EXHIBIT 10.9


 


Second Amendment to Construction Loan Agreement dated January
1, 2003, by and between First


National Bank of Omaha and Badger State Ethanol, LLC.


 

















 


SECOND AMENDMENT TO CONSTRUCTION LOAN AGREEMENT


 


This Second
Amendment to Construction Loan Agreement made as of the 1st day of
January, 2003, 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.                                       As
of the date hereof, construction of the PROJECT has almost been accomplished,
with the exception of emissions testing and certification of same by ICM, Inc.
in form reasonably acceptable to BANK, final retainage (resolution of impact
scales, grain storage requirements, blacktop, proof of extended warranty on
chiller, final ethanol storage tank approval, and all other unresolved items
related to the punch-list dated December 18, 2002), balance of Fagen contract
(i.e. general conditions, processing piping and values, insulation, and
electrical), and change orders (i.e. site soil issues, epoxy paint, ceramic
tile for control room, lab, plant offices,
etc., vapor recovery system, natural gas reroute, well expense,
concrete, winter expense, primary switch gear, and catalytic converter)
(jointly and severally, the “REMAINING ITEMS”).


 


3.                                       BORROWER
agrees to diligently work to complete the REMAINING ITEMS, and requests BANK to
advance the sum of $1,038,914.88 of the CONSTRUCTION LOAN to fund such
work.  BANK agrees to advance such
amount, and to deposit the same in an account at BANK for the benefit of
BORROWER.  BANK will disburse funds from
such account to pay for the REMAINING ITEMS as described in the AGREEMENT.  On completion of the REMAINING ITEMS, the
remaining funds in such account shall be paid to BORROWER.  If the described amount is insufficient, for
any reason, to complete the REMAINING ITEMS, BORROWER shall pay such additional
costs as are necessary to complete the REMAINING ITEMS no later than June 30,
2003.


 


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


 


1.19                           “LOAN
TERMINATION DATE” means the earliest to occur of the following: (i) as to the
REVOLVING NOTE, August 26, 2003, as to the TERM NOTE 1, January 1, 2008, and as
to the TERM NOTE 2, January 1, 2008, and as to the TERM NOTE 3, January 1, 2008
(ii) the date the OBLIGATIONS are accelerated pursuant to this AGREEMENT, and
(iii)


 


1

















 


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.                                       Section
1, Paragraph 1.32 of the AGREEMENT is hereby amended and restated, effective
immediately, to read:


 


1.32                           “WORKING
CAPITAL” means current assets (less investments in or other amounts due from
any member, employee or any person or entity related to or affiliated with the
BORROWER and prepayments) less current liabilities (less any portion of such current
liabilities that constitute debt that is expressly subordinated to the BANK in
a writing acceptable to the BANK) plus the amount available to BORROWER for
drawing under TERM NOTE 3


 


6.                                       Section
6, Paragraph 6.2.3 of the AGREEMENT is hereby amended and restated, effective
immediately, to read:


 


6.2.3                        The
BORROWER shall determine, at each fiscal year end, the amount of its EXCESS
CASH FLOW for said fiscal year, and within one hundred twenty days following
such fiscal year end, pay twenty percent (20%) of such sum to BANK, to be
applied pro rata to the principal amount of TERM NOTE 2 and TERM NOTE 1, and
after TERM NOTE 2 is repaid, pro rata to TERM NOTE 3 and TERM NOTE 1.  Such annual payment shall not release BORROWER
from making any payment of principal or interest otherwise required by this
AGREEMENT.


 


7.                                       By
execution hereof, the parties agree that the initial principal amount of the
TERM LOAN shall be $30,600,000.00, the proceeds of which will retire the
CONSTRUCTION LOAN.  Said TERM LOAN will
be paid by BORROWER’s execution and delivery of three new notes, called TERM
NOTE 1, TERM NOTE 2, and TERM NOTE 3, in the forms attached hereto as Exhibits
1, 2, and 3, respectively, and are by this reference made a part hereof.


 


8.                                       BORROWER
and BANK have agreed to allow BORROWER to fix the interest rate of 6.528% as to
the TERM NOTE 1 as of this date, which the parties agree satisfies the
BORROWER’s requirements to fix the interest rate on one-half of such TERM NOTE
as set forth in paragraph 2.6 of the AGREEMENT.   In the event that the BORROWER pre-pays part or all of its fixed
rate debt, except as required by the AGREEMENT, the BORROWER shall pay BANK the
breakage fees shown in the Exhibit attached hereto as marked Exhibit 4, which
BANK shall apportion among its participants.


