Document:

exv10w14

 

EXECUTION COPY

EXHIBIT 10.14

LOAN AGREEMENT

     THIS LOAN AGREEMENT (this “Agreement”) is dated as of the 16th day of December, 2004, and is
by and between GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC, d/b/a GRANITE FALLS ENERGY, LLC, a
Minnesota limited liability company (the “Borrower”), and FIRST NATIONAL BANK OF OMAHA (the “Bank”
or “Lender”), a national banking association established at Omaha, Nebraska.

     WHEREAS, the Borrower has requested the Bank to lend to the Borrower the sum of up to
$34,000,000 for the purpose of partially funding the cost of construction (the “Construction Loan”)
for an ethanol plant on the real estate described in Exhibit F (the “Property”) and the subsequent
replacement of such Construction Loan with a term loan for the ethanol plant and Property (the
“Term Loan”), together with a $3,500,000 revolving line of credit (the “Revolving Loan”) and a
standby letter of credit in an amount up to $1,000,000 (“Letter of Credit”); and

     WHEREAS, the Bank is willing to provide such credit facilities to the Borrower upon the terms
and conditions herein set forth.

ARTICLE I

DEFINITIONS

     “Assignment of Design/Build Construction Contract” means the assignment of the agreement
between the Borrower and Fagen, Inc. (the “General Contractor”) for preparation of plans and
construction of the Project in accordance with Plans therein described (the “Design/Build
Construction Contract”) by which the Borrower assigns, as additional security for repayment of the
Obligations, the Borrower’s interest in the Design/Build Construction Contract in a form reasonably
acceptable to the Bank.

     “Assignment of Rents” means the assignment of rents and leases as to the Property between the
Borrower, as assignor, and the Bank, as assignee, as security for payment of the Obligations in a
form acceptable to the Bank.

     “Banking Day” means a day on which the Bank is open for substantially all of its business.

     “Borrowing Base” means the lesser of:

     (a) $3,500,000, less the amount of any Letters of Credit issued and outstanding on the
Borrower’s account; or

     (b) The aggregate of (i) 75% of the Borrower’s Inventory of corn, at current value on
the date reported, plus (ii) 75% of the Borrower’s Finished Goods-Distiller’s Grains
Inventory, at current value on the date reported, plus (iii) 75% of the Borrower’s

 

 

Finished Goods-Ethanol Inventory, valued at the lower of cost or market, plus (iv) 75%
of the amount of the Borrower’s current sales Accounts Receivable aged thirty (30) days or
less, and (v) 75% of the amount of the Borrower’s current state incentives Accounts
Receivable aged less than 120 days, excluding any accounts reasonably deemed ineligible by
the Bank.

     “Capital Leases” shall have the same meaning in this Agreement as those terms are defined by
GAAP.

     “Closing” shall mean the date on which the Bank receives this Agreement, executed by the
Borrower, together with the Construction Note and the Revolving Note.

     “Completion Date” means March 10, 2006.

     “Construction Loan” shall mean an amount of up to the lesser of 58% of the total cost of the
Project or $34,000,000 loaned to the Borrower under the terms and conditions of this Agreement for
the purpose of partially funding the cost of construction of the Project.

     “Construction Loan Termination Date” means the earlier of (a) the Completion Date or (b) such
earlier date upon which the Bank’s commitment to make a disbursement under the Construction Loan is
terminated.

     “Construction Note” means the promissory note of the Borrower in the form of Exhibit A
evidencing borrowings under the Construction Loan of up to a maximum amount of $34,000,000.

     “Draw Request” means forms acceptable to the Bank to be submitted to the Bank by the Borrower
when a disbursement is requested under the Construction Note.

     “EBITDA” means earnings before interest, taxes, depreciation and amortization, all experienced
during the applicable reporting period.

     “Eurodollar Business Day” means a Banking Day on which commercial banks are open for
international business (including dealings in dollar deposits) in London, England.

     “Event of Default” has the meaning provided for in Article VII of this Agreement.

     “Excess Cash Flow” means EBITDA less: scheduled payments to the Bank (excluding payments
required under Section 6.02(c)); payments to Bank-approved subordinated debt (excluding unscheduled
payments on subordinated debt); and less allowable capital expenditures.

     “Farmer’s Cooperative Elevator Contract” means that written contract between the Borrower and
Farmer’s Cooperative Elevator Co. dated May 14, 2004.

     “Finished Goods-Ethanol Inventory” means ethanol that conforms to minimum quality standards as
developed by current industry standards, including, but not limited to, ASTM D 4806 specifications
for E-Grade denatured ethanol.

2

 

     “Fixed Charge Coverage Ratio” means the ratio derived when comparing (i) EBITDA, less capital
expenditures, dividends and taxes to (ii) the Borrower’s payments on the principal and interest of
the Obligations and Subordinated Debt made during the applicable reporting period.

     “GAAP” means generally accepted accounting principles, applied on a basis consistent with the
accounting principles applied in the preparation of the annual financial statements of the Borrower
referred to in Section 6.01 of this Agreement and the Projections described in Section 5.07 of this
Agreement. All accounting terms not otherwise defined in this Agreement have the meaning assigned
to them in accordance with GAAP.

     “General Contractor” shall mean Fagen, Inc.

     “Indebtedness” means, as to the Borrower, all items of indebtedness, Obligation or liability,
whether matured or unmatured, liquidated or unliquidated, direct or contingent, joint or several
including, but without limitation:

     (a) All indebtedness guaranteed, directly or indirectly, in any manner, or endorsed
(other than for collection or deposit in the ordinary course of business) or discounted with
recourse;

     (b) All indebtedness in effect guaranteed, directly or indirectly, through agreements,
contingent or otherwise (i) to purchase such indebtedness; or (ii) to purchase, sell or
lease (as lessee or lessor) property, products, materials or supplies or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment of such
Indebtedness or to insure the owner of the Indebtedness against loss;

     (c) All indebtedness secured by (or for which the holder of such Indebtedness has a
right, contingent or otherwise, to be secured by) any mortgage, deed of trust, pledge, lien,
security interest or other charge or encumbrance upon property owned or acquired subject
thereto, whether or not the liabilities secured thereby have been assumed;

     (d) All indebtedness incurred as the lessee of goods or services under leases that, in
accordance with GAAP, should not be reflected on the lessee’s balance sheet; and

     (e) The Borrower’s Obligations for payment of the negative termination value of any
interest rate swap agreement.

     “Independent Inspector” means the firm which will be retained by the Bank, at the Borrower’s
cost, to conduct on-site inspections of the work in progress on the Project, and to issue periodic
reports to the Bank as to the progress of construction and adherence to the Plans. The Bank’s
selection of the Independent Inspector shall be subject to the Borrower’s approval, which approval
will not be unreasonably withheld.

     “Interest Period” means, initially, the period commencing on the date of the Construction
Note, Short Term Operating Note, Swap Note, Variable Rate Loan or the Long Term Revolving Note, as
applicable, and ending (i) on the one-month anniversary of note for the Construction

3

 

Note, (ii) on the one-month anniversary of the Note for the Revolving Note, (iii) on the
three-month anniversary of the Note for the Swap Note, (iv) on the three-month anniversary for the
Variable Rate Note and (v) on the one-month anniversary of the Note for the Long Term Revolving
Note, and thereafter each period commencing on the first day immediately following the last day of
the immediately preceding Interest Period and ending after the applicable period set forth above
thereafter, provided that:

     (a) subject to clauses (b) and (c) below, any Interest Period which would otherwise end
on a day which is not a Eurodollar Business Day shall be extended to the next succeeding
Eurodollar Business Day unless such Eurodollar Business Day falls in another calendar month,
in which case such Interest Period shall end on the immediately preceding Eurodollar
Business Day;

     (b) subject to clause (c) below, any Interest Period which begins on the last
Eurodollar Business Day of a calendar month (or a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period) shall end on the
last Eurodollar Business Day of a calendar month; and

     (c) no Interest Period shall extend beyond the Loan Termination Date.

     “Letter of Credit” has the meaning set forth in the preamble.

     “LIBOR” shall mean the London interbank offered rate.

     “LIBOR Base Rate” shall mean, with respect to the applicable Interest Period, (a) the LIBOR
Index Rate for such Interest Period, if such rate is available, or (b) if the LIBOR Index Rate
cannot be determined, the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of
the respective rates per annum of interest at which deposits in dollars are offered to the Bank in
the London interbank market by two Eurodollar dealers of recognized standing, selected by the Bank
in its sole discretion, at such time on the date two Eurodollar Business Days before the first day
of such Interest Period as the Bank in its sole discretion elects, for delivery on the first day of
the applicable Interest Period for a number of days comparable to the number of days in such
Interest Period and in an amount approximately equal to the principal amount of the Obligations.

     “LIBOR Index Rate” shall mean, with respect to the applicable Interest Period, the rate per
annum (rounded upwards, if necessary, to the next higher 1/100 of 1%) for deposits in U.S. Dollars
for a period equal to such Interest Period, which appears on the Bank’s information vendor as of
9:00 a.m. (Omaha time) on the day two Eurodollar Business Days before the first day of such
Interest Period. The term “the Bank’s information vendor” means the Bloomberg service or such
other vendor chosen by the Bank for the purpose of displaying British the Bankers’ Association
Interest Settlement Rates for U.S. Dollar Deposits.

     “LIBOR Rate” shall mean the quotient of the (i) LIBOR Base Rate divided by (ii) one minus the
applicable LIBOR Reserve Percentage. The LIBOR Rate shall be adjusted automatically on and as of
the effective date of any change in the LIBOR Reserve Percentage.

4

 

     “LIBOR Reserve Percentage” shall mean for any day that percentage (expressed as a decimal)
which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve
System (or any successor), for determining the maximum reserve requirement for a member bank of the
Federal Reserve System with respect to “Eurocurrency liabilities” (or in respect of any other
category of liabilities which includes deposits by reference to which the interest rate on LIBOR
loans is determined or any category of extensions of credit or other assets which include loans by
a non-United States office of any bank to United States residents). The LIBOR Rate shall be
adjusted automatically on and as of the effective date of any change in the LIBOR Reserve
Percentage.

     “Loan Documents” means this Agreement and each document referred to in Article IV of this
Agreement.

     “Management Contract” means the agreement between the Borrower and Glacial Lakes Energy, LLC
for management of the property of the Borrower in accordance with the terms thereof.

     “Marketing Contract” means that written contract between the Borrower and one or more entities
approved by the Bank, which approval will not be unreasonably withheld, by which the latter agrees
to provide marketing services to the Borrower for the Borrower’s ethanol products, as well as the
written contracts between the Borrower and one or more entities approved by the Bank, which
approval will not be unreasonably withheld, by which the latter agrees to provide marketing
services as to the Borrower’s distiller’s grains.

     “Mortgage” means the agreement between the Borrower and the Bank creating a first lien on the
Property and a security interest in all of the personal property located thereon as security for
payment of the Obligations.

     “Net Worth” means total assets less total liabilities and less the following types of assets:
(a) leasehold improvements; (b) receivables (other than those created by sale of goods) to a member
and other investments in or amounts due from any member, employee or other person or entity related
to or affiliated with the Borrower; (c) goodwill, patents, copyrights, mailing lists, trade names,
trademarks, servicing rights, organizational and franchise costs, bond underwriting costs and other
like assets properly classified as intangible; and (d) treasury stock or treasury membership units.
Net Worth shall not include any debt due to the Borrower not acceptable to the Bank in the
exercise of its reasonable discretion.

     “Note” or “Notes” means any promissory note delivered by the Borrower to the Bank.

     “Obligations” means the obligation of the Borrower:

     (a) to pay the principal of and interest on the Notes in accordance with the terms
thereof and to satisfy all of its other liabilities to the Bank, whether hereunder or
otherwise, whether now existing or hereafter incurred, matured or unmatured, direct or
contingent, joint or several, including any extensions, modifications, renewals thereof and
substitutions therefor and including, but not limited to, any obligations under Letter of
Credit agreements;

5

 

     (b) to repay to the Bank all amounts advanced by the Bank hereunder or otherwise on
behalf of the Borrower, including, but without limitation, advances for principal or
interest payments to prior secured parties, mortgagees or licensers, or taxes, levies,
insurance, rent or repairs to, or maintenance or storage of, any of the real or personal
property securing the Borrower’s payment and performance of this Agreement; and

     (c) to reimburse the Bank, on demand, for the Bank’s reasonable and necessary
out-of-pocket expenses and costs, including the reasonable fees and expenses of its counsel,
in connection with the preparation, administration, amendment, modification, or enforcement
of this Agreement and the Loan Documents required hereunder, including, without limitation,
any proceeding brought or threatened to enforce payment of any of the Obligations referred
to in the foregoing subparagraphs (a) and (b).

     “Permit” or “Permits” means any license or permit, and all licenses or permits, required under
any environmental law or regulation required to construct and operate the facility on the Property
after completion of the Project at its operational capacity, including without limitation the
following:

     (a) An air emissions permit, which allows, or will allow, the Borrower after the
Completion Date to operate the ethanol plant on the Property after construction of the
Project at maximum capacity.

     (b) All permits required in connection with the construction and operation of all
aboveground storage tanks included in the Plans for the ethanol plant.

     (c) A National Pollution Discharge Elimination System Construction Permit for any storm
water that is discharged during construction and after construction of the Project.

     “Plans” means the plans and specifications prepared by ICM, Inc. and Fagen Engineering LLC on
behalf of the Borrower for the Project and identified to this Agreement by the General Contractor,
the Borrower and the Bank.

     “Project” means the design and construction of an ethanol plant, together with all necessary
and appropriate fixtures, equipment, attachments and accessories, as described in the Plans, to be
constructed on the Property.

     “Revolving Loan” shall mean an amount of up to $3,500,000 loaned to the Borrower under the
terms and conditions of this Agreement to provide Borrower a revolving line of credit.

     “Revolving Loan Termination Date” means the earliest to occur of the following: (a) December
15, 2005, (b) the date the Obligations are accelerated pursuant to this Agreement and (c) the date
the Bank has received (i) notice in writing from the Borrower of the Borrower’s election to
terminate this Agreement and (ii) indefeasible payment in full of the Obligations.

6

 

     “Revolving Note” means that promissory note of the Borrower to the Bank evidencing the
revolving credit facility described in Section 2.06 of this Agreement and as set forth in the
attached Exhibit B, its renewals, modifications and extensions.

     “Security Agreement” means the agreement between the Borrower, as debtor, and the Bank, as
secured party, creating a first security interest in all the Borrower’s assets, including general
intangibles, securing the Obligations.

     “Subcontractor” means any person who contracts with the General Contractor or the Borrower to
perform any work or supply any of the materials or equipment necessary to complete the Project.

     “Subordinated Debt” means Indebtedness of the Borrower to entities other than the Bank that
has been subordinated, in form acceptable to the Bank, to the Obligations.

     “Subsidiary” means, as to the Borrower, a corporation or other entity of which shares of stock
or membership interests, having ordinary voting power (other than stock or membership interests,
having such power only by reason of the happening of a contingency) to elect a majority of the
board of directors or other managers or governors of such corporation or other entity are at the
time owned, or the management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by the Borrower.

     “SWAP Contract” or “SWAP Contracts” means (a) any and all rate swap transactions, basis swaps,
credit derivative transactions, forward rate transactions, commodity swaps, commodity options,
forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond
index swaps or options or forward bond or forward bond price or forward bond index transactions,
interest rate options, forward foreign exchange transactions, cap transactions, floor transactions,
collar transactions, currency swap transactions, cross-currency rate swap transactions, currency
options, spot contracts or any other similar transactions or any combination of any of the
foregoing (including any options to enter into any of the foregoing), whether or not any such
transaction is governed by or subject to any master agreement and (b) any and all transactions of
any kind, and the related confirmations, which are subject to the terms and conditions of, or
governed by, any form of master agreement published by the International Swaps and Derivatives
Association, Inc.; provided, however, the term “SWAP Contract” shall not, for the purposes of this
Agreement, include commodity hedging or commodity risk management contracts. “Commodity” includes
grain, natural gas and other traded commodities.

     “Term Loan” shall mean an amount of up to $34,000,000 loaned to the Borrower under the terms
and conditions of this Agreement to provide the Borrower funds to pay the Construction Loan in
full.

     “Term Loan Termination Date” means the earliest to occur of the following: (a) March 10, 2011,
(b) the date the Obligations are accelerated pursuant to this Agreement and (c) the date the Bank
has received (i) notice in writing from the Borrower of the Borrower’s election to terminate this
Agreement and (ii) indefeasible payment in full of the Obligations.

7

 

     “Term Notes” means those promissory notes of the Borrower to the Bank which evidences
permanent financing to pay the Construction Note as described in Article II of this Agreement, its
renewals, modifications and extensions and which shall include the Swap Note, the Variable Note and
the Long Term Revolving Note.

     “USDA CCC Bio-Energy Accounts Receivable” shall mean cash incentives offered by the United
States Department of Agriculture (“USDA”) to the Borrower after the Borrower has commenced
operations and provided that the Borrower has complied with other applicable requirements, terms
and conditions of the USDA.

     “Working Capital” means current assets (including any amount available under the Long Term
Revolving Loan at the time of determination), less investments in or other amounts due from any
member, employee or any person or entity related to or affiliated with the Borrower and less
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, in the
exercise of its reasonable discretion).

