Document:

EXHIBIT 10.8

 

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

National
Bank of Omaha and Badger State Ethanol, LLC.

 

 

FIRST
AMENDMENT TO CONSTRUCTION LOAN AGREEMENT

 

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

 

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

 

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

 

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

 

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

 

1.4                                 “BORROWING
BASE” means the lesser of:

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

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

 

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

 

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

 

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

 

1

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

	
  First National Bank of Omaha

  	
  Badger State Ethanol, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
  by

  	
  /s/ Brian Thome

  	
   

  	
  by

  	
  /s/ Gary L. Kramer

  	
   

  
	
  Brian Thome, Commercial Loan Officer

  	
   

  	
  Gary L. Kramer,
  President

  	
   

  
						

 

3

 

EXHIBIT 1-D

Badger State Ethanol, LLC

 

CERTIFICATE OF COMPLIANCE

 

	
  TO:

  	
  First National Bank of Omaha

  
	
   

  	
  1620 Dodge Street STOP 1050

  
	
   

  	
  Omaha, Nebraska 68197-1050

  
	
   

  	
  Attn: Brian Thome

  

 

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

 

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

 

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

 

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

 

	
  COVENANT

  	
   

  	
  AT PRIOR

  YEAR-END

  	
   

  	
  ACTUAL

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NET WORTH

  	
   

  	
  $

  	
   

  	
   

  	
  $

  	
   

  	
   

  
								

 

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

 

	
   

  	
   

  	
  REQUIRED

  	
   

  	
  ACTUAL

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FIXED CHARGE
  COVERAGE RATIO

  	
   

  	
  1.25:1.0

  	
   

  	
  :1.0

  	
   

  

 

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

 

	
  CAPITAL
  EXPENDITURES (Maximum)

  	
   

  	
  $

  	
  500,000

  	
   

  	
  $

  	
   

  	
   

  
	
  (Excluding
  construction and approved change orders)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  WORKING CAPITAL
  (Minimum)

  	
   

  	
  $

  	
  2,000,000

  	
   

  	
  $

  	
   

  	
   

  

 

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

 

4

 

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

	
   

  	
   

  	
  :1.00

  	
   

  	
   

  	
   

  

 

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

 

	
  EXCESS CASH FLOW

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Proposed distributions

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  
	
  Year-to-date distributions

  	
   

  	
  $

  	
   

  

 

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

 

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

 

	
   

  	
  Badger
  State Ethanol, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary L. Kramer

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Its:

  	
  President

  	
   

  
						

 

 

For BANK use only:

 

Rate change based on Incentive Pricing:

 

	
  Old rate:

  	
   

  	
  New rate:

  
	
   

  	
   

  	
   

  
	
  Effective date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Verified by:

  	
   

  	
   

  

 

5

 

Badger
State Ethanol, LLC

 

	
  First National Bank of Omaha

  	
   

  	
   

  	
  Borrowing Base
  Certificate

  
	
  ATTN:  Brian Thome

  	
   

  	
   

  	
   

  
	
  1620 Dodge St. STOP 1050

  	
   

  	
   

  	
  Report No.

  
	
  Omaha, NE 
  68197-1050

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date:

  

 

	
  1.

  	
  Total Accounts
  Receivable other than State or Federal Incentive payments

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  ADD
  Total State and Federal Incentive Payment Accounts Receivable

  	
   

  	
  +

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

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

  	
   

  	
  -

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

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

  	
   

  	
  -

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  DEDUCT
  Ineligible Accounts

  (as determined by Bank)

  	
   

  	
  -

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Eligible Accounts Receivable

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
   

  	
  MULTIPLY by
  Borrowing Base Factor

  	
   

  	
  X 75%

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Accounts Receivable Loan
  Availability

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
  4. 

  	
  Ending Distillers Grain Inventory

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5. 

  	
  Ending Corn or Milo Inventory

  	
   

  	
  +

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6. 

