Document:

Exhibit
10.17

REVOLVING
CREDIT AND SECURITY AGREEMENT

This
REVOLVING CREDIT AND SECURITY AGREEMENT dated as of June 29, 2006 (the “Agreement”), is executed by and
between MILLENNIUM ETHANOL, LLC, a South Dakota limited liability company (the “Borrower”),
and DOUGHERTY FUNDING LLC, a Delaware limited liability company (the “Lender”).

PRELIMINARY
RECITALS:

A.            Borrower is acquiring certain real property
located in the County of Turner, State of South Dakota, all as
more fully defined herein as the “Premises”.

B.            Borrower proposes to construct and operate on
the Premises a plant and other facilities
that are ancillary, incidental, necessary or related to the marketing,
management, servicing, ownership or operation of the foregoing as a 100
MGY anhydrous ethanol refinery and production facility all as more fully
defined herein as the “Project”.

C.            Fagen, Inc., a Minnesota corporation, will design and build the Project
pursuant to a lump sum
design-build contract between Fagen, Inc. and Borrower.

D.            ICM, Inc. a Kansas corporation, is licensing
technology and providing certain design and process engineering services
to Borrower pursuant to a License Agreement, dated May 6, 2006, by and between ICM, Inc. and Borrower.

E.             Archer
Daniels Midland Company (“ADM”), a Delaware corporation, will provide ethanol and DDGs marketing services
to Borrower.

F.             Fremar, LLC, a Minnesota limited liability
company, will provide grain origination
services to Borrower.

G.            Fremar Cooperative will provide Project
management services to Borrower.

H.            Borrower desires that the Lender make available to Borrower a revolving
credit line to provide working
capital for the operation of the Project.

I.              In furtherance thereof the Borrower has made
application to and the Lender has agreed to make revolving advances to
the Borrower not to exceed at any time in the aggregate outstanding the sum of up to Seven Million and no/100 Dollars
($7,000,000.00) and Borrower and
Lender are entering into this certain Agreement for the purpose of setting
forth the terms and conditions under which Lender will make the
Revolving Advances (as later defined herein) to Borrower.

NOW, THEREFORE, in
consideration of the making of the Loan and other good and valuable
consideration, the receipt of which is hereby acknowledged by the parties
hereto, the parties
hereto agree as follows:

1.

DEFINITIONS.

1.1           Defined Terms. For the purposes of this Agreement, the
following capitalized words and phrases shall have the meanings set forth
below.

“Accounts” shall have the meaning given it under the UCC.

“Account Debtor” shall have the meaning given it under the UCC.

“Adjustment Date” shall mean the first day of each calendar
quarter in a year, i.e., January
1, April 1, July 1 and October 1.

“Advances” shall mean any advance of funds under the Revolving Loan.

“Affiliate”
of any Person shall mean (a) any other Person which, directly or indirectly, controls or is controlled by or is under
common control with such Person, (b) any officer or director of such Person,
and (c) with respect to the Lender, any entity administered or managed by the Lender, or an Affiliate or
investment advisor thereof and which is engaged in making, purchasing, holding or otherwise investing in
commercial loans. A Person shall be deemed to be “controlled by” any other
Person if such Person possesses, directly or indirectly, power to direct
or cause the direction of the management and policies of such Person whether by contract, ownership of voting
securities, membership interests
or otherwise.

“Appeal”
shall mean an appeal commenced under the Rules of Civil Procedure for the State of South Dakota appealing the decision
in the Turner County Litigation.

“Bankruptcy
Code” shall mean the Bankruptcy Reform Act of 1978 as heretofore and hereafter amended, and codified as 11 U.S.C.
§101 et seq.

“Basis Points” shall mean an arithmetic expression of a
percentage measured in hundredths
of a percent (i.e. 50 Basis Points equals one-half of one percent).

“Borrower” shall mean Millennium Ethanol, LLC, a South Dakota
limited liability company.

“Borrowing Base Amount” shall mean at any time the lesser of:

(a)           Seven Million Dollars ($7,000,000.00); or

(b)           The sum of:

(i)            The
product of Seventy-Five percent (75%) times Eligible Accounts, plus

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(ii)           The
product of Seventy-Five Percent (75%) times Eligible Inventory, less

(iii)          Obligations
that the Borrower owes to the Lender that have not yet been advanced on the Revolving Note.

“Borrowing Base Certificate” shall mean a
certificate to be signed by
the Borrower certifying to the
accuracy of the Borrowing Base Amount in form and substance satisfactory to the Lender, and attached as Exhibit
A.

“Business Day”
shall mean any day other than a Saturday, Sunday or a legal holiday on which banks are authorized or required to be
closed for the conduct of commercial banking business in Minneapolis,
Minnesota.

“Capital Expenditures” shall mean all expenditures (including
Capitalized Lease Obligations) which, in accordance with GAAP, would be
required to be capitalized and shown
on the consolidated balance sheet of the Borrower, but excluding expenditures made in connection with the replacement,
substitution or restoration of assets to the extent financed (i) from insurance proceeds (or other similar
recoveries) paid on account of the loss of or damage to the assets being
replaced or restored or (ii) with awards of compensation arising from the
taking by eminent domain or condemnation of the assets being replaced.

“Capital Lease” shall mean, as to any Person, a lease of any
interest in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, by such Person, as lessee, that is, or should be, in accordance with Financial
Accounting Standards Board Statement No. 13, as amended from time to time, or,
if such statement is not then in effect, such statement of GAAP as may
be applicable, recorded as a “capital lease”
on the financial statements of such Person prepared in accordance with GAAP.

“Capitalized
Lease Obligations” shall mean, as to any Person, all rental obligations of such Person, as lessee under a Capital Lease
which are or will be required to be capitalized on the books of such Person.

“Closing Date”
shall mean the date on which the Revolving Loan is closed and the Loan
Documents are executed and delivered to the Lender which date shall be not
later than July 31, 2006.

“Code”
shall mean the Uniform Commercial Code as the same may, from time to time, be
in effect in the State of South Dakota, provided, however, in the event that,
by reason of mandatory
provisions of law, any or all of the attachment, perfection or priority of the Lender
security interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the State of South Dakota, the term “Code”
shall mean the Uniform Commercial Code as in effect in such other jurisdiction
for purposes of the provisions hereof
relating to such attachment, perfection or priority and for purposes of definitions related to such
provisions.

“Collateral” shall have the meaning set forth in Section 4.1
hereof.

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“Collateral Access Agreement” shall mean an agreement in form
and substance reasonably satisfactory to the Lender pursuant to which a
mortgagee or lessor of real property
on which Collateral is stored or otherwise located, or a warehouseman, processor
or other bailee of Inventory or other property owned by the Borrower or any
Subsidiary, acknowledges the Liens of the Lender and waives any Liens held by
such Person on such property, and, in
the case of any such agreement with a mortgagee or lessor, permits the
Lender reasonable access to and use of such real property following the
occurrence and during the continuance of an Event of Default to assemble,
complete and sell any collateral stored
or otherwise located thereon.

“Corn Inventory”
shall mean raw material corn purchased by Borrower pursuant to the Corn Purchase Agreement that meets the
requirements of the Corn Purchase Agreement.

“Corn Purchase
Agreement” shall mean one or more agreements between Borrower and Fremar, LLC and such other corn suppliers as
Borrower may select, providing for the supply to the Borrower of grain sufficient to achieve 100 MGY output of
Ethanol.

“Debt”
shall mean all items of indebtedness or liability that in accordance with GAAP
would be included in determining total liabilities as shown on the liabilities
side of the balance sheet for Borrower and shall also include the aggregate
payments required to be made
by Borrower at any time under any lease that is considered a capitalized lease
under GAAP, the indebtedness due the Lender under the Revolving Loan, including
(i) principal and interest on
the Subordinate Debt, (ii) any indebtedness due under the Unsecured Debt and (iii) principal and
interest due under the Plant Loan.

“Default Rate” shall mean a per annum rate of interest equal to
the lesser of (i) the maximum lawful rate of interest permitted to be
paid on the Revolving Loan or (ii) 800 Basis Points plus the LIBOR as it adjusts from time to time.

“Debt Service”
shall mean as to any applicable period cash interest payments, principal payments, premiums and charges with respect
to all Debt required to be paid during such period.

“Debt Service Coverage Ratio” shall mean EBITDA divided by Fixed
Charges.

“DDGs”
shall mean dry distillers grains.

“DDG Accounts” shall mean those Accounts payable to the Borrower
for the sale of DDGs arising from investment grade account debtors in
connection with the purchase of DDGs
by such account debtors.

“EBITDA”
shall mean for any period an amount equal to Net Income for such period plus
(a) the following to the extent deducted in calculating such Net Income: (i)
Fixed Charges for such period, (ii) the provision for Federal, state, local and
foreign income taxes payable for such period, (iii) depreciation and amortization
expense and (iv) other non-recurring expenses reducing such Net Income which do
not represent a cash item in such period or any future period and minus (b) the following to
the extent included in

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calculating such
Net Income: (i) Federal, state, local and foreign income tax credits for such period and (ii) all non-cash items
increasing Net Income for such period.

“Electrical Facilities” shall mean all mains, substations,
service laterals, piping, manholes and appurtenances for the furnishing,
transmission, storage and disposal of electricity to the Project.

“Electrical
Supply Agreements” shall mean those agreements with Utility Providers to provide the Electrical Supply System to the
Plant under the following agreements:

·      Proposal
for Electrical Service submitted by Southeastern Electric Cooperative, Inc. dated June 9, 2006.

·      Definitive agreement not yet negotiated and to be executed and
delivered pursuant to the above Proposal.

“Electrical Supply Provider” shall mean Southeastern Electric
Cooperative, Inc., or such other acceptable Utility Provider, providing the
electricity to the Project.

“Electrical
Supply System” shall mean the Electrical Facilities pursuant to which electrical energy is transferred from the
Utility Providers’ main lines and down converted for use in the Plant and which Borrower shall purchase under the
Electrical Supply Agreements.

“Eligible Account” and “Eligible Accounts”
shall mean each Account and all such Accounts (exclusive of sales, excise or other similar taxes) owing to the
Borrower which meets each of the following requirements:

(a)           is genuine in all respects and has arisen in
the ordinary course of the Borrower’s
business from the sale of Ethanol or DDGs by the Borrower, including
C.O.D. sales, which Ethanol or DDGs have been produced and finished in
accordance with the Account Debtor’s specifications (if any) and delivered to
and accepted by the Account Debtor, and the Borrower has possession of, or has
delivered to the Lender at the Lender’s request, shipping and delivery receipts evidencing such delivery;

(b)           is
subject to a perfected, first priority Lien in favor of the Lender and is not
subject to any other assignment, claim or Lien, except a subordinate Lien in favor of the Plant Lender and the Subordinate Lender;

(c)           is the valid, legally enforceable and
unconditional obligation of the Account Debtor with respect thereto, and
is not subject to the fulfillment of
any condition whatsoever or any counterclaim, credit (except as provided
in subsection (h) of this definition), trade or volume discount, allowance, discount, rebate or adjustment by
the Account Debtor with respect thereto, or to any claim by such Account
Debtor denying liability thereunder in whole or in part and the Account Debtor
has not refused to accept and/or has
not returned or offered to return any of the Goods or services which are the subject of such
Account;

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(d)           is
not an Account owed by an Account Debtor located outside the United States
which is not (A) backed by a bank letter of credit naming the Lender as
beneficiary or assigned to the Lender, in the Lender’s possession or control,
and with respect to which a control agreement concerning the letter-of-credit
rights is in effect, and acceptable to the Lender in all respects, in its sole
discretion, or (B) covered by a foreign receivables insurance policy acceptable
to the Lender in its sole discretion;;

(e)           is
not an Account arising from a “sale on approval”, “sale or return”, “consignment”,
“guaranteed sale” or “bill and hold”, or are subject to any other repurchase or
return agreement;

(f)            is
not an Account with respect to which possession and/or control of the goods
sold giving rise thereto is held, maintained or retained by the Borrower (or by
any agent or custodian of the Borrower) for the account of, or subject to,
further and/or future direction from the Account Debtor with respect thereto;

(g)           it
has not arisen out of contracts with the United States or any department, agency
or instrumentality thereof, unless the Borrower has assigned its right to
payment of such Account to the Lender pursuant to the Assignment of Claims Act
of 1940, and evidence (satisfactory to the Lender) of such assignment has been
delivered to the Lender, or any state, county, city or other governmental body,
or any department, agency or instrumentality thereof;

(h)           if
the Borrower maintains a credit limit for an Account Debtor, the aggregate
dollar amount of Accounts due from such Account Debtor, including such Account,
does not exceed such credit limit;

(i)            if the
Account is evidenced by chattel paper or an instrument, the originals of such
chattel paper or instrument shall have been endorsed and/or assigned and
delivered to the Lender or, in the case of electronic chattel paper, shall be
in the control of the Lender, in each case in a manner satisfactory to the
Lender;

(j)            such
Account is evidenced by an invoice delivered to the related Account Debtor and
is not more than (i) one (1) day past the due date thereof, or (ii) thirty-one
(31) days past the original invoice date thereof, in each case according to the
original terms of sale;

(k)           it is
not an Account with respect to an Account Debtor that is located in any
jurisdiction which has adopted a statute or other requirement with respect to
which any Person that obtains business from within such jurisdiction must file
a notice of business activities report or make any other required filings in a
timely manner in order to enforce its claims in 

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such jurisdiction’s courts unless (i) such notice of business activities report has been
duly and timely filed or the Borrower is exempt from filing such report and has provided the Lender with
satisfactory evidence of such exemption
or (ii) the failure to make such filings may be cured retroactively by the Borrower for a nominal
fee;

(l)            the
Account Debtor with respect thereto is not the Borrower or an Affiliate of the Borrower;

(m)          such Account does not
arise out of a contract or order which, by its terms, forbids or makes void or unenforceable the assignment thereof by the Borrower to the Lender and is not
unassignable to the Lender for any other reason;

(n)           there
is no bankruptcy, insolvency or liquidation proceeding pending by or against the Account Debtor with respect
thereto, nor has the Account Debtor suspended business, made a general
assignment for the benefit of creditors or failed to pay its debts generally as
they come due, and/or no condition or event has occurred having a Material
Adverse Effect on the Account Debtor
which would require the Accounts of such Account Debtor to be deemed uncollectible in accordance with GAAP;

(o)           is not
owed by an Account Debtor with respect to which twenty five percent (25.00%) or
more of the aggregate amount of outstanding Accounts owed at such time by such Account Debtor is classified as ineligible under clause (j) of this definition; and

(p)           does not violate the negative covenants and
does satisfy the affirmative covenants
of the Borrower contained in
this Agreement, and it is otherwise not unacceptable to the Lender for any
other reason.

An Account which
is at any time an Eligible Account, but which subsequently fails to meet any of
the foregoing requirements, shall forthwith cease to be an Eligible Account.
Further, with respect to any Account, if the Lender at any time hereafter
determine in its discretion
that the prospect of payment or performance by the Account Debtor with respect thereto is materially impaired for
any reason whatsoever, such Account shall cease to be an Eligible Account after notice of such determination is
given to the Borrower.

“Eligible
Inventory” shall mean all Inventory of the Borrower which meets each of the
following requirements:

(a)           is
subject to a perfected, first priority Lien in favor of the Lender and is not
subject to any other assignment, claim or Lien, except a subordinate Lien in favor of the Plant Lender and the
Subordinate Lender;

(b)           is
salable and not slow-moving, obsolete or discontinued, as determined in the sole and absolute discretion of the
Lender;

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(c)           is in
the possession and control of the
Borrower and it is stored and held in facilities owned by the Borrower or, if
such facilities are not so owned, the Lender is in possession of a Collateral Access Agreement with respect thereto;

(d)           is not
Inventory produced in violation of the
Fair Labor Standards Act and subject to the “hot goods” provisions contained in
Title 29 U.S.C. §215;

(e)           is not
subject to any agreement or license which would restrict the Lender’s ability to sell or otherwise dispose
of such Inventory;

(f)            is located in the United States or in any
territory or possession of the United
States that has adopted Article 9 of the Uniform Commercial Code;

(g)           is not
“in transit” to the Borrower or held by the Borrower on consignment;

(h)           is not “work in progress” Inventory;

(i)            is
not supply items, packaging or any other similar materials;

(j)            is
not identified to any purchase order or contract to the extent progress or advance payments are received with respect to
such Inventory;

(k)           does
not breach any of the representations, warranties or covenants pertaining
to Inventory set forth in the Loan Documents;

(l)            consists
of Ethanol, Corn Inventory or
DDGs; and

(m)          the
Lender shall not have determined in its reasonable discretion that it is unacceptable due to age, type, category,
quality, quantity and/or any other reason whatsoever.

Inventory which is
at any time Eligible Inventory but which subsequently fails to meet any of the foregoing requirements shall forthwith cease to be Eligible
Inventory.

“Employee Plan”
includes any pension, stock bonus, employee stock ownership plan, retirement,
profit sharing, deferred compensation, stock option, bonus or other incentive
plan, whether qualified or nonqualified, or any disability, medical, dental or
other health plan, life insurance or other death benefit plan, vacation benefit
plan, severance plan or other employee benefit plan or arrangement, including
those pension, profit-sharing and retirement plans of the Borrower described
from time to time in the financial statements of the Borrower and any pension
plan, welfare plan, Defined Benefit Pension Plans (as defined in ERISA) or any multi-employer plan,
maintained or administered by the Borrower
or to which the Borrower is a part or may have any liability or by which the Borrower
is bound.

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“Environmental Laws” shall mean all present or future federal,
state or local laws, statutes, common law duties, rules, regulations,
ordinances and codes, together with all administrative or judicial orders,
consent agreements, directed duties, requests, licenses, authorizations and permits of, and agreements
with, any governmental authority, in each case relating to any matter arising out of or relating to public health
and safety, or pollution or protection of the environment or workplace,
including any of the foregoing relating
to the presence, use, production, generation, handling, transport, treatment, storage, disposal, distribution, discharge,
emission, release, threatened release, control or cleanup of any Hazardous
Substance.

“Equipment” shall have the meaning given it under the UCC.

“ERISA” shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.

“Ethanol” shall mean anhydrous denatured fuel grade ethanol
alcohol meeting all applicable
ASTM Standards and the ethanol standards established by the Williams Pipeline Test and ethanol standards
established by all other standard ethanol industry tests.

“Ethanol Sales
and Purchase Agreement” shall mean an sales and purchase agreement, the terms and conditions of which are to be
reasonably acceptable to Lender, between Borrower and ADM wherein ADM agrees to purchase up to 120% of the
nameplate capacity of the Ethanol produced from the Facility.

“Event of Default” shall mean any of the events or conditions
which are set forth in Section 9 hereof.

“Extension”
shall mean the extension of the initial Maturity Date from thirty-five (35) months to forty-seven (47) months.

“Final Completion” shall have the meaning set forth in the Plant
Loan and Security Agreement.

“Final Completion Date” shall have the meaning set forth in the
Plant Loan and Security Agreement.

“Fixed Charges” shall mean for any described fiscal period, the
sum of: (a) interest expense
for such period; (b) payments under Capitalized Lease Obligations not otherwise
included in interest expense for such period; plus (c) any
scheduled principal payments for
borrowed money made during such period.

“Funding
Expiration Date” shall mean the earliest of (i) thirty-four (34) months
from the Closing Date (unless the Extension is exercised in which event it
shall be forty-six (46) months
from the Closing Date) or (ii) the Maturity Date or (iii) the date the Lender demands payment of the Advances after an
Event of Default.

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“GAAP” shall mean generally accepted accounting principles set
forth from time to time in
the opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board
(or agencies with similar functions of comparable stature and authority within
the U.S. accounting profession), which are applicable to the circumstances as of the date of determination,
provided, however, that interim
financial statements or reports shall be deemed in compliance with GAAP despite
the absence of footnotes and fiscal year-end adjustments as
required by GAAP.

“Hazardous Substances” shall mean (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation, dielectric fluid containing
levels of polychlorinated biphenyls, radon gas and mold; (b) any chemicals,
materials, pollutant or substances defined as or included in the definition of “hazardous substances”, “hazardous
waste”, “hazardous materials”, “extremely
hazardous substances”, “restricted hazardous waste”, “toxic substances”, “toxic
pollutants”, “contaminants”, “pollutants” or words of similar import, under any
applicable Environmental Law; and (c) any other chemical, material or
substance, the exposure to, or release of which is prohibited, limited or
regulated by any governmental authority
or for which any duty or standard of care is imposed pursuant to, any Environmental Law.

“Impositions”
shall mean all real estate, ad valorem and personal property taxes, general and
special assessments imposed by Governmental Authorities, water, sewer and other
municipal utility charges and any and all other fees and charges that may be
assessed or imposed by Governmental
Authorities on the Project and the underlying Premises.

“Indemnified Party” and “Indemnified Parties” shall mean,
respectively, each of the Lender and any parent corporation, Affiliate or
Subsidiary of the Lender, and each of their respective officers, directors, employees, attorneys and agents,
and all of such parties and
entities.

“Intellectual Property” shall mean the collective reference to
all rights, priorities and privileges
relating to intellectual property, whether arising under United States, multinational
or foreign laws or otherwise, including copyrights, patents, service marks and
trademarks, and all registrations and applications for registration therefor
and all licensees thereof, trade names,
domain names, technology, know-how and processes, and all rights to sue at law or in equity for any
infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.

“Intercreditor Agreement” shall mean the Intercreditor and
Collateral Priority Agreement between the Lender and the Plant Lender.

“Inventory” shall mean “inventory,” as that term is defined in
the UCC, now or hereafter owned by Borrower, including without
limitation (a) all products, goods, materials and supplies produced, purchased or acquired by
Borrower for the purpose of sale in the ordinary course of its business including corn and grain supplies,
ethanol, denatureants, distillers
grains and carbon dioxide byproduct, (b) spare parts and maintenance materials 

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inventory and (c) goods in which Borrower has an interest in mass or a
joint or other interest
or right of any kind.

“Liabilities” shall mean at all times all liabilities of the
Borrower that would be shown as such on a balance sheet of the Borrower
prepared in accordance with GAAP.

“LIBOR” shall mean the daily rate of interest as
published in the Money Rates section of The Wall Street Journal
as London Interbank Offered Rates (Libor) with a term of three (3)
months. If The Wall Street Journal ceases to publish the London Interbank
Offered Rates (Libor), Lender may select a substitute publication or
service that publishes the London
Interbank Offered Rates (Libor),
or its equivalent, and if such London Interbank Offered Rates (Libor) is
no longer published, then the LIBOR Rate will be determined by Lender computing
the arithmetic mean rates of interest per annum notified to the Lender by
at least two (2) major banks in the London interbank market as the rate of
interest at which U.S. dollar deposits in the approximate amount of the Loan
would be offered to major banks in the
London interbank market at their request on the second Libor Business Day prior to the Adjustment Date. If
the LIBOR Rate is not published or announced
on the Adjustment Date, then the LIBOR Rate published or announced on the immediate last day prior to the
Adjustment Date shall be substituted.

“Libor Business
Day” shall mean any day on which banks in London, England and New York, New York are open for conducting
transactions in foreign currency and exchange.

“Lien” shall mean, with respect to any Person, any interest
granted by such Person in any real or personal property, asset or other
right owned or being purchased or acquired by such Person (including an
interest in respect of a Capital Lease) which secures payment or performance of any obligation and shall
include any mortgage, lien, encumbrance, title retention lien, charge or
other security interest of any kind, whether arising by contract, as a matter of law, by judicial process or
otherwise.

“Loan Documents” shall mean each of the agreements, documents,
instruments and certificates set forth in Section 3.1 hereof, and any
and all such other instruments, documents, certificates and agreements
from time to time executed and delivered by the Borrower for the benefit of the
Lender pursuant to any of the foregoing, and all amendments, restatements, supplements and other modifications thereto.

“Management
Agreement” shall mean the Management Agreement dated September 6, 2005, between Millennium Ethanol, LLC and Fremar
Farmers Cooperative, Inc., providing
for the management of the Project and its operations by Fremar Farmer Cooperative, Inc.

“Material Adverse Effect” shall mean a material adverse effect
on the business, operations, property, assets, liabilities or financial
condition taken as a whole, or a material adverse effect on the ability of any Person to perform its
obligations.

“Maturity Date” shall mean thirty-five (35) months from the
Closing Date unless the Borrower elects to extend and qualifies for the Extension
in which case it shall mean fort-seven
(47) months from the Closing Date.

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“Maturity Date
Extension Fee” shall mean a $35,000.00 fee payable to the Lender if the Borrower elects to extend the Maturity Date
for an additional twelve (12) months.

“Member” shall mean in
the context of the Borrower any member of the Borrower.

“Natural Gas Distribution Delivery Agreement” shall mean the
Natural Gas Distribution Delivery Agreement dated May 30, 2006 between
North Western Services Corporation and
Millennium Ethanol, LLC

“Natural Gas Facilities” shall mean all mains, service laterals,
storage tanks, piping, valves,
manholes and appurtenances for the furnishing, transmission, storage and
disposal of natural gas to the Project including those facilities to be
constructed pursuant to the Natural Gas
Supply Agreement.

“Natural Gas
Pipeline Agreements” shall mean those agreements to provide natural gas from the mainlines of the Natural Gas Supply
Provider to the distribution point of the Natural Gas Supply Distributor under the following agreements:

·      Firm Throughput Service Agreement dated June 9, 2006 between Northern Natural Gas Company and Millennium Ethanol,
LLC

·      Northern Lights-Phase 2 Precedent Agreement
between Northern Natural Gas Company
and Millennium Ethanol, LLC dated May 18, 2006

“Natural Gas Supply Agreements” shall mean those agreements with
Utility Providers to provide natural gas to the Plant under the following
agreements:

·      Natural Gas Distribution Delivery Agreement

·      Firm Throughput Service Agreement

·      Northern Lights-Phase 2 Precedent Agreement

“Natural Gas
Supply Distributor” shall mean North Western Services Corporation, the entity directly providing the natural gas to
the Plant from a point outside of the
Plant.

“Natural Gas
Supply Provider” shall mean Northern Natural Gas Company, the entity providing the natural gas to North Western
Services Corporation at a point outside of the Plant for further distribution by North Western Services
Corporation to Borrower at the Plant. 

“Natural Gas
Supply System” shall mean the pipelines pursuant to which natural gas is
transferred from the Utility Providers’ main pipe lines and ultimately piped to
the Plant for use in the
Plant and which Borrower shall purchase under the Natural Gas Distribution Delivery Agreement.

