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July 29, 2004




Paul Enstad

Granite Falls Community Ethanol Plant, LLC

dba Granite Falls Energy



Dear Paul:


First National Bank of Omaha wants to thank you for the opportunity to visit
with your Board on Wednesday, July 28, 2004, and to discuss the financing of
the new ethanol plant to be built near Granite Falls, Minnesota. First
National Bank of Omaha (“Bank”) is pleased to present Granite Falls Community
Ethanol Plant, LLC (“Borrower”), with a commitment to provide financing for the
construction and operation of an ethanol plant new Granite Falls, Minnesota.
The Bank’s commitment to lend is subject to the following terms and conditions:



	 	 	 
	OBLIGOR:

	 	Granite Falls Community Ethanol Plant, LLC
	 
	 	 
	BANK GROUP:

	 	Closing of the facilities will be subject to Bank obtaining
adequate participants for the credit facilities within sixty
(60) days of the date of this commitment letter.
	 
	 	 
	PURPOSE:

	 	1. Construction/Term Loan: Interim Construction and Term
Loan for permanent financing of plant facility.
	 
	 	 
	

	 	2. Operating Line of Credit: Funding operating cash
flow and Letters of Credit to Borrower.
	 
	 	 
	LOAN AMOUNTS:

	 	Based upon the Projected Financial Statements provided to Bank
by Glacial Lakes Energy, LLC, dated May, 2004, the following credit
amounts are being offered by Bank:
	 
	 	 
	

	 	1. Construction/Term Loan: The lesser of
$34,000,000, or 58% of total project cost.
	 
	 	 
	

	 	2. Operating Line of Credit: $3,500,000
	 
	 	 
	CLOSING FEES:

	 	- $50,000 Due Diligence and Negotiation Fee, which would be
due per the following schedule:
	 
	 	 
	

	 	           $25,000 due when commitment is accepted by Borrower.

           $25,000 due at document closing.
	 
	 	 
	

	 	- 3⁄4% Construction/Commitment Fee would be due at
document closing.
	 
	 	 
	

	 	- $30,000 Annual Servicing Fee would be due at time
of permanent loan placement (Term Debt closing) and
on each anniversary thereafter.
	 
	 	 
	RATE:

	 	1. Construction/Term Loan: Variable rate during Construction Period
equal to one-month LIBOR plus 350 basis points, which would equal 4.98% at
today’s prevailing interest rates. The Construction Period is defined as
the lesser of the first eighteen months following the closing of loan
documents or completion of construction.







 









 





Granite Falls Energy

July 29, 2004

Page Two



	 	 	 
	

	 	Variable rate during Term Period (Term Debt), equal
to one-month or three-month LIBOR plus 350 basis
points, which would equal 4.98% or 5.18%,
respectively, at today’s prevailing interest rates
(see following for further detail regarding rates).
	 
	 	 
	

	 	Not later than ninety (90) days following the end of
the Construction Period, Borrower will accept a fixed
rate option on no less than 50% of the outstanding
Term Debt at that time, entering into a matched
funding contract acceptable to the Bank (e.g., an
Interest Rate Swap), which contract would provide a
300 basis point spread over applicable funding
source. Bank’s preferred funding source for fixed
rate debt is interest rate swaps. The term of the
matched funding contract would match the term of the
note, unless Bank and Borrower further agree
otherwise.
	 
	 	 
	

	 	Incentive Pricing: Six months after the end of the
Construction Period, and based upon the following
ratio, the interest rate for the variable portion of
the Term Loan can be reduced as follows:











	 	 	 	 	 
	Rate Grid:
	 
	If Debt to Tangible Net Worth is
	less than:
	 	Interest Rate will be:

	1.25:1.00
	 	LIBOR plus 325 bp
	1.00:1.00
	 	LIBOR plus 300 bp
	0.75:1.00
	 	LIBOR plus 275 bp







	 	 	 
	