ARTICLE II

AMOUNT AND TERMS OF THE LOANS

     Section 2.01. Construction Loan. The Bank agrees, on the terms and subject to the conditions
set forth in this Agreement, to make, from time to time during the period beginning on the date of
execution of this Agreement and ending on the Construction Loan Termination Date, disbursements to
the Borrower in an aggregate principal amount not to exceed the lesser of $34,000,000 or 58% of the
total cost of the Project for the sole purpose of paying approved construction costs of the
Project. If, prior to the Completion Date, there is paid to the Bank a third-party payment (a
grant payment, for example) that is applied to the Construction Loan, the Bank may, in its sole
discretion, reduce the amount to be advanced to a lesser sum, which the Bank reasonably determines
is necessary to complete the Project. Approved construction costs are costs actually incurred in
connection with the construction of the Project. Such approved construction costs shall include
but shall not be limited to costs of permits, licenses, labor, supplies, materials, services,
equipment, insurance premiums, real estate taxes and interest on disbursements and operating costs
of the ethanol plant. Construction costs shall not include the cost associated with payment of
lost profits connected with termination under Section 14.1.3 of the General Conditions of Contract
to the Design/Build Construction Contract.

     Section 2.02. Construction Note. The Obligation of the Borrower to repay the Construction
Loan shall be evidenced by a promissory note (the “Construction Note”) in the form attached hereto
as Exhibit A.

     Section 2.03. Interest on Construction Note. Interest shall be payable at the rate provided
therein only on such portions of the Construction Loan proceeds as actually have been disbursed
pursuant to this Agreement. Interest on the Construction Note shall accrue at the one (1) month
LIBOR Rate plus 350 basis points prior to acceleration or maturity, and 650 basis points in excess
of the LIBOR Rate in effect from time to time after maturity, whether by acceleration or otherwise.

8

 

     Section 2.04. Repayment of Construction Note. Interest only shall be payable quarterly on the
Construction Note. All outstanding principal and accrued but unpaid interest shall be payable on
the Construction Loan Termination Date.

     Section 2.05. Revolving Loan. The Bank agrees, on the terms and subject to the conditions set
forth in this Agreement, to lend up to $3,500,000 to the Borrower. At the Borrower’s request, on
the Borrower’s account, pursuant to the Bank’s customary policies and with its standardized
documents, the Bank will issue its letters of credit up to the same amount so long as the combined
amount of letters of credit and Revolving Note does not exceed the amount available under the
Revolving Loan. The Bank will credit proceeds of the Revolving Loan to the Borrower’s deposit
account with the Bank, bearing number 110118183. Subject to the terms hereof, the Bank will lend
the Borrower, from time to time until the Revolving Loan Termination Date such sums in integral
multiples of $10,000 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, less the aggregate amounts of
any issued and outstanding letters of credit issued by the Bank at the request of and on the
account of the Borrower (the “Loan Commitment”). The Borrower may borrow, repay without penalty or
premium and reborrow hereunder, from the date of this Agreement until the Revolving Loan
Termination Date, either the full amount of the Loan Commitment or any lesser sum which is $10,000
or an integral multiple thereof. It is the intention of the parties that the outstanding balance
of the Revolving Loan, at all such times after July 10, 2006, shall not exceed the Borrowing Base,
as defined herein, and if at any time said balance exceeds the Borrowing Base, the Borrower shall
forthwith pay the Bank sufficient funds to reduce the balance of the Revolving Loan until it is in
compliance with this requirement.

     Section 2.06. Revolving Note. The Revolving Loan shall be evidenced by a Promissory Note (the
“Revolving Note”) having stated maturity on the Revolving Loan Termination Date, in the form
attached hereto as Exhibit B.

     Section 2.07. Interest on Revolving Note. Interest on the Revolving Note shall accrue at the
one (1) month LIBOR Rate plus 350 basis points, prior to acceleration or maturity, and 650 basis
points in excess of the LIBOR Rate in effect from time to time after maturity, whether by
acceleration or otherwise.

     Section 2.08. Incentive Pricing. The interest rate applicable to the Variable Rate Loan and
the Long Term Revolving Loan and the Revolving Loan shall, upon the request of the Borrower, be
subject to periodic temporary adjustments commencing six months subsequent to the Completion Date,
based on the business results of the Borrower. If, at any time during the preceding three (3)
month period ending on the date six (6) months after the date of the Completion Date and each three
(3) month period thereafter, as applicable, the ratio of Borrower’s Indebtedness to its Net Worth
has been (a) greater than or equal to 1.25 to 1.0, then the interest rate shall remain or shall be
increased to 350 basis points over the LIBOR Rate, (b) less than 1.25 to 1.0 but greater than or
equal to 1.0 to 1.0, then the interest rate shall change to 325 basis points over the LIBOR Rate,
(c) less than 1.0 to 1.0 but greater than or equal to .75 to 1.0, then the interest rate shall
change to 300 basis points over the LIBOR Rate, and/or (d) less than .75 to 1.0, then the interest
rate shall change to 275 basis points over the LIBOR Rate.

9

 

     Any such adjustment under this Section shall be applied and effective for the following
Interest Rate Period.

     Section 2.09. Term Loans and Term Notes. So long as Bank is lender, all of the terms,
conditions and covenants of this Agreement have been complied with and there has not been at any
time an Event of Default, on the Completion Date, the Construction Loan shall be paid in full by
the following Swap Loan, Variable Rate Loan and Long Term Revolving Loan (collectively, the “Term
Loans”) and execution of the following Swap Note, Variable Rate Note and Long Term Revolving Note
(collectively, the “Term Notes”):

     (a) Swap Loan. A loan in the amount of $17,000,000 (the “Swap Loan”) evidenced by the
execution and delivery of a promissory note dated March 10, 2006 and subject to the terms
and conditions of this Agreement, in the principal amount of $17,000,000 and having a
maturity date of March 10, 2011 (the “Swap Note”) in the form attached hereto as Exhibit C;

     (b) Variable Rate Loan. A loan in the amount of $12,000,000 (the “Variable Rate Loan”)
evidenced by the execution and delivery of a promissory note dated March 10, 2006 and
subject to the terms and conditions of this Agreement, in the principal amount of
$12,000,000 and having a maturity date of March 10, 2011 (the “Variable Rate Note”) in the
form attached hereto as Exhibit D; and

     (c) Long Term Revolving Loan. A loan in the amount of $5,000,000 (the “Long Term
Revolving Loan”) evidenced by the execution and delivery of a promissory note dated March
10, 2006 and subject to the terms and conditions of this Agreement, in the principal amount
of $5,000,000 and having a maturity date of March 10, 2011 (the “Long Term Revolving Note”)
in the form attached hereto as Exhibit E.

     Section 2.10. Interest on Term Notes. Interest on the Term Notes shall accrue at the
following rates:

     (a) Swap Note. At all times for the Swap Note, interest shall accrue at a variable
rate equal to the three-month LIBOR Rate plus 300 basis points prior to acceleration or
maturity, and 600 basis points in excess of the LIBOR Rate in effect from time to time after
maturity, whether by acceleration or otherwise.

     (b) Variable Rate Note. At all times for the Variable Rate Note, interest shall accrue
at a variable rate equal to the three-month LIBOR Rate plus 350 basis points prior to
acceleration or maturity, and 650 basis points in excess of the LIBOR Rate in effect from
time to time after maturity, whether by acceleration or otherwise.

     (c) Long Term Revolving Note. At all times for the Long Term Revolving Note, interest
shall accrue at a variable rate equal to the one-month LIBOR Rate plus 350 basis points
prior to acceleration or maturity, and 650 basis points in excess of the LIBOR Rate in
effect from time to time after maturity, whether by acceleration or otherwise.

10

 

     Section 2.11. Repayment of Term Notes. The Term Notes shall be repaid as follows:

     (a) On the 10th day of every third month, commencing June 10th,
2006, the Borrower shall pay to the Bank the scheduled principal payment shown in Schedule
I, attached hereto and by this reference made a part hereof, plus accrued interest on the
Swap Note.

     (b) On the 10th day of every third month, commencing June 10th,
2006, the Borrower shall pay the sum of $600,053.89 to the Bank, which shall be allocated as
follows: (i) first to accrued interest on the Long Term Revolving Note, (ii) next to accrued
interest on the Variable Rate Note, and (iii) next to principal on the Variable Rate Note.

     (c) After the Variable Rate Note has been fully paid, such quarterly payments shall be
allocated first to accrued interest on the Long Term Revolving Note, and thence to principal
on such Note, thereby reducing available loan capacity by such amount.

     (d) Notwithstanding the foregoing, all unpaid principal and accrued interest for all
Term Notes shall be due and payable on the Term Loan Termination Date, if not sooner paid.

     Section 2.12. Letter of Credit. Bank will issue its Letter of Credit at Borrower’s request, on
Borrower’s account, pursuant to the Bank’s customary policies and with its standardized documents,
in amounts outstanding at no time exceeding $1,000,000 in the aggregate.

     Section 2.13. Payments and Prepayments for All Obligations. All principal, interest and fees
due under this Agreement, the Notes and the Loan Documents shall be paid in immediately available
funds as contracted in this Agreement and no later than the payment due date set forth in the
periodic statements mailed to the Borrower by the Bank. Should a payment come due on a day other
than a Banking Day, the payment shall be made no later than the next the Banking Day and interest
shall continue to accrue during the extended period.

     On the occasion of any prepayment of all or substantially all of the outstanding Obligations
by the Borrower, and the direct or indirect source of funds to pay such Obligations was one or more
loans from a financial institution, the Borrower will pay to the Bank a prepayment fee calculated
as follows: If the prepayment occurs during the construction of the Project or within the first
three years of the Term Loan, a fee of 2% if during the construction period or within the first
year of the Term Loan and 1% if within the second year or third year shall be paid to the Bank.

     The Borrower also agrees to pay, at the time of any such prepayment of the Construction Note
or Term Note, any additional amounts as may be provided in the Notes evidencing the Obligations for
compensation to the Bank for prepayment of such Notes evidencing fixed interest rates.

11

 

     Section 2.14. Fees.

     (a) At or before the Closing, the Borrower shall pay to the Bank a due diligence and
negotiation fee in the sum of $50,000 at or before Closing. At the Closing, the Borrower
shall pay to the Bank a commitment fee of $255,000. At the Completion Date, and on each
annual anniversary of the Completion Date for five years subsequent to the Completion Date,
the Borrower shall pay to the Bank an annual servicing fee of $30,000.

     (b) The Borrower agrees to pay the Bank an unused commitment fee equal to 37.5 basis
points of the average unused portion of the Long Term Revolving Note and the Revolving Note,
calculated and payable on a quarterly basis in arrears; provided, however, the unused
commitment fee on the Revolving Note shall not apply and shall be payable by the Borrower
only after the earlier of (i) such time as the Borrower has requested, and the Bank has
deposited, the initial advance of the Revolving Loan into the Borrower’s deposit account
with the Bank or (ii) the Completion Date.

     (c) The Borrower shall pay the Bank fees for issuance of letters of credit according to
the Bank’s customary fee schedule. The Borrower shall pay all costs associated with the
Closing of the Loan, including, but not limited to, title, survey, environmental and
appraisal reports, costs of disbursement agent, independent construction inspector, mortgage
fees and taxes and the Bank’s legal fees.

     Section 2.15. Appraisal. If the Bank is required by any government entity with regulatory
authority over the Bank to obtain a real estate appraisal, the Bank will obtain, at the Borrower’s
expense, an appraisal of the Project and the Property providing values obtained by use of the cost
approach, the income approach and the replacement cost approach. If such appraisal shows that the
outstanding Construction Loan amount at that time exceeds the value of the Project and the Property
as determined by the appraisal, using the replacement cost approach, then the Borrower shall,
within 30 days of notice by the Bank and without penalty or premium, pay the difference between the
outstanding Construction Loan amount and the appraised value amount of the Project and the Property
as determined by such appraisal, and no further advances shall be made on the Construction Loan
thereafter until such time as the appraised value of the Project and the Property exceeds the
Construction Loan amount.

ARTICLE III

DISBURSEMENT PROCEDURES

     Section 3.01. Submission of Draw Requests. Whenever the Borrower desires a disbursement under
the Construction Loan, which at all times shall be pursuant to disbursement agreement, which shall
be entered into by the Parties in a mutually agreeable form and with a mutually agreeable
disbursing agent, and shall be no more often than three times a month, unless the Bank agrees
otherwise, the Borrower shall submit to the Bank a Draw Request, duly executed on behalf of the
Borrower, setting forth the information requested therein. Each Draw Request shall be delivered to
the Bank at least five days before the date the disbursement is desired.

12

 

     Section 3.02. Amount of Draw Request. Each Draw Request shall be limited to amounts equal to
(a) the total of costs actually incurred and paid or owing by the Borrower to the date of such Draw
Request for work performed or materials incorporated in the Project as described in the Plans, plus
(b) the cost of materials and equipment not incorporated in the Project, but delivered to and
suitably stored at the Project site, plus (c) prepayments for
equipment when prepayment is required by the manufacturer or supplier; less (d) prior
disbursements for such costs and from the Construction Loan or the Borrower’s Working Capital for
such costs. Notwithstanding anything herein to the contrary, no disbursements for materials stored
at the Project site will be made by the Bank unless the Borrower shall advise the Bank of its
intention to store materials prior to their delivery, and provide suitable security for such
storage.

     Section 3.03. Other Documents. At the time of submission of each Draw Request, the Borrower
shall submit or cause to be submitted to the Bank the following:

     (a) A written general lien waiver from the General Contractor for work done and
materials supplied by it which were paid for by the Draw Request.

     (b) A written lien waiver from the General Contractor and each Subcontractor for work
done and materials supplied by it which were paid for pursuant to the next preceding Draw
Request with copies of all invoices supporting the Draw Request.

     (c) A document from the Borrower and the General Contractor, and, if applicable, the
Independent Inspector, requesting and/or approving payment of the relevant Draw Request.

     (d) Such other supporting evidence as may be reasonably requested by the Bank to
substantiate all payments which are to be made out of the relevant Draw Request and/or to
substantiate all payments then made with respect to the Project.

     Section 3.04. Cost Overruns. The Borrower agrees that all cost overruns on the Project shall
be paid solely by the Borrower and that the Borrower shall deliver additional funds to the Bank in
accordance with Section 3.06 of this Agreement to pay any cash required to fund cost overruns on
the Project.

     Section 3.05. Making Disbursements. Provided that on the date a Draw Request is received by
the Bank (a) the Borrower has performed all of its agreements and complied with all requirements of
this Agreement to be performed or complied with including, but not limited to, satisfaction of all
applicable conditions precedent contained in Article IV of this Agreement, and (b) if required by
the Bank, the Bank has received a current report from the Independent Inspector documenting
material compliance with the Plans for those portions of the Project indicated as completed in the
Draw Request and otherwise confirming the acceptability of the Project work represented by the Draw
Request, the Bank shall pay to the Borrower the amount of the requested disbursement. Each
disbursement disbursed to the Title Company as Disbursing Agent under the Construction Loan shall
bear interest at the rate provided in the Construction Note evidencing the disbursement from the
date such disbursement is so disbursed to the Borrower or deposited into the Borrower’s account.

13

 

     Section 3.06. Deposit of Funds by Borrower. If the Independent Inspector shall at any time in
good faith determine that the undisbursed amount of the Construction Loan is less than the amount
required to pay costs and expenses of any kind which reasonably may be anticipated in connection
with the completion of the Project after application of all funds received from the Borrower’s
equity and shall thereupon send written notice thereof to the Borrower specifying the
amount required to be deposited by the Borrower with the Bank to provide sufficient funds to
complete the Project, the Borrower agrees that it will, within 30 calendar days of receipt of any
such notice, deposit with the Bank the amount of funds specified in the Bank’s notice. The
Borrower agrees that any such funds deposited with the Bank may be disbursed before any further
disbursement of Construction Loan proceeds from the Bank to pay any and all costs and expenses of
any kind in connection with completion of the Project.

     Section 3.07. Disbursements Without Receipt of Draw Request. Notwithstanding anything herein
to the contrary, the Bank shall have the irrevocable right at any time and from time to time to
apply funds which it agrees to disburse hereunder to pay interest on the Construction Note as and
when such interest becomes due, and to pay any and all of the expenses of the Bank related to the
Project and the Construction Loan, all without receipt of a Draw Request.

     Section 3.08. Miscellaneous Procedures. The Bank may establish additional procedures
regarding disbursements and Draw Requests as are reasonable to assure the proceeds of the
Construction Loan are paid only to those persons and entities entitled to the same, and that the
liens securing the Obligations are in all cases first and paramount liens on the Property.

     Section 3.09. Appointment of Independent Inspector. No Draw Request shall be honored after
commencement of construction unless and until the Borrower has consented to the appointment of an
Independent Inspector.

     Section 3.10. Limitation on Advances. Notwithstanding any other provision of this section,
the Bank is not required to advance any sum under the Construction Loan until the Bank has obtained
participation agreements with other Lenders satisfactory to the Bank.

ARTICLE III

CONDITIONS OF LENDING

     Section 4.01. Conditions Precedent to All Disbursements. The obligation of the Bank to make
each disbursement under any Loans (including the initial disbursement) shall be subject to the
further conditions precedent that on the date of such disbursement:

     (a) The Borrower shall have paid costs of the Project in an amount equal to its total
equity and all subordinated debt which exists on the date of this Agreement.

     (b) The representations and warranties contained in Article V of this Agreement are
correct on and as of the date of such disbursement as though made on and as of such date,
except to the extent that such representations and warranties relate solely to an earlier
date and except to the extent of changes permitted under the terms of this Agreement.

14

 

     (c) No event has occurred and is continuing, or would result from such disbursement,
which constitutes an Event of Default.

