EXHIBIT 10.8


 


First
Amendment to Construction Loan Agreement dated August 27, 2002, by and between
First


National
Bank of Omaha and Badger State Ethanol, LLC.


 

















 


FIRST
AMENDMENT TO CONSTRUCTION LOAN AGREEMENT


 


This First Amendment to Construction Loan Agreement
made as of the 27th day of August, 2002, by and among First National
Bank of Omaha (“BANK”), a national banking association with principal offices
in Omaha, Nebraska, and Badger State Ethanol, LLC (“BORROWER”), a Wisconsin
limited liability company.


 


Whereas, BANK and BORROWER executed a written Construction Loan
Agreement dated as of August 28, 2001 (the Construction Loan Agreement,
together with all amendments thereto is collectively called the “AGREEMENT”).


 


Now, Therefore, in consideration of the AGREEMENT, and their mutual
promises made herein, BANK and BORROWER agree as follows:


 


1.             Terms
which are typed herein as all capitalized words and are not defined herein
shall have the same meanings as when described in the AGREEMENT.


 


2.             Section
1, Paragraph 1.4 of the AGREEMENT is hereby amended to read, effective
immediately:


 


1.4                                 “BORROWING
BASE” means the lesser of:


A.            $3,500,000.00
less the aggregate amount of Letters of Credit issued by BANK and outstanding
for the BORROWER’s account, or


B.            The
aggregate of (i) 75% of BORROWER’s inventory of ethanol, corn, milo or other
grains, and distiller’s dried grain, all at current value on the date reported,
plus (ii) 75% of the amount of BORROWER’s Accounts other than State and Federal
Incentive Payments aged less than thirty days, and Accounts for State and
Federal Incentive Payments aged 120 days or less, excluding any Accounts deemed
ineligible by BANK.


 


3.             Section
2, Paragraphs 2.7 and 2.7.1 are hereby amended to read, effective immediately:


 


2.7                                 REVOLVING
LOAN.            BANK agrees to lend
$3,500,000.00 to BORROWER pursuant to this facility.  BANK will credit proceeds of this revolving loan (“REVOLVING
LOAN”) to BORROWER’s deposit account with the BANK, bearing number 22674184.


 


2.7.1                        Subject to
the terms hereof, the BANK will lend the BORROWER, from time to time until the
“LOAN TERMINATION DATE” such sums in integral multiples of $10,000.00 as the
BORROWER may request by reasonable same day notice to the BANK, received by the
BANK not later than 11:00 A.M. of such day, but which shall not exceed in the
aggregate principal amount at any one time outstanding, $3,500,000.00 (the
“LOAN COMMITMENT”).  The BORROWER may
borrow, repay without


 


1

















 


penalty or premium and reborrow hereunder, from the
date of this AGREEMENT until the LOAN TERMINATION DATE, either the full amount
of the LOAN COMMITMENT or any lesser sum which is $10,000.00 or an integral
multiple thereof.  It is the intention
of the parties that the outstanding balance of the REVOLVING LOAN shall not
exceed the BORROWING BASE, and if at any time said balance exceeds the
BORROWING BASE, BORROWER shall forthwith pay BANK sufficient funds to reduce
the balance of the REVOLVING LOAN until it is in compliance with this
requirement.  BANK will also issue
Letters of Credit at BORROWER’s request, aggregating no more than $1,000,000.00
at any one time.  BORROWER will execute
BANK’s standard documentation regarding such Letters of Credit and pay BANK’S
usual and customary fees for same.  The
amount of outstanding Letters of Credit will reduce the LOAN COMMITMENT.


 


4.             Section
1, Paragraph 1.19 of the AGREEMENT is amended, effective immediately, to read:


 


1.19                           “LOAN
TERMINATION DATE” means the earliest to occur of the following: (i) as to the
CONSTRUCTION NOTE, January 1, 2003, as to the REVOLVING NOTE, August 26, 2003,
and the TERM NOTE, January 1, 2008 (ii) the date the OBLIGATIONS are
accelerated pursuant to this AGREEMENT, and (iii) the date BANK receives (a)
notice in writing from BORROWER of BORROWER’s election to terminate this
AGREEMENT and (b) indefeasible payment in full of the OBLIGATIONS.