“Net Income” shall mean with respect to the Borrower for any
period, the net income (or loss)
of the Borrower for such period
as determined in accordance with GAAP, excluding gains or losses on the sale of
assets other than Inventory.

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“Obligations” shall mean all outstanding Advances, as evidenced
by the Revolving Note, all interest accrued thereon (including interest which
would be payable as post-petition in connection with any bankruptcy or similar proceeding, whether or not
permitted as a claim thereunder), any fees due the Lender hereunder, any
expenses incurred by the Lender hereunder, including without limitation,
all liabilities and obligations under this Agreement, under any other Loan Document.

“Obligor” shall mean the Borrower.

“Operating Lease” shall mean any lease of any property (whether
real, personal or mixed) that, in accordance with GAAP, would be
required to be classified and accounted for as an expense item on a balance sheet.

“Organizational Identification Number” means, with respect to
Borrower, the organizational
identification number assigned to Borrower by the applicable governmental unit or agency of the
jurisdiction of organization of the
Borrower.

“Other Taxes” shall mean any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar levies which arise from the
execution, delivery, enforcement or registration of, or otherwise with
respect to, this Agreement or any of
the other Loan Documents.

“Permitted Liens” shall mean those (i) liens and security
interests in favor of Lender pursuant to this Agreement, (ii) those
liens and security interests in favor of the Plant Lender providing the Plant Loan pursuant to
the Plant Loan and Security Agreement and (iii) those liens and security interests on the Borrower’s real and
personal property in favor of
the Subordinate Lender which are expressly subordinate to the liens and
security interests of both the
Lender and the Plant Lender pursuant to the Subordination and Standstill Agreement.

“Person”
shall mean any natural person, partnership, limited liability company, corporation, trust, joint venture, joint stock
company, association, unincorporated organization, government or agency or political subdivision thereof, or
other entity, whether acting in
an individual, fiduciary or other capacity.

“Plant” shall mean a to-be-built dry mill grain processing plant
capable of grinding approximately
36,000,000 bushels of corn per year to produce a name-plate capacity of 100,000,000 gallons of fuel grade Ethanol per
year and with approximately 321,000 tons of dried distillers grains with solubles per year located on
approximately 225 acres of existing
raw land in Turner County, near the City of Marion, South Dakota.

“Plant Lender” shall mean Dougherty Funding LLC.

“Plant Loan” shall mean the loan to be made by the Plant Lender
pursuant to the terms of the
Plant Loan and Security Agreement.

“Plant Loan and Security Agreement” shall mean the Loan and
Security Agreement dated June 22, 2006, by the Plant Lender and the
Borrower providing the terms of the 

 13
 

$90,000,000.00 construction-term loan to finance the construction and
initial operation of the
Plant.

“Plant Loan Documents” shall mean the documents required by the
Plant Loan and Security
Agreement consummating the Plant Loan including the Intercreditor Agreement.

“Principal”
shall mean the from time to time sums of money disbursed by the Lender pursuant to this Revolving Credit and
Security Agreement.

“Principal Balance” shall mean the from time to time amount of
Principal remaining unpaid.

“Reimbursement Obligations” shall mean any obligation of the
Borrower to repay advances made under the Supporting Letters of Credit
which obligations must either (i) be
nonrecourse to the Borrower or (ii) be fully subordinated and stood still to
the Revolving Loan and Plant Loan, and any replacements and refinances
thereof and any security given for the
repayment thereof under the terms and conditions of a subordination and standstill agreement
satisfactory to the Lender in all respects.

“Revolving Advances” shall mean, respectively, each direct
advance and the aggregate of all such direct advances made by the Lender
to the Borrower under and pursuant to this Agreement, as set forth in Section 2.1 of this Agreement.

“Revolving Loan”
shall mean the aggregate of all advances made by the Lender to the Borrower under and pursuant to this
Agreement, as set forth in Section 2.1 of this Agreement, not to exceed Revolving Loan
Availability.

“Revolving Loan
Availability” shall mean, at any time, an amount equal to the lesser of (a) the Revolving Loan Commitment or (b) the
Borrowing Base Amount, minus the outstanding Principal Balance of all unpaid Revolving Advances.

“Revolving Loan
Commitment” shall mean at any given time the maximum amount of Seven Million and 00/100 Dollars
($7,000,000.00).

“Revolving Note” shall mean a revolving note in the form
prepared by and acceptable to the Lender, dated as of the date hereof, in the amount of the Revolving
Loan Commitment and maturing on the Maturity Date, duly executed by the
Borrower and payable to the order of the
Lender, together with any and all renewal, extension, modification or replacement notes executed by
the Borrower and delivered to the Lender and given in substitution therefor.

“Senior Mortgage” means the Mortgage, Security Agreement and
Fixture Financing Statement
granting the Plant Lender a first priority mortgage lien on the Premises to secure the Borrower’s obligations on the
Plant Loan.

“Solvent” or “Solvency” as to any person or entity shall
mean that (i) the sum of the assets of such person or entity, both at a
fair valuation and at present fair salable value, will exceed its liabilities,
including contingent liabilities, (ii) such person or entity will

 14
 

have sufficient
capital with which to conduct its business as presently conducted and as proposed to be conducted and (iii) such
person or entity has not incurred debts, and does not intend to incur debts, beyond its ability
to pay such debts as they mature. For purposes of this definition, “debt”
shall mean any liability on a claim, and “claim” shall mean (x) a right to payment, whether or not such right is reduced to
judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured, or (y) a
right to an equitable remedy for breach of performance if such breach gives
rise to a payment, whether or not such right to an equitable remedy is reduced to judgment,
fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured. With respect to any such
contingent liabilities, such liabilities shall be computed at the amount
which, in light of all the facts and circumstances existing at the time,
represents the amount which can reasonably be expected to become an actual or matured liability.

“Subordinate
Debt” shall mean a subordinated loan to be made to the Borrower in the amount of $14,000,000.00 by the Subordinate
Lender and which is subject to the Subordination
and Standstill Agreement.

“Subordinate Lender” shall mean Rex Radio and Television, Inc.,
an Ohio corporation, or its designee.

“Subordination and Standstill Agreement” shall mean in each case
an agreement between Lender and any party whose debt is to be
subordinate to the Loan, including the Subordinate Lender, pursuant to which the parties agree to the
Subordination Requirements.

“Substantial Completion” shall have the meaning set forth in the
Plant Loan and Security Agreement.

“Substantial Completion Date” shall have the meaning set forth
in the Plant Loan and Security
Agreement.

“Supporting
Letters of Credit” shall mean “clean”, irrevocable, “evergreening” standby letters of credit issued pursuant to the (i)
Electrical Supply Agreement and (ii) Natural Gas Supply Agreements to assure the payment of the Borrower’s obligations thereunder.

“Tax Distribution” or “Tax Distributions” shall mean quarterly
Distributions to Members for the purpose of paying the quarterly
estimated federal and state income tax payments required to be made by each Member of Borrower based upon the
operations of the Borrower and the resulting federal and state tax
liability of such Member attributable to Borrower’s
operations in the assumed amount of 42%.

“Taxes” shall mean any and all present and future taxes, duties,
levies, imposts, deductions, assessments, charges or withholdings, and
any and all liabilities (including interest
and penalties and other additions to taxes) with respect to the foregoing.

“Title” shall mean Chicago Title Insurance Company, the title
insurer issuing the mortgagee’s
title insurance policy.

 15

“Turner County Litigation”
shall mean the Petition for Writ of Certiorari and Review of a Decision of the Turner County Board of
Adjustment dated March 14, 2006, filed by Great Plains Ethanol, LLC
against the Turner County Board of Adjustment, a summary of which has been previously provided to Lender.

“UCC”
shall mean the Uniform Commercial Code as the same may, from time to time, be in effect in the State of South Dakota,
provided, however, in the event that, by reason of mandatory provisions of law,
any or all of the attachment, perfection or priority of the Secured Part’s security interest in any
collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of South Dakota, the term shall mean the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to such
attachment, perfection or priority and for
purposes of definitions related to such provisions.

“UCC Policy” shall
mean a fully paid UCC Insurance Policy written in the full Revolving Loan
amount in form and substance satisfactory to Lender and written by Title (or
First American Title Insurance
Company) insuring title to the Collateral is vested in Borrower, free from all
Liens, naming Lender as the insured and insuring that the security interest of
the Lender in the Collateral is a valid, perfected first security interest.

“Unsecured Debt”
shall mean any unsecured subordinated loan or loans in the aggregate amount
of $2,000,000.00 made to the Borrower which shall be fully subordinate to the
Revolving Loan and may not be secured in any manner but which may be converted
to membership units in the
Borrower.

“Utility
Providers” shall mean those regulated providers of specific utility
services to the Project, i.e.
natural gas, water, electricity and other power and energy suppliers.

1.2                                 Accounting Terms. Any accounting terms used in this Agreement
which are not specifically defined herein shall have the meanings
customarily given them in accordance with GAAP.
Calculations and determinations of financial and accounting terms used and not otherwise specifically defined hereunder and
the preparation of financial statements to be furnished to the Lender
pursuant hereto shall be made and prepared, both as to classification of items and as to amount, in accordance with
sound accounting practices and GAAP as used in the preparation of the
financial statements of the Borrower on the date of this Agreement. If any
changes in accounting principles or practices from those used in the
preparation of the financial statements are hereafter occasioned by the
promulgation of rules, regulations, pronouncements and opinions by or required by the Financial Accounting Standards Board
or the American Institute of
Certified Public Accountants (or any successor thereto or agencies with similar
functions), which results in a
material change in the method of accounting in the financial statements
required to be furnished to the Lender hereunder or in the calculation of
financial covenants, standards or terms contained in this Agreement, the
parties hereto agree to enter into good faith negotiations to amend such
provisions so as equitably to reflect such changes to the end that the criteria
for evaluating the financial condition and performance of the Borrower will be
the same after such changes as they were before such changes; and if the
parties fail to agree on the amendment
of such provisions, the Borrower will furnish financial statements in accordance with such changes, but shall provide
calculations for all financial covenants, perform all financial
covenants and otherwise observe all financial standards and terms in accordance

 16
 

with applicable accounting
principles and practices in effect immediately prior to such changes. Calculations with respect to financial
covenants required to be stated in accordance with applicable accounting
principles and practices in effect immediately prior to such changes shall be reviewed and certified by the Borrower’s
accountants.

1.3                                 Other Terms Defined in UCC. All other capitalized words and phrases
used herein and not otherwise
specifically defined herein shall have the respective meanings assigned to such
terms in the UCC, to the extent the same are used or defined therein.

1.4                                 Other Interpretive Provisions.

(a)                                  The meanings of defined terms are equally
applicable to the singular and plural forms of the defined terms.
Whenever the context so requires, the neuter
gender includes the masculine and feminine, the single number includes
the plural, and vice versa, and in particular the word “Borrower” shall be so construed.

(b)                                 Section and Schedule references are to this
Agreement unless otherwise
specified. The words “hereof”, “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.

(c)                                  The term “including” is not limiting, and
means “including, without limitation”.

(d)                                 In the computation of periods of time from a
specified date to a later specified date, the word “from” means “from
and including”; the words “to” and “until”
each mean “to but excluding”, and the word “through” means “to and including”.

(e)                                  Unless otherwise expressly provided herein,
(i) references to agreements (including
this Agreement and the other Loan Documents) and other contractual instruments shall be deemed to
include all subsequent amendments, restatements,
supplements and other modifications thereto, but only to the extent such amendments, restatements, supplements and other modifications are not prohibited
by the terms of any Loan Document, and (ii) references to any statute or
regulation shall be construed as including all statutory and regulatory
provisions amending, replacing,
supplementing or interpreting such statute or regulation.

(f)                                    To the extent any of the provisions of the other Loan Documents are inconsistent with the terms of this
Agreement, the provisions of this Agreement
shall govern.

(g)                                 This Agreement and the other Loan Documents
may use several different limitations,
tests or measurements to regulate the same or similar matters. All such
limitations, tests and measurements are cumulative and each shall be performed
in accordance with its terms.

 17
 

2.

REVOLVING
LOAN.

2.1                                 Revolving Advances. Subject to the terms and conditions of this
Agreement and the other Loan
Documents, and in reliance upon the representations and warranties of the Borrower
set forth herein and in the other Loan Documents, the Lender agrees to make
such Revolving Advances at such times as the Borrower may request pursuant to
the provisions of Section 2.2 until, but not including, the Funding Expiration
Date, and in such amounts as the Borrower
may from time to time request, provided, however, that the aggregate principal
balance of all Revolving Advances
outstanding at any time shall not exceed the Revolving Loan Availability.
Revolving Advances made by the Lender may be repaid and, subject to the terms and conditions hereof, borrowed again up to,
but not including the Funding Expiration Date unless the Revolving Advances are otherwise accelerated, terminated or
extended as provided in this
Agreement. The Revolving Advances shall be used by the Borrower for the purpose
of working capital.

2.2                                 Procedure for Requesting a Revolving Advance. The Borrower agrees to comply with the following procedures in requesting
Revolving Advances:

(a)                                  The Borrower shall make each request for a
Revolving Advance to the Lender
before 11:00 a.m. (Minneapolis time) two (2) Business Days prior to
the day of the requested Revolving Advance which Revolving Advance must
be in a minimum of Fifty Thousand and 00/100 Dollars ($50,000.00). Requests must be made in writing accompanied by a current
Borrowing Base Certificate in the form of the Borrowing Base Certificate set
forth in Exhibit A, and transmitted by facsimile or electronic mail to the following address specifying the date of
the requested Revolving Advance
and the amount thereof:

Dougherty
Funding LLC 

90 South Seventh Street 

Suite 4300 

Minneapolis, Minnesota 55402

	
   

  	
  Attn:

  
	
   

  	
  Email:

  
	
   

  	
  Facsimile:

  
	
   

  	
  Telephone:

  

 

(b)                                 Upon
fulfillment of the applicable
conditions set forth in Section 3, Lender shall
disburse the requested Revolving Advance by transmitting the Revolving Advance
via Federal Reserve Wire Transfer to Borrower’s account as follows unless the
Lender and the Borrower shall agree in writing to another manner of
disbursement:

 18
 

Bank: 

ABA Number:

For the Account of:

Account Number:

Notify
on Receipt:

Upon
the Lender’s request, the Borrower shall promptly confirm each request for a
Revolving Advance by executing and delivering an appropriate confirmation
certificate to the Lender. The Borrower shall repay all Revolving Advances even if the Lender does not
receive such confirmation and even if the person requesting a Revolving
Advance was not in fact authorized to do so. Any request for a Revolving
Advance shall be deemed to be a representation by the Borrower that the conditions set forth in Section 3 have been satisfied
as of the time of the request.

2.3                                 Revolving Loan Interest. Except as otherwise provided in this Section
2.3, the principal amount of the Revolving Advances outstanding from time
to time shall bear interest as follows:

(a)                                  Pay Rate. During the term of the Revolving Loan at a
fluctuating per annum interest rate equal to 400 Basis Points plus LIBOR
as it adjusts on each Adjustment Date.

(b)                                 Default Rate. If an Event of
Default occurs, then, at the option of the Lender, during the entire period during which such Event of Default shall occur and be continuing interest shall be payable on the
Principal Balance at a per annum rate of interest equal to the lesser of (i)
the maximum lawful rate of interest permitted to be paid on the
Revolving Loan or (ii) 800 Basis Points
plus LIBOR as it adjusts from time to time (“Default Rate”) whether or not the Lender has
exercised its option to accelerate the maturity of the Revolving Loan
and declare the entire Principal Balance due
and payable.

2.4                                 Revolving Loan Interest Payments. Except as otherwise provided, payments of interest under the Revolving Loan shall
be payable as follows:

(a)                                  Prior to Maturity Date. Prior to Maturity Date, on the first day of
each month, there shall be paid monthly payments of all accrued and unpaid interest on the Principal Balance.

(b)                                 Maturity Date. On the Maturity Date the entire unpaid
balance plus accrued and unpaid
interest shall be due and payable in full

2.5                                 Revolving Loan Principal Payments.

(a)                                  Revolving Loan Mandatory Payments. All Revolving Advances hereunder shall be repaid by the Borrower on the
Maturity Date, unless payable sooner pursuant to the provisions of this
Agreement. In the event the aggregate outstanding principal balance of all
Revolving Advances hereunder exceeds the Revolving Loan Availability, the
Borrower shall, 

 19
 

                                                without notice or demand of any kind, immediately make such repayments of the Revolving
Advances or take such other actions as are satisfactory to the Lender as shall
be necessary to eliminate such excess.

(b)                                 Optional Prepayments. The Borrower may from time to
time prepay the Revolving
Advances, in whole or in part in the minimum amount of $100,000.00,
without any prepayment penalty whatsoever, provided that any prepayment of the entire principal
balance of the Advances shall include
accrued interest on such Advances to the date of such prepayment.

2.6                                 Discretionary Disbursements. The Lender, in its sole and absolute
discretion, may immediately upon
notice to the Borrower, disburse any or all proceeds of the Revolving Loan made or
available to the Borrower pursuant to this Agreement to pay any substantiated fees, costs, expenses or other amounts
undisputedly required to be paid by the Borrower hereunder and not so paid. All monies so disbursed shall be a part of the Obligations, payable by the Borrower on demand from the Lender.

2.7                                 Revolving Note. The Revolving Advances shall be evidenced by
the Revolving Note. At the time
of the initial disbursement of a Revolving Advance and at each time any additional Revolving Advance shall be
requested hereunder or a repayment made in whole or in part thereon, a notation thereof shall be
made on the books and records of the Lender. All amounts recorded shall
be, absent manifest error, conclusive and binding evidence of (i) the principal
amount of the Revolving Advances advanced hereunder, (ii) any accrued and
unpaid interest owing on the Revolving
Advances, and (iii) all amounts repaid on the Revolving Advances. The
failure to record any such amount or any error in recording such amounts shall not, however, limit or otherwise affect the
obligations of the Borrower under the Revolving Note to repay the correct and undisputed principal
amount of the Revolving Advances, together with all interest accruing thereon.

2.8                                 Interest Computation; Collection of Funds. Except as otherwise set forth herein, all interest and fees shall be
calculated on the basis of a year consisting of 360 days and shall be paid for
the actual number of days elapsed. If any payment to be made by the Borrower hereunder or under the
Revolving Note shall become due on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in computing any interest in
respect of such payment. Notwithstanding anything to the contrary contained herein, the final payment due under
the Revolving Loan must be made by wire transfer or other immediately available
funds. All payments made by the Borrower hereunder or under any of the Loan
Documents shall be made without setoff, counterclaim, or other defense. To the extent permitted by applicable
law, all payments hereunder or
under any of the Loan Documents (including any payment of Principal, interest,
or fees) to, or for the benefit, of any Person shall be made by the
Borrower free and clear of, and without deduction or withholding for, or
account of, any Taxes now or hereinafter imposed by any taxing authority.

2.9                                 Application of Payments. Any payments received by the Lender shall be
applied (i) to any costs of collection, (ii) to Late Charges, (iii) to
Interest, (iv) to Principal Balance and

 20
 

(v) if any advance has been
made by the Lender under the terms of this Agreement or any Loan Documents
to repay such advances plus interest thereon, all in such order and priority as
the Lender shall determine. Upon an Event of Default any monies received shall,
at the option and direction of the Lender, be applied to any sums due
hereunder and any Loan Documents in such order and priority as the Lender shall
determine.

2.10                           Late Charge. In the event that any payment required under the Revolving Note is not paid when due, the Borrower agrees
to pay a late charge of $.04 per $1.00 of unpaid payment to defray the costs of
the Lender incident to collecting such late payment. This late charge shall
apply individually to all payments past due and there will be no daily pro rata
adjustment. This provision shall not be
deemed to excuse a late payment or be deemed a waiver of any other rights the Lender may have including the right to declare
the entire unpaid principal and interest immediately due and payable.

2.11                           Unused
Line Fee. For the purposes of this Section 2.11, “Unused Amount” means the Revolving Loan Commitment reduced
by outstanding Revolving Advances. The Borrower agrees to pay to the Lender an unused line fee at the rate of
one-quarter of one percent (0.25%)
per quarter on the average daily Unused Amount from the date of this Agreement to and including the Funding Expiration Date, due and
payable quarterly in arrears on the last day of each calendar quarter and on
the Funding Expiration Date. No fee under this Section 2.11 shall be payable until the earlier of: (1) the
first Revolving Advance, or (2) Substantial Completion.

2.12                           Taxes.

(a)                                  All payments made by the Borrower under this
Agreement shall be made free and clear of, and without deduction or
withholding for or on account of, any
present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed,
levied, collected, withheld or assessed by any governmental authority, excluding net income taxes and
franchise taxes (imposed in lieu of
net income taxes) imposed on the Lender as a result of a present or former connection between the
Lender and the jurisdiction of the governmental authority imposing such
tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising solely from the Lender having executed,
delivered or performed its obligations or received a payment under, or
enforced, this Agreement or any other
Loan Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings (collectively, “Non-Excluded Taxes”) or Other Taxes are
required to be withheld from any amounts payable to the Lender hereunder, the
amounts so payable to the Lender shall
be increased to the extent necessary to yield to the Lender (after
payment of all Non-Excluded Taxes and Other Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement, provided, however, that the Borrower shall not be required to
increase any such amounts payable to the Lender with respect to any Non-Excluded Taxes that are attributable to the Lender’s
failure to comply with the
requirements of subsection 2.12(c).

 21
 

(b)                                 The Borrower shall pay any Other Taxes to the
relevant governmental authority
in accordance with applicable law.

(c)                                  At the request of the Borrower and at the Borrower’s sole cost,
the Lender shall take reasonable steps to (i) contest its liability for any
Non-Excluded Taxes or Other Taxes that have not been paid, or (ii) seek
a refund of any Non-Excluded Taxes or
Other Taxes that have been paid.

(d)                                 Whenever any Non-Excluded Taxes or Other Taxes
are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Lender a
certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded
Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Lender the
required receipts or other required documentary evidence or if any
governmental authority seeks to collect
a Non-Excluded Tax or Other Tax directly from the Lender for any other reason,
the Borrower shall indemnify the Lender on an after-tax basis for any incremental taxes, interest or
penalties that may become payable
by the Lender.

(e)                                  The agreements in this
Section shall survive the satisfaction and payment of the Obligations and the termination of this Agreement.

2.13                           All Advances to Constitute Single
Obligation. The Advances shall constitute one general obligation of the
Borrower, and shall be secured by Lender’s priority security interest in and Lien upon all of the Collateral and by
all other security interests, Liens, claims and encumbrances heretofore, now or at any time or times hereafter granted
by the Borrower to Lender.

2.14                           Extension Right. Provided the following
conditions are satisfied: (1) the Borrower’s request is made in writing
not less than ninety (90) days prior to the initial Maturity Date; (2) the request is accompanied by the
Maturity Date Extension Fee; and (3) the Revolving Loan is current and no Event
of Default exists under the Loan Documents, the Maturity Date and Funding
Expiration Date of the Revolving Loan may be extended for an additional period
of twelve (12) months..

2.15                            Savings Clause. It is expressly stipulated and agreed to be
the intent of Borrower and Lender at all times to comply with applicable
state law or applicable United States federal law (to the extent that it permits Lender to contract for, charge,
take, reserve, or receive a greater amount of interest than permitted
under state law) and that this section shall control every other covenant and agreement in this Agreement and
any other Loan Documents delivered in connection herewith. If the
applicable law is ever judicially interpreted so as to render usurious any amount called for under the Revolving Note
or under any other Loan Documents, or contracted for, charged, taken,
reserved, or received with respect to the indebtedness evidenced by this
Revolving Loan (“Indebtedness”), or if Lender’s exercise of the option to
accelerate the maturity of the Revolving Note, or if any prepayment by Borrower
results in Borrower having 

 22
 

paid any interest in excess of that permitted by applicable law, then it is
Borrower’s and Lender’s express intent that all excess amounts
theretofore collected by Lender shall be credited on the Principal Balance of this Note and all other
Indebtedness (or, if this Note and all other Indebtedness have been or would thereby be paid in full, refunded to
Borrower), and the provisions of the Revolving Note and the other Loan
Documents shall immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder reduced, without the necessity of the execution of any new
documents, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder or thereunder.
All sums paid or agreed to be
paid to Lender for the use, forbearance, or detention of the Indebtedness
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full stated term of the Indebtedness until
payment in full so that the rate or amount of interest on account of the
Indebtedness does not exceed the maximum lawful rate from time to time in effect and applicable to the Indebtedness for
so long as the Indebtedness is
outstanding. Notwithstanding anything to the contrary contained herein or in
any of the other Loan Documents, it is not the intention of Lender to
accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned
interest at the time of such acceleration.

3.

CONDITIONS
OF BORROWING.

Notwithstanding any other
provision of this Agreement, the Lender shall not be required  to disburse, make or continue all or any
portion of the Advances, if any of the following conditions shall have occurred.

3.1                                 Loan Documents. The Borrower shall have failed to execute and deliver to the Lender any of
the following Loan Documents, all of which must be satisfactory to the Lender and the Lender’s counsel in form, substance
and execution:

(a)                                  Revolving Loan and Security Agreement. This Agreement duly executed by the Borrower.

(b)                                 Revolving Note. The Revolving Note duly executed by the Borrower, in the
form prepared by and acceptable to the Lender.

(c)                                  Subordination and Standstill Agreement. A Subordination and Standstill
Agreement dated as of the date of this Agreement, from the holder of the Subordinate Debt, in the form prepared by and
acceptable to the Lender.

(d)                                 Collateral Access Agreement. Collateral Access Agreements dated as of the date of this Agreement, from the owner, lessor
or mortgagee, as the case may be, of
any real estate whereon any Collateral is stored or otherwise located, in the
form prepared by and acceptable to the Lender.

(e)                                  Borrowing Base Certificate. A Borrowing Base Certificate in the form prepared by the Lender, certified as accurate by the
Borrower and acceptable to the Lender
in its sole discretion.

 23
 

(f)                                    Search Results; Lien Terminations. Copies of UCC search reports dated
such a date as is reasonably acceptable to the Lender, listing all effective
financing statements which name the Borrower, under its present names and any previous names, as debtors, together
with (i) copies of such financing
statements, (ii) payoff letters evidencing repayment in full of all existing
Debt to be repaid with the Advances, the termination of all agreements relating thereto and the release of
all Liens granted in connection
therewith, with UCC or other appropriate termination statements and
documents effective to evidence the foregoing (other than Permitted Liens), and
(iii) such other UCC termination statements as the Lender may reasonably request.