	 	In addition, the variable rate note would provide a
revolving feature that would allow Borrower to “pay
down” and “draw up” on the commitment, up to $5
million. For example, if the variable rate loan had
a maximum commitment of $17,000,000, Borrower could
use its excess cash to pay down the loan amount to
$12,000,000, thereby reducing interest rate expense.
Borrower is thus allowed all of the features on the
top $5 million of a revolving note, and could make
multiple advances or payments within that range. In
the example, Borrower would be allowed to maintain a
principal balance between the two amounts noted.
When a scheduled payment is made, whether through
normal amortization or annual excess cash flow
recapture, the total commitment would reduce
according to the principal portion of the payment,
but Borrower would continue to retain the $5 million
revolving portion on the top end of the commitment.
If/when the total commitment amount of the variable
rate note dropped below $5 million, the note would be
considered a revolving credit, but would continue to
reduce according to the amortization schedule, as a
reducing revolver.
	 
	 	 
	

	 	An Unused Commitment Fee of 37.5 basis points will be
assessed against the average unused portion of the
revolving portion of the variable rate note, payable
quarterly in arrears. Note that this Unused
Commitment Fee would not be applicable to the
Construction Loan.







 









 








Granite Falls Energy

July 29, 2004

Page Three



	 	 	 
	

	 	2. Operating Line of Credit: Variable rate equal to
one-month LIBOR plus 350 basis points, which would
equal 4.98% at today’s prevailing rates.
	 
	 	 
	

	 	Incentive Pricing: Identical to Rate Grid for Term
Loan.
	 
	 	 
	

	 	An Unused Commitment Fee of 37.5 basis points will be
assessed against the average unused portion of the
Operating Line of Credit, payable quarterly in
arrears. Note that this Unused Commitment Fee would
not be applicable to the Construction Loan.
	 
	 	 
	REPAYMENT & TERM:

	 	1. Construction/Term Loan: Interest only due quarterly
during Construction Period. Term Loan would then be written
as a 5-year
note, amortized on a 10-year basis with quarterly payments of
principal and interest, balance due at maturity.
	 
	 	 
	

	 	2. Operating Line of Credit: 364-day note,
renewable annually. Interest only due monthly,
outstanding balance due at maturity or upon
acceleration as provided by Loan Agreement.
	 
	 	 
	PREPAYMENT PENALTIES:

	 	Prepayment penalties will apply as necessary to compensate Bank for
breakage of contracted interest rates on fixed portions of Term Loan.
Additionally, if the Construction/Term Loan would be pre-paid in full,
a pre-payment penalty of 2% would be assessed during the Construction
Period and the first year of the Term Loan against the entire Term Loan
balance. If the Construction/Term Loan would be pre-paid in full
during the second or third years of the Term Loan following
construction, a pre-payment penalty of 1% would be assessed against the
entire Term Loan balance.
	 
	 	 
	COLLATERAL:

	 	Blanket filing on all business assets of the company and Mortgage or
Deed of Trust on property. All credit to Borrower will include
cross-collateral and cross-default language.
	 
	 	 
	COVENANTS:

	 	- Loan Agreement, prepared by counsel, will be utilized, containing
various additional covenants and requirements, including without
limitation, opinion of Borrower’s counsel.
	 
	 	 
	

	 	- Minimum Fixed Charge Coverage
Ratio1, measured quarterly:
	

	 	All periods after construction 1.25:1.00
	 
	 	 
	

	 	1 Fixed Charge Coverage is defined as (EBITDA
Cash Flow2 less Capital Expenditures,
Distributions and Taxes) compared to all Debt
Payments (as to debt due Bank and approved
Subordinated Debt, including Principal and
Interest).
	 
	 	 
	

	 	2 EBITDA Cash Flow is defined as Earnings Before
Interest, Taxes, Depreciation and Amortization.







 









 








Granite Falls Energy

July 29, 2004

Page Four



	 	 	 
	 
	 	- Minimum Working Capital, measured continually, of
$2,500,000 during months five through eight after the
end of the Construction Period, $3,500,000 during
months nine through twelve after the end of the
Construction Period, and $5,000,000 thereafter.
	 
