Document:

exv10w2

 

EXHIBIT 10.2

                          , 20     

	 	 	 
	 

	 	 
	 

	 	 
	 

	 	 

Re: Arch Coal, Inc.

Dear                                         :

     In order to encourage you to remain in the employ of the Company, this Agreement sets forth
those benefits which the Company will provide to you in the event your employment with the Company
(1) is Terminated without Cause during the term of this Agreement, or (2) you resign for Good
Reason following a Change in Control under the circumstances described below.

SECTION A. DEFINITIONS

     1. “Agreement” shall mean this letter agreement.

     2. “Average Annual Bonus” shall be the highest of (i) the most recent annual bonus paid to
you, (ii) if your Date of Termination occurs after the end of the calendar year but prior to the
payment of annual bonuses with respect to the prior year, the amount calculated as payable as your
annual bonus pursuant to the bonus targets approved by the Board of Directors of the Company for
such year compared to the actual performance of the Company for such year; or (iii) the average
annual bonus paid to you in the three full calendar years preceding the Date of Termination. If
you have not been employed by the Company for three full calendar years prior to the Date of
Termination, the average annual bonus for purposes of clause (iii) of this definition shall be a
percentage of your highest annual salary in effect at any time during the term of this Agreement
equal to the average percentage of annual base pay paid as an annual bonus to all executives of the
Company at your Incentive Compensation level in the three calendar years preceding the Date of
Termination.

     3. “Board” shall mean the Company’s Board of Directors.

     4. “Cause” shall occur hereunder only upon (A) the willful and/or continued failure by you
substantially to perform your duties with the Company (other than any such failure resulting from
your incapacity due to physical or mental illness) after a written demand for substantial
performance is delivered to you by the Chief Executive Officer of the Company (“CEO”) which
specifically identifies the manner in which the CEO believes that you have not substantially
performed your duties, (B) the willful engaging by you in gross misconduct materially and
demonstrably injurious to the Company including, without limitation, a violation of the Company’s
Code of Business Conduct in effect from time to time, or (C) your conviction of or the entering of
a plea of nolo contendere to the commission of a felony. For purposes of this paragraph, no act,
or failure to act, on your part shall be considered “willful” unless done, or omitted to be done,
by you not in good faith and without reasonable belief that your action or omission was in the best
interest of the Company.

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     5. “Change in Control” shall be deemed to have occurred if (i) there shall be consummated (A)
any consolidation, merger, or share exchange of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the Company’s Common Stock would
be converted into cash, securities or other property, other than a merger of the Company in which
the holders of the Company’s Common Stock immediately prior to the merger have substantially the
same proportionate ownership of common stock of the surviving corporation immediately after the
merger, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of
related transactions) of all or substantially all of the assets of the Company, or (ii) the
stockholders of the Company shall approve any plan or proposal for the liquidation or dissolution
of the Company, or (iii) at any time during a period of two (2) consecutive years, “Continuing
Directors” shall cease for any reason to constitute at least a majority of the Board. For such
purpose, “Continuing Directors” shall be directors who were in office at the beginning of such two
year period and new directors whose election or nomination for election by the Company’s
stockholders was approved by a vote of at least two-thirds of the Continuing Directors then in
office.

     6. “COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act, as amended.

     7. “Common Stock” shall mean the common stock, par value $0.01 per share, of the Company.

     8. “Company” shall mean Arch Coal, Inc. and any successor to its business and/or assets which
executes and delivers the agreement provided for in Section F, paragraph 1 hereof or which
otherwise becomes bound by all the terms and provisions of this Agreement by operation of law.

     9. “Competitive Activity” shall have the meaning as set forth in Section D, paragraph 7.

     10. “Competitive Operation” shall have the meaning as set forth in Section D, paragraph 7.

     11. “Confidential Information” shall mean information relating to the Company’s, its
divisions’ and Subsidiaries’ and their successors’ business practices and business interests,
including, but not limited to, customer and supplier lists, business forecasts, business and
strategic plans, financial and sales information, information relating to products, process,
equipment, operations, marketing programs, research, or product development, engineering records,
computer systems and software, personnel records or legal records.

     12. “Date Of Termination” shall mean: (A) if this Agreement is terminated for Disability, 30
days after the Notice of Termination is given by the Company to you (provided that you shall not
have returned to the performance of your duties on a full-time basis during such 30 day period),
(B) if your employment is terminated for Good Reason by you, the date specified in the Notice of
Termination, and (C) if your employment is Terminated for any other reason, the date on which a
Notice of Termination is received by you unless a later date is specified.

     13. “Disability” shall occur if, as a result of your incapacity due to physical or mental
illness, you shall have been absent from your duties with the Company for six consecutive months
and shall not have returned to full-time performance of your duties within 30 days after written
notice is given to you by the Company.

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     14. “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

     15. “Excise Tax” shall have the meaning as set forth in Section E.

     16. “Good Reason” shall mean:

     (a) without your express written consent, the assignment to you after a Change in
Control, of any duties inconsistent with, or a significant diminution of, your position,
duties, responsibilities or status with the Company immediately prior to a Change in
Control, or a diminution in your title(s) as in effect immediately prior to a Change in
Control or any removal of you from, or any failure to reelect you to, any of such positions;

     (b) a reduction by the Company in your base salary in effect immediately prior to a
Change in Control or a failure by the Company to increase (within fifteen months of your
last increase in base salary) your base salary after a Change in Control in an amount which
is substantially similar, on a percentage basis, to the average percentage increase in base
salary for all corporate officers of the Company during the preceding 12 months;

     (c) the failure by the Company to continue in effect any retirement, stock ownership or
health and welfare plan in which you are participating or are eligible to participate at the
time of a Change in Control (or plans providing you with substantially similar benefits),
except as otherwise required by the terms of such plans as in effect at the time of any
Change in Control, or the taking of any action by the Company which would adversely affect
your participation in or materially reduce your benefits under any of such plans or deprive
you of any material fringe benefits enjoyed by you at the time of the Change in Control or
the failure by the Company to provide you with the number of paid vacation days to which you
are entitled in accordance with the vacation policies of the Company in effect at the time
of a Change in Control, unless a comparable plan is substituted therefor;

     (d) the failure by the Company to continue in effect any incentive plan or arrangement
(including without limitation, the Company’s incentive compensation plan, annual bonus and
contingent bonus arrangements and credits and the right to receive performance awards and
similar incentive compensation benefits) in which you are participating at the time of a
Change in Control (or to substitute and continue other plans or arrangements providing you
with substantially similar benefits), or a reduction in your Incentive Compensation level in
effect at the time of a Change in Control except as otherwise required by the terms of such
plans or arrangements as in effect at the time of any Change in Control;

     (e) the failure by the Company to continue in effect any plan or arrangement to receive
securities of the Company (including, without limitation, any plan or arrangement to receive
and exercise stock options, stock appreciation rights, restricted stock or grants thereof or
to acquire stock or other securities of the Company) in which you are participating at the
time of a Change in Control (or to substitute and continue plans or arrangements providing
you with substantially similar benefits), except as otherwise required by the terms of such
plans or arrangements as in effect at the time of any Change in Control, or the taking of
any action by the Company which would

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adversely affect your participation in or materially reduce your benefits under any
such plan or arrangement;

     (f) the relocation of the Company’s principal executive offices to a location outside
the St. Louis metropolitan area, or the Company’s requiring you to be based anywhere other
than at your current location or at the location of the Company’s principal executive or
divisional offices, except for required travel on the Company’s business to an extent
substantially consistent with your present business travel obligations, or, in the event you
consent to any such relocation of the Company’s principal executive or divisional offices,
the failure by the Company to pay (or reimburse you for) all reasonable moving expenses
incurred by you relating to a change of your principal residence in connection with such
relocation and to indemnify you against any loss (defined as the difference between the
actual sale price of such residence and the greater of (a) your aggregate investment in such
residence, or (b) the fair market value of such residence as determined by a real estate
appraiser reasonably satisfactory to both you and the Company) realized in the sale of your
principal residence in connection with any such change of residence;

     (g) any breach by the Company of any material provision of this Agreement; or

     (h) any failure by the Company to obtain the assumption of this Agreement by any
successor or assign of the Company.

     17. “Gross-up Payment” shall have the meaning as set forth in Section E.

     18. “Notice of Termination” shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment under the provision so
indicated.

     19. “Payment” shall have the meaning as set forth in Section E.

     20. “Person” shall have the meaning as set forth in Sections 13(d) and 14(d)(2) of the
Exchange Act.

     21. “Qualifying Termination” shall mean the termination of your employment after a Change in
Control while this Agreement is in effect, unless such termination is (a) by reason of your death
or Disability, (b) by the Company for Cause, or (c) by you other than for Good Reason.

     22. “Significant Stockholder” shall mean any stockholder of the Company who, immediately prior
to the Effective Date, owned more than 5% of the common stock of the Company.

     23. “Solicitation Activity” shall have the meaning as set forth in Section D, paragraph 7.

     24. “Specified Employee” shall mean a key employee (as defined in Code Section 416(i)(5))
determined in accordance with the meaning of such term under Code Section 409A and the regulations
promulgated thereunder. The identification date for purposes of determining

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whether you are a key employee shall be the identification date used for the same purpose
under the Arch Coal, Inc. Deferred Compensation Plan.

     24. “Subsidiary” shall mean any corporation of which more than 20% of the outstanding capital
stock having ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether or not at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any contingency) is at
the time directly or indirectly owned by the Company, by the Company and one or more other
Subsidiaries, or by one or more other Subsidiaries.

SECTION B. TERM AND BENEFITS

     This Agreement shall be in effect for a period of one year from the date you accept this
Agreement and shall automatically renew for successive one year periods unless terminated by either
party by at least one year advance written notice prior to the commencement of the next succeeding
one year period at which time the Agreement shall terminate at the end of the next succeeding one
year period. During the term of employment hereunder, you agree to devote your full business time
and attention to the business and affairs of the Company and to use your best efforts, skills and
abilities to promote its interests.

     In the event of your retirement, at your election or in accordance with the Company’s
generally applicable retirement policies, as in effect from time to time, this Agreement shall
automatically terminate, without additional notice to you, as of the effective date of your
retirement. Notwithstanding the first sentence of this paragraph and the first sentence of this
Section B, if a Change in Control should occur while you are still an employee of the Company and
while this Agreement is in effect, then this Agreement shall continue in effect from the date of
such Change in Control for a period of two years. Prior to a Change in Control, your employment
may be terminated by the Company for Cause at any time pursuant to a Notice of Termination. In
such event, you shall not be entitled to the benefits provided hereunder. No benefits shall be
payable hereunder unless your employment is terminated without Cause or there shall have been a
Change in Control and your employment by the Company shall thereafter terminate in accordance with
Section D hereof.

SECTION C. TERMINATION PRIOR TO CHANGE IN CONTROL

     1. Compensation Prior to a Change in Control. If you are Terminated by the Company
without Cause during the term of this Agreement and prior to a Change in Control, you shall be
entitled to the following:

     (a) A single lump sum payment equal to the higher of: (1) your annual salary
immediately prior to your Date of Termination, or (2) your highest annual salary during the
three fiscal years preceding the fiscal year in which your Date of Termination occurs.

     (b) To the extent you are covered thereunder on the Date of Termination, a single lump
sum payment equal to the product of (i) 12 and (ii) the monthly COBRA rate in effect from
time to time for your and your eligible dependents’ coverage under the Company’s health
plans. Upon your Termination, you and any covered dependents shall be entitled to elect to
continue participation in the Company’s health plans in accordance with COBRA and the
otherwise applicable terms of such plans, including terms relating to payment of COBRA
premiums or retiree medical contributions, if eligible and timely elected.

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     (c) A single lump sum payment equal to the product of (i) 12 and (ii) the monthly
premium rate applicable upon conversion of your non-optional Company-group life insurance to
individual coverage at the rate applicable to the converted policy assuming timely
application to the insurance company for conversion and, if you have not timely applied for
conversion, then at the group rate on the Date of Termination.

     (d) If and when payments are made, payment in cash of any pro-rata portion (up through
your Date of Termination) of any amounts you would have received under the Company’s
performance unit/share plans, Annual Incentive Compensation Plan, and any other similar
executive compensation plan in which you were a participant immediately prior to your Date
of Termination.

     (e) A single lump sum payment in cash equal to your Average Annual Bonus.

     (f) To the extent you are participating thereunder on the Date of Termination, a single
lump sum payment equal to the sum of (i) (A) the Company matching contribution you would
have received under the Company’s thrift plan and nonqualified deferred compensation plan as
if you had been contributing the same percentage of your eligible compensation under such
plans as in effect on your Date of Termination during the 12-month period following your
Date of Termination and (B) the annual cash balance credit amount you would have received
under the Company’s cash balance plan and nonqualified supplemental retirement plan during
the 12-month period following your Date of Termination and (ii) an amount such that after
payment by you of all taxes, including any income and employment taxes imposed on such
amount, you retain an amount equal to the amount calculated under (i) above. For purposes
of this calculation, payments made pursuant to paragraph 1(a) and 1(e) hereof shall be
deemed includable compensation under these plans to the same extent as if you had remained
an active employee of the Company and the payments were made for base salary and annual
bonus, respectively, during the 12-month period following your Date of Termination.

     (g) To the extent you had elected to receive such services prior to the Date of
Termination, financial counseling services shall be provided to you in accordance with the
Company’s financial counseling services plan during the 12-month period following your Date
of Termination; provided that, the maximum amount payable to the provider of such services
shall not exceed $5,000.

     (h) Reasonable outplacement services, for a period not to exceed the 12-month period
following your Date of Termination.

     (i) A single lump sum payment equal to the value of all unused, earned and accrued
vacation as of your Date of Termination.

     (j) All unexpired, non-restricted stock options held by you under any Company stock
option plan shall immediately vest as of your Date of Termination, and shall be exercisable,
if at all, in accordance with the option agreements and plans granting such options to you.

     However, in the event that your employment with the Company is Terminated during the term of
this Agreement and prior to a Change in Control and such Termination is not a Termination without
Cause (including, without limitation, termination by reason of your voluntary termination,
retirement, death, or Disability), or if your employment is terminated for Cause

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during the term of this Agreement, you shall not be entitled to receive any benefits under
this Agreement.

     2. Release. In exchange for the benefits herein and as a condition to receiving any
benefits under this Agreement, you agree to execute a release in substantially the form used by the
Company on the Date of Termination, which completely releases the Company to the fullest extent
permitted by law from all claims you may have against the Company on your Date of Termination
except claims related to (a) claims for benefits to which you are entitled under this Agreement and
(b) any applicable worker’s compensation or unemployment compensation.

     3. Payment of Benefits. Unless otherwise provided in this Agreement or in the
applicable compensation or stock option plan or program, all payments shall be made to you in a
single lump sum within 60 days after your Date of Termination. These benefits are in addition to
all accrued and vested benefits to which you are entitled to under any of the Company’s plans and
arrangements, including but not limited to, the accrued vested benefits to which you are eligible
for and entitled to receive under any of the Company’s qualified and non-qualified benefit or
retirement plans, or any successor plans in effect on your Date of Termination hereunder, except
that if you are disabled on the Date of Termination so as to make you eligible for long-term
disability benefits on or after that date, you will not be eligible for pension credits for one
year from the Date of Termination, except that if you are disabled on the Date of Termination so as
to make you eligible to receive long-term disability benefits under a Company plan on or after that
date, you will not receive the portion of the single lump sum payment described in Section C,
paragraph 1(f)(i)(B).

     4. No Duty to Mitigate. You shall not be required to mitigate the amount of any
payment provided for in this Section by seeking other employment or otherwise, nor shall the amount
of any payment provided for in this Section be reduced by any compensation earned by you as the
result of employment by another employer after your Date of Termination, or otherwise. Except as
provided herein, the Company shall have no right to set off against any amount owing hereunder any
claim which it may have against you.

