of Renewable Energy Group, Inc., a Delaware corporation (“REG”), pursuant
to the Second Amended and Restated Agreement and Plan of Merger dated November 20, 2009 by and among the Company, REG and
REG Merger Sub, Inc. (the “Initiating Holders”) that the Company file a registration statement under the Securities Act covering the
registration of Registrable Securities with anticipated proceeds of at least (i) $40,000,000 at a share price (subject to appropriate
adjustments in the event of any stock dividend, stock split, combination or other similar recapitalization as generally described in the
Company’s Certificate of Designation of Series A Convertible Preferred Stock (the “Series A Certificate of Designation” )) of at least
two times the original purchase price
3
per share of the Series A Preferred Stock for the Initial Offering or (ii) $10,000,000 for a public offering thereafter, then the Company
shall, within ten (10) days of the receipt thereof, give written notice of such request to all Holders, and subject to the limitations of this
Section 3.1, use best efforts to file, and commercially reasonable efforts to cause to become effective, as soon as practicable, the
registration under the Securities Act of all Registrable Securities that the Holders request to be registered in a written request received
by the Company within twenty (20) days of the mailing of the Company’s notice pursuant to this Section 3.1(a). The holders of Senior
Registrable Securities shall be limited to a maximum of two (2) demand registrations pursuant to this Section 3.1, provided that a
registration requested pursuant to this Section 3.1(a) shall not be deemed to have been effected (i) unless a registration statement with
respect thereto has been declared effective for a period of at least one hundred twenty (120) days, (ii) if after a registration statement
has become effective, such registration is interfered with by any stop order, injunction or other order or requirement of the Commission
or other governmental agency or court for any reason, (iii) if the conditions to closing specified in the purchase agreement or
underwriting agreement entered into in connection with such registration are not satisfied, other than as a result of the voluntary
termination of such offering by the Holders of Registrable Securities, or (iv) if the Holders of Registrable Securities that would
otherwise be underwritten are required to exclude or withdraw a number of Registrable Securities from such underwriting pursuant to
Section 3.1(b) the result of which is gross proceeds to the Holders of Registrable Securities from the registration of less than
$40,000,000 if the Initial Offering or $10,000,000 if a public offering thereafter.
(b) If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to this Section 3.1 and the Company shall include such
information in the written notice referred to in Section 3.1(a). In such event the right of any Holder to include its Registrable Securities
in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s
Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such
Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company (which
underwriter or underwriters shall be nationally recognized and reputable investment banks reasonably acceptable to a majority in
interest of the Initiating Holders). Notwithstanding any other provision of this Section 3.1, if the underwriter advises the Company that
marketing factors require a limitation of the number of securities underwritten (including Registrable Securities), then the Company
shall so advise all Holders of Registrable Securities that would otherwise be underwritten pursuant hereto, and the number of shares
that may be included in the underwriting shall be allocated on a pro rata basis first among the selling Holders of Senior Registrable
Securities based on the number of Senior Registrable Securities held by such Holder, and then, if any additional shares may be included
in the underwriting, pro rata among the Holders
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according to the total amount of remaining Junior Registrable Securities, owned by each such selling Holder. Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn from the registration.
(c) The Company shall not be required to effect a registration pursuant to this Section 3.1:
(i) prior to the earlier of (A) August 1, 2011 or (B) six (6) months following the effective date of the Initial Offering;
provided, however, that, if at any time after the date hereof the Initiating Holders shall provide to the Company letters from two
nationally recognized and reputable investment banks of their willingness to act as lead underwriter in an Initial Offering with
anticipated proceeds of at least $40,000,000 at a share price (subject to appropriate adjustments in the event of any stock
dividend, stock split, combination or other similar recapitalization as generally described in the Series A Certificate of
Designation) of at least two times the original purchase price of the Series A Preferred Stock, the Company shall use its
commercially reasonable efforts to file and effectuate a registration statement on Form S-1 under the Securities Act in a timely
manner thereafter; or
(ii) in any particular jurisdiction in which the Company would be required to execute a general consent to service of process
in effecting such registration, unless the Company is already subject to service in such jurisdiction and except as may be required
under the Securities Act; or
(iii) during the period starting with the date sixty (60) days prior to the Company’s good faith estimate of the date of the
filing of, and ending on a date one hundred eighty (180) days following the effective date of, a Company-initiated registration
subject to Section 3.2 below, provided that the Company is actively employing in good faith its best efforts to cause such
registration statement to become effective; or
(iv) if the Initiating Holders propose to dispose of Registrable Securities that may be immediately registered on Form S-3
pursuant to a request made pursuant to Section 3.3 below; or
(v) if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 3.1, a certificate
signed by the Company’s Chief Executive Officer or Chairman of the Board (as defined below) stating that in the good faith
judgment of the Board of Directors of the Company (the “Board”), it would be seriously detrimental to the Company and its
stockholders for such registration statement to be effected at such time, in which event the Company shall have the right to defer
such filing for a period of not more than one hundred twenty (120) days after receipt of the request of the Initiating Holders,
provided that (A) such right to delay a request shall be exercised by the Company not more
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than once in any twelve (12)-month period and (B) any such delay must also suspend the registration rights of all stockholders of
the Company having any registration rights with respect to shares of capital stock of the Company.
3.2 Company Registration.
(a) If (but without any obligation to do so) the Company proposes to register under the Securities Act (whether for its own
account or otherwise) any of its Common Stock and solely for cash in connection with a public offering of such Common Stock (other
than (i) a registration relating solely to the sale of securities to participants in a Company stock plan, (ii) a registration relating to a
corporate reorganization or other transaction under Rule 145 of the Securities Act, (iii) a registration on any form that does not include
substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable
Securities or (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt
securities that are also being registered), the Company shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within twenty (20) days after mailing of such notice by the Company in
accordance with Section 7, the Company shall, subject to the provisions of Section 3.2(c), use its commercially reasonable efforts to
cause to be registered under the Securities Act all of the Registrable Securities that each such Holder has requested to be registered.
(b) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated by it
under this Section 3.2 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such
registration. The expenses of such withdrawn registration shall be borne by the Company in accordance with Section 3.8 hereof.
(c) Underwriting Requirements. In connection with any offering involving an underwriting of shares of the Company’s capital
stock, the Company shall not be required under this Section 3.2 to include any of the Holders’ securities in such underwriting unless
they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other
persons entitled to select the underwriters) and enter into an underwriting agreement in customary form with an underwriter or
underwriters selected by the Company, and then only in such quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities, requested by
holders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters
determine in their sole discretion is compatible with the success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities, that the underwriters determine in their sole discretion
will not jeopardize the success of the offering (the securities so included to be apportioned on a pro rata basis first among the selling
Holders of Senior Registrable Securities based on the number of
6
Senior Registrable Securities held by such Holder, and then, if any additional shares may be included in the underwriting, pro rata
among the Holders according to the total amount of remaining Junior Registrable Securities owned by each such selling Holder) unless
such offering is the Initial Offering in which case the selling Holders may be excluded if the underwriters make the determination
described above.
3.3 Form S-3 Registration. In case the Company shall receive from any Holder or Holders a written request or requests that the
Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable
Securities owned by such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, use commercially reasonable efforts to effect such registration and all such qualifications and
compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder’s or
Holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any
other Holder or Holders joining in such request as are specified in a written request given within fifteen (15) days after receipt of such
written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this Section 3.3: (i) if Form S-3 is not available for such offering by the Holders; (ii) if the
Holders, together with the Holders of any other securities of the Company entitled to inclusion in such registration, propose to sell
Registrable Securities and such other securities (if any) at an aggregate price to the public of less than $2,000,000; (iii) if the Company
shall furnish to the Holders a certificate signed by the Company’s Chief Executive Officer or Chairman of the Board stating that in the
good faith judgment of the Board, it would be seriously detrimental to the Company and its stockholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than ninety (90) days after receipt of the request of the Holder or Holders under this
Section 3.3; provided, however, that the Company shall not utilize this right more than once in any twelve (12) month period; (iv) if
the Company has, within the twelve (12) month period preceding the date of such request, already effected two (2) registrations on
Form S-3 for any Holders pursuant to this Section 3.3; (v) in any particular jurisdiction in which the Company would be required to
qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance;
or (vi) during the period ending one hundred eighty (180) days after the effective date of a registration statement subject to Section 3.2.
(c) Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders. Registrations
7
effected pursuant to this Section 3.3 shall not be counted as demands for registration or registrations effected pursuant to Section 3.1.
3.4 Registration Procedures. If and whenever the Company is required to use its commercially reasonable efforts to effect the
registration of any Registrable Securities under the Securities Act as provided in Sections 3.1, 3.2 or 3.3 above, the Company shall as
expeditiously as possible:
(a) prepare and as soon thereafter as possible (but with respect to a public offering other than the Initial Offering, in any event no
later than ninety (90) days after the last request for inclusion in the applicable registration is timely given to the Company) file with the
Commission the requisite registration statement to effect such registration and thereafter use commercially reasonable efforts to cause
such registration statement to become effective and remain effective for a period of one hundred twenty (120) days or, if earlier, until
the distribution contemplated by the registration statement has been completed (the “Effectiveness Period”); provided, however, in the
case of any registrations on Form S-3 that are intended to be offered on a continuous or delayed basis, the Effectiveness Period shall be
extended until all applicable Registrable Securities thereunder are sold. Notwithstanding the foregoing, the Company may discontinue
any registration of its securities which are not Registrable Securities at any time prior to the effective date of the registration statement
relating thereto; and provided further, in the event that, in the good faith judgment of the Company, it is advisable to suspend use of the
prospectus relating to such registration statement for a discrete period of time (a “Deferral Period”) due to pending or proposed
material corporate developments or similar material events that have not yet been publicly disclosed and as to which the Company
believes public disclosure will be prejudicial to the Company, the Company shall deliver a certified resolution of the Board, signed by a
duly authorized officer of the Company, to each Holder of Registrable Securities covered by the Registration Statement to the effect of
the foregoing and such Holders, upon receipt of such certificate, and the Company agrees not to dispose of any Registrable Securities
covered by any registration or prospectus (other than in transactions exempt from the registration requirements under the Securities
Act); provided, however, that the Company shall not utilize more than four (4) Deferral Periods in any twelve (12) month period and in
no event shall the aggregate length of all such Deferral Periods in any such twelve (12) month period be greater than ninety (90) days.
The Effectiveness Period shall be extended for a period of time equal to any Deferral Period.
(b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such registration statement until such time as all of such
securities have been disposed of in accordance with the intended methods of disposition by the Holder or Holders thereof set forth in
such registration statement;
8
(c) furnish to each Holder of Registrable Securities covered by such registration statement such number of conformed copies of
such registration statement and of each such amendment and supplement thereto (in each case including, without limitation, all
exhibits), such number of copies of the prospectus contained in such registration statement (including, without limitation, each
preliminary prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such other documents, as such Holder may reasonably request;
(d) use commercially reasonable efforts to register or qualify all Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws of such jurisdictions as each Holder thereof shall reasonably request,
to keep such registration or qualification in effect for so long as such registration statement remains in effect, and to take any other
action which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in such jurisdictions of the
securities owned by such Holder, except that the Company shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this clause (d) be obligated to be
so qualified or to consent to general service of process in any such jurisdiction;
(e) use its commercially reasonable efforts to cause all Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or authorities in the United States as may be necessary to enable the
Holder or Holders thereof to consummate the disposition of such Registrable Securities;
(f) use its commercially reasonable efforts to furnish, at the request of the underwriters pursuant to an underwriting agreement, on
the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to
Section 3.1:
(i) an opinion of counsel for the Company for the purpose of such registration, dated as of such date, in form and substance
as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, and
(ii) a “comfort” letter, dated such date, signed by the independent certified public accountants who have certified the
Company’s financial statements included in such registration statement, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters.
(g) notify each Holder of Registrable Securities covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under
9
the Securities Act, upon discovery that, or upon the happening of any event as a result of which, the prospectus included in such
registration statement, as then in effect, includes an untrue statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made, or,
if for any reason it shall be necessary during such time period to amend or supplement the registration statement or the prospectus in
order to comply with the Securities Act, at the request of any such Holder promptly prepare and furnish to such Holder a reasonable
number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall (i) not include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they
were made or (ii) effect such compliance;
(h) otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and
make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve
(12) months, but not more than eighteen (18) months, beginning with the first full calendar month after the effective date of such
registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act, and shall furnish to
each such Holder of Registrable Securities covered by such registration statement at least five (5) business days prior to the filing
thereof a copy of any amendment or supplement to such registration statement or prospectus and shall not file any thereof to which any
such Holder shall have reasonably objected on the grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act or of the rules or regulations thereunder;
(i) provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such registration statement;
(j) use its commercially reasonable efforts to list all Registrable Securities covered by such registration statement on any securities
exchange on which any of the equity securities of the Company of the same class as the Registrable Securities are then listed;
(k) cooperate with the underwriters with respect to all roadshows and other marketing activities as may be reasonably requested
by the underwriters; and
(l) enter into such agreements and take such other actions as the Holders of Registrable Securities covered by a registration
statement shall reasonably request in order to expedite or facilitate the disposition of such Registrable Securities.
The Company may require each Holder of Registrable Securities as to which any registration is being effected to furnish to the Company
such information regarding such Holder and the
10
distribution of such securities as the Company may from time to time reasonably request in writing.
Each Holder of Registrable Securities agrees by acquisition of such Registrable Securities that upon receipt of any notice from the
Company of the happening of any event of the kind described in clause (g) of this Section 3.4, such Holder will forthwith discontinue such
Holder’s disposition of Registrable Securities pursuant to the registration statement relating to such Registrable Securities until such
Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by clause (g) of this Section 3.4 and, if so directed
by the Company, will deliver to the Company (at the Company’s expense) all copies, other than permanent file copies, then in such
Holder’s possession of the prospectus relating to such Registrable Securities current at the time of receipt of such notice.
3.5 Preparation; Reasonable Investigation. In connection with the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give one representative designated by the Holders of a majority of the
Registrable Securities included in such registration statement, and one special counsel and accounting firm similarly designated by the
Holders of a majority of the Registrable Securities included in such registration statement, the opportunity to participate in the preparation
of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement
thereto and will give each of them such access to its books and records and such opportunities to discuss the business of the Company with
its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of such
Holders’ counsel, to conduct a reasonable investigation within the meaning of the Securities Act.
3.6 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this
Section 3 with respect to the Registrable Securities of any selling Holder that at the request of the Company such Holder shall furnish to the
Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities
as shall be reasonably required to effect the registration of such Holder’s Registrable Securities.
3.7 Additional Rights of Holders. If any registration statement prepared under this Agreement refers to any Holder by name or
otherwise as the Holder of any securities of the Company, then such Holder shall have the right to require (a) the insertion therein of
language, in form and substance satisfactory to such Holder to the effect that the holding by such Holder of such securities does not
necessarily make such Holder a “controlling person” of the Company within the meaning of the Securities Act and is not to be construed as
a recommendation by such Holder of the investment quality of the Company’s debt or equity securities covered thereby and that such
holding does not imply that such Holder will assist in meeting any future financial requirements of the Company, or (b) in the event that
such reference to such Holder by name or otherwise is not required by the Securities Act or any rules and regulations promulgated
thereunder, the deletion of the reference to such Holder.
11
3.8 Expenses of Registration. The Company shall pay all Registration Expenses in connection with any registration requested
pursuant to Sections 3.1, 3.2 or 3.3. Any Selling Expenses in connection with any registration requested pursuant to Sections 3.1, 3.2 or 3.3
shall be allocated among all Holders on whose behalf Registrable Securities of the Company are included in such registration, on the basis
of the respective amounts of the Registrable Securities then being registered on their behalf. Notwithstanding the foregoing or anything
contained herein to the contrary, the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant
to Section 3.1 or 3.3 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable
Securities to be registered (in which case the participating Holders shall bear such expenses on a pro rata basis based on the Registrable
Securities of such Holder proposed to be included in such withdrawn registration), unless the Holders of a majority of the Registrable
Securities agree to forfeit their right to one demand registration pursuant to Section 3.1 or one S-3 registration pursuant to Section 3.3, as
applicable; provided further, however, that if such withdrawal occurs prior to the date the registration statement shall have become
effective and at the time of such withdrawal, the Holders have learned of a material adverse change in the financial condition, business,
properties or results of operations of the Company from that known to the Holders at the time of their request and have withdrawn the
request with reasonable promptness following disclosure by the Company of such material adverse change, then the Holders shall not be
required to pay any of such expenses and shall retain their rights pursuant to Section 3.1 and 3.3, as applicable.
3.9 Indemnification.
(a) Indemnification by the Company . In the event of any registration of any securities of the Company under the Securities Act,
the Company will, and hereby does, indemnify and hold harmless the Holder of any Registrable Securities covered by such registration
statement, its directors and officers, legal counsel and accountants for such Holder, and each other Person, if any, who controls such
Holder, within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which any of the
foregoing persons may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under
the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Company will reimburse such Holder and each such director, officer, and
controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in such
12
registration statement, any such preliminary prospectus, final prospectus, summary prospectus, amendment or supplement in reliance
upon and in conformity with written information furnished to the Company through an instrument duly executed by such Holder
specifically stating that it is for use in the preparation thereof; provided further, that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter
within the meaning of the Securities Act, in any such case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of such Person’s failure to send or give a copy of the final prospectus, as the same
may be then supplemented or amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of Registrable Securities to such Person if such statement or omission was
corrected in such final prospectus; and provided still further, that the indemnity agreement contained in this Section 3.9(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld). Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such Holder or any such director, officer, underwriter or controlling person and
shall survive the transfer of such securities by such Holder.
(b) Indemnification by the Holders. Each Holder, severally and not jointly, shall indemnify and hold harmless the Company, each
director of the Company, each officer of the Company and each other Person, if any, who controls the Company within the meaning of
the Securities Act, any underwriter, any other Holder selling securities in such registration statement and any officer, director, legal
counsel or accountant or controlling person of any such Holder, against any losses, claims, damages, or liabilities (joint or several) to
which any of the foregoing persons may become subject, under the Securities Act, the Exchange Act or other federal or state securities
law insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any statement or
alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written information furnished to the Company through an
instrument duly executed by such Holder specifically stating that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided, however, that the indemnity
agreement contained in this Section 3.9(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld. The
maximum liability of each Holder for any such indemnification shall not exceed the amount of aggregate gross proceeds received by
such Holder from the sale of his/its Registrable Securities, except in the case of willful fraud. Such indemnity shall remain in full force
and effect, regardless of any investigation made by or on behalf of the Company or any such
13
director, officer or controlling Person and shall survive the transfer of such securities by such Holder.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in Section 3.9(a) or (b) above, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of the commencement of such action; provided that the failure of
any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under Section 3.9(a)
or (b) above, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such
action is brought against an indemnified party, unless in such indemnified party’s reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in
and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party for any legal or other
expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release
reasonably acceptable to such indemnified party from all liability in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that specified in Sections 3.9(a), (b) and (c) above (with appropriate
modifications) shall be given by the Company and each Holder of Registrable Securities with respect to any required registration or
other qualification of securities under any Federal or state law or regulation of any governmental authority other than the Securities
Act.
(e) Indemnification Payments. The indemnification required by this Section 3.9 shall be made by periodic payments of the
amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is
incurred.
(f) Contribution. If the indemnification provided for in this Section 3.9 is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations;
provided, that
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in no event shall any contribution by a Holder under this Section 3.9(f) exceed the aggregate gross proceeds from the offering received
by such Holder, except in the case of willful fraud by such Holder. The relative fault of the indemnifying party and of the indemnified
party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties’
relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.
3.10 Adjustments Affecting Registrable Securities. The Company will not effect or permit to occur any combination or subdivision
which would adversely affect the ability of the Holders of Registrable Securities to include such Registrable Securities in any registration of
its securities contemplated by this Section 3 or the marketability of such Registrable Securities under any such registration.
4. Rule 144 and Rule 144A. If the Company shall have filed a registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the Securities Act, the Company will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder (or, if the
Company is not required to file such reports, will, upon the request of any Holder of Registrable Securities, make publicly available other
information) and will take such further action as any Holder of Registrable Securities may reasonably request, all to the extent required
from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of
the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule
or regulation hereafter adopted by the Commission. Upon the request of any Holder of Registrable Securities, the Company will deliver to
such Holder a written statement as to whether it has complied with such requirements (at any time after ninety (90) days after the effective
date of the first registration statement filed by the Company). After any sale of Registrable Securities pursuant to this Section 4, the
Company will, to the extent allowed by law, cause any restrictive legends to be removed and any transfer restrictions relating to the absence
of registration under the Securities Act to be rescinded with respect to such Registrable Securities. In order to permit the Holders of
Registrable Securities to sell the same, if they so desire, pursuant to Rule 144A promulgated by the Commission (or any successor to such
rule) (“Rule 144A”), the Company will comply with all rules and regulations of the Commission applicable in connection with use of Rule
144A. Prospective transferees of Registrable Securities that are Qualified Institutional Buyers (as defined in Rule 144A) which would be
purchasing such Registrable Securities in reliance upon Rule 144A may request from the Company information regarding the business,
operations and assets of the Company. Within five (5) business days after receipt by the Company of any such request, the Company shall
deliver to any such prospective transferee copies of annual audited and quarterly unaudited financial statements of the Company and such
other information as may be required to be supplied by the Company for it to comply with Rule 144A.
5. Amendments and Waivers. This Agreement may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and
15
either retroactively or prospectively) and the Company may take any action herein prohibited or omit to perform any act herein required to
be performed by it, only if the Company agrees and it shall have obtained written consents to such amendment, action or omission to act
from the Holders of at least a majority of the Registrable Securities (which must also include the consent of the holders of at least seventy-
five percent (75%) of the issued and outstanding shares of Preferred Stock that were issued in exchange for shares of series A, series AA,
series B or series BB preferred stock of REG, pursuant to the Second Amended and Restated Agreement and Plan of Merger dated
November 20, 2009 by and among the Company, REG and REG Merger Sub, Inc.); provided, however, that any such amendment or
consent that would have a material adverse effect on a particular Holder but would not have a similar material adverse effect on all Holders
generally or would otherwise remove a Holder as a party to this Agreement shall require the consent of such Holder. Each Holder of any
Registrable Securities at the time or thereafter outstanding shall be bound by any consent authorized by this Section 5, whether or not such
Registrable Securities shall have been marked to indicate such consent.
6. Nominees for Beneficial Owners. In the event that any Registrable Securities are held by a nominee for the beneficial owner
thereof, the beneficial owner thereof may, at its election, be treated as the Holder of such Registrable Securities for purposes of any request
or other action by any Holder or Holders of Registrable Securities pursuant to this Agreement or any determination of any number or
percentage of Registrable Securities held by any Holder or Holders of Registrable Securities contemplated by this Agreement. If the
beneficial owner of any Registrable Securities so elects, the Company may require assurances reasonably satisfactory to it of such owner’s
beneficial ownership of such Registrable Securities.
7. Notices. Except as set forth in Section 8, all communications provided for hereunder shall be sent (a) by first-class mail and (i) if
addressed to a party other than the Company, to such party at the address furnished to the Company by such party, or (ii) if addressed to the
Company, at the address of its principal place of business, Attention: President, or at such other address, or to the attention of such other
officer, as the Company shall have furnished to each Holder of Registrable Securities at the time outstanding or (b) by electronic
transmission in the manner permitted by the General Corporation Law of the State of Delaware.
8. Assignment. The rights to cause the Company to register Registrable Securities pursuant to Section 3 may be assigned (but only
with all related obligations) by (a) a Holder to a transferee or assignee of such securities who, after such assignment or transfer, holds at
least 250,000 shares of such Holder’s Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends,
combinations and other recapitalizations and including for purposes of such calculation the shares of Common Stock then issuable upon
conversion of the Preferred Stock), or (b) any Holder who transfers all of its Registrable Securities to a single transferee or assignee, or
(c) a Holder to its partners, members, stockholders, subsidiaries or affiliates (“the Distributees”); provided, however, prior to an assignment
pursuant to subclause (c), the Distributees shall appoint a single attorney-in-fact for the purpose of exercising any rights, receiving notices
or taking any action under this Agreement; and provided, further, in each case: (i) the Company is, within
16
a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities
with respect to which such registration rights are being assigned and (ii) such transferee or assignee agrees in writing to be bound by and
subject to the terms and conditions of this Agreement. For the purposes of determining the number of shares of Registrable Securities held
by a transferee or assignee, the holdings of transferees and assignees of a partnership or limited liability company who are partners or
retired partners of such partnership or members of such limited liability company (including spouses and ancestors, lineal descendants and
siblings of such partners or members or spouses who acquire Registrable Securities by gift, will or intestate succession) shall be aggregated
together and with the partnership or limited liability company, as the case may be. For purposes of this Agreement, the terms “affiliates” or
“affiliated” shall mean, with respect to any person or entity, any person or entity that, directly or indirectly, controls or is controlled by or is
under common control with such person or entity. For the purposes of the preceding sentence, the term “control” shall mean the
possession; directly or indirectly, through one or more intermediaries in the case of any person or entity, of the power or authority, through
ownership of voting securities, by contract or otherwise, to direct the management, activities or policies of the person or entity.
9. Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior
written consent of the holders of two-thirds (2/3rds) of the Senior Registrable Securities, enter into any agreement with any holder or
prospective holder of any securities of the Company that would allow such holder or prospective holder the right to include such securities
in any registration (unless such right is subordinate to the rights granted to holders of Senior Registrable Securities in this Agreement) or to
demand any registration of any securities held by such holder or prospective holder.
10. Termination. The right of any Holder to request registration or inclusion in any registration pursuant to Section 3.1, Section 3.2 or
Section 3.3 shall terminate at such time as both (A) all shares of Registrable Securities held or entitled to be held upon conversion by such
Holder are permitted to be immediately sold under Rule 144 during any ninety (90) day period, and (B) such Holder holds or upon
conversion of Series A Preferred Stock would hold less than three percent (3%) of the issued and outstanding shares of Common Stock of
the Company.
11. Descriptive Headings. The descriptive headings of the several sections and paragraphs of this Agreement are inserted for
reference only and shall not limit or otherwise affect the meaning hereof. References herein to Sections are references to Sections of this
Agreement, except as otherwise indicated.
12. Specific Performance. The parties hereto recognize and agree that money damages may be insufficient to compensate the Holders
of any Registrable Securities for breaches by the Company of the terms hereof and, consequently, that the equitable remedy of specific
performance of the terms hereof will be available in the event of any such breach.
17
13. Governing Law. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be
governed by, the internal laws of the State of Delaware, without regard to rules or principles of conflicts of law requiring the application of
the law of another State.
14. Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an
original, but all such counterparts shall together constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
18
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement or have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
COMPANY:
REG NEWCO, INC.
/s/ Jeff Stroburg
By:
Name: Jeff Stroburg
Title:
Chairman & CEO
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement or have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
SERIES A STOCKHOLDER:
WEST CENTRAL COOPERATIVE
/s/ Jeff Stroburg
By:
Name: Jeff Stroburg
Title:
President & CEO
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement or have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
SERIES A STOCKHOLDER:
NGP ENERGY TECHNOLOGY PARTNERS, L.P.
/s/ Chris Sorrells
By:
Name: Chris Sorrells
Title:
Managing Director
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement or have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
SERIES A STOCKHOLDER:
NATURAL GAS PARTNERS VIII, L.P.
By: G.F.W. Energy VIII, L.P., General Partner
By: GFW VIII, L.L.C., General Partner
/s/ William J. Quinn
By:
Name: William J. Quinn
Title:
Authorized Member
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement or have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
SERIES A STOCKHOLDER:
E D & F MAN NETHERLANDS BV
/s/ Paul Chatterton
By:
Name: Paul Chatterton
Title:
Appointed Representative
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement or have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
SERIES A STOCKHOLDER:
BUNGE NORTH AMERICA, INC.
/s/ Eric Hakmiller
By:
Name: Eric Hakmiller
Title:
Vice-President Bunge Biofuels
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement or have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
SERIES A STOCKHOLDER:
USBG MEMBERS:
USRG HOLDCO V, LLC
By: USRG Management Company, LLC,
its Manager
/s/ Jonathan Koch
By:
Name: Jonathan Koch
Title:
Managing Director
OHANA HOLDINGS, LLC
/s/ Michael G. Mohr
By:
Name: Michael G. Mohr
Title:
Manager
JYCO, LLC
/s/ Gregory R. Hardester
By:
Name: Gregory R. Hardester
Manager
Title:
SUPREME OIL COMPANY, INC.
/s/ Michael Leffler
By:
Name: Michael Leffler
Title:
Chief Executive Officer
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
MANDAM B.V.
/s/ Paul Chatterton
By:
Name: Paul Chatterton
Title:
Appointed Representative
PADMA RAG DATTA TRUST
/s/ Lois-Ellin G. Datta
By:
Name: Lois-Ellin G. Datta
Title:
Trustee
JANE SU AND RICHARD CHOW
REVOCABLE TRUST
/s/ Richard Chow
By:
Name: Richard Chow
Trustee
Title:
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement or have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
COMMON STOCKHOLDER:
WEST CENTRAL COOPERATIVE
/s/ Jeff Stroburg
By:
Name: Jeff Stroburg
Title:
President & CEO
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement or have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
COMMON STOCKHOLDER:
BLUE MARBLE INVESTORS LLC
/s/ Kendell Enebrit
By:
Name: Kendell Enebrit
Secretary
Title:
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement or have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
COMMON STOCKHOLDER:
WEST CENTRAL BIODIESEL INVESTORS, LLC
/s/ Susan Tronchetti
By:
Name: Susan Tronchetti
Title:
Managing Director
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement or have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
COMMON STOCKHOLDER:
ENERGY TECHNOLOGY PARTNERS, L.L.C.
/s/ Chris Sorrells
By:
Name: Chris Sorrells
Title:
Managing Director
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement or have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
COMMON STOCKHOLDER:
BUNGE NORTH AMERICA, INC.
/s/ Eric Hakmiller
By:
Name: Eric Hakmiller
Title:
Vice-President Bunge Biofuels
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement or have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
COMMON STOCKHOLDER:
USBG MEMBERS:
USRG HOLDCO V, LLC
By: USRG Management Company, LLC,
its Manager
/s/ Jonathan Koch
By:
Name: Jonathan Koch
Title:
Managing Director
OHANA HOLDINGS, LLC
/s/ Michael G. Mohr
By:
Name: Michael G. Mohr
Title:
Manager
JYCO, LLC
/s/ Gregory R. Hardester
By:
Name: Gregory R. Hardester
Manager
Title:
SUPREME OIL COMPANY, INC.
/s/ Michael Leffler
By:
Name: Michael Leffler
Title:
Chief Executive Officer
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
MANDAM B.V.
/s/ Paul Chatterton
By:
Name: Paul Chatterton
Title:
Appointed Representative
PADMA RAG DATTA TRUST
/s/ Lois-Ellin G. Datta
By:
Name: Lois-Ellin G. Datta
Title:
Trustee
JANE SU AND RICHARD CHOW
REVOCABLE TRUST
/s/ Richard Chow
By:
Name: Richard Chow
Trustee
Title:
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement or have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
COMMON STOCKHOLDER:
SARGECO, INC.
/s/ Lee Sargent
By:
Name: Lee Sargent
Title:
President
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement or have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
COMMON STOCKHOLDER:
NATURAL GAS PARTNERS VIII, L.P.