(g)                                 Organizational and Authorization Document. Copies of (i) the Articles of Organization (Certificate of
Formation) and Operating Agreement of the Borrower; (ii) resolutions of the
members of the Borrower approving and authorizing
such Person’s execution, delivery and performance of the Loan Documents to
which it is part and the transactions contemplated thereby; (iii) signature
and incumbency certificates of the members
of the Borrower, executing any of the
Loan Documents, each of which the Borrower hereby certifies to be true
and complete, and in full force and effect
without modification, it being understood that the Lender may conclusively rely on each such document and
certificate until formally advised by the Borrower of any changes
therein; and (iv) good standing certificates
in the state of formation of the Borrower and in each other state requested by the Lender.

(h)                                 Insurance. Evidence satisfactory to the Lender of the existence of insurance required to be maintained pursuant
to Section 6.6, together with evidence that the Lender has been named as a lender’s loss payee on all
related insurance policies.

(i)                                     Intercreditor and Collateral Priority Agreement. The
Intercreditor and Collateral
Priority Agreement, duly executed by Lender and Plant Lender, in the form prepared by and acceptable to the Lender.

(j)                                     Additional Documents. Such other certificates,
financial statements, schedules, resolutions, opinions of counsel, notes
and other documents which are provided for hereunder or which the
Lender shall require.

(k)                                  Borrower Equity. The Borrower Equity (as defined in the Plant
Loan and Security Agreement)
shall have been received by Borrower and disbursed to pay Project Costs as
required by the Plant Loan and Security Agreement. Borrower shall also provide copies of the documentation evidencing the Borrower Equity to Lender

(I)                                    Governmental Requirements and Approvals. All regulatory approvals
required for the construction and operation of the Project as of the date of 

 24
 

                                                the Advance (as described in and consistent
with the Plant Loan and Security
Agreement) shall have been issued without conditions (other than as may be satisfied
by the Work) and copies thereof provided
to Lender.

(m)                               Flood Certification.
Evidence satisfactory to Lender that the Plant is not located in the flood plain.

(n)                                 Opinion. Prior to the Loan Closing, Borrower shall furnish such opinions of counsel as Lender may require in
connection with the matters contemplated by this Agreement.

(o)                                 Appraisal. An Appraisal as provided in Section 6.23.

(p)                                 Plant Loan Documents. Copies of the executed Plant Loan Documents.

(q)                                 Project Documents. Copies of each Project Document (as defined
in the Plant Loan Documents).

(r)                                    Third Part Consents. Consents of each third party to the Project Documents consenting to the collateral
assignment of such documents to Lender,
to the extent required to be received by Plant Lender.

(s)                                  Utility Preconditions. Evidence satisfactory to the Lender that all Utility Preconditions (as defined in the Plant Loan
Documents) have been satisfied,
to the extent required to be received and approved by Plant Lender.

(t)                                    Rail Agreements. The Rail Agreements (as defined in the Plant
Loan Documents), the Rail Spur Contract (as defined in the Plant Loan Documents), and all other agreements
necessary to provide rail access to the
Plant must be executed and in full force and effect, to the extent required to be received and approved by Plant
Lender.

(u)                                 Turner County Litigation. The Turner County Litigation shall
have been finally resolved in a
manner satisfactory to Lender.

3.2                                 Event of Default. Any Event of Default shall have
occurred and be continuing.

3.3                                 Material Adverse Effect. The occurrence of any event having a
Material Adverse Effect upon the
Borrower.

3.4                                 Litigation. Any litigation or governmental proceeding shall have been instituted against the Borrower having a
Materially Adverse Effect upon the Borrower.

3.5                                 Representations and Warranties. Any representation or warranty of the Borrower contained herein or in any Loan Document shall be untrue or incorrect
as of the date of any Loan as
though made on such date, except to the extent such representation or warranty
expressly relates to an earlier
date.

 25
 

3.6                                 Supporting Letters of Credit. The Supporting Letters of
Credit shall have not been
issued on terms and conditions reasonably acceptable to Lender.

3.7                                 Substantial Completion. The Borrower shall have failed to certify
that Substantial Completion will be achieved no later than ninety (90)
days after the initial Advance hereunder.

3.8                                 UCC
Insurance. On the Closing Date, Borrower shall have failed to furnish Lender with a fully paid UCC Policy written
in the full Loan amount in form and substance satisfactory to Lender and written by Title (or First American Title
Insurance Company) insuring title to the Collateral is vested in
Borrower, free from all Liens (with the exception of the Plant Lender’s Liens and the Subordinate Lender’s
Liens), naming Lender as the insured and insuring that the security interest of the Lender in the Collateral is a valid,
perfected first security interest.

3.9                                 Commitment Fee. The Borrower shall have failed to pay to
the Lender a commitment fee in
the amount of One Hundred Forty Thousand and 00/100 Dollars ($140,000.00), payable on the execution of this Agreement by the Lender.

3.10                           Extension Fees. The Borrower shall have failed to pay
the Lender any extension fee
required under this Agreement, including the Maturity Date Extension Fee.

4.

SECURITY
FOR THE OBLIGATIONS.

4.1                                 Grant of Security Interest. To secure the prompt payment and performance
of the Revolving Loan, Borrower hereby grants a
continuing security interest in and Lien upon all assets of Borrower, including all of the
following property (all of which
property, along with the products
and proceeds therefrom, are individually and collectively referred to as the “Collateral”)
whether now owned or hereafter acquired, and wherever located:

(i)                                     all Accounts;

(ii)                                  all Inventory;

(iii)                               all accessions to,
substitutions for, and all replacements, products, and cash and non-cash
proceeds of the foregoing, including proceeds of and unearned premiums with
respect to insurance policies, and claims against any Person for loss, damage or destruction of any Collateral; and

(iv)                              all books and records (including customer lists, files, correspondence, tapes,
computer programs, print-outs and
computer records) pertaining to the
foregoing.

4.2                                 Possession and Transfer of Collateral. Unless an Event of Default exists hereunder, the Borrower shall be entitled to
possession or use of the Collateral (other than Instruments or Documents, Tangible Chattel Paper, Investment Property
consisting of certificated
securities and other Collateral required to be delivered to the Lender pursuant
to this Section 4). The
cancellation or surrender of the Revolving Note, upon payment or otherwise,

 26
 

shall not affect the right of the Lender to retain the Collateral for
any other of the Obligations.  The Borrower shall not sell, assign (by operation of law or otherwise),
license, lease or otherwise dispose
of, or grant any option with respect to any of the Collateral, except that the
Borrower may sell Inventory and
worn, damaged, or obsolete Equipment in the ordinary course of business

4.3                                 Financing Statements. The Borrower shall, at the Lender’s
request, at any time and from time to time, execute and deliver to the Lender
such financing statements, amendments and other documents and do such acts as the Lender deems necessary in
order to establish and maintain
valid, attached and perfected first priority security interests in the
Collateral in favor of the Lender, free and clear of all Liens and
claims and rights of third parties whatsoever, except Permitted Liens. The
Borrower hereby irrevocably authorizes the Lender at any time, and from time to
time, to file in any jurisdiction any initial financing statements and
amendments thereto without the signature
of the Borrower that (a)
indicate the Collateral (i) is comprised of all assets of the Borrower or words
of similar effect, regardless of whether any particular asset comprising a part of the Collateral falls within
the scope of Article 9 of the Uniform Commercial Code of the jurisdiction wherein such
financing statement or amendment is filed, or (ii) as being of an equal or
lesser scope or within greater detail as the grant of the security interest set
forth herein, and (b) contain any other
information required by Section 5 of Article 9 of the Uniform Commercial Code
of the jurisdiction wherein such financing statement or amendment is filed
regarding the sufficiency or filing
office acceptance of any financing statement or amendment, including (i)
whether the Borrower is an organization, the type of organization and any
Organizational Identification Number issued to the Borrower, and (ii) in the
case of a financing statement filed as a
fixture filing or indicating Collateral as as-extracted collateral or timber to
be cut, a sufficient description of the real property to which the
Collateral relates. The Borrower hereby agrees
that a photocopy or other reproduction of this Agreement is sufficient for
filing as a financing statement
and the Borrower authorizes the Lender to file this Agreement as a financing
statement in any jurisdiction. The Borrower agrees to furnish any such
information to the Lender promptly upon request. The Borrower further ratifies
and affirms its authorization for any financing statements and/or amendments thereto, executed and filed by
the Lender in any jurisdiction
prior to the date of this
Agreement. In addition, the Borrower shall make appropriate entries on its books and records disclosing
the Lender’s security interests in the Collateral.

4.4                                 Preservation of the Collateral. The
Lender may, but is not required, to take such actions from time to time as the Lender deems appropriate to maintain
or protect the Collateral. The
Lender shall have exercised reasonable care in the custody and preservation of
the Collateral if the Lender takes such action as the Borrower shall
reasonably request in writing which is not inconsistent with the Lender’s status as a secured part, but the failure
of the Lender to comply with any such request shall not be deemed a
failure to exercise reasonable care; provided, however, the Lender’s
responsibility for the safekeeping of the Collateral shall (i) be deemed
reasonable if such Collateral is accorded treatment substantially equal to that
which the Lender accords its own property,
and (ii) not extend to matters beyond the control of the Lender, including acts of God, war, insurrection,
riot or governmental actions. In addition, any failure of the Lender to
preserve or protect any rights with respect to the Collateral against prior or
third parties, or to do any act with respect to preservation of the Collateral,
not so requested by the Borrower, shall
not be deemed a failure to exercise reasonable care in the custody or
preservation of the Collateral. The Borrower shall have the sole
responsibility for taking such action as may be necessary, from time to time, to preserve all rights of the Borrower
and the Lender in the  

 27
 

Collateral against prior or third parties. Without
limiting the generality of the foregoing, where Collateral consists in whole or
in part of securities, the Borrower represents to, and covenants with, the
Lender that the Borrower has made arrangements for keeping informed of changes
or potential changes affecting the securities (including rights to convert or
subscribe, payment of dividends,
reorganization or other exchanges, tender offers and voting rights), and the
Borrower agrees that the Lender shall have no responsibility or liability
for informing the Borrower of any such
or other changes or potential changes or for taking any action or omitting to
take any action with respect thereto.

4.5                                 Other Actions as to any and all Collateral. The Borrower further agrees to take any other action reasonably requested by the
Lender to ensure the attachment, perfection and first priority of, and the ability of the Lender to enforce, the Lender’s
security interest in any and all
of the Collateral, including (a)
causing the Lender’s name to be noted as secured party on any certificate
of title for a titled good if such notation is a condition to attachment,
perfection or priority of, or ability of the Lender to enforce, the Lender’s
security interest in such Collateral, (b) complying with any provision of any
statute, regulation or treaty of the United States as to any Collateral if compliance with such
provision is a condition to attachment, perfection or priority of, or
ability of the Lender to enforce, the Lender’s security interest in such
Collateral, (c) obtaining governmental and other third party consents and approvals,
including any consent of any licensor,
lessor or other Person obligated on Collateral, (d) obtaining waivers from mortgagees
and landlords in form and substance satisfactory to the Lender, and (e) taking
all actions required by the UCC in effect from time to time or by other law, as
applicable in any relevant UCC jurisdiction, or by other law as applicable in
any foreign jurisdiction. The Borrower
further agrees to indemnify and hold the Lender harmless against claims of any Persons not a party to this Agreement
concerning disputes arising over the Collateral.

4.6                                 Collateral in the Possession of a Warehouseman
or Bailee. If any of the Collateral at any time is in the
possession of a warehouseman or bailee, the Borrower shall promptly
notify the Lender thereof, and shall promptly obtain a Collateral Access
Agreement. The Lender agrees with the
Borrower that the Lender shall not give any instructions to such warehouseman
or bailee pursuant to such Collateral Access Agreement unless an Event of Default
has occurred and is continuing, or would occur after taking into account any
action by the Borrower with respect to
the warehouseman or bailee.

4.7                                 Letter-of-Credit Rights. If the Borrower at any time is a beneficiary under a letter of
credit now or hereafter issued in favor of the Borrower to secure payment of an
Account, the Borrower shall promptly notify the Lender thereof and, at the
request and option of the Lender, the Borrower shall, pursuant to an agreement
in form and substance satisfactory to the Lender, either (i) arrange for the issuer and any confirmer of such letter of
credit to consent to an assignment
to the Lender of the proceeds of any drawing under the letter of credit, or
(ii) arrange for the Lender to
become the transferee beneficiary of the letter of credit, with the Lender
agreeing, in each case, that the proceeds of any drawing under the letter to
credit are to be applied as
provided in this Agreement.

4.8                                 Electronic Chattel Paper and Transferable
Records. If the Borrower at
any time holds or acquires an interest in any electronic chattel paper
or any “transferable record”, as that term
is defined in Section 201 of the federal Electronic Signatures in Global and National

 28
 

Commerce
Act, or in Section 16 of the Uniform Electronic Transactions Act as in
effect in any relevant
jurisdiction, the Borrower shall promptly notify the Lender thereof and, at the
request of the Lender, shall take such action as the Lender may
reasonably request to vest in the Lender control
under Section 9-105 of the UCC of such electronic chattel paper or control
under Section 201 of the federal Electronic Signatures in Global and
National Commerce Act or, as the case may be, Section 16 of the Uniform
Electronic Transactions Act, as so in effect in such jurisdiction, of such
transferable record. The Lender agrees with the Borrower that the Lender will
arrange, pursuant to procedures satisfactory to the Lender and so long as such
procedures will not result in the
Lender’s loss of control, for the Borrower to make alterations to the electronic
chattel paper or transferable record permitted under Section 9-105 of the UCC
or, as the case may be, Section 201 of
the federal Electronic Signatures in Global and National Commerce Act or Section 16 of the Uniform
Electronic Transactions Act for a part in control to make without loss of
control.

4.9                                 Administration of Inventory.

(a)                                 Records and Reports of Inventory. Borrower shall keep accurate and complete records of its Inventory, including
costs and daily withdrawals and additions, and shall submit to Lender inventory reports in form reasonably satisfactory to Lender, on such periodic basis as Lender may
request. Borrower shall conduct a physical
inventory at least once per calendar year (and on a more frequent
basis if requested by Lender when an Event of Default exists) and
periodic cycle counts consistent with
historical practices, and shall provide to Lender a report based on each
such inventory and count promptly upon completion thereof, together with such supporting information as Lender may request. Lender may
participate in and observe each
inventory or physical count.

(b)                                Records and Schedules of Equipment. Borrower shall keep accurate and complete
records of its Equipment, including kind, quality, quantity, cost, acquisitions and dispositions thereof, and
shall submit to Lender, on such periodic basis as Lender may request, a
current schedule thereof, in form satisfactory to Lender. Promptly upon
request, Borrower shall deliver to Lender evidence of its ownership or interests in any Equipment.

(c)                                 Dispositions of Equipment. Borrower shall not sell,
lease or otherwise dispose of any
Equipment, without the prior written consent of Lender, other than replacement
of Equipment that is worn, damaged or obsolete with Equipment of like function
and value, if the replacement Equipment is acquired substantially contemporaneously with such disposition and
is free of Liens.

4.10                           Business Purpose. Any Collateral installed in or used in the
Premises are to be used by the Borrower solely for Borrower’s business
purposes and such Collateral will
be kept on the Premises and will not be
removed therefrom without the consent of the Lender and may be affixed
to such buildings but will not be affixed to any other real estate.

4.11                           Remedies Not Cumulative. The
exercise of any one or more of the remedies provided for under the UCC
shall not be construed as a waiver of any of the other rights of the 

 29
 

Lender including having any Collateral deemed part of
the realty upon any foreclosure thereof. If notice to any part of the intended disposition of the Collateral is
required by law in a particular instance, such notice shall be deemed
commercially reasonable if given at least ten (10) days prior to such intended
disposition and may be given by advertisement in a newspaper accepted for legal
publications either separately or as part of a notice given to foreclose the
real property or may be given by
private notice if such parties are known to Lender. Borrower will on demand deliver all financing statements
that may from time to time be required by Lender to establish, perfect and continue the priority
of Lender’s security interest in
the Collateral and shall pay all expenses incurred by Lender in
connection with the renewal, continuation or extensions of any financing
statements executed in connection with the Premises; and shall give advance written notice of any proposed change in
Borrower’s name, identity or structure and will execute and deliver to
Lender prior to or concurrently with such change all additional financing
statements that Lender may require to establish and perfect the priority of
Lender’s security interest.

4.12                           Notification of Account Debtors and Other
Obligors. The Lender may at
any time after an Event of Default notify any account debtor or other
person obligated to pay the amount due that such right to payment has been
assigned or transferred to the Lender for security and shall be paid directly
to the Lender. The Borrower will join in giving such notice if the Lender so requests. At any time after the Borrower
or the Lender gives such notice to an account debtor or other obligor, the Lender may, but need not, in the Lender’s name or in the Borrower’s
name, demand, sue for, collect or receive any money or property at any
time payable or receivable on account
of, or securing, any such right to payment, or grant any extension to, make any compromise or settlement with or otherwise
agree to waive, modify, amend or change the obligations (including collateral obligations) of any such account
debtor or other obligor.

4.13                           Assignment of Insurance. As additional security for the payment and
performance of the Loan, the Borrower hereby assigns to the Lender any
and all monies (including proceeds of
insurance and refunds of unearned premiums) due or to become due under, and all
other rights of the Borrower with respect to, any and all policies of
insurance now or at any time hereafter covering
the Collateral or any evidence thereof or any business records or valuable
papers pertaining thereto, and the Borrower hereby directs the issuer of
any such policy to pay all such monies
directly to the Lender. At any time the Lender may (but need not), in the
Lender’s name or in the Borrower’s name, execute and deliver proof of claim,
receive all such monies, endorse checks and other instruments representing
payment of such monies, and adjust, litigate, compromise or release any claim
against the issuer of any such policy.

4.14                           License. Without limiting the generality of any other Loan Document, the Borrower hereby grants to the Lender a
non-exclusive, worldwide and royalty-free license to use or otherwise exploit all Intellectual Property
Rights of the Borrower for the purpose of: (a) producing
Ethanol, DDGs and CO2 from the Plant and (b) selling, leasing or otherwise
disposing of any or all Collateral.

4.15                           Collateral. This Agreement does not contemplate a sale of Accounts, Contract
Rights or Chattel Paper, and, as provided by law, the Borrower is entitled to
any surplus and shall remain liable for
any deficiency. The Lender’s duty of care with respect to Collateral in its possession (as imposed by law) shall be
deemed fulfilled if it exercises reasonable care in

 30

physically keeping such Collateral, or in the case of
Collateral in the custody or possession of a bailee or other third person, exercises
reasonable care in the selection of the bailee or other third person, and the Lender need not otherwise
preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated to preserve any rights the Borrower may have against prior parties, to realize on the Collateral at all
or in any particular manner or order or to apply any cash proceeds of the Collateral
in any particular order of application. The Lender has no obligation to
clean-up or otherwise prepare the Collateral for sale. The Borrower waives any
right it may have to require the
Lender to pursue any third person for any of the Obligations.

5.

REPRESENTATIONS AND WARRANTIES.

To induce the Lender to
make the Advances, the Borrower makes the following representations and warranties to the Lender,
each of which shall survive the execution and delivery of this Agreement:

5.1           Borrower Organization and Name. The Borrower is a limited liability company
duly organized, existing and in
good standing under the laws of the State of South Dakota, with full and adequate power to carry on and
conduct its business as presently conducted. The Borrower is duly licensed or qualified in all foreign jurisdictions
wherein the nature of its activities
require such qualification or licensing, except for such jurisdictions where
the failure to so qualify would
not have a Material Adverse Effect. The Borrower’s Organizational Identification Number is DL009781. The exact
legal name of the Borrower is as
set forth in the first paragraph of this Agreement, and the Borrower currently
does not conduct, nor has it during the last five (5) years conducted, business
under any other name or trade name.

5.2           Authorization.
The Borrower has full right, power and authority to enter into this Agreement,
to make the borrowings and execute and deliver the Loan Documents as provided
herein and to perform all of its duties and obligations under this Agreement
and the other Loan Documents. The execution and delivery of this Agreement and
the other Loan Documents will not, nor
will the observance or performance of any of the matters and things herein or
therein set forth, violate or
contravene any provision of law or of the certificate of organization of the Borrower.
All necessary and appropriate action has been taken on the part of the Borrower
to authorize the execution and delivery
of this Agreement and the Loan Documents.

5.3           Validity and Binding Nature. This Agreement and the other Loan Documents
are the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their terms, subject to
bankruptcy, insolvency and similar laws affecting the enforceability of creditors’ rights generally and to general principles
of equity.

5.4           Consent; Absence of Breach. The execution, delivery and performance of
this Agreement, the other Loan Documents and any other documents or
instruments to be executed and delivered
by the Borrower in connection with the Advances, and the borrowings by the Borrower
hereunder, do not and will not (a) require any consent, approval, authorization
of, or filings with, notice to or other act by or in respect of, any
governmental authority or any other Person
(other than any consent or approval which has been obtained and is in full
force and effect); (b) conflict
with (i) any provision of law or any applicable regulation, order, writ,

 31
 

injunction or decree of any
court or governmental authority, (ii) the articles of organization of the Borrower, or (iii) any material agreement, indenture, instrument or
other document, or any judgment,
order or decree, which is binding upon the Borrower or any of its properties or
assets; or (c) require, or result in, the creation or imposition of any Lien on
any asset of Borrower, other than Liens in favor of the Lender created pursuant
to this Agreement.

5.5           Ownership of Properties; Liens. The Borrower is the sole owner all of its
properties and assets, real and personal, tangible and intangible, of any
nature whatsoever (including
patents, trademarks, trade names, service marks and copyrights), free and clear
of all Liens, charges and claims (including infringement claims with
respect to patents, trademarks, service
marks, copyrights and the like), other than Permitted Liens.

5.6           Intellectual Property. The Borrower owns and possesses or has a
license or other right to use
all Intellectual Property, as are necessary for the conduct of the businesses
of the Borrower, without any
infringement upon rights of others which could reasonably be expected to have a
Material Adverse Effect upon the Borrower, and no material claim has been
asserted and is pending by any Person challenging or questioning the use
of any Intellectual Property or the validity or effectiveness of any
Intellectual Property nor does the Borrower know of any valid basis for any such claim.

5.7           Financial Statements. All financial statements submitted to the
Lender have been prepared in
accordance with sound accounting practices and GAAP on a basis, except as otherwise
noted therein, consistent with the previous fiscal year and present fairly the
financial condition of the Borrower and the results of the operations for the
Borrower as of such date and for the periods indicated. Since the date of the
most recent financial statement submitted by the Borrower to the Lender, there
has been no change in the financial condition or in the assets or liabilities of the Borrower having a Material Adverse Effect on the Borrower.

5.8           Litigation and Contingent Liabilities. There is no litigation, arbitration proceeding, demand, charge, claim, petition or
governmental investigation or proceeding pending, or threatened, against the Borrower, which, if adversely
determined, which might reasonably be expected to have a Material Adverse
Effect upon the Borrower, except as set forth in Schedule 5.8. Other than any liability incident to such
litigation or proceedings, the Borrower has no material guarantee obligations, contingent liabilities,
liabilities for taxes, or any long-term leases or unusual forward or long-term
commitments, including any interest rate or foreign currency swap or
exchange transaction or other obligation in respect of derivatives, that are
not fully-reflected or fully reserved for in the most recent audited financial
statements delivered pursuant to
Section 6 or fully-reflected or fully reserved for in the most recent quarterly
financial statements delivered pursuant to Section 6 and not permitted by Section
7.1.

5.9           Event of Default. No Event of Default exists or would result
from the incurrence by the Borrower of any of the Obligations hereunder
or under any of the other Loan Document, and
the Borrower is not in default (without regard to grace or cure periods) under
any other contract or agreement
to which it is a party.

5.10         Adverse Circumstances. No condition, circumstance, event,
agreement, document, instrument,
restriction, litigation or proceeding (or threatened litigation or proceeding

 32
 

or basis therefor) exists which (a) would have a
Material Adverse Effect upon the Borrower, or (b) would constitute an Event of Default.

5.11         Environmental
Laws and Hazardous Substances. The Borrower has not generated, used, stored, treated, transported, manufactured, handled,
produced or disposed of any Hazardous
Substances, on or off any of the premises of the Borrower (whether or not owned by it) in any manner which at
any time violates any Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder. The Borrower will comply in all material
respects with all Environmental Laws and will obtain all licenses, permits
certificates, approvals and similar
authorizations thereunder. There has been no investigation, proceeding, complaint,
order, directive, claim, citation or notice by any governmental authority or
any other Person, nor is any pending or,
to the best of the Borrower’s knowledge, threatened, and the Borrower
shall immediately notify the Lender upon becoming aware of any such
investigation, proceeding, complaint,
order, directive, claim, citation or notice, and shall take prompt and
appropriate actions to respond thereto, with respect to any non-compliance
with, or violation of, the requirements of any Environmental Law by the
Borrower or the release, spill or discharge, threatened or actual, of any Hazardous Material or the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Material or any other
environmental, health or safety matter, which affects the Borrower or its
business, operations or assets or any properties at which the Borrower
has transported, stored or disposed of
any Hazardous Substances. The Borrower has no material liability, contingent or
otherwise, in connection with a
release, spill or discharge, threatened or actual, of any Hazardous Substances or the generation, use, storage,
treatment, transportation, manufacture, handling, production or disposal
of any Hazardous Material. The Borrower further agrees to allow the Lender or its agent access to the properties
of the Borrower to confirm compliance with all Environmental Laws, and the
Borrower shall, following determination by the Lender that there is non-compliance,
or any condition which requires any action by or on behalf of the Borrower in order to avoid any non-compliance, with any
Environmental Law, at the Borrower’s sole expense, cause an independent
environmental engineer acceptable to the Lender to conduct such tests of the relevant site as are
appropriate, and prepare and deliver a report setting forth the result of such tests, a proposed plan for
remediation and an estimate of the costs thereof.

5.12         Solvency, etc. As of the date hereof, and immediately
prior to and after giving effect
to the issuance of each Advance hereunder and the use of the proceeds thereof,
the Borrower is Solvent, and (a)
the fair value of the Borrower’s
assets is greater than the amount of its liabilities (including disputed, contingent and unliquidated
liabilities) as such value is established and liabilities evaluated as
required under the Section 548 of the Bankruptcy Code, (b) the present fair saleable value of the Borrower’s assets is not less than the amount that will be required
to pay the probable liability on its debts as they become absolute and matured,
(c) the Borrower is able to realize
upon its assets and pay its debts and other liabilities (including disputed, contingent and unliquidated
liabilities) as they mature in the normal course of business, (d) the Borrower does not
intend to, and does not believe that it will, incur debts or liabilities beyond its ability to pay as such debts and
liabilities mature, and (e) the Borrower is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
its property would constitute unreasonably small capital.