SECTION D. TERMINATION FOLLOWING CHANGE IN CONTROL

     1. Qualifying Termination. If your termination is a Qualifying Termination, you shall
be entitled to receive the payments and benefits provided in this Section.

     2. Notice of Termination. Except as provided in Section F, paragraph 1, any
termination of your employment following a Change in Control shall be communicated by written
Notice of Termination to the other party hereto. No termination shall be effective without such
Notice of Termination.

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     3. Compensation Upon Termination After a Change in Control.

     (a) If your termination is a Qualifying Termination, then the Company shall pay to you
as severance pay (and without regard to the provisions of any benefit or incentive plan), in
a lump sum cash payment, an amount equal to two times the higher of; (1) your annual salary
immediately prior to your Date of Termination, or (2) your highest annual salary during the
three fiscal years preceding the fiscal year in which your Date of Termination occurs or, if
greater, the prior three fiscal years preceding the fiscal year in which the Change in
Control occurs.

     (b) If your termination is a Qualifying Termination, in addition to the payments
required by the preceding paragraph, you shall be entitled to the following:

     (i) To the extent you are covered thereunder on the Date of Termination, a
single lump sum payment equal to the product of (i) 18 and (ii) the monthly COBRA
rate in effect from time to time for your and any covered dependents’ coverage under
the Company’s health plans. Upon your Termination, you and any covered dependents
shall be entitled to elect to continue participation in the Company’s health plans
in accordance with COBRA and the otherwise applicable terms of such plans, including
terms related to payment of COBRA premiums or retiree medical contributions, if
eligible and timely elected.

     (ii) A single lump sum payment equal to the product of (A) 24 and (B) the
monthly premium rate applicable upon conversion of your non-optional Company-group
life insurance to individual coverage at the rate applicable to the converted policy
assuming timely application to the insurance company for conversion and, if you have
not timely applied for conversion, then at the group rate on the Date of
Termination.

     (iii) Full payment in cash of any performance unit/share awards in existence on
your Date of Termination less any amounts paid to you under the applicable
performance unit/share plan upon a Change in Control pursuant to the provisions of
such plan; plus any pro rata portion (up through your Date of Termination) of any
amounts you would have received under the Company’s Incentive Compensation Plan and
any other similar executive compensation plan in which you were a participant
immediately prior to your Date of Termination.

     (iv) A single lump sum payment in cash of an amount equal to two times your
Average Annual Bonus.

     (v) Reasonable outplacement services, for a period not to exceed two (2) years
after your Date of Termination.

     (vi) To the extent you had elected to receive such services prior to the Date
of Termination, financial counseling services shall be provided to you by a firm
reasonably acceptable to you during the 24-month period following your Date of
Termination; provided that, the maximum amount payable to the provider of such
services shall not exceed $5,000.

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     (vii) A single lump sum payment equal to the value of all unused, earned and
accrued vacation as of your Date of Termination pursuant to the Company’s policies
in effect immediately prior to the Change in Control.

     (viii) All unexpired stock options held by you under any Company stock option
plan shall immediately vest as of your Date of Termination, and shall be
exercisable, if at all, in accordance with the option agreements and plans granting
such options to you.

     (ix) To the extent you are participating thereunder on the Date of Termination,
a single lump sum payment equal to the sum of (i) (A) the Company matching
contribution you would have received under the Company’s thrift plan and
nonqualified deferred compensation plan as if you had been contributing the same
percentage of your eligible compensation under such plans as in effect on your Date
of Termination during the 24-month period following your Date of Termination and (B)
the annual cash balance credit amount you would have received under the Company’s
cash balance plan and nonqualified supplemental retirement plan during the 24-month
period following your Date of Termination and (ii) an amount such that after payment
by you of all taxes, including any income and employment taxes imposed on such
amount, you retain an amount equal to the amount calculated under (i) above. For
purposes of this calculation, payments made pursuant to paragraph 3(a) and 3(b)(iv)
hereof shall be deemed includable compensation under these plans to the same extent
as if you had remained an active employee of the Company and the payments were made
for base salary and annual bonus, respectively, during the 24-month period following
your Date of Termination.

     4. Release. In exchange for the benefits herein and as a condition to receiving any
benefits under this Agreement, you agree to execute a release in substantially the form used by the
Company on the Date of Termination, which completely releases the Company to the fullest extent
permitted by law from all claims you may have against the Company on your Date of Termination
except claims related to (a) claims for benefits to which you are entitled under this Agreement and
(b) any applicable worker’s compensation or unemployment compensation.

     5. Payment of Benefits. Unless otherwise provided in this Agreement or in the
applicable compensation or stock option plan or program, all payments shall be made to you within
30 days after your Date of Termination. These benefits are in addition to all accrued and vested
benefits to which you are entitled to under any of the Company’s plans and arrangements, including
but not limited to, the accrued vested benefits to which you are eligible for and entitled to
receive under any of the Company’s qualified and non-qualified benefit or retirement plans, or any
successor plans in effect on your Date of Termination hereunder, except that if you are disabled on
the Date of Termination so as to make you eligible for long-term disability benefits on or after
that date, you will not be eligible for pension credits for two years from the Date of Termination
and provided that, the payment described in paragraph 3(a) shall be made on the fifth day following
your Date of Termination. Notwithstanding the preceding sentence, the payment of the amounts
described in paragraphs 3(a) and 3(b)(i), (ii), (iii), (iv), (vi) and (ix) shall not be made until
the day after the last day of the six-month period beginning on your Date of Termination if you are
a Specified Employee to the extent required by Code Section 409A.

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     6. No Duty to Mitigate. You shall not be required to mitigate the amount of any
payment provided for in this Section by seeking other employment or otherwise, nor shall the amount
of any payment provided for in this Section be reduced by any compensation earned by you as the
result of employment by another employer after your Date of Termination, or otherwise. Except as
provided herein, the Company shall have no right to set off against any amount owing hereunder any
claim which it may have against you.

     7. Competitive Activity and Solicitation Activity. In consideration of the foregoing,
you agree that if your employment is terminated during the term of this Agreement, then (i) during
a period ending six months following your Date of Termination you shall not engage in any
Competitive Activity and (ii) during a period ending one year following your Date of Termination
you shall not engage in any Solicitation Activity; provided, you shall not be subject to the
foregoing obligation if the Company breaches a material provision of this Agreement. If you choose
to engage in any Competitive Activity or Solicitation Activity during that period, the Company
shall be entitled to recover any benefits paid to you under this Agreement. For purposes of this
Agreement, “Competitive Activity” shall mean your participation, without the written consent of the
General Counsel of the Company, in the management of any business operation of any enterprise if
such operation (a “Competitive Operation”) engages in substantial and direct competition with any
business operation actively conducted by the Company or its divisions and Subsidiaries on your Date
of Termination. For purposes of this paragraph, a business operation shall be considered a
Competitive Operation if such business sells a competitive product or service which constitutes (i)
15% of that business’s total sales or (ii) 15% of the total sales of any individual subsidiary or
division of that business and, in either event, the Company’s sales of a similar product or service
constitutes (i) 15% of the total sales of the Company or (ii) 15% of the total sales of any
individual Subsidiary or division of the Company. Competitive Activity shall not include (i) the
mere ownership of securities in any enterprise, or (ii) participation in the management of any
enterprise or any business operation thereof, other than in connection with a Competitive Operation
of such enterprise. For purposes of this Agreement, “Solicitation Activity” shall mean your
solicitation for employment or retention, hiring or retention, without the written consent of the
General Counsel of the Company, of any person employed or retained by the Company on your Date of
Termination or during the six months preceding your Date of Termination.

SECTION E. ADDITIONAL PAYMENTS BY THE COMPANY

     Notwithstanding anything to the contrary in this Agreement, in the event that any payment or
distribution by the Company to or for your benefit, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (a “Payment”), would be subject
to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, or any
interest or penalties with respect to such excise tax (such excise tax, together with any such
interest or penalties, are hereinafter collectively referred to as the “Excise Tax”), the Company
shall pay to you an additional payment (a “Gross-up Payment”) in an amount such that after payment
by you of all taxes (including any interest or penalties imposed with respect to such taxes),
including any income, employment and Excise Tax imposed on any Gross-up Payment, you retain an
amount of the Gross-up Payment equal to the Excise Tax imposed upon the Payments. You and the
Company shall make an initial determination as to whether a Gross-up Payment is required and the
amount of any such Gross-up Payment. If you and the Company can not agree on whether a Gross-up
Payment is required or the amount thereof, then an independent nationally recognized accounting
firm, appointed by you, shall determine the amount of the Gross-up Payment. The Company shall

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pay all expenses which you may incur in determining the Gross-up Payment. You shall notify
the Company in writing of any claim by the Internal Revenue Service which, if successful, would
require the Company to make a Gross-up Payment (or a Gross-up Payment in excess of that, if any,
initially determined by the Company and you) within ten days of the receipt of such claim. The
Company shall notify you in writing at least ten days prior to the due date of any response
required with respect to such claim if it plans to contest the claim. If the Company decides to
contest such claim, you shall cooperate fully with the Company in such action; provided, however,
the Company shall bear and pay directly or indirectly all costs and expenses (including additional
interest and penalties) incurred in connection with such action and shall indemnify and hold you
harmless, on an after-tax basis, for any Excise Tax or income tax, including interest and penalties
with respect thereto, imposed as a result of the Company’s action. If, as a result of the
Company’s action with respect to a claim, you receive a refund of any amount paid by the Company
with respect to such claim, you shall promptly pay such refund to the Company. If the Company
fails to timely notify you whether it will contest such claim or the Company determines not to
contest such claim, then the Company shall immediately pay to you the portion of such claim, if
any, which it has not previously paid to you. Notwithstanding anything in this Section E, no
Gross-up Payment shall be made after the March 15th following the calendar year in which
your Date of Termination occurs, unless a later date is required pursuant to Section D, paragraph
5.

SECTION F. MISCELLANEOUS

     1. Assumption of Agreement. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, share exchange or otherwise) to all or substantially
all of the business and/or assets of the Company, by agreement in form and substance satisfactory
to you, expressly to assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of any such succession
shall be a breach of a material provision of this Agreement and shall entitle you to terminate your
employment for Good Reason and receive the compensation in the same amount and on the same terms as
you would be entitled pursuant to Section D, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be deemed your Date of
Termination without a Notice of Termination being given.

     2. Confidentiality. All Confidential Information which you acquire or have acquired
in connection with or as a result of the performance of services for the Company, whether under
this Agreement or prior to the effective date of this Agreement, shall be kept secret and
confidential by you unless (a) the Company otherwise consents or (b) you are legally required to
disclose such Confidential Information by a court of competent jurisdiction. This covenant of
confidentiality shall extend beyond the term of this Agreement and shall survive the termination of
this Agreement for any reason. If you breach this covenant of confidentiality, the Company shall
be entitled to recover from any benefits paid to you under this Agreement its damages resulting
from such breach.

     3. Employment. You agree to be bound by the terms and conditions of this Agreement
and to remain in the employ of the Company during any period following any public announcement by
any Person of any proposed transaction or transactions which, if effected, would result in a Change
in Control until a Change in Control has taken place. However,

11

 

nothing contained in this Agreement shall impair or interfere in any way with the right of the
Company to terminate your employment for Cause prior to a Change in Control.

     4. Arbitration. Any controversy or claim arising out of or relating to this
Agreement, or the breach thereof, shall be settled exclusively by arbitration in accordance with
the Center for Public Resources’ Model ADR Procedures and Practices, and judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.
Notwithstanding the foregoing, the Company shall not be restricted from seeking equitable relief,
including injunctive relief as set forth in paragraph 5 of this Section, in the appropriate forum.
Any cost of arbitration will be paid by the Company. In the event of a dispute over the existence
of Good Reason or Cause after a Change in Control, the Company shall continue to pay your salary,
bonuses and plan benefits pending resolution of the dispute. If you prevail in the arbitration,
the remaining amounts due to you under this Agreement are to be immediately paid to you.

     5. Injunctive Relief. You acknowledge and agree that the remedy of the Company at law
for any breach of the covenants and agreements contained in paragraph 2 of this Section and in
Section D, paragraph 7 will be inadequate, and that the Company will be entitled to injunctive
relief against any such breach or any threatened, imminent, probable or possible breach. You
represent and agree that such injunctive relief shall not prohibit you from earning a livelihood
acceptable to you.

     6. Notice. For the purposes of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this Agreement, provided that
all notices to the Company shall be directed to the attention of the General Counsel of the
Company, or to such other address as either party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be effective only upon receipt.

     7. Indemnification. The Company will indemnify you to the fullest extent permitted by
the laws of the State of Missouri and the existing bylaws of the Company, in respect of all your
services rendered to the Company and its divisions and Subsidiaries prior to your Date of
Termination. You shall be entitled to the protection of any insurance policies the Company now or
hereafter maintains generally for the benefit of its directors, officers and employees (but only to
the extent of the coverage afforded by the existing provisions of such policies) to protect against
all costs, charges and expenses whatsoever incurred or sustained by you in connection with any
action, suit or proceeding to which you may be made a party by reason of your being or having been
a director, officer or employee of the Company or any of its divisions or Subsidiaries during your
employment therewith.

     8. Further Assurances. Each party hereto agrees to furnish and execute such
additional forms and documents, and to take such further action, as shall be reasonably and
customarily required in connection with the performance of this Agreement or the payment of
benefits hereunder.

     9. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing signed by you and
such officer(s) as may be specifically designated by the Board. No waiver by either party

12

 

hereto at any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth expressly in this
Agreement.

     10. Termination of other Agreements. Upon execution by both parties, this Agreement
shall terminate and shall replace all prior employment and severance agreements between you and the
Company and its divisions or Subsidiaries and the terms hereof shall govern as if executed on the
initial date of such prior employment and severance agreements.

     11. Severability. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.

     12. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will constitute one and the same
instrument.

     13. Legal Fees And Expenses. Any other provision of this Agreement notwithstanding,
the Company shall pay all legal fees and expenses which you may incur as a result of the Company’s
unsuccessful contesting of the validity, enforceability or your interpretation of, or
determinations under, any part of this Agreement.

     14. Governing Law. This Agreement shall be governed in all respects by the laws of
the State of Missouri, without reference to its conflicts of law provisions.

     15. Agreement Binding on Successors. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns. This Agreement
shall inure to the benefit of and be enforceable by your personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and legatees. If you should
die while any amounts would still be payable to you hereunder if you had continued to live, all
such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to your devisee, legatee, or other designee or, if there be no such designee, to your
estate.

     16. Headings. All Headings are inserted for convenience only and shall not affect any
construction or interpretation of this Agreement.

     If this Agreement correctly sets forth our agreement on the subject matter hereof, please sign
and return to the Company the enclosed copy of this Agreement which will then constitute our
agreement on this matter.

	 	 	 
	 

	 	
	 

	 	

	 	 	 	 	 
	 	Sincerely,	 	
	 	 	 	 
	 	ARCH COAL, INC.	 		 
	 	 	 	 
	 	 	 
	 	Sheila B. Feldman 	 
	 	Vice President, Human Resources 	 
	 

ACKNOWLEDGED AND ACCEPTED as

of this       day of
                    ,
20      .