  	
  Ending Ethanol Inventory

  	
   

  	
  +

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

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

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
   

  	
  MULTIPLY by
  Borrowing Base Factor

  	
   

  	
  X 75%

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  Inventory Loan
  Availability

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  TOTAL Borrowing Base

  	
   

  	
  ADD
  Lines 3&7

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  Outstanding Loan Balance

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  Letters of Credit

  (not to exceed $1,000,000)

  	
   

  	
  $

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  Total Outstanding Balance

  (not to exceed $3,500,000)

  	
   

  	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  Margin

  	
   

  	
  Line 8 MINUS Line 11

  	
   

  	
  $

  	
   

  

 

 

6

 

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

 

	
  Borrower:

  	
   

  	
  Badger State Ethanol, LLC

  
	
   

  	
   

  	
   

  
	
  Signature:

  	
   

  	
  /s/ Gary L. Kramer

  	
   

  
	
  Title:

  	
   

  	
  President

  	
   

  

 

7

 

REVOLVING PROMISSORY NOTE

 

	
  Omaha, Nebraska

  	
  $3,500,000.00

  
	
  Note Date: 
  August 27, 2002

  	
  Maturity Date:  August 26, 2003

  

 

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

 

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

 

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

 

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

 

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

 

	
  Badger State Ethanol, LLC

  
	
   

  
	
   

  
	
  By

  	
  /s/ Gary L. Kramer

  	
   

  
	
   

  	
  Gary L. Kramer,
  President

  	
   

  

 

 

8EXHIBIT 10.9

 

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

National Bank of Omaha and Badger State Ethanol, LLC.

 

 

SECOND AMENDMENT TO CONSTRUCTION LOAN AGREEMENT

 

This Second
Amendment to Construction Loan Agreement made as of the 1st day of
January, 2003, by and among First National Bank of Omaha (“BANK”), a national
banking association with principal offices in Omaha, Nebraska, and Badger State
Ethanol, LLC (“BORROWER”), a Wisconsin limited liability company.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

1

 

the date BANK
receives (a) notice in writing from BORROWER of BORROWER’s election to
terminate this AGREEMENT and (b) indefeasible payment in full of the
OBLIGATIONS.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

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

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

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

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

 

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

 

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

 

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

 

	
  First
  National Bank of Omaha

  	
  Badger State
  Ethanol, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
  by

  	
  /s/ Brian D.
  Thome

  	
   

  	
  by

  	
  /s/ Gary L.
  Kramer

  	
   

  
	
   

  	
  Brian D.
  Thome, Second Vice President

  	
   

  	
  Gary L.
  Kramer, President

  
						

 

3

 

Exhibit 1

TERM NOTE 1 (Fixed Rate)

 

	
  Note Date:

  	
  January 1,
  2003

  	
  $15,300,000.00

  
	
  Maturity
  Date:

  	
  January 1,
  2008

  	
   

  

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

	
   

  	
  BADGER STATE ETHANOL, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary L.
  Kramer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  STATE OF
  Wisconsin

  	
  )

  	
   

  
	
   

  	
  ) ss.

  	
   

  
	
  COUNTY OF
  Green

  	
  )

  	
   

  

 

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

 

 

	
   

  	
  /s/ Notary
  Signature

  	
   

  
	
   

  	
  Notary
  Public

  

 

5

 

Exhibit 2

TERM NOTE 2 (Variable Rate)

 

	
  Note Date:

  	
  January 1,
  2003

  	
  $10,300,000.00

  
	
  Maturity
  Date:

  	
  January 1,
  2008

  	
   

  

 

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

 

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

 

INTEREST
ACCRUAL.  Interest
on the principal amount outstanding shall accrue at a rate (the “RATE”) equal
to one hundred basis points in excess of the BASE RATE in effect from time to
time until maturity, and six per cent (6%) above the BASE RATE in effect from
time to time after maturity, whether by acceleration or otherwise.  For purposes hereof, BASE RATE shall mean
the rate published as the “prime rate” in the Midwestern Edition of the Wall Street Journal.

 

Each time the BASE RATE shall
change, the RATE shall change contemporaneously with such change in the BASE
RATE.  Interest shall be calculated on
the basis of a 360-day year, counting the actual number of days elapsed.

 

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

 

	
  If
  INDEBTEDNESS to NET WORTH

  is less than:

  	
   

  	
  Interest will be:

  
	
   

  	
   

  	
   

  
	
  1.25 : 1.00

  	
   

  	
  BASE RATE
  plus 75 basis points

  
	
  1.00 : 1.00

  	
   

  	
  BASE RATE
  plus 50 basis

  
	
  0.75 : 1.00

  	
   

  	
  BASE RATE
  plus 25 basis points

  

 

6

 

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

 

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

 

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

 

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

 

	
   

  	
  BADGER STATE ETHANOL, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gary L.
  Kramer

  	
   

  

 

(notary
acknowledgement on next page)

 

7

 

	
  STATE OF
  Wisconsin

  	
  )

  	
   

  
	
   

  	
  ) ss.