 33
 

5.13         ERISA Obligations. Neither the Borrower nor any ERISA Affiliate
(i) maintains or has maintained any Plan, (ii) contributes or has contributed to
any Multiemployer Plan or (iii) provides or has provided post-retirement
medical or insurance benefits with respect to employees or former
employees (other than benefits required under Section 601 of ERISA, Section
4980B of the IRC or applicable state law). Neither the Borrower nor any ERISA
Affiliate will (i) adopt,
create, assume or become a party to any Plan, (ii) incur any obligation to
contribute to any Multiemployer Plan, (iii) incur any obligation to
provide post-retirement medical or insurance benefits with respect to employees or former employees (other than
benefits required by law) or (iv) amend any Plan in a manner that would
materially increase its funding obligations without giving prior written notice thereof to the Lender.

5.14         Labor Relations.
Except as could not reasonably be expected to have a Material Adverse Effect,
(i) there are no strikes, lockouts or other labor disputes against the Borrower
or threatened, (ii) hours worked by and
payment made to employees of the Borrower have not been in violation of the
Fair Labor Standards Act or any other applicable law, and (ii) no unfair labor practice complaint is pending against the
Borrower or threatened before any governmental authority.

5.15         Security Interest.
This Agreement creates a valid security interest in favor of the Lender in the Collateral and, when properly
perfected by filing in the appropriate jurisdictions, or by possession
or Control of such Collateral by the Lender or delivery of such Collateral to
the Lender, shall constitute a valid,
perfected, first-priority security interest in such Collateral, subject to the terms and conditions of the Intercreditor Agreement.

5.16         Lending Relationship.
The relationship hereby created between the Borrower and the Lender is and has
been conducted on an open and arm’s length basis in which no fiduciary relationship exists, and the Borrower has not
relied and is not relying on any such fiduciary relationship in executing this Agreement and in consummating the
Revolving Loan. The Lender represents that it will receive the Revolving Note
payable to its order as evidence of a bank loan.

5.17         Business Loan. The Advances, including interest rate, fees
and charges as contemplated
hereby, (i) are an exempted transaction under the Truth In Lending Act, 12
U.S.C. 1601 et  seq., as amended from time to time, and (iii) do
not, and when disbursed shall not, violate the provisions of the South
Dakota usury laws, any consumer credit laws or the usury laws of any state which may have jurisdiction
over this transaction, the Borrower or any property securing the Advances.

5.18         Taxes. The Borrower has timely filed all tax returns and reports required by
law to have been filed by it and has paid all taxes, governmental
charges and assessments due and payable
with respect to such returns, except any such taxes or charges which are being
diligently contested in good
faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set
aside on its books, are insured against or bonded over to the satisfaction of
the Lender and the contesting of such payment does not create a Lien on the Collateral which is not a Permitted Lien.
There is no controversy or objection pending, or threatened in respect of any tax returns of the Borrower. The Borrower
has made adequate reserves on its books and records in accordance with
GAAP for all taxes that have accrued but which
are not yet due and payable.

 34
 

5.19         Compliance with Regulation U. No portion of the proceeds of the Advances shall be used by the
Borrower, or any Affiliate of the Borrower, either directly or indirectly, for
the purpose of purchasing or carrying
any margin stock, within the meaning of Regulation U as adopted by the Board of Governors of the Federal Reserve System or any successor
thereto.

5.20         Governmental Regulation. The Borrower is not, or after giving effect
to any loan, will not be,
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the ICC
Termination Act of 1995 or the Investment Company Act of 1940 or to any federal
or state statute or regulation limiting its ability to incur indebtedness for
borrowed money.

5.21         Bank Accounts. The
Borrower has no other Deposit Accounts except those listed on Schedule 5.21
attached hereto. All such Deposit Accounts (and any other bank accounts of Borrower) shall be maintained at a financial
institution as Lender and its participants shall determine.

5.22         Place of Business. The principal place of business and books
and records of the Borrower is
set forth in the preamble to this Agreement, and the location of all
Collateral, if other than at such
principal place of business, is
as set forth on Schedule 5.22 attached hereto and made a part
hereof, and the Borrower shall promptly notify the Lender of any change in such
location. The Borrower will not remove
or permit the Collateral to be removed from such location without the
prior written consent of the Lender, except for Inventory sold in the usual and ordinary course of the Borrower’s business.

5.23         Complete Information. This Agreement and all financial
statements, schedules, certificates,
confirmations, agreements, contracts, and other materials and information
heretofore or contemporaneously herewith furnished in writing by the Borrower
to the Lender for purposes of, or in connection with, this Agreement and
the transactions contemplated hereby is, and all written information hereafter
furnished by or on behalf of the Borrower to the Lender pursuant hereto or in
connection herewith will be, true and accurate in every material respect on the
date as of which such information is
dated or certified, and none of such information is or will be incomplete by
omitting to state any material fact necessary to make such information not misleading
in light of the circumstances under which made (it being recognized by the
Lender that any projections and forecasts provided by the Borrower are based on
good faith estimates and assumptions
believed by the Borrower to be reasonable as of the date of the applicable projections
or assumptions and that actual results during the period or periods covered by
any such projections and forecasts may
differ from projected or forecasted results).

5.24         Subordinated Debt. The subordination provisions of the
Subordinate Debt are to Borrower’s knowledge enforceable against the
holders of the Subordinate Debt by the Lender. The Obligations constitute Senior Debt (as defined in the Subordination
and Standstill Agreement) entitled to the benefits of the subordination
provisions contained in the Subordination
and Standstill Agreement. The Borrower acknowledges that the Lender is entering into this Agreement and is making
the Advances in reliance upon the subordination provisions of the
Subordination and Standstill Agreement and this Section 5.24.

 35
 

6.

AFFIRMATIVE COVENANTS.

6.1           Borrower Existence. The Borrower shall at all times (a)
preserve and maintain its existence and good standing in the
jurisdiction of its organization, (b) preserve and maintain its qualification to do business and good
standing in each jurisdiction where the nature of its business makes such
qualification necessary (other than such jurisdictions in which the failure to be
qualified or in good standing could not reasonably be expected to have a
Material Adverse Effect), and (c)
continue as a going concern in the business which the Borrower is presently conducting. If the Borrower does not have an
Organizational Identification Number and later obtains one, the Borrower shall promptly notify the Lender of such
Organizational Identification Number.

6.2           Compliance With Laws. The Borrower shall use the proceeds of the
Advances for working capital and
other general corporate or business purposes not in contravention of any requirements
of law and not in violation of this Agreement, and shall comply in all
respects, including the conduct of its
business and operations and the use of its properties and assets, with all
applicable laws, rules, regulations, decrees, orders, judgments, licenses and
permits, except where failure to comply
could not reasonably be expected to have a Material Adverse Effect.

6.3           Office of Foreign Asset Control. Borrower represents and warrants that
neither Borrower or any of its respective Affiliates is a Prohibited
Person and Borrower and all of its respective
Affiliates are in full compliance with all applicable orders, rules,
regulations and recommendations of The Office of Foreign Assets Control of the
U.S. Department of the Treasury. At all times throughout the term of the Loan,
Borrower and all of its respective Affiliates
shall: (i) not be a Prohibited Person (defined below); and (ii) be in full
compliance with all applicable orders, rules, regulations and
recommendations of The Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury.

The term “Prohibited Person” shall mean any person or entity:

(i)            listed in the Annex to, or otherwise subject
to the provisions of, the Executive Order No. 13224 on Terrorist
Financing, effective September 24, 2001, and relating to Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or
Support Terrorism (the “Executive Order”);

(ii)           that
is owned or controlled by, or acting for or on behalf of, any person or entity that is listed to the Annex to, or is
otherwise subject to the provisions
of, the Executive Order; 

(iii)          with
whom Lender is prohibited from dealing or otherwise engaging in any transaction by any terrorism or money
laundering law, including the Executive
Order;

(iv)          who commits, threatens
or conspires to commit or supports “terrorism” as defined in the Executive Order;

 36
 

(v)           that is named as a “specially designated
national and blocked person” on the most current list published by the
U.S. Treasury Department Office of Foreign
Assets Control at its official website, www.ustreas.gov/offices/enforcement/ofac, or at any replacement website
or other replacement official publication of such list; or

(vi)          who is an Affiliate of
or affiliated with a person or entity listed above; or

(vii)         who is
a “disregarded entity” as defined in IRS Regulation 1.1445-2(b)(2)(iii).

The
term “Affiliate,” as used herein, shall mean as to any person or entity, any
other person or entity that, directly or indirectly, is in control of,
is controlled by or is under common control with such person or entity or is a director or officer of such
person or entity or of an Affiliate
of such person or entity. As used herein, the term “control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of management, policies or activities of a person or entity, whether
through ownership of voting securities, by contract or otherwise.

6.4           Payment of Taxes and Liabilities. The Borrower shall pay and discharge, prior
to delinquency and before penalties
accrue thereon, all property and other taxes, and all governmental
charges or levies against it or any of the Collateral, as well as claims of any
kind which, if unpaid, could become a Lien on any of its property; provided
that the foregoing shall not require
the Borrower to pay any such tax or charge so long as it shall contest the
validity thereof in good faith by
appropriate proceedings and shall set aside on its books adequate reserves
with respect thereto in accordance with GAAP and, in the case of a claim which
could become a Lien on any of the Collateral, such contest proceedings stay the
foreclosure of such Lien or the sale of
any portion of the Collateral to
satisfy such claim.

6.5           Maintain Property. The Borrower shall at all times maintain,
preserve and keep its plant, properties and Equipment, including any
Collateral, in good repair, working order and condition, and shall from time to time make all needful and proper
repairs, renewals, replacements,
and additions thereto so that at all times the efficiency thereof shall be
fully preserved and maintained. The Borrower shall permit the Lender to
examine and inspect such plant,
properties and Equipment, including any Collateral, at all reasonable times.

6.6           Maintain Insurance.
The Borrower shall at all times maintain with insurance companies reasonably
acceptable to the Lender, such insurance coverage as may be required by any law or governmental regulation or court
decree or order applicable to it and such other insurance, to such
extent and against such hazards and liabilities, including employers’, public and professional liability risks, as is
customarily maintained by companies similarly situated, and shall have insured amounts no less than, and
deductibles no higher than, are reasonably acceptable to the Lender. The
Borrower shall furnish to the Lender a certificate setting forth in reasonable detail the nature and extent of
all insurance maintained by the Borrower, which shall be reasonably
acceptable in all respects to the Lender. The Borrower shall cause each issuer
of an insurance policy to provide the
Lender with an endorsement (i) showing the Lender as lender’s loss payee with respect to each
policy of property or casualty insurance; and

 37
 

(ii) providing that thirty (30) days notice will be
given to the Lender prior to any cancellation of, material reduction or change
in coverage provided by or other material modification to such policy. The
Borrower shall execute and deliver to the Lender a collateral assignment, in
form and substance satisfactory
to the Lender, of each business interruption insurance policy maintained by the Borrower.

In
the event the Borrower either fails to provide the Lender with evidence of the insurance coverage required by this Section
or at any time hereafter shall fail to obtain or maintain any of the
policies of insurance required above, or to pay any premium in whole or in part
relating thereto, then the Lender, without waiving or releasing any obligation
or default by the Borrower hereunder,
may at any time (but shall be under no obligation to so act), obtain and maintain such policies of insurance and pay
such premiums and take any other action with respect thereto, which the
Lender deems advisable. This insurance coverage (a) may, but need not, protect
the Borrower’s interests in such property, including the Collateral, and (b)
may not pay any claim made by, or
against, the Borrower in connection with such property, including the Collateral. The Borrower may later cancel any
such insurance purchased by the Lender, but only after providing the Lender with evidence that the Borrower has obtained
the insurance coverage required by this Section. If the Lender purchases
insurance for the Collateral, the Borrower will be responsible for the costs of
that insurance, including interest and any other charges that may be imposed
with the placement of the insurance, until the effective date of the
cancellation or expiration of the insurance. The costs of the insurance may be
added to the principal amount of the
Advances owing hereunder. The costs of the insurance may be more than the cost
of the insurance the Borrower
may be able to obtain on its own.

6.7           ERISA Liabilities; Employee Plans. Borrower is not an entity deemed to hold “plan
assets” within the meaning of 29 C.F.R. §2510.3-101 of any “employee benefit
plan” (as defined in Section 3(3) of ERISA) that is subject to Title I of ERISA
or any “plan” (within the meaning of
Section 4975 of the Internal Revenue Code), and neither the execution of this Agreement nor the funding of the Loan gives
rise to a prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Internal Revenue Code.

6.8           Financial Statements. The Borrower shall at all times maintain a
standard and modern system of
accounting, on the accrual basis of accounting and in all respects in accordance
with GAAP, and shall furnish to the Lender or its authorized representatives
such information regarding the business affairs, operations and financial
condition of the Borrower, including:

(a)                                  promptly when available, and in any event,
within one hundred fifty (150) days
after the close of each of its fiscal years, a copy of (i) the annual audited
financial statements of the Borrower, including balance sheet, statement of income and retained earnings,
statement of cash flows for the fiscal year then ended and such other
information (including nonfinancial information) as the Lender may request, in
reasonable detail, prepared and certified;

(b)                                 promptly when available, and in any event,
within thirty (30) days following
the end of each month, a copy of the financial statements of the

 38
 

Borrower regarding such month, including balance sheet, statement of income
and retained earnings, statement of cash flows for the month then ended and such other information (including
nonfinancial information) as the Lender may request, in reasonable detail,
prepared and certified as true and
correct by the Borrower’s treasurer or chief financial officer;

(c)           within ten (10) days after the filing due date
(as such date may be extended in
accordance with properly granted extensions) each year, a signed copy of the complete income tax
returns filed with the Internal Revenue Service by the Borrower; and

(d)           Annual
financial projections, including balance sheet, income statement, and cash flow
statement for the next fiscal year (by month) thirty (30) days prior to the beginning of the next fiscal year.

No change with respect to
such accounting principles shall be made by the Borrower without giving prior notification to the Lender. The
Borrower represents and warrants to the Lender that the financial
statements delivered to the Lender at or prior to the execution and delivery of
this Agreement and to be delivered at
all times thereafter accurately reflect and will accurately reflect the financial condition of the Borrower. The
Lender shall have the right at all times during business hours to inspect the books and records of the Borrower and make extracts therefrom.

6.9           Supplemental Financial Statements. The Borrower shall immediately upon receipt thereof, provide to the Lender copies
of interim and supplemental reports if any, submitted to the Borrower by
independent accountants in connection with any interim audit or review of the books of the Borrower.

6.10         Borrowing Base Certificate.
The Borrower shall, (a) within ten (10) days after the end of each month, and (b) at any time the Borrower shall request an
Advance hereunder, deliver to the Lender a Borrowing Base Certificate
dated as of the last Business Day of such month, certified as true and correct
by an authorized representative of the Borrower and acceptable to the Lender in its sole and absolute
discretion, provided, however, at any time an Event of Default exists, the Lender may require the Borrower to deliver Borrowing Base
Certificates more frequently.

6.11         Aged Accounts Schedule. The Borrower shall, within thirty (30) days
after the end of each month,
deliver to the Lender an aged schedule of the Accounts of the Borrower, listing the name and amount due from each Account
Debtor and showing the aggregate amounts due from (a) 0-30 days, (b)
31-60 days, (c) 61-90 days and (d) more than 90 days, and certified as accurate by the Borrower’s treasurer or
chief financial officer.

6.12          Inventory Reports. The Borrower shall, within thirty (30) days
after the end of each month,
deliver to the Lender an inventory report, certified as accurate by the
Borrower’s treasurer or chief financial officer, and within such time as
the Lender may specify, such other schedules
and reports as the Lender may require.

6.13          Covenant Compliance Certificate. The Borrower shall, contemporaneously with the
furnishing of the financial statements pursuant to Section 6.8, deliver
to the Lender a duly

 39
 

completed compliance
certificate, dated the date of such financial statements and certified as true and correct by an appropriate officer of the
Borrower, containing a computation of each of the financial covenants
set forth in Section 8.1 and stating that the Borrower has not become
aware of any Event of Default that has
occurred and is continuing or, if there is any such Event of Default describing it and the steps, if any,
being taken to cure it.

6.14         Field Audits. The Borrower shall permit the Lender to
inspect the Inventory, other tangible assets and/or other business
operations of the Borrower, to perform appraisals of the Equipment of the
Borrower, and to inspect, audit, check and make copies of, and extracts from, the books, records, computer data,
computer programs, journals, orders, receipts, correspondence and other data relating to Inventory, Accounts and any
other Collateral, the results of which must be satisfactory to the
Lender in the Lender’s sole and absolute discretion. All such inspections or audits by the Lender shall be at the Borrower’s
sole expense, subject to a limit
of $5,000 per year unless an Event of Default occurs.

6.15         Other Reports. The Borrower shall, within such period of time as the Lender may specify, deliver to
the Lender such other schedules and reports as the Lender may require.

6.16         Collateral Records. The Borrower shall keep full and accurate
books and records relating to
the Collateral and shall mark such books and records to indicate the Lender’s
Lien in the Collateral.

6.17         Intellectual Property. The Borrower shall maintain, preserve and
renew all Intellectual Property
necessary for the conduct of its business as and where the same is currently
located as heretofore or as hereafter conducted by it.

6.18         Notice of Proceedings. The Borrower, promptly upon becoming aware, shall give written notice to the Lender of any
litigation, arbitration or governmental investigation or proceeding not previously disclosed by the
Borrower to the Lender which has been instituted or, to the knowledge of the Borrower, is
threatened against the Borrower or to which any of its properties is subject which might reasonably
be expected to have a Material Adverse Effect.

6.19         Notice of Event of Default or Material Adverse
Effect. The Borrower shall, immediately after the commencement thereof,
give notice to the Lender in writing of the occurrence of any Event of Default,
or the occurrence of any condition or event having a Material Adverse Effect.

6.20         Environmental Matters. If any release or threatened release or
other disposal of Hazardous Substances shall occur or shall have
occurred on any real property or any other assets of the Borrower, the Borrower shall cause the prompt containment and
removal of such Hazardous Substances and the remediation of such real
property or other assets as necessary to comply
with all Environmental Laws and to preserve the value of such real property or
other assets. Without limiting the generality of the foregoing, the Borrower
shall comply with any Federal or state judicial or administrative order
requiring the performance at any real property of the Borrower of activities in response to the release or threatened
release of a Hazardous Substance.
To the extent that the transportation of Hazardous Substances is permitted by
this

 40
 

Agreement, the Borrower shall dispose of such
Hazardous Substances, or of any other wastes, only at licensed disposal facilities
operating in compliance with Environmental Laws.

6.21         Further
Assurances. The Borrower shall take such actions as are necessary or as the
Lender may reasonably request from time to time to ensure that the Obligations
under the Loan Documents are secured by substantially all of the assets of the
Borrower, in each case as the Lender
may determine, including (a) the execution and delivery of security agreements,
pledge agreements, mortgages, deeds of trust, financing statements and
other documents, and the filing or
recording of any of the foregoing, and (b) the delivery of certificated
securities and other collateral
with respect to which perfection is obtained by possession.

6.22         Project Management Agreement. Borrower shall keep the Project Management Agreement
with Fremar Farmer Cooperative, Inc. in full force and effect with no amendment
thereto without the prior written
consent of Lender.

6.23         Updated Appraisals. Borrower agrees that the Lender shall have
the right to obtain, at Borrower’s expense, an updated Appraisal of the
Project from an appraiser approved by Lender at any time (a) that an Event of
Default shall have occurred hereunder, or (b) Lender determines in its commercially reasonable discretion that the security
for the Loan has been physically or financially impaired in any material
manner, or (c) or Final Completion of the Project. In the event that Lender shall elect to obtain such an
Appraisal, Lender may immediately
commission an appraiser acceptable to Lender to prepare the Appraisal and Borrower
shall, after reasonable request therefor, fully cooperate with Lender and the
appraiser in obtaining the necessary information to prepare such Appraisal. In
the event that Borrower fails, after reasonable request therefor, to cooperate
with Lender in obtaining such an Appraisal or in the event that Borrower shall fail to pay for the cost of such
Appraisal as soon as practicable,
but in no event later than ten (10) business days after demand, such event
shall constitute an Event of Default hereunder and Lender shall be
entitled to exercise all remedies available
to it hereunder.

7.

NEGATIVE
COVENANTS.

7.1           Indebtedness. The Borrower will not incur, create, assume
or permit to exist any indebtedness or liability on account of deposits
or advances or any indebtedness for borrowed money or letters of credit issued
on the Borrower’s behalf, or obligations under any Operating Lease or Capital Lease (except as permitted
by Section 7.13 and Section 7.19 hereafter) any other indebtedness or liability evidenced by notes, bonds, debentures,
leases or similar obligations,
except:

(a)           Reimbursement
Obligations for the Supporting Letters of Credit;

(b)           the indebtedness arising hereunder;

(c)           the indebtedness arising and permitted under
the Plant Loan of the Borrower
to the Plant Lender;

 41
 

(d)           the Unsecured Debt.

(e)           the Subordinate Loan or any replacement
indebtedness fully replacing the Subordinate
Loan in the full principal amount of $14,000,000.00 and obligations arising thereunder; and

(f)            the Impositions due any Governmental
Authority.

7.2           Encumbrances.
The Borrower shall not, either directly or indirectly, create, assume, incur or
suffer or permit to exist any Lien or charge of any kind or character upon any asset of the Borrower, whether owned at the
date hereof or hereafter acquired, except for Permitted Liens.

7.3           Transactions with Affiliates. The Borrower shall not, directly or
indirectly, enter into or permit to exist any transaction with any of
its Affiliates or with any director, officer or employee of the Borrower other
than transactions in the ordinary course of, and pursuant to the reasonable
requirements of, the business of the Borrower and upon fair and reasonable
terms which are fully disclosed to the
Lender and are no less favorable to the Borrower than would be obtained
in a comparable arm’s length transaction with a Person that is not an Affiliate
of the Borrower. Lender acknowledges
that the Corn Purchase Agreement and Management Agreement each comply with this Section 7.3. 

7.4           Unconditional Purchase Obligations. The Borrower shall not enter into or be a party to any contract for the purchase of
materials, supplies or other property or services if such contract requires that payment be made by it
regardless of whether delivery is ever made of such materials, supplies or
other property or services.

7.5           Cancellation of Debt. The Borrower shall not cancel any claim or
debt owing to it, except for
reasonable consideration or in the ordinary course of business.

7.6           Inconsistent Agreements. The Borrower shall not enter into any
agreement containing any
provision which would (a) be violated or breached by any borrowing by the Borrower
hereunder or by the performance by the Borrower of any of its Obligations
hereunder or under any other Loan
Document, (b) prohibit the Borrower from granting to the Lender a Lien on any
of its assets.

7.7           Bank Accounts. The Borrower shall not establish any new
Deposit Accounts or other bank
accounts without the prior written consent of the Lender.

7.8           Guaranties. The Borrower will not assume, guarantee, endorse or otherwise become
directly or contingently liable in connection with any obligations of any other
Person, except the endorsement of negotiable instruments by the Borrower for
deposit or collection or similar
transactions in the ordinary course of business.

 42
 

7.9           Member Loans and Distributions. Borrower:

(a)                                  Subordinates all loans, advances, and
indebtedness owing from Borrower to Members of Borrower from time to
time, whether or not evidenced by promissory
notes.

(b)                                 Shall not make any Distributions (other than
Tax Distributions) to its Members
if the Debt Service Coverage
Ratio is less than 1.25 to 1.00.

(c)                                  Shall not pay any dividend or distribution,
excluding Tax Distributions, whether
in cash or otherwise, to any of its Members (i) unless and until the Debt Service Reserve Account (as created and
defined under the Plant Loan) is fully funded, all Fixed Charges are
paid current and the FF&E Reserve
(as created and defined under the Plant Loan) is currently funded and (ii) then only in aggregate amounts not to
exceed 50% of Net Income, which dividend or distribution (other than
Tax Distribution) shall be made not more frequently than once annually under a
request made by Borrower to Lender accompanied by Borrower’s accountant’s
calculations of the distributions
subject to Lender’s approval of the same not to be unreasonably
withheld. After the principal balance of the Plant Loan is less than $50,000,000.00, distributions may
be made quarterly.

7.10         Sale or Transfer of Assets; Suspension of
Business Operations. The
Borrower will not sell, lease, assign, transfer or otherwise dispose of
(i) the Project, (ii) all or a substantial part of its assets, or (iii) any Collateral or any interest therein
(whether in one transaction or in a series of transactions) to any other Person
other than the sale of Inventory in the ordinary course of business and will not liquidate, dissolve
or suspend business operations, provided, however, that Borrower may in
the ordinary course of business sell or dispose of Equipment constituting
Collateral that is obsolete or otherwise being replaced in the ordinary course
of business up to $500,000 in the
aggregate per year. The Borrower will not transfer any part of its ownership interest
in any Intellectual Property Rights and will not permit any agreement under
which it has licensed Intellectual
Property to lapse, except that the Borrower may transfer such rights or permit such agreements to lapse if it shall
have reasonably determined that the applicable Intellectual Property
Rights are no longer useful in its business. If the Borrower transfers any
Intellectual Property Rights for value, the Borrower will pay over the proceeds
to the Lender for application to the Obligations. The Borrower will not license
any other Person to use any of the Borrower’s
Intellectual Property Rights, except that the Borrower may grant licenses in
the ordinary course of its business in connection with sales of
Inventory or provision of services to its
customers.

7.11         Consolidation and Merger; Asset Acquisitions. The Borrower will not consolidate with or merge into any Person, or permit any
other Person to merge into it, or acquire (in a transaction analogous in purpose or effect to a consolidation or
merger) all or substantially all the assets of any other Person.

7.12          Sale and Leaseback. The Borrower will not enter into any
arrangement, directly or
indirectly, with any other Person whereby the Borrower shall sell or transfer
any real or personal property,
whether now owned or hereafter acquired, and then or thereafter rent or lease

 43
 

as lessee such property or
any part thereof or any other property that the Borrower intends to use for substantially the same purpose or
purposes as the property being sold or transferred.

7.13         Capital Leases. Borrower will not enter into any Capital
Leases in excess of $250,000.00
in the aggregate without the prior written consent of Lender.