                    
                    
                    

Employee

13exv10w1

 

Exhibit 10.1

Execution Copy

MASTER

AMENDED AND RESTATED

CREDIT AGREEMENT

dated as of November 14, 2006

between

GOLDEN GRAIN ENERGY, LLC

as Borrower

and

HOME FEDERAL SAVINGS BANK

as Lender

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE I. GENERAL TERMS
	 	 	1	 
	 
	 	 	 	 
	Section 1.01 Definitions
	 	 	1	 
	Section 1.02 Master Agreement/Supplements
	 	 	1	 
	Section 1.03 Notes
	 	 	2	 
	Section 1.04 Default Interest
	 	 	2	 
	Section 1.05 Additional Interest
	 	 	2	 
	Section 1.06 Interest Generally; Maximum Rate
	 	 	2	 
	Section 1.07 Payments Generally
	 	 	2	 
	Section 1.08 Computations
	 	 	3	 
	Section 1.09 Prepayments
	 	 	3	 
	Section 1.10 Advances and Paying Procedure
	 	 	3	 
	Section 1.11 Administrative Fee
	 	 	3	 
	Section 1.12 Reaffirmation of Existing Loan Documents
	 	 	3	 
	Section 1.13 Collateral
	 	 	4	 
	Section 1.14 Priority
	 	 	4	 
	Section 1.15 Restricted Cash Accounts
	 	 	4	 
	 
	 	 	 	 
	ARTICLE II. CONDITIONS PRECEDENT
	 	 	4	 
	 
	 	 	 	 
	Section 2.01 Conditions To Effectiveness
	 	 	4	 
	 
	 	 	 	 
	ARTICLE III. REPRESENTATIONS AND WARRANTIES
	 	 	6	 
	 
	 	 	 	 
	Section 3.01 Existence; Power
	 	 	6	 
	Section 3.02 Organizational Power; Authorization
	 	 	6	 
	Section 3.03 Governmental Approvals; No Conflicts
	 	 	6	 
	Section 3.04 Financial Statements
	 	 	7	 
	Section 3.05 Litigation and Environmental Matters
	 	 	7	 
	Section 3.06 Compliance with Laws and Agreements
	 	 	7	 
	Section 3.07 Investment Company Act, Etc
	 	 	7	 
	Section 3.08 Taxes
	 	 	7	 
	Section 3.09 Margin Regulations
	 	 	8	 
	Section 3.10 ERISA
	 	 	8	 
	Section 3.11 Ownership of Property
	 	 	8	 
	Section 3.12 Disclosure
	 	 	8	 
	Section 3.13 Labor Relations
	 	 	8	 
	Section 3.14 Subsidiaries
	 	 	9	 
	Section 3.15 Permits
	 	 	9	 
	Section 3.16 Projections
	 	 	9	 
	Section 3.17 Material Contracts
	 	 	9	 
	Section 3.18 Anti-Terrorism Laws
	 	 	9	 
	 
	 	 	 	 
	ARTICLE IV. AFFIRMATIVE COVENANTS
	 	 	9	 
	 
	 	 	 	 
	Section 4.01 Financial Statements and Other Information
	 	 	9	 
	Section 4.02 Notices of Material Events
	 	 	11	 

 

 

	 	 	 	 	 
	 	 	Page	 
	Section 4.03 Existence; Conduct of Business
	 	 	11	 
	Section 4.04 Compliance with Laws, Etc
	 	 	11	 
	Section 4.05 Payment of Obligations
	 	 	12	 
	Section 4.06 Books and Records
	 	 	12	 
	Section 4.07 Visitation, Inspection, Audit, Etc
	 	 	12	 
	Section 4.08 Maintenance of Properties; Insurance
	 	 	12	 
	Section 4.09 Use of Proceeds
	 	 	12	 
	Section 4.10 Subsidiaries
	 	 	12	 
	Section 4.11 Assignment of Material Contracts
	 	 	14	 
	Section 4.12 Compliance with Certain Laws
	 	 	13	 
	Section 4.13 Farm Products
	 	 	13	 
	Section 4.14 Warehouse Receipts
	 	 	13	 
	 
	 	 	 	 
	ARTICLE V. FINANCIAL COVENANTS
	 	 	14	 
	 
	 	 	 	 
	Section 5.01 Fixed Charge Coverage Ratio
	 	 	14	 
	Section 5.02 Working Capital
	 	 	14	 
	Section 5.03 Tangible Net Worth
	 	 	14	 
	 
	 	 	 	 
	ARTICLE VI. NEGATIVE COVENANTS
	 	 	16	 
	 
	 	 	 	 
	Section 6.01 Indebtedness
	 	 	16	 
	Section 6.02 Negative Pledge
	 	 	16	 
	Section 6.03 Fundamental Changes
	 	 	16	 
	Section 6.04 Investments, Loans, Etc
	 	 	16	 
	Section 6.05 Restricted Payments
	 	 	16	 
	Section 6.06 Sale of Assets
	 	 	17	 
	Section 6.07 Transactions with Affiliates
	 	 	17	 
	Section 6.08 Restrictive Agreements
	 	 	17	 
	Section 6.09 Sale and Leaseback Transactions
	 	 	17	 
	Section 6.10 Hedging Agreements
	 	 	17	 
	Section 6.11 Amendment to Material Documents
	 	 	18	 
	Section 6.12 Accounting Changes
	 	 	18	 
	Section 6.13 Deposit and Investment Accounts
	 	 	18	 
	Section 6.14 Use of Proceeds
	 	 	18	 
	Section 6.15 Non-Financed Maintenance Capital Expenditures
	 	 	18	 
	Section 6.16 Legal Status
	 	 	18	 
	 
	 	 	 	 
	ARTICLE VII. EVENTS OF DEFAULT AND REMEDIES
	 	 	18	 
	 
	 	 	 	 
	Section 7.01 Events of Default
	 	 	19	 
	Section 7.02 Remedies
	 	 	21	 
	 
	 	 	 	 
	ARTICLE VIII. MISCELLANEOUS
	 	 	21	 
	 
	 	 	 	 
	Section 8.01 Notices
	 	 	21	 
	Section 8.02 Waiver; Amendments
	 	 	22	 
	Section 8.03 Expenses; Indemnification
	 	 	23	 
	Section 8.04 Successors and Assigns
	 	 	24	 
	Section 8.05 Governing Law; Jurisdiction; Consent to Service of Process
	 	 	25	 

ii

 

	 	 	 	 	 
	 	 	Page	 
	Section 8.06 WAIVER OF JURY TRIAL
	 	 	23	 
	Section 8.07 Right of Setoff
	 	 	23	 
	Section 8.08 Counterparts; Integration
	 	 	24	 
	Section 8.09 Survival
	 	 	24	 
	Section 8.10 Severability
	 	 	24	 
	Section 8.11 Transferable Record
	 	 	24	 
	Section 8.12 Confidentiality
	 	 	24	 
	Section 8.13 Copies
	 	 	25	 
	Section 8.14 Notice of Claims Against Lender; Limitation of Certain Damages
	 	 	25	 
	Section 8.15 Effect of Amendment
	 	 	25	 
	 
	 	 	 	 
	Attachment I — Definitions
	 	 	I-1	 
	 
	 	 	 	 
	Exhibit 2.01(c)(6)
	 	 	2.01(c)(6)-1	
	 
	 	 	 	 
	Schedule 3.17 — Material Contracts
	 	 	3.17-1	 
	 
	 	 	 	 
	Schedule 6.04(a) — Investments
	 	 	6.04(a)-1	 

iii

 

MASTER AMENDED AND RESTATED CREDIT AGREEMENT

     THIS MASTER AMENDED AND RESTATED CREDIT AGREEMENT is made and entered into as of November 14,
2006, by and between GOLDEN GRAIN ENERGY, LLC, an Iowa limited liability company, (“Borrower”) and
HOME FEDERAL SAVINGS BANK, a federally chartered stock savings bank organized under the laws of the
United States (“Lender”).

RECITALS:

     A. Borrower and Lender are parties to a Credit Agreement dated as of January 16, 2004, as
amended by the First Amendment to the Credit Agreement dated May 17, 2004, and the Second Amendment
to the Credit Agreement dated January 30, 2006, (collectively, the “Original Credit Agreement”),
and promissory notes, instruments and other documents and agreements, pursuant to which Lender has
made certain loans, credit facilities and other credit accommodations available to Borrower.

     B. Subject to certain terms and conditions, Lender agrees to make additional loans, credit
facilities and other credit accommodations available to Borrower at this time.

     C. The parties wish to amend and restate the terms of the loans, credit facilities and other
credit accommodations which are presently outstanding and/or in effect.

AGREEMENT:

     In consideration of the foregoing and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

ARTICLE I.

GENERAL TERMS

     Section 1.01 Definitions. Capitalized terms used herein have the meanings set forth
on Attachment I.

     Section 1.02 Master Agreement/Supplements. Additional terms of each of the existing
and future loans, credit facilities and other credit accommodations are set forth in supplements
(“Supplements”) to this Master Amended and Restated Credit Agreement (“Master Agreement”). The
terms of this Master Agreement and the Supplements supersede all prior agreements and arrangements
between Borrower and Lender related to the Loans and govern the relationship and agreements between
Borrower and Lender. In the event Borrower and Lender agree to additional loans, credit
facilities, and/or other credit accommodations from time to time in the future, Borrower and Lender
will enter into additional Supplements to this Master Agreement. Each Supplement will set forth
additional terms and conditions specific to such loans and credit facilities, including without
limitation, the applicable:

 

 

     (a) amount of the loan and/or credit facility;

     (b) interest rate and rate options,

     (c) fees, costs and expenses; and

     (d) repayment terms.

In the event of any inconsistency between the terms set forth in the Master Agreement and any
Supplement, the terms of the applicable Supplement will control to the extent provided in such
Supplement. Unless otherwise provided in a Supplement, each Supplement applies solely to the Loans
described therein. The Supplements, including all Supplements entered into as the date hereof and
all future Supplements (when they become effective) are hereby incorporated by reference.

     Section 1.03 Notes. Each Supplement may be accompanied by one or more Notes made by
of Borrower.

     Section 1.04 Default Interest. Upon the occurrence and during the continuance of a
Default or Event of Default or after acceleration, Borrower will pay interest (“Default Interest”)
with respect to the Loans at the rate otherwise applicable plus an additional two hundred basis
points per annum (2.00%). Default Interest is payable on demand. The Default Interest rate will
apply whether or not Lender has exercised its option to accelerate the maturity of the Loans and
declare the entire principal balance due and payable.

     Section 1.05 Additional Interest. In the event any Deposit Account or Investment
Account is maintained with any Person other than Lender, Borrower will pay interest on all Loans at
the rate otherwise applicable plus an additional 200 basis points (2.00%) per annum.

     Section 1.06 Interest Generally; Maximum Rate. Lender’s internal records of
applicable interest rates are determinative in the absence of manifest error. Notwithstanding
anything to the contrary herein or in any Supplement, if at any time the interest rate applicable
to any Loan, together with all fees, charges and other amounts which may be treated as interest on
such Loan under applicable law (collectively, the “Charges”) exceed the maximum lawful rate of
interest (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by
Lender, the rate of interest payable in respect of the Loans, together with all Charges payable in
respect thereof, will be limited to the Maximum Rate; provided, such Charges may be applied by
Lender and collected over a longer period of time to avoid application of a rate that exceeds the
Maximum Rate. Any amount paid in excess of the Maximum Rate will be applied to principal and other
amounts outstanding in the order Lender deems appropriate.

     Section 1.07 Payments Generally. All payments will be made to Lender at the address
set forth in Section 8.01 in U.S. Dollars and in immediately available funds, without
set-off, deduction, or counterclaim, not later than 11:00 A.M. (Rochester, Minnesota time) on the
date on which such payment is due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day). All payments may be applied by
Lender to principal, interest, fees and other amounts in any order which Lender elects in its sole
discretion; provided unscheduled payments received during the continuance of an Event of

2

 

Default will be applied first to fees and reimbursable expenses of Lender and then ratably to
the Loans based on their respective outstanding principal balances. Whenever any payment is stated
to be due on a day that is not a Business Day, such payment will be due and payable on the next
succeeding Business Day, not later than 11:00 A.M., and such extension of time will in such case be
included in the computation of the payment of interest and fees, as the case may be.

     Section 1.08 Computations. Computations of interest and fees (to the extent computed
on the basis of days elapsed) hereunder will be made on the basis of a year of 360 days (including
the first day but excluding the last day) occurring in the period for which such interest or fees
are payable. All interest and fees will be considered earned when due.

     Section 1.09 Prepayments.

     (a) Subject to applicable fees and charges and such other terms and conditions as set forth in
any applicable Supplement, Borrower may prepay the Loans, in whole or in part at any time and from
time to time, by giving irrevocable written notice (or telephonic notice promptly confirmed in
writing) to Lender not less than three Business Days prior to any such prepayment. Each such
notice will be irrevocable and will specify the proposed date of such prepayment and the principal
amount to be prepaid. The amount specified in such notice will be due and payable on the date
designated in such notice, together with accrued interest on the amount so prepaid and any
prepayment fee or premium payable in connection therewith.

     (b) If Borrower issues any capital stock, any other equity interests, or any debt securities,
then no later than the Business Day following the date of receipt of the proceeds thereof, Borrower
must prepay the Loans in an amount equal to all such proceeds, net of underwriting discounts and
commissions and other reasonable costs paid to non-Affiliates in connection therewith; provided,
that no such prepayment shall be required in the event Borrower issues capital stock or other
equity interests and the proceeds of such issuance are invested in assets that constitute either
plant or equipment of Borrower and such assets become Collateral subject to Lender’s first priority
security interest. Any prepayment fee, premium or penalty under any applicable supplement will be
applied in the event of such prepayment.

     Section 1.10 Advances and Paying Procedure. Lender is authorized and directed to
credit any of the Borrower’s accounts with Lender (or to the account Borrower designates in
writing) for all Advances made hereunder, and Lender is authorized to debit such account or any
other account of Borrower with Lender for the amount of any principal, interest, or other amount
due hereunder on the due date with respect thereto.

     Section 1.11 Administrative Fee. Borrower agrees to pay to Lender an annual
administrative fee in the amount of $20,000 on the next anniversary of the Closing Date (January
2007) and $10,000 on each anniversary of the Closing Date thereafter, until all Obligations have
been paid or satisfied in full and all Commitments have been terminated.

     Section 1.12 Reaffirmation of Existing Loan Documents. Except to the extent modified
by the Amendment Documents, Borrower and Lender reaffirm their respective obligations under each of
the Loan Documents in effect as of the date hereof.

3

 

     Section 1.13 Collateral. The Obligations are secured by Lender’s first priority Lien
on the Collateral. To the extent not otherwise in effect, Borrower hereby pledges, mortgages,
transfers, assigns, sets aside, and grants a security interest to Lender in the Collateral.

     Section 1.14 Priority. Except to the extent any Loan is specifically subordinated to
one or more other Loans, each Loan will be pari passu in all respects.

     Section 1.15 Restricted Cash Accounts. Borrower will maintain a balance of no less
than $4,000,000 in the account established pursuant to Section 2.10 of the Original Credit
Agreement. No additional deposits thereto are required. Borrower may direct Lender to apply
amounts on deposit in such reserve account as payment to the Obligations; provided any such
payments will be applied to Loan payments in the inverse order of maturity and will not reduce the
amount of any scheduled payment to the extent any Obligation remains unpaid. Proceeds of such
reserve account secure all Loans ratably.

ARTICLE II.

CONDITIONS PRECEDENT

     Section 2.01 Conditions To Effectiveness. Lender will have no obligation under this
Agreement or any other Amendment Document until each of the following conditions is satisfied (or
waived in accordance with Section 8.02):

     (a) Lender has received all fees and other amounts due and payable on or prior to the date
hereof, including the fees and amounts for reimbursement or payment of all out-of-pocket expenses
required to be reimbursed or paid by Borrower pursuant to this Agreement, under any other Loan
Document, or any other agreement with Lender.