     (d) No determination shall have been made by the Bank that the undisbursed amount of
the Construction Loan is less than the amount required to pay all costs and expenses of any
kind which reasonably may be anticipated in connection with the completion of the Project;
or, if such a determination has been made and notice thereof sent to the Borrower in
accordance with this Agreement, the Borrower shall have deposited the necessary funds with
the Bank in accordance with Section 3.06 of this Agreement.

     (e) The disbursement requirements of Article III of this Agreement have been satisfied.

     (f) If required by the Bank, the Bank shall be furnished with a statement from the
Borrower and the General Contractor, in form and substance satisfactory to the Bank, in the
exercise of its reasonable discretion, setting forth the names, addresses and amounts due or
to become due, as well as the amounts previously paid, to every Subcontractor.

     (g) No Permit necessary for the construction of the Project shall have been revoked or
the issuance thereof subjected to challenge before any court or other governmental authority
having or asserting jurisdiction as to the Project.

     (h) The parties intend that the Construction Loan is available to fund the lesser of
58% of the total cost of the Project, including all other approved expenses as set forth in
the final version of the Sources and Uses of Funds document furnished to the Bank by the
Borrower prior to the Closing, or $34,000,000. No advances or disbursements under the
Construction Loan shall exceed such levels, unless the Bank consents in writing to the same.

     (i) The Bank shall have entered into agreements with at least two (2) other entities
whereby such other entities have agreed to participate in the Construction Loan and Term
Loan under the terms and conditions of this Agreement.

     (j) The Borrower shall have entered into and delivered to the Bank the Swap Contract.

     Section 4.02. Conditions Precedent to Initial Disbursement. The obligation of the Bank to
make its initial disbursement under the Construction Loan is subject to the condition precedent
that the Borrower shall be in compliance with the conditions set forth in Section 4.01 of this
Agreement and to the further condition precedent that the Bank shall have received on or before the
Closing all of the following, each dated (unless otherwise indicated) such day, in form and
substance satisfactory to the Bank:

     (a) The Construction Note, duly executed on behalf of the Borrower.

     (b) The Mortgage duly executed on behalf of the Borrower.

15

 

     (c) The Security Agreement duly executed by the Borrower, together with (i)
acknowledgment copies of the Financing Statements (UCC-1) duly filed under the
Uniform Commercial Code of all jurisdictions necessary or, in the opinion of the Bank,
desirable to perfect the security interest created by the Security Agreement; and (ii)
certified copies of Requests for Copies or Information (Form UCC-11) identifying all of the
financing statements on file with respect to the Borrower in all jurisdictions referred to
under (i), including the Financing Statement filed by the Bank against the Borrower,
indicating that no party claims an interest in any of the Collateral.

     (d) Certified (as of the date of this Agreement) copies of all corporate action taken
by the Borrower, including resolutions of its Board of Governors, authorizing the execution,
delivery and performance of the Loan Document to which it is a party and each other document
to be delivered pursuant to this Agreement.

     (e) A certificate (dated as of the date of this Agreement) of the Secretary of the
Borrower certifying the names and true signatures of the officers of the Borrower authorized
to sign the Loan Documents to which it is a party and the other documents to be delivered by
the Borrower under this Agreement and performance with their terms.

     (f) A favorable opinion of counsel for the Borrower, in substantially the form of
Exhibit G, addressed to the Bank and containing customary qualifications, opining that (i)
the Borrower is duly organized and in good standing in the state of Minnesota; (ii) the
Borrower is qualified in each state in which it does business and is legally required to be
qualified; (iii) the Borrower has the requisite power to execute and deliver the Loan
Documents to which it is a party and to borrow money and perform in accordance with the
terms of such Loan Documents; (iv) all actions and consents by the Borrower necessary to the
validity of the Loan Documents to which it is a party have been obtained; (v) the Loan
Documents to which it is a party have been duly signed and are the valid and binding
Obligation of the Borrower and enforceable in accordance with their terms; and (vi) the Loan
Documents to which it is a party and the transactions contemplated thereunder do not
conflict with any provision of the articles of organization of the Borrower or its operating
agreement, or any agreement binding upon the Borrower or its properties.

     (g) The Assignment of Rents, duly executed on behalf of the Borrower.

     (h) A financing statement or statements sufficient when filed to perfect the security
interests granted under the Mortgage, the Assignment of Rents, the Security Agreement, and
the Assignment of the Design/Build Construction Contract, to the extent such security
interests are capable of being perfected by filing.

     (i) A copy of the Plans, certified by the General Contractor and the Borrower.

     (j) The Assignment of the Construction Contract, duly executed by the Borrower and
consented to by the General Contractor, and a copy of the Construction Contract, together
with the general conditions of the contract referred to herein.

16

 

     (k) The Assignment of the Ethanol Marketing Contract, duly executed by the Borrower and
consented to by the ethanol marketer, and a copy of the Ethanol Marketing Contract, together
with the general conditions of the contract referred to herein.

     (l) The Assignment of the DDGS Marketing Contract, duly executed by the Borrower and
consented to by the DDGS marketer, and a copy of the DDGS Marketing Contract, together with
the general conditions of the contract referred to herein.

     (m) Execution of the Control Agreement with respect to the Borrower’s commodity
derivative transaction account with FCStone Trading, LLC, duly executed by the Borrower and
consented to by the other parties to the account, and a copy of the applicable agreement,
together with the general conditions of the contract referred to herein.

     (n) Execution of the Control Agreement with respect to the Borrower’s commodity
contracts account with FCStone, LLC, duly executed by the Borrower and consented to by the
other parties to the account, and a copy of the applicable agreement, together with the
general conditions of the contract referred to herein.

     (o) The Assignment of the Consulting Agreement with Glacial Lakes Energy, LLC, duly
executed by the Borrower and consented to by Glacial Lakes Energy, LLC, and a copy of the
Consulting Agreement, together with the general conditions of the contract referred to
herein.

     (p) The Assignment of the Borrower’s Farmer’s Cooperative Elevator Contract, duly
executed by the Borrower and consented to by the authorized representative of such
cooperative, and a copy of the Farmer’s Cooperative Elevator Contract, together with the
general conditions of the contract referred to herein.

     (q) The Assignment of the Borrower’s Rail Infrastructure Agreement, duly executed by
the Borrower and consented to by the other parties to the Agreement, and a copy of the Rail
Infrastructure Agreement, together with the general conditions of the contract referred to
herein.

     (r) The Assignment of the Borrower’s Management Contract, duly executed by the Borrower
and consented to by the other parties to the Management Contract, and a copy of the
Management Contract, together with the general conditions of the contract referred to
herein.

     (s) The Assignment of the Glacial Lakes Energy LLC Management Contract, duly executed
by Glacial Lakes Energy LLC and consented to by the other parties to the Management
Contract, and a copy of the Management Contract, together with the general conditions of the
contract referred to herein.

     (t) The Assignment of the Borrower’s Job Opportunity Building Zone Business Subsidy
Agreement, duly executed by Borrower and consented to by the other parties to the Agreement,
and a copy of the Job Opportunity Building Zone Business

17

 

Subsidy Agreement, together with
the general conditions of the contract referred to herein.

     (u) A total project cost statement on the Project duly executed by the Borrower,
setting forth the anticipated total cost of the Project’s completion, and a
construction cost statement duly executed by the General Contractor, setting forth its
anticipated construction costs of the Project.

     (v) An ALTA (American Land Title Association) Survey of the Property, prepared at the
Borrower’s expense, currently certified by a licensed, registered surveyor and incorporating
the legal description of the Property, showing the location of all points and lines referred
to in the legal description, the location of any existing improvements, the proposed
location of the Project (including parking) as being within the exterior boundaries of the
Property and in compliance with all applicable building set-back requirements, and the
location of all utilities and the location of all easements and encroachments onto or from
the Property that are visible on the Property, known to the surveyor preparing the survey or
of record, identifying easements of record by recording data and currently certified by the
surveyor that there are no such easements or encroachments upon the Property except as shown
on the survey.

     (w) An as-built appraisal based upon the Plans to be performed by Natwick Associates
Appraisal Services which shows the as-completed value of the Property and Project addressed
to and otherwise acceptable to the Bank.

     (x) A title binder, issued by Ag Star Financial Services, ACA (the “Title Company”), at
the Borrower’s expense, constituting a commitment by the Title Company to issue a
mortgagee’s title policy in favor of the Bank under the Mortgage, that will be free from all
standard exceptions, including mechanics’ liens and all other exceptions not previously
approved by the Bank and that will insure the Mortgage to be a valid first lien on the
Property, and with the ALTA endorsements as set forth as Exhibit I.

     (y) A soil report on the Property certified by a registered engineer including
structural design recommendations in form and substance satisfactory to the Bank. Such
report shall include soil borings and geo-technical analyses.

     (z) A Phase I Environmental Report of the Property, as well as any subsequent limited
environmental site assessments issued prior to the Closing, all in form and content
satisfactory to the Bank.

     (aa) Copies of all Construction Permits from the applicable regulatory agencies from
whom such permit or license is required.

     (bb) Copies of documents from the appropriate state, federal, city or county authority
having jurisdiction over the Property and the Project that provide to the reasonable
satisfaction of the Bank that the Project when constructed in accordance with the Plans will
comply in all material respects with all applicable ordinances, zoning, subdivision,
platting, environmental and land use requirements, without special variance or exception,
and such other evidence as the Bank shall reasonably request to establish

18

 

 that the Project
and the contemplated use thereof are permitted by and comply in all material respects with
all applicable use or other restrictions and requirements in prior conveyances, zoning
ordinances, environmental laws and regulations, watershed district regulations and all other
applicable laws or regulations and governmental authorities
having jurisdiction over the Project. The Borrower is not required to obtain advance
confirmation from any governmental body that the Project will comply with such ordinances,
regulations and requirements.

     (cc) Copies of the policy of property/casualty insurance and comprehensive general
liability insurance and a certificate of the workers’ compensation insurance required under
Article VI of this Agreement, with all such insurance in full force and effect and approved
by the Bank, in the exercise of its reasonable discretion, and naming the Bank as a mortgage
and additional named insured, together with appropriate flood insurance, if the Property is
in a flood hazard area. Notwithstanding the foregoing, the Borrower is not required to
obtain workers’ compensation insurance until required by Minnesota law.

     (dd) A recently certified copy of the Borrower’s operating agreement, and any
amendments, if applicable.

     (ee) A recently certified copy of the Borrower’s Articles of Organization and any
amendments, if applicable.

     (ff) A certificate of good standing for the Borrower from the office of the Minnesota
Secretary of State.

     (gg) By the Closing, proof of injection of equity capital into the Borrower of no less
than $24,000,000, including Subordinated Debt.

     (hh) A copy of any existing contracts for the Borrower’s natural gas, electricity and
water service and assignments thereof in favor of the Bank in form satisfactory to the Bank.

     Section 4.03. Conditions Precedent to Final Disbursements on Construction Loan. The
obligation of the Bank to make the final disbursement on the Construction Loan shall be subject to
the condition precedent that the Borrower shall be in compliance with all conditions set forth in
Sections 4.01 and 4.02 of this Agreement and, further, that the following conditions shall have
been satisfied on or prior to the Completion Date:

     (a) The Project has been completed in material compliance with the Plans and the Bank
shall have received a certificate of completion from the General Contractor, certifying that
(i) work on the Project has been completed in material compliance with the Plans and all
labor, services, materials and supplies used in such work have been paid for and (ii) the
completed Project conforms in all material respects with all applicable zoning, land use
planning, building and environmental laws and regulations of the governmental authorities
having jurisdiction over the Project.

19

 

     (b) The Bank has received satisfactory evidence that all work requiring inspection by
municipal or other governmental authorities having jurisdiction has been duly inspected and
approved by such authorities and by the rating or inspection organization, bureau,
corporation or office having jurisdiction.

     (c) The Bank or the Title Company, on the Bank’s behalf, shall have received a lien
waiver from each Subcontractor and the General Contractor for all work done and for all
materials furnished by it for the Project.

     (d) The Bank has received an itemized list from the Borrower of all equipment and
fixtures, which are at that time subject to the Bank’s security interest.

     Section 4.04. Conditions Precedent to All Revolving Loans. The obligation of the Bank to make
each Revolving Loan (including the initial Revolving Loan) shall be in addition to the conditions
set forth in Section 4.01 and 4.02, subject to the further conditions precedent on the date of such
Revolving Loan:

     (a) The following statements shall be true and the Bank shall have received a
certificate signed by a duly authorized officer of the Borrower dated the date of such
Revolving Loan, stating that:

     (i) The representations and warranties contained in Article V of this
Agreement, and all provisions of the Security Agreement, are correct on and as of
the date of such Loan as though made on and as of such date; and

     (ii) No Default or Event of Default has occurred and is continuing, or would
result from such Loan.

     (b) The Bank shall have received such other approvals, opinions or documents as the
Bank may reasonably request.

     Section 4.05. No Waiver. The making of any disbursement under any Loan prior to fulfillment
of any condition thereto shall not be construed as a waiver of such condition, and the Bank
reserves the right to require fulfillment of any and all such conditions prior to making any
subsequent disbursements under the Construction Loan or any other Loan.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

     To induce the Bank to enter into this Agreement, the Borrower makes the following
representations and warranties and agrees that each Draw Request constitutes a reaffirmation of
these representations and warranties:

     Section 5.01. Existence and Power. The Borrower is a limited liability company duly formed
and in good standing under the laws of the State of Minnesota. The Borrower has accomplished all
necessary actions required by a corporate entity under applicable law to own

20

 

the Property and
construct the Project, and to execute and deliver, and to perform all of its Obligations under, the
Loan Documents to which it is a party.

     Section 5.02. Authorization of Borrowing; No Conflict as to Law or Other Agreements. The
execution, delivery and performance by the Borrower of the Loan Documents and the borrowings from
time to time hereunder have been duly authorized by all necessary
actions of the Borrower and do not and will not (a) require any material consent or approval,
or authorization, by any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, other than those obtained and in full force and effect, (b)
violate, in any material respect, any provision of any law, rule or regulation or of any order,
writ, injunction or decree presently in effect having applicability to the Borrower, or violate any
provision of the Articles of Organization or operating agreement of the Borrower, (c) result in a
breach of or constitute a default beyond any applicable cure period under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which the Borrower is a party or by
which it or its properties may be bound or affected, or (d) result in, or require, the creation or
imposition of any mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature to or with any other creditor of the Borrower, in the aggregate exceeding
$50,000 annually, upon or with respect to any of the properties now owned or hereafter acquired by
the Borrower.

     Section 5.03. Legal Agreements. The Loan Documents to which it is a party constitute the
legal, valid and binding Obligations of the Borrower enforceable against the Borrower in accordance
with their respective terms, and as to the Loan Documents to which the Borrower is not a party, the
Borrower believes such documents constitute the legal, valid and binding obligations of the parties
thereto, enforceable against such parties in accordance with their respective terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally and (b) as limited by laws
relating to the availability of specific performance, injunctive relief or other equitable
remedies.

     Section 5.04. License and Permits. The Borrower has all necessary Permits required for
construction and operation of the Project except those which are not required for the current stage
of construction of the Project, or which cannot be obtained until completion of the Project.

     Section 5.05. Construction of Project. The Project will be constructed in material compliance
with the Plans and will not encroach upon or overhang any easement or right-of-way on land not
constituting part of the Property. The Project, both during construction and on the Completion
Date, and the contemplated use thereof will not violate in any material respect any applicable
zoning or use statute, ordinance, building code, rule or regulation, or any covenant or agreement
of record. The Borrower agrees that it will furnish from time to time such satisfactory evidence
with respect thereto as may be required by the Bank.

     Section 5.06. Ownership and Liens. The Borrower and each Subsidiary have good and marketable
fee simple title to, or valid leasehold interests in, all of their properties and assets, real and
personal, including the properties and assets and leasehold interest reflected in the financial
statements referred to in Section 5.07 (other than any properties or assets disposed of in the
ordinary course of business), and none of the properties and assets owned by the Borrower or

21

 

any
Subsidiary and none of their leasehold interests are subject to any Lien, except such as may be
permitted under this Agreement.

     Section 5.07. Financial Condition. The Borrower has furnished to the Bank its compiled cash
flow projection of the Borrower prepared in accordance with GAAP which projections were dated July
15, 2003 together with the supplementary material attached hereto as
Exhibit H (the “Projections”). The Projections fairly present the projected financial
condition of the Borrower on the dates thereof, and were prepared in GAAP format and on the basis
of assumptions deemed reasonable by the Borrower. There has been no material adverse change in the
operations, properties or condition (financial or otherwise) of the Borrower since the date of the
Projections and no additional borrowings have been made by the Borrower other than the borrowing
contemplated hereby or approved by the Bank. No certificate or statement furnished to the Bank by
or on behalf of the Borrower in connection with the transactions contemplated hereby contains any
untrue statement of a material fact or omits to state a material fact necessary in order to make
the statements contained therein or herein not misleading. To the best of the knowledge of the
Borrower, there is no fact which materially adversely affects or in the future (so far as the
Borrower now foresees) may materially adversely affect the operation or prospects or condition
(financial or other) of the Borrower or its properties or assets which has not been set forth
herein or in a certificate or statement furnished to the Bank by the Borrower.

     Section 5.08. Litigation. There are no actions, suits or proceedings pending or, to the
knowledge of the Borrower, threatened against or affecting the Borrower or the properties of the
Borrower before any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which, if determined adversely to the Borrower, would have a
material adverse effect on the financial condition, properties, or operations of the Borrower.