By: G.F.W. Energy VIII, L.P., General Partner
By: GFW VIII, L.L.C., General Partner
/s/ William J. Quinn
By:
Name: William J. Quinn
Title:
Authorized Member
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement or have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
COMMON STOCKHOLDER:
E D & F MAN NETHERLANDS BV
/s/ Paul Chatterton
By:
Name: Paul Chatterton
Title:
Appointed Representative
SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT
Exhibit 10.17
EXECUTION COPY
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of April 8, 2010
among
SENECA LANDLORD, LLC
as Borrower,
THE LENDERS REFERRED TO HEREIN,
WESTLB AG, NEW YORK BRANCH,
as Administrative Agent for the Lenders,
WESTLB AG, NEW YORK BRANCH,
as Collateral Agent for the Senior Secured Parties,
WESTLB AG, NEW YORK BRANCH,
as Administrative Agent and Lender under the DIP Credit Agreement referred to herein,
and
WESTLB AG, NEW YORK BRANCH,
as Lead Arranger and Sole Bookrunner
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND INTERPRETATION
Section 1.01 Defined Terms
Section 1.02 Principles of Interpretation
Section 1.03 UCC Terms
Section 1.04 Accounting and Financial Determinations
ARTICLE II COMMITMENTS; OTHER CREDIT AGREEMENTS
Section 2.01 Loans
Section 2.02 Other Credit Agreements
Section 2.03 Evidence of Indebtedness
ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
Section 3.01 Repayment of Loans
Section 3.02 Interest Payment Dates
Section 3.03 Interest Rates
Section 3.04 Default Interest Rate
Section 3.05 Interest Rate Determination
Section 3.06 Computation of Interest and Fees
Section 3.07 Optional Prepayment
Section 3.08 Mandatory Prepayment
Section 3.09 Time and Place of Payments
Section 3.10 Payments Generally
Section 3.11 Fees
Section 3.12 Pro Rata Treatment
Section 3.13 Sharing of Payments
ARTICLE IV EURODOLLAR RATE AND TAX PROVISIONS
Section 4.01 Eurodollar Rate Lending Unlawful
Section 4.02 Inability to Determine Eurodollar Rates
Section 4.03 Increased Eurodollar Loan Costs
Section 4.04 Obligation to Mitigate; Replacement of Lender
Section 4.05 Funding Losses
Section 4.06 Increased Capital Costs
Section 4.07 Taxes
ARTICLE V REPRESENTATIONS AND WARRANTIES
Section 5.01 Organization; Power; Compliance with Law and Contractual Obligations
Section 5.02 Due Authorization; Non-Contravention
Section 5.03 Governmental Approvals
Section 5.04 Investment Company Act
Section 5.05 Validity
Section 5.06 Financial Information
Section 5.07 [Intentionally Omitted]
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Section 5.08 Project Compliance
Section 5.09 Litigation
Section 5.10 Sole Purpose Nature; Business
Section 5.11 Contracts. As of the date hereof:
Section 5.12 Collateral
Section 5.13 Ownership of Properties
Section 5.14 Taxes
Section 5.15 ERISA Plans
Section 5.16 Property Rights, Utilities, Supplies Etc.
Section 5.17 No Defaults
Section 5.18 Environmental Warranties
Section 5.19 Regulations T, U and X
Section 5.20 Accuracy of Information
Section 5.21 Indebtedness
Section 5.22 Separateness
Section 5.23 Required LLC Provisions
Section 5.24 Subsidiaries
Section 5.25 Foreign Assets Control Regulations, Etc.
Section 5.26 [Intentionally Omitted]
Section 5.27 Employment Matters
Section 5.28 Legal Name and Place of Business
Section 5.29 No Brokers
Section 5.30 Insurance
Section 5.31 Patents, Trademarks, Etc.
Section 5.32 Accounts
ARTICLE VI CONDITIONS PRECEDENT
Section 6.01 Conditions to Closing Date
ARTICLE VII COVENANTS
Section 7.01 Affirmative Covenants
Section 7.02 Negative Covenants
Section 7.03 Reporting Requirements
ARTICLE VIII CERTAIN PROCEEDS
Section 8.01 Insurance and Condemnation Proceeds
Section 8.02 Extraordinary Proceeds
ARTICLE IX DEFAULT AND ENFORCEMENT
Section 9.01 Events of Default
Section 9.02 Action Upon Bankruptcy
Section 9.03 Action Upon Other Event of Default
Section 9.04 Application of Proceeds
ARTICLE X THE AGENTS
Section 10.01 Appointment and Authority
Section 10.02 Rights as a Lender
Section 10.03 Exculpatory Provisions
ii
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Section 10.04 Reliance by Agents
Section 10.05 Delegation of Duties
Section 10.06 Resignation or Removal of Agent
Section 10.07 No Amendment to Duties of Agent Without Consent
Section 10.08 Non-Reliance on Agent and Other Lenders
Section 10.09 No Lead Arranger or Bookrunner Duties
Section 10.10 Collateral Agent May File Proofs of Claim
Section 10.11 Collateral Matters
Section 10.12 Copies
Section 10.13 No Liability for Clean-up of Hazardous Materials
ARTICLE XI MISCELLANEOUS PROVISIONS
Section 11.01 Amendments, Etc.
Section 11.02 Applicable Law; Jurisdiction; Etc.
Section 11.03 Assignments.
Section 11.04 Benefits of Agreement
Section 11.05 Consultants
Section 11.06 Costs and Expenses
Section 11.07 Counterparts; Effectiveness
Section 11.08 Indemnification by the Borrower
Section 11.09 Interest Rate Limitation
Section 11.10 No Waiver; Cumulative Remedies
Section 11.11 Notices and Other Communications
Section 11.12 Patriot Act Notice
Section 11.13 Payments Set Aside
Section 11.14 Right of Setoff
Section 11.15 Severability
Section 11.16 Survival
Section 11.17 Treatment of Certain Information; Confidentiality
Section 11.18 Waiver of Consequential Damages, Etc.
iii
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SCHEDULES
Part A
Part B
Part A
Part B
Schedule 5.08
Schedule 5.09
Schedule 5.11
Schedule 2.01
Schedule 3.01
Schedule 5.03
Commitments
Amortization Schedule
Necessary Project Approvals
First Funding Project Approvals
Deferred Approvals
Project Compliance
Litigation
Project Contracts
Necessary Project Contracts
Deferred Contracts
Schedule 5.12(c) UCC Filing Offices
Schedule 5.13
Schedule 5.22
Schedule 5.31
Schedule 5.32
Schedule 6.01(q) Capital Improvement Budget
Insurance
Schedule 7.01(h)
Schedule 7.02(h) Transactions with Affiliates
Schedule 11.11(a) Notice Information
Site Description
Separateness
Patents, Trademarks, Etc.
Local Accounts
EXHIBITS
Form of Operating Statement
Exhibit A Defined Terms
Exhibit B Form of Note
Exhibit C Performance Test Plan
Exhibit H Lender Statement – Section 881(c)(3)(A) of the Code
Exhibit I
Form of Insurance Consultant’s Certificate
Exhibit J-1 Form of Independent Engineer’s Closing Certificate
Exhibit L
Exhibit M -1 Form of Blocked Account Agreement
Exhibit M-2 Form of Lessee Blocked Account Agreement
Exhibit O Form of Interest Period Notice
Exhibit P-2 Form of Independent Engineer’s [First] [Second] Train Completion Date Certificate
Exhibit P-1 Form of Borrower’s [First] [Second] Train Completion Date Certificate
Exhibit Q Form of Lender Assignment Agreement
Exhibit R-1 Form of Borrower Final Completion Certificate
Exhibit R-2 Form of Independent Engineer Final Completion Certificate
Exhibit S
Exhibit BB Form of Capital Improvement Status Report
Form of Insurance and Condemnation Proceeds Request Certificate
iv
This AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”), dated as of April 8, 2010, is by and among
SENECA LANDLORD, LLC, an Iowa limited liability company (the “Borrower”), each of the Lenders from time to time party hereto,
WESTLB AG, NEW YORK BRANCH, as administrative agent for the Lenders, WESTLB AG, NEW YORK BRANCH, as collateral
agent for the Senior Secured Parties, WESTLB AG, NEW YORK BRANCH, as administrative agent under the DIP Credit Agreement
referred to herein (the “DIP Agent”), WESTLB AG, NEW YORK BRANCH, as sole lender under the DIP Credit Agreement referred to
herein (the “DIP Lender”), and WESTLB AG, NEW YORK BRANCH, as lead arranger and sole bookrunner.
RECITALS
WHEREAS, WestLB AG, New York Branch provided financing to Nova Biofuels Seneca, LLC (the “ Original Borrower”) pursuant
to the Credit Agreement, dated as of December 26, 2007, among the Original Borrower, each of the lenders referred to therein, WestLB
AG, New York Branch as administrative agent and collateral agent and Sterling Bank as accounts bank (as amended, modified or
supplemented through the date hereof, the “Original Credit Agreement”);
WHEREAS, on March 30, 2009, the Original Borrower and certain of its Affiliates (collectively, the “Debtors”) commenced cases
jointly administered under Case No. 09 11081 (collectively, the “Chapter 11 Cases”) by filing voluntary petitions for reorganization under
the Bankruptcy Code with the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”);
WHEREAS, in connection with the Chapter 11 Cases, the DIP Lender provided financing to the Debtors pursuant to the Debtor-In-
Possession Credit Agreement, dated as of July 15, 2009, among the Debtors, each of the lenders referred to therein, the DIP Agent, WestLB
AG, New York Branch as collateral agent and Sterling Bank as accounts bank (as amended, modified or supplemented through the date
hereof, the “DIP Credit Agreement”);
WHEREAS, pursuant to the Asset Purchase Agreement, dated as of September 23, 2009 (as amended, modified or supplemented
through the date hereof) among Nova Biofuels Seneca, LLC and Nova Biosource Technology, LLC (the “Sellers”) and REG Seneca, LLC
(the “Purchaser”) (the “Asset Purchase Agreement”), the Purchaser has agreed to purchase certain assets of the Sellers including the
Project;
WHEREAS, pursuant to the Membership Interest Purchase Agreement, dated as of April 8, 2010, Lessee Pledgor sold, transferred and
conveyed all of the Equity Interests in the Purchaser and Purchaser has been renamed Seneca Landlord, LLC;
WHEREAS, pursuant to the Assignment and Assumption Agreement, (i) the Original Borrower has assigned certain of its rights and
obligations under the Original Credit Agreement to the Borrower and the Borrower has assumed such rights and obligations and (ii) each
Debtor has assigned all of its rights and obligations under the DIP Credit Agreement to the Borrower and the Borrower has assumed such
rights and obligations;
Credit Agreement
WHEREAS, in connection with such assumptions, the Borrower desires to enter into the Lease with the Lessee and the Lenders are
unwilling to permit the Borrower to enter into the Lease unless (i) the Lessee makes the representations and warranties, agrees to perform
the covenants and agrees to the deposit arrangements set forth in the Lease and the Accounts Agreement and (ii) the Lessee secures its
obligations under the Lease by granting security interests in favor of the Borrower, as lessor, in all assets of the Lessee pursuant to the
Lessee Security Agreement, the deposit account arrangements set forth in the Accounts Agreement and by Lessee Pledgor granting a
security interest in all the Equity Interests in the Lessee pursuant to the Lessee Pledge Agreement which security interests shall be further
assigned by the Borrower to the Collateral Agent;
WHEREAS, the Borrower has requested that the parties to the Original Credit Agreement amend and restate the Original Credit
Agreement with respect to the obligations set forth therein assigned and assumed pursuant to the Assignment and Assumption Agreement,
and each such party is willing to amend and restate the Original Credit Agreement upon the terms and subject to the conditions set forth
herein; and
WHEREAS, the Borrower has requested that the DIP Agent and the DIP Lender consent to the termination of the DIP Credit
Agreement, and each such party is willing to grant such consent upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, the parties hereto agree that the Original Credit Agreement, with respect to the obligations set forth therein
assigned and assumed pursuant to the Assignment and Assumption Agreement, is hereby amended and restated to read in its entirety as
follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.01 Defined Terms. Capitalized terms used in this Agreement, including its preamble and recitals, shall, except as otherwise
defined, have the meanings provided in Exhibit A.
Section 1.02 Principles of Interpretation. (a) Unless otherwise defined, terms for which meanings are provided in this Agreement shall
have the same meanings when used in each other Financing Document and each other notice or other communication delivered from time
to time in connection with any Financing Document.
(b) Any reference in this Agreement to any Transaction Document shall mean such Transaction Document and all schedules,
exhibits and attachments thereto.
(c) All agreements, contracts or documents defined or referred to herein shall mean such agreements, contracts or documents as
the same may from time to time be supplemented, amended or replaced or the terms thereof waived or modified to the extent permitted
by, and in accordance with, the terms thereof and this Agreement, and
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shall disregard any supplement, amendment, replacement, waiver or modification made in violation of this Agreement.
(d) Any reference in any Financing Document relating to a Default or an Event of Default that has occurred and is continuing (or
words of similar effect) shall be understood to mean that such Default or Event of Default, as the case may be, has not been cured or
remedied to the satisfaction of, or has not been waived by, the Required Lenders.
(e) Defined terms in this Agreement shall include in the singular number the plural and in the plural number the singular.
(f) The words “herein,” “hereof” and “hereunder” and words of similar import when used in this Agreement shall, unless
otherwise expressly specified, refer to this Agreement as a whole and not to any particular provision of this Agreement and all
references to Articles, Sections, Exhibits and Schedules shall be references to Articles, Sections, Exhibits and Schedules of this
Agreement, unless otherwise specified.
(g) The words “include,” “includes” and “including” are not limiting.
(h) Any reference to any Person shall include its permitted successors and permitted assigns in the capacity indicated, and in the
case of any Governmental Authority, any Person succeeding to its functions and capacities.
Section 1.03 UCC Terms. Unless otherwise defined herein, terms used herein that are defined in the UCC shall have the respective
meanings given to those terms in the UCC.
Section 1.04 Accounting and Financial Determinations. Unless otherwise specified, all accounting terms used in any Financing
Document shall be interpreted, all accounting determinations and computations hereunder or thereunder shall be made, and all financial
statements required to be delivered hereunder or thereunder shall be prepared, in accordance with GAAP.
ARTICLE II
COMMITMENTS; OTHER CREDIT AGREEMENTS
On the terms, subject to the conditions and relying upon the representations and warranties herein set forth:
Section 2.01 Loans. (a) After giving effect to the consummation of the transactions contemplated by the Assignment and Assumption
Agreement, each Lender, severally and not jointly, on the terms and conditions of this Agreement, has as of the Closing Date made loans
(each such loan, a “Loan”) to the Borrower, in an aggregate principal amount not in excess of
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Credit Agreement
such Lender’s Commitment and the aggregate principal amount of the Loans does not exceed the Aggregate Loan Commitment. As of
the Closing Date, each Loan is a Base Rate Loan.
(b) Loans repaid or prepaid may not be reborrowed.
Section 2.02 Other Credit Agreements.
(a) The Borrower, the DIP Agent and the DIP Lender hereby agree that the DIP Credit Agreement is terminated as of the Closing
Date.
(b) The terms and conditions of the Original Credit Agreement are amended as set forth in, and restated and superseded by, this
Agreement, in each case with respect to the obligations set forth in the Original Credit Agreement assigned and assumed pursuant to the
Assignment and Assumption Agreement. Nothing in this Agreement shall be deemed to work a novation of any obligation under the
Original Credit Agreement not assigned and assumed pursuant to the Assignment and Assumption Agreement (the “Unassumed
Obligations”), but in no event shall the Borrower have any liability to the Senior Secured Parties or any other party with respect to such
Unassumed Obligations. The Original Credit Agreement remains in full force and effect with respect to each such Unassumed
Obligation, but in no event shall the Borrower have any liability to the Senior Secured Parties or any other party with respect to such
Unassumed Obligations. Notwithstanding any provision of this Agreement or any other document or instrument executed in connection
herewith, the execution and delivery of this Agreement and the incurrence of obligations hereunder shall be in substitution for, but not
in payment of, the obligations owing to the Senior Secured Parties under the Original Credit Agreement assigned and assumed pursuant
to the Assignment and Assumption Agreement.
Section 2.03 Evidence of Indebtedness. (a) Each Loan made by each Lender shall be evidenced by one or more accounts or records
maintained by such Lender and by the Administrative Agent in the ordinary course of business, including the Register for the recordation
of the Loans maintained by the Administrative Agent in accordance with the provisions of Section 11.03(c) (Assignments). The accounts or
records maintained by the Administrative Agent and each Lender shall be conclusive evidence, absent manifest error, of the amount of the
Loans made by the Lenders to the Borrower and the interest and payments thereon. Any failure to so record or any error in doing so shall
not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations.
In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Administrative
Agent in respect of such matters, the accounts and records of the Administrative Agent shall control, absent manifest error.
(b) The Borrower agrees that in addition to the Register and any other accounts and records maintained pursuant to
Section 2.03(a), the Loans made by each Lender may, if requested by the Lenders, be evidenced by a Note or Notes duly executed on
behalf of the Borrower. The Notes shall be dated as of the Closing Date (or, if later, the date of any request therefor by a Lender). Each
such Note shall be payable to the order of such Lender in a principal amount equal to such Lender’s
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Credit Agreement
Commitment. Each Lender may attach schedules to its Note and endorse thereon the date, amount and maturity of its Loan and
payments with respect thereto.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
Section 3.01 Repayment of Loans. (a) The Borrower unconditionally and irrevocably promises to pay to the Administrative Agent for
the ratable account of each Lender the aggregate outstanding principal amount of the Loans, on the Initial Quarterly Payment Date and on
each Quarterly Payment Date thereafter, in accordance with Schedule 3.01 (which amount shall be reduced as a result of any prepayments
of the Loans made in accordance with Section 3.07 (Optional Prepayment) or Section 3.08 (Mandatory Prepayment) in accordance with the
terms set forth therein).
(b) Notwithstanding anything to the contrary set forth in Section 3.01(a), the final principal repayment installment on the Final
Maturity Date shall in any event be in an amount equal to the aggregate principal amount of all Loans outstanding on such date.
Section 3.02 Interest Payment Dates. (a) Interest accrued on each Loan shall be payable, without duplication:
(i)
on the Final Maturity Date;
(ii)
on each Interest Payment Date for such Loan; and
(iii) with respect to any Loan, on any date when such Loan is prepaid hereunder.
(b) Interest accrued on the Loans or other monetary Obligations after the date such amount is due and payable (whether on the
Final Maturity Date, any Quarterly Payment Date, any Interest Payment Date, upon acceleration or otherwise) shall be payable upon
demand.
(c) Interest hereunder shall be due and payable in accordance with the terms hereof, before and after judgment, regardless of
whether an Insolvency or Liquidation Proceeding exists in respect of the Borrower and, to the fullest extent permitted by law, the
Lenders shall be entitled to receive post petition interest during the pendency of an Insolvency or Liquidation Proceeding.
Section 3.03 Interest Rates. (a) Pursuant to each properly delivered Interest Period Notice, (i) each Eurodollar Loan shall accrue
interest at a rate per annum during each Interest Period applicable thereto equal to the sum of the Eurodollar Rate for such Interest Period
plus the Applicable Margin and (ii) each Base Rate Loan shall accrue interest at a rate per annum during
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Credit Agreement
each Monthly Period equal to the sum of the Base Rate for such Monthly Period plus the Applicable Margin.
(b) On or before 2:00 p.m., New York City time, at least five (5) Business Days prior to the end of each Interest Period for each
Eurodollar Loan, and at least three (3) Business Days prior to the end of any Monthly Period for any Base Rate Loans, the Borrower
shall deliver to the Administrative Agent an Interest Period Notice setting forth the Borrower’s election (i) to continue any such
Eurodollar Loan as (or convert any such Base Rate Loan to) a Eurodollar Loan and setting forth the Borrower’s election with respect to
the duration of the next Interest Period applicable to such continued or converted Eurodollar Loan, which Interest Period shall be one
(1), two (2) or three (3) months in length or (ii) to convert any such Eurodollar Loan to a Base Rate Loan at the end of the then-current
Interest Period; provided, that if an Event of Default has occurred and is continuing, all Eurodollar Loans shall automatically convert
into Base Rate Loans at the end of the then-current Interest Periods. Upon the waiver or cure of such Event of Default, the Borrower
shall have the option to continue such Loans as Base Rate Loans and/or to convert such Loans to Eurodollar Loans (by delivery of an
Interest Period Notice), subject to the notice periods set forth above. Notwithstanding anything to the contrary, any portion of the Loans
maturing in less than one month may not be continued as, or converted to, Eurodollar Loans and will automatically convert to Base Rate
Loans at the end of the then-current Interest Period.
(c) If the Borrower fails to deliver an Interest Period Notice in accordance with Section 3.03(b), (i) with respect to any Eurodollar
Loan, provided there is no Default or Event of Default has occurred that is continuing, such Eurodollar Loan shall automatically
continue as a Eurodollar Loan with an Interest Period of one (1) month or (ii) with respect to any Base Rate Loan, such Base Rate Loan
shall automatically continue as a Base Rate Loan.
(d) All Eurodollar Loans shall bear interest from and including the first day of the applicable Interest Period to (and excluding) the
last day of such Interest Period at the interest rate determined, as applicable, to such Eurodollar Loan.
(e) Notwithstanding anything to the contrary, the Borrower shall have one (1) Eurodollar Loan outstanding at any one time. For
purposes of the foregoing, (i) Eurodollar Loans having different Interest Periods, regardless of whether they commence on the same
date, shall be considered separate Eurodollar Loans and (ii) all Eurodollar Loans having the same Interest Period and commencing on
the same date shall be considered to be a single Eurodollar Loan.
(f) All Base Rate Loans shall bear interest from and including the first day of each Monthly Period (or the day on which
Eurodollar Loans are converted to Base Rate Loans as required under Section 3.03(b) or under ARTICLE IV (Eurodollar Rate and Tax
Provisions)) to (and including) the next succeeding Monthly Payment Date at the interest rate determined, as applicable, to such Base
Rate Loan.
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Credit Agreement
Section 3.04 Default Interest Rate. Upon the occurrence and during the continuance of an Event of Default, the Borrower shall pay
interest (after as well as before judgment) on the Obligations at a rate per annum equal to the rate then applicable to Base Rate Loans plus
two percent (2%) per annum (the “Default Rate”).
Section 3.05 Interest Rate Determination. The Administrative Agent shall determine the interest rate applicable to the Loans in
accordance with the terms of this Agreement, and shall give prompt notice to the Borrower and the Lenders of such determination, and its
determination thereof shall be conclusive, absent manifest error.
Section 3.06 Computation of Interest and Fees. (a) All computations of interest for Base Rate Loans when the Base Rate is
determined by WestLB’s “prime rate” shall be made on the basis of a year of 365 or 366 days, as the case may be, and actual days elapsed.
All computations of interest for Eurodollar Loans and for Base Rate Loans when the Base Rate is determined by the Federal Funds
Effective Rate shall be made on the basis of a 360 day year and actual days elapsed.
(b) Interest shall accrue on each Loan for the day on which the Loan is made, and shall not accrue on a Loan, or any portion
thereof, for the day on which the Loan or such portion is paid; provided, that any Loan or portion thereof that is repaid on the same day
on which it is made shall bear interest for one (1) day.
(c) Each determination by the Administrative Agent of an interest rate or fee hereunder shall be conclusive and binding for all
purposes, absent manifest error.
Section 3.07 Optional Prepayment. (a) The Borrower shall have the right at any time, and from time to time, to prepay the Loans, in
whole or in part, upon not fewer than five (5) Business Days’ prior written notice to the Administrative Agent.
(b) Any partial prepayment of the Loans shall be in a minimum amount of one hundred thousand Dollars ($100,000) and in
integral multiples of fifty thousand Dollars ($50,000) in excess thereof.
(c) Each notice of prepayment given by the Borrower under this Section 3.07 shall specify the prepayment date and the portion of
the principal amount of Loans to be prepaid. All prepayments under this Section 3.07 shall be made by the Borrower to the
Administrative Agent for the account of the Lenders and shall be accompanied by accrued interest on the principal amount being
prepaid to but excluding the date of payment and by any additional amounts required to be paid under Section 4.05 (Funding Losses).
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Credit Agreement
(d) Amounts of principal prepaid under this Section 3.07 shall be applied by the Administrative Agent to the Loans pro rata
among the Lenders based on their respective outstanding principal amounts of the Loans on the date of such prepayment and then to
the remaining outstanding installments of principal of the Loans under Section 3.01(a) (Repayment of Loans) in inverse order of
maturity.
(e) Amounts of the Loans prepaid pursuant to this Section 3.07 may not be reborrowed.
Section 3.08 Mandatory Prepayment. (a) The Borrower shall be required to apply the amounts set forth below to prepay the Loans:
(i)
upon receipt of Insurance Proceeds as required pursuant to Section 8.01 (Insurance and Condemnation Proceeds);
(ii)
upon receipt of Condemnation Proceeds, as required pursuant to Section 8.01 (Insurance and Condemnation Proceeds);
(iii) upon receipt of any Project Document Termination Payments, as required pursuant to Section 8.02 (Extraordinary Proceeds);
(iv) upon receipt of proceeds of any asset disposal (other than proceeds received from the sale of Products) that are not used for
replacement, as required pursuant to Section 8.02 (Extraordinary Proceeds); and
(v)
as required pursuant to Sections 3.03(a)(ii)(I) and (J) of the Accounts Agreement.
(b) All prepayments under this Section 3.08 shall be made by the Borrower to the Administrative Agent for the account of the
applicable Lenders and shall be accompanied by accrued interest on the principal amount being prepaid to but excluding the date of
payment and by any additional amounts required to be paid under Section 4.05 (Funding Losses).
(c) Amounts of principal prepaid under Section 3.08(a) shall be allocated by the Administrative Agent to the Loans pro rata
among the Lenders based on their respective outstanding principal amounts of the Loans on the date of such prepayment and then to
the remaining outstanding installments of principal of the Loans under Section 3.01(a) (Repayment of Loans) in inverse order of
maturity.
(d) Amounts of the Loans prepaid pursuant to this Section 3.08 may not be reborrowed.
Section 3.09 Time and Place of Payments. (a) The Borrower shall make each payment (including any payment of principal of or
interest on any Loan or any Fees or other Obligations) hereunder and under any other Financing Document without setoff, deduction or
counterclaim not later than 2:00 p.m., New York City time on the date when due in Dollars in immediately available funds to the
Administrative Agent at the following account: JPMorgan Chase Bank
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Credit Agreement
(Swift ID: CHASUS33XXX), Account Number: 920-1-060663, for the Account of WestLB AG NY Branch, ABA #021 000 021, Ref:
Seneca Landlord, LLC, Attention: Loan Administration, or at such other office or account as may from time to time be specified by the
Administrative Agent to the Borrower. Funds received after 12:00 noon New York City time shall be deemed to have been received by the
Administrative Agent on the next succeeding Business Day.
(b) The Administrative Agent shall promptly (but in no event later than 5:00 p.m. New York City time on the date such payment
is received or deemed to be received) remit in immediately available funds to each Senior Secured Party its share, if any, of any
payments received by the Administrative Agent for the account of such Senior Secured Party.
(c) Whenever any payment (including any payment of principal of or interest on any Loan or any Fees or other Obligations)
hereunder or under any other Financing Document shall become due, or otherwise would occur, on a day that is not a Business Day,
such payment shall (except as otherwise required by the proviso to the definition of “Interest Period” with respect to Eurodollar Loans)
be made on the immediately succeeding Business Day, and such increase of time shall in such case be included in the computation of
interest or Fees, if applicable.
Section 3.10 Payments Generally. (a) Unless the Administrative Agent has received notice from the Borrower prior to the date on
which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such
payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance with this Agreement
and may, in reliance upon such assumption, distribute to the Lenders the amount due. If the Borrower has not in fact made such payment,
then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such
Lender in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but
excluding the date of payment to the Administrative Agent, at the greater of (i) the Federal Funds Effective Rate and (ii) a rate determined
by the Administrative Agent in accordance with banking industry rules on interbank compensation. A notice by the Administrative Agent to
any Lender with respect to any amount owing under this Section 3.10(a) shall be conclusive, absent manifest error.
(b) Nothing herein shall be deemed to obligate any Lender to obtain funds for any Loan in any particular place or manner or to
constitute a representation by any Lender that it has obtained or will obtain funds for any Loan in any particular place or manner.
(c) The Borrower hereby authorizes each Lender, if and to the extent payment owed to such Lender is not made when due under
this Agreement or under any Notes held by such Lender, to charge from time to time against any or all of the Borrower’s accounts with
such Lender (other than, in the event that the Accounts Bank or any bank holding a Local Account is also a Lender, the Borrower
Revenue Account or Local Account) any amount so due.
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Credit Agreement
Section 3.11 Fees. (a) From and including the date hereof until the Final Maturity Date, the Borrower agrees to pay to the
Administrative Agent, for the account of the Administrative Agent, on or prior to the date that is four (4) months after the Closing Date and
on each anniversary of the Closing Date, an administrative agency fee equal to fifty thousand Dollars ($50,000).
(b) All Fees shall be paid on the dates due, in immediately available funds. Once paid, none of the Fees shall be refundable under
any circumstances.
Section 3.12 Pro Rata Treatment. Except as required under Section 3.07 (Optional Prepayment), Section 3.08 (Mandatory
Prepayment) or ARTICLE IV (Eurodollar Rate and Tax Provisions), (i) each payment or prepayment of principal of the Loans shall be
allocated by the Administrative Agent pro rata among the applicable Lenders in accordance with the respective principal amounts of their
outstanding Loans of the type being repaid and (ii) each payment of interest on the Loans shall be allocated by the Administrative Agent
pro rata among the applicable Lenders in accordance with the respective interest amounts outstanding on their outstanding Loans of the
type in respect of which interest is being paid.
Section 3.13 Sharing of Payments. (a) If any Lender obtains any payment or other recovery (whether voluntary, involuntary, by
application of setoff or otherwise) on account of any Loan (other than pursuant to the terms of ARTICLE IV (Eurodollar Rate and Tax
Provisions)) in excess of its pro rata share of payments then or therewith obtained by all Lenders holding Loans of such type, such Lender
shall purchase from the other Lenders holding Loans of such type such participations in Loans of such type made by them as shall be
necessary to cause such purchasing Lender to share the excess payment or other recovery ratably with each of them; provided, however,
that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing Lender, the purchase shall be
rescinded and each Lender that has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to
the ratable extent of such recovery together with an amount equal to such selling Lender’s ratable share (according to the proportion of
(x) the amount of such selling Lender’s required repayment to the purchasing Lender to (y) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the purchasing Lender in respect of the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another Lender pursuant to this Section 3.13 may, to the fullest
extent permitted by law, exercise all of its rights of payment (including pursuant to Section 11.14 (Right of Setoff)) with respect to such
participation as fully as if such Lender were the direct creditor of the Borrower in the amount of such participation.
(b) If under any applicable bankruptcy, insolvency or other similar Law, any Lender receives a secured claim in lieu of a setoff to
which this Section 3.13 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a
manner consistent with the rights of the Lenders entitled under this Section 3.13 to share in the benefits of any recovery on such
secured claim.
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Credit Agreement
ARTICLE IV
EURODOLLAR RATE AND TAX PROVISIONS
Section 4.01 Eurodollar Rate Lending Unlawful. (a) If any Lender reasonably determines (which determination shall, upon notice
thereof to the Borrower and the Administrative Agent, be conclusive and binding on the Borrower absent manifest error), but only if such
Lender has complied with its obligations under Section 4.04 (Obligation to Mitigate; Replacement of Lender)) that the introduction of or
any change in or in the interpretation of any Law after the date hereof makes it unlawful, or any central bank or other Governmental
Authority asserts after the date hereof that it is unlawful, for such Lender to maintain any Loan as a Eurodollar Loan, the obligations of
such Lender to maintain any Loan as a Eurodollar Loan (but not the obligations of such Lender to maintain any Loan as a Base Rate Loan)
shall, upon such determination, forthwith be suspended until such Lender notifies the Administrative Agent that the circumstances causing
such suspension no longer exist, and all Eurodollar Loans of such Lender shall automatically convert into Base Rate Loans at the end of the
then-current Interest Periods with respect thereto or sooner, if required by such Law or assertion. Upon any such conversion the Borrower
shall pay any accrued interest on the amount so converted and, if such conversion occurs on a day other than the last day of the then-current
Interest Period for such affected Eurodollar Loans, such Lender shall be entitled to make a request for, and the Borrower shall in such case
pay, compensation for breakage costs under Section 4.05 (Funding Losses).
(b) If such Lender notifies the Borrower that the circumstances giving rise to the suspension described in Section 4.01(a) no
longer apply, the Borrower may elect (by delivering an Interest Period Notice) to convert the principal amount of any such Base Rate
Loan to a Eurodollar Loan in accordance with this Agreement.
Section 4.02 Inability to Determine Eurodollar Rates. (a) In the event, and on each occasion, that the Administrative Agent shall have
determined in good faith that for any Eurodollar Loan (i) Dollar deposits in the amount of such Loan and with an Interest Period similar to
such Interest Period are not generally available in the London interbank market, or (ii) the rate at which such Dollar deposits are being
offered will not adequately and fairly reflect the cost to any Lender of making, maintaining or funding the principal amount of such Loan
during such Interest Period, or (iii) adequate and reasonable means do not exist for ascertaining LIBOR, the Administrative Agent shall
promptly notify the Borrower and the Lenders of such determination, whereupon each such Eurodollar Loan will automatically, on the last
day of the then existing Interest Period for such Eurodollar Loan, convert into a Base Rate Loan. Each determination by the Administrative
Agent hereunder shall be conclusive, absent manifest error.
(b) Upon the Administrative Agent’s determination that the condition that was the subject of a notice under Section 4.02(a) has
ceased, the Administrative Agent shall promptly notify the Borrower and the Lenders of such determination, whereupon the Borrower
may elect (by delivering an Interest Period Notice) to convert any such Base Rate Loan to a Eurodollar Loan on the last day of the
then-current Monthly Period in accordance with this Agreement.