	 	 
	

	 	- Minimum Tangible Net Worth of $21,000,000 at
completion of Construction Period, including a
minimum injected owner cash equity of $24,000,000.
Tangible Net Worth may include subordinated debt
acceptable to Bank, and would be reduced by any
amortized start-up costs and losses incurred during
the Construction Period. Minimum total tangible net
worth, measured annually, would be required to step
up in an amount equal to the greater of
(1)undistributed earnings for the year just ended or
(2) $250,000.
	 
	 	 
	

	 	- Maximum distribution payout according to the
following grid:










	 	 	 	 	 
	Distribution Grid:
	 
	If Owner Equity (as a percentage of	       	Allowable Distributions, as a
	combined liabilities and Tangible Net	 	percentage of Net Income, would
	Worth) is:
	 	be:

	Less than or equal to 60%
(OE <= 60%)
	 	 	65	%
	 
	 	 	
 	 
	Greater than 60%
(60% < OE)
	 	 	70	%
	 
	 	 	
 	 







	 	 	 
	 
	 	Dividends could be paid out annually, based on a
12-month year to be determined by Bank and Borrower,
after all Bank covenants are met.
	 
	 	 
	

	 	- Annual Excess Cash Flow Recapture due within 120
days of the end of each fiscal year, based upon the
results of Borrower’s year-end audit, of 15 percent
of excess cash flow.3 In the event that audited
results are not available in a manner that allows
this payment to be made in accordance with the
scheduled re-pricing of interest rates, the payment
shall be made at the next such re-pricing.
	 
	 	 
	

	 	          3 Excess cash flow is defined as EBITDA Cash
Flow less scheduled payments to Bank and

           approved
Subordinated Debt, and capital expenditures.
	 
	 	 
	

	 	- Maximum Capital
Expenditures of $500,000 per fiscal year, other
than construction of plant per approved Plans.
	 
	 	 
	

	 	- No additional
borrowings without prior Bank approval.
	 
	 	 
	

	 	- Change in plant management or management company
will require notification to or approval by Bank, not
to be unreasonably withheld.







 









 





Granite Falls Energy

July 29, 2004

Page Five



	 	 	 
	

	 	- All depository accounts of Borrower and any excess
cash/funds would be held at First National Bank of
Omaha, unless otherwise agreed. All equity funds
shall be deposited at and disbursed from First
National Bank of Omaha.
	 
	 	 
	

	 	- All Subordinated Debt must be acceptable to Bank.
	 
	 	 
	

	 	- Assignments of all applicable contracts (i.e.
ethanol marketing contract, DDGS marketing contract,
design/engineering contract, construction contract,
risk management contract, management contract, and
others).
	 
	 	 
	

	 	- Assignment of Borrower’s grain hedging account and
summary descriptions of all transactions.
	 
	 	 
	

	 	- Independent construction inspections would occur
on a scheduled basis, with unscheduled inspections by
Bank and/or its participants at their discretion.
	 
	 	 
	

	 	- Other covenants, documents, or additional
requirements, as required by Bank’s Loan Agreement,
will be added. These conditions will be modeled
after the existing Loan Agreement and Amendments.
	 
	 	 
	FINANCIAL REPORTING:

	 	- Beginning with the commencement of Operations, Borrower
will provide monthly internal financial statements (balance sheet and
income statement), prepared in accordance with GAAP, with the exception of
footnotes, along with calculations of financial covenants, within thirty
(30) days of month-end.
	 
	 	 
	

	 	- Borrower will provide accountant audited fiscal
year-end financial statements within one hundred
twenty (120) days of fiscal year-end.
	 
	 	 
	

	 	- Borrower will provide projected financial
statements prior to each year-end, for the subsequent
fiscal year, including proposed capital projects.
	 