     Section 5.09. Taxes. The Borrower has filed all federal, state and local tax returns which to
the knowledge of the Borrower are required to be filed, and the Borrower has paid or caused to be
paid to the respective taxing authorities all taxes as shown on said returns or on any assessment
received by it to the extent such taxes have become due except those which the Borrower is
contesting in good faith and with respect to which adequate reserves have been set aside.

     Section 5.10. No Default. There is no event, which is, or with notice or the lapse of time
would be, an Event of Default under this Agreement.

     Section 5.11. ERISA. The Borrower is in compliance in all material respects with the Employee
Retirement Income Security Act of 1974, as amended, and has received no notice to the contrary from
the Internal Revenue Service, the Department of Labor, the Pension Benefit Guaranty Corporation or
any other governmental entity or notice of any claims or pending claims under ERISA.

     Section 5.12. Environmental Matters. Except as set forth in the Phase I Environmental Report
referenced in Section 4.01 of this Agreement (a) the Borrower is in compliance in all material
respects with all health and environmental laws applicable to the Borrower and its operations and
knows of no conditions or circumstances that could materially interfere with such compliance in the
future; (b) except for Permits that cannot be obtained until completion of the

22

 

Project, the
Borrower has obtained all Permits, and approvals required by law for the operation of its business;
and (c) the Borrower has not identified any “recognized environmental conditions,” as that term is
defined by the American Society for Testing and Materials in its standards for environmental due
diligence which could subject the Borrower to enforcement action if brought to the attention of
appropriate governmental authorities.

     Section 5.13. Necessary Utilities, Etc. As required by the completion of the Project, the
Borrower will make suitable arrangements so that the Project has all necessary electrical, gas,
water and sewer facilities in place for the proper construction and operation of its ethanol plant.
The Borrower has made adequate provision for all storage facilities, equipment and product
supplies, including corn, as specified by its engineers for the maximum output and operation of the
plant.

ARTICLE V

ADDITIONAL COVENANTS OF BORROWER

     Section 6.01. Financial Information and Reporting. Except as otherwise stated in this
Agreement, all financial information provided to the Bank shall be compiled using GAAP consistently
applied. During the time period that any amounts are outstanding under the Construction Note or
this Agreement or the Loan Documents to which it is a party, unless the Bank shall otherwise agree
in writing:

     (a) The Borrower shall provide the Bank within 120 days of the Borrower’s fiscal year
end the Borrower’s consolidated, annual financial statements. The statements must be
audited with an unqualified opinion by a certified public accountant reasonably acceptable
to the Bank, with such opinion directed both to the Borrower and to the Bank, and must be
accompanied by a certificate of such accountants stating whether, in conducting their audit,
they have become aware of any event of default under this Agreement, or of any event which
would, after the lapse of time or the giving of notice, or both, constitute an Event of
Default, specifying the nature and duration of the default. Such audit statement shall be
accompanied by the accountants’ calculations of the Borrower’s compliance with the covenants
contained in Section 6.02 of this Agreement as of the said fiscal year end.

     (b) After the Completion Date, the Borrower will furnish to the Bank within 30 days
after the end of each calendar month consolidated financial statements of the Borrower for
such period and year to date all in reasonable detail.

     (c) For each full calendar quarter ending after the Completion Date, the Borrower will
deliver to the Bank, within 30 days of each calendar quarter end, a certificate in a form
reasonably acceptable to the Bank that has been signed by an officer or member of the Board
of Governors of the Borrower, which (i) certifies that the statements required by Section
6.01(a) and (b) have been accurately prepared in accordance with GAAP applied consistently
(except for the absence of financial footnotes to the statements furnished under Section
6.01(b)); (ii) certifies that the officer or member of the Board of Governors has no
knowledge of any Event of Default under

23

 

this Agreement or the Loan Documents, or of any
event which would, after the lapse of time or the giving of notice, or both, constitute an
event of default under this Agreement or the Loan Documents and that the Borrower is in full
compliance with all Covenants contained in this Agreement and the Loan Documents.

     (d) After the Completion Date, the Borrower will deliver to the Bank each month, within
30 days of each month end, a monthly production report, in form acceptable to the Bank,
which shall, at a minimum, report for each such month the Borrower’s input and output
amounts of corn or other grain usage, natural gas usage, electrical usage, dry distillers
grains and wet distillers grains output, ethanol output and, if applicable,
CO2 output.

     (e) Prior to the end of each fiscal year, the Borrower shall provide the Bank projected
financial statements for the following fiscal year which shall include, but not be limited
to, proposed capital projects and expenditures.

     (f) The Borrower shall notify the Bank of the existence of any Event of Default
promptly after such Event of Default becomes known to any manager, officer or member of the
Board of Governors of the Borrower.

     (g) The Borrower shall authorize all federal, state and municipal authorities to
furnish reports of examinations, records and other information relating to the condition and
affairs of the Borrower and its ethanol plant, and any information from reports, returns,
files and records by such authorities regarding the Borrower upon request to the Bank.

     (h) The Borrower will give the Bank prompt written notice of any material violation as
to any environmental matter by the Borrower and of the commencement of any judicial or
administrative proceeding relating to health, safety or environmental matters (i) in which
an adverse determination or result could result in the revocation of or have a material
adverse effect on any Permits held by the Borrower which are material to the operations of
the Borrower and (ii) which will or threatens to impose a material liability on the Borrower
to any person or party or which will require a material expenditure by the Borrower to cure
any alleged problem or violation.

     (i) The Borrower will give prompt notice to the Bank of (i) any litigation or
proceeding in which it is a party if an adverse decision therein would require it to pay
more than $100,000 or deliver assets the value of which exceeds such sum (whether or not the
claim is considered to be covered by insurance); and (ii) the institution of any other suit
or proceeding involving it that might materially and adversely affect its operations,
financial condition, property or business prospects.

     (j) The Borrower shall provide monthly Borrowing Base certificates in a form reasonably
acceptable to the Bank, calculating advance rates under the Revolving Loan pursuant to the
Borrowing Base beginning with the certificate with respect to the fourth month following the
Completion Date.

24

 

     (k) The Borrower will provide the Bank with such other information as it may reasonably
request.

     Section 5.02. Financial Covenants. At all times that any amounts are outstanding under the
Construction Note, the Term Note, this Agreement or the Loan Documents to which
the Borrower is a party, unless the Bank shall otherwise agree in writing, the Borrower agrees
to comply with the financial covenants described below, which shall be calculated using GAAP
consistently applied, except as they otherwise may be modified by the capitalized definitions:

     (a) The Borrower shall maintain a Fixed Charge Coverage Ratio, measured on a trailing
four quarters basis at the end of each full calendar quarter, of no less than 1.25:1.0, for
all periods following the Completion Date; provided, however, the Fixed Charge Coverage
Ratio shall be measured as follows for the first three quarters after the Completion Date:

first quarter: on a trailing one quarter basis at the end of the calendar quarter
second quarter: on a trailing two quarter basis at the end of each calendar quarter
third quarter: on a trailing three quarter basis at the end of each calendar
quarter.

     (b) The Borrower shall maintain Net Worth of not less than $21,000,000 at all times.
The required minimum Net Worth of Borrower, which is to be measured annually at the end of
each fiscal year of Borrower, shall increase each fiscal year by an amount equal to the
greater of (a) $250,000 or (b) the amount of undistributed earnings accumulated during the
fiscal year just ended, but not including allowable distributions attributable to the just
ended fiscal year’s earnings.

     (c) The Borrower shall determine, at each fiscal year and following the Completion
Date, the amount of its Excess Cash Flow for said fiscal year, and within one hundred twenty
(120) days following such fiscal year end, pay fifteen percent (15%) of such sum to the
Bank, to be applied to the outstanding principal amount of the Term Note, and after the Term
Note is repaid, to the Long Term Revolving Note, and after Long Term Revolving Note is
repaid, to the Swap Note. Such annual payment shall not release the Borrower from making
any payment of principal or interest otherwise required by this Agreement. No payment of
Excess Cash Flow shall be the cause of a payment to the Bank for interest rate breakage fees
or otherwise result in any prepayment fee.

     (d) The Borrower shall maintain the following minimum Working Capital during the
periods stated below, measured continuously:

	 	 	 	 	 
	Period	 	Minimum Working Capital	 
	Beginning on July 31, 2006 through October 31, 2006
	 	$	2,500,000	 
	From November 1, 2006 through February 28, 2007
	 	$	3,500,000	 
	From March 1, 2007 until payment in full
of the Term Loan
	 	$	5,000,000	 

25

 

     For the purpose of this covenant, the amount of any availability to draw under the
terms of the Long Term Revolving Note shall constitute an addition to Working Capital in
such amount available.

     Section 6.03. Affirmative Covenants. During the time period that any amounts are outstanding
under the Notes, this Agreement or the Loan Documents to which the Borrower is a party, unless the
Bank shall otherwise agree in writing, the Borrower shall:

     (a) diligently proceed with construction of the Project in material compliance with the
Plans and in accordance in all material respects with all applicable laws and ordinances,
and complete the Project by the Completion Date;

     (b) use the proceeds of each of the disbursements under the Construction Loan solely
for the purposes set forth in this Agreement;

     (c) retain Fagen, Inc. as the General Contractor. In the event that Fagen, Inc. is no
longer the General Contractor for the Project, the Borrower shall replace Fagen, Inc. with
another General Contractor, subject to the reasonable approval of the Bank and shall provide
the Bank with proof of a performance completion bond in such form and in such amount as the
Bank deems reasonably satisfactory;

     (d) use its reasonable best efforts to require the General Contractor and each
Subcontractor to comply in all material respects with all rules, regulations, ordinances and
laws bearing on its conduct of work on the Project;

     (e) provide and maintain at all times during the process of building the Project and,
from time to time at the request of the Bank, furnish the Bank with such additional
insurance, which the Bank, in its sole discretion, deems necessary and with proof of payment
of premiums on:

     (i) Builders’ Risk completed value form insurance, in form and content
satisfactory to the Bank, and placed with financially sound and reputable insurers
insuring the Project (and after completion of the Project, comprehensive, all risk
casualty insurance) against all risks, including flood, earthquake and mechanical
and electrical breakdown including testing to the full value of the Project (subject
to reasonable loss deductible provisions). The Bank’s interest shall be protected
by naming the Bank as a “loss payee” and shall contain an agreement of the insurer
to give not less than 30 days’ advance written notice to the Bank in the event of
cancellation of such policy or change affecting the coverage thereunder;

     (ii) Insurance against loss, damage or destruction by fire and other casualty,
including theft, vandalism and malicious mischief, flood (if the Premises is in a
location designated by the Federal Emergency Management Administration as a Special
Flood Hazard Area), earthquake (if the Premises is in an area subject to destructive
earthquakes within recorded history), boiler explosion (if there is any boiler upon
the Premises), plate glass breakage, sprinkler damage (if the Premises have a
sprinkler system), all matters covered by a standard extended

26

 

coverage endorsement, special coverage endorsement commonly known as an “all
risk” endorsement and such other risks as Lender may reasonably require, insuring
the Mortgaged Property for not less than 100% of their full insurable replacement
cost;

     (iii) Commercial General Liability insurance, (including products and completed
operations, operations of subcontractors and contractual liability insurance), in
form and content satisfactory to the Bank, and placed with financially sound and
reputable insurers with limits reasonably acceptable to the Bank, but in no event
for less than $2,000,000;

     (iv) State Worker’s compensation insurance in the statutorily mandated limits,
employer’s liability insurance with limits not less than $500,000 or such greater
amount as Lender may from time to time require and such other insurance as may be
necessary to comply with applicable laws;

     (v) By the Completion Date, business income insurance equal to 100% of the
principal and interest payable under the Note for a period of not less than six
months.

     (vi) Business automobile liability insurance insuring all vehicles on the site,
including hired and non-owned liability;

     (vii) Environmental coverage for clean up and removal once the Project becomes
operational, but only insofar as it is reasonably required by the Bank;

     (viii) All insurance policies shall provide that any “no other insurance”
clause in the insurance policy shall exclude any policies of insurance maintained by
Lender and that the insurance policy shall not be brought into contribution with
insurance maintained by Lender;

     (ix) All insurance policies shall contain a standard without contribution
mortgage clause endorsement in favor of Lender and its successors and assigns as
their interests may appear and any other lender designated by Lender;

     (x) All insurance policies shall provide that the policy of insurance shall not
be terminated, cancelled or substantially modified without at least thirty (30)
days’ prior written notice to Lender and to any lender covered by any standard
mortgage clause endorsement;

     (xi) All insurance policies shall provide that the insurer shall not have the
option to restore the Premises if Lender elects to terminate the Mortgage in
accordance with the terms hereof;

     (xii) All insurance policies shall be issued by insurance companies licensed to
do business in the state in which the Premises is located and which are rated A:VI
or better by Best’s Insurance Guide or otherwise approved by Lender;

27

 

     (xiii) It is expressly understood and agreed that the foregoing minimum limits
of insurance coverage shall not limit the liability of Borrower for its acts or
omission as provided in the Mortgage. All liability insurance policies (with the
exception of worker’s compensation insurance to the extent not available under
statutory law) shall designate Lender and its successors and assigns as “loss
payee.” All such policies shall be written as primary policies, with deductibles
not to exceed 10% of the amount of coverage. Any other policies, including any
policy now or hereafter carried by Lender, shall serve as excess coverage. Borrower
shall procure policies for all insurance for periods of not less than one year and
shall provide to Lender certificates of insurance or, upon Lender’s request,
duplicate originals of insurance policies evidencing that insurance satisfying the
requirements of the Mortgage is in effect as all times.

     (f) assign to the Bank, in form acceptable to the Bank, all equipment and systems
warranties relating to the Project, together with all contracts for natural gas,
electricity, water and other utilities, as the same are obtained by the Borrower following
the Closing;

     (g) maintain accurate and complete books, accounts and records pertaining to the
Property and the Project and its ongoing and continuing operations in form and substance
reasonably satisfactory to the Bank. The Borrower will permit the Bank, at the Bank’s
expense if the Bank employees make the inspection, but at the Borrower’s expense if the Bank
contracts with third parties at reasonable expense to make the inspection, to examine upon
reasonable notice all books, records, contracts, plans, drawings, Permits, bills and
statements of account pertaining to the Project and to inspect upon reasonable notice all
books and records pertaining to its operations and to make extracts therefrom and copies
thereof;

     (h) cause to be paid to the proper authorities when due all federal, state and local
taxes, including taxes on the Property, required to be paid or withheld by it except those
which the Borrower is contesting in good faith and with respect to which adequate reserves
have been set aside;

     (i) allow the Bank and its participants, upon reasonable notice, and at its expense, to
conduct such inspections of the Project and the Borrower’s personal property subject to the
Bank’s security interest as the Bank may deem necessary for the protection of the Bank’s
interest; provided, however, such inspections shall occur during regular business hours, or
such other time as the Borrower and the Bank may agree, and shall not unreasonably interfere
with the Borrower’s business operations. Any such inspections shall be made and any
certificates issued are solely for the benefit and protection of the Bank, and the Borrower
shall not be entitled to rely thereon;

     (j) make all repairs, renewals or replacements necessary to keep its plant, properties
and equipment in good working condition;

     (k) comply in all material respects with all laws applicable to its form of
organization and business and the ownership of its property;

28

 

     (l) maintain and preserve all Permits, licenses, rights, privileges, charters and
franchises that it is required to hold to construct and operate the Project;

     (m) observe and comply with all laws, rules, regulations and orders of any government
or government agency relating to health, safety, pollution, hazardous materials or other
environmental matters to the extent noncompliance could result in a material liability or
otherwise have a material adverse effect on the Borrower;

     (n) maintain primary operating accounts (including those accounts containing the
Borrower’s equity capital) at the Bank, other than local operating accounts approved by the
Bank, such approval not to be unreasonably withheld by the Bank; and

     (o) preserve and maintain, and cause each Subsidiary to preserve and maintain, its
corporate existence and good standing in the jurisdiction of its incorporation, and qualify
and remain qualified, and cause each Subsidiary to qualify and remain qualified, as a
foreign corporation in each jurisdiction in which such qualification is required.