 


9.                                       On
the first day of each calendar quarter, commencing April 1, 2003, BORROWER
shall pay $526,033.10 to the BANK which will be allocated to TERM NOTE 1.


 


10.                                 On
the first day of each calendar quarter, commencing April 1, 2003, BORROWER shall
pay $495,806.31 to BANK which shall be allocated as follows:


 


2

















 


a.          first
to accrued interest on TERM NOTE 3 until paid in full;


b.         next,
the remaining balance of such payment shall be applied to accrued interest on
TERM NOTE 2 until paid in full;


c.          next,
the remaining balance of such payment shall be applied to principal on TERM
NOTE 2 until paid in full;


d.         last,
the remaining balance (if any) of such payment shall be applied to principal on
TERM NOTE 3.  All unpaid principal and
accrued interest shall be due and payable on January 1, 2008, if not sooner
paid.


 


11.                                 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.


 


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


 


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 D.
  Thome

  	
   

  	
  by

  	
  /s/ Gary L.
  Kramer

  	
   

  
	
   

  	
  Brian D.
  Thome, Second Vice President

  	
   

  	
  Gary L.
  Kramer, President

  
						



 


3

















 


Exhibit 1


TERM NOTE 1 (Fixed Rate)


 


	
  Note Date:

  	
  January 1,
  2003

  	
  $15,300,000.00

  
	
  Maturity
  Date:

  	
  January 1,
  2008

  	
   

  



 


FOR
VALUE RECEIVED, BADGER STATE ETHANOL, LLC, a Wisconsin
limited liability company (“BORROWER”) promises to pay, on or before the
Maturity Date shown above, to the order of First National Bank of Omaha
(“BANK”), at its principal office or such other address as BANK or holder may
designate from time to time, the principal sum of Fifteen Million Three Hundred
Thousand and No/100 Dollars ($15,300,000.00), or the amount shown on the BANK’s
records to be outstanding, plus interest (calculated on the basis of actual
days elapsed in a 360-day year) accruing each day on the unpaid principal
balance at the annual interest rates defined below.  Absent manifest error, the BANK’s records shall be conclusive
evidence of the principal and accrued interest owing hereunder.


 


This promissory note is
executed pursuant to a Construction Loan Agreement (“CONSTRUCTION LOAN
AGREEMENT”) between BORROWER and BANK dated as of August 28, 2001, (the
Construction Loan Agreement, together with all amendments thereto is called the
“AGREEMENT”).  All capitalized terms not
otherwise defined in this note shall have the meanings provided in the
AGREEMENT.


 


INTEREST
ACCRUAL. Interest on the principal amount outstanding
shall accrue at a rate of 6.528% per annum. 
Interest shall be calculated on the basis of a 360-day year, counting
the actual number of days elapsed.


 


REPAYMENT
TERMS. BORROWER will pay 19 quarterly payments
intended to amortize interest and principal, commencing April 1, 2003, in the
amount of $526,033.10.  Any remaining
principal balance, plus any accrued but unpaid interest, shall be fully due and
payable on Maturity Date.


 


PREPAYMENT.
The BORROWER may prepay this promissory note in full
or in part at any time.  Provided,
however, a condition of any prepayment is that a breakage fee, in the amount set
forth on Exhibit 4 to the Second Amendment to the Agreement, shall be paid to
BANK.  Each prepayment may be applied in
inverse order of maturity or as the BANK in its sole discretion may deem
appropriate.  Such prepayment shall not
excuse the BORROWER from making subsequent payments each quarter until the
indebtedness is paid in full.


 


ADDITIONAL
TERMS AND CONDITIONS. The AGREEMENT, and any
amendments or substitutions, contains additional terms and conditions,
including default and acceleration provisions, which are incorporated into this
promissory note by reference.  The
BORROWER agrees to pay all costs of collection, including reasonable attorneys
fees and legal expenses incurred by the BANK if this promissory note is not
paid as provided above.  This promissory
note shall be governed by the substantive laws of the State of Nebraska.