	 	 
	

	 	- Beginning at the end of the first full fiscal-year
quarter following commencement of Operations,
Borrower will provide a Quarterly Compliance
Certificate, completed by an authorized
representative of Borrower, certifying that Borrower
is in compliance with all Bank covenants.
	 
	 	 
	

	 	- Borrower will provide a monthly Production Report
within thirty (30) days of month-end.







 









 





Granite Falls Ethanol

July 29, 2004

Page Six



	 	 	 
	

	 	- Beginning in the fourth month following the
commencement of Operations, Borrower will provide a
monthly Borrowing Base Certificate for the Operating
Line of Credit with advance rates of 75% of Corn
Inventory, 75% of Finished Goods-Ethanol and
Distillers Grains Inventory, 75% of current sales
Accounts Receivable (0 — 30 days) and 75% of current
incentive Accounts Receivable (0 — 120 days).
	 
	 	 
	CLOSING COSTS:

	 	Borrower will be responsible for costs associated with the closing of this loan, including, but not
limited to, title, survey, environmental reports, appraisal reports, cost of disbursement agent,
independent construction inspector, mortgage fees and taxes and Bank’s legal fees.
	 
	 	 
	OFFER EXPIRATION:

	 	This offer will expire thirty (30) days from the date of this letter.
	 
	 	 
	COMMITMENT EXPIRATION:

	 	This commitment to lend is subject to closing within ninety (90) days from the date of this letter.
	 
	 	 
	MISCELLANEOUS:

	 	- Bank’s commitment is contingent upon its satisfaction with the proposed participants, and its
approval of the participation agreements evidencing its relationship with said lenders. To the extent
that the Borrower has received any representations or promises about these credit facilities, Bank’s
loan agreement will supercede and subsume all such representations.
	 
	 	 
	

	 	- Closing of these facilities will be subject to Bank obtaining adequate participants within sixty (60)
days of the date of this letter (“Best Efforts Basis”).
	 
	 	 
	

	 	- Bank’s commitment will also be contingent upon its
satisfaction with an Opinion of Counsel, in form and
authorship satisfactory to Bank, as to the
enforceability of any prior agreements Borrower may
have entered with respect to the design,
construction, management, or other relationship
related to the ethanol plant.






Paul, thank you again for the opportunity for First National Bank of Omaha to
work with Granite Falls Community Ethanol Plant, LLC. We continue to be
excited about the opportunities available in the ethanol industry, especially
those that involve such strong teams as ICM, Inc., Fagen, Inc., and Glacial
Lakes Energy, LLC.


As always, please do not hesitate to call with any additional questions or
comments you may have in the interim. I can be reached at 402-633-3515 or
bthome@fnni.com, and Omer Sagheer can be reached at 402-633-3056 or
osagheer@fnni.com.



 



Sincerely,



			
	/s/ BRIAN D. THOME	 	/s/ OMER SAGHEER
	Brian D. Thome

Second Vice President
	 	Omer Sagheer

Commercial Loan Officer







 









 





Exibit 10.7 of Post
Effective
Amendment No. 3


Granite Falls Energy

July 29, 2004

Page Seven


A credit agreement must be in writing to be enforceable under Nebraska Law. To
protect you and us from any misunderstandings or disappointments, any contract,
promise, undertaking, or offer to forebear repayment of money or to make any
other financial accommodation in connection with this loan of money or grant or
extension of credit, or any amendment of, cancellation of, waiver of, or
substitution for any or all of the terms or provisions of any instrument or
document executed in connection with this loan of money or grant or extension
of credit, must be in writing to be effective.



ACCEPTANCE:



Commitment acknowledged and accepted

Granite Falls Community Ethanol Plant, LLC



	 	 	 	 	 	 	 
	By:

	/s/ Paul Enstad	 	Date: 	 	August 4, 2004
	 	
 

	 	 	 	
 
	 	Signer
	 	 	 	 
	 
	Title:   
	Chairman	 	 	 	 
	 	
 
	 	 	 	 







GFCEP Commitment 072904.doc

Confidential            7/29/2004