     Section 6.04. Negative Covenants. During the time period that any amounts are outstanding
under the Notes or this Agreement or the Loan Documents to which the Borrower is a party, unless
the Bank shall otherwise agree in writing, the Borrower shall not:

     (a) permit any security interest or mortgage or lien on the Property or Project or
other real or personal property the Borrower owns now or in the future, or assign any
interest that it may have in any assets or subordinate any rights that it may have in any
assets now or in the future, except (i) liens, assignments or subordinations in favor of the
Bank; (ii) liens, assignments or subordinations outstanding on the date of this Agreement
and disclosed in advance to the Bank in writing and approved by the Bank; (iii) liens for
taxes or assessments or other governmental charges not delinquent or which the Borrower is
contesting in good faith; (iv) liens which secure purchase money indebtedness allowed under
this Agreement; (v) liens that are imposed by law for obligations for labor or materials not
overdue for more than 120 days, such as mechanics’, materialmen’s, carriers’, landlords’ and
warehousemen’s liens or liens, pledges or deposits under workers’ compensation, unemployment
insurance, Social Security or similar legislation; and (vi) liens securing Subordinated
Debt;

     (b) agree or consent to any material changes in the Plans, any material changes in the
terms and provisions of the Design/Build Construction Contract, any one change order in an
amount exceeding $50,000, all change orders which when combined exceed $100,000 or any
material change to any other contract identified in Article IV of this Agreement;

     (c) change or permit any changes to the marketing contracts;

     (d) incorporate in the Project any materials, fixtures or property that are subject to
the claims of any other person, whether pursuant to a conditional sales contract, security
agreement, lease or mortgage, except as permitted under Article VI;

29

 

     (e) lease, sell, transfer, convey, assign or otherwise transfer all or any material
part of the interest of the Borrower in the Project or the Property;

     (f) cause or suffer any change to the management contracts without the Bank’s approval,
which will not be withheld unreasonably;

     (g) engage in any line of business materially different from that presently engaged in
by the Borrower;

     (h) change its legal form of organization;

     (i) make any material changes in its accounting procedures for tax or other purposes
unless such change is, or becomes, required under the Internal Revenue Code;

     (j) incur any Indebtedness except (i) debt arising under this or another agreement with
the Bank; (ii) trade credit incurred in the ordinary course of business; (iii) indebtedness
in existence on the date of this Agreement and disclosed in advance to the Bank in writing;
and (iv) Subordinated Debt. The Borrower shall not borrow other than pursuant to this
Agreement without permission of the Bank; provided, however, the Bank consents to the
Borrower in the ordinary course of its business, borrowing up to an aggregate amount of
$50,000 each year, without further permission from the Bank;

     (k) consolidate, merge, pool, syndicate or otherwise combine with any other entity,
give any preferential treatment or make any advance, directly or indirectly, by way of loan,
gift, bonus or otherwise to any entity directly or indirectly controlling or affiliated with
or controlled by the Borrower or any other entity or to any partner or employee of the
Borrower or of any such entity;

     (l) make, or commit to make, capital expenditures (including the total amount of any
capital leases, but excluding the Bank-approved plant construction) in an aggregate amount
exceeding $500,000 in any single fiscal year;

     (m) make or pay, without the written consent of the Bank, which written consent will
not be unreasonably withheld, in any fiscal year distributions to members of the Borrower
which would result in the Borrower at the time of such distribution not being in compliance
with any of the covenants set forth in this Agreement after payment of such distribution or
in excess of the following amounts:

	 	 	 	 	 
	 

	 	 If Owner Equity (as a percentage of
combined liabilities and Net Worth) is:
	 	The Allowable Distribution
(as a percentage of Net
Income) shall be:

	 	 	 	 	 
	

	 	• Less than or equal to 60%
	 	• 65%
	 
	 	 	 	 
	

	 	• Greater than 60%
	 	• 70%

30

 

     Any such distributions allowed hereunder shall be made only once per fiscal year, and
only after receipt by the Bank of the Borrower’s annual audited financial statements and
compliance statements as required herein, and if no Event of Default has occurred or is
continuing.

     (n) assume, guarantee, endorse or otherwise become contingently liable for any
obligations of any other person, except for those guaranties outstanding at the time of
execution of this Agreement and disclosed to the Bank in writing;

     (o) make sales to or purchases from any affiliate of the Borrower or extend credit or
make payments for services rendered by any affiliate of the Borrower unless such sales or
purchases are made or such services are rendered in the ordinary course of business and on
terms and conditions at least as favorable to the Borrower as the terms and conditions which
would apply in a similar transaction with a person or party not an affiliate of the
Borrower;

     (p) sell or dispose of all or substantially all its assets; and

     (q) redeem, purchase or retire any of its membership units or capital stock or grant or
issue, or purchase or retire for any consideration, any warrant, right or option pertaining
thereto, or permit any redemption, retirement or other acquisition by the Borrower of the
ownership of the outstanding membership units or capital stock of the Borrower.

ARTICLE VII

EVENTS OF DEFAULT, RIGHTS AND REMEDIES

     Section 7.01. Events of Default. Each of the following shall be an Event of Default and give
the Bank the right to exercise its remedies under this Agreement:

     (a) the Borrower shall fail to pay when due any Obligations or any other installment of
principal or interest or fee payable to the Bank;

     (b) the Borrower shall fail to timely provide reports to the Bank as provided in
Article VI;

     (c) the Borrower shall fail to observe or perform any other obligation to be observed
or performed by it hereunder or under any of the Loan Documents;

     (d) the Borrower shall fail to pay any Indebtedness in an aggregate principal amount in
excess of $100,000 due any third persons and such failure shall continue beyond any
applicable grace period, or the Borrower shall default under any material agreement binding
the Borrower and such default shall continue beyond any applicable grace period;

     (e) the Security Agreement shall at any time after its execution and delivery and for
any reason cease (i) to create a valid and perfected first priority security interest

31

 

in and to the property purported to be subject to such Security Agreement; or (ii) to
be in full force and effect or shall be declared null and void, or the validity or
enforceability thereof shall be contested by the Borrower, or the Borrower shall deny it has
any further liability or obligation under the Security Agreement, or the Borrower shall fail
to perform any of its obligations under the Security Agreement;

     (f) any financial statement, representation, warranty or certificate made or furnished
by or with respect to the Borrower to the Bank in connection with this Agreement, or as an
inducement to the Bank to enter into this Agreement, or in any separate statement or
document to be delivered to the Bank hereunder, shall be materially false, incorrect or
incomplete when made;

     (g) the Borrower shall admit its inability to pay its debts as they mature or shall
make an assignment for the benefit of itself or any of its creditors;

     (h) proceedings in bankruptcy, or for reorganization of the Borrower, or for the
readjustment of debt under the Bankruptcy Code, as amended, or any part thereof, or under
any other laws, whether state or federal, for the relief of debtors, now or hereafter
existing, shall be commenced against or by the Borrower and, except with respect to any such
proceedings instituted by the Borrower, shall not be discharged or stayed within 60 days of
their commencement;

     (i) a receiver or trustee shall be appointed for the Borrower or for any substantial
part of its respective assets, or any proceedings shall be instituted for the dissolution or
the full or partial liquidation of the Borrower, and except with respect to any such
appointments requested or instituted by the Borrower such receiver or trustee shall not be
discharged within 60 days of his appointment, and except with respect to any such
proceedings instituted by the Borrower such proceedings shall not be discharged within 60
days of their commencement, or the Borrower shall discontinue business or materially change
the nature of its business;

     (j) the Borrower shall suffer final judgments for payment of money aggregating in
excess of $100,000 which are not covered, without reservation, by insurance and shall not
discharge the same within a period of 30 days unless, pending further proceedings, execution
has not been commenced or, if commenced, has been effectively stayed;

     (k) a judgment creditor of the Borrower shall obtain possession of any of the Bank’s
collateral by any means, including (without implied limitation) levy, distraint, replevin or
self-help;

     (l) the construction of the Project is abandoned or shall be unreasonably delayed or be
discontinued for a period of 15 consecutive calendar days, in each instance for reasons
other than acts of God, fire, storm, adverse weather, strikes, blackouts, labor
difficulties, riots, inability to obtain materials, equipment or labor, governmental
restrictions or any similar cause not subject to the Borrower’s control and other than a
change in the General Contractor as provided in Section 7.01(o);

32

 

     (m) the Borrower at any time prior to the completion of the Project shall delay
construction or suffer construction to be delayed for any period of time, for any reason
whatsoever, so that the completion of the Project cannot be accomplished, in the reasonable
judgment of the Bank, by the Completion Date;

     (n) the Project is materially damaged or destroyed by fire or other casualty and the
loss, in the reasonable judgment of the Bank, is not adequately covered by insurance
actually collected or in the process of collection;

     (o) Fagen, Inc. shall cease to be the General Contractor and the Borrower has not
replaced the General Contractor and provided a performance completion bond within 30 days
following the termination of the same to the satisfaction of the Bank, which Bank approval
shall not be unreasonably withheld;

     (p) the entities contracting with the Borrower under the Marketing Contracts, or their
permitted assignees, shall cease to be the marketing agents of the Borrower as to sale of
its products, or the entity contracting with the Borrower in the Management Contract shall
cease to be the manager of the Borrower, and the Borrower has not within 30 days following
termination of the foregoing hired a replacement to the Bank’s satisfaction, which Bank
approval will not be unreasonably withheld; or

     (q) the Borrower pays any amount other than the required monthly management fee
pursuant to the Management Contract prior to the Bank’s receipt of scheduled payments on the
Obligations and the Bank’s acknowledgment that all required covenants have been met by the
Borrower.

     Section 7.02. Rights and Remedies. If an Event of Default shall have occurred and be
continuing, the Bank may refrain from making any further disbursements hereunder (but the Bank may
make disbursements after the occurrence of such an Event of Default without thereby waiving its
rights and remedies hereunder), and the Bank may exercise any or all of the following rights and
remedies:

     (a) the Bank may declare any or all Loans to be terminated, whereupon the same shall
forthwith terminate;

     (b) the Bank may declare the entire unpaid principal amount of any or all Notes then
outstanding, all interest accrued and unpaid thereon and all other amounts payable under
this Agreement to be forthwith due and payable, whereupon such Notes, all such accrued
interest and all such amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are hereby
expressly waived by the Borrower;

     (c) the Bank may exercise and enforce its rights and remedies under any or all of the
Loan Documents;

     (d) the Bank may enter upon the Property, if allowed under applicable law, and take
possession thereof, together with the Project then in the course of construction, and
proceed either in its own name or in the name of the Borrower, as the attorney-in-fact

33

 

of the Borrower (which authority is coupled with an interest and is irrevocable by the
Borrower) to complete or cause to be completed the Project, at the cost and expense of the
Borrower. If the Bank elects to complete or cause to be completed the Project, it may do so
according to the Plans or according to such changes, alterations or modifications in and to
the Plans as the Bank may deem reasonable and appropriate; and the Bank may enforce or
cancel all contracts let by the Borrower relating to construction of the Project, and/or let
other contracts which in the Bank’s sole judgment may seem advisable; and the Borrower shall
forthwith turn over and duly assign to the Bank, as the Bank may from time to time require,
contracts not already assigned to the Bank relating to construction of the Project,
blueprints, shop drawings, bonds, building permits, bills and statements of accounts
pertaining to the Project, whether paid or not, and any other instruments or records in the
possession of the Borrower pertaining to the Project. The Borrower shall be liable under
this Agreement to pay to the Bank, on demand, any amount or amounts reasonably expended by
the Bank in so completing the Project, together with any reasonable costs, charges or
expenses incident thereto or resulting therefrom, all of which shall be secured by the Loan
Documents. In the event that a proceeding is instituted against the Borrower for recovery
and reimbursement of any moneys expended by the Bank in connection with the completion of
the Project, a statement of such expenditures, verified by the affidavit of an officer of
the Bank, shall be prima facie evidence of the amounts so expended and of the propriety of
the necessity for such expenditures, and the burden of proving to the contrary shall be upon
the Borrower. The Bank shall have the right to apply any funds which it agrees to disburse
hereunder to bring about the completion of the Project and to pay the costs thereof and, if
such money so agreed to be disbursed is insufficient, in the sole judgment of the Bank, to
complete the Project, the Borrower agrees to promptly deliver and pay to the Bank such sum
or sums of money as the Bank may from time to time demand for the purpose of completing the
Project or of paying any liability, charge or expense which may have been incurred or
assumed by the Bank under or in performance of this Agreement or for the purpose of
completing the Project. It is expressly understood and agreed that in no event shall the
Bank be obligated, or liable in any way to complete the Project or to pay for the costs of
construction thereof beyond the amount of the Construction Loan.

     (e) The Bank may exercise any other rights and remedies available to it by law or
agreement.

ARTICLE VIII

MISCELLANEOUS

     Section 8.01. Inspections. The Borrower and the General Contractor shall be responsible for
making inspections of the Project during the course of construction and shall determine to their
own satisfaction that the work done or materials supplied by the General Contractor or any
Subcontractor to whom payment is to be made out of each disbursement has been properly done or
supplied in accordance with the Design/Build Construction Contract. If any work done or materials
supplied by the General Contractor or any Subcontractor are not satisfactory to the Borrower and/or
its General Contractor and the same is not remedied within 15 days of the discovery thereof, the
Borrower will immediately notify the Bank in writing of

34

 

such fact. It is expressly understood and agreed that the Bank and any party designated by
the Bank may conduct such inspections of the Project, subject to the limitations expressed in this
Agreement, as the Bank may deem necessary for the protection of the Bank’s interest, and that any
inspections which may be made of the Project by the Bank will be made, solely for the benefit and
protection of the Bank and that the Borrower will not rely thereon.

     Section 8.02. Indemnification by Borrower. The Borrower shall bear all loss, expense
(including reasonable attorneys’ fees) and damage in connection with, and agrees to indemnify and
hold harmless the Bank, its agents, servants and employees from, all claims, demands and judgments
made or recovered against the Bank, its agents, servants and employees because of bodily injuries,
including death at any time resulting therefrom, and/or because of damages to property (including
loss of use) from any cause whatsoever, arising out of, incidental to or in connection with the
construction of the Project, whether or not due to any act of omission or commission, including
negligence of the Borrower or the General Contractor or of his or their employees, servants or
agents, other than gross negligence or willful misconduct of the Bank or its agents. The
Borrower’s liability hereunder shall not be limited to the extent of insurance carried by or
provided by the Borrower or subject to any exclusion from coverage in any insurance policy. The
obligations of the Borrower under this Section shall survive the payment of the Construction Note.

     Section 8.03. No Waiver; Cumulative Remedies. No failure or delay on the part of the Bank in
exercising any right, power or remedy under the Loan Documents shall operate as a waiver thereof
nor shall any single or partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy under the Loan
Documents. The remedies provided in the Loan Documents are cumulative and not exclusive of any
remedies provided by law.

     Section 8.04. Amendments, Etc. No amendment, modification, termination or waiver of any
provision of any of the Loan Documents or consent to any departure by the Borrower therefrom shall
be effective unless the same shall be in writing and signed by the Bank and the Borrower, and then
such waiver or consent shall be effective only in the specific instance and for the specific
purpose for which given. No notice to or demand on the Borrower in any case shall entitle the
Borrower to any other or further notice or demand in similar or other circumstances.

     Section 8.05. Addresses for Notices, Etc. Except as otherwise expressly provided herein, all
notices, requests, demands and other communications provided for under the Loan Documents shall be
in writing and sent by mail or telecopy (if by telecopy with a confirmation mailed within two
Business Days thereafter), to the applicable party at its address indicated below:

	 	 	 	 	 
	 

	 	If to the Borrower:
	 	Granite Falls Community Ethanol Plant, LLC
	

	 	 	 	15045 Highway 23 Southeast
	

	 	 	 	Granite Falls, MN 56241
	

	 	 	 	Attention: General Manager
	

	 	 	 	Facsimile: (320) 564-3190

35

 

	 	 	 	 	 
	

	 	If to the Bank:
	 	First National Bank of Omaha
	

	 	 	 	1620 Dodge Street STOP 1050
	

	 	 	 	Omaha, NE 68197-1050
	

	 	 	 	Attention: Natalie E. Mason
	

	 	 	 	Facsimile: (402) 633-3519

or, as to each party, at such other address as shall be designated by such party in a written
notice to the other party complying as to delivery with the terms of this Section. All such
notices, requests, demands and other communications, when mailed, shall be effective when deposited
in the mails, addressed as aforesaid, or, when telecopied, shall be effective when confirmation of
receipt is received, except that notices or requests to the Bank pursuant to any of the provisions
hereunder shall not be effective until received by the Bank.

     Section 8.06. Time of Essence. Time is of the essence in the performance of this Agreement.

     Section 8.07. Execution in Counterparts. The Loan Documents may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed to be an original and
all of which counterparts of each instrument or agreement, taken together, shall constitute but one
and the same instrument.

     Section 8.08. Binding Effect, Assignment. The Loan Documents to which they are parties shall
be binding upon and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns, except that the Borrower shall not have the right to assign its rights
thereunder or any interest therein without the prior written consent of the Bank.

     Section 8.09. Governing Law. The Loan Documents, to the extent they do not otherwise provide,
shall be governed by, and construed in accordance with, the laws of the State of Nebraska.

     Section 8.10. Severability of Provisions. Any provision of this Agreement which is prohibited
or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof.

     Section 8.11. Headings. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement for any other
purpose.

     Section 8.12. Integration. This Agreement supersedes, replaces and terminates any prior oral
offers, negotiations, understandings or agreements and any commitment letters or similar writings
relating to any of the matters contemplated herein.

     Section 8.13. Participations. Notwithstanding any other provision of this Agreement, the
Borrower understands that the Bank may enter into participation agreements with other lenders
whereby the Bank will allocate a certain percentage of the Loans to them. The Borrower
specifically permits and authorizes the Bank to exchange financial information about the Borrower
with actual or potential participants. The Borrower acknowledges that, for the convenience of all
parties, this Agreement is being entered into with the Bank only and that its

36

 

obligations under this Agreement are undertaken for the benefit of, and as an inducement to,
each of the Participating Lenders as well as the Bank, and the Borrower hereby grants to each of
the Participating Lenders to the extent of its participation in any Loan the right to set off
deposit accounts maintained by the Borrower with the Bank. The Borrower understands that the terms
of such participation agreements with any of the participants will limit the Bank’s rights to
amend, waive or modify the terms and conditions of this Agreement without the express written
consent of all or a designated percentage of such participants.

37

 

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their
respective officers thereunto duly authorized, as of the date first above written.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC d/b/a
	 	 	 	 	 	 	GRANITE FALLS ENERGY,
LLC, a Minnesota limited liability company
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	By	 	/s/ Paul Eustad
	

	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	Its	 	Chairman
	

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	FIRST NATIONAL BANK OF OMAHA
	 
	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	By	 	/s/ Natalie E. Mason
	

	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	Natalie E. Mason, Commercial Loan Officer
	STATE
OF MINNESOTA

	 	)	 	 	 	 	 	 
	 

	 	) ss.
	 	 	 	 