 


4

















 


WAIVER
OF PRESENTMENT AND NOTICE OF DISHONOR.  BORROWER
and any other person who signs, guarantees or endorses this promissory note, to
the extent allowed by law, hereby waives presentment, demand for payment,
notice of dishonor, protest, and any notice relating to the acceleration of the
maturity of this promissory note.


 


	
   

  	
  BADGER STATE ETHANOL, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary L.
  Kramer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  STATE OF
  Wisconsin

  	
  )

  	
   

  
	
   

  	
  ) ss.

  	
   

  
	
  COUNTY OF
  Green

  	
  )

  	
   

  



 


On this 19th
day of December, 2002, before me, the undersigned, a Notary Public, personally
appeared Gary Kramer, the President of Badger State Ethanol, LLC, on behalf of
said entity, who executed the foregoing instrument, and acknowledged that he
executed the same as his voluntary act and deed.


 


 


	
   

  	
  /s/ Notary
  Signature

  	
   

  
	
   

  	
  Notary
  Public

  



 


5

















 


Exhibit 2


TERM NOTE 2 (Variable Rate)


 


	
  Note Date:

  	
  January 1,
  2003

  	
  $10,300,000.00

  
	
  Maturity
  Date:

  	
  January 1,
  2008

  	
   

  



 


FOR
VALUE RECEIVED, BADGER STATE ETHANOL, LLC, a Wisconsin
limited liability company (“BORROWER”) promises to pay, on or before the
Maturity Date shown above, to the order of First National Bank of Omaha
(“BANK”), at its principal office or such other address as BANK or holder may
designate from time to time, the principal sum of Ten million Three Hundred
Thousand and No/100 Dollars ($10,300,000.00), or the amount shown on the BANK’s
records to be outstanding, plus interest (calculated on the basis of actual
days elapsed in a 360-day year) accruing each day on the unpaid principal
balance at the annual interest rates defined below.  Absent manifest error, the BANK’s records shall be conclusive
evidence of the principal and accrued interest owing hereunder.


 


This promissory note is
executed pursuant to a Construction Loan Agreement (“CONSTRUCTION LOAN
AGREEMENT”) between BORROWER and BANK dated as of August 28, 2001, (the
Construction Loan Agreement, together with all amendments thereto is called the
“AGREEMENT”).  All capitalized terms not
otherwise defined in this note shall have the meanings provided in the
AGREEMENT.


 


INTEREST
ACCRUAL.  Interest
on the principal amount outstanding shall accrue at a rate (the “RATE”) equal
to one hundred basis points in excess of 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 published as the “prime rate” in the Midwestern Edition of the Wall Street Journal.


 


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.


 


INCENTIVE
PRICING. The interest rate applicable to the TERM LOAN
are subject to reduction after a date six months subsequent to CONSTRUCTION
COMPLETION DATE, based on the business results of BORROWER.  In the event that BORROWER maintains the
following ratios, measured monthly, the interest rates will be reduced
accordingly:


 




	
  If
  INDEBTEDNESS to NET WORTH

  is less than:

  	
   

  	
  Interest will be:

  
	
   

  	
   

  	
   

  
	
  1.25 : 1.00

  	
   

  	
  BASE RATE
  plus 75 basis points

  
	
  1.00 : 1.00

  	
   

  	
  BASE RATE
  plus 50 basis

  
	
  0.75 : 1.00

  	
   

  	
  BASE RATE
  plus 25 basis points

  






 


6

















 


REPAYMENT
TERMS. BORROWER will pay equal quarterly payments of
$495,806.31, as described in the AGREEMENT, which will applied to this Note and
an additional Note, in the manner described in the AGREEMENT.  Such quarterly payments shall remain in said
amount without regard to any reduction or variance in interest rate accrual
during the term hereof.  Any remaining
principal balance, plus any accrued but unpaid interest, shall be fully due and
payable on January 1, 2008, if not sooner paid.


 


PREPAYMENT.
The BORROWER may prepay this promissory note in full
or in part at any time.  Each prepayment
may be applied in inverse order of maturity or as the BANK in its sole
discretion may deem appropriate.  Such
prepayment shall not excuse the BORROWER from making subsequent payments each
quarter until the indebtedness is paid in full.