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Credit Agreement
Section 4.03 Increased Eurodollar Loan Costs. If, after the date hereof, the adoption of any applicable Law or any change therein, or
any change in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration
thereof, or compliance by any Lender (or its Eurodollar Office) with any request or directive (whether or not having the force of law) of any
Governmental Authority increases the cost (other than with respect to Taxes, which are addressed in Section 4.07 (Taxes)) to such Lender
of, or results in any reduction in the amount of any sum receivable by such Lender (whether of principal, interest or any other amount) in
respect of, maintaining (or of its obligation to maintain) the Loans as Eurodollar Loans, then the Borrower agrees to pay to the
Administrative Agent for the account of such Lender the amount of any such increase or reduction. Such Lender shall promptly notify the
Administrative Agent and the Borrower in writing of the occurrence of any such event, such notice to state, with accompanying support, the
additional amount required to compensate fully such Lender for such increased cost or reduced amount. Such additional amounts shall be
payable by the Borrower directly to such Lender within five (5) Business Days of delivery of such notice, and such notice and
determination shall be binding on the Borrower, absent manifest error. Notwithstanding anything to the contrary in this Section 4.03, the
Borrower shall not be required to pay a Lender pursuant to this Section 4.03 for any such increase or reduction incurred more than 365 days
prior to the date that such Lender notifies the Borrower, or notifies the Borrower of its intention to demand compensation, in accordance
with this Section 4.03; provided that, if the circumstance giving rise to such increase or reduction is retroactive, then such 365 day period
shall be extended to include the period of retroactive effect.
Section 4.04 Obligation to Mitigate; Replacement of Lender. (a) Each Lender agrees that, after it becomes aware of the occurrence of
an event that would entitle it to give notice pursuant to Section 4.01 (Eurodollar Rate Lending Unlawful), Section 4.03 (Increased
Eurodollar Loan Costs) or Section 4.06 (Increased Capital Costs) or to receive additional amounts pursuant to Section 4.07 (Taxes), such
Lender shall use reasonable efforts to maintain its affected Loan through another lending office (i) if as a result thereof the increased costs
would be avoided or materially reduced or the illegality would thereby cease to exist and (ii) if, in the opinion of such Lender, the
maintaining of such Loan through such other lending office would not be disadvantageous to such Lender, contrary to such Lender’s
normal banking practices or violate any applicable Law.
(b) No change by a Lender in its Domestic Office or Eurodollar Office made for such Lender’s convenience shall result in any
increased cost to the Borrower.
(c) If any Lender demands compensation pursuant to Section 4.03 (Increased Eurodollar Loan Costs) or Section 4.06 (Increased
Capital Costs) with respect to any Eurodollar Loan, the Borrower may, at any time upon at least three (3) Business Days’ prior notice
to such Lender through the Administrative Agent, elect to convert such Loan to a Base Rate Loan. Thereafter, unless and until such
Lender notifies the Borrower that the circumstances giving rise to such notice no longer apply, all such Eurodollar Loans by such
Lender shall bear interest as Base Rate Loans. If such Lender notifies the Borrower that the circumstances giving rise to such notice no
longer apply, the Borrower may elect (by delivering an Interest Period Notice) to convert the principal amount of each such Base Rate
Loan to a Eurodollar Loan in accordance with this Agreement.
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Credit Agreement
(d) The Borrower will be permitted, with the approval of the Administrative Agent, to replace (with one or more replacement
Lenders) any Lender that provides notice under Section 4.01(a) (Eurodollar Rate Lending Unlawful) that it is unable to maintain any
Loan as a Eurodollar Loan or requests reimbursement for, or is otherwise entitled to, amounts owing pursuant to Section 4.03
(Increased Eurodollar Loan Costs), Section 4.06 (Increased Capital Costs) or Section 4.07(c) (Taxes – Indemnification by Borrower);
provided, that (i) such replacement does not conflict with any Law or any determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to the Borrower or such Lender or to which the Borrower or such Lender or any of
their respective property is subject, (ii) no Default or Event of Default shall have occurred and be continuing at the time of such
replacement, (iii) the replacement Lender shall purchase, at par, the Loans and all other amounts owing to such replaced Lender prior
to the date of replacement, (iv) the Borrower shall be liable to such replaced Lender under Section 4.05 (Funding Losses) if any
Eurodollar Loan owing to such replaced Lender is purchased other than on the last day of the Interest Period relating thereto, (v) until
such time as such replacement is consummated, the Borrower shall pay all additional amounts (if any) required pursuant to
Section 4.03 (Increased Eurodollar Loan Costs), Section 4.06 (Increased Capital Costs) or Section 4.07(c) (Taxes – Indemnification by
Borrower), as the case may be, (vi) the replacement Lender is an Eligible Assignee, (vii) such replacement is made in accordance with
the provisions of Section 11.03(b) (Assignments) (provided, that the Borrower shall be obligated to pay the registration and processing
fee), (viii) any such replacement shall not be deemed to be a waiver of any rights that the Borrower, any Agent or any other Lender may
have against the replaced Lender, and (ix) prior to any such replacement, in the case of any replacement of a Lender that has
determined that the maintaining of a Loan as a Eurodollar Loan is unlawful, the Lender to be replaced shall not have delivered a notice
to the Borrower under Section 4.01(b) (Eurodollar Rate Lending Unlawful) that it is no longer unable to maintain any Loan as a
Eurodollar Loan and, in the case of any replacement of a Lender that has claimed increased costs, shall have taken no action under
Section 4.04 (Obligation To Mitigate; Replacement of Lender) so as to eliminate the need for payment of amounts owing pursuant to
Section 4.03 (Increased Eurodollar Loan Costs), Section 4.06 (Increased Capital Costs) or Section 4.07(c) (Taxes – Indemnification by
Borrower), as the case may be.
Section 4.05 Funding Losses. In the event that any Lender incurs any loss or expense (including any loss or expense incurred by
reason of the liquidation or redeployment of deposits or other funds acquired by such Lender to continue or maintain any portion of the
principal amount of any Loan as a Eurodollar Loan, and any customary administrative fees charged by such Lender in connection with the
foregoing) as a result of any conversion or repayment or prepayment of the principal amount of any Loans on a date other than the
scheduled last day of the Interest Period applicable thereto, whether pursuant to Section 3.07 (Optional Prepayment), Section 3.08
(Mandatory Prepayment), Section 4.01(a) (Eurodollar Rate Lending Unlawful) or otherwise, then, upon the written notice of such Lender
to the Borrower (with a copy to the Administrative Agent), together with accompanying support of the amounts owing, the Borrower shall,
within five (5) Business Days of receipt thereof, pay to the Administrative Agent for the account of such Lender such amount as will (in
the reasonable determination of such Lender)
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reimburse such Lender for such loss or expense. Such written notice and determination shall be binding on the Borrower, absent manifest
error.
Section 4.06 Increased Capital Costs. If after the date hereof any change in, or the introduction, adoption, effectiveness,
interpretation, reinterpretation or phase in of, any applicable Law, guideline or request (whether or not having the force of law) of any
Governmental Authority, affects the amount of capital required to be maintained by any Lender, and such Lender reasonably determines
that the rate of return on its capital as a consequence of its Loan is reduced to a level below that which such Lender could have achieved but
for the occurrence of any such circumstance, then, in any such case upon notice from time to time by such Lender to the Borrower (with
accompanying support for the amount required to compensate such Lender for such reduction in rate of return), the Borrower shall pay,
within five (5) Business Days after such demand, directly to such Lender additional amounts sufficient to compensate such Lender for such
reduction in rate of return. A statement of such Lender as to any such additional amount or amounts shall be binding on the Borrower,
absent manifest error.
Section 4.07 Taxes.
(a) Payments Free of Taxes. Any and all payments by or on account of any Obligations shall be made free and clear of, and
without deduction for, any Taxes, unless required by Law; provided that if the Borrower shall be required to deduct any Indemnified
Taxes from any such payment, then (i) the sum payable shall be increased as necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section 4.07) the Agent or Lender (as the case may be) receives
an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions
and (iii) the Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable Law.
(b) Payment of Other Taxes by the Borrower. In addition, the Borrower shall timely pay any Indemnified Taxes arising from any
payment made under any Financing Document or from the execution, delivery or enforcement of, or otherwise with respect to, any
Financing Document and not collected by withholding at the source as contemplated by Section 4.07(a) to the relevant Governmental
Authority in accordance with applicable Law.
(c) Indemnification by the Borrower. The Borrower shall indemnify each Agent and each Lender, within five (5) Business Days
after written demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or
attributable to amounts payable under this Section 4.07) paid by such Agent or Lender, as the case may be, and any penalties, interest,
additions to tax and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were
correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrower by a Lender or Agent, as the case may be, shall be conclusive, absent manifest error.
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Credit Agreement
(d) Evidence of Payments. As soon as practicable after any payment of Indemnified Taxes by the Borrower to a Governmental
Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such
Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment
reasonably satisfactory to the Administrative Agent.
(e) Foreign Lenders. Each Lender (including any Participant and any other Person to which any Lender transfers its interests in
this Agreement as provided under Section 11.03 (Assignments)) that is not a United States Person (a “Non-U.S. Lender”) shall deliver
to the Borrower and the Administrative Agent two (2) copies of U.S. Internal Revenue Service Form W 8ECI, Form W 8BEN or
Form W 8IMY (with supporting documentation and any other certificate or statements required for exemption from, or reduction of,
U.S. federal withholding tax), or any subsequent versions thereof or successors thereto, properly completed and duly executed by such
Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments of interest by
the Borrower under the Financing Documents if such Lender is legally entitled to so claim, together with, in the case of a Non-U.S.
Lender that is relying on an exemption pursuant to Section 871(h) or 881(c) of the Code, a certificate substantially in the form of
Exhibit H certifying that such Lender is not a bank described in Section 881(c)(3)(A) of the Code. Such forms shall be delivered by
each Non-U.S. Lender on or before the date it becomes a party to this Agreement. In addition, to the extent that it is in a position to
legally do so, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously
delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower and the Administrative Agent at any
time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of
certification adopted by U.S. taxing authorities for such purpose). The Borrower shall not be obligated to pay any additional amounts in
respect of U.S. federal income taxes pursuant to this Section 4.07 (or make an indemnification payment pursuant to this Section 4.07) to
any Lender (or any Participant or other Person to which any Lender transfers its interests in this Agreement as provided under
Section 11.03 (Assignments)) if the obligation to pay such additional amounts (or such indemnification) would not have arisen but for a
failure by such Lender to comply with this Section 4.07(e).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce each Agent and each Lender to enter into this Agreement, the Borrower represents and warrants to each Senior
Secured Party as set forth in this ARTICLE V as follows:
Section 5.01 Organization; Power; Compliance with Law and Contractual Obligations. On the date hereof and the Bring Down Date,
the Borrower (a) is duly formed, validly existing
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and in good standing under the laws of its jurisdiction of organization, (b) is duly qualified to do business as is now being conducted and as
is proposed to be conducted and is in good standing in each jurisdiction where the nature of its business requires such qualification
(including Illinois), (c) has all requisite power and authority required to enter into and perform its obligations under each Transaction
Document to which it is a party and to conduct its business as currently conducted by it and (d) is in compliance in all material respects with
all Laws and Contractual Obligations necessary to conduct its business, except to the extent that any non compliance with clause (b) of this
Section 5.01 in any jurisdiction (other than Illinois) could not reasonably be expected to result in a Material Adverse Effect.
Section 5.02 Due Authorization; Non-Contravention. On the date hereof and the Bring Down Date, the execution, delivery and
performance by the Borrower of each Transaction Document to which it is a party are within the Borrower’s powers, have been duly
authorized by all necessary action, and do not:
(a) contravene the Borrower’s Organic Documents;
(b) contravene in any material respect any Law binding on or affecting the Borrower;
(c) (i) in the case of any Financing Document, contravene any Contractual Obligation binding on or affecting the Borrower or
(ii) in the case of any Project Document, contravene in any material respect any Contractual Obligation binding on or affecting the
Borrower;
(d) require any consent or approval under the Borrower’s Organic Documents or under any Contractual Obligation binding on or
affecting the Borrower that has not been obtained; or
(e) result in, or require the creation or imposition of, any Lien on any of the Borrower’s properties or Equity Interests other than
Permitted Liens.
Section 5.03 Governmental Approvals.
(a) As of the date hereof and the Bring Down Date:
(i)
all material Governmental Approvals that are required to be obtained by the Borrower in connection with (A) the due execution,
delivery and performance by it of the Transaction Documents to which it is a party, (B) the ownership, use and operation of the
Project as contemplated by the Transaction Documents, and the completion of those capital improvements indentified in the
Capital Improvement Budget, and (C) the grant by the Borrower of the Liens granted under the Security Documents and the
validity, perfection and enforceability thereof (the “Necessary Project Approvals”) are listed in Schedule 5.03;
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(ii)
(iii)
the Necessary Project Approvals listed in Part A of Schedule 5.03 have been obtained, are in full force and effect, are properly in
the name of the appropriate Person, and are final and Non-Appealable;
the Necessary Project Approvals listed in Part B of Schedule 5.03 are not required under applicable Laws to be obtained prior to
the Closing Date (collectively, the “Deferred Approvals”) and the Borrower has no reason to believe that any Deferred Approval
will not be obtained, as required, in the normal course of the ownership, use and operation of the Project, and the completion of
those capital improvements identified in the Capital Improvement Budget; and
(iv) Part B of Schedule 5.03 specifies the stage of performance of capital improvements or operation for which, each Deferred
Approval included therein is required to be obtained.
(b) The Borrower may update and correct, with approval of the Administrative Agent, which approval will not be unreasonably
withheld, conditioned or delayed, any reference to a Necessary Project Approval on Schedule 5.03 that has been replaced in accordance
with applicable Law or to reflect changes in the status thereof between the date hereof and the Bring Down Date.
(c) As of the Bring Down Date, the information set forth in each application (including any updates or supplements thereto)
submitted by or on behalf of the Borrower in connection with each Necessary Project Approval after the date hereof was accurate and
complete at the time of submission and continues to be accurate and complete, in each case in all material respects and to the extent
required for the issuance or continued effectiveness of such Necessary Project Approval.
Section 5.04 Investment Company Act. As of the date hereof and the Bring Down Date, the Borrower is not, and after giving effect to
the Loans and the application of the proceeds of the Loans as described herein will not be, an “investment company” or a company
“controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.
Section 5.05 Validity. As of the date hereof and the Bring Down Date, each Transaction Document to which the Borrower is a party
has been duly authorized, validly executed and delivered, and constitutes the legal, valid and binding obligations of the Borrower
enforceable against the Borrower in each case in accordance with its respective terms, except as the enforceability hereof or thereof may be
limited by (a) bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors’ rights generally and
(b) general equitable principles (whether considered in a proceeding in equity or at law).
Section 5.06 Financial Information. As of the date hereof and the Bring Down Date, each of the financial statements of the Borrower
delivered pursuant hereto (which, as of the date hereof, consists solely of the balance sheet of the Borrower delivered pursuant to
Section 6.01(h) Conditions to Closing Date – Financial Statements) has been prepared in accordance with
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GAAP, and fairly presents in all material respects the financial condition of the Borrower covered thereby as at the dates thereof and the
results of its operations for the period then ended (subject, in the case of unaudited financial statements, to changes resulting from audit and
normal year end adjustments and the absence of footnotes).
Section 5.07 [Intentionally Omitted].
Section 5.08 Project Compliance. (a) As of the Bring Down Date, except as set forth on Schedule 5.08, the Project is owned,
improved and maintained in compliance in all material respects with all applicable Laws and in compliance in all material respects with the
requirements of all Necessary Project Approvals (including all Deferred Approvals) then required to have been obtained.
(b) As of the Bring Down Date, the Project is owned, improved and maintained in compliance in all material respects with all of
the Borrower’s Contractual Obligations.
Section 5.09 Litigation. As of the date hereof (to the Knowledge of the Borrower) and as of the Bring Down Date, no action, suit,
proceeding or investigation has been instituted or threatened in writing against the Borrower that, individually or in the aggregate, has had
or could reasonably be expected to have a Material Adverse Effect.
Section 5.10 Sole Purpose Nature; Business. As of the date hereof and the Bring Down Date, the Borrower has not conducted and is
not conducting any business or activities other than businesses and activities relating to the ownership of the Project as contemplated by the
Transaction Documents.
Section 5.11 Contracts. As of the date hereof:
(i)
all contracts, agreements, instruments, letter agreements, or other documents to which the Borrower is a party or by which it or
any of its properties is bound (other than the Financing Documents), including the Project Documents, and all documents
amending, supplementing, interpreting or otherwise modifying or clarifying such contracts, agreements, instruments, letter
agreements, understandings and other documents are listed in Schedule 5.11, other than any such contracts that are not Project
Documents and (A) have a term of less than six (6) months, (B) under which the Borrower could not reasonably be expected to
have obligations, liabilities or revenues equal to or in excess of one hundred thousand Dollars ($100,000) per year individually or
two hundred fifty thousand Dollars ($250,000) per year in the aggregate and (C) a termination of which could not reasonably be
expected to result in a Material Adverse Effect;
(ii)
all contracts, agreements, instruments, letter agreements, or other documents that are required to be obtained by the Borrower in
connection with the repair, remediation and improvement contemplated by the Capital Improvement Budget and operation of
the Project as contemplated by the
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Transaction Documents (subject, until the CS End Date, to Cold Shutdown) (collectively, the “Necessary Project Contracts”)
are listed in Schedule 5.11, other than any such contracts that (A) have a term of less than six (6) months, (B) under which the
Borrower could not reasonably be expected to have obligations, liabilities or revenues equal to or in excess of one hundred
thousand Dollars ($100,000) per year individually or two hundred fifty thousand Dollars ($250,000) per year in the aggregate
and (C) a termination of which could not reasonably be expected to result in a Material Adverse Effect; and
(iii)
the Necessary Project Contracts listed in Part B of Schedule 5.11 are not required to be in effect prior to the Closing Date
(collectively, the “Deferred Contracts”) and are not yet in effect.
Section 5.12 Collateral. (a) As of the date hereof, the Collateral includes all of the Equity Interests in, and all of the tangible and
intangible assets of, the Borrower.
(b) As of the date hereof, the Liens and security interests granted to the Collateral Agent (for the benefit of the Senior Secured
Parties) pursuant to the Security Documents (i) constitute, as to personal property included in the Collateral, a valid first priority
security interest in such personal property and (ii) constitute, as to the Mortgaged Property included in the Collateral, a valid first
priority Lien of record in the Mortgaged Property, in each case subject only to Permitted Liens.
(c) As of the date hereof, the security interest granted to the Collateral Agent (for the benefit of the Senior Secured Parties)
pursuant to the Security Documents in the Collateral consisting of personal property will be perfected (i) with respect to any property
that can be perfected by filing, upon the filing of UCC financing statements in the filing offices identified in Schedule 5.12(c), (ii) with
respect to any Blocked Account Collateral that can be perfected solely by control, upon execution of a Blocked Account Agreement
and (iii) with respect to any property (if any) that can be perfected solely by possession, upon the Collateral Agent receiving possession
thereof, and in each case such security interest will be, as to Collateral perfected under the UCC or otherwise as aforesaid, superior and
prior to the rights of all third Persons now existing or hereafter arising whether by way of mortgage, lien, security interest,
encumbrance, assignment or otherwise, in each case subject only to Permitted Liens. After giving effect to the filings, registrations and
giving of notice referred to in the prior sentence, all such action as is necessary has been taken to establish and perfect the Collateral
Agent’s rights in and to the Collateral covered by the Security Documents to the extent the Collateral Agent’s security interest can be
perfected by filing, including any recordation, filing, registration, giving of notice or other similar action. The Borrower has properly
delivered or caused to be delivered to the Collateral Agent, or provided the Collateral Agent control of, all Collateral relating to assets
of or equity in the Borrower or the Lessee, as applicable, that requires perfection of the Liens and security interests described above by
possession or control. All or substantially all of the Collateral relating to assets of or equity in the Borrower and all the Lessee
Collateral relating to assets of or equity in the Lessee (other than in each
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case, the Blocked Account Collateral, certificates, securities, investments, chattel paper, books and records and general intangibles),
including the Mortgaged Property, is or will (when acquired) be located on the Site.
Section 5.13 Ownership of Properties. (a) As of the date hereof and the Bring Down Date, to the extent set forth in the Sale Order, the
Borrower has a good and valid fee ownership interest in the Site, subject to Permitted Liens.
(b) As of the date hereof and the Bring Down Date, to the extent set forth in the Sale Order, the Borrower has a good and valid
ownership interest, leasehold interest, license interest or other right of use in all other property and assets (tangible and intangible)
included in the Collateral relating to assets of or equity in the Borrower under each Security Document, other than the collateral
pledged pursuant to the Pledge Agreement. To the Knowledge of Borrower, none of such properties or assets of or equity in the
Borrower are subject to any other claims of any Person on and after the Closing Date, including any easements, rights of way or similar
agreements affecting the use or occupancy of the Project or the Site, other than Permitted Liens.
(c) As of the date hereof and the Bring Down Date, all Equity Interests in the Borrower are owned by the Pledgor.
(d) As of the date hereof and the Bring Down Date, the properties and assets of the Borrower are separately identifiable and are
not commingled with the properties and assets of any other Person and are readily distinguishable from the property and assets of other
Persons.
(e) As of the date hereof and the Bring Down Date, the Borrower does not have any leasehold interest in, and is not lessee of, any
real property.
(f) As of the date hereof and the Bring Down Date, there are no easements, rights of way or similar agreements affecting the use
or occupancy of the Project, other than Permitted Liens.
Section 5.14 Taxes. (a) As of the date hereof (to the Knowledge of the Borrower) and as of the Bring Down Date, the Borrower has
(i) filed all Tax Returns required by Law to have been filed by it and (ii) has paid all Taxes thereby shown to be owing, as and when the
same are due and payable, other than, in the case of this Section 5.14(a)(ii), Taxes that are subject to a Contest.
(b) As of the date hereof (to the Knowledge of the Borrower) and as of the Bring Down Date, the Borrower is not taxable as a
corporation for federal tax purposes, and the Borrower has not taken any action to cause it to be treated as a corporation for state or
local tax purposes if it would, in the absence of such action, not be taxable as a corporation for state or local purposes.
(c) As of the date hereof (to the Knowledge of the Borrower) and as of the Bring Down Date, the Borrower is not a party to any
tax sharing agreement with any Person.
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(d) As of the date hereof (to the Knowledge of the Borrower) and as of the Bring Down Date, the Borrower has not agreed to
extend the statute of limitations period applicable to the assessment or collection of any Tax.
(e) As of the date hereof (to the Knowledge of the Borrower) and as of the Bring Down Date, the Borrower is not under any
governmental audit with respect to any Tax for any period, there are no claims for additional Tax being pursued by any Governmental
Authority with respect to its business, income or activities, and no such claims have been threatened in writing by a Governmental
Authority.
Section 5.15 ERISA Plans. As of the date hereof and the Bring Down Date, (i) neither the Borrower nor any ERISA Affiliate has (or
within the five year period immediately preceding the date hereof had) any liability in respect of any Plan or Multiemployer Plan and
(ii) the Borrower has no contingent liability with respect to any post retirement benefit under any “welfare plan” (as defined in Section 3(1)
of ERISA).
Section 5.16 Property Rights, Utilities, Supplies Etc. (a) As of the Bring Down Date, all material property interests, utility services,
means of transportation, facilities and other materials necessary for the performance of capital repairs, remediation and improvements with
respect to, testing, start-up, use and operation of the Project (until the CS End Date in Cold Shutdown) (including, as necessary, gas, roads,
rail transport, electrical, water and sewage services and facilities) are, or will be when needed, available to the Project, and arrangements in
respect thereof have been or will be made on commercially reasonable terms.
(b) As of the Bring Down Date, there are no material supplies, materials or equipment necessary for the performance of capital
repair, remediation and improvements with respect to, operation (until the CS End Date in Cold Shutdown) or maintenance of the
Project that are not expected to be available at the Site on commercially reasonable terms consistent with the Capital Improvement
Budget, any Supplemental Capital Improvement Budget, or the Operating Budget, as applicable.
Section 5.17 No Defaults. As of the date hereof and the Bring Down Date, (i) no Default or Event of Default has occurred and is
continuing and (ii) no default has occurred under the Lease and is continuing.
Section 5.18 Environmental Warranties. As of the date hereof (to the Knowledge of the Borrower) and as of the Bring Down Date:
(a) (i) The Borrower and its Environmental Affiliates are in compliance in all material respects with all applicable Environmental
Laws, (ii) the Borrower and its Environmental Affiliates have all Environmental Approvals required to operate their businesses as
presently conducted and are in compliance in all material respects with the terms and conditions thereof and (iii) none of the Borrower
nor any of its Environmental Affiliates has received any written communication (other than a communication that the Administrative
Agent has agreed in writing is not materially adverse) from a Governmental Authority that alleges that the Borrower or such
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Environmental Affiliate is not in compliance in all material respects with all Environmental Laws and Environmental Approvals.
(b) There is no Environmental Claim pending or, to the Knowledge of the Borrower, threatened against the Borrower. There is no
Environmental Claim pending or , to the Knowledge of the Borrower, threatened against any Environmental Affiliate of the Borrower.
(c) Except as disclosed in the Environmental Site Assessment Report, there are no circumstances, conditions, events or incidents,
including the release, emission, discharge, presence or disposal of any Material of Environmental Concern that have occurred since the
Closing Date, that could reasonably be expected to form the basis of any Environmental Claim against the Borrower or any
Environmental Affiliate or could otherwise reasonably be expected to interfere with the capital improvement work with respect to or
operation (until the CS End Date in Cold Shutdown) of the Project.
(d) Except to the extent disclosed in the Environmental Site Assessment Report, without in any way limiting the generality of the
foregoing, (i) there are no on site or off site locations in which the Borrower or any Environmental Affiliate of the Borrower has stored,
disposed or arranged for the disposal of Materials of Environmental Concern that could reasonably be expected to form the basis of an
Environmental Claim or that is not in compliance with applicable Environmental Laws and (ii) no polychlorinated biphenyls (PCBs) are
or will be used or stored by the Borrower at any property owned or leased by the Borrower.
(e) The Borrower has not received any letter or request for information under Section 104 of the CERCLA, or comparable state
laws, and none of the business or operations of the Borrower is the subject of any investigation by a Governmental Authority
evaluating whether any remedial action is needed to respond to a release or threatened release of any Material of Environmental
Concern at the Project or at any other location, including any location to which the Borrower has transported, or arranged for the
transportation of, any Material of Environmental Concern.
Section 5.19 Regulations T, U and X. As of the date hereof and as of the Bring Down Date, the Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Loan will be used for any
purpose that violates, or would be inconsistent with, F.R.S. Board Regulation T, U or X. Terms for which meanings are provided in F.R.S.
Board Regulation T, U or X or any regulations substituted therefor, as from time to time in effect, are used in this Section 5.19 with such
meanings.
Section 5.20 Accuracy of Information. As of the date hereof and as of the Bring Down Date:
(a) All factual information furnished by or on behalf of the Borrower in this Agreement, in any other Financing Document or
otherwise in writing to any Senior Secured Party, any Consultant, or counsel for purposes of or in connection with this Agreement and the
other
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Credit Agreement
Financing Documents (other than projections, budgets and other “forward looking” information that have been prepared on a reasonable
basis and in good faith by or on behalf of the Borrower) is, when taken as a whole, after giving effect to any supplemental information, and
as of the date furnished, true and accurate in all material respects and such information is not, when taken as a whole, after giving effect to
any supplemental information, as of the date furnished, incomplete by omitting to state any material fact necessary to make such
information not misleading in any material respect.
(b) The assumptions constituting the basis on which the Borrower prepared the Capital Improvement Budget and the Operating
Budget, and the numbers set forth therein, were developed and consistently utilized in good faith and are reasonable and represent the
Borrower’s reasonable judgment as of the date prepared as to the matters contained therein, based on all information known to the
Borrower.
(c) The Borrower reasonably believes that the Capital Improvement Completion Date will occur on or before the
Commencement Date Certain and that the cost to complete the performance of capital improvements with respect to the Project shall
be as set forth in the Capital Improvement Budget.
(d) The Borrower reasonably believes that after the performance of capital repair, remediation and improvements contemplated
under the Capital Improvement Budget and performance of any necessary testing and start-up, the use, ownership, operation and
maintenance of the Project are economically and technically feasible.
Section 5.21 Indebtedness. (a) As of the date hereof and as of the Bring Down Date, the Obligations are, after giving effect to the
Financing Documents and the transactions contemplated thereby, the only outstanding Indebtedness of the Borrower other than Permitted
Indebtedness. The Obligations rank at least pari passu with all other Indebtedness of the Borrower.
(b) As of the date hereof and as of the Bring Down Date, after giving effect to the Financing Documents and the transactions
contemplated thereby, the Borrower will have no outstanding Indebtedness other than Permitted Indebtedness, and all Liens (other
than Permitted Liens) against assets of the Borrower will have been released.
Section 5.22 Separateness. (a) As of the date hereof and as of the Bring Down Date, (i) the Borrower maintains separate bank
accounts and separate books of account from any other Person and (ii) the separate liabilities of the Borrower are readily distinguishable
from the liabilities of each Affiliate of the Borrower, including the Pledgor.
(b) As of the date hereof and as of the Bring Down Date, the Borrower conducts its business solely in its own name in a manner
not misleading to other Persons as to its identity.
(c) As of the date hereof and as of the Bring Down Date, the Borrower is in compliance with the provisions set forth on Schedule
5.22.
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Section 5.23 [Intentionally Omitted].
Section 5.24 Subsidiaries. As of the date hereof and as of the Bring Down Date, the Borrower has no Subsidiaries.
Section 5.25 Foreign Assets Control Regulations, Etc. As of the date hereof and as of the Bring Down Date:
(a) The use of the proceeds of the Loan by the Borrower will not violate the Trading with the Enemy Act, as amended, or any of the
foreign assets control regulations of the United States Treasury Department (31 C.F.R., Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
(b) The Borrower:
(i)
is not a Person or entity described by Section 1 of Executive Order 13224 of September 24, 2001 Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (12 C.F.R. 595), and does not
engage in dealings or transactions with any such Persons or entities; and
(ii)
is not in violation of the Patriot Act.
Section 5.26 [Intentionally Omitted]
Section 5.27 Employment Matters. As of the date hereof and as of the Bring Down Date, the Borrower does not have any employees.
Section 5.28 Legal Name and Place of Business. (a) As of the date hereof and as of the Bring Down Date, the exact legal name and
jurisdiction of formation of the Borrower is: Seneca Landlord, LLC, a limited liability company organized and existing under the laws of
the State of Iowa, and the Borrower has not had any other legal names in the previous five (5) years other than REG Seneca, LLC.
(b) As of the date hereof and as of the Bring Down Date, the chief executive office of the Borrower is located at 2425 Olympic
Boulevard, Suite 4050, West Santa Monica, California 90404. The Borrower also does business at the Site.
Section 5.29 No Brokers. As of the date hereof and as of the Bring Down Date, the Borrower has no obligation to pay any finder’s,
advisory, broker’s or investment banking fee in connection with the transactions contemplated by this Agreement, except for the fees
payable pursuant to Section 3.11 (Fees).
Section 5.30 Insurance. As of the date hereof, all insurance required to be obtained and maintained pursuant to the Transaction
Documents by the Borrower is in full force and effect and complies with the insurance requirements set forth on Schedule 7.01(h) (and, in
the case of insurance required under any Project Document, also complies in all material respects with the
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insurance requirements in such Project Document). All premiums then due and payable on all such insurance have been paid.
Section 5.31 Patents, Trademarks, Etc. As of the date hereof:
(a) The Borrower has obtained all patents, trademarks, copyrights and other such rights or adequate licenses therein set forth in
the Sale Order.
(b) To the extent set forth in the Sale Order, the Borrower is the sole owner of the issued and pending patents set forth on
Schedule 5.31. No claims have been made against the Borrower in writing with respect to such issued or pending patents or its
ownership thereof.
(c) To the extent set forth in the Sale Order, the Borrower owns and possesses all, right, title and interest in and to the Intellectual
Property owned or used by the Borrower (“Borrower Intellectual Property”) as currently available for use.
(d) The Borrower has not received any notice regarding any infringement or misappropriation by the Borrower of any Intellectual
Property of any third party including any demands or offers to license any Intellectual Property from any third party.
(e) To the Knowledge of the Borrower, no third party is infringing or has infringed, misappropriated or otherwise violated any
Borrower Intellectual Property. No such claims have been brought or threatened in writing against any third party by the Borrower.