	COUNTY
OF YELLOW MEDICINE

	 	)	 	 	 	 	 	 

     On this 16th day of December, 2004, before me, the undersigned, a Notary Public, personally
appeared Paul Eustad, on behalf of said entity as
Chairman of Granite Falls Community Ethanol Plant, LLC d/b/a Granite Falls Energy, LLC, a
Minnesota limited liability company, who executed the foregoing instrument, and acknowledged that
he executed the same as his voluntary act and deed, as well as that of the corporation.

	 	 	 	 	 	 	 
	

	 	 	 	 	 	/s/
Patti Herber
	

	 	 	 	 	 	Notary Public

38

 

EXHIBIT A

CONSTRUCTION NOTE

			
	Note Date: December 16, 2004

Maturity Date: March 10, 2006
	 	$34,000,000

FOR VALUE RECEIVED, Granite Falls Community Ethanol Plant, LLC d/b/a Granite Falls Energy, LLC, a
Minnesota limited liability company (the “Borrower”), promises to pay to the order of First
National Bank of Omaha (the “Bank”), at its principal office or such other address as the Bank or
holder may designate from time to time, the principal sum of $34,000,000, 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 Construction Note is executed pursuant to the loan agreement (the “Loan Agreement”) between
the Borrower and the Bank dated as of December 16, 2004. All capitalized terms not otherwise
defined in this Construction Note shall have the meanings provided in the Loan Agreement.

Interest Accrual. Interest on the principal amount outstanding shall accrue based on the one month
LIBOR Rate plus 350 basis points prior to acceleration or maturity, and 650 basis points in excess
of the LIBOR Rate in effect from time to time after maturity, whether by acceleration or otherwise.
Interest shall be calculated on the basis of a 360-day year, counting the actual number of days
elapsed.

Repayment Terms. Until the Construction Loan Termination Date, interest only shall be payable
every three months, commencing on January 10, 2005. On the Construction Loan Termination Date, all
principal and accrued interest are due and payable.

Prepayment. The Loan Agreement contains provisions regarding prepayment.

Additional Terms and Conditions. The Loan Agreement, and any amendments or substitutions, contains
additional terms and conditions, including default and acceleration provisions, which are
incorporated into this Construction 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
Construction Note is not paid as provided above. This Construction Note shall be governed by the
substantive laws of the State of Nebraska.

 

 

Waiver of Presentment and Notice of Dishonor. The Borrower and any other person who signs,
guarantees or endorses this Construction 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 Construction Note.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	GRANITE FALLS COMMUNITY ETHANOL
	

	 	 	 	 	 	PLANT, LLC d/b/a GRANITE FALLS

	

	 	 	 	 	 	ENERGY, LLC, a Minnesota limited liability company

	 
	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	By  	 	 
	

	 	 	 	 	 	 	 
	

	 	 	 	 	 	Its	 	 
	

	 	 	 	 	 	 	 
	STATE OF ___________________

	 	 	)	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	

	 	 	) ss.
	 	 	 
	COUNTY OF __________________

	 	 	)	 	 	 	 	 

     On this 16th day of December, 2004, before me, the undersigned, a Notary Public, personally
appeared
          , on behalf of said entity as            of Granite Falls Community Ethanol Plant, LLC d/b/a Granite Falls Energy, LLC, a
Minnesota limited liability company, who executed the foregoing instrument, and acknowledged that
he executed the same as his voluntary act and deed, as well as that of the corporation.

	 	 	 
	

	 	 
	

	 	Notary Public

 

 

EXHIBIT B

REVOLVING NOTE

			
	Note Date: December 16, 2004

Maturity Date: December 15, 2005
	 	$3,500,000

     On or before December 15, 2005, Granite Falls Community Ethanol Plant, LLC d/b/a Granite Falls
Energy, LLC, a Minnesota limited liability company (the “Borrower”), promises to pay to the order
of First National Bank of Omaha (the “Bank”) at any of its offices in Omaha, Nebraska the principal
sum hereof, which shall be $3,500,000 or so much thereof as may have been advanced by the Bank and
shown on the records of the Bank to be outstanding under this Revolving Note and the loan agreement
executed by the Bank and the Borrower dated as of December 16, 2004 (the “Loan Agreement”), as it
may from time to time be amended.

     Interest on the principal amount outstanding shall accrue based on the one month LIBOR Rate
plus 350 basis points prior to acceleration or maturity, and 650 basis points in excess of the
LIBOR Rate in effect from time to time after maturity, whether by acceleration or otherwise.
Interest shall be calculated on the basis of a 360-day year, counting the actual number of days
elapsed. Interest on this Revolving Note shall be payable monthly in arrears.

     The interest rate applicable to this Revolving Note is subject to reduction after a date six
months subsequent to the Completion Date, based on the business results of the Borrower. During
any three month Interest Period that the Borrower maintains the following ratios, measured for the
prior Interest Period, and after Bank receipt of a quarter compliance certificate which quarter
shall include the prior Interest Period, the interest rates will be adjusted accordingly for the
next Interest Period:

	 	 	 
	If Indebtedness to	 	 
	Net Worth is:	 	Interest Rate will be:
	Greater than or equal to 1.25 : 1.00

	 	One month LIBOR Rate plus 350 basis

points
	Less than 1.25 : 1.00 but greater than
or equal to 1.00 : 1.00

	 	One month LIBOR Rate plus 325 basis

points
	Less than 1.00 : 1.00 but greater than
or equal to .75 : 1.00

	 	One month LIBOR Rate plus 300 basis

points
	Less than .75 : 1.00

	 	One month LIBOR Rate plus 275 basis

points

     This Revolving Note is executed pursuant to the Loan Agreement. The Loan Agreement contains
additional terms of this Revolving Note, including, but not limited to, enumerated events of
default and the granting of liens to secure the 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, the Bank may accelerate
the due date of this Revolving Note and declare all obligations set forth herein immediately due
and payable, and the 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 16th day of December, 2004.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	GRANITE FALLS COMMUNITY ETHANOL
	 	 	 	 	 	 	 	 	PLANT, LLC d/b/a GRANITE FALLS
	 	 	 	 	 	 	 	 	ENERGY, LLC, a Minnesota limited liability company
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	By	 	 
	

	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	Its	 	 
	

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	STATE
OF                                  

	 	 	)	 	 	 	 	 	 	 
	

	 	 	)	 	 	ss.	 	 	 	 
	COUNTY
OF                              

	 	 	)	 	 	 	 	 	 	 

     On this 16th day of December, 2004, before me, the undersigned, a Notary Public, personally
appeared                , on behalf of said entity as                 of Granite Falls Community Ethanol Plant, LLC d/b/a Granite Falls Energy, LLC, who
executed the foregoing instrument, and acknowledged that he executed the same as his voluntary act
and deed, as well as that of the corporation.

	 	 	 
	 
	 	 
	

	 	 
	

	 	Notary Public

 

 

EXHIBIT C

SWAP NOTE

			
	 	 	 
	Note Date:                     

Maturity Date:                     
	 	$17,000,000

FOR VALUE RECEIVED, Granite Falls Community Ethanol Plant, LLC d/b/a Granite Falls Energy, LLC, a
Minnesota limited liability company (the “Borrower”), promises to pay to the order of First
National Bank of Omaha (the “Bank”), at its principal office or such other address as the Bank or
holder may designate from time to time, the principal sum of $17,000,000, 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 Swap Note is executed pursuant to the loan agreement (the “Loan Agreement”) between the
Borrower and the Bank dated as of December 16, 2004. All capitalized terms not otherwise defined
in this Swap Note shall have the meanings provided in the Loan Agreement.

Interest Accrual. Interest on the principal amount outstanding shall accrue based on the
three-month LIBOR Rate plus 300 basis points prior to acceleration or maturity, and 600 basis
points in excess of the LIBOR Rate in effect from time to time after maturity, whether by
acceleration or otherwise. Interest shall be calculated on the basis of a 360-day year, counting
the actual number of days elapsed.

Repayment Terms.

(a) On the 10th day of every third month, commencing June 10th, 2006, the
Borrower shall pay to the Bank the scheduled principal payment shown in Schedule I, attached to the
Loan Agreement, plus accrued interest on the Swap Note.

(b) Notwithstanding the foregoing, all unpaid principal and accrued interest for all Term Notes
shall be due and payable on the Term Loan Termination Date, if not sooner paid.

Prepayment. The Loan Agreement contains provisions regarding prepayment.

Additional Terms and Conditions. The Loan Agreement, and any amendments or substitutions, contains
additional terms and conditions, including default and acceleration provisions, which are
incorporated into this Swap 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 Swap Note is
not paid as provided above. This Swap Note shall be governed by the substantive laws of the State
of Nebraska.

Waiver of Presentment and Notice of Dishonor. The Borrower and any other person who signs,
guarantees or endorses this Swap 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 Swap Note.

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	GRANITE FALLS COMMUNITY ETHANOL
	 	 	 	 	 	 	 	 	PLANT, LLC d/b/a GRANITE FALLS
	 	 	 	 	 	 	 	 	ENERGY, LLC, a Minnesota limited liability company
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	By	 	 
	

	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	Its	 	 
	

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	STATE OF                     

	 	 	)	 	 	 	 	 	 	 
	

	 	 	)	 	 	ss.	 	 	 	 
	COUNTY OF                     

	 	 	)	 	 	 	 	 	 	 

     On this 16th day of December, 2004, before me, the undersigned, a Notary Public, personally
appeared                      , on behalf of said entity as                      of Granite Falls Community Ethanol Plant, LLC d/b/a Granite Falls Energy, LLC, a
Minnesota limited liability company, who executed the foregoing instrument, and acknowledged that
he executed the same as his voluntary act and deed, as well as that of the corporation.

	 	 	 
	 
	 	 
	

	 	 
	

	 	Notary Public

 

 

EXHIBIT D

VARIABLE RATE NOTE

	 	 	 
	Note Date:                                         

	 	$12,000,000
	Maturity Date:                                         
	 	 

     On or before                                         , Granite Falls Community Ethanol Plant, LLC
d/b/a Granite Falls Energy, LLC, a Minnesota limited liability company (the “Borrower”), promises
to pay to the order of First National Bank of Omaha (the “Bank”) at any of its offices in Omaha,
Nebraska the principal sum hereof, which shall be $12,000,000 or so much thereof as may have been
advanced by the Bank and shown on the records of the Bank to be outstanding under this Variable
Rate Note and the loan agreement executed by the Bank and the Borrower dated as of December 16,
2004 (the “Loan Agreement”), as it may from time to time be amended.

     Interest on the principal amount outstanding shall accrue based on the three-month LIBOR Rate
plus 350 basis points prior to acceleration or maturity, and 650 basis points in excess of the
LIBOR Rate in effect from time to time after maturity, whether by acceleration or otherwise.
Interest shall be calculated on the basis of a 360-day year, counting the actual number of days
elapsed. Interest on this Variable Rate Note shall be payable quarterly in arrears.

     The interest rate applicable to this Variable Rate Note is subject to reduction after a date
six months subsequent to the Completion Date, based on the business results of the Borrower.
During any three month Interest Period that the Borrower maintains the following ratios, measured
for the prior Interest Period, and after Bank receipt of a quarter compliance certificate which
quarter shall include the prior Interest Period, the interest rates will be adjusted accordingly
for the next Interest Period:

	 	 	 
	If Indebtedness to	 	 
	Net Worth is:	 	Interest Rate will be:
	Greater than or equal to 1.25 : 1.00
	 	One month LIBOR Rate plus 350 basis points
	Less than 1.25 : 1.00 but greater than or equal to 1.00 : 1.00
	 	One month LIBOR Rate plus 325 basis points
	Less than 1.00 : 1.00 but greater than or equal to .75 : 1.00
	 	One month LIBOR Rate plus 300 basis points
	Less than .75 : 1.00
	 	One month LIBOR Rate plus 275 basis points

     This Variable Rate Note is executed pursuant to the Loan Agreement. The Loan Agreement
contains additional terms of this Variable Rate Note, including, but not limited to, the repayment
provisions enumerated in Section 2.11(b), enumerated events of default and the granting of liens to
secure the 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, the Bank may accelerate
the due date of this Variable Rate Note and declare all obligations set forth herein immediately
due and payable, and the 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 16th day of December, 2004.

	 	 	 	 	 
	 	 	GRANITE FALLS COMMUNITY ETHANOL
	 	 	PLANT, LLC d/b/a GRANITE FALLS
	 	 	ENERGY, LLC, a Minnesota limited liability
	 	 	company
	 
	 	 	 	 
	

	 	By
	 	                                                            
	

	 	Its
	 	                                                            

	 	 	 
	STATE
OF                          

	)	 
	

	)	 ss.
	COUNTY
OF                      

	)	 

     On this 16th day of December, 2004, before me, the undersigned, a Notary Public, personally
appeared                     , on behalf of said entity as                      of Granite Falls Community Ethanol Plant, LLC d/b/a Granite Falls Energy, LLC, who
executed the foregoing instrument, and acknowledged that he executed the same as his voluntary act
and deed, as well as that of the corporation.

	 	 	 
	

	 	                                                            
	

	 	Notary Public

 

 

EXHIBIT E

LONG TERM REVOLVING NOTE

	 	 	 	 	 
	Note Date:                     

	 	$	5,000,000	 
	Maturity Date:                     
	 	 	 	 

     On or before                     , Granite Falls Community Ethanol Plant, LLC
d/b/a Granite Falls Energy, LLC, a Minnesota limited liability company (the “Borrower”), promises
to pay to the order of First National Bank of Omaha (the “Bank”) at any of its offices in Omaha,
Nebraska the principal sum hereof, which shall be $5,000,000 or so much thereof as may have been
advanced by the Bank and shown on the records of the Bank to be outstanding under this Long Term
Revolving Note and the loan agreement executed by the Bank and the Borrower dated as of December
16, 2004 (the “Loan Agreement”), as it may from time to time be amended.

     Interest on the principal amount outstanding shall accrue based on the one month LIBOR Rate
plus 350 basis points prior to acceleration or maturity, and 650 basis points in excess of the
LIBOR Rate in effect from time to time after maturity, whether by acceleration or otherwise.
Interest shall be calculated on the basis of a 360-day year, counting the actual number of days
elapsed. Interest on this Long Term Revolving Note shall be payable quarterly in arrears.

     The interest rate applicable to this Long Term Revolving Note is subject to reduction after a
date six months subsequent to the Completion Date, based on the business results of the Borrower.
During any three month Interest Period that the Borrower maintains the following ratios, measured
for the prior Interest Period, and after Bank receipt of a quarter compliance certificate which
quarter shall include the prior Interest Period, the interest rates will be adjusted accordingly
for the next Interest Period:

	 	 	 
	If Indebtedness to	 	 
	Net Worth is:	 	Interest Rate will be:
	Greater than or equal to 1.25 : 1.00
	 	One month LIBOR Rate plus 350 basis points
	Less than 1.25 : 1.00 but greater than or equal to 1.00 : 1.00
	 	One month LIBOR Rate plus 325 basis points
	Less than 1.00 : 1.00 but greater than or equal to .75 : 1.00
	 	One month LIBOR Rate plus 300 basis points
	Less than .75 : 1.00
	 	One month LIBOR Rate plus 275 basis points

     This Long Term Revolving Note is executed pursuant to the Loan Agreement. The Loan Agreement
contains additional terms of this Long Term Revolving Note, including, but not limited to, the
repayment provisions enumerated in Section 2.11(b), enumerated events of default and the granting
of liens to secure the 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, the Bank may accelerate
the due date of this Long Term Revolving Note and declare all obligations set forth

 

 

herein immediately due and payable, and the 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 16th day of December, 2004.

	 	 	 	 	 
	 	 	GRANITE FALLS COMMUNITY ETHANOL
	 	 	PLANT, LLC d/b/a GRANITE FALLS
	 	 	ENERGY, LLC, a Minnesota limited liability
	 	 	company
	 
	 	 	 	 
	

	 	By
	 	                                                            
	

	 	Its
	 	                                                            

	 	 	 
	STATE OF                           

	)	 
	

	)	 ss.
	COUNTY OF                       

	)	 

     On this 16th day of December, 2004, before me, the undersigned, a Notary Public, personally
appeared                     , on behalf of said entity as                      of Granite Falls Community Ethanol Plant, LLC d/b/a Granite Falls Energy, LLC, who
executed the foregoing instrument, and acknowledged that he executed the same as his voluntary act
and deed, as well as that of the corporation.