  	
   

  
	
  COUNTY OF
  Green

  	
  )

  	
   

  

 

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

 

 

	
   

  	
  /s/ Notary
  Signature

  	
   

  
	
   

  	
  Notary Public

  	
   

  

 

8

 

Exhibit 3

TERM NOTE 3 (Reducing Revolver)

 

	
  Note Date:

  	
  January 1,
  2003

  	
  $5,000,000.00

  
	
  Maturity
  Date:

  	
  January 1,
  2008

  	
   

  

 

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

 

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

 

INTEREST
ACCRUAL. Interest on the principal amount outstanding
shall accrue at a rate (the “RATE”) equal to one hundred basis points in excess
of the BASE RATE in effect from time to time until maturity, and six per cent
(6%) above the BASE RATE in effect from time to time after maturity, whether by
acceleration or otherwise.  For purposes
hereof, BASE RATE shall mean the rate published as the “prime rate” in the
Midwestern Edition of the Wall Street
Journal.

 

Each time the BASE RATE shall
change, the RATE shall change contemporaneously with such change in the BASE
RATE.  Interest shall be calculated on
the basis of a 360-day year, counting the actual number of days elapsed.

 

REVOLVING
FEATURE. The BORROWER may reborrow, on a revolving
basis, that principal amount repaid on this promissory note which remains at a
variable interest rate. BORROWER will pay BANK an unused commitment fee of
three-eighths of one percent (3/8%) assessed quarterly in arrears against the
unused portion of the note amount. 
Pursuant to this revolving loan feature the BANK will lend the BORROWER,
from time to time until maturity of this note such sums in integral multiples
of $10,000.00 as the BORROWER may request by reasonable same day notice to the
BANK, received by the BANK not later than 11:00 A.M. of such day, but which
shall not exceed in the aggregate principal amount at any one time outstanding,
$5,000,000.00.  The BORROWER may borrow,
repay and reborrow hereunder, from the date of this AGREEMENT until the
maturity of this note, said amount or any lesser sum which is $10,000.00 or an
integral multiple thereof.

 

9

 

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

 

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

 

	
  If
  INDEBTEDNESS to NET WORTH

  is less than:

  	
   

  	
  Interest will be:

  
	
   

  	
   

  	
   

  
	
  1.25 : 1.00

  	
   

  	
  BASE RATE
  plus 75 basis points

  
	
  1.00 : 1.00

  	
   

  	
  BASE RATE
  plus 50 basis

  
	
  0.75 : 1.00

  	
   

  	
  BASE RATE plus
  25 basis points

  

 

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

 

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

 

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

 

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

 

	
   

  	
  BADGER STATE ETHANOL, LLC

  

 

10

 

	
  By:

  	
  /s/ Gary L. Kramer

  

 

 

 

	
  STATE OF

  	
   

  	
  Wisconsin

  	
  )

  
	
   

  	
   

  	
   

  	
  )ss.

  
	
  COUNTY OF

  	
   

  	
  Green

  	
  )

  
						

 

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

 

 

	
  /s/ Notary
  Signature

  
	
  Notary
  Public

  

 

11

 

Exhibit 4

 

Breakage
Fees

(excludes
any pre-payment required by the

Excess Cash Flow Recapture covenants as

Required by the AGREEMENT)

 

	
  1.

  	
   

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

  
	
   

  	
   

  	
  Breakage Fee

  
	
   

  	
   

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

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

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

  
	
   

  	
   

  	
  Breakage Fee

  
	
   

  	
   

  	
  SEE ATTACHED FEDERAL HOME
  LOAN BANK OF DES MOINES -

  PREPAYMENT FEE CALCULATIONS

  
	
   

  	
   

  	
   

  
	
  3.

  	
   

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

  
	
   

  	
   

  	
  Breakage Fee = none

  
	
   

  	
   

  	
   

  
	
  4.

  	
   

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

  
	
   

  	
   

  	
  Breakage Fee = none

  
	
   

  	
   

  	
   

  
	
  5.

  	
   

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

  
	
   

  	
   

  	
  Breakage Fee

  
	
   

  	
   

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

  
	
   

  	
   

  	
   

  
	
  6.

  	
   

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

  
	
   

  	
   

  	
  Breakage Fee

  
	
   

  	
   

  	
  SEE ATTACHED FEDERAL HOME
  LOAN BANK OF DES MOINES -

  PREPAYMENT FEE CALCULATIONS

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