(f) As used herein, “Intellectual Property” means any of the following in any jurisdiction throughout the world: (A) patents, patent
applications, patent disclosures and inventions, including any continuations, divisionals, continuations-in-part, renewals and reissues
for any of the foregoing; (B) Internet domain names, trademarks, service marks, trade dress, trade names, logos, slogans and corporate
names and registrations and applications for registration thereof together with all of the goodwill associated therewith; (C) copyrights
(registered or unregistered) and copyrightable works and registrations and applications for registration thereof; (D) mask works and
registrations and applications for registration thereof; (E) computer Software, data, data bases and documentation thereof; (F) trade
secrets and other confidential information (including ideas, formulas, compositions, inventions (whether patentable or unpatentable and
whether or not reduced to practice), know-how, manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical data, copyrightable works, financial and marketing plans and
customer and supplier lists and information) (collectively, “Trade Secrets”); and (G) copies and tangible embodiments thereof (in
whatever form or medium). As used herein, “Software” means computer software programs, including all source code, object code,
specifications, databases, designs and documentation related to such programs, in each case as they exist anywhere in the world.
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Section 5.32 Accounts. As of the date hereof and as of the Bring Down Date, the Borrower does not have, and is not the beneficiary
of, any bank account other than (i) the Borrower Revenue Account and the Capital Improvements Account and (ii) Local Accounts set forth
on Schedule 5.32 with respect to which Blocked Account Agreements have been duly executed and delivered.
Section 5.33 Closing Date Disbursements. The Closing Date Disbursements are in accordance with the Capital Improvement Budget.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Conditions to Closing Date. The occurrence of the Closing Date is subject to the satisfaction of each of the following
conditions precedent:
(a) Delivery of Financing Documents. The Administrative Agent shall have received each of the following fully executed
documents, each of which shall be originals, portable document format (“pdf”) or facsimiles (followed promptly by originals), duly
executed and delivered by each party thereto and in form and substance reasonably satisfactory to each Lender:
(i)
(ii)
this Agreement;
if requested by any Lender, the original Note, duly executed and delivered by an Authorized Officer of the Borrower in favor of
such Lender;
(iii)
the Security Agreement;
(iv)
the IP Security Agreement;
(v)
the Pledge Agreement;
(vi)
the Leasehold Mortgage;
(vii) the Mortgage; and
(viii) the Blocked Account Agreement(s).
(b) Project Documents; Contracts; Consents; Lessee Security Documents. (i) The Administrative Agent shall have received true,
correct and complete copies of (A) each of the Necessary Project Contracts listed on Schedule 5.11 Part A (and in the case of the
Lease, the original executed counterpart thereof), which shall be in form and substance reasonably satisfactory to the Administrative
Agent and the Independent Engineer, (B) each other material Contractual Obligation of the Borrower relating to the Project for which a
copy has been reasonably requested by the Administrative Agent and (C) the Lessee Security Documents.
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(ii) The Administrative Agent shall have received a Consent, in form and substance reasonably satisfactory to the Administrative
Agent, with respect to each Construction Contract and with respect to the Lessee Security Agreement and the Lessee Pledge
Agreement.
(c) Officer’s Certificates. The Administrative Agent shall have received the following certificates, dated as of the Closing Date,
upon which the Administrative Agent and each Senior Secured Party may conclusively rely:
(i) Borrower:
(A)
(B)
a duly executed certificate of an Authorized Officer of the Borrower certifying that (x) all conditions set forth in this
Section 6.01 have been satisfied on and as of the Closing Date, (y) all representations and warranties made by the
Borrower in this Agreement and each other Financing Document to which the Borrower is a party are true and correct on
and as of the Closing Date and (z) the Effective Date (as such term is defined in the Lease) has occurred;
a duly executed certificate of an Authorized Officer of the Borrower certifying that (w) the copies of each of the
documents delivered pursuant to Section 6.01(b) are true, correct and complete, (x) each such document is in full force and
effect and no term or condition of any such document has been amended from the form thereof delivered to the
Administrative Agent, (y) each of the conditions precedent set forth in each such document delivered pursuant to
Section 6.01(b) that is required to be satisfied on or before the Closing Date has been satisfied or waived by the parties
thereto, and (z) no material breach, material default or material violation by the Borrower, or to the Knowledge of the
Borrower, by the other party under any such document has occurred and is continuing; and
(C)
a duly executed certificate of an Authorized Officer of the Pledgor certifying that all representations and warranties made
by the Pledgor in the Pledge Agreement are true and correct on and as of the Closing Date (except with respect to
representations and warranties that expressly refer to an earlier date).
(ii)
the Lessee: each certificate delivered to Borrower on the Closing Date pursuant to the Lease Documents each of which shall be in
form and substance reasonably acceptable to the Administrative Agent.
(d) Resolutions, Incumbency, Organic Documents. (i) The Administrative Agent shall have received from each of the Borrower
and the Pledgor a certificate of
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an Authorized Officer, dated as of the Closing Date, upon which the Administrative Agent and each Senior Secured Party may
conclusively rely, as to:
(A)
(B)
(C)
satisfactory resolutions of its members, managers or directors, as the case may be, then in full force and effect authorizing
the execution, delivery and performance of each Transaction Document to which it is party and the consummation of the
transactions contemplated therein;
the incumbency and signatures of those of its officers and representatives duly authorized to execute and otherwise act
with respect to each Financing Document to which it is party; and
such Person’s Organic Documents, which in the case of the Borrower shall be in form and substance reasonably
satisfactory to the Administrative Agent and shall include the Required LLC Provisions, and in every case certifying that
(A) such documents are in full force and effect and no term or condition thereof has been amended from the form thereof
delivered to the Administrative Agent and (B) no material breach, material default or material violation thereunder has
occurred and is continuing.
(ii) The Administrative Agent shall have received each resolution, incumbency certificate and Organic Document delivered to
Borrower on the Closing Date pursuant to the Lease Documents each of which shall be in form and substance reasonably
acceptable to the Administrative Agent.
(e) Authority to Conduct Business. The Administrative Agent shall have received satisfactory evidence, including certificates of
good standing from the Secretaries of State of each relevant jurisdiction, dated no more than five (5) Business Days (or such other time
period reasonably acceptable to the Administrative Agent) prior to the Closing Date, that each of the Borrower, the Lessee, the Pledgor
and the Lessee Pledgor is duly authorized as a limited liability company or corporation, as applicable, to carry on its business, and is
duly formed, validly existing and in good standing in each jurisdiction in which it is required to be so authorized.
(f) Opinions of Counsel. The Administrative Agent shall have received the legal opinions of New York, Illinois and Iowa counsel
to the Borrower, the Pledgor, the Lessee, the Lessee Pledgor, REG Services and REG Marketing, including with respect to the
enforceability of the Management and Operating Services Agreement against REG Services and REG Marketing, addressed to the
Senior Secured Parties, and each in form and substance reasonably satisfactory to the Administrative Agent.
(g) Lien Search; Perfection of Security. The Collateral Agent shall have been granted a first priority perfected security interest in
all Collateral (including the Lessee Collateral), and the Administrative Agent shall have received satisfactory copies or
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evidence, as the case may be, of the following actions in connection with the perfection of the Security:
(i)
completed requests for information or lien search reports, dated no more than five (5) Business Days (or such other, longer time
period reasonably acceptable to the Administrative Agent) before the Closing Date, listing all effective UCC financing
statements, fixture filings or other filings evidencing a security interest filed in Delaware, Illinois, Iowa and any other
jurisdictions reasonably requested by the Administrative Agent that name the Borrower, the Pledgor, the Lessee or the Lessee
Pledgor as a debtor, together with copies of each such UCC financing statement, fixture filing or other filings, which shall show
no Liens other than Permitted Liens;
(ii) UCC financing statements and other filings and recordations (including fixture filings), in proper form for filing in all
jurisdictions that the Administrative Agent may deem necessary or desirable in order to perfect and protect the first priority Liens
and security interests created under the Security Documents covering the Collateral described therein, and each such UCC
financing statement and other filing or recordation shall be duly filed on or prior to the Closing Date;
(iii)
the original certificates representing all Equity Interests in the Borrower shall have been delivered to the Collateral Agent, in each
case together with a duly executed irrevocable proxy and a duly executed transfer power in the forms attached to the Pledge
Agreement;
(iv) UCC financing statements and other filings and recordations (including fixture filings), in proper form for filing in all
jurisdictions that the Administrative Agent may deem necessary or desirable in order to perfect and protect the first priority Liens
and security interests created under the Lessee Security Documents covering the Lessee Collateral described therein, and each
such UCC financing statement and other filing or recordation shall be duly filed on or prior to the Closing Date;
(v)
the original certificates representing all Equity Interests in the Lessee shall have been delivered to the Collateral Agent, in each
case together with a duly executed irrevocable proxy and a duly executed transfer power in the forms attached to the Lessee
Pledge Agreement; and
(vi) with respect to the Borrower and the Project, evidence of the making (which may be done on the Closing Date) of all other
actions, recordings and filings of or with respect to the Security Documents delivered pursuant to Section 6.01(a) (Conditions
Precedent – Conditions to Closing) that the Administrative Agent may deem necessary or desirable in order to perfect and protect
the first priority Liens created thereunder (including the Borrower’s security interest in the Lease Collateral).
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(h) Financial Statements. The Administrative Agent shall have received an accurate and complete copy of the Borrower’s balance
sheet as of March 31, 2010.
(i) Governmental Approvals. The Borrower shall have obtained all Necessary Project Approvals listed on Schedule 5.03 Part A,
and the Administrative Agent shall have received a duly executed certificate of an Authorized Officer of the Borrower certifying that
(i) attached to such certificate are true, correct and complete copies of each such Necessary Project Approval and (ii) Schedule 5.03
Part A accurately identifies all Necessary Project Approvals.
(j) Equator Principles. The Administrative Agent shall have received all documentation requested by the Administrative Agent
that is necessary to evidence compliance with, and otherwise required in connection with, the Equator Principles.
(k) Third Party Approvals. The Administrative Agent shall have received reasonably satisfactory documentation of any approval
by any Person required in connection with any transaction contemplated by this Agreement or any other Financing Document that the
Administrative Agent has reasonably requested in connection herewith.
(l) Fees; Expenses. The Administrative Agent shall have received for its own account, or for the account of each Senior Secured
Party entitled thereto, all costs and expenses (including costs, fees and expenses of legal counsel and Consultants) for which invoices
have been presented subject, in the case of Closing Costs and Closing Costs (as such term is defined in the ABL Agreement) payable
on the Closing Date (as such term is defined in the ABL Agreement), to an aggregate maximum amount of one hundred and fifty
thousand Dollars $150,000.
(m) Establishment of Deposit Accounts. Each of the Borrower Revenue Account, the Capital Improvements Account and the
Lessee Revenue Account shall have been established to the reasonable satisfaction of the Administrative Agent.
(n) Insurance. The Administrative Agent shall have received:
(i)
satisfactory evidence that the insurance requirements set forth on Schedule 7.01(h) with respect to the Borrower and the Project
have been satisfied, including binders or certificates evidencing the commitment of insurers to provide each insurance policy
required by Schedule 7.01(h), evidence of the payment of all premiums then due and owing in respect of such insurance policies
and a certificate of the Borrower’s insurance broker (or insurance carrier) certifying that all such insurance policies are in full
force and effect; and
(ii)
a report of the Insurance Consultant in form and substance reasonably satisfactory to the Administrative Agent discussing,
among other matters that the Administrative Agent may require, the adequacy of the insurance coverage for the Project, together
with a duly executed certificate of the
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Insurance Consultant in the form of Exhibit I, appropriately completed to the satisfaction of the Administrative Agent.
(o) Independent Engineer’s Report. The Administrative Agent shall have received a report of the Independent Engineer with
respect to the Project, accompanied by a duly executed certificate of the Independent Engineer in the form of Exhibit J-1, each in form
and substance reasonably satisfactory to each Lender, discussing, among other matters that the Lenders may require:
(i)
the reasonableness of the Capital Improvement Budget and the feasibility and efficacy of the Borrower’s approach to performing
capital repair, remediation and improvement work with respect to and start-up of the Project;
(ii)
operating performance and costs assumptions;
(iii) confirmation that the Borrower is in compliance in all material respects with all Environmental Approvals applicable to the
Project and does not have any known present or contingent liability relating to any Environmental Approval or Environmental
Claim regarding the Project; and
(iv) confirmation that all Environmental Approvals necessary to perform capital improvement work with respect to and operate the
Project (other than Environmental Approvals that are Deferred Approvals) have been obtained and are in full force and effect,
final and Non-Appealable.
(p) Environmental Site Assessment Report. The Administrative Agent shall have received the Environmental Site Assessment
Report.
(q) Capital Improvement Budget; Preliminary Operating Budget . The Administrative Agent shall have received (i) the Capital
Improvement Budget in form and substance reasonably satisfactory to the Required Lenders, and (ii) a certificate of a Financial Officer
of each of the Borrower and the Lessee certifying as to the reasonableness of the underlying assumptions and the conclusions on which
the Capital Improvement Budget is based and demonstrating aggregate Designated Capital Improvement Costs equal to or less than
$4,000,000. The Administrative Agent shall have received a proposed Operating Budget (“Preliminary Operating Budget”) for the
period from the proposed First Train Completion Date to the six-month anniversary of such date setting forth in reasonable detail the
projected requirements for Operating and Maintenance Expenses for such period.
(r) Survey; Site Description. The Administrative Agent shall have received a current survey of the Site conforming with
ALTA/ACSM 2005 survey standards, including Table A, items 6, 8, 10 and 11(a), and otherwise acceptable to the Administrative
Agent (a “Survey”) prepared by Etscheid Duttlinger & Associates Inc., or another registered or licensed surveyor acceptable to the
Administrative Agent and the Title Insurance Company, certified to the Senior Secured Parties and such
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Title Insurance Company. The Administrative Agent shall have received a detailed description of the parcel of real property owned by
the Borrower and/or on which the Project is situated and, upon approval by the Administrative Agent, such description shall be deemed
to be an amendment to this Agreement and Schedule 5.13 shall be deemed to be replaced with such description.
(s) Title Insurance.
(i)
The Administrative Agent shall have received a paid policy or policies of mortgage title insurance (the “ Title Insurance Policy”),
in an aggregate amount equal to the Aggregate Loan Commitment on a Form 2006 extended coverage lender’s policy, containing
such endorsements (including an endorsement deleting the creditor’s rights exception) as the Administrative Agent may request
and otherwise in form and substance reasonably satisfactory to the Administrative Agent, from the Title Insurance Company (with
co insurance or reinsurance in such amounts and with such title insurance companies as may be required and approved by the
Administrative Agent), containing no exception for mechanics’ or materialmen’s Liens and no other exceptions (printed or
otherwise) other than those approved by the Required Lenders, and insuring that the Collateral Agent has a good, valid and
enforceable first Lien of record on the Mortgaged Property free and clear of all defects and encumbrances (other than Permitted
Liens).
(ii) The Title Insurance Policy shall confirm that the Borrower has good, marketable title to the Site subject to no Liens (other than
Liens in favor of the Collateral Agent or other Permitted Liens).
(t) Bank Regulatory Requirements. The Administrative Agent shall have received at least four (4) Business Days prior to the
Closing Date all documentation and other information required by bank regulatory authorities under applicable “know your customer”
and anti money laundering rules and regulations, including the Patriot Act.
(u) Process Agent. The Administrative Agent shall have received, in form and substance reasonably satisfactory to the
Administrative Agent, acceptances from the Process Agent for the Borrower appointed under Section 11.02(d) (Applicable Law;
Jurisdiction; Etc. – Appointment of Process Agent and Service of Process) and as required under each other Financing Document in
effect on the Closing Date.
(v) [INTENTIONALLY OMITTED].
(w) Equity. The Required Equity Contribution less the Closing Date Disbursements shall have been funded into the Capital
Improvements Account and the Administrative Agent shall have received satisfactory confirmation thereof.
(x) Asset Purchase Agreement. The transactions contemplated by the Asset Purchase Agreement shall have been consummated in
accordance with the terms of the
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Asset Purchase Agreement and a final order of the Bankruptcy Court in form and substance acceptable to the Administrative Agent and
the DIP Agent.
(y) Assignment and Assumption Agreement. The transactions contemplated by the Assignment and Assumption Agreement shall
have been consummated in accordance with the terms of the Assignment and Assumption Agreement and a final order of the
Bankruptcy Court in form and substance acceptable to the Administrative Agent and the DIP Agent.
(z) Lease Documents. The Lease Documents shall have been entered into and shall be in full force and effect. No default or
breach has occurred and is continuing under any Lease Document.
(aa) Representations and Warranties. All representations and warranties made by the Borrower and the Pledgor in any Financing
Document to which it is a party are true and correct in all material respects (other than representations and warranties that are qualified
by Material Adverse Effect or materiality, which shall be true and correct in all respects) on and as of the Closing Date, before and after
giving effect to the making of the Loans;
(bb) No Default. No Default or Event of Default has occurred and is continuing, or would result from the making of the Loans.
(cc) No MAE. As of the Closing Date, there is no event or occurrence that would reasonably be expected to have a Material
Adverse Effect.
(dd) No Litigation. No action, suit, proceeding or investigation shall have been instituted or threatened in writing against the
Borrower, the Pledgor or the Project.
(ee) Abandonment, Taking, Total Loss. (i) No Event of Abandonment or Event of Total Loss shall have occurred and be
continuing with respect to the Project, (ii) no Event of Taking relating to any Equity Interests in the Borrower or the Lessee shall have
occurred and be continuing, or (iii) no Event of Taking with respect to a material part of the Project shall have occurred.
(ff) Effective Date. The Effective Date (as such term is defined in the Lease) shall have occurred.
ARTICLE VII
COVENANTS
Section 7.01 Affirmative Covenants. The Borrower agrees with each Senior Secured Party that, until the Discharge Date, it will
perform the obligations set forth in this Section 7.01 applicable to it.
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(a) Compliance with Laws. The Borrower shall comply in all material respects with all Laws (other than Environmental Laws,
which are addressed in Section 7.01(b)) applicable to it or to its business or property.
(b) Environmental Matters.
(i)
The Borrower shall (A) comply in all material respects with all Environmental Laws, (B) after giving effect to the terms of the
Sale Order, keep the Project free of any Lien imposed pursuant to any Environmental Law, (C)) after giving effect to the terms of
the Sale Order, pay or cause to be paid when due and payable any and all costs required to be paid by the Borrower by any
Environmental Laws, including the cost of identifying the nature and extent of the presence of any Materials of Environmental
Concern in, on or about the Project or on any real property owned or leased by the Borrower or on the Mortgaged Property, and
the cost of delineation, management, remediation, removal, treatment and disposal of any such Materials of Environmental
Concern, and (D) use its best efforts to ensure that no Environmental Affiliate takes any action or violates any Environmental Law
that could reasonably be expected to result in an Environmental Claim.
(ii) Without limiting the provisions of Section 7.01(b)(i), the Borrower shall not use or allow the Project to generate, manufacture,
refine, produce, treat, store, handle, dispose of, transfer, process or transport Materials of Environmental Concern other than in
compliance in all material respects with Environmental Laws.
(c) Operations and Maintenance. The Borrower shall own and peform (or cause to be performed) capital improvement work with
respect to, and operate and maintain (or cause to be operated and maintained) (until the CS End Date in Cold Shutdown) the Project in
all material respects in accordance with (i) the terms and provisions of the Transaction Documents to which it is a party, (ii) all
applicable Governmental Approvals and Laws and (iii) Prudent Biodiesel Operating Practice.
(d) Capital Improvement of Project; Maintenance of Properties. (i) The Borrower shall apply the proceeds of the Required Equity
Contribution to the purposes specified in Section 7.01(g) (Covenants – Affirmative Covenants – Use of Proceeds and Cash Flow ) and
shall duly complete, or cause the completion of, capital repair, remediation and improvement work with respect to the Project and shall
cause the Final Completion Date to occur, substantially in accordance with (A) the scope of work and other specifications set forth in
the Construction Contracts, (B) the Capital Improvement Budget, and (C) exercise of that degree of skill, diligence, prudence, foresight
and care that are expected of a biodiesel construction contractor, in order to efficiently accomplish the desired result consistent with
safety standards, applicable Laws, manufacturers’ warranties, manufacturers’ recommendations and the Project Documents.
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(ii) The Borrower (subject to Cold Shutdown until the CS End Date) shall keep, or cause to be kept, in good working order and
condition, ordinary wear and tear excepted, all of its material properties and equipment that are necessary or useful in the proper
conduct of its business.
(iii) Except as required in connection with the performance of capital repair, remediation and improvement work with respect to the
Project, the Borrower shall not permit the Project or any material portion thereof to be removed, demolished or materially altered,
unless such material portion that has been removed, demolished or materially altered has been replaced or repaired as permitted
under this Agreement.
(iv) The Borrower shall continue to engage in business of the same type as now conducted by it and do or cause to be done all things
necessary to preserve and keep in full force and effect (A) its entity existence and (B) its material patents, trademarks, trade
names, copyrights, franchises and similar rights.
(e) Payment of Obligations. The Borrower shall pay and discharge as the same shall become due and payable all of its material
obligations and liabilities, including (i) all tax liabilities, assessments and governmental charges or levies upon it or its properties or
assets, unless the same are subject to a Contest, (ii) all of its obligations and liabilities under its Contractual Obligations, (iii) all lawful
claims that, if unpaid, would by law become a Lien upon its properties (other than Permitted Liens), unless such claims are subject to a
Contest and (iv) the obligation to pay $200,000 in real property taxes with respect to the Project assumed by the Borrower pursuant to
the Asset Purchase Agreement.
(f) Governmental Approvals. The Borrower shall maintain in full force and effect, in the name of the Borrower or the Lessee, all
Necessary Project Approvals and obtain all Deferred Approvals, all of which shall be reasonably satisfactory to the Administrative
Agent prior to the time it is required to be obtained hereunder, including as set forth on Schedule 5.03 Part B, but in any event no later
than the date required to be obtained under applicable Law.
(g) Use of Proceeds and Cash Flow.
(i) All proceeds of the Required Equity Contribution shall be applied to pay Designated Capital Improvement Costs.
(ii) The Borrower shall cause all Cash Flow, Insurance Proceeds and Condemnation Proceeds, proceeds of asset disposals (other than
the sale of Products) and Project Document Termination Payments that it receives to be applied in accordance with the Accounts
Agreement and ARTICLE VIII (Certain Proceeds).
(iii) Prior to the receipt by the Borrower of Insurance Proceeds, Condemnation Proceeds, proceeds of asset disposals (other than the
sale of Products) or
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Project Document Termination Payments, the Borrower shall establish a bank account on terms and conditions reasonably
acceptable to the Collateral Agent into which such Insurance Proceeds, Condemnation Proceeds, proceeds of asset disposals
(other than the sale of Products) and Project Document Termination Payments shall be deposited.
(h) Insurance. Without cost to any Senior Secured Party, the Borrower shall at all times obtain and maintain, or cause to be
obtained and maintained, the types and amounts of insurance listed and described on Schedule 7.01(h), in accordance with the terms
and provisions set forth therein for the Project and the Borrower, and shall obtain and maintain such other insurance as may be required
pursuant to the terms of any Transaction Document. The Lenders shall be additional insureds on all liability policies except workers
compensation/employers liability policies and additional named insureds on all property policies, and the Administrative Agent shall be
the loss payee in accordance with Schedule 7.01(h), under all property related policies including business interruption (including any
delay in start-up) as applicable. The Borrower shall cause such insurance to be in place prior to the date required, and each required
insurance policy shall be renewed or replaced prior to the expiration thereof. In the event the Borrower fails to take out or maintain (or
cause to be taken out and maintained) the full insurance coverage required by this Section 7.01(h), the Administrative Agent may (but
shall not be obligated to) take out and maintain the required policies of insurance and pay the premiums on such policies. All amounts
so advanced by the Administrative Agent shall become Obligations, and the Borrower shall forthwith pay such amounts to the
Administrative Agent, together with interest from the date of payment by the Administrative Agent at the Default Rate.
(i) Books and Records; Inspections. The Borrower shall keep proper books of record and account relating to the Project, separate
from the books and records of any other Person (including any Affiliates of the Borrower), in which complete, true and accurate entries
in conformity with GAAP and all requirements of Law shall be made of all financial transactions and matters elating to the Project, and
shall maintain such books of record and account in material conformity with applicable requirements of any Governmental Authority
having regulatory jurisdiction over the Borrower. The Borrower shall keep books and records that accurately reflect all of its business
affairs, transactions and the documents and other instruments that underlie or authorize all of its actions in each case relating to the
Project. The Borrower shall permit officers and designated representatives of the Agents to visit and inspect any of its properties
(including the Project), to examine its entity, financial and operating records relating to the Project, and make copies thereof or
abstracts therefrom, and to discuss its affairs, finances and accounts relating to the Project with its members, managers, directors,
officers and independent public accountants, all at the expense of the Borrower (provided that so long as no Default or Event of
Default has occurred and is continuing, such visits or inspections shall be at the expense of the Borrower only once per Fiscal Year)
and at reasonable times during normal business hours, upon reasonable advance notice to the Borrower; provided that if a Default or
Event of Default has occurred and is continuing, any Agent, Lender or Consultant (or any of
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Credit Agreement
their respective officers or designated representatives) may do any of the foregoing at the expense of the Borrower during normal
business hours and without advance notice.
(j) Operating Budget.
(i)
The Borrower shall, not later than fifteen (15) days before the First Train Completion Date, adopt an operating plan and a budget
setting forth in reasonable detail the projected requirements for Operation and Maintenance Expenses for the Project for the
period from such date to the conclusion of the then-current Fiscal Year and provide a copy of such operating plan and budget at
such time to the Administrative Agent. No less than forty-five (45) days in advance of the beginning of each Fiscal Year and each
six (6) month period thereafter, the Borrower shall similarly adopt a twelve (12) calendar month operating plan and budget for
the Project setting forth in reasonable detail the projected requirements for Operation and Maintenance Expenses for the ensuing
twelve (12) calendar month period and provide a copy of such operating plan and budget at such time to the Administrative
Agent. (Each such operating plan and budget is herein called an “Operating Budget”.) Each Operating Budget shall set forth for
each week covered thereby (i) an amount expressed in Dollars in respect of the OPEX Expenses to be incurred during such week
and (ii) an amount expressed in the relevant quantity in respect of the COGS Expenses to be incurred during such week and the
notional Dollar value of such quantities calculated in the manner set forth in the Operating Budget. Each Operating Budget shall
be prepared in accordance with a form approved by the Independent Engineer and shall become effective upon approval, which
shall not be unreasonably withheld, conditioned or delayed, of the Administrative Agent (acting in consultation with the
Consultants). If the Borrower shall not have adopted an Operating Budget before the beginning of any six (6) month period or
any Operating Budget adopted by the Borrower shall not have been accepted by the Administrative Agent before the beginning
of any upcoming six (6) month period, the Operating Budget for the preceding twelve (12) calendar month period shall, until the
adoption of an Operating Budget by the Borrower and acceptance of such Operating Budget by the Administrative Agent, be
deemed to be in force and effective as the Operating Budget for the upcoming twelve (12) calendar month period.
(ii) Each Operating Budget delivered to the Administrative Agent pursuant to this Section 7.01(j) shall be accompanied by a
memorandum detailing all material assumptions used in the preparation of such Operating Budget, shall contain a line item for
each Operating Budget Category, shall specify for each month and for each such Operating Budget Category the amount
budgeted for such category for such month, and shall clearly distinguish Operation and Maintenance Expenses.
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Credit Agreement
(k) Project Documents.
(i)
The Borrower shall maintain in full force and effect, preserve, protect and defend its material rights under, and take all actions
necessary to prevent termination or cancellation (except by expiration in accordance with its terms or permitted replacement) of,
each Project Document to which it is a party. The Borrower shall exercise all material rights, discretion and remedies under each
such Project Document, if any, in accordance with its terms and in a manner consistent with (and subject to) the Borrower’s
obligations under the Financing Documents.
(ii) Promptly upon execution of any Additional Project Document by the Borrower or the Lessee, the Borrower shall deliver to the
Administrative Agent a certified copy of such Project Document and, if reasonably requested by the Administrative Agent, any
Ancillary Documents related thereto.
(iii)
(i)
If any Project Document provides that such Project Document will expire prior to the Final Maturity Date, then, on or prior to the
date that is ninety (90) days (or such shorter period as shall be satisfactory to the Administrative Agent) prior to the expiration
date of such Project Document to which it is a party, the Borrower shall enter into an agreement replacing such Project
Document, in form and substance, and with a counterparty, reasonably satisfactory to the Required Lenders, unless the
Administrative Agent reasonably agrees that such Project Document is no longer required for the Project.
(l) Preservation of Title; Acquisition of Additional Property.
The Borrower shall preserve and maintain (A) good, marketable and insurable interest in the Site and valid easement interest in its
easement interest in the Site and (B) good, legal and valid title to all of its other respective material properties and assets, in each
case free and clear of all Liens other than Permitted Liens. If the Borrower at any time acquires any real property or leasehold or
other interest in real property (including, to the extent reasonably requested by the Administrative Agent, with respect to any
material easement or right-of-way not covered by the Mortgage), the Borrower shall, promptly upon such acquisition and at the
Administrative Agent’s request, execute, deliver and record a supplement to the Mortgage, reasonably satisfactory in form and
substance to the Administrative Agent, subjecting such real property or leasehold or other interest to the Lien and security interest
created by the Mortgage. If reasonably requested by the Administrative Agent and available on commercially reasonable terms,
the Borrower shall obtain an appropriate endorsement or supplement to the Title Insurance Policy insuring the Lien of the
Security Documents in such additional property, subject only to Permitted Liens.
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Credit Agreement
(ii) Prior to the acquisition or lease of any such additional real property interests (other than easements that do not involve soil
disturbance), the Borrower shall deliver to the Administrative Agent an environmental site assessment report(s) with respect to
such real property (if, in the reasonable determination of the Administrative Agent, acting in consultation with the Independent
Engineer, such environmental site assessment report(s) with respect to such real property interests is warranted), in each case
along with a corresponding reliance letter from the consultant issuing such report(s) (to the extent such report(s) does not permit
reliance thereon by the Senior Secured Parties). Each such environmental site assessment report(s) shall be in form and substance
reasonably satisfactory to the Administrative Agent and shall not identify any material liability associated with the condition of
such real property.
(m) Maintenance of Liens; Creation of Liens on Newly Acquired Property.
(i) Borrower shall take or cause to be taken all action necessary or desirable to maintain and preserve the Lien of the Security
Documents and, on and after the Closing Date, the first ranking priority thereof (subject to Permitted Liens).
(ii) Borrower shall take all actions required to cause each Additional Project Document to which it becomes a party to be or become
subject to the Lien of the Security Documents (whether by amendment to any Security Document or otherwise) and shall, if
required, deliver or cause to be delivered to the Administrative Agent all Ancillary Documents related thereto.
(iii) Simultaneously with the making of any investment in Cash Equivalents, the Borrower shall take or cause to be taken all actions
required to cause such Cash Equivalents to be or become subject to a first priority perfected Lien (subject to Permitted Liens) in
favor of the Senior Secured Parties.
(n) Certificate of Formation. The Borrower shall observe all of the provisions and procedures of its certificate of formation and
Borrower LLC Agreement.
(o) [Intentionally Omitted].
(p) Further Assurances. Upon written request of the Administrative Agent, Borrower shall promptly perform or cause to be
performed any and all acts and execute or cause to be executed any and all documents (including UCC financing statements and UCC
continuation statements):
(A)
that are necessary or desirable for compliance with Section 7.01(m)(i) (Covenants – Affirmative Covenants – Maintenance
of Liens; Creation of Liens on Newly Acquired Property);
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Credit Agreement
(B)
(C)
for the purposes of ensuring the validity and legality of this Agreement or any other Financing Document and the rights of
the Senior Secured Parties hereunder or thereunder; and
for the purposes of facilitating the proper exercise of rights and powers granted to the Senior Secured Parties under this
Agreement or any other Financing Document.
(q) First Priority Ranking. The Borrower shall cause its payment obligations with respect to the Loans to constitute direct senior
secured obligations of the Borrower and to rank no less than pari passu in priority of payment, in right of security (except with respect
to Permitted Liens) and in all other respects to all other Indebtedness of the Borrower.
(r) Final Completion. The Borrower shall cause Final Completion to occur on or before the date that is thirty (30) days after the
Capital Improvement Completion Date.
(s) Closing Costs. Within sixty (60) days after the Closing Date, the Borrower shall pay to the Administrative Agent for its own
account, or for the account of each Senior Secured Party entitled thereto, to the extent not paid by REG pursuant to Section 5.5.21
(Closing Costs) of the Lease, all Closing Costs for which invoices have been presented and all Closing Costs (as defined in the ABL
Agreement) up to an aggregate maximum amount of seventy five thousand Dollars ($75,000). In addition to the payment required to be
made pursuant to the immediately preceding sentence, within ninety (90) days after the Closing Date, the Borrower shall pay to the
Administrative Agent for its own account, or for the account of each Senior Secured Party entitled thereto, to the extent not paid by
REG pursuant to Section 5.5.21 (Closing Costs) of the Lease, all Closing Costs for which invoices have been presented and all Closing
Costs (as defined in the ABL Agreement) up to an aggregate maximum amount of seventy five thousand Dollars ($75,000).