 


5.             The
AGREEMENT identified the concept of a BORROWING BASE CERTIFICATE acceptable to
BANK and a form of COMPLIANCE CERTIFICATE. 
Effective immediately the BORROWING BASE CERTIFICATE shall be in the
form of Exhibit 1-E, attached hereto, and the COMPLIANCE CERTIFICATE shall be
in the form of Exhibit 1-D, attached hereto.


 


6.             BORROWER
certifies by its execution hereof that the representations and warranties set
forth in Section 5 of the AGREEMENT are true as of this date, and that no EVENT
OF DEFAULT under the AGREEMENT, and no event which, with the giving of notice
or passage of time or both, would become such an EVENT OF DEFAULT, has occurred
as of this date.


 


7.             Except
as amended hereby the parties ratify and confirm as binding upon them all of
the terms of the AGREEMENT.


 


2

















 


In witness whereof the parties set their hands as of the date first
written above.


 


	
  First National Bank of Omaha

  	
  Badger State Ethanol, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
  by

  	
  /s/ Brian Thome

  	
   

  	
  by

  	
  /s/ Gary L. Kramer

  	
   

  
	
  Brian Thome, Commercial Loan Officer

  	
   

  	
  Gary L. Kramer,
  President

  	
   

  
						



 


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EXHIBIT 1-D


Badger State Ethanol, LLC


 


CERTIFICATE OF COMPLIANCE


 


	
  TO:

  	
  First National Bank of Omaha

  
	
   

  	
  1620 Dodge Street STOP 1050

  
	
   

  	
  Omaha, Nebraska 68197-1050

  
	
   

  	
  Attn: Brian Thome

  



 


I am
a                    of
Badger State Ethanol, LLC (the “BORROWER”) and under the terms of a
CONSTRUCTION LOAN AGREEMENT (the “AGREEMENT”) between the BANK and the BORROWER
dated August 28th, 2001, and as it may be amended from time to time,
certify that:


 


1.                                       The
attached financial statements of the BORROWER from
                    through
                          (the
“STATEMENT DATE”) are true and correct and have been accurately prepared in
accordance with generally accepted accounting principles (GAAP) applied
consistently with the BORROWER’s most recent annual financial statement; and


 


2.                                       I
have read and am familiar with the AGREEMENT and have no knowledge of an
existing EVENT OF DEFAULT under the AGREEMENT or of any event which would,
after the lapse of time or the giving of notice, or both, constitute an EVENT
OF DEFAULT under the AGREEMENT.


 


The calculations regarding each financial covenant, as
of the STATEMENT DATE, and regardless of whether the BORROWER must be in
compliance with each covenant as of the STATEMENT DATE, are as follows:


 


	
  COVENANT

  	
   

  	
  AT PRIOR

  YEAR-END

  	
   

  	
  ACTUAL

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NET WORTH

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  
								



 


6.2.2                        The
BORROWER shall maintain a NET WORTH of not less than (i) $20,000,000.00 at all
times after COMPLETION DATE and (ii) $20,000,000.00 plus an amount each fiscal
year equal to the greater of (a) $250,000.00 or (b) the amount of undistributed
earnings during the current fiscal year, at all times subsequent thereto.


 


	
   

  	
   

  	
  REQUIRED

  	
   

  	
  ACTUAL

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FIXED CHARGE
  COVERAGE RATIO

  	
   

  	
  1.25:1.0

  	
   

  	
  :1.0

  	
   

  



 


6.2.1        The BORROWER shall maintain a FIXED
CHARGE COVERAGE RATIO, measured quarterly, of no less than 1.25 : 1.0, for all
periods following COMPLETION DATE.