     (b) Borrower has delivered to Lender duly executed counterparts of the following, each in form
and substance acceptable to Lender in all respects:

	 	(1)	 	Each of the First Supplement, Second Supplement, and Third
Supplement to this Master Agreement, along with all Notes and other documents,
instruments and agreements required thereunder;
	 
	 	(2)	 	all Control Agreements required under Section 6.13, if
any; and
	 
	 	(3)	 	the Mortgage, fully notarized, together with evidence that it
has been recorded in all places to the extent necessary or desirable, in the
judgment of Lender, to create a valid and enforceable first priority Lien
(subject to Permitted Encumbrances) on the fee simple estate (or leasehold or
other interest if agreeable to Lender) of the Real Estate.

     (c) Lender has received the following, each in form and substance acceptable to Lender in all
respects:

	 	(1)	 	a commitment by a recognized title insurance company to issue a
date down endorsement to the original lender’s title insurance policy assuring

4

 

	 	 	 	Lender that the Mortgage creates a valid and enforceable encumbrance on the
Real Estate, free and clear of all defects and encumbrances except Permitted
Encumbrances, as well as such other endorsements and additional coverages as
Lender requires;
	 
	 	(2)	 	copies of favorable UCC, tax, judgment, bankruptcy and fixture
lien search reports (or other evidence of the same satisfactory to Lender) in
all necessary or appropriate jurisdictions and under all legal and trade names
of Borrower and all other parties requested by Lender, indicating that there
are no prior Liens on any of the Collateral other than Permitted Encumbrances;
	 
	 	(3)	 	duly executed landlord waivers and/or warehouseman, or bailee
agreements with respect to all inventory of Borrower located at leased
locations or other locations not owned by Borrower in fee simple, if any, along
with a certified copy of all leases of Borrower, if any;
	 
	 	(4)	 	certified copies of the articles of organization or other
charter documents of Borrower, together with certificates of good standing or
existence, as are available from the Secretary of State (or other applicable
Governmental Authority) of the jurisdiction of organization of Borrower and
each other jurisdiction where Borrower is required to be qualified to do
business as a foreign entity;
	 
	 	(5)	 	a certificate, dated as of the date hereof and signed by an
appropriate Responsible Officer, attaching and certifying copies of the bylaws
or similar documents, and appropriate resolutions authorizing the execution,
delivery and performance of the Amendment Documents and certifying the name,
title and the signature of each officer executing the Amendment Documents;
	 
	 	(6)	 	a favorable written opinion of counsel to Borrower, addressed
to Lender, addressing the matters set forth on Exhibit 2.01(c)(6); and
	 
	 	(7)	 	certificates of insurance, in form and substance acceptable to
Lender, describing the types and amounts of insurance (property and liability)
carried by Borrower, in each case naming Lender as loss payee or additional
insured, as the case may be, and which include a stipulation that coverages
will not be cancelled or diminished without at least 30 days’ prior written
notice to Lender, together with a lender’s loss payable endorsement.
	 
	 	(8)	 	An assignment of the Borrower’s business interruption insurance
policy, duly executed by Borrower and pursuant to which the Borrower assigns to
Lender all of the Borrower’s right, title and interest in and to its business
interruption insurance policy, and which assignment shall have been

5

 

	 	 	 	consented to and certified in writing by the other party(ies) to such
insurance policy.

     (d) The representations and warranties set forth in the Loan Documents are true and correct in
all material respects.

     (e) All conditions precedent in the other Loan Documents have been satisfied or waived in
accordance with Section 8.02.

     (f) No Default or Event of Default has occurred and is continuing.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES

     Borrower represents and warrants to Lender, as of the date hereof, the date of each
Supplement, and the date of each Advance (unless otherwise specified) as follows:

     Section 3.01 Existence; Power. Borrower (a) is duly organized, validly existing and in
good standing as a limited liability company under the laws of the State of Iowa, (b) has all
requisite power and authority to carry on its businesses as now conducted, and (c) is duly
qualified to do business, and is in good standing, in each jurisdiction where such qualification is
required, except where a failure to be so qualified could not reasonably be expected to result in a
Material Adverse Effect.

     Section 3.02 Organizational Power; Authorization. The execution, delivery and
performance by Borrower of the Amendment Documents to which it is a party are within its limited
liability company powers and have been duly authorized by all necessary board, manager, and if
required, member action. This Agreement and the other Amendment Documents have been duly executed
and delivered by Borrower, and constitute valid and binding obligations of Borrower, enforceable
against it in accordance with their respective terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of
creditors’ rights generally and by general principles of equity.

     Section 3.03 Governmental Approvals; No Conflicts. The execution, delivery and
performance by Borrower of the Amendment Documents (a) does not require any consent or approval of,
registration or filing with, or any action by, any Governmental Authority, except those as have
been obtained or made and are in full force and effect or where the failure to do so, individually
or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, (b)
will not violate any applicable law or regulation or the charter, articles of incorporation,
bylaws, or other organization documents of Borrower or any order of any Governmental Authority, (c)
will not violate or result in a default under any indenture, material agreement or other material
instrument binding on Borrower or any of its assets or give rise to a right thereunder to require
any payment to be made by Borrower, and (d) will not result in the creation or imposition of any
Lien on any asset of Borrower except Liens created under the Loan Documents.

6

 

     Section 3.04 Financial Statements. Borrower has furnished to Lender copies of
Borrower’s (a) audited financial statements (consistent with the requirements of Section
4.01(a)) as of its most recent fiscal year end and (b) internally prepared financial statements
(consistent with the requirements of Section 4.01(b)) as of the last day of the most recent
quarter. Such financial statements fairly present the financial condition of Borrower as of such
dates and the results of operations for such periods in conformity with GAAP consistently applied,
subject in the case of interim financial statements, to year-end audit adjustments and the absence
of footnotes. Since the date of such financial statements, there have been no changes with respect
to Borrower which have had or could reasonably be expected to have, singly or in the aggregate, a
Material Adverse Effect on the business, results of operations, financial condition, assets,
liabilities or prospects of Borrower.

     Section 3.05 Litigation and Environmental Matters.

     (a) No litigation, investigation or proceeding of or before any arbitrator or Governmental
Authority is pending against or, to the knowledge of Borrower, threatened against or affecting
Borrower (1) as to which there is a reasonable possibility of an adverse determination that could
reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect
or (2) which in any manner draws into question the validity or enforceability of this Agreement or
any other Loan Document.

     (b) Borrower (1) has not failed to comply with any Environmental Law or to obtain, maintain or
comply with any permit, license or other approval required under any Environmental Law, (2) has not
become subject to any Environmental Liability, (3) has not received notice of any claim with
respect to any Environmental Liability, or (4) does not know of any basis for any Environmental
Liability.

     Section 3.06 Compliance with Laws and Agreements. Borrower is in compliance with all
(a) applicable laws, rules, and regulations, (b) orders of any Governmental Authority, and (c) all
indentures, agreements or other instruments binding upon it or its properties; except where
non-compliance, either singly or in the aggregate, could not reasonably be expected to result in a
Material Adverse Effect.

     Section 3.07 Investment Company Act, Etc. Borrower is not (a) an “investment
company,” as defined in, or subject to regulation under, the Investment Company Act of 1940, as
amended, (b) a “holding company” as defined in, or subject to regulation under, the Public Utility
Holding Company Act of 1935, as amended, or (c) otherwise subject to any other regulatory scheme
limiting its ability to incur debt.

     Section 3.08 Taxes. Borrower and each other Person for whose taxes Borrower could
become liable have timely filed or caused to be filed all tax returns and other filings that are
required to be filed by any of them, and have paid all taxes shown to be due and payable (or with
respect to real estate taxes, have paid all taxes prior to the time the same become delinquent) on
such returns or on any assessments made against it or its property and all other taxes, fees or
other charges imposed on it or any of its property by any Governmental Authority, except (a) to the
extent the failure to do so would not have a Material Adverse Effect or (b) where the same are
currently being contested in good faith by appropriate proceedings and for which Borrower

7

 

has set aside adequate reserves on its books in accordance with GAAP. The charges, accruals
and reserves on the books of Borrower in respect of such taxes are adequate, and no tax liabilities
that could be materially in excess of the amount so provided are anticipated.

     Section 3.09 Margin Regulations. None of the proceeds of the Loans have been used,
directly or indirectly, for “purchasing” or “carrying” any “margin stock” with the respective
meanings of each of such terms under Regulation U of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect, or for any purpose that violates the
provisions of Regulation U, T or X of the Board of Governors of the Federal Reserve System.

     Section 3.10 ERISA. No ERISA Event has occurred or is reasonably expected to occur
that, when taken together with all other such ERISA Events for which liability is reasonably
expected to occur, could reasonably be expected to result in a Material Adverse Effect. The
present value of all accumulated benefit obligations under each Plan (based on the assumptions used
under GAAP) did not, as of the date of the most recent financial statements reflecting such
amounts, exceed the fair market value of the assets of such Plan, and the present value of all
accumulated benefit obligations of all underfunded Plans (based on the assumptions used under GAAP)
did not, as of the date of the most recent financial statements reflecting such amounts, exceed by
more than $10,000 the fair market value of the assets of all such underfunded Plans.

     Section 3.11 Ownership of Property. Borrower has good title to or a valid leasehold
interest in all of the real and personal property material to operation of Borrower’s businesses.
Borrower owns, or is licensed or otherwise has the right to use, all patents, trademarks, service
marks, tradenames, copyrights and other intellectual property material to its business, and the use
thereof by Borrower does not infringe on the rights of any other Person, except for any such
infringements that, individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.

     Section 3.12 Disclosure. Borrower has disclosed to Lender all agreements,
instruments, and corporate or other restrictions to which Borrower is subject, and all other
matters known to it, that, individually or in the aggregate, could reasonably be expected to result
in a Material Adverse Effect. None of the reports, financial statements, certificates or other
information furnished by or on behalf of Borrower pursuant to this Agreement or any other Loan
Document or delivered hereunder or thereunder (as modified or supplemented by any other information
so furnished) contains any material misstatement of fact or omits to state any material fact
necessary to make the statements therein, not misleading.

     Section 3.13 Labor Relations. There are no strikes, lockouts or other material labor
disputes or grievances against Borrower, or, to the knowledge of Borrower, threatened against or
affecting Borrower, and no significant unfair labor practice, charges or grievances are pending
against Borrower, or to the knowledge of Borrower, threatened against Borrower before any
Governmental Authority. All payments due from Borrower pursuant to any collective bargaining
agreement have been paid or accrued as a liability except where the failure to do so could not
reasonably be expected to result in a Material Adverse Effect.

8

 

     Section 3.14 Subsidiaries. Borrower has no Subsidiaries other than those for which
Borrower has complied with the requirements of Section 4.10.

     Section 3.15 Permits. Borrower has obtained all licenses, consents, approvals,
authorizations and permits of Governmental Authorities which Borrower is required to obtain in
connection with the operation of Borrower’s business, including but not limited to any of the
foregoing related to Environmental Laws, zoning and land-use laws (including any requirement to
obtain a special exception, if applicable), water use laws, waste disposal laws, laws requiring
construction permits, and occupancy certificates. Borrower has provided true and correct copies of
such licenses, consents, approvals, authorizations and permits to Lender.

     Section 3.16 Projections. As of the Closing Date, the Projections fairly present
Borrower’s reasonable forecast of the results of operations and changes in cash flows for the
periods covered thereby, based on the assumptions set forth therein, which assumptions are
reasonable based on historical experience and presently known facts.

     Section 3.17 Material Contracts. Schedule 3.17 sets forth a complete and
accurate listing of all Material Contracts in effect as of the date hereof. There are no Material
Contracts other than those for which Borrower has complied with Section 4.11.

     Section 3.18 Anti-Terrorism Laws. Neither Borrower nor any of its Affiliates is in
violation of (a) any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto, (b) Executive Order No. 13,224, 66 Fed Reg 49,079 (2001), issued by the
President of the United States (Executive Order Blocking Property and Prohibiting Transactions with
Persons Who Commit, Threaten to Commit or Support Terrorism) or (c) the anti-money laundering
provisions of the Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, Public Law 107-56 (October 26,
2001) amending the Bank Secrecy Act, 31 U.S.C. Section 5311 et seq.

ARTICLE IV.

AFFIRMATIVE COVENANTS

     Borrower covenants and agrees that so long as any Commitment is in effect or the principal of
or interest on any Loan or any fee remains unpaid:

     Section 4.01 Financial Statements and Other Information. Borrower will deliver to
Lender:

     (a) as soon as available and in any event (1) within 120 days after the end of each fiscal
year of Borrower, a copy of the annual audited report for such fiscal year for Borrower as of the
end of such fiscal year and the related consolidated balance sheets, statements of income, owners’
equity and cash flows (together with all footnotes thereto) of Borrower for such fiscal year, (2)
setting forth in comparative form (for all reports delivered after Borrower’s first fiscal year of
plant operations) the figures for the previous fiscal year, all in reasonable detail and reported
on by a firm of independent public accountants acceptable to Lender (without a “going

9

 

concern” or like qualification, exception or explanation and without any qualification or
exception as to scope of such audit), and a statement from such accountants to the effect that such
financial statements present fairly in all material respects the financial condition and the
results of operations of Borrower for such fiscal year in accordance with GAAP, that the
examination by such accountants in connection with such financial statements has been made in
accordance with GAAP;

     (b) as soon as available and in any event within 30 days after the end of each month, an
unaudited balance sheet of Borrower as of the end of such month and the related unaudited
statements of income, owner’s equity and cash flow of Borrower for such month and the then elapsed
portion of such fiscal year, setting forth in each case in comparative form the figures for the
corresponding month and the corresponding portion of Borrower’s previous fiscal year; in either
case all certified by an appropriate Responsible Officer of Borrower as presenting fairly in all
material respects the financial condition and results of operations of Borrower in accordance with
GAAP, subject to normal year-end audit adjustments and the absence of footnotes;

     (c) within 30 days of the last day of each quarter, a certificate, in form and substance
satisfactory to Lender in all respects, of a Responsible Officer, (1) certifying as to whether
there exists a Default or Event of Default on the date of such certificate, and if a Default or an
Event of Default then exists, specifying the details thereof and the action which Borrower has
taken or proposes to take with respect thereto, (2) setting forth in reasonable detail
calculations demonstrating compliance with Article V, (3) stating whether any change in
GAAP or the application thereof has occurred since the date of Borrower’s most recent previously
delivered audited financial statements and, if any change has occurred, specifying the effect of
such change on the financial statements accompanying such certificate; and (4) attaching a
production report, certified as to accuracy, which sets forth pertinent information in respect of
the amount of ethanol produced and other information as Lender may request from time to time;

     (d) concurrently with the financial statements referred to in clause (a) above, a certificate
of the accounting firm that reported on such financial statements stating whether it obtained any
knowledge during the cause of its examination of such financial statements of the occurrence of any
Default or Event of Default (which certificate may be limited to the extent required by accounting
rules or guidelines);

     (e) promptly after the same become available, copies of all periodic reports distributed by
Borrower to its members generally, or to any national securities exchange, as applicable;

     (f) concurrently with the delivery of the financial statements referred to in clause (a)
above, a copy of Borrower’s pro forma budget and business plan for the subsequent fiscal year for
Borrower, containing a pro forma consolidated balance sheet of Borrower as of the end of such
subsequent fiscal year and the related pro forma consolidated statements of income, owners’ equity
and cash flows (together with all footnotes thereto) of Borrower for such subsequent fiscal year;
and

10

 

     (g) promptly following any request therefor, such other information regarding the results of
operations, business affairs and financial condition of Borrower as Lender may reasonably request.