(t) Observer Rights. The Borrower shall permit the Administrative Agent to designate an observer to the board of managers of the
Borrower (the “Board”). The observer shall have the right to receive notice of the meetings of the Board at the same time such notice is
given to the members of the Board. The observer shall have the right to be present at each such meeting and receive a copy of all
materials distributed at each such meeting to the members of the Board. The observer shall also have the right to meet and consult with
members of the Board and the officers of the Borrower from time to time. All costs of the observer shall be borne by the Administrative
Agent and shall not be considered fees or expenses payable by the Borrower. The observer shall have no approval or other participation
right in any Board meeting.
(u) Certain Proceeds. The Borrower shall pay and deliver to the Borrower Revenue Account any and all funds, refunds, payments
or other monetary receipts received by the Borrower from the Village of Seneca, LaSalle and Grundy Counties, Illinois pursuant to the
Redevelopment Agreement, including any and all payments
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Credit Agreement
received pursuant to the Company Note, as that term is defined in the Redevelopment Agreement. Such amounts shall be deemed to be
Cash Flow of the Borrower for purposes of the Accounts Agreement.
(v) Appointment of Auditor. Within one hundred and eighty (180) days after the Closing Date, the Borrower shall appoint the
Auditors.
Section 7.02 Negative Covenants. The Borrower agrees with each Senior Secured Party that, until the Discharge Date, it will perform
the obligations set forth in this Section 7.02 applicable to it.
(a) Restrictions on Indebtedness. The Borrower will not create, incur, assume or suffer to exist any Indebtedness except:
(i)
(ii)
the Obligations;
accounts payable to trade creditors incurred in the ordinary course of business and (A) not more than ninety (90) days past due or
(B) subject to a Contest not more than six (6) months past due and not exceeding an aggregate amount of two hundred fifty
thousand Dollars ($250,000); and
(iii) obligations as lessee under operating leases or leases for the rental of any real or personal property which are required by GAAP
to be capitalized where all such leases under this Section 7.02(a)(iii) do not require the Borrower to make scheduled payments to
the lessors in any Fiscal Year in excess of one hundred thousand ($100,000) in the aggregate.
(b) Liens. The Borrower shall not create, incur, assume or suffer to exist any Lien upon any of its property, revenues or assets or
its Equity Interests, whether now owned or hereafter acquired, except:
(i)
Liens in favor, or for the benefit, of the Collateral Agent pursuant to the Security Documents;
(ii) Liens in favor of the Borrower under the Lessee Security Documents;
(iii) Liens for taxes, assessments and other governmental charges that are not yet due or the payment of which is the subject of a
Contest;
(iv) Liens of carriers, warehousemen, mechanics and materialmen incurred in the ordinary course of business for sums not yet due or
the payment of which is the subject of a Contest;
(v) Liens of no more than one hundred thousand Dollars ($100,000) in the aggregate securing judgments for the payment of money
not constituting an Event of Default, provided that each such Lien is subject to a Contest and any appropriate legal proceedings
which may have been initiated for
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Credit Agreement
the review shall not have been terminated or the period within such proceedings may have been initiated shall not have expired;
(vi)
rights of setoff and other similar Liens of banks holding Local Accounts, solely to the extent permitted by, and in accordance
with, the Blocked Accounts Agreement applicable to such Local Account;
(vii) purchase money security interests in discrete items of equipment not comprising an integral part of the Project or other Collateral
when the obligation secured is incurred for the purchase of such equipment and does not exceed the lesser of the cost or the fair
market value thereof at the time of acquisition and, in aggregate, an outstanding value of one hundred thousand Dollars
($100,000); and
(viii) any Liens reflected on the Title Insurance Policy or any Title Continuation.
(c) Permitted Investments. The Borrower shall not make any loan or advance to any Person other than accounts receivable
incurred in commercially reasonable amounts in the normal course of its business and investments received in satisfaction or partial
satisfaction thereof from financially troubled Account Debtors to the extent reasonably necessary in order to prevent or limit loss.
Except for (i) Cash Equivalents and (ii) investments received in satisfaction or partial satisfaction of accounts receivable incurred in
commercially reasonable amounts in the normal course of its business from financially troubled Account Debtors to the extent
reasonably necessary in order to prevent or limit loss, the Borrower will not purchase or otherwise acquire the capital stock, securities,
debt, assets or obligations of, or any interest in, any Person.
(d) Change in Business. The Borrower shall not (i) enter into or engage in any business other than the ownership, operation (until
the CS End Date in Cold Shutdown), maintenance, performance of capital repair, remediation and improvement work with respect to,
start-up, testing, use and financing of the Project and all activities reasonably related thereto or (ii) change in any material respect the
scope of the Project from that which is contemplated as of the date hereof.
(e) Equity Issuances. The Borrower shall not issue any Equity Interests unless such Equity Interests are immediately pledged to
the Collateral Agent (for the benefit of the Senior Secured Parties) on a first priority perfected basis pursuant to the Pledge Agreement
or, if necessary, a supplement thereto or a pledge and security agreement in substantially the form of the Pledge Agreement.
Notwithstanding anything to the contrary contained in any Financing Document, but subject to Section 7.02(g) (Consolidation, Merger)
and Section 7.02(f) (Asset Dispositions), the Lenders agree that the Lessee Pledgor may exercise its call option to purchase, and
Pledgor may exercise its put option to sell, the Equity Interests in the Borrower in accordance with the terms of the Put/Call
Agreement.
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Credit Agreement
(f) Asset Dispositions. The Borrower shall not sell, lease, assign, transfer or otherwise dispose of assets of the Project or the
Borrower (other than Products), whether now owned or hereafter acquired, except:
(i)
(ii)
disposal of assets that are promptly replaced in accordance with the then-current Operating Budget;
to the extent that such assets are uneconomical, obsolete or no longer useful or no longer usable in connection with the operation
or maintenance of the Project;
(iii) disposal of assets with a fair market value, or at a disposal price, of less than one million Dollars ($1,000,000) in the aggregate
during any Fiscal Year; provided, that such disposal does not, and would not reasonably be expected to, adversely affect the
performance of capital repair, remediation and improvement work with respect to, operation or maintenance of the Project; and
(iv)
so long as no Default or Event of Default has occurred and is continuing or would result therefrom the Pledgor and Lessee
Pledgor may consummate the Put/Call Option.
(g) Consolidation, Merger. The Borrower will not directly or indirectly liquidate, wind up, terminate, reorganize or dissolve (or
suffer any liquidation, winding up, termination, reorganization or dissolution). The Borrower will not acquire (in one transaction or a
series of related transactions) all or any substantial part of the assets, property or business of, or any assets that constitute a division or
operating unit of, the business of any Person or otherwise merge or consolidate with or into any other Person; provided that if the
Put/Call Option is exercised, the Borrower may be merged with the Lessee so long as the Borrower is the surviving entity and an
amendment and restatement of this Agreement and the other Financing Documents on terms and conditions acceptable to the parties
thereto providing for the Senior Secured Parties to receive the benefits of the representations, warranties, covenants and defaults set
forth in the Lease and the Lessee Security Documents shall be entered into simultaneously with the closing of such merger.
(h) Transactions with Affiliates. Except to the extent indentified on Schedule 7.02(h), the Borrower shall not enter into or cause,
suffer or permit to exist any arrangement or contract with any of its Affiliates or any other Person that owns, directly or indirectly, any
Equity Interest in the Borrower unless such arrangement or contract (i) is fair and reasonable to the Borrower and (ii) is an arrangement
or contract that is on an arm’s length basis and contains terms no less favorable than those that would be entered into by a prudent
Person in the position of the Borrower with a Person that is not one of its Affiliates; provided that with respect to any licensing or other
arrangement pursuant to which the Borrower provides any Affiliate with the right to own or use any of the Borrower’s patents or other
intellectual property, the Borrower shall provide to the Admnistrative Agent prior written notice of such license
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Credit Agreement
or other arrangement and a certificate executed by the chief executive officer of the Borrower stating that such license or other
arrangement complies with the provisions of clauses (i) and (ii).
(i) Accounts. (A) The Borrower shall not maintain, establish or use any deposit account, securities account (as each such term is
defined in the UCC) or other banking account other than (x) the Borrower Revenue Account and the Capital Improvements Account
and (y) any Local Account set forth on Schedule 5.32 with respect to which a Blocked Account Agreement is in effect.
(B)
The Borrower shall not change the name or account number of the Borrower Revenue Account, the Capital Improvements
Account or any Local Account without the prior written consent of the Administrative Agent, which will not be
unreasonably delayed, conditioned or withheld.
(C)
There shall not be, at any single point in time, more than one Borrower Local Account.
(j) Subsidiaries. The Borrower shall not create or acquire any Subsidiary or enter into any partnership or joint venture.
(k) ERISA. The Borrower will not engage in any nonexempt prohibited transactions under Section 406 of ERISA or under
Section 4975 of the Code that could reasonably be expected to result in a material liability. The Borrower will not incur any obligation
or liability in respect of any Plan, Multiemployer Plan or employee welfare benefit plan providing post retirement welfare benefits
(other than a plan providing continuation coverage under Part 6 of Title I of ERISA) that could reasonably be expected to result in a
material liability and the Borrower shall obtain the prior written approval of the Administrative Agent before incurring any such
obligation or liability.
(l) Taxes. The Borrower shall not make any election to be treated as an association taxable as a corporation for federal, state or
local tax purposes.
(m) Project Documents.
(i)
The Borrower shall not direct or consent or agree to any amendment, modification, supplement, waiver or consent in respect of
any provision of any Project Document except the Lease (other than any immaterial amendment, modification, supplement,
waiver or consent, in which case a true, correct and complete copy shall be delivered to the Administrative Agent) without the
prior written consent of the Administrative Agent, which consent shall not be unreasonably delayed, conditioned or withheld, and
in the case of any amendment to a Project Document other than the Lease solely to reflect the removal or replacement of a party,
the prior written consent of the Required Lenders, which consent shall not be unreasonably delayed, conditioned or withheld.
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Credit Agreement
(ii) The Borrower shall not direct or consent or agree to any amendment, modification, supplement, waiver or consent in respect of
any provision of the Lease or approve any document submitted to the Borrower for approval pursuant to Section 5.6.13(b) of the
Lease without the prior written consent of the Administrative Agent which consent may be withheld in its sole discretion and in
the case of any amendment to the Lease solely to reflect the removal or replacement of the Lessee, the prior written consent of
the Required Lenders (except in the case of removal and replacement of the initial Lessee with an Approved Lessee).
(iii) Except for collateral assignments under the Security Documents, the Borrower shall not assign any of its rights under any Project
Document to which it is a party except the Lease to any Person, or consent to the assignment of any obligations under any such
Project Document by any other party thereto, without the prior written approval of the Administrative Agent, which consent shall
not be unreasonably delayed, conditioned, or withheld, and in the case of any assignment of any obligations under any Project
Document other than the Lease by a party, without the prior written approval of the Required Lenders, which consent shall not be
unreasonably delayed, conditioned or withheld.
(iv) Except for collateral assignments under the Security Documents, the Borrower shall not assign any of its rights under the Lease to
any Person, or consent to the assignment of any obligations under the Lease by any other party thereto, without the prior written
approval of the Administrative Agent which approval may be withheld in its sole discretion and in the case of any assignment of
any obligations under the Lease by the Lessee, without the prior written approval of the Required Lenders (except in the case of
an assignment by the initial Lessee to an Approved Lessee).
(v) The Borrower shall not enter into a Project Document unless such Project Document requires the counterparty thereto to obtain
such insurance to protect, directly or indirectly, against loss or liability to the Borrower, the Project or any Senior Secured Party
as the Administrative Agent may reasonably require.
(n) Additional Project Documents. The Borrower shall not enter into any Additional Project Document except with the prior
written approval of the Administrative Agent, which shall not be unreasonably delayed, conditioned or withheld.
(o) Suspension or Abandonment. The Borrower shall not (i) permit or suffer to exist an Event of Abandonment without the prior
written approval of the Required Lenders or (ii) except to the extent contemplated by Cold Shutdown until the CS End Date, order or
consent to any suspension of work under any Project Document without the prior written approval of the Administrative Agent.
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Credit Agreement
(p) Margin Regulations. The Borrower shall not purchase or carry any Margin Stock (as defined in Regulation U) or to extend
credit to others for the purpose of purchasing or carrying any Margin Stock. The Borrower shall not violate or act in a manner
inconsistent with the provisions of Regulations T, U or X.
(q) Environmental Matters. Without prejudice to Section 7.01(b), the Borrower shall not permit (i) any underground storage tanks
to be located on any property owned or leased by the Borrower (unless such storage tanks exist on the Closing Date), (ii) any asbestos
to be contained in or form part of any building, building component, structure or office space owned or leased by the Borrower (unless
such asbestos exists on the Closing Date), (iii) any polychlorinated biphenyls (PCBs) to be used or stored at any property owned or
leased by the Borrower or (iv) any other Materials of Environmental Concern to be used, stored or otherwise be present at any property
owned or leased by the Borrower (unless such Materials of Environmental Concern exist on the Closing Date), other than Materials of
Environmental Concern necessary for the performance of capital improvements with respect to or operation of the Project and used in
accordance with all Laws and Prudent Biodiesel Operating Practice.
(r) Restricted Payments. The Borrower shall not make a Restricted Payment; provided that so long as (i) no Default or Event of
Default shall have occurred and be continuing or would result therefrom, (ii) the representations and warranties of the Borrower and the
Pledgor set forth in the Financing Documents are true in all material respects on the date of such Restricted Payment and (iii) a
Financial Officer of the Borrower certifies to the Administrative Agent in writing that after giving effect to such Restricted Payment
the Borrower has no knowledge of any circumstance or event that exists on the date of such certificate that the Borrower reasonably
believes will prevent the Borrower from paying in accordance with the terms hereof all Debt Service due in the three-month period
following the making of such Restricted Payment, the Borrower shall be permitted to make such Restricted Payments in accordance
with Section 3.03 of the Accounts Agreement.
(s) Accounting Changes. The Borrower shall not make any change in (i) its accounting policies or reporting practices, except as
required by GAAP and notified to the Administrative Agent in writing (provided that the Borrower shall provide a historical
reconciliation for the prior period addressing any such change in accounting practices) or (ii) its Fiscal Year without the prior written
consent of the Administrative Agent, which consent shall not be unreasonably delayed, conditioned or withheld.
(t) Capital Expenditure. The Borrower shall not make or become legally obligated to make any Capital Expenditure using Cash
Flow individually or in the aggregate at any time in excess of one million Dollars ($1,000,000), except to the extent such Capital
Expenditure is included in the Capital Improvement Budget, the Supplemental Capital Improvement Budget or any Operating Budget.
(u) Operation and Maintenance Expenses. The Operation and Maintenance Expenses of the Project in any month shall not exceed
the lesser of (i) actual expenses
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Credit Agreement
incurred and (ii) the expenses set forth in the Operating Budget for such month subject to the Permitted Operating Budget Deviation
Levels.
Section 7.03 Reporting Requirements. The Borrower will furnish to the Administrative Agent the following information with respect
to itself and, to the extent received by the Borrower from the Lessee pursuant to the Lease, with respect to the Lessee:
(a) Quarterly Financial Statements. As soon as available and in any event within forty-five (45) days after the end of the first three
(3) Fiscal Quarters of each Fiscal Year, unaudited financial statements, including balance sheets, statements of income and cash flows
for each of Borrower and the Lessee for such Fiscal Quarter and for the period commencing at the end of the previous Fiscal Year and
ending with the end of such Fiscal Quarter, prepared in accordance with GAAP together with, in each case, consolidated and
consolidating financial statements for the Borrower and the Lessee.
(b) Annual Financial Statements. As soon as available and in any event within ninety (90) days after the end of each Fiscal Year,
a copy of the annual audit report for such Fiscal Year for each of the Borrower and the Lessee including therein balance sheets as of the
end of such Fiscal Year and statements of income and cash flows for such Fiscal Year, and accompanied by an unqualified opinion of
the Auditors stating that such financial statements present fairly in all material respects the financial position of the Borrower or the
Lessee, as applicable, for the periods indicated in conformity with GAAP applied on a basis consistent with prior periods, which report
and opinion shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the
scope of such audit.
(c) Certificate of Financial Officer . Concurrently with the delivery of the financial statements referred to in Section 7.03(a) and
(b), other than consolidated or consolidating financial statements, certificates executed by a Financial Officer of the Borrower or the
Lessee, as applicable, stating that:
(i)
(ii)
its financial statements fairly present in all material respects the financial condition and results of operations of the Borrower or
the Lessee, as applicable, on the dates and for the periods indicated in accordance with GAAP subject, in the case of interim
financial statements, to the absence of notes and normally recurring year end adjustments;
such Financial Officer has reviewed the terms of the Financing Documents and has made, or caused to be made under his or her
supervision, a review in reasonable detail of the business and financial condition of the Borrower or the Lessee, as applicable,
during the accounting period covered by such financial statements; and
(iii) as a result of such review such Financial Officer has concluded that no Default or Event of Default has occurred during the
period covered by
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Credit Agreement
such financial statements through and including the date of such certificate or, if any Default or Event of Default has occurred,
specifying the nature and extent thereof and, if continuing, the action that the Borrower or the Lessee, as applicable, has taken
and proposes to take in respect thereof.
(d) Concurrently with the delivery of the consolidated and consolidating financial statements referred to in Section 7.03(a) and
(b), certificates executed by a Financial Officer of the Borrower or the Lessee, as applicable, stating that such financial statements
fairly present in all material respects the consolidated financial condition and results of operations of the Borrower or the Lessee on the
dates and for the periods indicated in accordance with GAAP subject, in the case of interim financial statements, to the absence of
notes and normally recurring year end adjustments.
(e) Auditor’s Letters. Promptly upon receipt, copies of any detailed audit reports, management letters or recommendations
submitted to the Borrower (or the audit or finance committee of the Borrower) by the Auditors in connection with the accounts or
books of the Borrower or any audit of the Borrower.
(f) Notice of Default or Event of Default. As soon as possible and in any event within five (5) days after the Borrower has
Knowledge of the occurrence of any Default or Event of Default, a statement of an Authorized Officer of the Borrower setting forth
details of such Default or Event of Default and the action that the Borrower has taken and proposes to take with respect thereto.
(g) Notice of Other Events. Within five (5) Business Days after the Borrower obtains Knowledge thereof, a statement of an
Authorized Officer of the Borrower setting forth details of:
(i)
(ii)
any litigation or governmental proceeding pending or threatened in writing against the Borrower or the Project that has or could
reasonably be expected to have a Material Adverse Effect;
any litigation or governmental proceeding pending or threatened in writing against any Project Party that has or could reasonably
be expected to have a Material Adverse Effect;
(iii) any other event, act or condition that has or could reasonably be expected to have a Material Adverse Effect;
(iv) notification of any event of force majeure or similar event under a Project Document that has or could reasonably be expected to
have a Material Adverse Effect; or
(v)
notification of any other change in circumstances that could reasonably be expected to result in an increase of more than three
hundred thousand Dollars ($300,000) in Project Costs.
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Credit Agreement
(h) Project Document or Additional Project Document Notice. Promptly after delivery or receipt thereof, copies of all material
notices or documents given or received by the Borrower, pursuant to any of the Project Documents including:
(i)
any written notice alleging any breach or default thereunder that has or could reasonably be expected to have a Material Adverse
Effect; and
(ii)
any written notice regarding, or request for consent to, any assignment, termination, modification, waiver or variation thereof.
(i) Construction Contracts Notice. Within three (3) Business Days following receipt thereof, the Borrower shall deliver to the
Administrative Agent and the Independent Engineer any report provided to the Borrower under any Construction Contract, which shall
be subject to review by the Independent Engineer.
(j) ERISA Event. As soon as possible and in any event within five (5) days after the Borrower has Knowledge that any of the
events described below has occurred, a duly executed certificate of an Authorized Officer of the Borrower setting forth the details of
each such event and the action that the Borrower proposes to take with respect thereto, together with a copy of any notice or filing from
the PBGC, Internal Revenue Service or Department of Labor or that may be required by the PBGC or other U.S. Governmental
Authority with respect to each such event:
(i)
(ii)
any Termination Event with respect to an ERISA Plan or a Multiemployer Plan has occurred or will occur that could reasonably
be expected to result in any liability to the Borrower;
any condition exists with respect to a Plan that presents a material risk of termination of a Plan (other than a standard termination
under Section 4041(b) of ERISA) or imposition of an excise tax or other material liability on the Borrower;
(iii) an application has been filed for a waiver of the minimum funding standard under Section 412 of the Code or Section 302 of
ERISA under any Plan;
(iv)
the Borrower or any Plan fiduciary has engaged in a “prohibited transaction,” as defined in Section 4975 of the Code or as
described in Section 406 of ERISA, that is not exempt under Section 4975 of the Code, Section 408 of ERISA or another
applicable administrative, regulatory or statutory exemption, that could reasonably be expected to result in material liability to the
Borrower;
(v)
there exists any Unfunded Benefit Liabilities under any ERISA Plan;
(vi) any condition exists with respect to a Multiemployer Plan that presents a risk of a partial or complete withdrawal (as described in
Section 4203 or
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Credit Agreement
4205 of ERISA) from a Multiemployer Plan that could reasonably be expected to result in any liability to the Borrower;
(vii) a “default” (as defined in Section 4219(c)(5) of ERISA) occurs with respect to payments to a Multiemployer Plan and such default
could reasonably be expected to result in any liability to the Borrower;
(viii) a Multiemployer Plan is in “reorganization” (as defined in Section 418 of the Code or Section 4241 of ERISA) or is “insolvent”
(as defined in Section 4245 of ERISA);
(ix)
(x)
the Borrower or any ERISA Affiliate has incurred any potential withdrawal liability (as defined in accordance with Title IV of
ERISA); or
there is an action brought against the Borrower or any ERISA Affiliate under Section 502 of ERISA with respect to its failure to
comply with Section 515 of ERISA.
(k) Notice of PBGC Demand Letter. As soon as possible and in any event within five (5) days after the receipt by the Borrower of
a demand letter from the PBGC notifying the Borrower of a final decision finding liability and the date by which such liability must be
paid, a copy of such letter, together with a duly executed certificate of the president or chief financial officer of the Borrower setting
forth the action the Borrower proposes to take with respect thereto.
(l) Notice of Environmental Event. Promptly and in any event within five (5) days after the existence of any of the following
conditions, a duly executed certificate of an Authorized Officer of the Borrower specifying in detail the nature of such condition and, if
applicable, the Borrower’s proposed response thereto:
(i)
(ii)
(iii)
receipt by the Borrower of any written communication from a Governmental Authority or any written communication from any
other Person (other than a privileged communication from legal counsel to the Borrower, the Pledgor or the Pledgor’s members)
or other source of written information, including reports prepared by the Borrower, that alleges or indicates that the Borrower or
an Environmental Affiliate is not in compliance in all material respects with applicable Environmental Laws or Environmental
Approvals and such alleged noncompliance could reasonably be expected to form the basis of an Environmental Claim against the
Borrower;
the Borrower obtains Knowledge that there exists any Environmental Claim pending or threatened in writing against the
Borrower or an Environmental Affiliate;
the Borrower obtains Knowledge of any release, threatened release, emission, discharge or disposal of any Material of
Environmental Concern or obtains Knowledge of any material non compliance with any
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Environmental Law that, in either case, could reasonably be expected to form the basis of an Environmental Claim against the
Borrower or any Environmental Affiliate; or
(iv) any Removal, Remedial or Response action is taken, or required to be taken, by the Borrower or any other person in response to
any material release, emission, discharge or disposal of any Material of Environmental Concern in, at, on or under a part of or
about the Borrower’s properties or any property in connection with the Project.
(m) Materials of Environmental Concern. The Borrower will maintain and make available for inspection by the Administrative
Agent, the Consultants and, if an Event of Default has occurred and is continuing, the Lenders, and each of their respective agents and
employees, on reasonable notice during regular business hours, accurate and complete records of all material non privileged
correspondence, investigations, studies, sampling and testing conducted, and any and all remedial actions taken, by the Borrower or, to
the best of the Borrower’s Knowledge and to the extent obtained by the Borrower, by any Governmental Authority or other Person in
respect of Materials of Environmental Concern that could reasonably be expected to form the basis of an Environmental Claim on or
affecting the Borrower or the Project.
(n) Deferred Approvals. Promptly after receipt thereof, copies of each Deferred Approval obtained by the Borrower or the
Lessee, together with such documents relating thereto as the Administrative Agent may request, certified as true, complete and correct
by an Authorized Officer of the Borrower or the Lessee.
(o) Capital Improvement Disbursement Statements . Not less than ten (10) Business Days after the last day of each month in
which a disbursement from the Capital Improvements Account is made, a disbursement statement which shall include:
(i)
(ii)
all invoices for Designated Capital Improvement Costs with respect to which such disbursement was made, each of which shall
be certified as true, correct and complete by the Borrower and substantiated by the Independent Engineer;
absolute and unconditional sworn Lien waiver statements in form and substance reasonably satisfactory to the Administrative
Agent and the Independent Engineer evidencing receipt of payment by each Construction Contractor, all subcontractors, all
contractors performing capital improvement work with respect to the Project and all other Persons having the right to create a
Lien on any asset of the Borrower or Lessee who were paid from the proceeds of such disbursement (other than Lien waivers
from contractors whose work, on an aggregate basis (taking into account any and all contracts or agreements pursuant to which
such contractor has performed work relating to the Project), entitles them to aggregate payment of less than $50,000. Each such
Lien waiver statement shall be certified as true and correct and complete by the Borrower to its
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Credit Agreement
Knowledge and the applicable contractor and shall be verified by the Independent Engineer;
(iii) Capital Improvement Status Report(s) covering such month, each of which shall be certified as true and complete by the
Borrower and substantiated by the Independent Engineer; and
(iv) a certification of a Financial Officer of the Borrower and a Financial Officer of the Lessee confirming that such disbursement,
when considered on its own and when considered on an aggregate basis with all prior disbursements, is in compliance with the
Capital Improvement Budget (or, if such disbursement would be in excess of the Capital Improvement Budget, such deviation
from the Capital Improvement Budget has been approved by the Independent Engineer).
(p) Operating Statements. Within forty-five (45) days after the end of each Fiscal Quarter the Borrower shall furnish to the
Administrative Agent an Operating Statement regarding the operation and performance of the Project for each monthly, quarterly and,
in the case of the last quarterly Operating Statement for each year, annual period substantially in the form of Exhibit L. Such Operating
Statements shall contain (i) line items corresponding to each Operating Budget Category of the then-current Operating Budget showing
in reasonable detail by Operating Budget Category all actual expenses related to the operation and maintenance of the Project
compared to the budgeted expenses for each such Operating Budget Category for such period, (ii) information showing the amount of
biodiesel and other Products produced by the Project during such period and (iii) information showing (A) the amount of biodiesel sold
by the Lessee from the Project, (B) the amount, if any, of other sales of biodiesel and the amount of all sales of glycerin sold by the
Lessee from the Project, together with an explanation of any such sale and identification of the purchaser, and (C) the amount, if any, of
other Products sold by the Lessee from the Project, together with an explanation of any such sale and identification of the purchaser.
The Operating Statements shall be certified as complete and correct in all material respects by an Authorized Officer of each of the
Borrower and the Lessee, subject to auditing review, who also shall certify that, the expenses reflected therein for the year to date and
for each month or quarter therein did not exceed the provision for such period contained in the Operating Budget then in effect by more
than the Permitted Operating Budget Deviation Levels or, if any of such certifications cannot be given, stating in reasonable detail the
necessary qualifications to such certifications.
(q) Capital Expenditure. As soon as possible and in any event within five (5) days after the incurrence of a Capital Expenditure in
excess of fifty thousand Dollars ($50,000) by the Borrower or the Lessee using Cash Flow, a notice to the Administrative Agent setting
forth the amount and purpose of such expenditure.
(r) Commodity Hedging Arrangements. Within fifteen (15) Business Days after the end of each calendar month, (i) a position
report describing all of the Commodity Hedging Arrangements in effect as of the date of such report and (ii) a
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duly authorized certificate of an Authorized Officer of the Borrower stating that the Commodity Hedging Arrangements set
forth in the report delivered pursuant to clause (i) have been entered into in accordance with the Commodity Risk Management
Plan.
(s) Other Information. Other information reasonably requested by the Administrative Agent or any Lender (through the
Administrative Agent).
ARTICLE VIII
CERTAIN PROCEEDS
Section 8.01 Insurance and Condemnation Proceeds. (a) The Borrower may apply any Insurance Proceeds and Condemnation
Proceeds in amounts less than or equal to one million Dollars ($1,000,000) arising from any one claim or any series of claims relating to the
same occurrence directly for the replacement or repair of damaged assets to which such Insurance Proceeds or Condemnation Proceeds, as
the case may be, relate; provided, that the Borrower delivers to the Administrative Agent, no fewer than three (3) Business Days in advance
of any such application, an Insurance and Condemnation Proceeds Request Certificate setting forth proposed instructions for such
application. A Financial Officer of the Borrower shall certify that each Insurance and Condemnation Proceeds Request Certificate is being
delivered, and the applications specified therein are being directed, in accordance with this Agreement and the other Transaction
Documents, and shall also certify that the directed applications will be used exclusively for repair or replacement of damaged assets to
which such Insurance Proceeds or Condemnation Proceeds, as the case may be, relate.
(b) Any Insurance Proceeds and Condemnation Proceeds in amounts greater than one million Dollars ($1,000,000) but less than
or equal to five million Dollars ($5,000,000) arising from any one claim or any series of claims relating to the same occurrence shall:
(i)
be applied for repair or replacement of damaged assets to which such Insurance Proceeds or Condemnation Proceeds, as the case
may be, relate in accordance with the Borrower’s direction in an Insurance and Condemnation Proceeds Request Certificate
delivered to the Administrative Agent if, within sixty (60) days after the occurrence of the Casualty Event or Event of Taking
giving rise to such proceeds, the Borrower delivers a Restoration or Replacement Plan to the Administrative Agent and the
Independent Engineer with respect to such Casualty Event or Event of Taking that is based upon, and accompanied by, each of the
following:
(A)
(B)
a description of the nature and extent of such Casualty Event or Event of Taking, as the case may be;
a bona fide assessment (from a contractor reasonably acceptable to the Independent Engineer) of the estimated cost and
time needed to
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(C)
(D)
(E)
(F)
(G)
restore or replace the Project to substantially the same value and general performance capability as prior to such event;
reasonably satisfactory evidence that such Insurance Proceeds or Condemnation Proceeds, as the case may be, are
sufficient to make the necessary restorations or replacements;
a certificate of a Financial Officer of the Borrower certifying that (1) all work contemplated to be done under the
Restoration or Replacement Plan can be done within the time periods, if any, required under any Project Document; (2) all
Governmental Approvals necessary to perform the work have been obtained (or are reasonably expected to be obtained
without undue delay); and (3) the Project once repaired/restored will continue to perform at the levels set forth in the then-
current Operating Budget with respect to production volume, yield and utility consumption (or other levels approved by
the Required Lenders);
the Casualty Event or Event of Taking, as the case may be (including the non operation of the Project during any period of
repair or restoration) has not resulted or would not reasonably be expected to result in a default giving rise to a termination
of, or a materially adverse modification of, one or more of the Governmental Approvals or Project Documents (or, in the
case of a default giving rise to a termination of a Project Document, an agreement replacing such Project Document, in
form and substance, and with a counterparty, reasonably satisfactory to the Required Lenders is entered into (together with
all applicable Ancillary Documents) within forty-five (45) days thereof (or, if such termination could not reasonably be
expected to result in a Material Adverse Effect, within sixty (60) days thereof));
after taking into consideration the availability of such Insurance Proceeds or Condemnation Proceeds, as applicable, and
Business Interruption Insurance Proceeds and any additional documented voluntary equity contributions for the purpose of
covering such costs, there will be adequate amounts available to pay all ongoing expenses including Debt Service during
the period of repair or restoration;
construction contractors and vendors of recognized skill, reputation and creditworthiness and reasonably acceptable to the
Administrative Agent have executed reconstruction contracts, purchase orders or similar arrangements for the repair,
rebuilding or restoration on terms and conditions reasonably acceptable to the Administrative Agent; and
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(H)
a confirmation by the Independent Engineer of its agreement with the matters set forth in clauses (A) through (G) above
and its approval of such Restoration or Replacement Plan; or
(ii)
if (A) the Borrower does not deliver such Restoration or Replacement Plan and the accompanying deliveries referred to in
Section 8.01(b)(i) within such sixty (60) day period or (B) after the completion of such Restoration or Replacement Plan, there
are excess Insurance Proceeds or Condemnation Proceeds, as the case may be, the Borrower shall on the next succeeding
Quarterly Payment Date thereafter, transfer to the Administrative Agent, for the account of the Lenders, an amount equal to such
Insurance Proceeds or Condemnation Proceeds, as the case may be, for mandatory prepayment of the Loans in accordance with
Section 3.08 (Mandatory Prepayments).