 


	
  CAPITAL
  EXPENDITURES (Maximum)

  	
   

  	
  $

  	
  500,000

  	
   

  	
  $

  	
   

  	
   

  
	
  (Excluding
  construction and approved change orders)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  WORKING CAPITAL
  (Minimum)

  	
   

  	
  $

  	
  2,000,000

  	
   

  	
  $

  	
   

  	
   

  



 


6.2.4        BORROWER shall maintain, at all times
subsequent to COMPLETION DATE and measured at fiscal year end, minimum WORKING
CAPITAL of $2,000,000.00.


 


4

















 


For the purpose of determining Incentive Pricing changes, the Borrowers
INDEBTNESS to NET WORTH Ratio is:


	
   

  	
   

  	
  :1.00

  	
   

  	
   

  	
   

  



 


4.                                       BORROWER
has not made or paid distributions to members of the BORROWER in excess of the
PERCENTAGE allowed.  Note that
distributions are only allowed annually based on previous year’s audited
financials.  Calculation of “Proposed
Distributions” is required for communication purposes only.  Calculated EXCESS CASH FLOW, allowable
distributions and distributions made in the current fiscal year are:


 




	
  EXCESS CASH FLOW

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Proposed distributions

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Year-to-date distributions

  	
   

  	
  $

  	
   

  






 


5.                                       BORROWER
has not incurred any additional INDEBTEDNESS except debt allowed under the
AGREEMENT or debt otherwise authorized by BANK approval.


 


6.                                       There
has been no personnel change to the ethanol plant management that would be in
violation of the AGREEMENT.  ICM
Marketing, Inc continues to be the marketer of BORROWER’s Distiller’s Grain
products. Murex, N.A., Ltd., continues to be the marketer of BORROWER’s ethanol
products.


 


	
   

  	
  Badger
  State Ethanol, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary L. Kramer

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Its:

  	
  President

  	
   

  
						



 


 


For BANK use only:


 


Rate change based on Incentive Pricing:


 


	
  Old rate:

  	
   

  	
  New rate:

  
	
   

  	
   

  	
   

  
	
  Effective date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Verified by:

  	
   

  	
   

  



 


5

















 


Badger
State Ethanol, LLC


 


	
  First National Bank of Omaha

  	
   

  	
   

  	
  Borrowing Base
  Certificate

  
	
  ATTN:  Brian Thome

  	
   

  	
   

  	
   

  
	
  1620 Dodge St. STOP 1050

  	
   

  	
   

  	
  Report No.

  
	
  Omaha, NE 
  68197-1050

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date:

  



 


	
  1.

  	
  Total Accounts
  Receivable other than State or Federal Incentive payments

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  ADD
  Total State and Federal Incentive Payment Accounts Receivable

  	
   

  	
  +

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DEDUCT
  Ineligible Accounts, other than State or Federal Incentive Ineligible
  Accounts (31 days or more from invoice
  date)

  	
   

  	
  -

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DEDUCT
  Ineligible State and Federal Incentive Payment Accounts (121 days or more from invoice date)

  	
   

  	
  -

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DEDUCT
  Ineligible Accounts

  (as determined by Bank)

  	
   

  	
  -

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Eligible Accounts Receivable

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
   

  	
  MULTIPLY by
  Borrowing Base Factor

  	
   

  	
  X 75%

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Accounts Receivable Loan
  Availability

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  4. 

  	
  Ending Distillers Grain Inventory

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5. 

  	
  Ending Corn or Milo Inventory

  	
   

  	
  +

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6. 