     Section 4.02 Notices of Material Events. Borrower will promptly furnish written
notice to Lender of the following, in each case accompanied by a written statement of a Responsible
Officer setting forth the details of the event or development requiring such notice and any action
taken nor proposed to be taken with respect thereto:

     (a) the occurrence of any Default or Event of Default;

     (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator
or Governmental Authority against or, to the knowledge of Borrower, affecting Borrower which, if
adversely determined, could reasonably be expected to result in a Material Adverse Effect;

     (c) the occurrence of any event or any other development by which Borrower (1) fails to comply
with any Environmental Law or to obtain, maintain or comply with any permit, license or other
approval required under any Environmental Law, (2) becomes subject to any Environmental Liability,
(3) receives notice of any claim with respect to any Environmental Liability, or (4) becomes aware
of any basis for any Environmental Liability and in each of the preceding clauses, which
individually or in the aggregate, could reasonably be expected to result in a Material Adverse
Effect;

     (d) the occurrence of any ERISA Event that alone, or together with any other ERISA Events that
have occurred, could reasonably be expected to result in a Material Adverse Effect;

     (e) the incurrence of any Indebtedness, including Indebtedness permitted under this Agreement;
and

     (f) any other development that results in, or could reasonably be expected to result in, a
Material Adverse Effect.

     Section 4.03 Existence; Conduct of Business. Borrower will do all things necessary to
preserve, renew and maintain in full force and effect its legal existence and its rights, licenses,
permits, privileges, franchises, patents, copyrights, trademarks and trade names material to the
conduct of its business, and will continue to engage in the same business as presently conducted or
such other businesses that are reasonably related thereto.

     Section 4.04 Compliance with Laws, Etc. Borrower will comply with all laws, rules,
regulations and requirements of any Governmental Authority applicable to it or its properties,
except where the failure to do so, either individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. Borrower will in all respects conform to and
comply with all applicable covenants, conditions, restrictions and reservations, and with all
requirements of Governmental Authorities, including, without limitation, all building codes and
zoning, environmental, hazardous substance, energy and pollution control laws, ordinances and
regulations affecting Borrower’s business, and the Real Estate and the related improvements.

11

 

     Section 4.05 Payment of Obligations. Borrower will pay and discharge all of its
obligations and liabilities (including without limitation all tax liabilities and claims that could
result in a statutory Lien) before the same become delinquent or in default, except where (a) the
validity or amount thereof is being contested in good faith by appropriate proceedings, (b)
Borrower has set aside on its books adequate reserves with respect thereto in accordance with GAAP,
and (c) the failure to make payment pending such contest could not reasonably be expected to result
in a Material Adverse Effect.

     Section 4.06 Books and Records. Borrower will keep proper books of record and account
in which full, true and correct entries are made of all dealings and transactions in relation to
its business and activities to the extent necessary to prepare the consolidated financial
statements of Borrower in conformity with GAAP.

     Section 4.07 Visitation, Inspection, Audit, Etc.

     (a) Borrower will permit any representative or agent of Lender to visit and inspect its
properties, to conduct audits of the Collateral, to examine its books and records and to make
copies and take extracts therefrom, and to discuss its affairs, finances and accounts with any of
its officers, employees and its independent certified public accountants, all at such reasonable
times and as often as Lender, may reasonably request after reasonable prior notice to Borrower;
provided, if a Default or an Event of Default has occurred and is continuing, no prior
notice will be required. Borrower will bear all expenses incurred by Lender in connection with any
such visit, inspection, audit, examination, or discussion.

     (b) Borrower will deliver to Lender such appraisals of the Real Estate and other fixed assets
of Borrower as Lender may request at any time and from time to time, such appraisals to be
conducted by an appraiser, and to be presented in form and substance, reasonably satisfactory to
Lender, in each case conducted at the expense of Borrower if the appraisal is delivered in
connection with a request by Borrower for an accommodation, waiver, or other credit action.

     Section 4.08 Maintenance of Properties; Insurance. Borrower will (a) keep and
maintain all property material to the conduct of its business in good working order and condition,
ordinary wear and tear expected, except where the failure to do so, either individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse Effect, and (b)
maintain with financially sound and reputable insurance companies, insurance with respect to its
properties and business against loss or damage of the kinds and in the amounts customarily carried
by companies in the same or similar business operating in the same of similar locations and under
the same or similar circumstances.

     Section 4.09 Use of Proceeds. No part of the proceeds of any Loan will be used,
directly or indirectly, for any purpose that would violate Regulation T, U or X of the Board of
Governors of the Federal Reserve System or for speculative purposes, including, without limitation,
speculating in the commodities and/or futures markets.

     Section 4.10 Subsidiaries. Within 10 Business Days after Borrower acquires or forms
any Subsidiary, Borrower will notify Lender and will cause such Subsidiary to execute a Guarantee
of the Obligations, a joinder to the Security Agreement, and a joinder to such other

12

 

instruments, agreements, and documents as Lender requires, each in form and substance
satisfactory to Lender, and will cause such Subsidiary to deliver simultaneously therewith similar
documents applicable to such Subsidiary required under Section 2.01 as requested by Lender.

     Section 4.11 Assignment of Material Contracts. Borrower will notify Lender of the
existence of any Material Contract promptly upon entering into the same. Borrower agrees to
promptly execute and deliver to Lender such Collateral Assignments and take such other actions as
Lender requests in furtherance of Borrower’s collateral assignment of Borrower’s rights under such
Material Contracts.

     Section 4.12 Compliance with Certain Laws. Borrower will (a) ensure that no Person
that Controls Borrower is or will be listed on the Specially Designated Nationals and Blocked
Person List or other similar list maintained by the Office of Foreign Assets Control (“OFAC”), the
Department of Treasury or included in any executive order or other similar list of such Persons
published by a Governmental Authority, (b) not use or permit the use of any proceeds of any Loan to
violate any of the foreign asset control regulations of OFAC or any enabling statute, executive
order, or requirement of a Governmental Authority relating thereto, and (c) comply with all
applicable Bank Secrecy Act (“BSA”) laws and regulations, as amended.

     Section 4.13 Farm Products. If Borrower acquires any Collateral which may have
constituted Farm Products in the possession of the seller or supplier thereof, Borrower will, at
its sole expense, use its best efforts to take such steps to insure that all Liens (except the
security interests granted to Lender) in such acquired Collateral are terminated or released,
including, without limitation, in the case of such Farm Products produced in a state which has
established a Central Filing System (as defined in the Food Security Act), registering with the
Secretary of State of such state (or such other party or office designed by such state) and
otherwise take such reasonable actions necessary, as prescribed by the Food Security Act, to
purchase Farm Products free of liens, security interest and encumbrances of any kind (except the
security interests granted to Lender); provided, however, that Borrower may contest and need not
obtain the release or termination of any lien, security interest or encumbrance asserted by any
creditor of any seller of such Farm Products, so long as it contests the same by proper proceedings
and maintain appropriate accruals and reserves therefore in accordance with GAAP. Upon the
Lender’s request, Borrower agrees to forward to Lender promptly after receipt copies of all notices
of Liens and master lists of effective financing statements delivered to Borrower pursuant to the
Food Security Act, which notices and/or lists pertain to any of the Collateral. Upon Lender’s
request, Borrower agrees to provide Lender with the names of Persons who supply Borrower with such
Farm Products and such other information as Lender may reasonably request with respect to such
Persons.

     Section 4.14 Warehouse Receipts. If any warehouse receipt or receipts in the nature
of a warehouse receipt is/are issued in respect of any portion of the Collateral, then Borrower (a)
will not permit such warehouse receipt or receipts in the nature thereof to be “negotiable” as such
term is used in Article 7 of the UCC and (b) will deliver all such receipts to Lender (or a Person
designated by Lender) within five days of Lender’s request and from time to time thereafter. If no
Default or Event of Default then exists, Lender agrees to deliver to Borrower any receipt so held
by Lender upon Borrower’s request in connection with Borrower’s sale or other disposition of the
underlying Collateral, if such disposition is in the ordinary course of Borrower’s business.

13

 

ARTICLE V.

FINANCIAL COVENANTS

     Borrower covenants and agrees that so long as any Obligation remains unpaid or any Commitment
is in effect:

     Section 5.01 Fixed Charge Coverage Ratio. Beginning October 31, 2006, Borrower’s
Fixed Charge Coverage Ratio will not be less than 1.15:1.00, and 1.25:1.00 on October 31, 2007, and
each fiscal year end thereafter.

     Section 5.02 Working Capital. Borrower will maintain working capital of at least (a)
$3,000,000 on October 31, 2006, (b) $4,000,000 on October 31, 2007, and (c) $5,000,000 on October
31, 2008, and all times thereafter. The amount of Lender’s revolving Commitment, if any, less the
amount of planned reduction in such revolving Commitment during the succeeding 12 months will be
considered working capital for purposes of the determination of compliance with this covenant.

     Section 5.03 Tangible Net Worth. Borrower’s Tangible Net Worth will be, and will not
fall below at any time:

     (a) $43,000,000 by October 31, 2006;

     (b) $50,000,000 by October 31, 2007; and

     (c) $55,000,000 by October 31, 2008.

ARTICLE VI.

NEGATIVE COVENANTS

     Borrower covenants and agrees that so long as Lender has a Commitment hereunder or the
principal of or interest on any Loan or any fee remains unpaid:

     Section 6.01 Indebtedness. Borrower will not create, incur, assume or suffer to exist
any Indebtedness other than Indebtedness created pursuant to the Loan Documents.

     Section 6.02 Negative Pledge. Except Permitted Encumbrances, Borrower will not
create, incur, assume or suffer to exist any Lien on any of its assets or property now owned or
hereafter acquired.

     Section 6.03 Fundamental Changes. Borrower will not, and will not permit any
Subsidiary to, engage in any business other than businesses of the type conducted by Borrower on
the date hereof and businesses reasonably related thereto.

     Section 6.04 Investments, Loans, Etc. Borrower will not purchase, hold or acquire any
common stock, evidence of indebtedness or other securities (including any option, warrant, or other
right to acquire any of the foregoing) of, make or permit to exist any loans or advances

14

 

to, Guarantee any obligations of, or make or permit to exist any investment or any other
interest in, any other Person (all of the foregoing being collectively called “Investments”), or
purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any
other Person that constitute a business unit, or create or form any Subsidiary, except:

     (a) Investments (other than Permitted Investments) existing on the date hereof and set forth
on Schedule 6.04(a);

     (b) Permitted Investments in which Lender maintains a first priority, perfected security
interest therein; and

     (c) loans or advances to employees, officers or directors of Borrower in the ordinary course
of business for travel, relocation and related expenses; provided, however, that
the aggregate amount of all such loans and advances does not exceed $100,000 at any time.

     Section 6.05 Restricted Payments. Other than Permitted Distributions and dividends or
distributions by Borrower consisting solely of one or more classes of its membership units,
Borrower will not pay, declare or make, or agree to pay, declare or make, directly or indirectly,
any dividend or distribution on any class of its membership units, or make any payment on account
of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption,
retirement, defeasance or other acquisition of, any membership units or any options, warrants, or
other rights to purchase any of the foregoing, whether now or hereafter outstanding, or any payment
in respect of Indebtedness subordinated to the Obligations. In addition, notwithstanding the
foregoing, Borrower may make payments in respect of subordinate Indebtedness to the extent such
payments are allowed under an intercreditor agreement between Lender and the other creditor to
which such payments are made.

     Section 6.06 Sale of Assets. Borrower will not convey, sell, lease, assign, transfer
or otherwise dispose of, any of its assets, business or property, whether now owned or hereafter
acquired, to any Person except (a) the sale or other disposition for fair market value of obsolete
or worn out property or other property not necessary for operations disposed of in the ordinary
course of business; and (b) the sale of inventory and Permitted Investments in the ordinary course
of business.

     Section 6.07 Transactions with Affiliates. Borrower will not sell, lease or otherwise
transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets
from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) in the
ordinary course of business at prices and on terms and conditions not less favorable to Borrower
than could be obtained on an arm’s-length basis from unrelated third parties in comparable
transactions, and (b) transactions solely between Borrower and any wholly-owned Subsidiary of
Borrower.

     Section 6.08 Restrictive Agreements. Borrower will not directly or indirectly, enter
into, incur or permit to exist any agreement that prohibits, restricts or imposes any condition
upon the ability of Borrower to create, incur or permit any Lien upon any of its assets or
properties, whether now owned or hereafter acquired, except restrictions or conditions imposed

15

 

by any agreement relating to secured Indebtedness permitted under this Agreement if such
restrictions and conditions apply only to the property or assets securing such Indebtedness.

     Section 6.09 Sale and Leaseback Transactions. Borrower will not enter into any
arrangement, directly or indirectly, whereby it sells or transfers any property, real or personal,
used or useful in its business, whether now owned or hereinafter acquired, and thereafter rent or
lease such property or other property that it intends to use for substantially the same purpose or
purposes as the property sold or transferred.

     Section 6.10 Hedging Agreements. Borrower will not enter into any Hedging Agreement
other than Hedging Agreements entered into in the ordinary course of business to hedge or mitigate
risks to which Borrower is exposed in the conduct of its business or the management of its
liabilities.

     Section 6.11 Amendment to Material Documents. Except to the extent as could not
reasonably be expected to result in a Material Adverse Effect, Borrower will not amend, modify or
waive any of its rights under (a) its certificate or articles of organization, operating agreement,
bylaws or other organizational documents or (b) any Material Contract.

     Section 6.12 Accounting Changes. Borrower will not make any significant change in
accounting treatment or reporting practices, except as required by GAAP, or change its fiscal year.

     Section 6.13 Deposit and Investment Accounts. Except as consented to in writing by
Lender (which consent will be conditioned on, among other things, the Person who will maintain the
funds entering into a Control Agreement acceptable to Lender in all respects) Borrower will not
maintain, deposit or invest funds with any Person other than Lender. Lender acknowledges its
consent to Borrower’s account number 9000917 with State Bank of Lawler so long as the Account
Control Agreement dated January 16, 2004, among Lender, Borrower, and State Bank of Lawler remains
in effect.

     Section 6.14 Use of Proceeds. Borrower will not use the proceeds of any Loan,
directly or indirectly, for “purchasing” or “carrying” any “margin stock” with the respective
meanings of each of such terms under Regulation U of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect, or for any purpose that violates the
provisions of Regulation U, T or X of the Board of Governors of the Federal Reserve System.

     Section 6.15 Non-Financed Maintenance Capital Expenditures. Borrower’s Non-Financed
Maintenance Capital Expenditures will not exceed $1,000,000 during the fiscal year ending October
31, 2006, and $1,500,000 during any fiscal year period thereafter.

     Section 6.16 Legal Status. Borrower will not (a) change its jurisdiction of
organization, or (b) take or permit any action that would result in Borrower’s discontinuance as a
limited liability company in good standing under the jurisdiction of Borrower’s organization.

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ARTICLE VII.