(c) Any Insurance Proceeds or Condemnation Proceeds in amounts greater than five million Dollars ($5,000,000) arising from
any one claim or any series of claims relating to the same occurrence shall be applied, at the written instruction of the Administrative
Agent, to prepay the Loans or for repair or replacement of damaged assets, as determined by the Required Lenders in their sole
discretion.
Section 8.02 Extraordinary Proceeds. (a) If at any time the Borrower receives proceeds of an asset disposal by the Borrower (other
than proceeds from the sale of Products) that will not be used for replacement in accordance with Section 7.02(f)(i) (Covenants – Negative
Covenants - Asset Dispositions), then:
(i)
(ii)
if such proceeds are in an amount in the aggregate of less than one hundred thousand Dollars ($100,000) (taken together with any
other such proceeds received by the Borrower during the then-current Fiscal Year), the Borrower shall transfer such funds to the
Borrower Revenue Account; and
if such proceeds are in an amount equal to or greater than one hundred thousand Dollars ($100,000) (taken together with any other
such proceeds received by the Borrower during the then-current Fiscal Year), such amounts shall be transferred by the Borrower
to the Administrative Agent for application as a prepayment of the Loans in accordance with Section 3.08 (Mandatory
Prepayment).
(b) If at any time the Borrower receives Project Document Termination Payments, then:
(i)
if such Project Document Termination Payments are in an amount in the aggregate of less than one hundred thousand Dollars
($100,000) (taken together with any other Project Document Termination Payments received during the then-current Fiscal
Year), the Borrower shall transfer such
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Credit Agreement
Project Document Termination Payments to the Borrower Revenue Account; and
(ii)
if such Project Document Termination Payments are in an amount equal to or greater than one hundred thousand Dollars
($100,000) (taken together with any other Project Document Termination Proceeds received during the then-current Fiscal Year),
such amounts shall be transferred by the Borrower to the Administrative Agent for application as a prepayment of the Loans in
accordance with Section 3.08 (Mandatory Prepayment).
ARTICLE IX
DEFAULT AND ENFORCEMENT
Section 9.01 Events of Default. Each of the following events or occurrences described in this Section 9.01 shall constitute an Event of
Default.
(a) Nonpayment. The Borrower fails to pay any amount of principal of any Loan, any interest on any Loan or any fee or other
Obligation or amount payable hereunder or under any other Financing Document within three (3) Business Days after the same
becomes due and payable.
(b) Breach of Warranty. Any representation or warranty of any Loan Party in any Financing Document is incorrect or misleading
in any material respect when made or; provided that (i) if such Loan Party was not aware that such representation or warranty was
incorrect or misleading at the time such representation or warranty was made, (ii) the fact, event or circumstance resulting in such
incorrect or misleading representation or warranty is capable of being cured, corrected or otherwise remedied, (iii) such fact, event or
circumstance resulting in such incorrect or misleading representation or warranty is cured, corrected or otherwise remedied within
thirty (30) days from the date any Loan Party obtains, or should have obtained, Knowledge thereof, and (iv) no Material Adverse Effect
shall have occurred as a result of such representation or warranty being incorrect or misleading, then such incorrect representation or
warranty shall not constitute an Event of Default.
(c) Non-Performance of Certain Covenants and Obligations. (i) The Borrower defaults in the due performance and observance of
any of its obligations under Sections 7.01(d)(ii), (iii) and (iv)(A) (Covenants – Affirmative Covenants – Capital Improvement of
Project; Maintenance of Properties), Section 7.01(g) (Covenants – Affirmative Covenants – Use of Proceeds and Cash Flow ),
Section 7.01(h) (Covenants – Affirmative Covenants – Insurance), Section 7.01(q) (Covenants – Affirmative Covenants – First Priority
Ranking), Section 7.02 (Covenants – Negative Covenants ), Section 7.03(f) (Covenants – Reporting Requirements – Notice of Default
or Event of Default) or Section 7.03(g) (Covenants – Reporting Requirements – Notice of Other Events) of this Agreement, or
Section 5.02, Section 5.04 or Section 5.07 of the Security Agreement; or (ii) the Borrower or the
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Credit Agreement
Pledgor defaults in the due performance and observance of any of its obligations under Section 5.02, Section 5.04, Section 5.05 or
Section 5.09 of the Pledge Agreement.
(d) Non-Performance of Other Covenants and Obligations. (i) The Borrower or the Pledgor defaults in the due performance and
observance of any covenant or agreement (other than covenants and agreements referred to in Section 9.01(a) (Events of Default –
Nonpayment) or Section 9.01(c) (Events of Default – Non-Performance of Certain Covenants and Obligations) contained in any
Financing Document to which it is a party, and such default continues unremedied for a period of thirty (30) days after the Borrower or
the Pledgor, as the case may be, obtains, or should have obtained, Knowledge thereof; or (ii) the Borrower defaults in the due
performance and observance of any covenant or agreement contained in the Lease or a Lessee Security Document, and such default
continues unremedied for a period of thirty (30) days after the Borrower obtains, or should have obtained, Knowledge thereof.
(e) Capital Improvement Completion . The Capital Improvement Completion Date does not occur on or before the
Commencement Date Certain; provided, that such failure shall not constitute an Event of Default if within 60 days of such failure, the
Borrower shall terminate the Lease, obtain possession of the Project, enter into such alternative arrangements and agreements replacing
the Lease (which arrangements and agreements as well as the counterparties thereto shall be satisfactory to the Required Lenders
(together with all applicable Ancillary Documents), it being understood that for purposes of this Section 9.01(e) the replacement of the
initial Lessee by an Approved Lessee and any such alternate arrangements having the same terms and conditions as the Lease and the
Management and Operating Services Agreement shall be deemed satisfactory to the Required Lenders) and achieve the Capital
Improvement Completion Date.
(f) Cross Defaults. Any one of the following occurs with respect to a Loan Party:
(i)
(ii)
a default occurs in the payment when due (subject to any applicable grace period and notice requirements), whether by
acceleration or otherwise, with respect to Indebtedness (other than the Obligations) in an amount greater than or equal to one
hundred thousand Dollars ($100,000) in the aggregate or has resulted in or could reasonably be expected to result in a Material
Adverse Effect;
such Person fails to observe or perform (subject to any applicable grace periods and notice requirements) any other agreement or
condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto,
or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders of such
Indebtedness (other than the Obligations) or the beneficiary or beneficiaries of any Guarantee (or a trustee or agent on behalf of
such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be
demanded or
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Credit Agreement
to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase,
prepay, defease or redeem such Indebtedness (other than the Obligations) to be made, prior to its stated maturity, or such
Guarantee to become payable or cash collateral in respect thereof to be demanded, in each case with respect to Indebtedness in
an amount greater than or equal to one hundred thousand Dollars ($100,000) in the aggregate or has resulted in or could
reasonably be expected to result in a Material Adverse Effect; or
(iii) any “Event of Default” (as defined therein) shall occur under or within the meaning of the Lease; provided, that any such event
under or within the meaning of the Lease shall not constitute an Event of Default if within 60 days of such event, the Borrower
shall terminate the Lease, obtain possession of the Project, enter into such alternative arrangements and agreements replacing the
Lease (which arrangements and agreements as well as the counterparties thereto shall be satisfactory to the Required Lenders
(together with all applicable Ancillary Documents), it being understood that for purposes of this Section 9.01(f)(iii) the
replacement of the initial Lessee by an Approved Lessee and any such alternate arrangements having the same terms and
conditions as the Lease and the Management and Operating Services Agreement shall be deemed satisfactory to the Required
Lenders) and, if such replacement does not cure any such event which affects the operation of the Project, then cure such event.
(g) Judgments. (i) Any judgment or order that has or could reasonably be expected to have a Material Adverse Effect is rendered
against a Loan Party, or (ii) any judgment or order is rendered against a Loan Party in an amount in excess of two hundred fifty
thousand Dollars ($250,000) in the aggregate and, in any such case, (x) enforcement proceedings are commenced by any creditor upon
such judgment or order or (y) there is a period of thirty (30) consecutive days during which a stay of enforcement of such judgment is
not in effect.
(h) ERISA Events. Any one of the following occurs that has resulted in or could reasonably be expected to result in a Material
Adverse Effect: (i) Any Termination Event occurs, (ii) any Plan incurs an “accumulated funding deficiency” (as defined in Section 412
of the Code or Section 302 of ERISA), (iii) any Loan Party or an ERISA Affiliate engages in a transaction that is prohibited under
Section 4975 of the Code or Section 406 of ERISA for which there is no regulatory, statutory or administrative exemption, (iv) any
Loan Party or any ERISA Affiliate fails to pay when due any amount it has become liable to pay to the PBGC, any Plan or a trust
established under Title IV of ERISA, (v) a condition exists by reason of which the PBGC would be entitled to obtain a decree
adjudicating that an ERISA Plan must be terminated or have a trustee appointed to administer it, (vi) any Loan Party or any ERISA
Affiliate suffers a partial or complete withdrawal from a Multiemployer Plan or is in “default” (as defined in Section 4219(c)(5) of
ERISA) with respect to payments to a Multiemployer Plan, (vii) a proceeding is instituted against any Loan Party to enforce
Section 515 of
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Credit Agreement
ERISA, (viii) the aggregate amount of the then “current liability” (as defined in Section 412(l)(7) of the Code, as amended) of all
accrued benefits under such Plan or Plans exceeds the then-current value of the assets allocable to such benefits by more than five
hundred thousand Dollars ($500,000) at such time, or (ix) any other event or condition occurs or exists with respect to any Plan that
would subject any Loan Party to any material tax, material penalty or other material liability.
(i) Bankruptcy. Any Loan Party:
(i)
(ii)
(iii)
generally fails to pay, or admits in writing its inability or unwillingness to pay, debts as they become due;
applies for, consents to, or acquiesces in, the appointment of a trustee, receiver, sequestrator or other custodian for such Person or
a substantial portion of its property, or makes a general assignment for the benefit of creditors;
in the absence of such application, consent or acquiescence, permits or suffers to exist the appointment of a trustee, receiver,
sequestrator or other custodian for such Person or for a substantial part of its property, and such trustee, receiver, sequestrator or
other custodian is not discharged within sixty (60) days; provided that nothing in the Financing Documents shall prohibit or
restrict any right any Senior Secured Party may have under applicable Law to appear in any court conducting any relevant
proceeding during such sixty (60) day period to preserve, protect and defend its rights under the Financing Documents (and such
Person shall not object to any such appearance);
(iv) permits or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding
under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of such Person and,
if any such case or proceeding is not commenced by such Person, such case or proceeding is consented to or acquiesced in by
such Person or results in the entry of an order for relief or remains for sixty (60) days undismissed; provided that nothing in the
Financing Documents shall prohibit or restrict any right any Senior Secured Party may have under applicable Law to appear in
any court conducting any such case or proceeding during such sixty (60) day period to preserve, protect and defend its rights
under the Financing Documents (and such Person shall not object to any such appearance); or
(v)
takes any action authorizing, or in furtherance of, any of the foregoing.
(j) Project Document Defaults; Termination.
(i)
The Borrower shall be in material breach of or otherwise in material default under any Project Document to which it is a party,
and such breach or default has continued beyond any applicable grace period expressly
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Credit Agreement
provided for in such Project Document (or, if no such cure period is provided, thirty (30) days).
(ii) Any Project Document to which the Borrower is a party ceases to be in full force and effect prior to its scheduled expiration, is
repudiated, or its enforceability is challenged or disaffirmed by or on behalf of the Borrower; provided, that such occurrence shall
not constitute an Event of Default with respect to any Project Document if an agreement replacing such Project Document, in
form and substance, and with a counterparty, reasonably satisfactory to the Required Lenders, is entered into (together with all
applicable Ancillary Documents) within forty-five (45) days thereof.
(k) Governmental Approvals. Any Loan Party fails to obtain, renew, maintain or comply in all material respects with any
Necessary Project Approval then required to be maintained or any Necessary Project Approval then required to be maintained is
revoked, canceled, terminated, withdrawn or otherwise ceases to be in full force and effect, or any Necessary Project Approval then
required to be maintained is adversely modified without the consent of the Required Lenders, or a proceeding is commenced which
could reasonably produce any such result.
(l) Unenforceability of Documentation. At any time after the execution and delivery thereof:
(i)
(ii)
any material provision of any Financing Document (including the further assignment of the Lessee Collateral) shall cease to be in
full force and effect;
any Financing Document is revoked or terminated, becomes unlawful or is declared null and void by a Governmental Authority
of competent jurisdiction;
(iii) any Financing Document becomes unenforceable, is repudiated or the enforceability thereof is contested or disaffirmed by or on
behalf of any party thereto other than the Senior Secured Parties; or
(iv) any Liens against any of the Collateral (including the Lessee Collateral) cease to be a first priority, perfected security interest in
favor of the Collateral Agent, or the enforceability thereof is contested by any Loan Party or any of the Security Documents
ceases to provide the security intended to be created thereby with the priority purported to be created thereby.
(m) Environmental Matters. (i) Any Environmental Claim has occurred with respect to any Loan Party, the Project or any
Environmental Affiliate, (ii) any release, Threat of Release, emission, discharge or disposal of any Material of Environmental Concern
occurs, and such event would reasonably be expected to form the basis of an Environmental Claim against any Loan Party, the Project
or any Environmental
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Credit Agreement
Affiliate, or (iii) any violation or alleged violation of any Environmental Law or Environmental Approval occurs that could
reasonably result in an Environmental Claim against any Loan Party or the Project or, to the extent any Loan Party may have
liability, any Environmental Affiliate that, in the case of any of Section 9.01(m)(i), (ii) or (iii), could reasonably be expected to
result in liability for any Loan Party in an amount greater than fifty thousand Dollars ($50,000) for any single claim or two
hundred fifty thousand Dollars ($250,000) for all such claims during any twelve (12) month period or could otherwise
reasonably be expected to result in a Material Adverse Effect.
(n) Loss of Collateral. Any portion of the Collateral (excluding any portion of the Collateral that is immaterial) is damaged,
seized or appropriated; provided that such an occurrence shall not constitute an Event of Default if the Borrower repairs, replaces,
rebuilds or refurbishes such damaged, seized or appropriated Collateral (i) in accordance with Section 8.01 (Insurance and
Condemnation Proceeds), or (ii) otherwise with the approval of the Required Lenders, in consultation with the Independent Engineer
(provided that such approval is obtained within sixty (60) days thereof).
(o) Event of Abandonment. An Event of Abandonment occurs.
(p) Taking or Total Loss. An Event of Taking with respect to all or a material portion of the Project or any Equity Interests in the
Borrower occurs, or an Event of Total Loss occurs.
(q) ABL EOD. At anytime following the purchase of the equity interests of the Borrower pursuant to the Put/Call Option, an
ABL Event of Default occurs.
(r) Change of Control. A Change of Control occurs.
Section 9.02 Action Upon Bankruptcy. If any Event of Default described in Section 9.01(i) (Events of Default – Bankruptcy) occurs
with respect to the Borrower, the outstanding principal amount of the outstanding Loans and all other Obligations shall automatically be
and become immediately due and payable, without notice, demand or further act of the Administrative Agent, the Collateral Agent or any
other Senior Secured Party.
Section 9.03 Action Upon Other Event of Default. (a) If any other Event of Default occurs and is continuing for any reason, whether
voluntary or involuntary, the Administrative Agent may, or upon the direction of the Required Lenders shall, by written notice to the
Borrower, declare all or any portion of the outstanding principal amount of the Loans and other Obligations to be due and payable,
whereupon the full unpaid amount of such Loans and other Obligations that has been declared due and payable shall be and become
immediately due and payable, without further notice, demand or presentment. During the continuance of an Event of Default, the
Administrative Agent may, or upon the direction of the Required Lenders shall, instruct the Collateral Agent to exercise any or all remedies
provided for under this Agreement or the other Financing Documents.
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Credit Agreement
(b) Any declaration made pursuant to Section 9.03(a) may, should the Required Lenders in their sole and absolute discretion so
elect, be rescinded by written notice to the Borrower at any time after the principal of the Loans has become due and payable, but
before any judgment or decree for the payment of the monies so due, or any part thereof, has been entered; provided that no such
rescission or annulment shall extend to or affect any subsequent Event of Default or impair any right consequent thereon.
Section 9.04 Application of Proceeds. Any moneys received by the Collateral Agent after the occurrence and during the continuance
of an Event of Default may be held by the Collateral Agent as Collateral and/or, at the direction of the Administrative Agent, may be
applied in full or in part by the Collateral Agent against the Obligations in the following order of priority (but without prejudice to the right
of the Collateral Agent to recover any shortfall from the Borrower):
(a) first, to payment of that portion of the Obligations constituting fees, costs, expenses (and interest owing thereon (if any)) and
any other amounts (including fees, costs and expenses of counsel and amounts payable under ARTICLE IV (Eurodollar Rate and Tax
Provisions)) payable to the Agents in their capacities as such ratably among them in proportion to the amounts described in this clause
first;
(b) second, to payment of that portion of the Obligations constituting fees, costs, expenses (and interest owing thereon (if any))
and any other amounts (including fees, costs and expenses of counsel and amounts payable under ARTICLE IV (Eurodollar Rate and
Tax Provisions)) but excluding principal of and accrued interest on the Loans payable to the Lenders, ratably among the Lenders in
proportion to the amounts described in this clause second payable to them;
(c) third, to payment of the portion of the Obligations constituting accrued and unpaid interest (including default interest) with
respect to the Loans, ratably among the Lenders in proportion to the respective amounts described in this clause third payable to them;
(d) fourth, to the principal amount of the Loans payable by the Borrower to the Lenders, ratably among the Lenders in proportion
to the respective amounts described in this clause fourth held by them;
(e) fifth, to payment of the portion of the Obligations constituting ABL Shortfall, ratably among the Lenders in proportion to the
respective amounts described in this clause fifth payable to them; and
(f) last, the balance, if any, after all of the Obligations have been paid in full, to the Borrower or as otherwise required by
Applicable Law.
Section 9.05 Event of Default Caused by Lessee. Notwithstanding anything contained in this Agreement to the contrary, if an event
which would constitute an Event of Default under or within the meaning of this Agreement shall occur as the direct result of any “Event of
Default” under or within the meaning of the Lease, such event shall not constitute an Event of
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Default if within 60 days of such event the Borrower shall terminate the Lease, obtain possession of the Project, enter into such alternative
arrangements and agreements replacing the Lease (which arrangements and agreements as well as the counterparties thereto shall be
satisfactory to the Required Lenders (together with all applicable Ancillary Documents), it being understood that for purposes of this
Section 9.05) the replacement of the initial Lessee by an Approved Lessee and any such alternate arrangements having the same terms and
conditions as the Lease and the Management and Operating Services Agreement shall be deemed satisfactory to the Required Lenders) and,
if such replacement does not cure such event, cure such event.
ARTICLE X
THE AGENTS
Section 10.01 Appointment and Authority. (a) Each Lender hereby irrevocably appoints, designates and authorizes each Agent to take
such action on its behalf under the provisions of this Agreement and each other Financing Document and to exercise such powers and
perform such duties as are expressly delegated to such Agent by the terms of this Agreement or any other Financing Document, together
with such actions as are reasonably incidental thereto. The provisions of this ARTICLE X are solely for the benefit of the Agents and the
Lenders, and neither the Borrower nor any other Person shall have rights as a third party beneficiary of any of such provisions.
(b) Each Lender hereby appoints WestLB as its Administrative Agent under and for purposes of each Financing Document to
which it is a party. WestLB hereby accepts this appointment and agrees to act as the Administrative Agent for the Lenders in
accordance with the terms of this Agreement. Each Lender appoints and authorizes the Administrative Agent to act on behalf of such
Lender under each Financing Document to which it is a party and, in the absence of other written instructions from the Required
Lenders received from time to time by the Administrative Agent (with respect to which the Administrative Agent agrees that it will
comply, except as otherwise provided in this Section 10.01 or as otherwise advised by counsel), to exercise such powers hereunder and
thereunder as are specifically delegated to or required of the Administrative Agent by the terms hereof and thereof, together with such
powers as may be reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in any Financing
Document, the Administrative Agent shall not have any duties or responsibilities except those expressly set forth herein, nor shall the
Administrative Agent have or be deemed to have any fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into any Financing Document or otherwise exist against the
Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” in this Agreement with
reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable Law. Instead, such term is used merely as a matter of market custom, and is intended to create or
reflect only an administrative relationship between independent contracting parties.
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(c) Each Lender hereby appoints WestLB as its Collateral Agent under and for purposes of each Financing Document to which it
is a party. WestLB hereby accepts this appointment and agrees to act as the Collateral Agent for the Senior Secured Parties in
accordance with the terms of this Agreement. Each of the Lenders hereby irrevocably appoints and authorizes the Collateral Agent to
act as the agent of such Lender for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the
Borrower, the Pledgor or the Lessee Pledgor to the Collateral Agent in order to secure any of the Obligations, together with such
powers and discretion as are reasonably incidental thereto. In this connection any co-agents, sub-agents and attorneys-in-fact appointed
by the Collateral Agent pursuant to Section 10.05 (Delegation of Duties) for purposes of holding or enforcing any Lien on the
Collateral (or any portion thereof) granted under the Security Documents, or for exercising any rights and remedies thereunder at the
direction of the Collateral Agent, as the case may be, shall be entitled to the benefits of all provisions of this ARTICLE X and
ARTICLE XI (Miscellaneous Provisions) (including Section 11.08 (Indemnification by the Borrower), as though such co-agents, sub-
agents and attorneys-in-fact were the Collateral Agent under the Financing Documents. Notwithstanding any provision to the contrary
contained elsewhere in any Financing Document, the Collateral Agent shall not have any duties or responsibilities except those
expressly set forth herein or in the other Financing Documents to which the Collateral Agent is party, nor shall the Collateral Agent
have or be deemed to have any fiduciary relationship with the Borrower or any Senior Secured Party, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read into any Financing Document or otherwise exist against the
Collateral Agent. Each of the Collateral Agent and the Administrative Agent shall have the right at any time to seek instructions from
the Required Lenders or, in the case of the Collateral Agent, the Administrative Agent as to any discretionary actions contemplated
hereby or in any other Financing Document or if this Agreement or any other Financing Document is silent as to any matter requiring
action by the Collateral Agent and shall be fully protected in accordance with Section 10.03 (Exculpatory Provisions) and
Section 10.04 (Reliance by Agents) when acting upon such instructions. Any action taken by the Collateral Agent or the Administrative
Agent under or in relation to this Agreement and any other Financing Document to which it is party with requisite authority or on the
basis of appropriate instructions received from the Lenders (other otherwise as duly authorized) shall be binding on each Lender.
Without limiting the generality of the foregoing sentence, the use of the term “agent” in this Agreement with reference to the Collateral
Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable
Law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.
Section 10.02 Rights as a Lender. Each Person serving as Agent hereunder or under any other Financing Document shall have the
same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent. Each
such Person and its Affiliates may accept deposits from, lend money to, act as the financial advisor for or in any other advisory capacity for
and generally engage in any kind of business with the Borrower
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or Affiliates of the Borrower as if such Person were not an Agent hereunder and without any duty to account therefor to the Lenders or any
other Agent.
Section 10.03 Exculpatory Provisions. (a) No Agent nor any of its respective directors, officers, employees or agents shall have any
duties or obligations except those expressly set forth herein and in the other Financing Documents to which it is party. Without limiting the
generality of the foregoing, no Agent shall:
(i)
(ii)
be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is
continuing;
have any duty to take any discretionary action or exercise any discretionary powers except discretionary rights and powers
expressly contemplated hereby or by the other Financing Documents to which it is party that such Agent is required to exercise as
directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided
for herein or in such other Financing Documents); provided that such Agent shall not be required to take any action that, in its
opinion or the opinion of its counsel, may expose the Agent to liability or that is contrary to any Financing Document or
applicable Law; and provided further that no such direction given to such Agent that in the sole judgment of such Agent imposes,
or purports to impose, or might reasonably be expected to impose upon such Agent any obligation or liability not set forth in this
Agreement or arising under this Agreement or other Financing Documents to which it is party shall be binding upon such Agent
unless such Agent, in its sole discretion, accepts such direction;
(iii) except as expressly set forth herein and in the other Financing Documents to which it is party, have any duty to disclose, or be
liable for any failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or
obtained by the Person serving as an Agent or any of its Affiliates in any capacity; or
(iv) be required to institute any legal proceedings arising out of or in connection with, or otherwise take steps to enforce, this
Agreement or any other Financing Document other than on the instructions of the Lenders.
(b) No Agent nor any of its respective directors, officers, employees or agents shall be liable for any action taken or not taken by
it (i) with the prior written consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as
may be necessary, or as such Agent may reasonably believe in good faith to be necessary, under the circumstances as provided in
Section 10.01 (Appointment and Authority)), (ii) in connection with any amendment, consent, approval or waiver which it is permitted
under the Financing Documents to enter into, agree to or grant or (iii) in the absence of its own gross negligence or willful misconduct.
Each Agent shall be deemed not to have knowledge of any Default or Event of Default unless and
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until notice describing such Default or Event of Default is given to such Agent in writing by the Borrower or a Lender.
(c) No Agent nor any of its respective directors, officers, employees or agents shall be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other
Financing Document, (ii) the contents of any certificate, report, opinion or other document delivered hereunder or thereunder or in
connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions
set forth herein or therein (including the use of proceeds) or the occurrence or continuance of any Default or Event of Default, (iv) the
execution, validity, enforceability, effectiveness, genuineness or admissibility into evidence of this Agreement, any other Financing
Document or any other agreement, instrument or document, or the creation, perfection or priority of any Lien or security interest
created or purported to be created by any Security Document (or title to or rights in any Collateral under any Security Document), or
(v) the satisfaction of any condition set forth in ARTICLE VI (Conditions Precedent) or elsewhere herein, other than to confirm receipt
of items expressly required to be delivered to any such Agent.
(d) Each Agent may, unless and until it shall have received directions from the Lenders, take such action or refrain from taking
such action in respect of a Default or Event of Default of which such Agent has been advised in writing by the Lenders as it shall
reasonably deem advisable in the best interests of the Lenders (but shall not be obligated to do so).
(e) The Collateral Agent may refrain from acting in accordance with any instructions of the Lenders to institute any legal
proceedings arising out of or in connection with this Agreement or any other Financing Document until it has been indemnified and/or
secured to its satisfaction against any and all costs, expenses or liabilities (including legal fees and expenses) which it would or might
reasonably be expected to incur as a result.
(f) No Agent shall be required to advance or expend any funds or otherwise incur any financial liability in the performance of its
duties or the exercise of its powers or rights hereunder or under any Financing Document to which it is party unless it has been
provided with security or indemnity reasonably satisfactory to it against any and all liability or expense which may be incurred by it by
reason of taking or continuing to take such action.
Section 10.04 Reliance by Agents. Each Agent shall be entitled to rely upon, and shall not (nor shall any of its directors, officers,
employees or agents) incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other
writing (including any electronic message, internet or intranet website posting or other distribution) reasonably believed by it to be genuine
and to have been signed, sent or otherwise authenticated by the proper Person. Each Agent also may rely upon any statement made to it
orally or by telephone and reasonably believed by it to have been made by the proper Person, and shall not incur any liability for relying
thereon. In determining compliance with any condition hereunder
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to the making of a Loan that by its terms must be fulfilled to the satisfaction of a Lender, each Agent may presume that such condition is
satisfactory to such Lender unless such Agent shall have received written notice to the contrary from such Lender prior to the making of
such Loan. Each Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts
reasonably selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel,
accountants or experts. Each Agent may at any time and from time to time solicit written instructions in the form of directions from the
Required Lenders or an order of a court of competent jurisdiction as to any action that it may be requested or required to take, or that it may
propose to take, in the performance of any of its obligations under this Agreement or any other Financing Document to which it is party.
Section 10.05 Delegation of Duties. Each Agent may perform any and all of its duties and exercise any and all its rights and powers
hereunder or under any other Financing Document by or through any one or more sub-agents appointed by such Agent. Absent gross
negligence or willful misconduct in selecting a sub agent, no Agent shall be responsible for any action of, or failure to act by, any sub agent
that has been approved by the Required Lenders. Each Agent and any such sub agent may perform any and all of its duties and exercise its
rights and powers by or through their respective Related Parties. The exculpatory provisions of this ARTICLE X shall apply to any such
sub agent and to the Related Parties of such Agent and any such sub agent, and shall apply to their respective activities in connection with
their acting as Agent.
Section 10.06 Resignation or Removal of Agent. (a) Any Agent may resign from the performance of all its functions and duties
hereunder and/or under the other Financing Documents at any time by giving thirty (30) days’ prior notice to the Borrower and the
Lenders. Any Agent may be removed at any time by the Required Lenders. Such resignation or removal shall take effect upon the
appointment of a successor Agent, in accordance with this Section 10.06.
(b) Upon any notice of resignation by any Agent or upon the removal of any Agent by the Required Lenders, the Required
Lenders shall, in consultation with the Borrower (provided that no Default or Event of Default has occurred and is continuing), appoint
a successor Agent hereunder and under each other Financing Document who shall be a commercial bank having a combined capital and
surplus of at least two hundred fifty million Dollars ($250,000,000).
(c) If no successor Agent has been appointed by the Required Lenders within thirty (30) days after the date such notice of
resignation was given by such Agent or the Required Lenders elected to remove such Agent, any Senior Secured Party may petition
any court of competent jurisdiction for the appointment of a successor Agent. Such court may thereupon, after such notice, if any, as it
may deem proper, appoint a successor Agent, as applicable, who shall serve as Agent hereunder and under each other Financing
Document until such time, if any, as the Required Lenders appoint a successor Agent, as provided above.
(d) Upon the acceptance of a successor’s appointment as Agent hereunder, such successor shall succeed to and become vested
with all of the rights, powers,
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privileges and duties of the retiring (or removed) Agent, and the retiring (or removed) Agent shall be discharged from all of its duties
and obligations hereunder and under the other Financing Documents. After the retirement or removal of any Agent hereunder and under
the other Financing Documents, the provisions of this ARTICLE X shall continue in effect for the benefit of such retiring (or removed)
Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while
such Agent was acting as Agent.
(e) If a retiring (or removed) Agent is the Collateral Agent, such Collateral Agent will promptly transfer any Collateral in the
possession or control of such Collateral Agent to the successor Collateral Agent and will, subject to payment of its reasonable costs and
expenses (including counsel fees and expenses), execute and deliver such notices, instructions and assignments as may be reasonably
necessary or desirable to transfer the rights of the Collateral Agent with respect to such Collateral property to the successor Collateral
Agent.
Section 10.07 No Amendment to Duties of Agent Without Consent. No Agent shall be bound by any waiver, amendment, supplement
or modification of this Agreement or any other Financing Document that affects its rights or duties hereunder or thereunder unless such
Agent shall have given its prior written consent, in its capacity as Agent, thereto.
Section 10.08 Non-Reliance on Agent and Other Lenders. Each Lender acknowledges that it has, independently and without reliance
upon any Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this Agreement and make its Loans. Each Lender also acknowledges
that it will, independently and without reliance upon any Agent or any other Lender or any of their Related Parties and based on such
documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any other Financing Document or any related agreement or any document furnished hereunder or
thereunder.
Section 10.09 No Lead Arranger or Bookrunner Duties. Anything herein to the contrary notwithstanding, no Lead Arranger or
Bookrunner shall have any powers, duties or responsibilities under this Agreement or any of the other Financing Documents, except in its
capacity, as applicable, as an Agent or a Lender hereunder.
Section 10.10 Collateral Agent May File Proofs of Claim. (a) In case of the pendency of any Insolvency or Liquidation Proceeding
relative to the Borrower, the Pledgor or the Lessee Pledgor (including any event described in Section 9.01(i) (Events of Default –
Bankruptcy), the Collateral Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or
by declaration or otherwise and irrespective of whether the Collateral Agent or any other Senior Secured Party shall have made any demand
on the Borrower) shall be entitled and empowered, but shall not be obligated, by intervention in such proceeding or otherwise:
(i)
to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all
other Obligations that are
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Credit Agreement
owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Senior
Secured Parties (including any claim for the reasonable compensation, expenses, disbursements and advances of the Senior
Secured Parties and their respective agents and counsel and all other amounts due the Senior Secured Parties under Section 3.11
(Fees), Section 11.06 (Costs and Expenses) and Section 11.08 (Indemnification by the Borrower)) allowed in such judicial
proceeding; and
(ii)
to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same.