7.14         Restrictions on Nature of Business. The Borrower will not engage in any
line of business materially different
from that presently engaged in by the Borrower and will not purchase, lease or otherwise acquire assets
not related to its business.

7.15         Accounting. The Borrower will not adopt any material change in accounting principles
other than as required by GAAP. The Borrower will not adopt, permit or consent
to any change in its fiscal year.

7.16         Discounts, etc. The Borrower will not at any time discount,
modify, amend, subordinate, cancel or terminate the obligation of any
account debtor or other obligor of the Borrower
except in the ordinary course of business.

7.17         Place of Business; Name. The Borrower will not transfer its chief
executive office or principal
place of business, or move, relocate, close or sell any business location. The Borrower will not permit any tangible
Collateral or any records pertaining to the Collateral to be located in any state or area in which, in the
event of such location, a financing statement covering such Collateral would be required to be, but has not in fact
been, filed in order to perfect
the Security Interest. The Borrower will not change its name or jurisdiction of
organization.

7.18         No Purchase of
Perishable Agricultural Commodities. The Borrower will not purchase perishable agricultural products that
are subject to the Perishable Agricultural Commodities Act.

7.19         Lease. Borrower shall not enter into any Operating Lease with annual rental
in excess of $100,000.00 without
the prior written consent of the
Lender.

8.

FINANCIAL
COVENANTS

8.1           Financial Covenants. The Borrower covenants that during the term
of the Revolving Loan and any
extensions:

(a)                                  Retained Earnings. Twenty-Five percent (25%) of pre-tax Net
Income available for Distributions
are to be retained with Borrower.

(b)                                 Debt Service Coverage. As of the end of each fiscal quarter of the
Borrower, the Borrower shall
maintain a Debt Service Coverage Ratio for such period, of not less than 1.20
to 1.00.

 44
 

9.

EVENTS
OF DEFAULT.

The Borrower, without notice
or demand of any kind, shall be in default under this Agreement upon the occurrence of any of the
following events (each an “Event of Default”).

9.1           Nonpayment of Obligations. Any amount due and owing on the Revolving
Note or any of the Obligations, whether by its terms or as otherwise provided
herein, is not paid when due.

9.2           Misrepresentation. Any oral or written warranty,
representation, certificate or statement of the Borrower in this Agreement, the
other Loan Documents or any other agreement with the Lender shall be false when
made or at any time thereafter, or if any financial data or any other
information now or hereafter furnished to the Lender by or on behalf of the
Borrower shall prove to be false, inaccurate or misleading in any material
respect.

9.3           Nonperformance. Any failure to perform or default in the
performance of any covenant, condition or agreement contained in this
Agreement or in the other Loan Documents or
any other agreement with the Lender.

9.4           Default under Loan Documents. A default under any of the other Loan Documents,
all of which covenants, conditions and agreements contained therein are hereby incorporated in this Agreement by express
reference, shall be and constitute an Event of Default under this Agreement and any other of the Obligations.

9.5           Default under Plant Loan. If an event of default shall occur under
the Plant Loan Documents which is not cured to the satisfaction of the
Plant Lender within the applicable cure period and/or the Plant Loan is terminated
or cancelled or the obligation of the Plant Lender to advance the Plant Loan proceeds is terminated or rescinded.

9.6           Default under Other Debt. Any default by the Borrower in the payment
of any Debt for any other
obligation beyond any period of grace provided with respect thereto or in the
performance of any other term, condition or covenant contained in any agreement
(including any capital or operating lease or any agreement in connection
with the deferred purchase price of property) under which any such obligation
is created, the effect of which default is to cause or permit the holder of
such obligation (or the other party to such other agreement) to cause such obligation to become due prior to its stated
maturity or terminate such other agreement.

9.7           Other Material Obligations. Any default in the payment when due, or in
the performance or observance
of, any material obligation of, or condition agreed to by, the Borrower with respect to any material
purchase or lease of goods or services where such default, singly or in
the aggregate with all other such defaults, might reasonably be expected to
have a Material Adverse Effect.

9.8           Bankruptcy,
Insolvency, etc. The Borrower shall fail to pay its debts as they become due, or shall make an assignment for
the benefit of its creditors, or shall admit in writing its inability to
pay its debts as they become due, or shall file a petition under any chapter of
the Federal Bankruptcy Code or any similar law, state or federal, now or
hereafter existing, or shall

 45

become “insolvent” as that
term is generally defined under the Federal Bankruptcy Code, or shall in any
involuntary bankruptcy case commenced against it file an answer admitting
insolvency or inability
to pay its debts as they become due, or shall fail to obtain a dismissal of
such case within one hundred twenty (120) days after its commencement or
convert the case from one chapter of the Federal Bankruptcy Code to another
chapter, or be the subject of an order for relief in such bankruptcy case, or be adjudged a
bankrupt or insolvent, or shall have a custodian, trustee or receiver
appointed for, or have any court take jurisdiction of its property, or any part
thereof, in any voluntary proceeding
for the purpose of reorganization, arrangement, dissolution or liquidation and
such custodian, trustee or receiver shall not be discharged, or such
jurisdiction shall not be relinquished, vacated or stayed within one hundred
twenty (120) days of the appointment.

9.9           Judgments. The entry of any final judgment, decree, levy, attachment, garnishment
or other process, or the filing of any Lien against the Borrower which is not
fully covered by insurance, or such
action shall not be released or bonded over to Lender’s satisfaction within
fifteen (15) days after the assertion or filing thereof.

9.10         Collateral Impairment. The entry of any judgment, decree, levy,
attachment, garnishment or other process, or the filing of any Lien against,
any of the Collateral or any collateral
under a separate security agreement securing any of the Obligations, or the
loss, theft, destruction, seizure or forfeiture, or the occurrence of
any deterioration or impairment of any of the
Collateral or any of the collateral under any security agreement securing any
of the Obligations, or any
decline or depreciation in the value or market price thereof (whether actual or
reasonably anticipated), which causes the Collateral, in the sole
opinion of the Lender acting in good
faith, to become unsatisfactory as to value or character, or which causes the
Lender to reasonably believe that it is insecure and that the likelihood
for repayment of the Obligations is or
will soon be impaired, time being of the essence. The cause of such
deterioration, impairment, decline or depreciation shall include, but is
not limited to, the failure by the Borrower to do any act deemed necessary by
the Lender to preserve and maintain the value and collectability of the Collateral.

9.11         Material Adverse Effect. The occurrence of any development, condition
or event which has a Material
Adverse Effect on the Borrower.

9.12         Subordinate Debt. The subordination provisions of the Subordinate Debt shall for any
reason be revoked or invalid or otherwise cease to be in full force and effect.
The Borrower shall contest in any
manner, or any other holder thereof shall contest in any judicial proceeding, the
validity or enforceability of the Subordinate Debt or deny that it has any
further liability or obligation
thereunder, or the Obligations shall for any reason not have the priority
contemplated by the subordination provisions of the Subordinate Debt.

10.

REMEDIES.

Upon the occurrence of an
Event of Default, the Lender shall have all rights, powers and remedies
set forth in the Loan Documents, in any written agreement or instrument (other
than this Agreement or the Loan
Documents) relating to any of the Obligations or any security

 46
 

therefor, as a secured party
under the UCC or as otherwise provided at law or in equity. Without limiting
the generality of the foregoing, the Lender may, at its option upon the
occurrence of an Event of Default, declare its commitments to the Borrower to
be terminated and all Obligations to be immediately due and payable, provided,
however, that upon the occurrence of an Event of Default under Section 9.8, all commitments of the Lender to the
Borrower shall immediately terminate
and all Obligations shall be automatically due and payable, all without demand,
notice or further action of any kind required on the part of the Lender.
The Borrower hereby waives any and all
presentment, demand, notice of dishonor, protest, and all other notices and
demands in connection with the enforcement of Lender’s rights under the
Loan Documents, and hereby consents to,
and waives notice of release, with or without consideration, of any Collateral,
notwithstanding anything contained herein or in the Loan Documents to the
contrary. In addition to the
foregoing:

10.1         Possession and Assembly of Collateral. The
Lender may, without notice, demand or
legal process of any kind, take possession of any or all of the Collateral (in
addition to Collateral of which the Lender already has possession),
wherever it may be found, and for that purpose may pursue the same wherever it
may be found, and may at any time enter into any of the Borrower’s premises where any of the Collateral may be or is supposed to be, and search for, take
possession of, remove, keep and store any of the Collateral until the same
shall be sold or otherwise disposed of
and the Lender shall have the right to store and conduct a sale of the same in any of the Borrower’s premises without
cost to the Lender. At the Lender’s request, the Borrower will, at the
Borrower’s sole expense, assemble the Collateral and make it available to the Lender at a place or places to be
designated by the Lender which is reasonably convenient to the Lender and the Borrower.

10.2         Sale of Collateral. The Lender may sell any or all of the
Collateral at public or private sale, upon such terms and conditions as
the Lender may deem proper, and the Lender may purchase any or all of the
Collateral at any such sale. The Borrower acknowledges that the Lender may be
unable to effect a public sale of all or any portion of the Collateral because
of certain legal and/or practical
restrictions and provisions which may be applicable to the Collateral
and, therefore, may be compelled to resort to one or more private sales to a
restricted group of offerees and purchasers. The Borrower consents to any such
private sale so made even though at places and upon terms less favorable than
if the Collateral were sold at public sale. The Lender shall have no obligation to clean-up or otherwise prepare
the Collateral for sale. The Lender may apply the net proceeds, after deducting
all costs, expenses, attorneys’ and paralegals’ fees incurred or paid at
any time in the collection, protection and sale of the Collateral and the Obligations, to the payment of the Revolving
Note and/or any of the other
Obligations, returning the excess proceeds, if any, to the Borrower. The
Borrower shall remain liable for any amount remaining unpaid after such
application, with interest at the Default Rate. Any notification of intended
disposition of the Collateral required by law shall be conclusively deemed
reasonably and properly given if given by the Lender at least ten (10) calendar
days before the date of such disposition.
The Borrower hereby confirms, approves and ratifies all acts and deeds of the Lender
relating to the foregoing, and each part thereof, and expressly waives any and
all claims of any nature, kind or description which it has or may hereafter
have against the Lender or its representatives,
by reason of taking, selling or collecting any portion of the Collateral. The Borrower
consents to releases of the Collateral at any time (including prior to default)
and to sales of the Collateral in groups, parcels or portions, or as an
entirety, as the Lender shall deem

 47
 

appropriate. The Borrower expressly absolves the
Lender from any loss or decline in market value of any Collateral by reason of
delay in the enforcement or assertion or nonenforcement of any rights or remedies under this Agreement.

10.3         Standards for Exercising Remedies. To the extent that applicable law imposes
duties on the Lender to exercise remedies in a commercially reasonable manner,
the Borrower acknowledges and agrees that it is not commercially
unreasonable for the Lender (a) to fail to incur expenses reasonably deemed significant by the Lender to prepare
Collateral for disposition or
otherwise to complete raw material or work-in-process into finished goods or
other finished products for disposition, (b) to fail to obtain third
party consents for access to Collateral to be disposed of, or to obtain or, if
not required by other law, to fail to obtain governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of, (c) to fail to exercise collection remedies against
Account Debtors or other Persons obligated on Collateral or to remove liens or encumbrances on or any adverse claims
against Collateral, (d) to exercise
collection remedies against Account Debtors and other Persons obligated on
Collateral directly or through
the use of collection agencies and other collection specialists, (e) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral
is of a specialized nature, (f) to contact other Persons, whether or not in the
same business as the Borrower, for expressions of interest in acquiring all or
any portion of the Collateral,
(g) to hire one or more professional auctioneers to assist in the disposition of Collateral, whether or not
the collateral is of a specialized nature, (h) to dispose of Collateral by
utilizing internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (i) to dispose of assets in wholesale rather than
retail markets, (j) to disclaim disposition warranties, including any
warranties of title, (k) to purchase insurance or credit enhancements to insure
the Lender against risks of loss, collection or disposition of Collateral or to
provide to the Lender a guaranteed return from the collection or disposition of
Collateral, or (l) to the extent deemed appropriate
by the Lender, to obtain the services of other brokers, investment bankers, consultants
and other professionals to assist the Lender in the collection or disposition
of any of the Collateral. The Borrower acknowledges that the purpose of this
section is to provide non-exhaustive
indications of what actions or omissions by the Lender would not be
commercially unreasonable in the
Lender’s exercise of remedies
against the Collateral and that other actions or omissions by the Lender
shall not be deemed commercially unreasonable solely on account of not being
indicated in this section. Without limitation upon the foregoing, nothing
contained in this section shall be
construed to grant any rights to the Borrower or to impose any duties on the Lender
that would not have been granted or imposed by this Agreement or by applicable
law in the absence of this section.

10.4         UCC and Offset Rights. The Lender may exercise, from time to time,
any and all rights and remedies available to it under the UCC or under
any other applicable law in addition to,
and not in lieu of, any rights and remedies expressly granted in this Agreement
or in any other agreements between the Borrower and the Lender.

10.5         Additional
Remedies. The Lender shall have the right and power to:

(a)                                  instruct the Borrower, at its own expense, to
notify any parties obligated on
any of the Collateral, including any Account Debtors, to make payment

 48
 

directly to the Lender of any amounts due or to become due thereunder,
or the Lender may directly notify such obligors of the security interest of the
Lender, and/or of the
assignment to the Lender of the
Collateral and direct such obligors to make payment to the Lender of any
amounts due or to become due with
respect thereto, and thereafter, collect any such amounts due on the Collateral
directly from such Persons obligated thereon;

(b)                                 enforce collection of any of the Collateral,
including any Accounts, by suit or
otherwise, or make any compromise or settlement with respect to any of the
Collateral, or surrender, release or exchange all or any part thereof, or
compromise, extend or renew for any period (whether or not longer than the original period) any indebtedness
thereunder;

(c)                                  take possession or control of any proceeds and
products of any of the Collateral,
including the proceeds of insurance thereon;

(d)                                 extend, renew or modify for one or more
periods (whether or not longer than
the original period) the Revolving Note, any other of the Obligations, any obligation of any nature of any other
obligor with respect to the Revolving
Note or any of the Obligations;

(e)                                  grant releases, compromises or indulgences
with respect to the Revolving Note, any of the Obligations, any extension or
renewal of any of the Obligations, any security therefor, or to any
other obligor with respect to the
Revolving Note or any of the
Obligations;

(f)                                    transfer the whole or any part of securities
which may constitute Collateral into
the name of the Lender or the
Lender’s nominee without disclosing, if the Lender so desires, that such
securities so transferred are subject to the security interest of the Lender, and any corporation, association, or
any of the managers or trustees of any trust issuing any of such securities, or
any transfer agent, shall not be bound to inquire, in the event that the Lender
or such nominee makes any further transfer of such securities, or any portion thereof,
as to whether the Lender or such nominee has the right to make such further transfer, and shall not be
liable for transferring the same;

(g)                                 make an election with respect to the
Collateral under Section 1111 of the Bankruptcy Code or take action
under Section 364 or any other section of the
Bankruptcy Code; provided, however, that any such action of the Lender
as set forth herein shall not, in any manner whatsoever, impair or affect the liability of the Borrower
hereunder, nor prejudice, waive, nor be construed to impair, affect, prejudice or waive the Lender’s rights and
remedies at law, in equity or by statute, nor release, discharge, nor be construed
to release or discharge, the Borrower, any guarantor or other Person liable to the Lender for the
Obligations; and

 49
 

(h)                                 at any time, and from time to time, accept
additions to, releases, reductions,
exchanges or substitution of the
Collateral, without in any way altering,
impairing, diminishing or affecting the provisions of this Agreement,
the Loan Documents, or any of the other Obligations, or the Lender’s rights
hereunder, under the Revolving Note or under any of the other Obligations.

The Borrower hereby ratifies
and confirms whatever the Lender may do with respect to the Collateral and agrees that the Lender shall
not be liable for any error of judgment or mistakes of fact or law with
respect to actions taken in connection with the Collateral, except to the
extent such error or mistake constitutes
gross negligence or willful misconduct of Lender.

10.6         Attorney-in-Fact. The Borrower hereby irrevocably makes,
constitutes and appoints the Lender (and any officer of the Lender or
any Person designated by the Lender for that
purpose) as the Borrower’s true and lawful proxy and attorney-in-fact (and
agent-in-fact) in the Borrower’s name, place and stead, with full power of
substitution, to (i) take such actions as are permitted in this Agreement, (ii)
execute such financing statements and other documents and to do such other acts as the Lender may
require to perfect and preserve the Lender’s security interest in, and to enforce such interests in
the Collateral, and (iii) carry out any remedy provided for in this
Agreement, including endorsing the Borrower’s name to checks, drafts,
instruments and other items of payment, and proceeds of the Collateral,
executing change of address forms with
the postmaster of the United States Post Office serving the address of the
Borrower, changing the address of the Borrower to that of the Lender,
opening all envelopes addressed to the Borrower and applying any payments
contained therein to the Obligations. The Borrower hereby acknowledges that the
constitution and appointment of such proxy and attorney-in-fact are coupled
with an interest and are irrevocable. The Borrower hereby ratifies and confirms
all that such attorney-in-fact may do
or cause to be done by virtue of any provision of this Agreement.

10.7         No
Marshaling. The Lender shall not be required to marshal any present or
future collateral security (including
this Agreement and the Collateral) for, or other assurances of payment of, the
Obligations or any of them or to resort to such collateral security or other assurances
of payment in any particular order. To the extent that it lawfully may, the
Borrower hereby agrees that it will not invoke any law relating to the
marshaling of collateral which might cause
delay in or impede the enforcement of the Lender’s rights under this
Agreement or under any other instrument creating or evidencing any of the
Obligations or under which any of the Obligations is outstanding or by which
any of the Obligations is secured or payment thereof is otherwise assured, and, to the extent that it lawfully may, the
Borrower hereby irrevocably waives
the benefits of all such laws.

10.8         Application of Proceeds. The Lender will within three (3) Business
Days after receipt of cash or solvent credits from collection of items
of payment, proceeds of Collateral or any other source, apply the whole or any
part thereof against the Obligations secured hereby. The Lender shall further
have the exclusive right to determine how, when and what application of such payments and such credits shall be
made on the Obligations, and such determination shall be conclusive upon
the Borrower. Any proceeds of any disposition by the Lender of all or any part of the Collateral may be first
applied by the Lender to the payment of expenses incurred

 50
 

by the Lender in connection with the Collateral,
including attorneys’ fees and legal expenses as provided for in Section 11 hereof.

10.9         No Waiver. No Event of Default
shall be waived by the Lender except in writing. No failure or delay on the
part of the Lender in exercising any right, power or remedy hereunder shall operate as a waiver of the exercise of the same or any other right at any other
time; nor shall any single or partial exercise of any such right, power
or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy hereunder. There
shall be no obligation on the part of the Lender to exercise any remedy
available to the Lender in any order. The remedies provided for herein
are cumulative and not exclusive of any remedies provided at law or in equity. The Borrower agrees that in
the event that the Borrower fails to perform, observe or discharge any of its
Obligations or liabilities under this Agreement or any other agreements
with the Lender, no remedy of law will provide adequate relief to the Lender,
and further agrees that the Lender shall be entitled to temporary and permanent
injunctive relief in any such case
without the necessity of proving actual damages.

11.

MISCELLANEOUS.

11.1         Obligations Absolute. None of the following shall affect the
Obligations of the Borrower to
the Lender under this Agreement or the Lender’s rights with respect to the Collateral:

(a)                                  acceptance or retention by the Lender of other
property or any interest in property
as security for the Obligations;

(b)                                 release by the Lender of all or any part of
the Collateral or of any party liable
with respect to the Obligations;

(c)                                  release, extension, renewal, modification or
substitution by the Lender of the
Revolving Note, or any note evidencing any of the Obligations, or the compromise
of the liability of the Guarantor of the Obligations; or

(d)                                 failure of the Lender to resort to any other
security or to pursue the Borrower
or any other obligor liable for any of the Obligations before resorting
to remedies against the Collateral.

11.2         Entire
Agreement. This Agreement and the other Loan Documents (i) are valid, binding and enforceable against the Borrower
and the Lender in accordance with their respective provisions and no conditions
exist as to their legal effectiveness; (ii) constitute the entire agreement
between the parties with respect to the subject matter hereof and thereof; and
(iii) are the final expression
of the intentions of the Borrower and the Lender. No promises, either expressed
or implied, exist between the Borrower and the Lender, unless contained herein
or therein. This Agreement, together with the other Loan Documents, supersedes
all negotiations, representations,
warranties, commitments, term sheets, discussions, negotiations, offers or contracts
(of any kind or nature, whether oral or written) prior to or contemporaneous
with the execution hereof with respect to any matter, directly or indirectly
related to the terms of this Agreement and the other Loan Documents. This
Agreement and the other Loan Documents are

 51
 

the result of negotiations
among the Lender, the Borrower and the other parties thereto, and have been
reviewed (or have had the opportunity to be reviewed) by counsel to all such
parties, and are the products of
all parties. Accordingly, this Agreement and the other Loan Documents shall not be construed more strictly against the
Lender merely because of the
Lender’s involvement in their
preparation.

11.3         WAIVER OF DEFENSES. THE BORROWER, WAIVES EVERY PRESENT AND
FUTURE DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH THE BORROWER MAY
NOW HAVE OR HEREAFTER MAY HAVE TO ANY ACTION BY THE LENDER IN ENFORCING THIS AGREEMENT. PROVIDED THE LENDER ACTS IN GOOD FAITH, THE BORROWER RATIFIES AND
CONFIRMS WHATEVER THE LENDER MAY DO PURSUANT TO THE TERMS OF THIS AGREEMENT.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER GRANTING ANY FINANCIAL ACCOMMODATION TO THE BORROWER.

11.4         Confirmations. The Borrower and the Lender agree from time
to time, upon written request
received by it from the other, to confirm to the other in writing the aggregate
unpaid principal amount of the Advances then outstanding under the
Revolving Note.

11.5         Binding Effect. This Agreement shall become effective upon
execution by the Borrower and the Lender. If this Agreement is not dated
or contains any blanks when executed by the Borrower, the Lender is hereby
authorized, without notice to the Borrower, to date this Agreement as of the date when it was executed
by the Borrower, and to complete any such blanks according to the terms upon which this Agreement is executed.

11.6         Enforceability. Wherever possible, each provision of this
Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by, unenforceable or
invalid under any jurisdiction, such provision
shall as to such jurisdiction, be severable and be ineffective to the extent of
such prohibition or invalidity, without invalidating the remaining
provisions of this Agreement or affecting
the validity or enforceability of such provision in any other jurisdiction.

11.7         Survival
of Borrower Representations. All covenants, agreements, representations and warranties made by the
Borrower herein shall, notwithstanding any investigation by the Lender, be
deemed material and relied upon by the Lender and shall survive the
making and execution of this Agreement and the Loan Documents and the issuance
of the Revolving Note, and shall be
deemed to be continuing representations and warranties until such time
as the Borrower has fulfilled all of its Obligations to the Lender, and the
Lender has been indefeasibly paid in
full in cash. The Lender, in extending financial accommodations to the Borrower, is expressly acting and relying on
the aforesaid representations and warranties.

11.8         Extensions of Lender’s Commitment. This Agreement shall secure and govern the terms of (i) any extensions or renewals of
the Lender’s commitment
hereunder, and (ii) any replacement note executed by the Borrower and
accepted by the Lender in its sole and absolute discretion in substitution for the Revolving Note.

 52
 

11.9         Time
of Essence. Time is of the essence in making payments of all amounts due
the Lender under this Agreement and in the performance and observance by the
Borrower of each covenant, agreement,
provision and term of this
Agreement.

11.10       Release of Claims Against Lender. In
consideration of the Lender making the Advances,
the Borrower hereby releases and discharges the Lender of and from any and all claims, harm, injury, and damage of any and
every kind, known or unknown, legal or equitable, which the Borrower may
have against the Lender from the date of their respective first contact with the Lender until the date of this Loan
Agreement, including any claim arising from any reports (environmental reports, surveys, appraisals, etc.) prepared by
any parties hired or recommended by the Lender. The Borrower confirms to
Lender that they have reviewed the effect of this release with competent legal
counsel of their choice, or have been afforded the opportunity to do so, prior to execution of this Agreement and the Loan
Documents and do each acknowledge and agree that the Lender is relying upon
this release in extending the Advances to the Borrower.

11.11       Costs, Fees and Expenses. The Borrower shall pay or reimburse the Lender for all reasonable costs, fees and expenses
incurred by the Lender or for which the Lender becomes obligated in connection with the negotiation,
preparation, consummation, collection of the Obligations or enforcement
of this Agreement, the other Loan Documents and all other documents provided for herein or delivered or
to be delivered hereunder or in connection herewith (including any
amendment, supplement or waiver to any Loan Document), or during any workout,
restructuring or negotiations in respect thereof, including reasonable
consultants’ fees and attorneys’ fees
and time charges of counsel to the Lender, which shall also include attorneys’ fees and time charges of attorneys
who may be employees of the Lender or any Affiliate of the Lender, plus
costs and expenses of such attorneys or of the Lender; search fees, costs and
expenses; and all taxes payable in connection with this Agreement or the other
Loan Documents, whether or not the
transaction contemplated hereby shall be consummated. In furtherance of
the foregoing, the Borrower shall pay any and all stamp and other taxes, UCC search fees, filing fees and other costs and
expenses in connection with the execution and delivery of this
Agreement, the Revolving Note and the other Loan Documents to be delivered hereunder, and agrees to save and hold the
Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or
omission to pay such costs and expenses.
That portion of the Obligations consisting of costs, expenses or advances to be
reimbursed by the Borrower to
the Lender pursuant to this Agreement or the other Loan Documents which are not paid on or prior to
the date hereof shall be payable by the Borrower to the Lender on demand. If at any time or times
hereafter the Lender: (a) employs counsel for advice or other
representation (i) with respect to this Agreement or the other Loan Documents, (ii) to represent the Lender in any
litigation, contest, dispute, suit or proceeding or to commence, defend, or
intervene or to take any other action in or with respect to any litigation,
contest, dispute, suit, or proceeding (whether instituted by the Lender, the Borrower,
or any other Person) in any way or respect relating to this Agreement,
the other Loan Documents or the Borrower’s business or affairs, or (iii) to
enforce any rights of the Lender against the Borrower or any other Person that may be obligated to the Lender by
virtue of this Agreement or the other Loan Documents; (b) takes any action to protect, collect, sell, liquidate,
or otherwise dispose of any of the
Collateral; and/or (c) attempts to or enforces any of the Lender’s rights or remedies under the Agreement
or the other Loan Documents, the costs and expenses incurred by the Lender in
any

 53
 

manner or way with respect
to the foregoing, shall be part of the Obligations, payable by the Borrower to the Lender on demand.