  	
  Ending Ethanol Inventory

  	
   

  	
  +

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Eligible Inventory (Sum of Lines, 3,4,5) 

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
   

  	
  MULTIPLY by
  Borrowing Base Factor

  	
   

  	
  X 75%

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Inventory Loan
  Availability

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  TOTAL Borrowing Base

  	
   

  	
  ADD
  Lines 3&7

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Outstanding Loan Balance

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  Letters of Credit

  (not to exceed $1,000,000)

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  Total Outstanding Balance

  (not to exceed $3,500,000)

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  Margin

  	
   

  	
  Line 8 MINUS Line 11

  	
   

  	
  $

  	
   

  



 


 


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To induce the First National Bank of Omaha (herein called Bank) to make
an advance under the Construction Loan Agreement dated August 28, 2001, between
the undersigned and the Bank, and any amendments thereto, the undersigned
hereby reaffirms the Bank’s security interest in:  all inventory, whether now owned or hereafter acquired, and the
proceeds thereof; and, each and every account whether such right to payment now
exists or hereafter arises, and the proceeds thereof.  The undersigned also certifies that the Borrowing Base as
represented above is true and correct and that there is no default under the aforementioned
Agreement, or on any of the Borrower’s liabilities to the Bank.


 


	
  Borrower:

  	
   

  	
  Badger State Ethanol, LLC

  
	
   

  	
   

  	
   

  
	
  Signature:

  	
   

  	
  /s/ Gary L. Kramer

  	
   

  
	
  Title:

  	
   

  	
  President

  	
   

  



 


7

















 


REVOLVING PROMISSORY NOTE


 


	
  Omaha, Nebraska

  	
  $3,500,000.00

  
	
  Note Date: 
  August 27, 2002

  	
  Maturity Date:  August 26, 2003

  



 


On or before August 26, 2003, Badger State Ethanol,
LLC (“BORROWER”) promises to pay to the order of First National Bank of Omaha
(“BANK”) at any of its offices in Omaha, Nebraska the principal sum hereof,
which shall be Three Million Five Hundred Thousand and no/100
($3,500,000.00)  Dollars or so much
thereof as may have been advanced by BANK, under this Note and the loan
agreement executed by the BANK and BORROWER dated as of August 28, 2001, as it
may, from time to time, be amended.


 


Interest on the principal balance from time to time
outstanding will be payable at a rate (the “RATE”) equal to one hundred (100)
basis points higher than the BASE RATE in effect from time to time until
maturity, and six per cent (6%) above the BASE RATE in effect from time to time
after maturity, whether by acceleration or otherwise.  For purposes hereof, BASE RATE shall mean the rate announced by
BANK from time to time as its “National Base Rate”.  Each time the BASE RATE shall change, the RATE shall change
contemporaneously with such change in the BASE RATE.  Interest shall be calculated on the basis of a 360-day year,
counting the actual number of days elapsed. 
Interest on the REVOLVING LOAN shall be payable monthly, commencing
September 27, 2002.


 


This note is executed pursuant to a Construction Loan
Agreement dated as of August 28, 2001, between BANK and BORROWER (the “LOAN
AGREEMENT”).  The LOAN AGREEMENT
contains additional terms of this Note, including, but not limited to
enumerated events of default, and the granting of liens to secure BORROWER’s
performance.  All capitalized terms not
otherwise defined herein shall have the same meanings as set forth in the LOAN
AGREEMENT.


 


As provided in the LOAN AGREEMENT, upon any such
enumerated default, BANK may accelerate the due date of this Note and declare
all obligations set forth herein immediately due and payable, and BANK shall
also have such other remedies as are described in the LOAN AGREEMENT and are
provided by law.  All makers and
endorsers hereby waive presentment, demand, protest and notice of dishonor,
consent to any number of extensions and renewals for any period without notice;
and consent to any substitution, exchange or release of collateral, and to the
addition or releases of any other party primarily or secondarily liable.


 


Executed as of the 27th day of August,
2002.


 


	
  Badger State Ethanol, LLC

  
	
   

  
	
   

  
	
  By

  	
  /s/ Gary L. Kramer

  	
   

  
	
   

  	
  Gary L. Kramer,
  President

  	
   

  



 


 


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