(b) Any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is
hereby authorized by each Lender to make such payments to the Collateral Agent and, in the event that the Collateral Agent consents to
the making of such payments directly to the Lenders, to pay to the Collateral Agent any amount due for the reasonable compensation,
expenses, disbursements and advances of the Agents and their respective agents and counsel, and any other amounts due the Agents
under Section 3.11 (Fees), Section 11.06 (Costs and Expenses) and Section 11.08 (Indemnification by the Borrower).
(c) Nothing contained herein shall be deemed to authorize the Collateral Agent to authorize or consent to or accept or adopt on
behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any
Lender or to authorize the Collateral Agent to vote in respect of the claim of any Lender in any such proceeding.
Section 10.11 Collateral Matters. (a) The Lenders irrevocably authorize the Collateral Agent to release any Lien on any property
granted to or held by the Collateral Agent under any Financing Document for the benefit of the Senior Secured Parties (i) upon the
occurrence of the Discharge Date, (ii) if approved, authorized or ratified in writing in accordance with Section 11.01 (Amendments, Etc.) or
(iii) as permitted pursuant to the terms of the Financing Documents (including as contemplated by Section 7.02(f) (Covenants – Negative
Covenants – Asset Dispositions)).
(b) Upon request by the Collateral Agent at any time and from time to time, the Lenders will confirm in writing the Collateral
Agent’s authority to release its interest in particular types or items of property pursuant to this Section 10.11. In each case as specified
in this Section 10.11, the Collateral Agent will, at the Borrower’s expense, execute and deliver to the Borrower, the Pledgor or the
Lessee Pledgor, as the case may be, such documents as such Person may reasonably request to evidence the release of such item of
Collateral from the assignment and security interest granted under the Security Documents in accordance with the terms of the
Financing Documents and this Section 10.11.
(c) Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder
or under any of the other
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Financing Documents to which it is party, the Collateral Agent shall have no duty as to any Collateral, as to ascertaining or taking
action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Collateral, whether or not the
Collateral Agent is deemed to have knowledge of such matters, or as to taking of any necessary steps to preserve rights against any
parties or any other rights pertaining to any Collateral (including the filing of UCC continuation statements). The Collateral Agent shall
be deemed to have exercised appropriate and due care in the custody and preservation of any Collateral in its possession if such
Collateral is accorded treatment substantially equal to that which other collateral agents accord similar property.
Section 10.12 Copies. Each Agent shall give prompt notice to each Lender of each material notice or request required or permitted to
be given to such Agent by the Borrower pursuant to the terms of this Agreement or any other Financing Document and copies of all other
communications received by such Agent from the Borrower for distribution to the Lenders by such Agent in accordance with the terms of
this Agreement or any other Financing Document.
Section 10.13 No Liability for Clean-up of Hazardous Materials. If the Collateral Agent is required to acquire title to an asset for any
reason, or take any managerial action of any kind in regard thereto, in order to carry out any duty or obligation for the benefit of another,
which in the Collateral Agent’s sole discretion may cause the Collateral Agent to be considered an “owner or operator” under any
Environmental Laws or otherwise cause the Collateral Agent to incur, or be exposed to, any Environmental Liabilities or any liability under
any other federal, state or local law, the Collateral Agent reserves the right, instead of taking such action, either to resign as Collateral Agent
or to arrange for the transfer of the title or control of the asset to a court appointed receiver. The Collateral Agent will not be liable to any
Person for any Environmental Liabilities or any environmental claims or contribution actions under any federal, state or local law, rule or
regulation by reason of the Collateral Agent’s action and conduct as authorized, empowered or directed hereunder or relating to any kind of
discharge or release or threatened discharge or release of any Hazardous Materials into the environment.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01 Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Financing Document, and
no consent to any departure by the Borrower or any other Loan Party therefrom, shall be effective unless in writing signed by the Required
Lenders (or, if expressly contemplated hereby, the Administrative Agent) and, in the case of an amendment, the Borrower and in each such
case acknowledged by the Administrative Agent, and each such waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided that no such amendment, waiver or consent shall:
(a) extend or increase the Commitment of any Lender (or reinstate any Commitment terminated pursuant to Section 9.03(a)
(Action Upon Other Event of
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Default) without the prior written consent of such Lender (other than any Non-Voting Lender or extend or increase the Aggregate Loan
Commitment);
(b) postpone any date scheduled for any payment of principal or interest under Section 3.01 (Repayment of Loans) or Section 3.02
(Interest Payment Dates), or any date fixed by the Administrative Agent for the payment of fees or other amounts due to the Lenders
(or any of them) hereunder or under any other Financing Document without the prior written consent of each Lender affected thereby
(other than any Non-Voting Lender);
(c) reduce the principal of, or the rate of interest specified herein on, any Loan, or any Fees or other amounts (including any
mandatory prepayments under Section 3.08 (Mandatory Prepayment)) payable hereunder or under any other Financing Document to
any Lender without the prior written consent of each Lender directly affected thereby (other than any Non-Voting Lender); provided
that only the prior written consent of the Required Lenders shall be necessary to amend the definition of Default Rate or to waive any
obligation of the Borrower to pay interest at the Default Rate;
(d) change the order of application of any prepayment of Loans from the application thereof set forth in the applicable provisions
of Section 3.07 (Optional Prepayment) or Section 3.08 (Mandatory Prepayment) in any manner without the prior written consent of
each Lender affected thereby (other than any Non-Voting Lender);
(e) change any provision of this Section 11.01, the definition of Required Lenders or any other provision of any Financing
Document specifying the number or percentage of Lenders required to amend, waive or otherwise modify any rights under any
Financing Document (including any such provision specifying the number or percentage of Lenders required to waive any Event of
Default or forbear from taking any action or pursuing any remedy with respect to any Event of Default), or make any determination or
grant any consent under any Financing Document, without the prior written consent of each Lender (other than any Non-Voting
Lender); or
(f) release (i) any Loan Party from all or substantially all of its obligations under any Financing Document or (ii) all or
substantially all of the Collateral in any transaction or series of related transactions, without the prior written consent of each Lender
(other than any Non-Voting Lender); and provided further that (i) no amendment, waiver or consent shall, unless in writing and signed
by an Agent in addition to the Lenders required above, affect the rights or duties of, or any fees or other amounts payable to, such
Agent under this Agreement or any other Financing Document; and (ii) Section 11.03(h) (Assignments) may not be amended, waived or
otherwise modified without the prior written consent of each Granting Lender all or any part of whose Loan is being funded by an SPV
at the time of such amendment, waiver or other modification.
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Notwithstanding the other provisions of this Section 11.01, the Borrower, the Collateral Agent and the Administrative Agent may (but
shall have no obligation to) amend or supplement the Financing Documents without the consent of any Lender solely: (i) to cure any
ambiguity, defect or inconsistency; (ii) to make any change that would provide any additional rights or benefits to the Lenders or (iii) to
make, complete or confirm any grant of Collateral permitted or required by this Agreement or any of the Security Documents or any release
of any Collateral that is otherwise permitted under the terms of this Agreement and the Security Documents.
Section 11.02 Applicable Law; Jurisdiction; Etc. (a) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA,
WITHOUT REFERENCE TO CONFLICTS OF LAWS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW).
(b) SUBMISSION TO JURISDICTION. BORROWER IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR
ITSELF AND ITS PROPERTY, TO THE NON EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF
NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY OTHER FINANCING DOCUMENT, OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT, AND BORROWER IRREVOCABLY AND UNCONDITIONALLY AGREES THAT
ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL
COURT. BORROWER AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER FINANCING DOCUMENT SHALL
AFFECT ANY RIGHT THAT ANY SENIOR SECURED PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER FINANCING DOCUMENT AGAINST BORROWER OR
ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.
(c) WAIVER OF VENUE. BORROWER IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY OTHER FINANCING DOCUMENT IN ANY COURT REFERRED TO IN SECTION 11.02(b). BORROWER HEREBY
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.
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Credit Agreement
(d) Appointment of Process Agent and Service of Process. The Borrower hereby irrevocably appoints CT Corporation, with an
office on the date hereof at 111 Eighth Avenue, New York, New York 10011, as its agent to receive on behalf of itself services of
copies of the summons and complaint and any other process that may be served in any such action or proceeding in the State of New
York. If for any reason the Process Agent shall cease to act as such for any Person, such Person hereby agrees to designate a new agent
in New York City on the terms and for the purposes of this Section 11.02 reasonably satisfactory to the Administrative Agent. Such
service may be made by mailing or delivering a copy of such process to such Person in care of the Process Agent at the Process
Agent’s above address, and the Borrower hereby irrevocably authorizes and directs the Process Agent to accept such service on its
behalf. As an alternative method of service, the Borrower also irrevocably consents to the service of any and all process in any such
action or proceeding by the air mailing of copies of such process to such Person at its then effective notice addresses pursuant to
Section 11.11 (Notices and Other Communications). Nothing in this Agreement shall affect any right that any party may otherwise
have to bring any action or proceeding relating to this Agreement or any other Financing Document in the courts of any jurisdiction.
(e) Immunity. To the extent that the Borrower has or hereafter may acquire any immunity from jurisdiction of any court or from
any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or
otherwise) with respect to itself or its property, the Borrower hereby irrevocably and unconditionally waives such immunity in respect
of its obligations under the Financing Documents and, without limiting the generality of the foregoing, agrees that the waivers set forth
in this Section 11.02(e) shall have the fullest scope permitted under the Foreign Sovereign Immunities Act of 1976 of the United States
and are intended to be irrevocable for purposes of such Act.
(f) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY 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 OR RELATING TO THIS AGREEMENT OR ANY OTHER FINANCING
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH PARTY HERETO (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(ii) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE OTHER FINANCING DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 11.02.
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Section 11.03 Assignments. (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 permitted hereby, except that the Borrower may not assign or otherwise transfer any of its rights
or obligations hereunder without the prior written consent of each Agent and Lender, and no Lender may assign or otherwise transfer any
of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with Section 11.03(b), (ii) by way of participation in
accordance with Section 11.03(d), (iii) by way of pledge or assignment of a security interest subject to the restrictions of Section 11.03(f),
or (iv) to an SPV in accordance with the provisions of Section 11.03(h) (and any other attempted assignment or transfer by any party hereto
shall be null and void). Nothing in this Agreement, express or implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in this Section 11.03 and, to the extent
expressly contemplated hereby, the Related Parties of each Agent and Lender) any legal or equitable right, remedy or claim under or by
reason of this Agreement.
(b) Any Lender may at any time after the date hereof assign to one or more Eligible Assignees all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that
(i) except in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Loans at the time
owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the
Commitment (which for this purpose includes the Loans outstanding thereunder) or, if the applicable Commitment is not then in effect,
the principal outstanding balance of the Loans of the assigning Lender subject to each such assignment, determined as of the date the
Lender Assignment Agreement with respect to such assignment is delivered to the Administrative Agent or, if “Trade Date” is specified
in the Lender Assignment Agreement, as of the Trade Date, shall not be less than three million Dollars ($3,000,000) and in integral
multiples of one million Dollars ($1,000,000) in excess thereof, unless the Administrative Agent otherwise consents in writing;
(ii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations
under this Agreement with respect to the Loan or the Commitment assigned; (iii) the parties to each assignment (other than Borrower)
shall execute and deliver to the Administrative Agent a Lender Assignment Agreement, together with a processing and recordation fee
of two thousand five hundred Dollars ($2,500); provided that (A) no such fee shall be payable in the case of an assignment to a Lender,
an Affiliate of a Lender or an Approved Fund with respect to a Lender and (B) in the case of contemporaneous assignments by a
Lender to one or more Approved Funds managed by the same investment advisor (which Approved Funds are not then Lenders
hereunder), only a single such two thousand five hundred Dollar ($2,500) fee shall be payable for all such contemporaneous
assignments and (iv) the Eligible Assignee, if it is not a Lender prior to such assignment, shall deliver to the Administrative Agent an
administrative questionnaire. Subject to acceptance and recording thereof by the Administrative Agent pursuant to Section 11.03(c), on
and after the effective date specified in each Lender Assignment Agreement, the Eligible Assignee thereunder shall be a party to this
Agreement and, to the extent of the interest assigned by such Lender Assignment Agreement, have the rights and obligations of a
Lender under this
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Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Lender Assignment Agreement, be
released from its obligations under this Agreement (and, in the case of a Lender Assignment Agreement covering all of the assigning
Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to
the benefits of Section 4.01 (Eurodollar Rate Lending Unlawful), Section 4.03 (Increased Eurodollar Loan Costs), Section 4.05
(Funding Losses), Section 11.06 (Costs and Expenses) and Section 11.08 (Indemnification by the Borrower) with respect to facts and
circumstances occurring prior to the effective date of such assignment). Upon request, the Borrower (at its expense) shall execute and
deliver a Note to the assignee Lender. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does
not comply with this Section 11.03(b) shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such
rights and obligations in accordance with Section 11.03(d).
(c) The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at the Administrative
Agent’s office a copy of each Lender Assignment Agreement delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitment of, and principal amount of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrower, the Agents and the Lenders
may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of
this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower at any reasonable
time and from time to time upon reasonable prior notice. In addition, at any time that a request for a consent for a material or other
substantive change to the Financing Documents is pending, any Lender may request and receive from the Administrative Agent a copy
of the Register.
(d) Any Lender may at any time, without the consent of, or notice to, the Borrower or any Agent, sell participations to any Person
(each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of
its Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and
(iii) the Borrower, the Agents and the other Lenders shall continue to deal solely and directly with such Lender in connection with such
Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender
will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in the first proviso to
Section 11.01 (Amendments, Etc.) that directly affects such Participant. Subject to Section 11.03(e), the Borrower agrees that each
Participant shall be entitled to the benefits of Section 4.01 (Eurodollar Rate Lending Unlawful), Section 4.03 (Increased Eurodollar
Loan Costs) and Section 4.05 (Funding
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Losses), to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 11.03(b). To the extent
permitted by law, each Participant also shall be entitled to the benefits of Section 11.14 (Right of Setoff) as though it were a Lender;
provided such Participant agrees to be subject to Section 3.13 (Sharing of Payments) as though it were a Lender.
(e) A Participant shall not be entitled to receive any greater payment under Section 4.01 (Eurodollar Rate Lending Unlawful) or
Section 4.03 (Increased Eurodollar Loan Costs) than the applicable Lender would have been entitled to receive with respect to the
participation sold to such Participant, unless the sale of the participation to such participant is made with the prior written consent of
the Borrower.
(f) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement
(including under its Notes, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or
substitute any such pledgee or assignee for such Lender as a party hereto.
(g) The words “execution,” “signed,” “signature,” and words of like import in any Lender Assignment Agreement shall be deemed
to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or
enforceability as a manually executed signature or the use of a paper based recordkeeping system, as the case may be, to the extent and
as provided for in any applicable Law, including the Federal Electronic Signatures in Global and National Commerce Act, the New
York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.
(h) Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special purpose
funding vehicle identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrower
(an “SPV”) the option to provide all or any part of any Loan that such Granting Lender would otherwise be obligated to make pursuant
to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPV to fund any Loan, and (ii) if an SPV
elects not to exercise such option or otherwise fails to make all or any part of such Loan, the Granting Lender shall be obligated to
make such Loan pursuant to the terms hereof or, if it fails to do so, to make such payment to the Administrative Agent as is required
under Section 3.13 (Sharing of Payments). Each party hereto hereby agrees that (A) neither the grant to any SPV nor the exercise by
any SPV of such option shall increase the costs or expenses or otherwise increase or change the obligations of the Borrower under this
Agreement (including their obligations under Section 4.03 (Increased Eurodollar Loan Costs), (B) no SPV shall be liable for any
indemnity or similar payment obligation under this Agreement for which a Lender would be liable, and (C) the Granting Lender shall
for all purposes, including the approval of any amendment, waiver or other modification of any provision of any Financing Document,
remain the lender of record hereunder. The
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making of a Loan by an SPV hereunder shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan
were made by such Granting Lender. In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive
the termination of this Agreement) that, prior to the date that is one (1) year and one (1) day after the payment in full of all outstanding
commercial paper or other senior debt of any SPV, it will not institute against, or join any other Person in instituting against, such SPV
in any Insolvency or Liquidation Proceeding under the laws of the United States or any State thereof. Notwithstanding anything to the
contrary contained herein, any SPV may (1) with notice to, but without prior consent of the Administrative Agent and without paying
any processing fee therefor, assign all or any portion of its right to receive payment with respect to any Loan to the Granting Lender
and (2) disclose on a confidential basis any non public information relating to its funding of any Loan to any rating agency, commercial
paper dealer or provider of any surety or Guarantee or credit or liquidity enhancement to such SPV.
Section 11.04 Benefits of Agreement. Nothing in this Agreement or any other Financing Document, express or implied, shall give to
any Person, other than the parties hereto and thereto, and each of their successors and permitted assigns under this Agreement or any other
Financing Document, any benefit or any legal or equitable right or remedy under this Agreement.
Section 11.05 Consultants. (a) The Required Lenders acting jointly or the Administrative Agent may, in consultation with the
Borrower (provided that no Default or Event of Default has occurred and is continuing), appoint any Consultant for the purposes specified
herein. If any of the Consultants is removed or resigns and thereby ceases to act for purposes of this Agreement and the other Financing
Documents, the Required Lenders acting jointly or the Administrative Agent, as the case may be, shall, in consultation with the Borrower
(provided that no Default or Event of Default has occurred and is continuing), designate a Consultant in replacement. If no Default or Event
of Default has occurred and is continuing, (i) the annual fees and expenses of any Financial Advisor appointed pursuant to this
Section 11.05 after the Closing Date shall not exceed one hundred and fifty thousand Dollars ($150,000) and (ii) the fees and expenses of
any such Financial Advisor in any month shall not exceed twelve thousand five hundred Dollars ($12,500) (the “Monthly Cap”) plus any
un-used portion of the Monthly Cap in respect of any prior month.
(b) The Borrower shall reimburse each Consultant appointed hereunder for the reasonable fees and documented expenses of such
Consultant retained on behalf of the Lenders pursuant to this Section 11.05.
(c) In all cases in which this Agreement provides for any Consultant to “agree,” “approve,” “certify” or “confirm” any report or
other document or any fact or circumstance, such Consultant may make the determinations and evaluations required in connection
therewith based upon information provided by the Borrower or other sources reasonably believed by such Consultant to be
knowledgeable and responsible, without independently verifying such information; provided that, notwithstanding the foregoing, such
Consultant shall engage in such independent investigations or findings as it may from time to time deem necessary in its reasonable
discretion to support the determinations and evaluations required of it.
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Section 11.06 Costs and Expenses. The Borrower shall pay (a) all Closing Costs pursuant to Section 6.01(l); (b) all reasonable out-of-
pocket expenses incurred by the Lenders and the Agents (including all reasonable fees, costs and expenses of counsel for any Agent), in
connection with any amendments, modifications or waivers of the provisions of this Agreement and the other Financing Documents; (c) all
reasonable out-of-pocket expenses incurred by the Agents (including all reasonable fees, costs and expenses of counsel for any Agent), in
connection with the administration of this Agreement and the other Financing Documents; and (d) all out-of-pocket expenses incurred by
the Agents or any Lender (including all fees, costs and expenses of counsel for any Senior Secured Party), in connection with the
enforcement or protection of its rights in connection with this Agreement and the other Financing Documents, including its rights under this
Section 11.06, including in connection with any workout, restructuring or negotiations in respect of the Obligations; provided that payments
made pursuant to subsection (a) above and, to the extent incurred prior to the Closing Date, pursuant to subsection (b) above, shall be
subject to an aggregate maximum amount of three hundred thousand Dollars $300,000 in respect of costs paid pursuant to this Agreement
together with the costs paid pursuant to the ABL Agreement and the transactions contemplated hereby and thereby.
Section 11.07 Counterparts; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto in
different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.
This Agreement shall become effective when it has been executed by the Administrative Agent and when the Administrative Agent has
received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy or portable document format (“pdf”) shall be effective as delivery of a
manually executed counterpart of this Agreement.
Section 11.08 Indemnification by the Borrower. (a) In addition to the indemnity by the Borrower set forth in Section 11.11(f) (Notices
and Other Communications) and except for Taxes (which are addressed in Section 4.07 (Taxes)), the Borrower hereby agrees to indemnify
each Agent (and any sub agent thereof), each Lender and each Related Party of any of the foregoing Persons (each such Person being called
an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses
(including all reasonable fees, costs and expenses of counsel for any Indemnitee), incurred by any Indemnitee or asserted against any
Indemnitee by any third party or by the Borrower arising out of, in connection with, or as a result of:
(i)
the execution or delivery of this Agreement, any other Transaction Document or any agreement or instrument contemplated
hereby or thereby, the performance by the parties hereto or thereto of their respective obligations hereunder or thereunder or the
consummation of the transactions contemplated hereby or thereby;
(ii)
any Loan or the use or proposed use of the proceeds therefrom;
(iii) any actual or alleged presence, release or threatened release of Materials of Environmental Concern on or from the Project or
any property owned,
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leased or operated by the Borrower, or any liability pursuant to an Environmental Law related in any way to the Project, the Site
or the Borrower;
(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, whether brought by a third party or by the Borrower or any of the Borrower’s members, managers, or
creditors, and regardless of whether any Indemnitee is a party thereto and whether or not any of the transactions contemplated
hereunder or under any of the other Financing Documents is consummated, in all cases, whether or not caused by or arising, in
whole or in part, out of the comparative, contributory or sole negligence of the Indemnitee; and/or
(v)
any claim, demand or liability for broker’s or finder’s or placement fees or similar commissions, whether or not payable by the
Borrower, alleged to have been incurred in connection with such transactions, other than any broker’s or finder’s fees payable to
Persons engaged by the Lenders or the Agents without the Knowledge of the Borrower;
provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or
related expenses are determined by a court of competent jurisdiction by final and Non-Appealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.
(b) To the extent that the Borrower for any reason fails to indefeasibly pay any amount required under Section 11.08(a) to be paid
by it to any Agent (or any sub agent thereof) or any Related Party of any of the foregoing, each Lender severally agrees to pay to such
Agent (or any such sub agent), or such Related Party, as the case may be, such Lender’s ratable share (determined as of the time that
the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense
or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against such Agent (or
any sub agent thereof) in its capacity as such, or against any Related Party of any of the foregoing acting for such Agent (or any sub
agent thereof) in connection with such capacity. The obligations of the Lenders to make payments pursuant to this Section 11.08(b) are
several and not joint and shall survive the payment in full of the Obligations and the termination of this Agreement. The failure of any
Lender to make payments on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on
such date, and no Lender shall be responsible for the failure of any other Lender to do so.
(c) To the extent that the Borrower or the Lessee for any reason fails to indefeasibly pay any amount required under
Section 5.06(a) of the Accounts Agreement and the Collateral Agent pays such amount, each Lender severally agrees to pay to the
Collateral Agent such Lender’s ratable share (determined as of the time that the applicable payment is sought) of such amount. The
obligations of the Lenders
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to make payments pursuant to this Section 11.08(c) are several and not joint and shall survive the payment in full of the Obligations and
the termination of this Agreement. The failure of any Lender to make payments on any date required hereunder shall not relieve any
other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other
Lender to do so.
(d) Except as otherwise provided in ARTICLE VI (Conditions Precedent), all amounts due under this Section 11.08 shall be
payable not later than ten (10) Business Days after demand therefor.
Section 11.09 Interest Rate Limitation. Notwithstanding anything to the contrary contained in any Financing Document, the interest
paid or agreed to be paid under the Financing Documents shall not exceed the maximum rate of non usurious interest permitted by
applicable Law (the “Maximum Rate”). If any Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the
excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In
determining whether the interest contracted for, charged, or received by any Agent or any Lender exceeds the Maximum Rate, such Person
may, to the extent permitted by applicable Law, (a) characterize any payment that is not principal as an expense, fee, or premium rather
than interest, (b) exclude prepayments and the effects thereof, and (c) amortize, prorate, allocate, and spread in equal or unequal parts the
total amount of interest throughout the contemplated term of the Obligations hereunder.
Section 11.10 No Waiver; Cumulative Remedies. No failure by any Senior Secured Party to exercise, and no delay by any such
Person in exercising, any right, remedy, power or privilege hereunder or under any other Financing Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided, and
provided under each other Financing Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided
by law.
Section 11.11 Notices and Other Communications. (a) Except in the case of notices and other communications expressly permitted to
be given by telephone (and except as provided in Section 11.11(b)), all notices and other communications provided for herein shall be in
writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier or electronic
mail as follows, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the
applicable telephone number, as follows:
(i)
(ii)
if to any party hereto other than a Lender, to the address, telecopier number, electronic mail address or telephone number
specified for such Person on Schedule 11.11(a); and
if to any Lender, to the address, telecopier number, electronic mail address or telephone number specified in its administrative
questionnaire.
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(b) Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been
given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal
business hours for the recipient, shall be deemed to have been given at the opening of business on the next Business Day for the
recipient). Notices delivered through electronic communications to the extent provided in Section 11.11(d) shall be effective as
provided in Section 11.11(d).
(c) Notices and other communications to the Lenders or any Agent hereunder may be delivered or furnished by electronic
communication (including e-mail and internet or intranet websites) pursuant to procedures approved by the Administrative Agent, and
in the case of notices to the Collateral Agent, by the Collateral Agent as well; provided that the foregoing shall not apply to notices to
any Lender pursuant to ARTICLE II (Commitments; Other Credit Agreements) if such Lender has so notified the Administrative
Agent. Each of the Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications.
(d) Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be
deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt
requested” function, as available, return e-mail or other written acknowledgement); provided that if such notice or other
communication is not received during the normal business hours of the recipient, such notice or communication shall be deemed to
have been received at the opening of business on the next Business Day for the recipient, and (ii) notices or communications posted to
an internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as
described in Section 11.11(d)(i) of notification that such notice or communication is available and identifying the website address
therefor.
(e) The Borrower and the Agents may change its address, telecopier or telephone number for notices and other communications
hereunder by notice to the other parties hereto. Each Lender may change its address, telecopier or telephone number for notices and
other communications hereunder by notice to the Borrower and each Agent.
(f) The Agents and the Lenders shall be entitled to rely and act upon any written notices purportedly given by or on behalf of the
Borrower even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any
other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof. The
Borrower shall indemnify each Lender and the Related Parties of each of them from all losses, costs, expenses and liabilities resulting
from the reliance by such Person on each notice purportedly given by or on behalf of the Borrower. All telephonic notices
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Credit Agreement
to and other telephonic communications with any Agent may be recorded by such Agent, and each of the parties hereto hereby consents
to such recording.
(g) So long as WestLB is the Administrative Agent, the Borrower and hereby agrees that it will provide to the Administrative
Agent all information, documents and other materials that it is obligated to furnish to the Administrative Agent pursuant to the
Financing Documents, including all notices, requests, financial statements, financial and other reports, certificates and other
information materials, but excluding any such communication that (i) relates to the Funding, (ii) relates to the payment of any principal
or other amount due under this Agreement prior to the scheduled date therefor, (iii) provides notice of any Default or Event of Default
or (iv) is required to be delivered to satisfy any condition precedent to Funding (all such non excluded communications being referred
to herein collectively as “Communications”), by transmitting the Communications in an electronic/soft medium in a format acceptable
to the Administrative Agent to ny_agencyservices@westlb.com. In addition, the Borrower agrees to continue to provide the
Communications to the Administrative Agent in the manner specified in the Financing Documents but only to the extent requested by
the Administrative Agent.
(h) So long as WestLB is the Administrative Agent, the Borrower and further agrees that the Administrative Agent may make the
Communications available to the Lenders by posting the Communications on http://www.intralinks.com (or any replacement or
successor thereto) or a substantially similar electronic transmission systems (the “Platform”).
(i) THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE”. THE AGENTS DO NOT WARRANT THE
ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THE ADEQUACY OF THE PLATFORM AND
EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE COMMUNICATIONS. NO WARRANTY OF ANY
KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER
CODE DEFECTS, IS MADE BY THE AGENTS IN CONNECTION WITH THE COMMUNICATIONS OR THE PLATFORM. IN
NO EVENT SHALL THE ADMINISTRATIVE AGENT OR ANY OF ITS AFFILIATES OR ANY OF THEIR RESPECTIVE
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ADVISORS OR REPRESENTATIVES (COLLECTIVELY, “AGENT
PARTIES”) HAVE ANY LIABILITY TO THE BORROWER, ANY LENDER OR ANY OTHER PERSON OR ENTITY FOR
DAMAGES OF ANY KIND, INCLUDING DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF THE
BORROWER’S OR THE ADMINISTRATIVE AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE
INTERNET, EXCEPT TO THE EXTENT THE LIABILITY OF ANY AGENT PARTY IS FOUND IN A FINAL NON-
APPEALABLE JUDGMENT BY A COURT OF COMPETENT JURISDICTION TO
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Credit Agreement
HAVE RESULTED PRIMARILY FROM SUCH AGENT PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(j) The Administrative Agent agrees that the receipt of the Communications by the Administrative Agent at its e-mail address set
forth in Schedule 11.11(a) shall constitute effective delivery of the Communications to the Administrative Agent for purposes of the
Financing Documents. Each Lender agrees that notice to it (as provided in the next sentence) specifying that the Communications have
been posted to the Platform shall constitute effective delivery of the Communications to such Lender for purposes of the Financing
Documents. Each Lender agrees to notify the Administrative Agent in writing (including by electronic communication) from time to
time of such Lender’s e-mail address to which the foregoing notice may be sent by electronic transmission and that the foregoing notice
may be sent to such e-mail address.
(k) Notwithstanding clauses (g) to (j) above, nothing herein shall prejudice the right of any Agent or Lender to give any notice or
other communication pursuant to any Financing Document in any other manner specified in such Financing Document.
Section 11.12 Patriot Act Notice. Each Senior Secured Party (for itself and not on behalf of any other) hereby notifies the Borrower
that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies the Borrower,
which information includes the name and address of the Borrower and other information that will allow such Senior Secured Party, to
identify the Borrower in accordance with the Patriot Act.
Section 11.13 Payments Set Aside. To the extent that any payment by or on behalf of the Borrower is made to any Agent or Lender, or
any Agent or Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by such Agent
or Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any Insolvency or Liquidation
Proceeding or otherwise, then (a) to the extent of such recovery, the Obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender
severally agrees to pay to each Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by
such Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal
Funds Effective Rate from time to time in effect. The obligations of the Lenders under Section 11.13(b) shall survive the payment in full of
the Obligations and the termination of this Agreement.
Section 11.14 Right of Setoff. Each Lender and each of its respective Affiliates is hereby authorized at any time and from time to time
during the continuance of an Event of Default, to the fullest extent permitted by applicable Law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final, in whatever currency) at any time held and other obligations (in whatever
currency) at any time owing by such Lender or any such Affiliate to or for the credit or the account of the Borrower against any and all of
the obligations of the Borrower now or hereafter existing under this Agreement or any other
83
Credit Agreement
Financing Document to such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or any
other Financing Document and although such obligations of the Borrower may be contingent or unmatured or are owed to a branch or
office of such Lender different from the branch or office holding such deposit or obligated on such indebtedness. The rights of each Lender
and their respective Affiliates under this Section 11.14 are in addition to other rights and remedies (including other rights of setoff) that such
Lender or their respective Affiliates may have. Each Lender agrees to notify the Borrower and the Administrative Agent promptly after any
such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.
Section 11.15 Severability. If any provision of this Agreement or any other Financing Document is held to be illegal, invalid or
unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this Agreement and the other Financing
Documents shall not be affected or impaired thereby and (b) the parties shall endeavor in good faith negotiations to replace the illegal,
invalid or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the illegal,
invalid or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction.
Section 11.16 Survival. Notwithstanding anything in this Agreement to the contrary, Section 11.06 (Costs and Expenses) and
Section 11.08 (Indemnification by the Borrower) shall survive any termination of this Agreement. In addition, each representation and
warranty made hereunder and in any other Financing Document or other document delivered pursuant hereto or thereto or in connection
herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties have been or will be
relied upon by each Agent and each Lender, regardless of any investigation made by any Agent or any Lender or on their behalf, and shall
continue in full force and effect as long as any Loan or any other Obligation hereunder or under any other Financing Document shall remain
unpaid or unsatisfied.