EVENTS OF DEFAULT AND REMEDIES

     Section 7.01 Events of Default. The following will be considered events of default
(each an “Event of Default”) hereunder:

     (a) Borrower fails to pay any amount payable under this Agreement or any other Loan Document
within ten days of when such amount becomes due;

     (b) any representation or warranty made or deemed made by or on behalf of Borrower in or in
connection with this Agreement or any other Loan Document (including the Schedules attached hereto
and thereto) and any amendments or modifications hereof or waivers hereunder, or in any
certificate, report, financial statement or other document submitted to Lender by Borrower or any
representative of Borrower pursuant to or in connection with this Agreement or any other Loan
Document proves to be materially incorrect when made or deemed made or submitted;

     (c) Borrower fails to observe or perform any covenant or agreement in Sections 4.01,
4.02, or 4.03, or Article V or VI;

     (d) Borrower fails to observe or perform any covenant or agreement in this Agreement (other
than those referred to in clauses (a), (b), or (c) above) or in any other Loan Document, and such
failure continues for 30 days after the earlier of the date (1) Borrower becomes aware of such
failure, or (2) written notice thereof is given to Borrower by Lender; or any Event of Default
otherwise occurs under any Loan Document;

     (e) Borrower or any guarantor of any portion of the Obligations, (whether as primary obligor
or as guarantor or other surety) fails to pay any principal of or premium or interest on any
Material Indebtedness that is outstanding, when and as the same becomes due and payable (whether at
scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure
continues after the applicable grace period, if any, specified in the agreement or instrument
evidencing such Indebtedness; or any other event occurs or condition exists under any agreement or
instrument relating to such Indebtedness and continues after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or condition is to
accelerate, or permit the acceleration of, the maturity of such Indebtedness; or any such
Indebtedness is declared to be due and payable; or required to be prepaid or redeemed (other than
by a regularly scheduled required prepayment or redemption), purchased or defeased, or any offer to
prepay, redeem, purchase or defease such Indebtedness is required to be made, in each case prior to
the stated maturity thereof;

     (f) Borrower or any guarantor of any portion of the Obligations, (1) commences a voluntary
case or other proceeding or files any petition seeking liquidation, reorganization or other relief
under any federal, state or foreign bankruptcy, insolvency or other similar law now or hereafter in
effect or seeking the appointment of a custodian, trustee, receiver, liquidator or other similar
official of it or any substantial part of its property, (2) consents to the institution of, or
fails to contest in a timely and appropriate manner, any proceeding or petition described in clause

17

 

(1) of this Section 7.01(f), (3) applies for or consents to the appointment of a
custodian, trustee, receiver, liquidation or other similar official for Borrower or such guarantor
or for a substantial part of the assets of Borrower or such guarantor, (4) files an answer
admitting the material allegations of a petition filed against it in any such proceeding, (5) makes
a general assignment for the benefit of creditors, or (6) takes any action for the purpose of
effecting any of the foregoing;

     (g) an involuntary proceeding is commenced or an involuntary petition is filed seeking (1)
liquidation, reorganization or other relief in respect of Borrower or any guarantor of any portion
of the Obligations, or the debts, or any substantial part of the assets of Borrower or such
guarantor under any federal, state or foreign bankruptcy, insolvency or other similar law now or
hereafter in effect or (2) the appointment of a custodian, trustee, receiver, liquidator or other
similar official for Borrower or any guarantor of any portion of the Obligations, or for a
substantial part of the assets of Borrower or such guarantor, and in any such case, such
proceeding or petition remains undismissed for a period of 60 days or an order or decree approving
or ordering any of the foregoing is entered;

     (h) Borrower or any guarantor of any portion of the Obligations becomes unable to pay, admits
in writing its inability to pay, or fails to pay, its debts as they become due;

     (i) an ERISA Event occurs with respect to Borrower or any guarantor of any portion of the
Obligations that, in the opinion of Lender, when taken together with other ERISA Events that have
occurred, could reasonably be expected to result in a Material Adverse Effect;

     (j) any judgment or order for the payment of money in excess of $250,000 in the aggregate is
rendered against Borrower or any guarantor of any portion of the Obligations, and either (1) such
judgment or order is final and enforcement proceedings have been commenced by any creditor upon
such judgment or order, or (2) there is a period of 30 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or otherwise, is not in
effect;

     (k) any non-monetary judgment or order is rendered against Borrower or any guarantor of any
portion of the Obligations that could reasonably be expected to result in a Material Adverse
Effect, and there is a period of 30 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, is not in effect;

     (l) a Change in Control occurs or exists;

     (m) Borrower ceases to exist or any guarantor of any portion of the Obligation dies or ceases
to exist;

     (n) Borrower or any guarantor of any portion of the Obligations becomes the subject of any
out-of-court settlement with its creditors;

     (o) any guarantor of any portion of the Obligations attempts to revoke such Guarantee, or any
such Guarantee becomes unenforceable in whole or in part for any reason;

18

 

     (p) an Event of Default occurs under any other agreement with (or instrument in favor of)
Lender; or

     (q) any other event occurs or exists which could reasonably be expected to result in a
Material Adverse Effect.

     Section 7.02 Remedies. Upon the occurrence of an Event of Default (other than an
event described in clause (f), (g) or (h) of Section 7.01), and at any time thereafter,
Lender may take any one or more or all of the following actions, at the same or different times:

     (a) terminate the Commitments, whereupon the Commitments will terminate immediately;

     (b) declare the principal of and any accrued interest on the Loans, and all other Obligations
to be due and payable, whereupon the same will become due and payable immediately, without
presentment, demand, protest or other notice of any kind, all of which are hereby waived by
Borrower;

     (c) Setoff;

     (d) take other steps to project or preserve Lender’s interest in any Collateral, including,
without limitation, notifying account debtors to make payments directly to Lender, advancing funds
to protect any Collateral, and insuring Collateral; and/or

     (e) exercise all remedies provided for in any other Loan Document or as otherwise provided by
law.

     If an Event of Default specified in either clause (f), (g) or (h) of Section 7.01
occurs, all Commitments will automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon, and all fees, and all other Obligations will
automatically become due and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by Borrower.

ARTICLE VIII.

MISCELLANEOUS

     Section 8.01 Notices.

     Except in the case of notices and other communications expressly permitted to be given by
telephone, all notices and other communications to any party herein to be effective will be in
writing and delivered by hand or overnight courier service, mailed by certified or registered mail
or sent by telecopy, as follows:

	 	 	 
	To Borrower:

	 	Attention: Walter Wendland

1822 43rd Street SW

Mason City, Iowa 50401

Facsimile: (641) 421-8457

19

 

	 	 	 
	With a copy to:

	 	Bill Hanigan, Esq.

BrownWinick Law Firm

666 Grand Avenue, Suite 2000

Des Moines, Iowa 50309

Facsimile: (515) 283-0231
	 
	 	 
	To Lender:

	 	Attention: Eric Oftedahl

Post Office Box 6947

1016 Civic Center Drive NW

Rochester, Minnesota 55903

Facsimile: (507) 252-7178
	 
	 	 
	With a copy to:

	 	Ronald K. Vaske, Esq.

Lindquist & Vennum P.L.L.P.

4200 IDS Center

80 South Eighth Street

Minneapolis, Minnesota 55402

Facsimile: (612) 371-3207

     Any party hereto may change its address or facsimile number for notices and other
communications hereunder by notice to the other parties. All notices and other communications
delivered to Borrower will, when transmitted by overnight delivery, or faxed, be effective when
delivered for overnight (next-day) delivery, or transmitted in legible form by facsimile machine,
respectively, or if mailed, upon the third Business Day after the date deposited in the mail or if
delivered, upon delivery. Notices delivered to Lender will not be effective until actually
received at its address specified in this Section 8.01.

     Any agreement of Lender to receive certain notices by telephone or facsimile is solely for the
convenience and at the request of Borrower. Lender will be entitled to rely on the authority of
any Person purporting to be a Person authorized by Borrower to give such notice and Lender will not
have any liability to Borrower or any other Person as a result of any action taken or not taken by
Lender in reliance upon such telephonic or facsimile notice. The obligation of Borrower to repay
the Loans and all other Obligations hereunder will not be affected in any way or to any extent by
any failure of Lender to receive written confirmation of any telephonic or facsimile notice or the
receipt by Lender of a confirmation which is at variance with the terms understood by Lender to be
contained in any such telephonic or facsimile notice.

     Section 8.02 Waiver; Amendments.

     (a) No failure or delay by Lender in exercising any right or power hereunder or any other Loan
Document, and no course of dealing between Borrower and Lender, will operate as a waiver, nor will
any single or partial exercise of any such right or power or any abandonment or discontinuance of
steps to enforce such right or power, preclude any other or further exercise thereof or the
exercise of any other right or power hereunder or thereunder. The rights and remedies of Lender
hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or
remedies provided by law. No waiver of any provision of this Agreement or any other Loan Document
or consent to any departure by Borrower therefrom will

20

 

in any event be effective unless the same is permitted by paragraph (b) of this Section, and
then such waiver or consent will be effective only in the specific instance and for the purpose for
which given. Without limiting the generality of the foregoing, the making of an Advance will not be
construed as a waiver of any Default or Event of Default, regardless of whether Lender had notice
or knowledge of such Default or Event of Default at the time.

     (b) No amendment or waiver of any provision of this Agreement or any other Loan Document, nor
consent to any departure by Borrower therefrom, will in any event be effective unless the same is
in writing and signed by Borrower and Lender and then such waiver or consent will be effective only
in the specific instance and for the specific purpose for which given.

     Section 8.03 Expenses; Indemnification.

     (a) Borrower indemnifies Lender and each Participant against, and holds Lender and each
Participant harmless from, any and all costs, losses, liabilities, claims, damages and related
expenses, including the fees, charges and disbursements of any counsel for Lender and/or any
Participant, which are incurred by or asserted against Lender and/or any Participant arising out
of, in connection with or as a result of (1) the execution, delivery and documentation of this
Master Agreement, any Supplement, any other Loan Document, or any other agreement or instrument
contemplated hereby, the performance by the parties hereto of their respective obligations
hereunder or the consummation of any of the transactions contemplated hereby or thereby, (2) any
Advances or any actual or proposed use of the proceeds therefrom, (3) any actual or alleged
presence or release of Hazardous Materials on or from any property owned by Borrower or any
Subsidiary, or any Environmental Liability related in any way to Borrower or any Subsidiary, or (4)
actual or prospective claim, litigation, investigation or proceeding relating to any of the
foregoing, whether based on contract, tort or any other theory and regardless of whether Lender is
a party thereto, including attorneys’ fees and all other costs and fees (i) incurred before or
after commencement of litigation or at trial, on appeal or in any other proceeding, and (ii)
incurred in any bankruptcy proceeding; provided, that Borrower is not obligated to
indemnify Lender or any Participant for any of the foregoing arising out of Lender’s or such
Participant’s gross negligence or willful misconduct as determined by a court of competent
jurisdiction in a final and nonappealable judgment.

     (b) Borrower will pay, and hold Lender and each Participant harmless from and against, any and
all Taxes with respect to this Agreement and any other Loan Document, any Collateral described
therein, or any payments due thereunder, and will save Lender and each Participant harmless from
and against any and all liabilities with respect to or resulting from any delay or omission to pay
such Taxes.

     (c) In the event any Governmental Authority subjects Lender to any new or additional charge,
fee, withholding or tax of any kind with respect to any Loan, or changes the method of taxation of
any Loan, or changes the reserve, capital or deposit requirements applicable to any Loan, Borrower
will pay and hold Lender and each Participant harmless from, within five Business Days after
receipt by Borrower of written demand by Lender, such additional amounts as will compensate Lender
and each Participant for such cost (including opportunity cost) or lost income resulting therefrom
as reasonably determined by Lender. Lender’s certificate setting

21

 

forth the amount or amounts necessary to compensate Lender as set forth in this Section
8.03(c) will be conclusive, absent manifest error.

     (d) To the extent permitted by applicable law, Borrower will not assert, and Borrower hereby
waives, any claim against Lender and/or any Participant, on any theory of liability, for special,
indirect, consequential or punitive damages (as opposed to actual or direct damages) arising out
of, in connection with or as a result of, this Agreement or any agreement or instrument
contemplated hereby, the transactions contemplated therein, any Advance or the use of proceeds
thereof.

     (e) All amounts due under this Section 8.03 are due and payable promptly on demand.

     Section 8.04 Successors and Assigns.

     (a) The provisions of this Agreement are binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that Borrower may not assign or transfer
any of its rights hereunder without the prior written consent of Lender (and any attempted
assignment or transfer by Borrower without such consent will be considered null and void).

     (b) Lender may at any time, without the consent of Borrower, assign to one or more assignees
all or a portion of its rights and obligations under this Agreement and the other Loan Documents,
including all or a portion of any Commitment and/or all or any portion of any Loan.

     (c) Lender and each Participant may at any time, without the consent of Borrower, sell
participation interests to one or more Persons (a “Participant”) in all or a portion of Lender’s
rights and obligations under this Agreement, including all or a portion of any Commitment and/or
all or any portion of any Loan. In the event Lender or any Participant sells one or more
participation interests, Lender’s (and such Participant’s) obligations under this Agreement will
remain unchanged, and Borrower will continue to deal solely and directly with Lender in connection
with Lender’s rights and obligations under this Agreement and the other Loan Documents.

     (d) Lender may at any time pledge or assign a security interest in all or any portion of its
rights under this Agreement and the Notes without complying with this Section. No such pledge or
assignment will release Lender from any of its obligations hereunder or substitute any such pledgee
or assignee for Lender as a party hereto.

     Section 8.05 Governing Law; Jurisdiction; Consent to Service of Process.

     (a) This Agreement and the other Loan Documents (except to the extent otherwise provided
therein) will be construed in accordance with and be governed by the law (without giving effect to
the conflict of law principles thereof) of the State of Minnesota.

     (b) Borrower hereby irrevocably and unconditionally submits, for itself and its property, to
the non-exclusive jurisdiction of the United States District Court of the District of Minnesota,
and of any state court of the State of Minnesota located in Olmstead County, in any

22

 

action or proceeding arising out of or relating to this Agreement or any other Loan Document
or the transactions contemplated hereby or thereby, or for recognition or enforcement of any
judgment. Each of the parties irrevocably and unconditionally agrees that all claims in respect of
any such action or proceeding may be heard and determined in such Minnesota state court or, to the
extent permitted by applicable law, such federal court. Each of the parties hereto agrees that a
final judgment in any such action or proceeding will be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this
Agreement or any other Loan Document will affect any right Lender may otherwise have to bring any
action or proceeding relating to this Agreement or any other Loan Document against Borrower or its
properties in the courts of any jurisdiction.

     (c) Borrower irrevocably and unconditionally waives any objection which it may now or
hereafter have to the laying of venue of any such suit, action or proceeding described in paragraph
(b) of this Section and brought in any court referred to in paragraph (b) of this Section. Each of
the parties hereto irrevocably waives, to the fullest extent permitted by applicable law, the
defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

     Section 8.06 WAIVER OF JURY TRIAL. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
SEEK TO ENFORCE THE FOREGOING WAIVER, AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO
HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

     Section 8.07 Right of Setoff. As additional security for payment of the Obligations,
Borrower grants to Lender a security interest in, a lien on, and an express contractual right, at
any time or from time to time upon the occurrence and during the continuance of a Default or Event
of Default, without prior notice to Borrower, any such notice being expressly waived by Borrower to
the extent permitted by applicable law, to set off and apply against all deposits (general or
special, time or demand, provisional or final) of Borrower at any time held or other obligations at
any time owing by Lender to or for the credit or the account of Borrower against any and all
Obligations held by Lender (“Setoff”), irrespective of whether Lender has made demand hereunder and
although such Obligations may be unmatured. Lender agrees to notify Borrower after any Setoff and
any application made by Lender; provided, that the failure to give such notice will not affect the
validity of such Setoff and application. Lender’s rights under this Section 8.07 are in
addition to any rights now or hereafter granted under applicable law and do not limit any such
rights.

23

 

     Section 8.08 Counterparts; Integration. This Agreement may be executed in any number
of separate counterparts (including by telecopy or other electronic mail, or any other electronic
means), and all of said counterparts taken together will be deemed to constitute one and the same
instrument. This Agreement, the other Loan Documents, and any separate letter agreement(s) relating
to any fees payable to the Lender constitute the entire agreement among the parties hereto and
thereto regarding the subject matters hereof and thereof and supersede all prior agreements and
understandings, oral or written, regarding such subject matters.