11.12       Indemnification. The Borrower agrees to
defend (with counsel satisfactory to the Lender),
protect, indemnify, exonerate and hold harmless each Indemnified Party from and
against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims,
costs, expenses and distributions of any kind or nature (including the
disbursements and the reasonable
fees of counsel for each Indemnified Party thereto, which shall also include, without limitation, reasonable attorneys’
fees and time charges of attorneys who may be employees of any Indemnified Party), which may be imposed on, incurred
by, or asserted against, any Indemnified Party (whether direct, indirect
or consequential and whether based on any
federal, state or local laws or regulations, including securities laws,
Environmental Laws, commercial
laws and regulations, under common law or in equity, or based on contract or otherwise) in any manner relating to or
arising out of this Agreement or any of the Loan Documents, or any act, event
or transaction related or attendant thereto, the preparation, execution and delivery of this Agreement and
the Loan Documents, including the making or issuance and management of the Advances, the use or intended use of the
proceeds of the Advances, the
enforcement of the Lender’s rights and remedies under this Agreement, the Loan Documents,
the Revolving Note, any other instruments and documents delivered hereunder, or
under any other agreement between the Borrower and the Lender; provided,
however, that the Borrower shall not
have any obligations hereunder to any Indemnified Party with respect to matters determined by a court of competent
jurisdiction by final and non-appealable judgment to have been caused by or resulting from the willful
misconduct or gross negligence of such Indemnified Party. To the extent that
the undertaking to indemnify set forth in the preceding sentence may be
unenforceable because it violates any law or public policy, the Borrower shall satisfy such undertaking to the maximum
extent permitted by applicable law. Any liability, obligation, loss, damage, penalty, cost or
expense covered by this indemnity shall be paid to each Indemnified Party
on demand, and failing prompt payment, together with interest thereon at the
Default Rate from the date incurred by each Indemnified Party until paid by the
Borrower, shall be added to the
Obligations of the Borrower and be secured by the Collateral. The provisions of
this Section shall survive the satisfaction and payment of the other
Obligations and the termination of this
Agreement.

11.13       Revival and Reinstatement of Obligations. If the incurrence or payment of the Obligations
by the Borrower or the transfer to the Lender of any property should for any
reason subsequently be declared to be
void or voidable under any state or federal law relating to creditors’ rights, including provisions of
the Bankruptcy Code relating to fraudulent conveyances, preferences, or
other voidable or recoverable payments of money or transfers of property
(collectively, a “Voidable Transfer”), and if the Lender is required to repay
or restore, in whole or in part, any such Voidable Transfer, or elects to do so
upon the reasonable advice of its
counsel, then, as to any such Voidable Transfer, or the amount thereof that the
Lender is required or elects to
repay or restore, and as to all reasonable costs, expenses, and attorneys fees of
the Lender, the Obligations shall automatically shall be revived, reinstated,
and restored and shall exist as though
such Voidable Transfer had never been made.

11.14       Customer Identification - USA Patriot Act Notice. The Lender hereby notifies the Borrower
that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L.
107-56,

 54
 

signed into law October 26,
2001) (the “Act”), and the Lender’s policies and practices, the Lender is required to obtain, verify and
record certain information and documentation that identifies the
Borrower, which information includes the name and address of the Borrower and such other information that will allow the
Lender to identify the Borrower in accordance with the Act.

11.15       Rights of Third Parties. All conditions
of the obligations of Borrower hereunder are
imposed solely and exclusively for the benefit of Lender and no other person
shall have standing to require
satisfaction of such conditions in accordance with their terms or be entitled
to assume that Lender will refuse to make advances in the absence of strict
compliance with any or all
thereof, and no other person shall, under any circumstances, be deemed to be
a beneficiary of such conditions, any
and all of which may be freely waived in whole or in part by Lender at any time if in its sole discretion it deems it
desirable to do so. In particular, Lender makes no representations and assumes no duties or
obligations as to third parties concerning the quality of the construction
of the Improvements or the absence therefrom of defects. In this connection, Borrower agrees to and shall indemnify Lender
from any liability, claims or losses resulting from the disbursement of
the Loan proceeds or from the condition of the Premises whether related to the quality of construction or otherwise and
whether arising during or after the term of the Loan made by Lender to
Borrower in connection therewith. This provision shall survive the repayment of
said Loan and shall continue in full force and effect so long as the
possibility of any such liability,
claims or losses exists.

11.16       Evidence of Satisfaction of Conditions. Any condition of this Agreement which requires the submission of evidence of the
existence or non-existence of a specified fact or facts implies as a
condition the existence or non-existence, as the case may be, of such fact or
facts, and Lender shall, at all times,
be free independently to establish to its satisfaction and in its absolute discretion such existence or
non-existence at its sole cost and expense except as otherwise expressly provided in the Loan
Documents.

11.17       Assignment. Borrower
may not assign this Loan Agreement or any of its rights or obligations hereunder,
including the right to an Advance, without the prior written consent of Lender.

11.18       Successors and Assigns Including in Parties.
Whenever in this Agreement one of the
parties hereto is named or referred to, the heirs, legal representatives, successors
and assigns of such parties shall be included and all covenants and
agreements contained in this Agreement by
or on behalf of the Borrower or by or on behalf of the Lender shall bind and
inure to the benefit of their respective heirs, legal representatives,
successors and assigns, whether so expressed or not.

11.19       Headings. The
headings of the sections, paragraphs and subdivisions of this Agreement
are for the convenience of reference only, and are not to be considered a part
hereof and shall not limit or otherwise
affect any of the terms hereof.

11.20       Invalid Provisions to Affect no Others.
If fulfillment of any provision hereof, or any transaction related thereto at
the time performance of any such provision shall be due, shall involve transcending the limit of validity
prescribed by law, then, ipso facto, the obligation to be

 55
 

fulfilled shall be reduced
to the limit of such validity; and such clause or provision shall be deemed invalid as though not herein
contained, and the remainder of this Agreement shall remain operative in full
force and effect.

11.21       Number and Gender.
Whenever the singular or plural number, masculine or feminine or neuter gender
is used herein, it shall equally include the other.

11.22       Amendments. Neither this Agreement nor
any provision hereof may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against whom
enforcement of the change,
waiver, discharge or termination is sought.

11.23       Revolving Loan Assignment. It is
contemplated that at some time subsequent to execution and delivery of the Loan Documents, Lender may assign its
interests as lender hereunder to First Bank & Trust, 133 South Main,
P.O. Box 1347, Sioux Falls, South Dakota 57104,
who shall succeed to the interests of Dougherty Funding LLC hereunder and shall
be substituted in all respects to Dougherty Funding LLC.

11.24       Notices. Any notices
and other communications permitted or required by the provisions of this
Agreement (except for telephonic notices expressly permitted) shall be in writing
and shall be deemed to have been properly given or served by depositing the
same with the United States Postal
Service, or any official successor thereto, designated as Certified Mail, Return Receipt Requested, bearing adequate
postage, or deposited with reputable private courier or overnight
delivery service, and addressed as hereinafter provided. Each such notice shall
be effective upon being deposited as aforesaid. The time period within which a
response to any such notice must be
given, however, shall commence to run from the date of receipt of the notice by the addressee thereof.
Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was
given shall be deemed to be receipt of the notice sent. By giving to the
other part hereto at least ten (10) days’ notice thereof, either party hereto
shall have the right from time to time to change its address and shall have the
right to specify as its address any
other address within the United States of America.

Each notice to Lender shall
be addressed as follows:

Dougherty Funding LLC

Suite 4300

90 South Seventh Street

Minneapolis, Minnesota 55402

Attention:
Executive Vice President and Chief Operating Officer

Each notice to Borrower
shall be addressed as follows:

Millennium Ethanol, LLC

300 North Broadway

Marion, South Dakota 57043

Attention: CEO

 56
 

11.25       Governing Law. Notwithstanding the place
of execution of this instrument, the parties
to this instrument have contracted for South Dakota law to govern this
instrument and it is controllingly agreed that this instrument is made pursuant
to and shall be construed and governed by the laws of the State
of South Dakota without regard to the principles of conflicts of law.

11.26       Participation. Lender may in its sole and
exclusive discretion issue participations in
the Loan and/or assign all or a portion of its obligations to make the
Revolving Loan to participant(s) in the Revolving Loan. The Lender may
assign the Revolving Loan and its rights and obligations to another lender or
to a Person that the Lender merges with, is merged into, or who acquires the assets of Lender or whose
assets are acquired by Lender. Subject to the confidentiality restrictions in the participation agreement, Lender may
divulge all information received
by it from Borrower or any other source, including but not limited to
information relating to the Revolving Loan, to the Project and to Borrower, to
any such participant(s) or other lenders, and Borrower shall cooperate with
Lender, at Lender’s expense, in satisfying the reasonable requirements
of any such participant(s) or other lenders for consummating such a purchase or participation.

11.27       Consent to Jurisdiction.
The Borrower submits and consents to personal jurisdiction of the Courts of the State of South Dakota and Courts of
the United States of America sitting in such State for the enforcement of this
instrument and waives any and all personal
rights under the laws of any state or the United States of America to object to
jurisdiction in the State of South Dakota. Litigation may be commenced
in any state court of general jurisdiction for the State of South Dakota or the
United States District Court located in that
state, at the election of the Lender. Nothing contained herein shall prevent
Lender from bringing any action against any other part or exercising any rights
against any security given to Lender,
or against the Borrower personally, or against any property of the Borrower, within any other state.
Commencement of any such action or proceeding in any other state shall not constitute a waiver of consent to
jurisdiction or of the submission made by the Borrower to personal jurisdiction within the State of
South Dakota.

11.28       Counterparts. This instrument may be
executed in any number of counterparts with
the same effect as if all parties hereto had signed the same document. All such
counterparts shall be construed together and shall constitute one
instrument, but in making proof hereof it shall
only be necessary to produce one such counterpart. The signatures to this
instrument may be executed on
separate pages and when attached to this instrument shall constitute one
complete document.

11.29       Waiver. THE UNDERSIGNED WAIVE TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING TO WHICH ANY PARTIES TO THIS INSTRUMENT ARE
INVOLVED DIRECTLY OR INDIRECTLY AND ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS INSTRUMENT
OR THE RELATIONSHIP ESTABLISHED HEREUNDER, AND WHETHER ARISING OR
ASSERTED BEFORE OR AFTER THE DATE OF
THIS INSTRUMENT.

 57
 

IN WITNESS WHEREOF, the Borrower and the Lender have
executed this Loan and Security
Agreement as of the date first above written.

	
   

  	
  MILLENIUM ETHANOL, LLC,

  
	
   

  	
  A South Dakota
  limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven Domm

  	
   

  
	
   

  	
  Name:

  	
  Steven Domm

  	
   

  
	
   

  	
  Title:

  	
  CEO

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DOUGHERTY
  FUNDING LLC,

  
	
   

  	
  A Delaware
  limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gregory
  Bolin

  	
   

  
	
   

  	
  Name:

  	
  Gregory Bolin

  	
   

  
	
   

  	
  Title:

  	
  Senior Vice
  President

  	
   

  

 

 58
 

EXHIBIT A

MILLENNIUM ETHANOL, LLC

BORROWING
BASE CERTIFICATE

	
  Dougherty Funding LLC

  	
   

  	
   

  
	
  90 South Seventh
  Street, Suite 4300

  	
   

  	
   

  
	
  Minneapolis, MN
  55402

  	
   

  	
   

  
	
  Attention:
  Executive Vice President and Chief Operating Officer

  	
  Date:

  	
   

  	
   

  
					

 

	
  1

  	
   

  	
  Accounts
  Receivable:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Ethanol

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Distiller’s Grain

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Other

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  Total Accounts
  Receivable

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Deduct
  Ineligible Accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (31 days or more
  from Invoice date)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Deduct Other
  Ineligible Accounts

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (as determined
  by Bank)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
  Eligible
  Accounts Receivable

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Multiply by
  Borrowing Base Factor

  	
   

  	
  75.00

  	
  %

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Accounts
  Receivable Loan

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
  Availability

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
  Ending Corm
  Inventory

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
  Ending Distiller’s
  Grain

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
  Ending Fuel
  Ethanol Inventory

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Total Inventory

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Multiply by
  Borrowing Base Factor

  	
   

  	
  75.00

  	
  %

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8

  	
   

  	
  Inventory Loan Availability

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9

  	
   

  	
  Total Borrowing
  Base

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10

  	
   

  	
  Outstanding
  Revolving Loan Balance

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11

  	
   

  	
  Outstanding
  Letters of Credit

  	
   

  	
  $

  	
  —

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12

  	
   

  	
  Total
  Outstanding Balance

  	
   

  	
   

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13

  	
   

  	
  Margin

  	
   

  	
   

  	
   

  	
  $

  	
   

  	
   

  

 

The undersigned certifies
that the Borrowing Base as represented above is a true and correct
representation of the information contained in the Borrower’s records. The Borrower’s submission of this
Borrowing Base by e-mail or fax constitutes its certification that this Borrowing Base is a true and correct representation
of the information contained in
the Borrower’s records.

	
  Millennium Ethanol, LLC

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
  Its:

  	
   

  	
   

  

 

 59
 

SCHEDULE
5.8

LITIGATION
AND CONTINGENT LIABILITIES

NONE

 60
 

SCHEDULE 5.21

DEPOSIT ACCOUNTS

	
  Farmers State Bank -
  Checking

  	
  Account No.
  158643001

  
	
   

  	
   

  
	
  Farmers State
  Bank - Savings

  	
  Account No.
  158643010

  
	
   

  	
   

  
	
  Goldman Sachs –
  Escrow in the name of Farmers State Bank

  

 

 61
 

SCHEDULE 5.22

LOCATION OF
COLLATERAL

Millennium Ethanol, LLC

300 North Broadway

Marion, South Dakota 57043

 62Exhibit
10.18

LETTER OF CREDIT APPLICATION, REIMBURSEMENT 

AND SECURITY AGREEMENT

This LETTER OF CREDIT APPLICATION, REIMBURSEMENT AND
SECURITY AGREEMENT dated as of December 18, 2006 (the “Agreement”), is executed
by and between MILLENNIUM ETHANOL, LLC, a South Dakota limited liability
company (the “Borrower”), and FIRST BANK & TRUST, a South Dakota state bank
(the “Lender”).

PRELIMINARY RECITALS:

A.            Borrower is acquiring
certain real property located in the County of Turner, State of South Dakota,
all as more fully defined herein as the “Premises”.

B.            Borrower proposes to
construct and operate on the Premises a plant and other facilities that are
ancillary, incidental, necessary or related to the marketing, management,
servicing, ownership or operation of the foregoing as a 100 MGY anhydrous
ethanol refinery and production facility all as more fully defined herein as
the “Project”.

C.            As part of the
construction of the Project, certain utility providers have required Borrower
to secure its obligations to them with letters of credit.

D.            In furtherance thereof
the Borrower has made application to and the Lender has agreed to issue letters
of credit subject to the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of issuing the letters
of credit and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto agree as follows:

1.

DEFINITIONS.

1.1           Defined Terms.  For the purposes of this Agreement, the
following capitalized words and phrases shall have the meanings set forth
below.

“Adjustment Date” shall mean the first day of
each calendar quarter in a year, i.e., January 1, April 1, July 1 and October
1.

“Advance” shall mean any payment by Lender of drafts
drawn and presented in accordance with the terms of a Letter of Credit.

“Affiliate” of any Person shall mean (a) any other Person which,
directly or indirectly, controls or is controlled by or is under common control
with such Person, (b) any officer or director of such Person, and (c) with
respect to the Lender, any entity administered or managed by the Lender, or an
Affiliate or investment advisor thereof and which is engaged in making,
purchasing, holding or otherwise investing in commercial loans.  A Person shall be deemed to be “controlled by”
any other Person if such Person possesses, directly or indirectly, power to
direct or cause the direction of the management and

policies of such Person whether by contract, ownership of voting
securities, membership interests or otherwise.

“Bankruptcy Code” shall mean the Bankruptcy Reform Act of 1978
as heretofore and hereafter amended, and codified as 11 U.S.C. §101 et seq.

“Basis Points” shall mean an arithmetic expression of a
percentage measured in hundredths of a percent (i.e. 50 Basis Points equals
one-half of one percent).

“Borrower” shall mean Millennium Ethanol, LLC, a South Dakota
limited liability company.

“Business Day” shall mean any day other than a Saturday, Sunday
or a legal holiday on which banks are authorized or required to be closed for
the conduct of commercial banking business in Brookings, South Dakota.

“Capital Lease” shall mean, as to any Person, a lease of any
interest in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, by such Person, as lessee, that is, or should be, in
accordance with Financial Accounting Standards Board Statement No. 13, as
amended from time to time, or, if such statement is not then in effect, such
statement of GAAP as may be applicable, recorded as a “capital lease” on the
financial statements of such Person prepared in accordance with GAAP.

“Capitalized Lease Obligations” shall mean, as to any Person,
all rental obligations of such Person, as lessee under a Capital Lease which
are or will be required to be capitalized on the books of such Person.

“Cash CAPEX” shall mean, for any fiscal period, the aggregate of
all expenditures during such period for any assets, or for improvements,
replacements, substitutions or additions therefor or thereto, which are
capitalized on the balance sheet of the Borrower and which, in conformity with
GAAP, are required to be included in or reflected by the property, plant or
equipment or similar fixed asset account reflected in such balance sheet, and
shall include the balance sheet amount of Capitalized Lease Obligations
incurred during such period, but excluding expenditures made in connection with
the replacement, substitution or restoration of assets to the extent financed
(i) from insurance proceeds (or other similar recoveries) paid on account of
the loss of or damage to the assets being replaced or restored or (ii) with
awards of compensation arising from the taking by eminent domain or
condemnation of the assets being replaced.

“Closing Date” shall mean the date on which the Loan Documents
are executed and delivered to the Lender which date shall be not later than
December 31, 2006, or such other date mutually agreed to by Borrower and
Lender.

“Collateral” shall have the meaning set forth in Section 4.1
hereof.

“Collateral Access Agreement” shall mean an agreement in form
and substance reasonably satisfactory to the Lender pursuant to which a
mortgagee or lessor of real property on which Collateral is stored or otherwise
located, or a warehouseman,

 2
 

processor or other bailee of Inventory or other property owned by the
Borrower or any Subsidiary, acknowledges the Liens of the Lender and waives any
Liens held by such Person on such property, and, in the case of any such
agreement with a mortgagee or lessor, permits the Lender reasonable access to
and use of such real property following the occurrence and during the
continuance of an Event of Default to assemble, complete and sell any
collateral stored or otherwise located thereon; provided, however,
that, notwithstanding the foregoing, Plant Lender shall not be required to
waive any Lien, but such Liens would be subject to the Intercreditor Agreement.

“Commitment Amount” shall mean $7,300,000.00, which amount shall
be reduced by the Lender over the term of this Agreement by an amount equal to
the amount of any letter of credit requirement reduction by the Natural Gas
Supply Distributor and the Natural Gas Supply Provider.  Borrower shall forward to Lender any notice
received from the Natural Gas Supply Distributor or the Natural Gas Supply
Provider informing Borrower of any letter of credit requirement reduction (the “Reduction
Amount”) whereby, without further act or notice from any party (except as may
be required under Section 2.10 hereof), the Commitment Amount shall
automatically be reduced by the Reduction Amount immediately upon receipt by
Lender of such notice.

“Debt” shall mean all items of indebtedness or
liability that in accordance with GAAP would be included in determining total
liabilities as shown on the liabilities side of the balance sheet for Borrower
and shall also include the aggregate payments required to be made by Borrower
at any time under any lease that is considered a capitalized lease under GAAP,
the indebtedness due the Lender hereunder, including (i) principal and interest
on the Subordinate Debt, (ii) any indebtedness due under the Unsecured Debt and
(iii) principal and interest due under the Plant Loan and the Revolving Loan.

“Default Rate” shall mean a per annum rate of interest equal to
the lesser of (i) the maximum lawful rate of interest permitted to be paid on
the Advances or (ii) 800 Basis Points plus the LIBOR as it adjusts from time to
time.

“Debt Service Coverage Ratio” shall mean EBITDA divided by Fixed
Charges.

“Distributions” shall mean any payment of monies paid by the
Borrower to a Member by reason of its membership interest, whether profits,
return of capital, interest on capital, or any preference payments or any
distribution in respect thereof, either directly or indirectly.

“EBITDA” shall
mean for any period an amount equal to Net Income for such period plus
(a) the following to the extent deducted in calculating such Net Income: (i)
Fixed Charges for such period, (ii) the provision for Federal, state, local and
foreign income taxes payable for such period, (iii) depreciation and
amortization expense and (iv) other non-recurring expenses reducing such Net
Income which do not represent a cash item in such period or any future period
and minus (b) the following to the extent included in calculating such
Net Income: (i) Federal, state, local and foreign income tax credits for such
period and (ii) all non-cash items increasing Net Income for such period.

 3
 

“Employee Plan” includes any pension,
stock bonus, employee stock ownership plan, retirement, profit sharing,
deferred compensation, stock option, bonus or other incentive plan, whether
qualified or nonqualified, or any disability, medical, dental or other health
plan, life insurance or other death benefit plan, vacation benefit plan,
severance plan or other employee benefit plan or arrangement, including those
pension, profit-sharing and retirement plans of the Borrower described from
time to time in the financial statements of the Borrower and any pension plan,
welfare plan, Defined Benefit Pension Plans (as defined in ERISA) or any
multi-employer plan, maintained or administered by the Borrower or to which the
Borrower is a party or may have any liability or by which the Borrower is
bound.

“Environmental Laws” shall mean all present or future federal,
state or local laws, statutes, common law duties, rules, regulations,
ordinances and codes, together with all administrative or judicial orders,
consent agreements, directed duties, requests, licenses, authorizations and
permits of, and agreements with, any governmental authority, in each case
relating to any matter arising out of or relating to public health and safety,
or pollution or protection of the environment or workplace, including any of
the foregoing relating to the presence, use, production, generation, handling,
transport, treatment, storage, disposal, distribution, discharge, emission,
release, threatened release, control or cleanup of any Hazardous Substance.

“ERISA” shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.

“Event of Default” shall mean any of the events or conditions
which are set forth in Section 9 hereof.

“Final Completion” shall have the meaning set
forth in the Plant Loan and Security Agreement.

“Final Completion Date” shall have the meaning
set forth in the Plant Loan and Security Agreement.

“Fixed Charges” shall mean for any described fiscal
period, the sum of: (a) interest expense for such period; (b) payments
under Capitalized Lease Obligations not otherwise included in interest expense
for such period; plus  (c) any
scheduled principal payments for borrowed money made during such period.

“GAAP” shall mean generally accepted accounting principles set
forth from time to time in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board (or
agencies with similar functions of comparable stature and authority within the
U.S. accounting profession), which are applicable to the circumstances as of
the date of determination, provided, however, that interim financial statements
or reports shall be deemed in compliance with GAAP despite the absence of
footnotes and fiscal year-end adjustments as required by GAAP.

 4
 

“Governmental Authorities” shall mean any federal, state or
local governmental body or regulatory authority exercising jurisdiction over
the Premises or the construction of the Project, including without limitation,
any department or subdivision of Turner County or Marion, South Dakota.

“Guaranty” shall mean the unsecured Guaranty executed by FREMAR
Farmers Cooperative, Inc., a South Dakota corporation, in favor of Lender
guarantying up to a maximum of $1,000,000 of the Obligations of Borrower
hereunder, in form and substance satisfactory to Lender.

“Hazardous Substances” shall mean (a) any petroleum or
petroleum products, radioactive materials, asbestos in any form that is or
could become friable, urea formaldehyde foam insulation, dielectric fluid
containing levels of polychlorinated biphenyls, radon gas and mold;
(b) any chemicals, materials, pollutant or substances defined as or
included in the definition of “hazardous substances”, “hazardous waste”, “hazardous
materials”, “extremely hazardous substances”, “restricted hazardous waste”, “toxic
substances”, “toxic pollutants”, “contaminants”, “pollutants” or words of
similar import, under any applicable Environmental Law; and (c) any other
chemical, material or substance, the exposure to, or release of which is
prohibited, limited or regulated by any governmental authority or for which any
duty or standard of care is imposed pursuant to, any Environmental Law.

“Impositions” shall mean all real estate, ad valorem
and personal property taxes, general and special assessments imposed by
Governmental Authorities, water, sewer and other municipal utility charges and
any and all other fees and charges that may be assessed or imposed by
Governmental Authorities on the Project and the underlying Premises.

“Incentive Payments” shall mean all incentive
payments, tax credits and subsidies payable to the Borrower to produce and
market ethanol including:

·              Eligibility
with the USDA Commodity Credit Corporation, 7 CFR Part 1424, Federal Register,
Volume 68, No. 88, May 2, 2003, page 24596-24603.

·              Eligibility
for the South Dakota Department of Revenue, Ethanol Production Incentive
Payment Program.

“Indemnified Party” and “Indemnified Parties” shall mean,
respectively, each of the Lender and any parent corporation, Affiliate or
subsidiary of the Lender, and each of their respective officers, directors,
employees, attorneys and agents, and all of such parties and entities.

“Intercreditor Agreement” shall mean the
Intercreditor and Collateral Priority Agreement among the Lender, the Revolving
Lender, and the Plant Lender.

“Letter of Credit”
shall mean a letter of credit issued under this Agreement, in substantially the
form of Exhibit A attached hereto, as the same may be amended, supplemented or
modified.

 5
 

“LIBOR” shall mean
the daily rate of interest as published in the Money Rates section of The Wall
Street Journal as London Interbank Offered Rates (Libor) with a term of three
(3) months. If The Wall Street Journal ceases to publish the London Interbank
Offered Rates (Libor), Lender may select a substitute publication or service
that publishes the London Interbank Offered Rates (Libor), or its equivalent,
and if such London Interbank Offered Rates (Libor) is no longer published, then
the LIBOR Rate will be determined by Lender computing the arithmetic mean rates
of interest per annum notified to the Lender by at least two (2) major banks in
the London interbank market as the rate of interest at which U.S. dollar
deposits in the approximate amount of the Advance would be offered to major
banks in the London interbank market at their request on the second Libor
Business Day prior to the Adjustment Date. If the LIBOR Rate is not published
or announced on the Adjustment Date, then the LIBOR Rate published or announced
on the immediate last day prior to the Adjustment Date shall be substituted.