 


ADDITIONAL
TERMS AND CONDITIONS. The AGREEMENT, and any
amendments or substitutions, contains additional terms and conditions,
including default and acceleration provisions, which are incorporated into this
promissory note by reference.  The
BORROWER agrees to pay all costs of collection, including reasonable attorneys
fees and legal expenses incurred by the BANK if this promissory note is not
paid as provided above.  This promissory
note shall be governed by the substantive laws of the State of Nebraska.


 


WAIVER
OF PRESENTMENT AND NOTICE OF DISHONOR. BORROWER and
any other person who signs, guarantees or endorses this promissory note, to the
extent allowed by law, hereby waives presentment, demand for payment, notice of
dishonor, protest, and any notice relating to the acceleration of the maturity
of this promissory note.


 


	
   

  	
  BADGER STATE ETHANOL, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary L.
  Kramer

  	
   

  



 


(notary
acknowledgement on next page)


 


7

















 


	
  STATE OF
  Wisconsin

  	
  )

  	
   

  
	
   

  	
  ) ss.

  	
   

  
	
  COUNTY OF
  Green

  	
  )

  	
   

  



 


On this 18th
day of December, 2002, before me, the undersigned, a Notary Public, personally
appeared Gary Kramer, the President of Badger State Ethanol, LLC, on behalf of
said entity, who executed the foregoing instrument, and acknowledged that he
executed the same as his voluntary act and deed.


 


 


	
   

  	
  /s/ Notary
  Signature

  	
   

  
	
   

  	
  Notary Public

  	
   

  



 


8

















 


Exhibit 3


TERM NOTE 3 (Reducing Revolver)


 


	
  Note Date:

  	
  January 1,
  2003

  	
  $5,000,000.00

  
	
  Maturity
  Date:

  	
  January 1,
  2008

  	
   

  



 


FOR
VALUE RECEIVED, BADGER STATE ETHANOL, LLC, a Wisconsin
limited liability company (“BORROWER”) promises to pay, on or before the
Maturity Date shown above, to the order of First National Bank of Omaha
(“BANK”), at its principal office or such other address as BANK or holder may
designate from time to time, the principal sum of Five Million and No/100
Dollars ($5,000,000.00), or the amount shown on the BANK’s records to be
outstanding, plus interest (calculated on the basis of actual days elapsed in a
360-day year) accruing each day on the unpaid principal balance at the annual
interest rates defined below.  Absent
manifest error, the BANK’s records shall be conclusive evidence of the
principal and accrued interest owing hereunder.


 


This promissory note is executed
pursuant to a Construction Loan Agreement (“CONSTRUCTION LOAN AGREEMENT”)
between BORROWER and BANK dated as of August 28, 2001, (the Construction Loan
Agreement, together with all amendments thereto is called the “AGREEMENT”).  All capitalized terms not otherwise defined
in this note shall have the meanings provided in the AGREEMENT.


 


INTEREST
ACCRUAL. Interest on the principal amount outstanding
shall accrue at a rate (the “RATE”) equal to one hundred basis points in excess
of 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 published as the “prime rate” in the
Midwestern Edition of the Wall Street
Journal.


 


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.


 


REVOLVING
FEATURE. The BORROWER may reborrow, on a revolving
basis, that principal amount repaid on this promissory note which remains at a
variable interest rate. BORROWER will pay BANK an unused commitment fee of
three-eighths of one percent (3/8%) assessed quarterly in arrears against the
unused portion of the note amount. 
Pursuant to this revolving loan feature the BANK will lend the BORROWER,
from time to time until maturity of this note 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,
$5,000,000.00.  The BORROWER may borrow,
repay and reborrow hereunder, from the date of this AGREEMENT until the
maturity of this note, said amount or any lesser sum which is $10,000.00 or an
integral multiple thereof.


 


9

















 


Following repayment of TERM
NOTE 2, when regular quarterly principal payments are applied to this note, the
amount available to be borrowed under the revolving loan feature will be
correspondingly reduced, so that the maximum amount outstanding under this
promissory note will decrease accordingly.