     Section 8.09 Survival. All covenants, agreements, representations and warranties made
by Borrower herein and in the certificates or other instruments delivered in connection with or
pursuant to this Agreement will be considered to have been relied upon by Lender and will survive
the execution and delivery of this Agreement, regardless of any investigation made by any such
other party or on its behalf and notwithstanding that Lender may have had notice or knowledge of
any Default or incorrect representation or warranty at the time any credit is extended hereunder,
and will continue in full force and effect as long as the principal of or any accrued interest on
the Loans or any fee or any other amount payable under this Agreement is outstanding and unpaid and
so long as any Commitment is in effect. The provisions of Section 8.09 will survive and
remain in full force and effect regardless of the consummation of the transactions contemplated
hereby, the repayment of the Loans, and termination of the Commitments, or this Agreement or any
provision hereof. All representations and warranties made herein, in the certificates, reports,
notices, and other documents delivered pursuant to this Agreement will survive the execution and
delivery of this Agreement and the other Loan Documents.

     Section 8.10 Severability. Any provision of this Agreement or any other Loan Document
held to be illegal, invalid or unenforceable in any jurisdiction, will, as to such jurisdiction, be
ineffective to the extent of such illegality, invalidity or unenforceability without affecting the
legality, validity or enforceability of the remaining provisions hereof or thereof; and the
illegality, invalidity or unenforceability of a particular provision in a particular jurisdiction
will not invalidate or render unenforceable such provision in any other jurisdiction.

     Section 8.11 Transferable Record. This Agreement, the Notes and the other Loan
Documents, as amended, are “transferable records” as defined in applicable law relating to
electronic transactions. Therefore, Lender may, on behalf of Borrower, create a microfilm, optical
disk or electronic image of such Loan Documents that are authoritative copies under applicable law.
Lender may store such authoritative copies in microfilm or electronic form and destroy the paper
original as part of its normal business practices. Lender, on its own behalf, may control and
transfer such authoritative copies as permitted by applicable law.

     Section 8.12 Confidentiality. Lender agrees to take normal and reasonable precautions
to maintain the confidentiality of any information designated in writing as confidential and
provided to it by Borrower or any Subsidiary, except that such information may be disclosed (a) to
any Affiliate, Participant or advisor of Lender, including without limitation accountants, legal
counsel and other advisors, provided that Lender shall have taken reasonable steps to assure that
such Affiliates, participants, and advisors will maintain such information in confidence to the
same extent required of Lender hereunder, (b) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (c) to the extent requested by any

24

 

regulatory agency or authority, (d) to the extent that such information becomes publicly
available, other than as a result of a breach of this Section 8.12, or which becomes
available to Lender on a nonconfidential basis from a source other than Borrower, (e) in connection
with the exercise of any remedy hereunder or any suit, action or proceeding relating to this
Agreement or the enforcement of rights hereunder, and (f) subject to provisions substantially
similar to this Section 8.12, to any actual or prospective assignee or Participant, or (g)
with the consent of Borrower. Any Person required to maintain the confidentiality of any
information as provided for in this Section shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of care to maintain the
confidentiality of such information as such Person would accord its own confidential information.

     Section 8.13 Copies. Borrower hereby acknowledges the receipt of a copy of this
Agreement and all other Loan Documents.

     Section 8.14 Notice of Claims Against Lender; Limitation of Certain Damages. In order
to allow Lender to mitigate any damages to Borrower from Lender’s alleged breach of its duties
under the Loan Documents or any other duty, if any, to Borrower, the Borrower agrees to give Lender
immediate written notice of any claim or defense it has against Lender, whether in tort or
contract, relating to any action or inaction by Lender under any Loan Document, or the transactions
related thereto, or of any defense to payment of the Obligations for any reason. The requirement
of providing timely notice to Lender represents the parties’ agreed-upon standard of performance
regarding claims against Lender. Notwithstanding any claim that Borrower may have against Lender,
and regardless of any notice Borrower may have given Lender, Lender will not be liable to Borrower
for consequential, punitive and/or special damages.

     Section 8.15 Effect of Amendment. This Agreement amends, supplements, and restates
the Original Credit Agreement. The Obligations under the Original Credit Agreement remain in
effect except to the extent specifically modified herein, and nothing in any of the Amendment
Documents will be construed to have the effect of a novation in respect of the Obligations under
the Original Credit Agreement. All Liens in favor of Lender granted in connection with the
Original Credit Agreement remain in effect. The Amendment Documents will not be construed to have
the effect of a refinancing of the Obligations under the Original Credit Agreement, but will
instead be construed to amend, modify and supplement the terms in effect immediately prior to
effectiveness of the Amendment Documents. All references to a credit agreement in any Loan Document
will hereafter mean this Agreement. Nothing herein waives any default, breach or violation that
may have occurred under any prior version of the Credit Agreement.

[Signature Page Follows]

25

 

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

      

	 	 	 	 	 
	 	BORROWER:

GOLDEN GRAIN ENERGY, LLC

 	 
	 	By:  	
/s/ Walter Wendland
 	 
	 	 	Name:  	Walter Wendland 	 
	 	 	Title:  	President 	 
	 

	 	 	 	 	 
	 	LENDER:

HOME FEDERAL SAVINGS BANK

 	 
	 	By:  	                                   /s/ Eric Oftedahl
 	 
	 	 	Name:  	Eric Oftedahl 	 
	 	 	Title:  	Vice President 	 
	 

[SIGNATURE PAGE TO MASTER AMENDED AND RESTATED CREDIT AGREEMENT]

26

 

ATTACHMENT I

DEFINITIONS

     A. Accounting Terms and Determination. Unless otherwise defined or specified herein, all
accounting terms used herein will be interpreted, all accounting determinations hereunder will be
made, and all financial statements required to be delivered hereunder will be prepared, in
accordance with GAAP as in effect from time to time.

     B. Terms Generally. The definitions of terms herein apply equally to the singular and plural
forms of the terms defined. The words “include,” “includes” and “including” are herein deemed to
be followed by the phrase “without limitation.” Unless the context requires otherwise (a) any
definition of or reference to any agreement, instrument or other document herein will be construed
as referring to such agreement, instrument or other document as it was originally executed or as it
may from time to time be amended, supplemented or otherwise modified (subject to any restrictions
on such amendments, supplements or modifications set forth herein), (b) any reference herein to any
Person will be construed to include such Person’s successors and permitted assigns, (c) the words
“hereof,” “herein” and “hereunder” and words of similar import will be construed to refer to this
Agreement as a whole and not to any particular provision hereof, (d) all references to Articles,
Sections, Exhibits and Schedules will be construed to refer to Articles, Sections, Exhibits and
Schedules to this Agreement, and (e) all references to a specific time will be construed to refer
to the time in the city provided herein for Lender’s receipt of notices hereunder, unless otherwise
indicated.

     C. Supplements. Certain terms are defined specifically in one or more Supplements. If there
is an inconsistency between the terms hereof and a Supplement, the definitions in the Supplement
will control to the extent provided therein.

     D. Defined Terms. In addition to the other terms defined in the Agreement, the following
terms have the meanings herein specified.

     “Advance” means an advance of Loan funds by Lender to or for the benefit of Borrower.

     “Affiliate” means, as to any Person, any other Person that directly, or indirectly through one
or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person.

     “Agreement” means, collectively, the Master Agreement and each of the Supplements in effect
from time to time.

     “Amendment Documents” means the Master Agreement, the First Supplement, the Second Supplement,
the Third Supplement, the Mortgage, and all Notes (including amended Notes), documents, instruments
and agreements delivered in fulfillment of a condition precedent to effectiveness or to Lender’s
obligations under any of the foregoing.

I-1

 

     “Borrower” means Golden Grain Energy, LLC, an Iowa limited liability company.

     “Business Day” means any day other than a Saturday, Sunday or other day on which commercial
banks in the city of Rochester, Minnesota, are authorized or required by law to close.

     “Capital Lease Obligations” of any Person means the capitalized amount, determined in
accordance with GAAP, of all obligations of such Person to pay rent or other amounts under any
lease (or other arrangement conveying the right to use) real or personal property, or a combination
thereof, which obligations are required to be classified and accounted for as capital leases on a
balance sheet of such Person under GAAP.

     “Change in Control” means the occurrence of one or more of the following events: (a) any sale,
lease, exchange or other transfer (in a single transaction or a series of related transactions) of
all or substantially all of the assets of Borrower or any guarantor of any portion of the
Obligations to any Person or “group” (within the meaning of the Securities Exchange Act of 1934 and
the rules of the Securities and Exchange Commission thereunder in effect on the date hereof), (b)
acquisition of Control of the Borrower or any guarantor of any portion of the Obligations by any
Person who does not Control the Borrower or such guarantor on the date of this Agreement, or (c)
occupation of a majority of the seats on the board of directors of Borrower or any guarantor of any
portion of the Obligations by Persons who were neither (1) nominated by the immediately previous
board of directors or (2) appointed by directors so nominated.

     “Charges” has the meaning set forth in Section 1.06.

     “Closing Date” means January 16, 2004, and with respect to each Supplement, the date specified
in such supplement if a different closing date is specified.

     “Code” means the Internal Revenue Code of 1986, as amended and in effect from time to time.

     “Collateral” means all of Borrower’s tangible and intangible property, real and personal,
including without limitation, all casualty insurance proceeds and condemnation awards.

     “Collateral Assignment” means each collateral assignment by Borrower in favor of Lender of a
Material Contract, including all such collateral assignments made prior to the date hereof and all
of those made hereafter.

     “Commitment” means, as to any Supplement, the meaning set forth in such Supplement.

     “Control” means the power, directly or indirectly, either to (a) vote 5% or more of securities
having ordinary voting power for the election of directors (or persons performing similar
functions) of a Person or (b) direct or cause the direction of the management and policies of a
Person, whether through the ability to exercise voting power, by contract or otherwise. The terms
“Controls,” “Controlling,” “Controlled by,” and “under common Control with” have meanings
correlative thereto.

I-2

 

     “Control Agreements” means the agreements requested by Lender, if any, to perfect Lender’s
security interest in Deposit Accounts and Investment Accounts, as the same may be amended,
restated, supplemented or otherwise modified from time to time.

     “Default” means any condition or event that, with the giving of notice or the lapse of time,
or both, would constitute an Event of Default.

     “Default Interest” has the meaning set forth in Section 1.04.

     “Deposit Accounts” means all demand, time, savings, passbook or similar depository accounts of
Borrower with any Person, including Borrower’s operating, payroll, and other bank or depository
accounts.

     “EBITDA” for any period means an amount equal to (a) Net Income plus (b) to the extent
deducted in determining Net Income, the sum of (i) Interest Expense, (ii) income taxes, (iii)
depreciation and amortization, and (iv) all other non-cash charges.

     “Environmental Laws” means all laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, notices or binding agreements issued, promulgated or entered into by or
with any Governmental Authority, relating in any way to the environment, preservation or
reclamation of natural resources, the management, Release or threatened Release of any Hazardous
Material or to health and safety matters.

     “Environmental Liability” means any liability, contingent or otherwise (including any
liability for damages, costs of environmental investigation and remediation, costs of
administrative oversight, fines, related attorneys’ fees, natural resource damages, penalties or
indemnities), directly or indirectly resulting from or based upon (a) any actual or alleged
violation of any Environmental Law, (b) the generation, use, handling, transportation, storage,
treatment or disposal of any Hazardous Materials, (c) any actual or alleged exposure to any
Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials, or (e) any
contract, agreement or other consensual arrangement pursuant to which liability is assumed or
imposed with respect to any of the foregoing.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to
time, and any successor statute.

     “ERISA Affiliate” means any trade or business (whether or not incorporated), which, together
with Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely
for the purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.

     “ERISA Event” means (a) any “reportable event,” as defined in Section 4043 of ERISA or the
regulations issued thereunder with respect to a Plan (other than an event for which the 30-day
notice period is waived); (b) the existence with respect to any Plan of an “accumulated funding
deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived;
(c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application
for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by
Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA

I-3

 

with respect to the termination of any Plan; (e) the receipt by Borrower or the ERISA
Affiliate from the PBGC or a plan administrator appointed by the PBGC of any notice relating to an
intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the
incurrence by Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by
Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from
Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or
a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.

     “Event of Default” has the meaning set forth in Section 7.01.

     “Farm Products” has the meaning ascribed thereto in the UCC.

     “First Supplement” means the First Supplement to the Master Amended and Restated Credit
Agreement (Original Term Loan) between Borrower and Lender dated the date hereof, as amended,
restated, supplemented, or otherwise modified from time to time.

     “Fixed Charges” for any period means the consolidated sum of (a) interest expense, (b)
scheduled principal payments made on Total Debt, (c) income taxes paid, (d) Permitted Distributions
paid, and (e) Non-Financed Maintenance Capital Expenditures.

     “Fixed Charge Coverage Ratio” means for any period of four consecutive quarters, the ratio of
(a) EBITDA to (b) Fixed Charges.

     “Food Security Act” means the Food Security Act of 1985, 7 U.S.C. § 1631, as amended, and the
regulations promulgated thereunder.

     “GAAP” means generally accepted accounting principles in effect from time to time in the
United States applied on a consistent basis.

     “Governmental Authority” means the government of the United States of America, any other
nation or any political subdivision thereof, whether state or local, and any agency, authority,
instrumentality, regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to
government.

     “Guarantee” of or by any Person, including without limitation any Governmental Authority
providing a guarantee of any portion of the Obligations, (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic effect of
guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in
any manner, whether directly or indirectly and including any obligation, direct or indirect, of the
guarantor (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of)
any security for the payment thereof, (b) to purchase or lease property, securities or services for
the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof,
(c) to maintain working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such

I-4

 

Indebtedness or other obligation, or (d) as an account party in respect of any letter of
credit or letter of guarantee issued in support of such Indebtedness or obligation. The term
“Guarantee” does not include endorsements for collection or deposits in the ordinary course of
business. The amount of any Guarantee is deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which Guarantee is made or, if not so stated or
determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person
is required to perform thereunder) as determined by such Person in good faith. The term “Guarantee”
used as a verb has a corresponding meaning.

     “Hazardous Materials” means all explosive or radioactive substances or wastes and all
hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas,
infectious or medical wastes and all other substances or wastes of any nature regulated pursuant to
any Environmental Law.

     “Hedging Agreements” means interest rate swap, cap or collar agreements, interest rate future
or option contracts, currency swap agreements, currency future or option contracts, commodity
agreements and other similar agreements or arrangements designed to protect against fluctuations in
interest rates, currency values or commodity values, in each case to which Borrower is a party.

     “Indebtedness” of any Person means, without duplication (a) all obligations of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (c) all obligations of such Person in respect of the deferred purchase price
of property or services (other than trade payables incurred in the ordinary course of business;
provided, that for purposes of Section 7.01(e), trade payables overdue by more than
120 days are included in this definition except to the extent that any of such trade payables are
being disputed in good faith and by appropriate measures), (d) all obligations of such Person under
any conditional sale or other title retention agreement(s) relating to property acquired by such
Person, (e) all Capital Lease Obligations of such Person, (f) all obligations, contingent or
otherwise, of such Person in respect of letters of credit, acceptances or similar extensions of
credit, (g) all Guarantees of such Person, (h) all Indebtedness of a third party secured by any
Lien on property owned by such Person, whether or not such Indebtedness has been assumed by such
Person, (i) all obligations of such Person, contingent or otherwise, to purchase, redeem, retire or
otherwise acquire for value any common stock, membership unit or other capital interest of such
Person, (j) Off-Balance Sheet Liabilities, and (k) all capital interests of such person (such as
preferred units) which call for a fixed or formulaic amount to be paid to the holder thereof or
that have a maturity date. The Indebtedness of any Person includes the Indebtedness of any
partnership or joint venture in which such Person is a general partner or a joint venturer, except
to the extent that the terms of such Indebtedness provide that such Person is not liable therefor.