	 	 	 
	

	 	                                                            
	

	 	Notary Public

 

 

EXHIBIT F

LEGAL DESCRIPTION

LAND DESCRIPTION — 46.70 ACRE PARCEL

That part of the East Half of the Northeast Quarter of Section 1, Township 115 North, Range 39 West
of the Fifth Principal Meridian, Granite Falls Township, Chippewa County, Minnesota, described as
follows:

Commencing at the northwest corner of Parcel 3, as shown on the record plat entitled STATE HIGHWAY
RIGHT OF WAY PLAT NO. 12-1, on file in the office of the Chippewa County Recorder; thence on an
assumed bearing of South 1 degree 56 minutes 15 seconds West, along the west line of Parcel 3, as
shown on said record plat entitled STATE HIGHWAY RIGHT OF WAY PLAT No. 12-1, a distance of 182.53
feet to southerly right of way boundary line of the railroad, which is also the southwest corner of
said Parcel 3 and the point of beginning of the land to be described; thence on a bearing of South
87 degrees 01 minutes 14 seconds West, along the southerly right of way line of the railroad, a
distance of 911.97 feet to the west line of the East Half of the Northeast Quarter of said Section
1; thence on a bearing of South 0 degrees 44 minutes 38 seconds West, along the west line of the
East Half of the Northeast Quarter of said Section 1, a distance of 2290.26 feet to the northwest
corner of Parcel 213, as shown on the record plat entitled MINNESOTA DEPARTMENT OF TRANSPORTATION
RIGHT OF WAY PLAT NO. 12-24, on file in the office of the Chippewa County Recorder; thence on a
bearing of South 88 degrees 21 minutes 26 seconds East, along the north boundary line of said
Parcel 213, a distance of 729.81 feet; thence on a bearing of North 47 degrees 28 minutes 37
seconds East, along the boundary line of said Parcel 213, a distance of 143.46 feet to the west
line of Parcel 1, as shown on said record plat entitled STATE HIGHWAY RIGHT OF WAY PLAT NO. 12-1;
thence on a bearing of North 3 degrees 18 minutes 35 seconds East, along the west line of said
Parcel 1, a distance of 1123.61 feet to the northwest corner of said Parcel 1; thence continuing on
a bearing of North 3 degrees 18 minutes 35 seconds East, along the west line of Parcel 2, as shown
on said record plat entitled STATE HIGHWAY RIGHT OF WAY PLAT NO. 12-1, a distance of 75.63 feet;
thence on a bearing of North 1 degree 56 minutes 15 seconds East, along the west line of Parcel 2,
as shown on said record plat entitled STATE HIGHWAY RIGHT OF WAY PLAT NO. 12-1, a distance of
1064.80 feet to the point of beginning.

 

 

EXHIBIT G

OPINION OF COUNSEL FOR BORROWER

December 16, 2004

First National Bank of Omaha

1620 Dodge Street STOP 1050

Omaha, NE 68197-1050

Attention: Natalie E. Mason

Granite Falls Community Ethanol Plant, LLC

15045 Highway 23 Southeast

Granite Falls, MN 56241

Attention: General Manager

	 	 	 
	Re:

	 	Loan Agreement dated as of December 16, 2004 (the “Loan Agreement”)
between Granite Falls Community Ethanol Plant, LLC, a Minnesota
limited liability company (the “Borrower”) and First National Bank of
Omaha (the “Lender”)
Our File No. 19201-001

Ladies and Gentlemen:

     This legal opinion is being delivered to the Lender pursuant to Section 4.02(f) of the Loan
Agreement upon the express instructions and request of our client, the Borrower. For purposes of
this opinion letter only, the Lender is deemed to be in privity with this firm. Capitalized terms
used but not otherwise defined herein are used herein as defined in the Loan Agreement.

     We have acted as counsel for the Borrower in connection with the Loan Agreement.

     In preparation of this opinion, we have examined originals, or copies certified or otherwise
identified to our satisfaction, of the following limited liability company records and documents of
the Borrower:

     a. Fifth Amended and Restated Operating and Member Control Agreement dated October 13, 2004
(the “Operating Agreement”).

     b. Articles of Organization filed December 29, 2000.

     c. Amendment of Articles of Organization filed March 15, 2003.

 

 

     d. Unanimous Written Action of Governors, dated ___ ______, 2004

     e. Loan Agreement.

     In preparation of this opinion, we have assumed the genuineness of all signatures, the legal
capacity of individual parties or signatories, the authenticity of all documents submitted to us as
originals, the conformity to the originals of all documents submitted as certified, photostatic or
conformed copies and the authenticity of the originals of such latter documents. We have assumed
the accuracy of the material and factual matters contained therein.

     Our opinions expressed below as to certain factual matters are qualified as being limited “to
our actual knowledge” or by other words, to the same or similar effect. Such words, as used
herein, mean that during the course of our representation of the Borrower with respect to the Loan
Agreement, no contrary information came to the attention of the undersigned, the attorney who has
represented the Borrower in connection with the transactions contemplated by the transaction
documents.

     In addition, in rendering the opinions expressed below, we have assumed that the Loan
Agreement constitutes the legal, valid, and binding obligation of each party (other than the
Borrower) thereto, enforceable against each such party in accordance with its terms. We have also
assumed that there has not been any mutual mistake of fact or misunderstanding, fraud, duress, or
undue influence in connection with the negotiation and execution of the Loan Agreement.

     You have agreed that this letter is subject to these conditions and those expressed elsewhere
in this letter.

     This opinion is solely for your information only in connection with the transaction described
above and should not be quoted or otherwise relied upon or referred to in whole or in part, in any
financial statement or other document or furnished to any other person or agency without prior
written consent.

     Based upon the foregoing and subject to the comments, exceptions, and qualifications set forth
below, we are of the opinion that:

     1. The Borrower is a Minnesota limited liability company duly organized and validly existing
and in good standing under the laws of the State of Minnesota and is authorized to transact
business in those jurisdictions in which it is now doing business;

     2. The Borrower has the requisite power and authority and has taken all requisite action
necessary to enable it to execute and deliver the Loan Agreement to which it is a party and to
consummate the transactions contemplated thereby and the execution of any agreements specifically
related to the Loan Agreement. The loan documents to which Borrower is a party have been duly and
validly authorized, executed and delivered and are valid and binding obligations, enforceable
against Borrower in accordance with their respective terms;

 

 

     3. The execution, delivery and performance of the Loan Agreement and the consummation of
the transactions contemplated thereunder will not violate or conflict with the (i) Articles of
Organization of the Borrower, nor with the Operating Agreement (ii) any agreement, contract or
instrument to which Borrower is now a party or by which it is bound, except to the extent consents
are necessary and have not been received or (iii) any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory agency or body having
jurisdiction over Borrower or any of their respective properties or assets.

     4. There are no actions, suits, investigations or proceedings pending or, to the best of our
knowledge, threatened before any court, commission, agency or other administrative authority
against Borrower that would question the validity of, or interfere with Borrower’s power or
authority to enter into and perform, the loan documents to which each is a party, as applicable.

     5. No authorization, approval or consent of, or filing or registration with any governmental
authority or agency is necessary to execute, deliver and perform the loan documents by Borrower
except such authorization, approval or consent as has been obtained;

     6. Upon the execution of the loan documents, the loans shall become effective in accordance
with the terms of the Loan Agreement;

     7. The provisions of the loan documents that purport to create security interests in favor of
the Lender are effective to create valid security interests therein;

     8. Each of the UCC financing statements attached hereto is an appropriate form for filing in
the Office of the Secretary of State of the State of Minnesota. Upon the proper filing of each
such UCC financing statement, the security interest in favor of the Lender will be perfected to the
extent a security interest in such Property can be perfected by such filing of a financing
statement; and

     9. The indebtedness under the loan documents does not violate the usury laws of the State of
Minnesota.

     The opinions expressed above are subject to the following exclusions and qualifications:

     1. We express no opinion as to the validity, binding effect, or enforceability of any right or
obligation to the extent that such right or obligation may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer, or other laws relating to or affecting
creditors’ rights generally, or (ii) general principles of equity (regardless of whether considered
in a proceeding in equity or at law), including without limitation those relating to the
availability of the remedy of specific performance or injunctive relief.

     2. We express no opinion as to any laws other than the laws of the State of Minnesota and the
United States, and we express no opinion with respect to the laws, regulations, or ordinances of
any county, municipality, or governmental subdivision or agency thereof.

 

 

     3. We have made no independent examination of the condition of title to any real estate
collateral securing the obligations of any party to the Loan Agreement, and we express no opinion
as to whether the Borrower have rights to any real estate collateral described in the Loan
Agreement.

     Our opinions are as of December 16, 2004, and we have no responsibility to update this opinion
for events or circumstances occurring after the date hereof or as to facts relating to prior events
which are subsequently brought to our attention. This opinion is rendered solely to the Lender as
a condition to the effectiveness of the Loan Agreement and is not to be used, circulated, quoted,
or otherwise relied upon by any third party without our prior written consent.

     This opinion is limited to the laws of the States of Minnesota and the federal laws of the
United States of America.

	 	 	 
	

	 	Very truly yours,

 

 

EXHIBIT H

SUPPLEMENTARY MATERIAL TO FINANCIAL PROJECTIONS

 

 

Granite Falls Energy, LLC

Estimated Sources and Uses

	 	 	 	 	 	 	 	 	 
	Sources:
	 	 	 	 	 	 	 	 
	Public Offering
	 	 	 	 	 	$	29,780,000	 
	Initial Investors
	 	 	 	 	 	$	638,500	 
	Construction Loan
	 	 	 	 	 	$	34,000,000	 
	Equipment Loans or Capital Leases
	 	 	 	 	 	$	270,000	 
	Items Paid for with Cash Flow from Operations
	 	 	 	 	 	$	350,000	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Total Sources
	 	 	 	 	 	$	65,038,500	 
	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Use of Proceeds:
	 	 	 	 	 	 	 	 
	Fixed Assets:
	 	 	 	 	 	 	 	 
	Plant Construction (with Fagen):
	 	 	 	 	 	 	 	 
	Original Contract
	 	$	43,050,000	 	 	 	 	 
	Grain Receiving Elevator
	 	$	2,850,000	 	 	 	 	 
	Adjustment of Sales Taxes (due to JOBZ)
	 	$	(150,300	)	 	 	 	 
	Production Enhancements (change order)
	 	$	2,270,000	 	 	 	 	 
	Projected Early Completion Bonus
	 	$	480,000	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Total Plant Construction
	 			 	 	$	48,499,700	 
	Land and Site Development
	 	 	 	 	 	$	2,371,000	 
	Railroad and Car Mover
	 	 	 	 	 	$	1,424,000	 
	Utilities (natural gas, electric and water)
	 	 	 	 	 	$	1,340,000	 
	Rolling Stock
	 	 	 	 	 	$	200,000	 
	Administrative Building
	 	 	 	 	 	$	200,000	 
	Computers, Phones and Office Equipment
	 	 	 	 	 	$	140,000	 
	 
	 	 	 	 	 	 	 	 
	Financial and Organizational:
	 	 	 	 	 	 	 	 
	Organizational Costs
	 	 	 	 	 	$	950,000	 
	Capitalized Interest
	 	 	 	 	 	$	900,000	 
	Stock Offering Costs: First Offering (2003)
	 	 	 	 	 	$	325,000	 
	Stock Offering Costs: Second Offering (2004)
	 	 	 	 	 	$	250,000	 
	Loan Financing Costs
	 	 	 	 	 	$	480,000	 
	Construction Insurance Costs
	 	 	 	 	 	$	300,000	 
	Grants and Interest Income
	 	 	 	 	 	$	(76,000	)
	 
	 	 	 	 	 	 	 	 
	Beginning Operations:
	 	 	 	 	 	 	 	 
	Inventory
	 	 	 	 	 	$	2,750,000	 
	Pre-Production Costs
	 	 	 	 	 	$	750,000	 
	Working Capital
	 	 	 	 	 	$	750,000	 
	Spare Parts
	 	 	 	 	 	$	320,000	 
	Shop and Safety Equipment
	 	 	 	 	 	$	60,000	 
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	Total Use of Proceeds
	 	 	 	 	 	$	61,933,700	 
	 
	 	 	 	 	 	 	 
	Excess / (Shortage) of Proceeds
	 	 	 	 	 	$	3,104,800	 
	 
	 	 	 	 	 	 	 

 

 

EXHIBIT I

TITLE AND ALTA INFORMATION

 

 

ENDORSEMENTS

FOR

GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC

The following endorsements will be issued by Old Republic and attached to the final lender’s
policy for First National Bank of Omaha:

	1.  	Form 3.1 (zoning-completed structure.) This can only be issued if accompanied by a letter
from the municipal zoning authority. Cost to issue: $1,875.00
	 
	2.  	Form 6 (variable rate mortgage). Cost to issue: $50.00
	 
	3.  	Form 8.1 (environmental protection). Cost to issue: None
	 
	4.  	Form 9 (comprehensive). Cost to issue: None
	 
	5.  	Form 14 (future advance). Cost to issue: $50.00
	 
	6.  	Form 15.1 (no imputations). Cost to issue: None
	 
	7.  	Form 17 (access and entry). Cost to issue: None
	 
	8.  	Form 18.1 (multiple tax parcel). Can be issued only if the tax parcels do not cover
additional land. Cost to issue: None
	 
	9.  	Fairway endorsement. Cost to issue: None
	 
	10.  	Arbitration endorsement. Cost to issue: None
	 
	11.  	Doing business endorsement. Cost to issue: None
	 
	12.  	Survey endorsement. Cost to issue: None

 

 

SCHEDULE I

AMORTIZATION SCHEDULE – U.S. RULE (NO COMPOUNDING), 360 DAY YEAR

	 	 	 	 	 	 	 
	 	 	Date	 	Principal	 
	 
	Loan
	 	3/10/2006	 	 	 	 
	1
	 	6/10/2006	 	 	299,836.55	 
	2
	 	9/10/2006	 	 	304,893.79	 
	3
	 	12/10/2006	 	 	313,042.13	 
	2006 Totals
	 	 	 	 	917,772.47	 
	 
	 	 	 	 	 	 
	4
	 	3/10/2007	 	 	321,213.13	 
	5
	 	6/10/2007	 	 	320,734.10	 
	6
	 	9/10/2007	 	 	326,143.82	 
	7
	 	12/10/2007	 	 	334,415.70	 
	2007 Totals
	 	 	 	 	1,302,506.75	 
	 
	 	 	 	 	 	 
	8
	 	3/10/2008	 	 	339,994.87	 
	9
	 	6/10/2008	 	 	343,019.84	 
	10
	 	9/10/2008	 	 	348,805.44	 
	11
	 	12/10/2008	 	 	357,209.07	 
	2008 Totals
	 	 	 	 	1,389,029.22	 
	 
	 	 	 	 	 	 
	12
	 	3/10/2009	 	 	365,623.47	 
	13
	 	6/10/2009	 	 	366,880.40	 
	14
	 	9/10/2009	 	 	373,068.45	 
	15
	 	12/10/2009	 	 	381,613.14	 
	2009 Totals
	 	 	 	 	1,487,185.46	 
	 
	 	 	 	 	 	 
	16
	 	3/10/2010	 	 	390,162.03	 
	17
	 	6/10/2010	 	 	392,378.14	 
	18
	 	9/10/2010	 	 	398,996.25	 
	19
	 	12/10/2010	 	 	407,691.69	 
	2010 Totals
	 	 	 	 	1,589,228.11	 
	 
	 	 	 	 	 	 
	20
	 	3/10/2011	 	Entire remaining balance dueexv10w15

 

EXHIBIT 10.15

DISTILLER’S GRAIN MARKETING AGREEMENT

     THIS DISTILLER’S GRAIN MARKETING AGREEMENT (the “Agreement”), is entered into effective as of
December 1, 2004, by Granite Falls Ethanol LLC, a Minnesota Limited Liability Company (“Seller”),
and Commodity Specialist Company, a Delaware corporation (“Buyer”).

WITNESSETH:

     WHEREAS, Seller desires to sell and Buyer desires to purchase the Distiller’s Dried Grains
with Solubles (“DDGS”), hereinafter DDGS, output of the ethanol production plant which Seller owns
in Granite Falls, Minnesota; and

     WHEREAS, Seller and Buyer wish to agree in advance of such sale and purchase to the price
formula, payment, delivery and other terms thereof in consideration of the mutually promised
performance of the other;

     NOW, THEREFORE, in consideration of the promises and the mutual covenants and conditions
herein contained, and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by both parties, it is hereby agreed:

     1. BUYER PERFORMANCE. Buyer agrees to perform the services that it provides for
Seller in a professional and competent manner.

     2. PURCHASE AND SALE. Seller agrees to sell to Buyer and Buyer agrees to purchase from
Seller the entire bulk feed grade DDGS, output from Seller’s plant at Granite Falls, Minnesota.
(hereinafter the “Plant”) that is shipped from Plant by rail, and so much output that is shipped by
truck that Seller in its discretion elects to sell to Buyer, subject to all terms and conditions
set forth in this Agreement. Buyer shall label all Product that is sold by Buyer and shall
register all labels with the states where the Products are sold.

     3. TRADE RULES. All purchases and sales made hereunder shall be governed by the Feed
Trade Rules of the National Grain and Feed Association unless otherwise specified. Said Trade
Rules, a copy of which is appended hereto as Exhibit A, shall, to the extent applicable, be a part
of this Agreement as if fully set forth herein.

     4. TERM. The term of this Agreement shall be for one year commencing as of completion
and start-up of production of the Plant. Start-up is anticipated to be October 1, 2005.
Thereafter this agreement shall remain in effect until terminated by either party at its
unqualified option by providing the other party hereto not less than 90 days written notice of its
election to terminate this Agreement.

1

 

     5. DELIVERY AND TITLE.

          A. The place of delivery for all the Products sold pursuant to this Agreement shall be FOB
Plant. Buyer and Buyer’s agents shall be given access to Seller’s Plant in a manner and at all
times reasonably necessary and convenient for Buyer to take delivery as provided herein. Buyer
shall coordinate the loading and shipping of all outbound Products purchased hereunder which is
shipped by truck or rail with Seller. All labor and equipment necessary to load trucks or rail
cars shall be supplied by Seller without charge to Buyer. Seller agrees to handle the Products in
a good and workmanlike manner in accordance with Buyer’s reasonable requirements and in accordance
with normal industry practice. Seller shall maintain the truck and rail loading facilities in safe
operating condition in accordance with normal industry standards.