“Libor Business Day”
shall mean any day on which banks in London, England and New York, New York are
open for conducting transactions in foreign currency and exchange.

 “Lien” shall mean, with
respect to any Person, any interest granted by such Person in any real or
personal property, asset or other right owned or being purchased or acquired by
such Person (including an interest in respect of a Capital Lease) which secures
payment or performance of any obligation and shall include any mortgage, lien,
encumbrance, title retention lien, charge or other security interest of any
kind, whether arising by contract, as a matter of law, by judicial process or
otherwise.

“Loan Documents” shall mean this Agreement, the Letters of
Credit, and each of the agreements, documents, instruments and certificates set
forth in Section 3.1 hereof, and any and all such other instruments,
documents, certificates and agreements from time to time executed and delivered
by the Borrower for the benefit of the Lender pursuant to any of the foregoing,
and all amendments, restatements, supplements and other modifications thereto.

“Management Agreement”
shall mean the Management Agreement dated September 6, 2005, between Millennium
Ethanol, LLC and Fremar Farmers Cooperative, Inc., providing for the management
of the Project and its operations by Fremar Farmer Cooperative, Inc.

“Material Adverse Effect” shall mean
a material adverse effect on the business, operations, property, assets,
liabilities or financial condition taken as a whole, or a material adverse
effect on the ability of any Person to perform its obligations.

“Maturity Date” shall mean May 29, 2009.

“Member” shall mean in the
context of the Borrower any member of the Borrower.

“Mortgage” shall mean the
Mortgage executed by Borrower in favor of Lender creating a lien and security
interest in the Premises and Project, in form and substance acceptable to
Lender.

 6
 

“Natural Gas Distribution Delivery Agreement”
shall mean the Natural Gas Distribution Delivery Agreement dated May 30, 2006
between North Western Services Corporation and Millennium Ethanol, LLC, as
amended by the First Amendment dated September 7, 2006.

“Natural Gas Facilities” shall mean all mains,
service laterals, storage tanks, piping, valves, manholes and appurtenances for
the furnishing, transmission, storage and disposal of natural gas to the
Project including those facilities to be constructed pursuant to the Natural
Gas Supply Agreement.

“Natural Gas Pipeline Agreements” shall mean
those agreements to provide natural gas from the mainlines of the Natural Gas
Supply Provider to the distribution point of the Natural Gas Supply Distributor
under the following agreements:

·      Firm Throughput Service
Agreement dated June 9, 2006 between Northern Natural Gas Company and
Millennium Ethanol, LLC

·      Northern
Lights-Phase 2 Precedent Agreement between Northern Natural Gas Company and
Millennium Ethanol, LLC dated May 18, 2006

“Natural Gas Supply Agreements” shall mean
those agreements with Utility Providers to provide natural gas to the Plant
under the following agreements:

·      Natural Gas Distribution
Delivery Agreement

·      Firm Throughput Service
Agreement

·      Northern
Lights-Phase 2 Precedent Agreement

“Natural Gas Supply Distributor” shall mean
North Western Services Corporation, the entity directly providing the natural
gas distribution to the Plant from a point outside of the Plant.

“Natural Gas Supply Provider” shall mean
Northern Natural Gas Company, the entity providing interstate transportation
services at a point outside of the Plant for further distribution by North
Western Services Corporation to Borrower at the Plant.

“Natural Gas Supply System” shall mean the
pipelines pursuant to which natural gas is transferred from the Utility
Providers’ main pipe lines and ultimately piped to the Plant for use in the
Plant and which Borrower shall purchase under supply agreements to be entered
into by Borrower.

“Net Income” shall mean with respect to the Borrower for any
period, the net income (or loss) of the Borrower for such period as determined
in accordance with GAAP, excluding gains or losses on the sale of assets other
than Inventory.

“Obligations” shall mean all obligations, indebtedness and
liabilities of Borrower to Lender arising under or in connection with this
Agreement or the other Loan Documents, whether now existing or hereafter
arising, whether direct, indirect, related, unrelated, fixed, contingent,
liquidated, unliquidated, joint, several, or joint and several, all interest
accrued thereon (including interest which would be payable as post-petition in
connection

 7
 

with any bankruptcy or similar proceeding, whether or not permitted as
a claim thereunder), any fees due the Lender hereunder, and any expenses
incurred by the Lender hereunder.

“Operating Lease” shall mean any lease of any
property (whether real, personal or mixed) that, in accordance with GAAP, would
be required to be classified and accounted for as an expense item on a balance
sheet.

“Organizational Identification Number” means, with respect to
Borrower, the organizational identification number assigned to Borrower by the
applicable governmental unit or agency of the jurisdiction of organization of
the Borrower.

“Other Taxes” shall mean any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies which arise from the execution, delivery, enforcement or registration
of, or otherwise with respect to, this Agreement or any of the other Loan
Documents.

“Permitted Liens” shall mean those (i) liens and security
interests in favor of Lender pursuant to this Agreement, (ii) those liens and
security interests in favor of the Plant Lender pursuant to the Plant Loan and
Security Agreement, (iii) those liens and security interests in favor of
the Revolving Lender pursuant to the Revolving Loan Agreement which are
expressly subject to the Intercreditor Agreement, and (iv) those liens and
security interests in favor of the Subordinate Lenders which are expressly
subordinate to the liens and security interests of the Lender pursuant to the
Subordination Agreements.

“Person” shall mean any natural person, partnership, limited
liability company, corporation, trust, joint venture, joint stock company,
association, unincorporated organization, government or agency or political
subdivision thereof, or other entity, whether acting in an individual,
fiduciary or other capacity.

“Plant” shall mean a to-be-built dry mill grain
processing plant capable of grinding approximately 36,000,000 bushels of corn
per year to produce a name-plate capacity of 100,000,000 gallons of fuel grade
Ethanol per year and with approximately 321,000 tons of dried distillers grains
with solubles per year located on approximately 225 acres of existing raw land
in Turner County, near the City of Marion, South Dakota.

“Plant Lender” shall mean Dougherty Funding LLC.

“Plant Loan” shall mean the loan to be made by the Plant Lender
pursuant to the terms of the Plant Loan and Security Agreement.

“Plant Loan and Security Agreement” shall mean the Loan and
Security Agreement dated June 22, 2006, by the Plant Lender and the Borrower
providing the terms of the $90,000,000.00 construction-term loan to finance the
construction and initial operation of the Plant.

“Plant Loan Documents” shall mean the documents required by the
Plant Loan and Security Agreement consummating the Plant Loan.

 8
 

“Project Free Cash Flow” shall mean EBITDA minus (i) Incentive
Payments (but only to the extent such Incentive Payments are included in
EBITDA), (ii) debt service on (aa) the Plant Loan, (bb) the Subordinate
Debt with Rex Radio and Television, Inc. or its designee, (cc) the Unsecured
Debt and (dd) the Revolving Loan, (iii) cash in the amount of the Tax
Distributions to Borrower’s members, (iv) deposits into the FF&E Reserve
(as defined under the Plant Loan Documents) and (v) Cash CAPEX in excess of
amounts drawn from the FF&E Reserve.

“Promissory Note” shall mean the promissory note of Borrower
payable to Lender in connection with this Agreement, in form and substance
acceptable to Lender, and all extensions, renewals and modifications thereof.

“Reimbursement Reserve Account” shall mean the interest bearing
reserve account established under Section 4.16 hereof, which shall provide that
all accrued interest shall be for the Borrower’s account (provided that
Borrower’s rights in such account and accrued interest shall be subject to the
provisions of Section 4.16).

“Revolving Lender” shall mean the lender under the Revolving
Loan Agreement.

“Revolving Loan Agreement” shall mean the Revolving Credit and
Security Agreement dated June 29, 2006, between Revolving Lender and Borrower.

“Revolving Loan Documents” shall mean the documents required by the
Revolving Loan Agreement consummating the Revolving Loan.

“Security Agreement” shall mean the Security Agreement executed
by Borrower in favor of Lender creating a security interest in the personal
property Collateral, in form and substance acceptable to Lender.

“Solvent” or “Solvency” as to any person
or entity shall mean that (i) the sum of the assets of such person or entity,
both at a fair valuation and at present fair salable value, will exceed its
liabilities, including contingent liabilities, (ii) such person or entity will
have sufficient capital with which to conduct its business as presently
conducted and as proposed to be conducted and (iii) such person or entity has
not incurred debts, and does not intend to incur debts, beyond its ability to
pay such debts as they mature. For purposes of this definition, “debt” shall
mean any liability on a claim, and “claim” shall mean (x) a right to payment,
whether or not such right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured, or unsecured, or (y) a right to an equitable remedy for breach of
performance if such breach gives rise to a payment, whether or not such right
to an equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured, or unsecured. With respect to any
such contingent liabilities, such liabilities shall be computed at the amount
which, in light of all the facts and circumstances existing at the time, represents
the amount which can reasonably be expected to become an actual or matured
liability.

“Subordinate Debt”
shall mean (i) a subordinated loan to be made to the Borrower in the amount of
up to $18,000,000.00 by Rex Radio and Television, Inc., an Ohio corporation,

 9
 

or its designee, and
which is subject to a Subordination and
Standstill Agreement, and (ii) only if and when Borrower elects at its option,
a subordinated loan to be made to the Borrower in the amount of $2,000,000.00
by the Turner County Regional Railroad Authority and which is subject to a
Subordination Agreement on terms and conditions acceptable to Lender.

“Subordinate
Lenders” shall mean Rex Radio and Television, Inc., an Ohio corporation, or
its designee, and if applicable, the Turner County Regional Railroad Authority.

“Subordination
Agreement” shall mean in each case an agreement between Lender and any
party whose debt is to be subordinate to the Obligations hereunder, including
the Subordinate Lenders.

“Substantial
Completion” shall have the meaning set forth in the Plant Loan and Security
Agreement.

“Substantial
Completion Date” shall have the meaning set forth in the Plant Loan and
Security Agreement.

“Tax Distribution” or “Tax Distributions” shall mean
quarterly Distributions to Members for the purpose of paying the quarterly
estimated federal and state income tax payments required to be made by each
Member of Borrower based upon the operations of the Borrower and the resulting
federal and state tax liability of such Member attributable to Borrower’s
operations in the assumed amount of 42%.

“Taxes” shall mean any and all present and future taxes, duties,
levies, imposts, deductions, assessments, charges or withholdings, and any and
all liabilities (including interest and penalties and other additions to taxes)
with respect to the foregoing.

“Title” shall mean Chicago Title Insurance
Company, the title insurer issuing the mortgagee’s title insurance policy.

“UCC” shall
mean the Uniform Commercial Code as the same may, from time to time, be in
effect in the State of South Dakota, provided, however, in the event that, by
reason of mandatory provisions of law, any or all of the attachment, perfection
or priority of the Lender’s security interest in any collateral is governed by
the Uniform Commercial Code as in effect in a jurisdiction other than the State
of South Dakota, the term shall mean the Uniform Commercial Code as in effect
in such other jurisdiction for purposes of the provisions hereof relating to
such attachment, perfection or priority and for purposes of definitions related
to such provisions.

“Unsecured Debt” shall mean any unsecured
subordinated loan or loans in the aggregate amount of $2,000,000.00 made to the
Borrower which shall be fully subordinate to the Obligations hereunder and may
not be secured in any manner but which may be converted to membership units in
the Borrower.

“Utility Providers” shall mean those regulated
providers of specific utility services to the Project, i.e. natural gas, water,
electricity and other power and energy suppliers.

 10
 

1.2           Accounting
Terms.  Any accounting terms used in
this Agreement which are not specifically defined herein shall have the
meanings customarily given them in accordance with GAAP.  Calculations and determinations of financial
and accounting terms used and not otherwise specifically defined hereunder and
the preparation of financial statements to be furnished to the Lender pursuant
hereto shall be made and prepared, both as to classification of items and as to
amount, in accordance with sound accounting practices and GAAP as used in the
preparation of the financial statements of the Borrower on the date of this
Agreement.  If any changes in accounting
principles or practices from those used in the preparation of the financial
statements are hereafter occasioned by the promulgation of rules, regulations,
pronouncements and opinions by or required by the Financial Accounting
Standards Board or the American Institute of Certified Public Accountants (or
any successor thereto or agencies with similar functions), which results in a
material change in the method of accounting in the financial statements
required to be furnished to the Lender hereunder or in the calculation of
financial covenants, standards or terms contained in this Agreement, the
parties hereto agree to enter into good faith negotiations to amend such
provisions so as equitably to reflect such changes to the end that the criteria
for evaluating the financial condition and performance of the Borrower will be
the same after such changes as they were before such changes; and if the
parties fail to agree on the amendment of such provisions, the Borrower will
furnish financial statements in accordance with such changes, but shall provide
calculations for all financial covenants, perform all financial covenants and
otherwise observe all financial standards and terms in accordance with
applicable accounting principles and practices in effect immediately prior to
such changes.  Calculations with respect
to financial covenants required to be stated in accordance with applicable
accounting principles and practices in effect immediately prior to such changes
shall be reviewed and certified by the Borrower’s accountants.

1.3           Other Terms Defined
in UCC.  All other words and phrases
used herein and not otherwise specifically defined herein shall have the
respective meanings assigned to such terms in the UCC, to the extent the same
are used or defined therein.

1.4           Other Interpretive
Provisions.

(a)           The meanings of defined terms are equally applicable
to the singular and plural forms of the defined terms.  Whenever the context so requires, the neuter
gender includes the masculine and feminine, the single number includes the
plural, and vice versa, and in particular the word “Borrower” shall be so
construed.

(b)           Section and Schedule references are to this
Agreement unless otherwise specified. 
The words “hereof”, “herein” and “hereunder” and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement.

(c)           The term “including” is not limiting, and
means “including, without limitation”.

(d)           In the computation of periods of time from a
specified date to a later specified date, the word “from” means “from and
including”; the words

 11
 

“to” and “until” each mean “to but excluding”, and the word “through”
means “to and including”.

(e)           Unless otherwise expressly provided herein,
(i) references to agreements (including this Agreement and the other Loan
Documents) and other contractual instruments shall be deemed to include all
subsequent amendments, restatements, supplements and other modifications
thereto, but only to the extent such amendments, restatements, supplements and
other modifications are not prohibited by the terms of any Loan Document, and
(ii) references to any statute or regulation shall be construed as
including all statutory and regulatory provisions amending, replacing,
supplementing or interpreting such statute or regulation.

(f)            To the extent any of the provisions of the
other Loan Documents are inconsistent with the terms of this Agreement, the
provisions of this Agreement shall govern.

(g)           This Agreement and the other Loan Documents
may use several different limitations, tests or measurements to regulate the
same or similar matters.  All such
limitations, tests and measurements are cumulative and each shall be performed
in accordance with its terms.

2.

LETTERS OF CREDIT.

2.1           Commitment to Issue
Letters of Credit.  Subject to the
terms and conditions of this Agreement and the other Loan Documents, and in
reliance upon the representations and warranties of the Borrower set forth
herein and in the other Loan Documents, the Lender agrees to issue one or more
Letters of Credit at such times as the Borrower may request pursuant to the
provisions of Section 2.2 until, but not including, the Maturity Date, and in
such amounts as the Borrower may from time to time request, provided, however,
that (i) the aggregate amount of all Letters of Credit outstanding at any
time shall not exceed the Commitment Amount, and (ii) the expiry date of a
Letter of Credit shall be the same as the Maturity Date.  The Letters of Credit shall be used by the
Borrower for the purpose of securing Borrower’s obligations to the Natural Gas
Supply Providers under the Natural Gas Supply Agreements.

2.2           Procedure for
Requesting a Letter of Credit.  The
Borrower shall make each request for a Letter of Credit to the Lender before
11:00 a.m. (Brookings, South Dakota time) five (5) Business Days prior to the
day of the requested Letter of Credit which Letter of Credit must be in a
minimum amount of Fifty Thousand and 00/100 Dollars ($50,000.00). Requests must
be made in writing in the form of Exhibit B attached hereto, and shall specify
the amount of the Letter of Credit, the beneficiary, the requested issuance
date and expiry date, the written certification to be made by the beneficiary
in connection with a draw, and such other information as requested by
Lender.  Each such request may be
transmitted by facsimile or electronic mail to the Lender.  Any request for a Letter of Credit shall be
deemed to be a representation by the Borrower that the conditions set forth in
Section 3 have been satisfied as of the time of the request.

 12
 

2.3           The Promissory Note.  At the time of execution of this Agreement,
the Borrower shall execute and deliver to Lender a Promissory Note evidencing
the obligations of Borrower in connection with Letters of Credit to be issued
hereunder.  Each payment by Lender
pursuant to a drawing under a Letter of Credit shall constitute and be deemed
an Advance by Lender to Borrower under the Promissory Note and this Agreement
as of the day and time such payment is made by Lender and in the amount of such
payment.  Notwithstanding anything to the
contrary contained in this Agreement, Borrower shall have no right to borrow
and Lender shall have no duty to lend hereunder, except to the extent of the
payment of drafts drawn and presented in accordance with the terms of a Letter
of Credit.  At the time of an Advance
hereunder or a repayment made in whole or in part thereon, a notation thereof
shall be made on the books and records of the Lender.  All amounts recorded shall be, absent
manifest error, conclusive and binding evidence of (i) the principal amount of
the Advances advanced hereunder, (ii) any accrued and unpaid interest
owing on the Advances, and (iii) all amounts repaid on the Advances.  The failure to record any such amount or any
error in recording such amounts shall not, however, limit or otherwise affect
the obligations of the Borrower under the Promissory Note to repay the correct
and undisputed principal amount of the Advances, together with all interest
accruing thereon.

2.4           Repayment
of Advances and Interest.  Borrower
shall repay to Lender the Advances, together with accrued interest thereon, as
follows:

(a)           Within ten (10) days
after an Advance, Borrower shall repay to Lender the Advance, together with
accrued interest thereon, to the extent such repayment does not cause an event
of default under the Plant Loan Documents or the Revolving Loan Documents.

(b)           To the extent repayment
of all or any portion of an Advance or accrued interest is prohibited under
Section 2.4(a), Borrower shall immediately request a loan of funds under the Revolving
Loan Agreement sufficient to repay the Advance and accrued interest, to the
extent such repayment does not cause an event of default under the Plant Loan
Documents or the Revolving Loan Documents. 
Borrower hereby expressly authorizes Lender to request, on behalf of
Borrower, such an advance of funds under the Revolving Loan Agreement directly
from the Revolving Lender, and appoints Lender its attorney-in-fact to execute
such documentation and take such actions as may be required to effectuate such request.

(c)           To the extent all or
any portion of an Advance or accrued interest remains outstanding after the
application of Sections 2.4(a) and (b), such remaining amount shall be due and
payable on the Maturity Date; provided, however, that, within fifteen (15) days
of the end of each month, Borrower shall make a mandatory prepayment to Lender
in respect of such remaining outstanding Advances and accrued interest to the
extent such prepayment would not cause an event of default under the Plant Loan
Documents or the Revolving Loan Documents. 
At such time, to the extent of availability thereunder, Borrower shall
also borrow additional funds under the

 13
 

Revolving Loan Agreement
(as provided in Section 2.4(b)) to make any payments to Lender required under
this Agreement.

2.5           Interest.  The principal amount of any Advances
outstanding from time to time shall bear interest at a fluctuating per annum
interest rate equal to 400 Basis Points plus LIBOR as it adjusts on each
Adjustment Date.  If an Event of Default
occurs, then, at the option of the Lender, during the entire period during
which such Event of Default shall occur and be continuing interest shall be
payable on the principal balance at a per annum rate of interest equal to the
lesser of (i) the maximum lawful rate of interest permitted to be paid or (ii)
the Default Rate, whether or not the Lender has exercised its option to
accelerate the maturity of the Promissory Note and declare the entire principal
balance due and payable.  Accrued and
unpaid interest on the Advances shall be due and payable on demand, or if no
demand is sooner made, as specified in Section 2.4.

2.6           Issuance Fees.  Prior to the date of issuance of each Letter
of Credit and annually thereafter, Borrower shall pay Lender a nonrefundable letter
of credit fee in an amount equal to one and one-quarter percent (1.25%) of the
amount of such Letter of Credit.  In the
event a Letter of Credit is amended to increase the amount thereof, prior to
the effective date of such amendment, Borrower shall pay Lender a nonrefundable
fee in an amount equal to one and one-quarter percent (1.25%) of the amount of
such increase in such Letter of Credit as amended; provided, however, that such
fees shall be calculated on a prorated basis such that in no event shall the
aggregate of such fees exceed 1.25% of the aggregate amount of such Letter of
Credit, as amended, for the 12 month period commencing on the initial date of
issuance thereof.  As an example, if a
$500,000 Letter of Credit is issued on September 30, 2006, a fee of 1.25% would
be $6,250 and would be paid at such time. 
If that Letter of Credit is amended exactly 6 months later to increase
it by $2,000,000 (so that the amended Letter of Credit amount is $2,500,000),
the amount of the letter of credit fee would be 1.25% of the additional
$2,000,000 prorated for the remaining 6 months of the 12 month period to which
the annual letter of credit fee applies, which would equal an additional fee of
$12,500.  On the 12-month anniversary
(September 30, 2007), a new letter of credit fee on the $2,500,000 Letter of
Credit would equal $31,250.

2.7           Yield Protection.  Upon demand by lender, Borrower shall pay to
Lender from time to time such amounts as Lender may determine to be necessary
to compensate it for any costs which Lender determines are attributable to its
issuance of a Letter of Credit or its obligation to honor drafts drawn and
presented in accordance with the terms of a Letter of Credit (such increases in
costs being hereinafter referred to as “Additional Costs”) resulting from any
regulatory change which: (i) imposes or modifies any reserve, special deposit,
minimum capital, capital ratio, or similar requirements relating to letters of
credit issued by, assets of, or any deposits with or other liabilities of
Lender, or (ii) imposes any other condition affecting this Agreement or a
Letter of Credit.  Determinations and
allocations by Lender of Additional Costs caused by any regulatory change
shall, in the absence of manifest error, be conclusive and binding for all
purposes as to the amount thereof.

2.8           Verification.  Lender shall have no duty to verify or make
any inquiry with regard to the truth or accuracy of any statement made in any
draft or document presented to Lender under a Letter of Credit, nor shall
Lender have any duty to make any inquiry into the genuineness of any signature
on any such draft or document or into the due authorization of any 

 14
 

party
to execute and/or present such draft or document or to receive payment under
any drafts drawn under a Letter of Credit.

2.9           Commercial
Practices.  Neither Lender nor any of
Lender’s correspondents shall be liable or have any responsibility for: (i) the
failure of any draft to bear any reference or adequate reference to a Letter of
Credit, or the failure of any Person to surrender or to take up a Letter of
Credit, or the failure of any Person to note the amount of any instrument on a
Letter of Credit, each of which requirements, if contained in a Letter of
Credit itself, it is agreed may be waived by Lender, (ii) errors, omissions,
interruptions, or delays in transmission or delivery of any messages, in
person, by mail, cable, telegraph, wireless or otherwise whether or not they
may be in cipher, (iii) any use which may be made of a Letter of Credit, (iv) any
acts or omissions of the beneficiary (whether or not related to a Letter of
Credit), (v) the validity, sufficiency, or genuineness of documents, or any
endorsement(s) thereon, even if such documents shall in fact prove to be in any
and all respects invalid, insufficient, fraudulent, or forged, or (vi) the
payment by Lender to the beneficiary of a Letter of Credit against presentation
of any draft or other document that does not comply with the terms of a Letter
of Credit.  Lender shall not be
responsible for any act, error, neglect, default, omission, insolvency, or
failure in business of any of Lender’s correspondents, and the happening of any
one or more of the contingencies referred to in this sentence or the preceding
sentence shall not affect, impair, or prevent the vesting of any of Lender’s
rights or powers under this Agreement and the other Loan Documents.  Lender and/or any of Lender’s correspondents
may receive, accept, or pay as complying with the terms of a Letter of Credit,
any drafts or other documents, otherwise in order, which may be signed by, or
issued to, the administrator or executor of, or the trustee in bankruptcy of,
or the receiver for any of the property of, the party in whose name a Letter of
Credit provides that any drafts or any other documents should be drawn or
issued.  In furtherance and extension and
not in limitation of the foregoing provisions, it is hereby further agreed that
any action, inaction, or omission taken or suffered by Lender, or by any of
Lender’s correspondents, under or in connection with a Letter of Credit or any
drafts or documents referenced therein, if in good faith and in conformity with
such foreign or domestic laws and customs or other regulations as Lender or any
of Lender’s correspondents may deem to be applicable thereto, shall be binding
upon Borrower and shall not place Lender or any of Lender’s correspondents
under any resulting liability of Borrower.

2.10         Modifications;
Reduction Amount.  In the event of
any change or modification with respect to:  (i) the amount or duration of a Letter of
Credit; (ii) the drawing, negotiation, presentation, acceptance, or maturity of
any drafts or documents referenced in a Letter of Credit, or (iii) any of the
other terms or provisions of a Letter of Credit, this Agreement shall be
binding upon Borrower in all respects with regard to the Letter of Credit as so
changed or modified, inclusive of any action taken by Lender or any of Lender’s
correspondents relative thereto.  In the
event Borrower or Lender receives notice of a Reduction Amount (as set forth in
the definition of Commitment Amount above), the parties shall take such actions
as may be necessary to cause the Letter of Credit to be amended to reflect the
reduction.

2.11         Separate
Transaction.  Borrower hereby
acknowledges that Lender has not made any representation in respect of and is
not otherwise connected with the transaction underlying the issuance of a
Letter of Credit, except as expressly provided herein.  Borrower agrees that

 15
 

Lender
may pay all drafts drawn and presented in accordance with the terms of a Letter
of Credit notwithstanding any protests, objections, or instructions by
Borrower.

2.12         Interest Computation;
Collection of Funds. Except as otherwise set forth herein, all interest and
fees shall be calculated on the basis of a year consisting of 360 days and
shall be paid for the actual number of days elapsed. If any payment to be made
by the Borrower hereunder or under the Promissory Note shall become due on a
day other than a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall be included in
computing any interest in respect of such payment. Notwithstanding anything to
the contrary contained herein, payments due hereunder must be made by wire
transfer or other immediately available funds. All payments made by the
Borrower hereunder or under any of the Loan Documents shall be made without
setoff, counterclaim, or other defense. To the extent permitted by applicable
law, all payments hereunder or under any of the Loan Documents (including any
payment of principal, interest, or fees) to, or for the benefit, of any Person
shall be made by the Borrower free and clear of, and without deduction or
withholding for, or account of, any Taxes now or hereinafter imposed by any
taxing authority.