     “Inventory” has the meaning ascribed thereto in the UCC, and shall include, without
limitation, grain, grain sorghum, corn, soybeans, wheat, ethanol, dried distiller’s grains and
solubles, and other goods, held by Borrower for sale or for processing and sale.

     “Investment Accounts” means all securities or investment accounts of Borrower with brokerage
firms and other Persons.

I-5

 

     “Investments” has the meaning set forth in Section 6.04.

     “Lender” means Home Federal Savings Bank, a federally chartered stock savings bank, and its
successors and assigns.

     “Lien” means any mortgage, pledge, security interest, lien (statutory or otherwise), charge,
encumbrance, hypothecation, assignment, deposit arrangement, or other arrangement having the
practical effect of the foregoing or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any conditional sale or other
title retention agreement and any capital lease having the same economic effect as any of the
foregoing).

     “Loan” means a loan commitment or credit and facilities made under this Agreement as more
fully described in a Supplement.

     “Loan Documents” means collectively this Master Agreement, the Supplements, the Mortgage, the
Security Agreement, the Notes, the Collateral Assignments, all other Amendment Documents, all UCC
financing statements filed by Lender in connection with perfection of Lender’s security interest in
the Collateral, and any Control Agreements, draw requests, and any and all other instruments,
agreements, documents and writings executed pursuant to any of the foregoing or which have
otherwise been executed by Borrower and delivered to Lender in connection with the Obligations or
the Collateral.

     “Master Agreement” means solely this Master Amended and Restated Credit Agreement, not
including the Supplements, as amended, restated, or otherwise modified (other than by Supplements
entered into pursuant to Section 1.02) from time to time.

     “Material Adverse Effect” means, with respect to any event, act, condition or occurrence of
whatever nature (including any adverse determination in any litigation, arbitration, or
governmental investigation or proceeding), whether singularly or in conjunction with any other
event or events, act or acts, condition or conditions, occurrence or occurrences whether or not
related, a material adverse change in, or a material adverse effect on, (a) the business, results
of operations, financial condition, assets, or liabilities, of Borrower, (b) the ability of
Borrower to perform any of its obligations under the Loan Documents, (c) the rights and remedies of
Lender under any of the Loan Documents or (d) the legality, validity or enforceability of any of
the Loan Documents.

     “Material Contract” means an agreement to which Borrower is or hereafter becomes a party which
is material to the operation of Borrower’s business.

     “Material Indebtedness” means Indebtedness (other than the Loans) or obligations in respect of
one or more Hedging Agreements in an aggregate principal amount of $100,000 or more. For purposes
of determining Material Indebtedness, the “principal amount” of the obligations in respect to any
Hedging Agreement at any time is the maximum aggregate amount (giving effect to any netting
agreements) that Borrower would be required to pay if such Hedging Agreement were terminated at
such time.

     “Maximum Rate” has the meaning set forth in Section 1.06.

I-6

 

     “Mortgage” means the Amended and Restated Future Advance Mortgage and Security Agreement and
Fixture Financing Statement and Assignment of Rents and Leases between Borrower and Lender dated
the date hereof, as further amended, restated, revised or otherwise modified from time to time
hereafter.

     “Multiemployer Plan” has the meaning set forth in Section 4001(a)(3) of ERISA.

     “Net Income” means net income (or loss) determined on a consolidated basis in accordance with
GAAP, but excluding (a) extraordinary gains or losses, (b) gains attributable to write-up of
assets, (c) any equity interest in unremitted earnings of any Person that is not a Subsidiary, and
(d) income (or loss) of any Person which accrued prior to the date such Person becomes a Subsidiary
or is merged into or consolidated with Borrower or any Subsidiary on the date such Person’s assets
are acquired by the Borrower or a Subsidiary.

     “Notes” means, collectively, all notes of Borrower in favor of Lender issued pursuant to a
Supplement.

     “Obligations” means all amounts owed by Borrower to Lender pursuant to or in connection with
this Agreement or any other Loan Document, and any other obligation of Borrower to Lender of any
nature whatsoever, including without limitation, all principal, interest (including any interest
accruing after the filing of any petition in bankruptcy or the commencement of any insolvency,
reorganization or like proceeding relating to Borrower, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), all reimbursement obligations, fees,
prepayment premiums, expenses, indemnification and reimbursement payments, costs and expenses
(including all fees and expenses of counsel to Lender incurred pursuant to this Agreement or any
other Loan Document), whether direct or indirect, absolute or contingent, liquidated or
unliquidated, now existing or hereafter arising hereunder or thereunder, together with all
renewals, extensions, modifications or refinancings thereof.

     “Off-Balance Sheet Liabilities” of any Person means (a) any repurchase obligation or liability
of such Person with respect to accounts or notes receivable sold by such Person, (b) any liability
of such Person under any sale and leaseback transactions which do not create a liability on the
balance sheet of such Person, (c) any liability of such Person under any so-called “synthetic”
lease transaction, or (d) any obligation arising with respect to any other transaction which is the
functional equivalent of or takes the place of borrowing but which does not constitute a liability
on the balance sheet of such Person.

     “Participant” has the meaning set forth in Section 8.04(c).

     “PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA, and
any successor entity performing similar functions.

     “Permitted Distribution” means cash distributions — first approved in writing by Lender — to
Borrower’s members of up to 65% of Borrower’s Net Income for any fiscal year period to the extent
no Default or Event of Default will occur or is continuing after payment thereof and Borrower’s
ratio of tangible assets (Tangible Net Worth plus Total Debt) to Total Debt exceeds 2.00:1.00.

I-7

 

     “Permitted Encumbrances” means:

     (a) Liens imposed by law for taxes not yet due (or with respect to real estate taxes, not yet
delinquent) or which are being contested in good faith by appropriate proceedings and with respect
to which adequate reserves are being maintained in accordance with GAAP;

     (b) statutory Liens of landlords and Liens of carriers, warehousemen, mechanic, materialmen
and other Liens imposed by law created in the ordinary course of business for amounts not yet due
or which are being contested in good faith by appropriate proceedings and with respect to which
adequate reserves are being maintained in accordance with GAAP;

     (c) pledges and deposits made in the ordinary course of business in compliance with workers’
compensation, unemployment insurance and other social security laws or regulations;

     (d) deposits to secure the performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in
each case in the ordinary course of business;

     (e) judgment and attachment liens not giving rise to an Event of Default or Liens created by
or existing from any litigation or legal proceeding that are currently being contested in good
faith by appropriate proceedings and with respect to which adequate reserves are being maintained
in accordance with GAAP;

     (f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property
imposed by law or arising in the ordinary course of business that do not secure any monetary
obligations and do not materially detract from the value of the affected property or materially
interfere with the ordinary conduct of business of Borrower and its Subsidiaries taken as a whole;
and

     (g) Liens in favor of Lender.

     “Permitted Investments” means:

     (a) direct obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent
such obligations are backed by the full faith and credit of the United States), in each case
maturing within one year from the date of acquisition thereof;

     (b) commercial paper having the highest rating, at the time of acquisition thereof, of S&P or
Moody’s and in either case maturing within six months from the date of acquisition thereof;

     (c) certificates of deposit, bankers’ acceptances and time deposits maturing within 180 days
of the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, any domestic office of any commercial bank organized under the laws
of the United States of America or any state thereof which has a combined capital and surplus and
undivided profits of not less than $500,000,000;

I-8

 

     (d) fully collateralized repurchase agreements with a term of not more than 30 days for
securities described in clause (a) above and entered into with a financial institution satisfying
the criteria described in clause (c) above;

     (e) mutual funds investing solely in any one or more of the Permitted Investments described in
clauses (a) through (d) above; and

     (f) Hedging Agreements entered into in the ordinary course of business solely to hedge or
mitigate risks to which Borrower is exposed in the conduct of its business or management of its
liabilities.

     “Person” means any individual, partnership, firm, corporation, association, joint venture,
limited liability company, trust or other entity, or any Governmental Authority.

     “Projections” means Borrower’s forecasted (a) balance sheets; (b) profit and loss statements;
and (c) cash flow statements; all prepared on a consolidated basis and otherwise consistent with
the historical financial statements of Borrower, together with appropriate supporting details and a
statement of underlying assumptions which are believed by Borrower to be reasonable and fair in
light of the current condition and past performance of Borrower and to reflect a reasonable
estimate of the projected balance sheets, results of operations, cash flows and other information
presented therein for five (5) years following the Closing Date.

     “Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to
the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in
respect of which Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

     “Real Estate” means all real property owned or leased by Borrower that is intended as
collateral for any Loan.

     “Release” means any release, spill, emission, leaking, dumping, injection, pouring, deposit,
disposal, discharge, dispersal, leaching or migration into the environment (including ambient air,
surface water, groundwater, land surface or subsurface strata) or within any building, structure,
facility or fixture.

     “Responsible Officer” means Borrower’s general manager or chief financial officer, or such
other duly authorized Person as may be designated in writing with the prior written consent of
Lender.

     “Second Supplement” means the Second Supplement to the Master Amended and Restated Credit
Agreement (Revolving and Letter of Credit Facility) between Borrower and Lender dated the date
hereof, as amended, restated, supplemented, or otherwise modified from time to time

     “Security Agreement” means the Security Agreement between Lender and Borrower dated January
16, 2004, as amended, restated, supplemented or otherwise modified from time to time.

I-9

 

     “Setoff” has the meaning set forth in Section 8.07.

     “Subsidiary” means, with respect to any Person (the “parent”), any corporation, partnership,
joint venture, limited liability company, association or other entity the accounts of which would
be consolidated with those of the parent in the parent’s consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as well as any other
corporation, partnership, joint venture, limited liability company, association or other entity (a)
of which securities or other ownership interests representing more than 50% of the equity or more
than 50% of the ordinary voting power, or in the case of a partnership, more than 50% of the
general partnership interests are, as of such date, owned, Controlled or held, or (b) that is, as
of such date, otherwise Controlled (as set forth in clause (b) of the definition thereof), by the
parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of
the parent. Unless otherwise indicated, all references to “Subsidiary” hereunder means a Subsidiary
of Borrower (including Subsidiaries formed after the Closing Date).

     “Supplements” has the meaning set forth in Section 1.02.

     “Tangible Net Worth” means, as of any date (a) the total assets of Borrower that should be
reflected on Borrower’s consolidated balance sheet as of such date prepared in accordance with
GAAP, after eliminating all amounts properly attributable to minority interests, if any, in the
stock and surplus of Subsidiaries, less (b) the sum of (i) Total Debt as of such date, (ii) the
amount of appraisal surplus or any write-up in the book value of any assets resulting from a
revaluation thereof or any write-up in excess of the cost of such assets acquired reflected on the
consolidated balance sheet of Borrower as of such date prepared in accordance with GAAP, and (iii)
the net book amount of all assets of Borrower that should be classified as intangible assets
(including investments in other entities) on a consolidated balance sheet of Borrower as of such
date prepared in accordance with GAAP.

     “Taxes” means any and all present or future taxes, levies, imposts, duties, deductions,
charges or withholdings imposed by any Governmental Authority arising from payment hereunder or
from the execution, delivery, or enforcement of, any Loan Document, including, without limitation,
all present or future stamp or documentary taxes or any other excise or property taxes. “Taxes”
does not include taxes based on (or determined solely by) Lender’s net income.

     “Third Supplement” means the Third Supplement to the Master Amended and Restated Credit
Agreement (2006 Expansion Loan Facility) between Borrower and Lender dated the date hereof, as
amended, restated, supplemented, or otherwise modified from time to time.

     “Total Debt” means all Indebtedness that should be reflected on Borrower’s consolidated
balance sheet prepared in accordance with GAAP.

     “Uniform Commercial Code” or “UCC” means the Uniform Commercial Code as in effect from time to
time in the State of Minnesota.

     “Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or
partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E
of Title IV of ERISA.

I-10

 

EXHIBIT 2.01(c)(6)

OPINION REQUIREMENTS

     1. Borrower (a) is a limited liability company duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its organization, (b) has the power and authority
and the legal right to own and operate its property and to conduct its business.

     2. Borrower has the power and authority to execute, deliver and perform the Loan Documents to
which it is a party and has taken all necessary organizational action to authorize the execution,
delivery and performance of the Loan Documents to which it is a party.

     3. No consent, approval or authorization of, or registration or filing with, any Person
(including, without limitation, any Governmental Authority) is required in connection with the
execution, delivery or performance by Borrower of the Loan Documents.

     4. Borrower has duly executed and delivered the Loan Documents to which it is a party, and the
Loan Documents constitute, legal, valid and binding obligations of Borrower enforceable against it
in accordance with their respective terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditors’
rights generally and by general principles of equity.

     5. The execution, delivery and performance by Borrower of the Loan Documents to which it is a
party will not (a) violate the articles of organization or the operating agreement of Borrower, (b)
violate any law applicable to Borrower, (c) insofar as known to us, violate any determination of an
arbitrator or a court or other Governmental Authority applicable to Borrower, (d) insofar as known
to us, cause a breach or default under any contractual obligation of Borrower, or (e) result in the
creation or imposition of any Lien on any of the property or revenues of Borrower.

     6. To the best of our knowledge, no litigation, investigation or proceeding of or before any
Governmental Authority are pending or threatened by or against Borrower, or against any of its
properties or revenues, existing or future (a) with respect to any Loan Document or any of the
transactions contemplated thereby, or (b) which, if adversely determined, would reasonably be
expected to have a Material Adverse Effect.

     7. The rates of interest and the fees provided for in the Credit Agreement and the description
thereof provided in the Credit Agreement and the Notes do not violate any laws of the State of Iowa
relating to interest and usury, and will not violate any such law by virtue of any fluctuations in
any base, prime, index or equivalent rate or rates on which interest charges may be based under
such agreements.

     8. Under the laws of the State of Iowa, the Loan Documents will be governed by the internal
laws of the State of Minnesota, including all such laws relating to interest and usury.

     9. To the extent Borrower has rights in the “Collateral” described in the Security Agreement
and Collateral Assignments, the provisions of the Security Agreement and the Collateral Assignments
are sufficient to grant to Lender, a security interest in all right, title and

2.01(c)(6)-1

 

interest of the Borrower in those items and types of Collateral in which a security interest
may be created under Article 8 or Article 9 of the UCC. To the extent that the Borrower has rights
in the “Collateral” described in the Security Agreement and the Collateral Assignments and to the
extent that such Collateral consists of types of items of property in which a security interest may
be perfected by the filing of financing statements in the State of Iowa, such security interests
have been perfected by the filing of the Financing Statements in the offices of the Iowa Secretary
of State and the Fixture Financing Statements in the office of the Recorder in Cerro Gordo County,
Iowa.

     10. The Mortgage, upon due recordation in the office of the Recorder in Cerro Gordo County,
Iowa, will constitute in favor of Lender, a valid and continuing lien on the property described
therein as security for the Obligations and will be enforceable in accordance with its terms,
except to the extent that enforceability may be limited by applicable bankruptcy, insolvency and
other similar laws, and equity principles of general application, relating to or affecting the
enforcement of creditors’ rights generally.

     11. Borrower has obtained all permits, licenses, approvals, and authorizations required by all
Governmental Authorities for construction, ownership, and operation of the Collateral.

2.01(c)(6)-2

 

Schedule 3.17

Material Contracts

     1. Lump Sum Design-Build Expansion Agreement dated June 9, 2006 between the Borrower and Fagen,
Inc.

3.17-1

 

Schedule 6.04(a)

Investments

     1. The Borrower has a $605,000 investment in Renewable Products Marketing Group.

     2. The Borrower has a $4,000,000 investment in Absolute Energy, LLC.

6.04(a)-1

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