Section 11.17 Treatment of Certain Information; Confidentiality. Each of the Agents and the Lenders agrees to maintain the
confidentiality of the Information, except that Information may be disclosed (a) to its Affiliates and to its Affiliates’ respective partners,
directors, officers, employees, agents, advisors (including legal counsel and financial advisors) and representatives (it being understood that
the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such
Information confidential); (b) to the extent requested or required by any regulatory authority purporting to have jurisdiction over it; (c) to
the extent required by applicable Law or regulations or by any subpoena or similar legal process; (d) to any other party to this Agreement;
(e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the
enforcement of rights hereunder (including any actual or prospective purchaser of Collateral); (f) subject to an agreement containing
provisions substantially the same as those of this Section 11.17, to (i) any Eligible Assignee of or Participant in, or any prospective Eligible
Assignee of or Participant in, any of its rights or obligations under this Agreement, (ii) any direct or indirect contractual counterparty or
prospective counterparty (or such contractual counterparty’s or prospective counterparty’s professional advisor) to any credit derivative
transaction relating to obligations of the Borrower or (iii) any Person (and any of its officers, directors, employees, agents or advisors) that
may enter into or support, directly or indirectly, or
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Credit Agreement
that may be considering entering into or supporting, directly or indirectly, either (A) contractual arrangements with such Agent or Lender,
or any Affiliates thereof, pursuant to which all or any portion of the risks, rights, benefits or obligations under or with respect to any Loan or
Financing Document is transferred to such Person or (B) an actual or proposed securitization or collateralization of, or similar transaction
relating to, all or a part of any amounts payable to or for the benefit of any Lender under any Financing Document (including any rating
agency); (g) with the consent of the Borrower: (h) to the extent such Information (i) becomes publicly available other than as a result of a
breach of this Section 11.17 or (ii) becomes available to any Agent, any Lender or any of their respective Affiliates on a non confidential
basis from a source other than the Borrower; (i) to any state, federal or foreign authority or examiner (including the National Association of
Insurance Commissioners or any other similar organization) regulating any Lender; or (j) to any rating agency when required by it (it being
understood that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Information relating
to the Borrower received by it from such Lender). In addition, any Agent and the Lenders may disclose the existence of this Agreement and
information about this Agreement to market data collectors, similar service providers to the lending industry, and service providers to the
Agents and the Lenders in connection with the administration and management of this Agreement, the other Financing Documents, the
Commitments, and the Funding. For the purposes of this Section 11.17, “Information” means written information that the Borrower
furnishes to any Agent or Lender after the date hereof (and designated at the time of delivery thereof in writing as confidential) pursuant to
or in connection with any Financing Document, relating to the assets and business of the Borrower, but does not include any such
information that (i) is or becomes generally available to the public other than as a result of a breach by such Agent or Lender of its
obligations hereunder, (ii) is or becomes available to such Agent or Lender from a source other than the Borrower that is not, to the
knowledge of such Agent or Lender, acting in violation of a confidentiality obligation with the Borrower or (iii) is independently compiled
by any Agent or Lender, as evidenced by their records, without the use of the Information. Any Person required to maintain the
confidentiality of Information as provided in this Section 11.17 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 to its own
confidential information.
Section 11.18 Waiver of Consequential Damages, Etc. Except as otherwise provided in Section 11.08 (Indemnification by the
Borrower) for the benefit of any Indemnitee, to the fullest extent permitted by applicable Law, the Borrower shall not assert, and the
Borrower hereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Financing
Document or any agreement or instrument contemplated hereby, the transactions contemplated hereby or thereby, any Loan or the use of
the proceeds thereof. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or
other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this
Agreement or the other Financing Documents or the transactions contemplated hereby or thereby.
[Remainder of page intentionally blank. Next page is signature page.]
85
Credit Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated Credit Agreement to be executed by their
respective officers as of the day and year first above written.
SENECA LANDLORD, LLC
as Borrower
By: /s/ Eric Hakmiller
Name: Eric Hakmiller
Title: Co-President
WESTLB AG, NEW YORK BRANCH,
as Lead Arranger and Sole Bookrunner
By: /s/ Keith Min
Name: Keith Min
Title: Managing Director
By: /s/ Christopher Nunn
Name: Christopher Nunn
Title: Director
WESTLB AG, NEW YORK BRANCH,
as Administrative Agent
By: /s/ Keith Min
Name: Keith Min
Title: Managing Director
By: /s/ Christopher Nunn
Name: Christopher Nunn
Title: Director
WESTLB AG, NEW YORK BRANCH,
as Collateral Agent
By: /s/ Keith Min
Name: Keith Min
Title: Managing Director
By: /s/ Christopher Nunn
Name: Christopher Nunn
Title: Director
Credit Agreement
WESTLB AG, NEW YORK BRANCH,
as Lender
By: /s/ Keith Min
Name: Keith Min
Title: Managing Director
By: /s/ Christopher Nunn
Name: Christopher Nunn
Title: Director
WESTLB AG, NEW YORK BRANCH,
as DIP Lender
By: /s/ Keith Min
Name: Keith Min
Title: Managing Director
By: /s/ Christopher Nunn
Name: Christopher Nunn
Title: Director
Credit Agreement
REGISTRATION RIGHTS AGREEMENT
Exhibit 10.22
THIS REGISTRATION RIGHTS AGREEMENT (the “Agreement”) is made and entered into as of February 26, 2010, by and among
REG Newco, Inc., a Delaware corporation (together with its successors and assigns, the “Company”), and Biofuels Company of America,
LLC, an Illinois limited liability company (“BCA”).
1. Background. Pursuant to that certain Asset Purchase Agreement dated, March 14, 2008, by and among the Renewable Energy
Group, Inc. (“REG”), Blackhawk Biofuels, LLC, BCA, Biodiesel Investment Group, LLC and Bunge North America, Inc. (the “Purchase
Agreement”), REG entered into a Registration Rights Agreement dated May 9, 2008 with BCA to provide BCA with certain registration
rights regarding REG’s equity securities (the “Prior BCA Agreement”). Pursuant to that certain Second and Amended Agreement and Plan
of Merger executed November 20, 2009, by and among REG, REG Merger Sub, Inc. and the Company (the “Merger Agreement”), REG
Merger Sub, Inc. will merge with and into REG in exchange for equity securities of the Company distributed to REG stockholders,
including BCA. Pursuant to the Merger Agreement, the Company is obligated to enter into this Agreement in order to carry over and
provide BCA with certain registration rights regarding the Company’s equity securities. Certain terms used herein are defined in Section 2
of this Agreement.
2. Definitions. As used herein, unless the context otherwise requires, the following terms have the following respective meanings:
2007 Registration Rights Agreement: The Amended and Restated Registration Rights Agreement dated as of July 18, 2007 by and
among REG and the other parties thereto and amended by that First Amendment to the Amended and Restated Registration Rights
Agreement dated June 25, 2008 by and among REG and the other parties thereto, which agreement terminated the prior Registration
Rights Agreement dated as of August 1, 2006 by and among REG and the other parties thereto, and which agreement shall be
terminated upon closing of the Merger Agreement and execution of the REG Newco Registration Rights Agreement.
Commission: The Securities and Exchange Commission or any other Federal agency at the time administering the Securities Act.
Common Stock: The common stock of the Company.
Exchange Act: The Securities Exchange Act of 1934, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time. Reference to a particular section of the Securities Exchange Act
of 1934 shall include a reference to the comparable section, if any, of any such similar Federal statute.
Form S-3: Such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act
subsequently adopted by the Commission
that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the
Commission.
Holder: BCA or any assignee thereof in accordance with Section 8 hereof.
Initial Offering: The Company’s first firm commitment underwritten public offering of its Common Stock under the Securities
Act.
Person: A corporation, an association, a partnership, a limited liability company, a business, an individual, a governmental or
political subdivision thereof or a governmental agency.
REG Newco Registration Rights Agreement: The Registration Rights Agreement dated as of February 26, 2010 by and among the
Company and the other parties thereto, as such agreement may be amended from time to time.
Registrable Securities: (i) The shares of Common Stock issued to BCA pursuant to the Purchase Agreement
Registration Expenses: All expenses incident to the Company’s performance of or compliance with Section 3.1 below, including,
without limitation, all registration, filing and National Association of Securities Dealers fees, all fees and expenses of complying with
applicable laws (including securities or blue sky laws), all word processing, duplicating and printing expenses, messenger and delivery
expenses, the fees and disbursements of counsel for the Company and of its independent public accountants, including, without
limitation, the expenses of any special audits or “cold comfort” letters required by or incident to such performance and compliance, the
fees and disbursements of one special counsel for the selling Holders selected by the selling Holders with the approval of the
Company, which approval shall not be unreasonably withheld, which fees and disbursements shall not exceed $50,000, premiums and
other costs of policies of insurance against liabilities arising out of the public offering of the Registrable Securities being registered, the
fees and expenses of any special experts retained by the Company in connection with such offering, the fees and expenses of any
qualified independent underwriter or other independent appraiser participating in any offering pursuant to the Conduct Rules of the
National Association of Securities Dealers, Inc., all printing, mailing, courier and overnight delivery charges (except to the extent borne
by underwriters), all travel expenses of the Company’s officers and employees and any other expenses of the Company in connection
with attending or hosting meetings with prospective purchasers of the offered securities, and any fees and disbursements of
underwriters customarily paid by issuers or sellers of securities, but excluding Selling Expenses, if any, provided, that, in any case
where Registration Expenses are not to be borne by the Company, such expenses shall not include salaries of Company personnel or
general overhead expenses of the Company, auditing fees, premiums or other expenses relating to liability insurance required by
underwriters of the Company or other expenses for the preparation of financial statements or other data normally prepared by
2
the Company in the ordinary course of its business or which the Company would have incurred in any event.
Securities Act: The Securities Act of 1933, or any similar Federal statute, and the rules and regulations of the Commission
thereunder, all as of the same shall be in effect at the time. References to a particular section of the Securities Act of 1933 shall include
a reference to the comparable section, if any, of any such similar Federal statute.
Selling Expenses: Underwriting discounts and commissions and stock transfer taxes relating to Registrable Securities covered by
such registration.
3. Registration under Securities Act, etc.
3.1 Company Registration.
(a) If (but without any obligation to do so) the Company proposes to register under the Securities Act (whether for its own
account or otherwise) any of its Common Stock and solely for cash in connection with a public offering of such Common Stock (other
than (i) a registration relating solely to the sale of securities to participants in a Company stock plan, (ii) a registration relating to a
corporate reorganization or other transaction under Rule 145 of the Securities Act, (iii) a registration on any form that does not include
substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable
Securities or (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt
securities that are also being registered), the Company shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within twenty (20) days after mailing of such notice by the Company in
accordance with Section 7, the Company shall, subject to the provisions of Section 3.1(c), use its commercially reasonable efforts to
cause to be registered under the Securities Act all of the Registrable Securities that each such Holder has requested to be registered.
(b) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration under this
Section 3.1 prior to the effectiveness of such registration whether or not any Holder has elected to include securities in such
registration. The expenses of such withdrawn registration shall be borne by the Company in accordance with Section 3.6 hereof.
(c) Underwriting Requirements. In connection with any offering involving an underwriting of shares of the Company’s capital
stock, the Company shall not be required under this Section 3.1 to include any of the Holders’ securities in such underwriting unless
they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other
persons entitled to select the underwriters) and enter into an underwriting agreement in customary form with an underwriter or
underwriters selected by the Company, and then only in such quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the
3
offering by the Company. If the total amount of securities, including Registrable Securities, requested by holders to be included in such
offering pursuant to this Agreement or the REG Newco Registration Rights Agreement exceeds the amount of securities sold other than
by the Company that the underwriters determine in their sole discretion is compatible with the success of the offering, then the
Company shall be required to include in the offering only that number of such securities, including Registrable Securities, that the
underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities so included to be
apportioned on a pro rata basis first among the selling holders of registrable securities subject to and in accordance with the REG
Newco Registration Rights Agreement, and then, if any additional shares may be included in the underwriting, pro rata among the
Holders of Registrable Securities subject to this Agreement according to the total amount of Registrable Securities owned by each such
selling Holder) unless such offering is the Initial Offering in which case the selling Holders may be excluded if the underwriters make
the determination described above.
3.2 Registration Procedures. If and whenever the Company is required to use its commercially reasonable efforts to effect the
registration of any Registrable Securities under the Securities Act as provided in Section 3.1 above, the Company shall as expeditiously as
possible:
(a) prepare and as soon thereafter as possible (but with respect to a public offering other than the Initial Offering, in any event no
later than ninety (90) days after the last request for inclusion in the applicable registration is timely given to the Company) file with the
Commission the requisite registration statement to effect such registration and thereafter use commercially reasonable efforts to cause
such registration statement to become effective and remain effective for a period of one hundred twenty (120) days or, if earlier, until
the distribution contemplated by the registration statement has been completed (the “Effectiveness Period”); provided, however, in the
case of any registrations on Form S-3 that are intended to be offered on a continuous or delayed basis, the Effectiveness Period shall be
extended until all applicable Registrable Securities thereunder are sold. Notwithstanding the foregoing, the Company may discontinue
any registration of its securities which are not Registrable Securities at any time prior to the effective date of the registration statement
relating thereto; and provided further, in the event that, in the good faith judgment of the Company, it is advisable to suspend use of the
prospectus relating to such registration statement for a discrete period of time (a “Deferral Period”) due to pending or proposed material
corporate developments or similar material events that have not yet been publicly disclosed and as to which the Company believes
public disclosure will be prejudicial to the Company, the Company shall deliver a certified resolution of the Board, signed by a duly
authorized officer of the Company, to each Holder of Registrable Securities covered by the Registration Statement to the effect of the
foregoing and such Holders, upon receipt of such certificate, and the Company agree not to dispose of any Registrable Securities
covered by any registration or prospectus (other than in transactions exempt from the registration requirements under the Securities
Act); provided, however, that the Company shall not utilize more than four (4) Deferral Periods in any twelve (12) month period and in
no event shall the aggregate length of all such Deferral Periods in any such
4
twelve (12) month period be greater than ninety (90) days. The Effectiveness Period shall be extended for a period of time equal to any
Deferral Period.
(b) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such registration statement until such time as all of such
securities have been disposed of in accordance with the intended methods of disposition by the Holder or Holders thereof set forth in
such registration statement;
(c) furnish to each Holder of Registrable Securities covered by such registration statement such number of conformed copies of
such registration statement and of each such amendment and supplement thereto (in each case including without limitation all exhibits),
such number of copies of the prospectus contained in such registration statement (including without limitation each preliminary
prospectus and any summary prospectus) and any other prospectus filed under Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, as such Holder may reasonably request;
(d) use commercially reasonable efforts to register or qualify all Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws of such jurisdictions as each Holder thereof shall reasonably request,
to keep such registration or qualification in effect for so long as such registration statement remains in effect, and to take any other
action which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in such jurisdictions of the
securities owned by such Holder, except that the Company shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not but for the requirements of this clause (d) be obligated to be
so qualified or to consent to general service of process in any such jurisdiction;
(e) use its commercially reasonable efforts to cause all Registrable Securities covered by such registration statement to be
registered with or approved by such other governmental agencies or authorities in the United States as may be necessary to enable the
Holder or Holders thereof to consummate the disposition of such Registrable Securities;
(f) notify each Holder of Registrable Securities covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, or, if for any reason it shall be necessary during such time period to amend or supplement
the registration statement or
5
the prospectus in order to comply with the Securities Act, at the request of any such Holder promptly prepare and furnish to such
Holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall (i) not include an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances
under which they were made or (ii) effect such compliance;
(g) otherwise use commercially reasonable efforts to comply with all applicable rules and regulations of the Commission, and
make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve
(12) months, but not more than eighteen (18) months, beginning with the first full calendar month after the effective date of such
registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act, and shall furnish to
each such Holder of Registrable Securities covered by such registration statement at least five (5) business days prior to the filing
thereof a copy of any amendment or supplement to such registration statement or prospectus and shall not file any thereof to which any
such Holder shall have reasonably objected on the grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act or of the rules or regulations thereunder;
(h) provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such registration statement;
(i) use its commercially reasonable efforts to list all Registrable Securities covered by such registration statement on any securities
exchange on which any of the equity securities of the Company of the same class as the Registrable Securities are then listed;
(j) cooperate with the underwriters with respect to all roadshows and other marketing activities as may be reasonably requested by
the underwriters; and
(k) enter into such agreements and take such other actions as the Holders of Registrable Securities covered by a registration
statement shall reasonably request in order to expedite or facilitate the disposition of such Registrable Securities.
The Company may require each Holder of Registrable Securities as to which any registration is being effected to furnish to the Company
such information regarding such Holder and the distribution of such securities as the Company may from time to time reasonably request in
writing.
Each Holder of Registrable Securities agrees by acquisition of such Registrable Securities that upon receipt of any notice from the
Company of the happening of any event of the kind described in clause (f) of this Section 3.2, such Holder will forthwith discontinue such
Holder’s disposition of Registrable Securities pursuant to the registration statement relating to
6
such Registrable Securities until such Holder’s receipt of the copies of the supplemented or amended prospectus contemplated by clause
(f) of this Section 3.2 and, if so directed by the Company, will deliver to the Company (at the Company’s expense) all copies, other than
permanent file copies, then in such Holder’s possession of the prospectus relating to such Registrable Securities current at the time of
receipt of such notice.
3.3 Preparation; Reasonable Investigation. In connection with the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give one representative designated by the Holders of a majority of the
Registrable Securities included in such registration statement, and one special counsel and accounting firm similarly designated by the
Holders of a majority of the Registrable Securities included in such registration statement, the opportunity to participate in the preparation
of such registration statement, each prospectus included therein or filed with the Commission, and each amendment thereof or supplement
thereto and will give each of them such access to its books and records and such opportunities to discuss the business of the Company with
its officers and the independent public accountants who have certified its financial statements as shall be necessary, in the opinion of such
Holders’ counsel, to conduct a reasonable investigation within the meaning of the Securities Act; unless the holders of registrable securities
under the REG Newco Registration Rights Agreement shall have appointed a representative, special counsel or accounting firm with
respect to such filing, in which event the Company shall have no obligation to provide the opportunity to participate to an additional
representative, special counsel or accounting firm, as the case may be, designated by the Holders of Registrable Securities as provided in
this Section 3.3.
3.4 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this
Section 3 with respect to the Registrable Securities of any selling Holder that at the request of the Company such Holder shall furnish to the
Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities
as shall be reasonably required to effect the registration of such Holder’s Registrable Securities.
3.5 Additional Rights of Holders. If any registration statement prepared under this Agreement refers to any Holder by name or
otherwise as the Holder of any securities of the Company, then such Holder shall have the right to require (a) the insertion therein of
language, in form and substance satisfactory to such Holder to the effect that the holding by such Holder of such securities does not
necessarily make such Holder a “controlling person” of the Company within the meaning of the Securities Act and is not to be construed as
a recommendation by such Holder of the investment quality of the Company’s debt or equity securities covered thereby and that such
holding does not imply that such Holder will assist in meeting any future financial requirements of the Company, or (b) in the event that
such reference to such Holder by name or otherwise is not required by the Securities Act or any rules and regulations promulgated
thereunder, the deletion of the reference to such Holder.
3.6 Expenses of Registration. The Company shall pay all Registration Expenses in connection with any registration requested
pursuant to Section 3.1. Any Selling Expenses in connection with any registration requested pursuant to Section 3.1 shall be allocated
among all
7
Holders on whose behalf Registrable Securities of the Company are included in such registration and the holders on whose behalf
registrable securities of the Company are included in such registration pursuant to the REG Newco Registration Rights Agreement, on the
basis of the respective amounts of the registrable securities of the Company then being registered on their behalf.
3.7 Indemnification.
(a) Indemnification by the Company . In the event of any registration of any securities of the Company under the Securities Act,
the Company will, and hereby does, indemnify and hold harmless the Holder of any Registrable Securities covered by such registration
statement, its directors and officers, legal counsel and accountants for such Holder, and each other Person, if any, who controls such
Holder, within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which any of the
foregoing persons may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any registration statement under which such securities were registered under
the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Company will reimburse such Holder and each such director, officer, and
controlling person for any legal or any other expenses reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such Holder specifically stating that it is for use in the
preparation thereof; provided further, that the Company shall not be liable to any Person who participates as an underwriter in the
offering or sale of Registrable Securities or any other Person, if any, who controls such underwriter within the meaning of the
Securities Act, in any such case to the extent that any such loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of such Person’s failure to send or give a copy of the final prospectus, as the same may be then supplemented or
amended, to the Person asserting an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the
written confirmation of the sale of Registrable Securities to such Person if such statement or omission was corrected in such final
prospectus; and provided still further, that the indemnity agreement contained in this Section 3.7(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld). Such indemnity shall remain in full force and effect regardless of any
8
investigation made by or on behalf of such Holder or any such director, officer, underwriter or controlling person and shall survive the
transfer of such securities by such Holder.
(b) Indemnification by the Holders. Each Holder, severally and not jointly, shall indemnify and hold harmless the Company, each
director of the Company, each officer of the Company and each other Person, if any, who controls the Company within the meaning of
the Securities Act, any underwriter, any other Holder selling securities in such registration statement and any officer, director, legal
counsel or accountant or controlling person of any such Holder, against any losses, claims, damages, or liabilities (joint or several) to
which any of the foregoing persons may become subject, under the Securities Act, the Exchange Act or other federal or state securities
law insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any statement or
alleged statement in or omission or alleged omission from such registration statement, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written information furnished to the Company through an
instrument duly executed by such Holder specifically stating that it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus, amendment or supplement; provided, however, that the indemnity
agreement contained in this Section 3.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld. The
maximum liability of each Holder for any such indemnification shall not exceed the amount of aggregate gross proceeds received by
such Holder from the sale of his/its Registrable Securities, except in the case of willful fraud. Such indemnity shall remain in full force
and effect, regardless of any investigation made by or on behalf of the Company or any such director, officer or controlling Person and
shall survive the transfer of such securities by such Holder.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in Section 3.7(a) or (b) above, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of the commencement of such action; provided that the failure of
any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations under Section 3.7(a)
or (b) above, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. In case any such
action is brought against any indemnified party, unless in such indemnified party’s reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist in respect of such claim, the indemnifying party shall be entitled to participate in
and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with
counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party
9
for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the indemnified party, consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party
of a release reasonably acceptable to such indemnified party from all liability in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that specified in Sections 3.7(a), (b) and (c) above (with appropriate
modifications) shall be given by the Company and each Holder of Registrable Securities with respect to any required registration or
other qualification of securities under any Federal or state law or regulation of any governmental authority other than the Securities
Act.
(e) Indemnification Payments. The indemnification required by this Section 3.7 shall be made by periodic payments of the
amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is
incurred.
(f) Contribution. If the indemnification provided for in this Section 3.7 is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations;
provided, that in no event shall any contribution by a Holder under this Section 3.7(f) exceed the aggregate gross proceeds from the
offering received by such Holder, except in the case of willful fraud by such Holder. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified
party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or
omission.
3.8 Adjustments Affecting Registrable Securities. The Company will not effect or permit to occur any combination or subdivision
which would adversely affect the ability of the Holders of Registrable Securities to include such Registrable Securities in any registration of
its securities contemplated by this Section 3 or the marketability of such Registrable Securities under any such registration.
3.9 Subordinate Rights. All rights of Holders of Registrable Securities under this Agreement shall be subordinate and subject to the
rights granted under the REG Newco Registration Rights Agreement.
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4. Rule 144 and Rule 144A. If the Company shall have filed a registration statement pursuant to the requirements of Section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the Securities Act, the Company will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder (or, if the
Company is not required to file such reports, will, upon the request of any Holder of Registrable Securities, make publicly available other
information) and will take such further action as any Holder of Registrable Securities may reasonably request, all to the extent required
from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act within the limitation of
the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule
or regulation hereafter adopted by the Commission. Upon the request of any Holder of Registrable Securities, the Company will deliver to
such Holder a written statement as to whether it has complied with such requirements (at any time after ninety (90) days after the effective
date of the first registration statement filed by the Company). After any sale of Registrable Securities pursuant to this Section 4, the
Company will, to the extent allowed by law, cause any restrictive legends to be removed and any transfer restrictions relating to the absence
of registration under the Securities Act to be rescinded with respect to such Registrable Securities. In order to permit the Holders of
Registrable Securities to sell the same, if they so desire, pursuant to Rule 144A promulgated by the Commission (or any successor to such
rule) (“Rule 144A”), the Company will comply with all rules and regulations of the Commission applicable in connection with use of Rule
144A. Prospective transferees of Registrable Securities that are Qualified Institutional Buyers (as defined in Rule 144A) which would be
purchasing such Registrable Securities in reliance upon Rule 144A may request from the Company information regarding the business,
operations and assets of the Company. Within five (5) business days after receipt by the Company of any such request, the Company shall
deliver to any such prospective transferee copies of annual audited and quarterly unaudited financial statements of the Company and such
other information as may be required to be supplied by the Company for it to comply with Rule 144A.
5. Amendments and Waivers. This Agreement may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or prospectively) and the Company may take any action herein
prohibited or omit to perform any act herein required to be performed by it, only if the Company agrees and it shall have obtained written
consents to such amendment, action or omission to act from the Holders of at least a majority of the Registrable Securities; provided,
however, that any such amendment or consent that would have a material adverse effect on a particular Holder but would not have a similar
material adverse effect on all Holders generally or would otherwise remove a Holder as a party to this Agreement shall require the consent
of such Holder. Each Holder of any Registrable Securities at the time or thereafter outstanding shall be bound by any consent authorized by
this Section 5, whether or not such Registrable Securities shall have been marked to indicate such consent.
6. Nominees for Beneficial Owners. In the event that any Registrable Securities are held by a nominee for the beneficial owner
thereof, the beneficial owner thereof may, at its election, be treated as the Holder of such Registrable Securities for purposes of any request
or other action by any Holder or Holders of Registrable Securities pursuant to this Agreement or
11
any determination of any number of percentage of Registrable Securities held by any Holder or Holders of Registrable Securities
contemplated by this Agreement. If the beneficial owner of any Registrable Securities so elects, the Company may require assurances
reasonably satisfactory to it of such owner’s beneficial ownership of such Registrable Securities.
7. Notices. Except as set forth in Section 8, all communications provided for hereunder shall be sent (a) by first-class mail and (i) if
addressed to a party other than the Company, to such party at the address furnished to the Company by such party, or (ii) if addressed to the
Company, at the address of its principal place of business, Attention: President, or at such other address, or to the attention of such other
officer, as the Company shall have furnished to each Holder of Registrable Securities at the time outstanding or (b) by electronic
transmission in the manner permitted by the General Corporation Law of the State of Delaware.
8. Assignment.
(a) The rights to cause the Company to register Registrable Securities pursuant to Section 3 may be assigned (but only with all related
obligations) by (i) a Holder to a transferee or assignee of such securities who, after such assignment or transfer, holds at least 250,000
shares of such Holder’s Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations and
other recapitalizations and including for purposes of such calculation the shares of Common Stock then issuable upon conversion of
the Preferred Stock of the Company), or (ii) any Holder who transfers all of its Registrable Securities to a single transferee or assignee,
or (iii) a Holder to its partners, members, stockholders, subsidiaries or affiliates (the “Distributees”); provided, however, prior to an
assignment pursuant to subclause (iii), the Distributees shall appoint a single attorney-in-fact for the purpose of exercising any rights,
receiving notices or taking any action under this Agreement; and provided, further, in each case: (1) the Company is, within a
reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned and (2) such transferee or assignee agrees in writing to be
bound by and subject to the terms and conditions of this Agreement. For the purposes of determining the number of shares of
Registrable Securities held by a transferee or assignee, the holdings of transferees and assignees of a partnership or limited liability
company who are partners or retired partners of such partnership or members of such limited liability company (including spouses and
ancestors, lineal descendants and siblings of such partners or members or spouses who acquire Registrable Securities by gift, will or
intestate succession) shall be aggregated together and with the partnership or limited liability company, as the case may be. For
purposes of this Agreement, the terms “affiliates” or “affiliated” shall mean, with respect to any person or entity, any person or entity
that, directly or indirectly, controls or is controlled by or is under common control with such person or entity. For the purposes of the
preceding sentence, the term “control” shall mean the possession, directly or indirectly, through one or more intermediaries in the case
of any person or entity, of the power or authority, through ownership of voting securities, by contract or otherwise, to direct the
management, activities or policies of the person or entity.
12
(b) Notwithstanding anything to the contrary contained in this Agreement, any Registrable Securities transferred or assigned by BCA to
Bunge North America, Inc. shall become “Senior Registrable Securities” under, and entitled to such rights under, the REG Newco
Registration Rights Agreement.
9. Termination. The right of any Holder to request registration or inclusion in any registration pursuant to Section 3.1 shall terminate
at such time as both (A) all shares of Registrable Securities held or entitled to be held upon conversion by such Holder may immediately be
sold under Rule 144 during any ninety (90) day period and (B) such Holder holds less than three percent (3%) of the issued and outstanding
shares of Common Stock of the Company.
10. Descriptive Headings. The descriptive headings of the several sections and paragraphs of this Agreement are inserted for
reference only and shall not limit or otherwise affect the meaning hereof. References herein to Sections are references to Sections of this
Agreement, except as otherwise indicated.
11. Specific Performance. The parties hereto recognize and agree that money damages may be insufficient to compensate the Holders
of any Registrable Securities for breaches by the Company of the terms hereof and, consequently, that the equitable remedy of specific
performance of the terms hereof will be available in the event of any such breach.
12. Governing Law. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be
governed by, the internal laws of the State of Delaware, without regard to rules or principles of conflicts of law requiring the application of
the law of another state.
13. Counterparts. This Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an
original, but all such counterparts shall together constitute one and the same instrument.
14. Prior BCA Agreement. Upon closing of the Merger Agreement, the Prior BCA Agreement is hereby terminated and of no further
force or effect, and neither REG nor BCA shall have any rights, obligations or liabilities under or by reason of the Prior BCA Agreement.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
13
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement or have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as of the date first above written.
COMPANY:
REG NEWCO, INC.
/s/ Jeffrey Stroburg
By:
Name: Jeffrey Stroburg
Title:
Chief Executive Officer
BCA:
BIOFUELS COMPANY OF AMERICA
/s/ Mark A. Burke
By:
Name: Mark A. Burke
President
Title:
REG for purposes of Section 14 only:
RENEWABLE ENERGY GROUP, INC.
/s/ Jeffrey Stroburg
By:
Name: Jeffrey Stroburg
Title:
Chief Executive Officer
REGISTRATION RIGHTS AGREEMENT SIGNATURE PAGE
14
Exhibit 21
RENEWABLE ENERGY GROUP, INC. SUBSIDIARIES
REG Biofuels, Inc.
REG Marketing & Logistics Group, LLC
REG Services Group, LLC
REG Construction & Technology Group, LLC
REG Ventures, LLC
REG Ralston, LLC
REG Houston, LLC
REG Danville, LLC
REG Newton, LLC
REG Seneca, LLC
REG New Orleans, LLC
REG Emporia, LLC
REG Clovis, LLC
REG Processing Systems, LLC
416 S. Bell, LLC 50% owned
Delaware
Iowa
Iowa
Iowa
Iowa
Iowa
Texas
Delaware
Iowa
Iowa
Iowa
Iowa
Iowa
Iowa
Iowa
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statements No. 333-161187 on Form S-8 of our report dated March 31, 2011,
relating to the financial statements and financial statement schedule of Renewable Energy Group, Inc. and subsidiaries, appearing in the
Annual Report on Form 10-K of Renewable Energy Group, Inc. and subsidiaries for the year ended December 31, 2010.
Exhibit 23
/S/ DELOITTE & TOUCHE LLP
Des Moines, Iowa
March 31, 2011
Exhibit 31
I, Jeffrey Stroburg, certify that:
1. I have reviewed this annual report on Form 10-K of Renewable Energy Group, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Dated: March 31, 2011
/s/ Jeffrey Stroburg
Jeffrey Stroburg
Chief Executive Officer
I, Chad Stone, certify that:
1. I have reviewed this annual report on Form 10-K of Renewable Energy Group, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;
and
c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Dated: March 31, 2011
/s/ Chad Stone
Chad Stone
Chief Financial Officer
SECTION 1350 CERTIFICATIONS
Exhibit 32
I, Jeffrey Stroburg, Chief Executive Officer of Renewable Energy Group, Inc. (the “Company”), certify, pursuant to 18 U.S.C. § 1350, as
adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge the Annual Report on Form 10-K of the Company (the
“Report”), which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, and all information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: March 31, 2011
/s/ Jeffrey Stroburg
Jeffrey Stroburg
Chief Executive Officer
SECTION 1350 CERTIFICATIONS
I, Chad Stone, Chief Financial Officer of Renewable Energy Group, Inc. (the “Company”), certify, pursuant to 18 U.S.C. § 1350, as
adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge the Annual Report on Form 10-K of the Company (the
“Report”), which accompanies this Certificate, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, and all information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
Dated: March 31, 2011
/s/ Chad Stone
Chad Stone
Chief Financial Officer