          B. Seller further warrants that storage space for not less than seven days production of DDGS
shall be reserved for Buyer’s use at the Plant and shall be continuously available for storage of
DDGS purchased by Buyer hereunder at no charge to Buyer. Seller shall be responsible at all times
for the quantity, quality and condition of any the Products in storage at the Plant. Seller shall
not be responsible for the quantity, quality and condition of any of the Products stored by Buyer
at locations other than the Plant.

          C. Buyer shall give to Seller a schedule of quantities of the Products to be removed by truck
and rail with sufficient advance notice reasonably to allow Seller to provide the required
services. Seller shall provide the labor, equipment and facilities necessary to meet Buyer’s
loading schedule and, except for any consequential or indirect damages, shall be responsible for
Buyer’s actual costs or damages resulting from Seller’s failure to do so. Buyer shall order and
supply trucks and rail cars as scheduled for truck and rail shipments. All freight charges shall
be the responsibility of Buyer and shall be billed directly to Buyer.

          D. Buyer shall provide loading orders as necessary to permit Seller to maintain Seller’s
usual production schedule, provided, however, that Buyer shall not be responsible for failure to
schedule removal of the Products unless Seller shall have provided to Buyer production schedules as
follows: Five (5) days prior to the beginning of each calendar month during the term hereof,
Seller shall provide to Buyer a tentative schedule for production in the next calendar month.
Seller shall inform Buyer daily of inventory and production status. For purposes of this paragraph,
notification will be sufficient if made by e-mail or facsimile as follows:

If to Buyer, to the attention of Steve Markham, Facsimile number 612-330-9894 or e-mail to
smarkham@csc-world.com, and

If
to Seller, to the attention of   . Or to such other representatives of Buyer and Seller
as they may designate to the other in writing.

          E. Title, risk of loss and full shipping responsibility shall pass to Buyer upon loading the
Products into trucks or rail cars and delivering to Buyer a the bill of lading for each such
shipment.

2

 

     6. PRICE AND PAYMENT

          A. Buyer agrees to pay Seller as follows: for all DDGS removed by Buyer from the Plant a
price equal to ninety eight (98%) of the FOB Plant price actually received by Buyer from its
customers. For purposes of this provision, the FOB Plant price shall be the actual sale price, less
all freight costs incurred by Buyer in delivering the Product to its customer. Buyer agrees that
it shall not sell Product for delivery more than 90 days from the date of entering into a sale
without the consent of Seller. Buyer agrees to use commercially reasonable efforts to achieve the
highest resale price available under prevailing market conditions. Seller’s sole and exclusive
remedy for breach of Buyer’s obligations hereunder shall be to terminate this Agreement. Buyer
shall collect all applicable state tonnage taxes on Products sold by Buyer and shall remit to the
appropriate governmental agency.

          B. Within three (3) business days following receipt of certified weight certificates, which
certificates shall be presented to Buyer each Thursday for all shipments during the preceding week,
Buyer shall pay Seller the full price, determined pursuant to paragraph 6A above, for all properly
documented shipments. Buyer agrees to maintain accurate sales records and to provide such records
to Seller upon request. Seller shall have the option to audit Buyer’s sales invoices at any time
during normal business hours and during the term of this Agreement. If any such audit shall reveal
a deficiency together with interest from the date that such payment should have been made at the
prime rate then in effect as reported in the Wall Street Journal.

     7. QUANTITY AND WEIGHTS.

          A. It is understood that the output of the Products shall be determined by Seller’s
production schedule and that no warranty or representation has been made by Seller as to the exact
quantities of Products to be sold pursuant to this Agreement.

          B. The quantity of Products delivered to Buyer from Seller’s Plant shall be established by
weight certificates obtained from scale at the Plant which is certified as of the time of weighing
and which complies with all applicable laws, rules and regulations or in the event that the scale
at the Plant is inoperable then at other scales which are certified as of the time of weighing and
which comply with all applicable laws, rules and regulations. The outbound weight certificates
shall be determinative of the quantity of the Products for which Buyer is obligated to pay pursuant
to Section 5.

     8. QUALITY.

          A. Seller understands that Buyer intends to sell the Products purchased from Seller as a
primary animal feed ingredient and that said Products are subject to minimum quality standards for
such use. Seller agrees and warrants that the Products produced at its plant and delivered to
Buyer shall be accepted in the feed trade under current industry standards.

3

 

          B. Seller warrants that all Products, unless the parties agree otherwise, sold to Buyer
hereunder shall, at the time of delivery to Buyer, conform to the following minimum quality
standard:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Protein	 	 	Fat	 	 	Fiber	 	 	Moisture	 	 	Ash	 
	 	 	Min	 	 	Max	 	 	Min	 	 	Max	 	 	Min	 	 	Max	 	 	Min	 	 	Max	 	 	Min	 	 	Max	 
	DDGS
	 	 	27	 	 	 	 	 	 	 	10	 	 	 	 	 	 	 	 	 	 	 	15	 	 	 	 	 	 	 	12	 	 	 	 	 	 	 	6	 

The standard for DDGS will be determined on an as is basis per original sample rather than a dry
weight basis.

          C. Seller warrants that at the time of loading, the Products will not be adulterated or
misbranded within the meaning of the Federal Food, Drug and Cosmetic Act and that each shipment may
lawfully be introduced into interstate commerce under said Act. Payment of invoice does not waive
Buyer’s rights if goods do not comply with terms or specifications of this Agreement. Unless
otherwise agreed between the parties to this Agreement, and in addition to other remedies permitted
by law, the Buyer may, without obligation to pay, reject either before or after delivery, any of
the Products which when inspected or used fail in a material way to conform to this Agreement.
Should any of the Products be seized or condemned by any federal or state department or agency for
any reason except noncompliance by Buyer with applicable federal or state requirements, such
seizure or condemnation shall operate as a rejection by Buyer of the goods seized or condemned and
Buyer shall not be obligated to offer any defense in connection with the seizure or condemnation.
When rejection occurs before or after delivery, at its option, Buyer may:

               (1) Dispose of the rejected goods after first offering Seller a reasonable opportunity of
examining and taking possession thereof, if the condition of the goods reasonably appears to Buyer
to permit such delay in making disposition; or

               (2) Dispose of the rejected goods in any manner directed by Seller which Buyer can accomplish
without violation of applicable laws, rules, regulations or property rights; or

               (3) If Buyer has no available means of disposal of rejected goods and Seller fails to direct
Buyer to dispose of it as provided herein, Buyer may return the rejected goods to Seller, upon
which event Buyer’s obligations with respect to said rejected goods shall be deemed fulfilled.
Title and risk of loss shall pass to Seller promptly upon rejection by Buyer.

               (4) Seller shall reimburse Buyer for all costs reasonably incurred by Buyer in storing,
transporting, returning and disposing of the rejected goods. Buyer shall have no obligation to pay
Seller for rejected goods and may deduct reasonable costs and expenses to be reimbursed by Seller
from amounts otherwise owed by Buyer to Seller.

4

 

               (5) If Seller produces Products which comply with the warranty in Section C above but which do
not meet applicable industry standards, Buyer agrees to purchase such Products for resale but makes
no representation or warranty as to the price at which such Product can be sold. If the Products
deviate so severely from industry standard as to be unsalable, then it shall be disposed of in the
manner provided for rejected goods in Section C above.

          D. If Seller knows or reasonably suspects that any of the Products produced at its Plant are
adulterated or misbranded, or outside of industry quality standards, Seller shall promptly so
notify Buyer so that such Product can be tested before entering interstate commerce. If Buyer
knows or reasonably suspects that any of the Products produced by Seller at its Plant are
adulterated, misbranded or outside of industry quality standards, then Buyer may obtain independent
laboratory tests of the affected goods. If such goods are tested and found to comply with all
warranties made by Seller herein, then Buyer shall pay all testing costs; and if the goods are
found not to comply with such warranties, Seller will pay all testing costs.

     9. RETENTION OF SAMPLES. Seller will take an origin sample of Products from each
truck and rail car before it leaves the Plant using standard sampling methodology. Seller will
label these samples to indicate the date of shipment and the truck or railcar number involved.
Seller will also retain the samples and labeling information for no less than one year.

     10. INSURANCE.

          A. All employees engaged in the removal of the Products from Seller’s Plant shall be covered
as required by law by worker’s compensation and unemployment compensation insurance.

          B. Seller agrees to maintain throughout every term of this Agreement commercial general
liability insurance, including product liability coverage, with combined single limits of not less
than $2,000,000. Seller’s policies of comprehensive general liability insurance shall be endorsed
to require at least thirty (30) days advance notice to Buyer prior to the effective date of any
decrease in or cancellation of coverage. Seller shall cause Buyer to be named as an additional
insured on Seller’s insurance policy and shall provide a certificate of insurance to Buyer to
establish the coverage maintained by Seller not later than fourteen (14) days prior to completion
and start-up of production of the Plant.

          C. Buyer agrees to carry such insurance on its vehicles operating on Seller’s property as
Seller reasonably deems appropriate. The parties acknowledge that Buyer may elect to self insure
its vehicles. Upon request, Buyer shall provide certificate of insurance to Seller to establish
the coverage maintained by Buyer.

          D. Notwithstanding the foregoing, nothing herein shall be construed to constitute a waiver by
either party of claims, causes of action or other rights which either party may have or hereafter
acquire against the other for damage or injury to its agents, employees, invitees, property,
equipment or inventory, or third party claims against the other for damage or injury to

5

 

other persons or the property of others.

11. REPRESENTATIONS AND WARRANTIES

          A. Seller represents and warrants that all of the Products delivered to Buyer shall
not be adulterated or misbranded within the meaning of the Federal Food, Drug and Cosmetic Act and
may lawfully be introduced into interstate commerce pursuant to the provisions of the Act. Seller
further warrants that the Products shall fully comply with any applicable state laws governing
quality, naming and labeling of product. Payment of invoice shall not constitute a waiver by Buyer
of Buyer’s rights as to goods which do not comply with this Agreement or with applicable laws and
regulations.

          B. Seller represents and warrants that the Products delivered to Buyer shall be free and
clear of liens and encumbrances.

          C. EXCEPT AS SPECIFICALLY STATED IN THIS AGREEMENT, SELLER MAKES NO WARRANTY OR
REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTIBILITY
OR FITNESS FOR A PARTICULAR PURPOSE.

     12. EVENTS OF DEFAULT. The occurrence of any of the following shall be an event of
default under this Agreement (“Event of Default”): (1) failure of either party to make payment to
the other when due; (2) default by either party in the performance of the covenants and agreements
set forth in this Agreement; (3) if either party shall become insolvent, or make a general
assignment for the benefit of creditors or to an agent authorized to liquidate any substantial
amount of its assets, or be adjudicated bankrupt, or file a petition in bankruptcy, or apply to a
court for the appointment of a receiver for any of its assets or properties with or without
consent, and such receiver shall not be discharged within sixty (60) days following appointment.

     13. REMEDIES. Upon the happening of an Event of Default, the parties hereto shall
have all remedies available under applicable law with respect to an Event of Default by the other
party. Without limiting the foregoing, the parties shall have the following remedies whether in
addition to or as one of the remedies otherwise available to them; (1) to declare all amounts owed
immediately due and payable; and (2) immediately to terminate this Agreement effective upon receipt
by the party in default of the notice of termination, provided, however, the parties shall be
allowed 10 days from the date of receipt of notice of default for to cure any default.
Notwithstanding any other provision of this Agreement, Buyer may offset against amounts otherwise
owed to Seller the price of any product which fails to conform to any requirements of this
Agreement.

     14. FORCE MAJEURE. Neither Seller nor Buyer will be liable to the other for any
failure or delay in the performance of any obligation under this Agreement due to events beyond its
reasonable control, including, but not limited to, fire, storm, flood, earthquake, explosion, act
of the public enemy, riots, civil disorders, sabotage, strikes, lockouts, labor disputes, labor

6

 

shortages, war stoppages or slowdowns initiated by labor, transportation embargoes, failure or
shortage of materials, acts of God, or acts or regulations or priorities of the federal, state or
local government or branches or agencies thereof.

     15. INDEMNIFICATION.

          A. Seller shall indemnify, defend and hold Buyer and its officers, directors, employees and
agents harmless, from any and all losses, liabilities, damages, expenses (including reasonable
attorneys’ fees), costs, claims, demands, that Buyer or its officers, directors, employees or
agents may suffer, sustain or become subject to, or as a result of (i) any misrepresentation or
breach of warranty, covenant or agreement of Seller contained herein or (ii) the Seller’s
negligence or willful misconduct.

          B. Buyer shall indemnify, defend and hold Seller and its officer, directors, employees and
agents harmless, from any and all losses, liabilities, damages, expenses (including reasonable
attorneys’ fees), costs, claims, demands, that Seller or its officers, directors, employees or
agents may suffer, sustain or become subject to, or as a result of (i) any misrepresentation or
breach of warranty, covenant or agreement of Buyer contained herein or (ii) the Buyer’s negligence
or willful misconduct.

          C. Where such personal injury, death or loss of or damage to property is the result of
negligence on the part of both Seller and Buyer, each party’s duty of indemnification shall be in
proportion to the percentage of that party’s negligence or faults.

          D. Seller acknowledges that in order to maximize the total revenue to be generated through the
sale of the Products, Buyer may take positions by selling Product in anticipation of Seller
providing the Products. Notwithstanding the fact that Seller’s obligation is to provide Buyer with
the output of the Plant the parties acknowledge that Buyer may suffer losses as a result of
positions taken by Buyer if Seller discontinues operations for any reason whatsoever including
Force Majeure. Therefore, Seller shall indemnify, defend and hold Buyer and its officers,
directors, employees and agents harmless from any and all losses, liabilities, damages, expenses
(including reasonable attorney’s fees), costs, claims, demands that Buyer or its officers,
directors, employees, or agents may suffer, sustain or become subject to as a result of any sale or
purchase of product taken by Buyer in anticipation of Seller delivering the Products hereunder,
provided Buyer has taken commercially reasonable steps to avoid the loss. Notwithstanding the
above, Seller shall not be liable for any loss resulting from Seller discontinuing operations
related to a position taken by Buyer for delivery more than 90 days from the date of entering into
a sale without the consent of Seller nor shall Seller be liable to Buyer for any positions taken by
Buyer that result in Buyer being over contracted beyond the Seller’s production capacity.

     16. GOVERNMENTAL ACTION. The parties recognize that the value of the Products could
change as a result of various governmental programs, be they foreign or domestic. In the event
that a significant value change of the Products as a result of any such governmental program, Buyer
may request re-negotiation of the contract price for the Products

7

 

by providing written notice to Seller. Buyer shall be required to demonstrate that the value of
the Products has significantly changed in the market. Should such a change take place, the parties
agree to negotiate, in good faith, a revised sale price for the Products. If, after a good faith
effort, the parties are unable to agree on a new price within the 90 day period immediately
following notice to the other party, then in such event and notwithstanding the other provisions
hereof, Buyer may terminate this Agreement upon 90 days prior written notice.

     17. RELATIONSHIP OF PARTIES. This Agreement creates no relationship other than that
of buyer and seller between the parties hereto. Specifically, there is no agency, partnership,
joint venture or other joint or mutual enterprise or undertaking created hereby. Nothing contained
in this Agreement authorizes one party to act for or on behalf of the other and neither party is
entitled to commissions from the other.

     18. MISCELLANEOUS.

          A. This writing is intended by the parties as a final expression of their agreement and a
complete and exclusive statement of the terms thereof.

          B. No course of prior dealings between the parties and no usage of trade, except where
expressly incorporated by reference, shall be relevant or admissible to supplement, explain, or
vary any of the terms of this Agreement.

          C. Acceptance of, or acquiescence in, a course of performance rendered under this or any
prior agreement shall not be relevant or admissible to determine the meaning of this Agreement even
though the accepting or acquiescing party has knowledge of the nature or the performance and an
opportunity to make objection.

          D. No representations, understandings or agreements have been made or relied upon in the
making of this Agreement other than as specifically set forth herein.

          E. This Agreement can only be modified by a writing signed by all of the parties or their
duly authorized agents.

          F. The paragraph headings herein are for reference purposes only and shall not in any way
affect the meaning or interpretation of this Agreement.

          G. This Agreement shall be construed and performed in accordance with the laws of the State
of Minnesota.

          H. The respective rights, obligations and liabilities of the parties under this Agreement are
not assignable or delegable without the prior written consent of the other party.

          I. Notice shall be deemed to have been given to the party to whom it is addressed ninety-six
(96) hours after it is deposited in certified U.S. mail, postage prepaid, return receipt requested,
addressed as follows:

8

 

	 	 	 
	 

	Buyer:	Commodity Specialist Company
	

	 	310 Grain Exchange Bldg.
	

	 	400 South Fourth Street,
	

	 	Minneapolis, MN 55415
	

	 	ATTN: Steve J. Markham
	 

	 	 
	 

	Seller:	Granite Falls Ethanol LLC

     IN WITNESS THEREOF, the parties have caused this Agreement to be executed the day and year
first above written.

	 	 	 	 	 
	

	 	 	 	COMMODITY SPECIALISTS COMPANY
	

	 	 	 	 
	

	 	 	 	By   /s/ Philip Lindau

	

	 	 	 	Its  EVP

	

	 	 	 	 
	

	 	 	 	Granite Falls Ethanol LLC
	

	 	 	 	 
	

	 	 	 	By  /s/ Thomas E. Branhan

	

	 	 	 	Its  CEO / General Manager

9

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00081-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00081-of-00352.parquet"}]]