 


INCENTIVE
PRICING. The interest rate applicable to the TERM LOAN
are subject to reduction after a date six months subsequent to CONSTRUCTION
COMPLETION DATE, based on the business results of BORROWER.  In the event that BORROWER maintains the following
ratios, measured monthly, the interest rates will be reduced accordingly:


 




	
  If
  INDEBTEDNESS to NET WORTH

  is less than:

  	
   

  	
  Interest will be:

  
	
   

  	
   

  	
   

  
	
  1.25 : 1.00

  	
   

  	
  BASE RATE
  plus 75 basis points

  
	
  1.00 : 1.00

  	
   

  	
  BASE RATE
  plus 50 basis

  
	
  0.75 : 1.00

  	
   

  	
  BASE RATE plus
  25 basis points

  






 


REPAYMENT
TERMS.  BORROWER
will pay equal quarterly payments of $495,806.31, as described in the
AGREEMENT, which will be applied to this Note and an additional Note, in the
manner described in the AGREEMENT.  Such
quarterly payments shall remain in said amount without regard to any reduction
or variance in interest rate accrual during the term hereof.  Any remaining principal balance, plus any
accrued but unpaid interest, shall be fully due and payable on January 1, 2008,
if not sooner paid.


 


PREPAYMENT.
The BORROWER may prepay this promissory note in full
or in part at any time.  Each prepayment
may be applied in inverse order of maturity or as the BANK in its sole
discretion may deem appropriate.  Such
prepayment shall not excuse the BORROWER from making subsequent payments each
quarter until the indebtedness is paid in full.


 


ADDITIONAL
TERMS AND CONDITIONS.  The
AGREEMENT, and any amendments or substitutions, contains additional terms and
conditions, including default and acceleration provisions, which are
incorporated into this promissory note by reference.  The BORROWER agrees to pay all costs of collection, including
reasonable attorneys fees and legal expenses incurred by the BANK if this promissory
note is not paid as provided above. 
This promissory note shall be governed by the substantive laws of the
State of Nebraska.


 


WAIVER
OF PRESENTMENT AND NOTICE OF DISHONOR.  BORROWER
and any other person who signs, guarantees or endorses this promissory note, to
the extent allowed by law, hereby waives presentment, demand for payment,
notice of dishonor, protest, and any notice relating to the acceleration of the
maturity of this promissory note.


 


	
   

  	
  BADGER STATE ETHANOL, LLC

  



 


10

















 


	
  By:

  	
  /s/ Gary L. Kramer

  



 


 


 


	
  STATE OF

  	
   

  	
  Wisconsin

  	
  )

  
	
   

  	
   

  	
   

  	
  )ss.

  
	
  COUNTY OF

  	
   

  	
  Green

  	
  )

  
						



 


                On
this 18th day of December, 2002, before me, the undersigned, a Notary Public,
personally appeared Gary Kramer, the President of Badger State Ethanol, LLC, on
behalf of said entity, who executed the foregoing instrument, and acknowledged
that he executed the same as his voluntary act and deed.


 


 


	
  /s/ Notary
  Signature

  
	
  Notary
  Public

  



 


11

















 


Exhibit 4


 


Breakage
Fees


(excludes
any pre-payment required by the

Excess Cash Flow Recapture covenants as

Required by the AGREEMENT)


 




	
  1.

  	
   

  	
  AgStar
  Financial Services, ACA ($6,500,052.00 in fixed rate funding)

  
	
   

  	
   

  	
  Breakage Fee

  
	
   

  	
   

  	
  1.25% if rate is broken in
  the first 12 months following note date, 1.00% thereafter.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Home
  Federal Bank ($1,499,706.00 in fixed rate funding)

  
	
   

  	
   

  	
  Breakage Fee

  
	
   

  	
   

  	
  SEE ATTACHED FEDERAL HOME
  LOAN BANK OF DES MOINES -

  PREPAYMENT FEE CALCULATIONS

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Badgerland
  Farm Credit Services ($2,500,020.00) in fixed rate funding)

  
	
   

  	
   

  	
  Breakage Fee = none

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Amcore
  Bank NA ($1,000,620.00 in fixed rate funding)

  
	
   

  	
   

  	
  Breakage Fee = none

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Farm
  Credit Services/Greenstone ($1,649,646.00 in fixed rate funding)

  
	
   

  	
   

  	
  Breakage Fee

  
	
   

  	
   

  	
  1.25% if rate is broken in
  the first 12 months following note date, 1.00% thereafter.

  
	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  First
  National Bank of Omaha ($2,149,956.00 in fixed rate funding)

  
	
   

  	
   

  	
  Breakage Fee

  
	
   

  	
   

  	
  SEE ATTACHED FEDERAL HOME
  LOAN BANK OF DES MOINES -

  PREPAYMENT FEE CALCULATIONS