2.13         Application of
Payments. Any payments received by the Lender shall be applied (i) to any
costs of collection, (ii) to late charges, (iii) to interest, (iv) to principal
balance and (v) if any advance has been made by the Lender under the terms of
this Agreement or any Loan Documents to repay such advances plus interest
thereon, all in such order and priority as the Lender shall determine. Upon an
Event of Default any monies received shall, at the option and direction of the
Lender, be applied to any sums due hereunder and any Loan Documents in such
order and priority as the Lender shall determine.

2.14         Late
Charge.  In the event that any payment required
under this Agreement or the Promissory Note is not paid when due, the Borrower
agrees to pay a late charge of $.04 per $1.00 of unpaid payment to defray the
costs of the Lender incident to collecting such late payment.  This late charge shall apply individually to
all payments past due and there will be no daily pro rata adjustment.  This provision shall not be deemed to excuse
a late payment or be deemed a waiver of any other rights the Lender may have
including the right to declare the entire unpaid principal and interest
immediately due and payable.

2.15         Taxes.

(a)           All payments made by the Borrower under this
Agreement shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any governmental
authority, excluding net income taxes and franchise taxes (imposed in lieu of
net income taxes) imposed on the Lender as a result of a present or former
connection between the Lender and the jurisdiction of the governmental
authority imposing such tax or any political subdivision or taxing authority
thereof or therein (other than any such connection arising solely from the
Lender having executed, delivered or performed its obligations or received a
payment under, or enforced, this Agreement or

 16
 

any other Loan Document).  If any
such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings (collectively, “Non-Excluded Taxes”) or Other Taxes are required
to be withheld from any amounts payable to the Lender hereunder, the amounts so
payable to the Lender shall be increased to the extent necessary to yield to
the Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest
or any such other amounts payable hereunder at the rates or in the amounts
specified in this Agreement, provided, however, that the Borrower shall not be
required to increase any such amounts payable to the Lender with respect to any
Non-Excluded Taxes that are attributable to the Lender’s failure to comply with
the requirements of subsection 2.15(c).

(b)           The Borrower shall pay any Other Taxes to
the relevant governmental authority in accordance with applicable law.

(c)           At the request of the Borrower and at the
Borrower’s sole cost, the Lender shall take reasonable steps to (i) contest its
liability for any Non-Excluded Taxes or Other Taxes that have not been paid, or
(ii) seek a refund of any Non-Excluded Taxes or Other Taxes that have been
paid.

(d)           Whenever any Non-Excluded Taxes or Other
Taxes are payable by the Borrower, as promptly as possible thereafter the
Borrower shall send to the Lender a certified copy of an original official
receipt received by the Borrower showing payment thereof.  If the Borrower fails to pay any Non-Excluded
Taxes or Other Taxes when due to the appropriate taxing authority or fails to
remit to the Lender the required receipts or other required documentary
evidence or if any governmental authority seeks to collect a Non-Excluded Tax
or Other Tax directly from the Lender for any other reason, the Borrower shall
indemnify the Lender on an after-tax basis for any incremental taxes, interest
or penalties that may become payable by the Lender.

(e)           The agreements in this Section shall survive
the satisfaction and payment of the Obligations and the termination of this
Agreement.

2.16         All Advances to
Constitute Single Obligation.  The
Advances shall constitute one general obligation of the Borrower, and shall be
secured by Lender’s security interest in and Lien upon all of the Collateral
and by all other security interests, Liens, claims and encumbrances heretofore,
now or at any time or times hereafter granted by the Borrower to Lender.

2.17         Savings Clause. It is expressly stipulated and agreed to be the intent of
Borrower and Lender at all times to comply with applicable state law or
applicable United States federal law (to the extent that it permits Lender to
contract for, charge, take, reserve, or receive a greater amount of interest
than permitted under state law) and that this section shall control every other
covenant and agreement in this Agreement and any other Loan Documents delivered
in connection herewith.  If the
applicable law is ever judicially interpreted so as to render usurious any
amount called for under the Promissory Note or under any other Loan Documents,
or

 17
 

contracted for, charged, taken, reserved, or
received with respect to the indebtedness evidenced by this Agreement (“Indebtedness”),
or if Lender’s exercise of the option to accelerate the maturity of the
Promissory Note, or if any payment by Borrower results in Borrower having paid
any interest in excess of that permitted by applicable law, then it is Borrower’s
and Lender’s express intent that all excess amounts theretofore collected by
Lender shall be credited on the principal balance of the Promissory Note and
all other Indebtedness (or, if the Promissory Note and all other Indebtedness
have been or would thereby be paid in full, refunded to Borrower), and the
provisions of the Promissory Note and the other Loan Documents shall
immediately be deemed reformed and the amounts thereafter collectible hereunder
and thereunder reduced, without the necessity of the execution of any new
documents, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder or thereunder.
All sums paid or agreed to be paid to Lender for the use, forbearance, or
detention of the Indebtedness shall, to the extent permitted by applicable law,
be amortized, prorated, allocated, and spread throughout the full stated term
of the Indebtedness until payment in full so that the rate or amount of
interest on account of the Indebtedness does not exceed the maximum lawful rate
from time to time in effect and applicable to the Indebtedness for so long as
the Indebtedness is outstanding. Notwithstanding anything to the contrary
contained herein or in any of the other Loan Documents, it is not the intention
of Lender to accelerate the maturity of any interest that has not accrued at
the time of such acceleration or to collect unearned interest at the time of
such acceleration.

2.18         Intercreditor
Agreement.  The obligations under
this Article 2 are subject to the terms and conditions of the Intercreditor
Agreement.

3.

CONDITIONS OF ISSUANCE.

Notwithstanding any other
provision of this Agreement, the Lender shall not be required to issue a Letter
of Credit, if any of the following conditions shall have occurred.

3.1           Loan Documents.  The Borrower shall have failed to execute and
deliver to the Lender any of the following Loan Documents, all of which must be
satisfactory to the Lender and the Lender’s counsel in form, substance and
execution; provided, however, in the event Lender receives any of the following
in another capacity (such as a lender or participant under the Revolving Loan
Documents), then Lender shall not separately exercise its rights under this
Section:

(a)           Agreement.  This Agreement duly executed by the Borrower.

(b)           Promissory Note.  The Promissory Note, duly executed by the
Borrower, in the form prepared by and acceptable to the Lender.

(c)           Mortgage.  The Mortgage duly executed by the Borrower,
in form prepared by and acceptable to the Lender.

(d)           Security Agreement.  The Security Agreement duly executed by the
Borrower, in form prepared by and acceptable to the Lender.

 18
 

(e)           Guaranty.  The Guaranty duly executed by FREMAR Farmers
Cooperative, Inc. in the form prepared by and acceptable to Lender.

(f)            Subordination Agreements.  A Subordination and Standstill Agreement dated
as of the date of this Agreement, from Subordinated Lender Rex Radio and
Television, Inc. or its designee, and at such time if ever, Borrower obtains
Subordinate Debt from Turner County Regional Railroad Authority, a
Subordination Agreement from Turner County Regional Railroad Authority, each in
the form prepared by and acceptable to the Lender.

(g)           Intercreditor and Collateral Priority
Agreement.   The Intercreditor and
Collateral Priority Agreement, duly executed by Lender, Revolving Lender, and
Plant Lender, in the form acceptable to the Lender.

(h)           Collateral Access Agreement.  Collateral Access Agreements dated as of the
date of this Agreement, from the owner, lessor or mortgagee, as the case may
be, of any real estate whereon any Collateral is stored or otherwise located,
in the form prepared by and acceptable to the Lender.

(i)            Search Results; Lien Terminations.  Copies of UCC search reports dated such a
date as is reasonably acceptable to the Lender, listing all effective financing
statements which name the Borrower, under its present names and any previous
names, as debtors, together with (i) copies of such financing statements, (ii)
the release of all Liens other than Permitted Liens, and (iii) such other UCC
termination statements as the Lender may reasonably request.

(j)            Organizational and Authorization
Document.  Copies of (i) the Articles
of Organization (Certificate of Formation) and Operating Agreement  of the Borrower; (ii) resolutions of the members of
the Borrower approving and authorizing such Person’s execution, delivery and
performance of the Loan Documents to which it is party and the transactions
contemplated thereby; (iii) signature and incumbency certificates of the
members  of the Borrower, executing any of the
Loan Documents, each of which the Borrower hereby certifies to be true and
complete, and in full force and effect without modification, it being
understood that the Lender may conclusively rely on each such document and
certificate until formally advised by the Borrower of any changes therein; and
(iv) good standing certificates in the state of formation of the Borrower and
in each other state requested by the Lender.

(k)           Insurance.  Evidence satisfactory to the Lender of the
existence of insurance required to be maintained pursuant to Section 6.6,
together with evidence that the Lender has been named as a lender’s loss payee
on all related insurance policies.

 19
 

(l)            Borrower Equity Documents.  Copies of the documentation evidencing the equity
investment in Borrower.

(m)          Governmental Requirements and Approvals.  All regulatory approvals required for the
construction and operation of the Project as of the date of the requested
Letter of Credit (as described in and consistent with the Plant Loan and
Security Agreement) shall have been issued without conditions (other than as
may be satisfied by the Work) and copies thereof provided to Lender.

(n)           Flood Certification.  Evidence satisfactory to Lender that the
Project is not located in the flood plain.

(o)           Opinion.  Borrower shall furnish such opinions of
counsel as Lender may require in connection with the matters contemplated by
this Agreement.

(p)           Appraisal.  An Appraisal as provided in Section 6.22.

(q)           Plant Loan Documents and Revolving Loan
Documents; Assignment.  Copies of the
executed Plant Loan Documents and Revolving Loan Documents, including the
assignment of the Revolving Loan Documents by Dougherty Funding, LLC, as the
Revolving Lender, to First Bank & Trust.

(r)            Project Documents.  Copies of each Project Document (as defined
in the Plant Loan Documents).

(s)           Third Party Consents.  Consents of each third party to the Project
Documents consenting to the collateral assignment of such documents to
Lender,  to the extent required to be received
by Plant Lender.

(t)            Utility Preconditions.  Evidence satisfactory to the Lender that all
Utility Preconditions (as defined in the Plant Loan Documents) have been
satisfied.

(u)           Rail Agreements.  The Rail Agreements (as defined in the Plant
Loan Documents), the Rail Spur Contract (as defined in the Plant Loan
Documents), and all other agreements necessary to provide rail access to the
Plant must be executed and in full force and effect, to the extent required to
be received and approved by Plant Lender.

(v)           Additional Documents.  Such other certificates, financial
statements, schedules, resolutions, opinions of counsel, notes and other
documents which are provided for hereunder or which the Lender shall require.

3.2           Event of Default.  Any Event of Default shall have occurred and
be continuing.

 20
 

3.3           Material Adverse
Effect.  The occurrence of any event
having a Material Adverse Effect upon the Borrower.

3.4           Litigation.  Any litigation or governmental proceeding
shall have been instituted against the Borrower having a Materially Adverse
Effect upon the Borrower.

3.5           Representations and
Warranties.  Any representation or
warranty of the Borrower contained herein or in any Loan Document shall be
untrue or incorrect in any material respect as of the date of any requested
Letter of Credit as though made on such date, except to the extent such
representation or warranty expressly relates to an earlier date.

3.6           Title
Insurance and Surveys.  On the
Closing Date, Borrower shall have failed to furnish (i) Lender with a fully
paid Title Policy written in the full amount of Lender’s commitment hereunder
in form and substance satisfactory to Lender and written by Title insuring the
Premises are marketable, insuring fee simple title to the Premises vested in
Borrower, free from exceptions for mechanic’s and materialmen’s liens, naming
Lender as an insured and insuring that the Mortgage is a valid lien in the full
amount of the Lender’s commitment hereunder subject only to the Permitted
Liens, and (ii) the surveys as required by the Plant Loan Documents.

3.7           Application.  The Borrower shall have failed to execute and
deliver a written request for the Letter of Credit in the form of Exhibit B.

3.8           Issuance
Fee.  Borrower shall have failed to
pay the Lender any issuance fee required under Section 2.6 of this Agreement.

4.

SECURITY FOR THE OBLIGATIONS.

4.1           Grant of Security
Interest.  To secure the prompt
payment and performance of its Obligations hereunder, Borrower hereby grants a
continuing security interest in and Lien upon all assets of Borrower, including
all of the following property (all of which property, along with the products
and proceeds therefrom, and the collateral identified in the Mortgage, are
individually and collectively referred to as the “Collateral”) whether now
owned or hereafter acquired, and wherever located:

(i)            all accounts, deposit accounts, equipment,
inventory, fixtures, documents, instruments, chattel paper, investment
property, and general intangibles (including, without limitation, the Reimbursement
Reserve Account);

(ii)           all accessions to, substitutions for, and
all replacements, products, and cash and non-cash proceeds of the foregoing,
including proceeds of and unearned premiums with respect to insurance policies,
and claims against any Person for loss, damage or destruction of any
Collateral; and

 21
 

(iii)          all books and records (including customer
lists, files, correspondence, tapes, computer programs, print-outs and computer
records) pertaining to the foregoing.

4.2           Possession and
Transfer of Collateral.  Unless an
Event of Default exists hereunder, the Borrower shall be entitled to possession
or use of the Collateral.  The Borrower
shall not sell, assign (by operation of law or otherwise), license, lease or
otherwise dispose of, or grant any option with respect to any of the
Collateral, except that the Borrower may sell inventory and worn, damaged, or
obsolete equipment in the ordinary course of business

4.3           Financing Statements.  The Borrower shall, at the Lender’s request,
at any time and from time to time, execute and deliver to the Lender such
financing statements, amendments and other documents and do such acts as the
Lender deems necessary in order to establish and maintain valid, attached and
perfected security interests in the Collateral in favor of the Lender, free and
clear of all Liens and claims and rights of third parties whatsoever, except
Permitted Liens.  The Borrower hereby
irrevocably authorizes the Lender at any time, and from time to time, to file
in any jurisdiction any initial financing statements and amendments thereto
without the signature of the Borrower that (a) indicate the Collateral (i) is
comprised of all assets of the Borrower or words of similar effect, regardless
of whether any particular asset comprising a part of the Collateral falls
within the scope of Article 9 of the Uniform Commercial Code of the
jurisdiction wherein such financing statement or amendment is filed, or (ii) as
being of an equal or lesser scope or within greater detail as the grant of the
security interest set forth herein, and (b) contain any other information
required by Section 5 of Article 9 of the Uniform Commercial Code of the
jurisdiction wherein such financing statement or amendment is filed regarding
the sufficiency or filing office acceptance of any financing statement or
amendment, including (i) whether the Borrower is an organization, the type
of organization and any Organizational Identification Number issued to the
Borrower, and (ii) in the case of a financing statement filed as a fixture
filing or indicating Collateral as as-extracted collateral or timber to be cut,
a sufficient description of the real property to which the Collateral
relates.  The Borrower hereby agrees that
a photocopy or other reproduction of this Agreement is sufficient for filing as
a financing statement and the Borrower authorizes the Lender to file this
Agreement as a financing statement in any jurisdiction.  The Borrower agrees to furnish any such
information to the Lender promptly upon request.  The Borrower further ratifies and affirms its
authorization for any financing statements and/or amendments thereto, executed
and filed by the Lender in any jurisdiction prior to the date of this
Agreement.  In addition, the Borrower
shall make appropriate entries on its books and records disclosing the Lender’s
security interests in the Collateral.

4.4           Preservation of the
Collateral.  The Lender may, but is
not required, to take such actions from time to time as the Lender deems
appropriate to maintain or protect the Collateral.  The Lender shall have exercised reasonable
care in the custody and preservation of the Collateral if the Lender takes such
action as the Borrower shall reasonably request in writing which is not
inconsistent with the Lender’s status as a secured party, but the failure of
the Lender to comply with any such request shall not be deemed a failure to
exercise reasonable care; provided, however, the Lender’s responsibility for
the safekeeping of the Collateral shall (i) be deemed reasonable if such Collateral
is accorded treatment substantially equal to that which the Lender accords its
own property, and (ii) not extend to matters beyond the control of the Lender,
including acts of God, war, insurrection, riot or governmental actions.  In addition, any failure of

 22
 

the Lender to preserve or protect any rights
with respect to the Collateral against prior or third parties, or to do any act
with respect to preservation of the Collateral, not so requested by the
Borrower, shall not be deemed a failure to exercise reasonable care in the
custody or preservation of the Collateral. 
The Borrower shall have the sole responsibility for taking such action
as may be necessary, from time to time, to preserve all rights of the Borrower
and the Lender in the Collateral against prior or third parties.  Without limiting the generality of the
foregoing, where Collateral consists in whole or in part of securities, the
Borrower represents to, and covenants with, the Lender that the Borrower has
made arrangements for keeping informed of changes or potential changes
affecting the securities (including rights to convert or subscribe, payment of
dividends, reorganization or other exchanges, tender offers and voting rights),
and the Borrower agrees that the Lender shall have no responsibility or
liability for informing the Borrower of any such or other changes or potential
changes or for taking any action or omitting to take any action with respect
thereto.

4.5           Other Actions as to
any and all Collateral.  The Borrower further agrees to
take any other action reasonably requested by the Lender to ensure the
attachment, perfection and priority of, and the ability of the Lender to
enforce, the Lender’s security interest in any and all of the Collateral,
including (a) causing the Lender’s name to be noted as secured party on any
certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or ability of the Lender to enforce, the
Lender’s security interest in such Collateral, (b) complying with any provision
of any statute, regulation or treaty of the United States as to any Collateral
if compliance with such provision is a condition to attachment, perfection or
priority of, or ability of the Lender to enforce, the Lender’s security
interest in such Collateral, (c) obtaining governmental and other third party
consents and approvals, including any consent of any licensor, lessor or other
Person obligated on Collateral, (d) obtaining waivers from mortgagees and
landlords in form and substance satisfactory to the Lender, and (e) taking all
actions required by the UCC in effect from time to time or by other law, as
applicable in any relevant UCC jurisdiction, or by other law as applicable in
any foreign jurisdiction.  The Borrower
further agrees to indemnify and hold the Lender harmless against claims of any
Persons not a party to this Agreement concerning disputes arising over the
Collateral.

4.6           Collateral
in the Possession of a Warehouseman or Bailee.  If any of the Collateral at any time is in the
possession of a warehouseman or bailee, the Borrower shall promptly notify the
Lender thereof, and shall promptly obtain a Collateral Access Agreement.  The Lender agrees with the Borrower that the
Lender shall not give any instructions to such warehouseman or bailee pursuant
to such Collateral Access Agreement unless an Event of Default has occurred and
is continuing, or would occur after taking into account any action by the
Borrower with respect to the warehouseman or bailee.

4.7           Letter-of-Credit
Rights.  Except with respect to the
letter of credit issued (as the same may be renewed or replaced) to secure the
Subordinated Debt from Rex Radio and Television Inc., or its designee, if the
Borrower at any time is a beneficiary under any other letter of credit now or
hereafter issued in favor of the Borrower to secure payment of an account, the
Borrower shall promptly notify the Lender thereof and, at the request and
option of the Lender, the Borrower shall, pursuant to an agreement in form and
substance satisfactory to the Lender, either (i) arrange for the issuer and any
confirmer of such letter of credit to consent to an assignment to the Lender of
the proceeds of any drawing under the letter of credit, or (ii) arrange

 23
 

for the Lender to become the transferee
beneficiary of the letter of credit, with the Lender agreeing, in each case,
that the proceeds of any drawing under the letter of credit are to be applied
as provided in this Agreement.

4.8           Electronic
Chattel Paper and Transferable Records. 
If the Borrower at any time holds or acquires an interest in any
electronic chattel paper or any “transferable record”, as that term is defined
in Section 201 of the federal Electronic Signatures in Global and National
Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in
effect in any relevant jurisdiction, the Borrower shall promptly notify the
Lender thereof and, at the request of the Lender, shall take such action as the
Lender may reasonably request to vest in the Lender control under Section 9-105
of the UCC of such electronic chattel paper or control under Section 201 of the
federal Electronic Signatures in Global and National Commerce Act or, as the
case may be, Section 16 of the Uniform Electronic Transactions Act, as so in
effect in such jurisdiction, of such transferable record.  The Lender agrees with the Borrower that the
Lender will arrange, pursuant to procedures satisfactory to the Lender and so
long as such procedures will not result in the Lender’s loss of control, for
the Borrower to make alterations to the electronic chattel paper or
transferable record permitted under Section 9-105 of the UCC or, as the case
may be, Section 201 of the federal Electronic Signatures in Global and National
Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a
party in control to make without loss of control.

4.9           Administration
of Inventory.

(a)           Records and Reports of Inventory.  Borrower shall keep accurate and complete
records of its inventory, including costs and daily withdrawals and additions,
and shall submit to Lender inventory reports in form reasonably satisfactory to
Lender, on such periodic basis as Lender may request.  Borrower shall conduct a physical inventory
at least once per calendar year (and on a more frequent basis if requested by
Lender when an Event of Default exists) and periodic cycle counts consistent
with historical practices, and shall provide to Lender a report based on each
such inventory and count promptly upon completion thereof, together with such
supporting information as Lender may request. 
Lender may participate in and observe each inventory or physical count.

(b)           Records and Schedules of Equipment.  Borrower shall keep accurate and complete
records of its equipment, including kind, quality, quantity, cost, acquisitions
and dispositions thereof, and shall submit to Lender, on such periodic basis as
Lender may request, a current schedule thereof, in form satisfactory to
Lender.  Promptly upon request, Borrower
shall deliver to Lender evidence of its ownership or interests in any
equipment.

(c)           Dispositions of Equipment.  Borrower shall not sell, lease or otherwise
dispose of any equipment, without the prior written consent of Lender, other
than replacement of equipment that is worn, damaged or obsolete with equipment
of like function and value, if the replacement equipment is acquired
substantially contemporaneously with such disposition and is free of Liens.

 24
 

4.10         Business Purpose.  Any Collateral installed in or used in the
Premises are to be used by the Borrower solely for Borrower’s business purposes
and such Collateral will be kept on the Premises and will not be removed
therefrom without the consent of the Lender and may be affixed to such
buildings but will not be affixed to any other real estate.

4.11         Remedies Not
Cumulative. The exercise of any one or more of the remedies provided for
under the UCC shall not be construed as a waiver of any of the other rights of
the Lender including having any Collateral deemed part of the realty upon any foreclosure
thereof.  If notice to any party of the
intended disposition of the Collateral is required by law in a particular
instance, such notice shall be deemed commercially reasonable if given at least
ten (10) days prior to such intended disposition and may be given by
advertisement in a newspaper accepted for legal publications either separately
or as part of a notice given to foreclose the real property or may be given by
private notice if such parties are known to Lender.  Borrower will on demand deliver all financing
statements that may from time to time be required by Lender to establish,
perfect and continue the priority of Lender’s security interest in the
Collateral and shall pay all expenses incurred by Lender in connection with the
renewal, continuation or extensions of any financing statements executed in
connection with the Premises; and shall give advance written notice of any
proposed change in Borrower’s name, identity or structure and will execute and
deliver to Lender prior to or concurrently with such change all additional
financing statements that Lender may require to establish and perfect the
priority of Lender’s security interest.

4.12         Notification of
Account Debtors and Other Obligors. 
The Lender may at any time after and during the continuance of an Event
of Default notify any account debtor or other person obligated to pay the
amount due that such right to payment has been assigned or transferred to the
Lender for security and shall be paid directly to the Lender.  The Borrower will join in giving such notice
if the Lender so requests.  At any time
after the Borrower or the Lender gives such notice to an account debtor or
other obligor, the Lender may, but need not, in the Lender’s name or in the
Borrower’s name, demand, sue for, collect or receive any money or property at
any time payable or receivable on account of, or securing, any such right to
payment, or grant any extension to, make any compromise or settlement with or
otherwise agree to waive, modify, amend or change the obligations (including
collateral obligations) of any such account debtor or other obligor.

4.13         Assignment of
Insurance. As additional security for the payment and performance of the
Obligations, the Borrower hereby assigns to the Lender any and all monies (including
proceeds of insurance and refunds of unearned premiums) due or to become due
under, and all other rights of the Borrower with respect to, any and all
policies of insurance now or at any time hereafter covering the Collateral or
any evidence thereof or any business records or valuable papers pertaining
thereto, and the Borrower hereby directs the issuer of any such policy to pay
all such monies directly to the Lender. 
At any time the Lender may (but need not), in the Lender’s name or in
the Borrower’s name, execute and deliver proof of claim, receive all such
monies, endorse checks and other instruments representing payment of such
monies, and adjust, litigate, compromise or release any claim against the
issuer of any such policy.

4.14         License. Without
limiting the generality of any other Loan Document, the Borrower hereby grants
to the Lender a non-exclusive, worldwide and royalty-free license to use

 25
 

or otherwise exploit all intellectual
property rights of the Borrower for the purpose of: (a) producing Ethanol, DDGs
and CO2 from the Plant (as such terms are defined in
the Plant Loan Documents) and (b) selling, leasing or otherwise disposing
of any or all Collateral.

4.15         Collateral.  This Agreement does not contemplate a sale of
accounts, contract rights or chattel paper, and, as provided by law, the
Borrower is entitled to any surplus and shall remain liable for any
deficiency.  The Lender’s duty of care
with respect to Collateral in its possession (as imposed by law) shall be
deemed fulfilled if it exercises reasonable care in physically keeping such
Collateral, or in the case of Collateral in the custody or possession of a
bailee or other third person, exercises reasonable care in the selection of the
bailee or other third person, and the Lender need not otherwise preserve,
protect, insure or care for any Collateral. 
The Lender shall not be obligated to preserve any rights the Borrower
may have against prior parties, to realize on the Collateral at all or in any
particular manner or order or to apply any cash proceeds of the Collateral in
any particular order of application.  The
Lender has no obligation to clean-up or otherwise prepare the Collateral for
sale.  The Borrower waives any right it
may have to require the Lender to pursue any third person for any of the
Obligations.

4.16         Reimbursement
Reserve Account.  Beginning
immediately after the Debt Service Reserve Account under the Plant Loan and
Security Agreement has been initially funded in an aggregate amount of
$7,000,000, and monthly thereafter, subject to the terms and conditions of the
Plant Loan and Security Agreement requiring continuing replenishment of the
Debt Service Reserve Account, seventy-five percent (75%) of Project Free Cash
Flow up to an aggregate amount equal to the Commitment Amount shall be
deposited into a Reimbursement Reserve Account to be maintained with
Lender.  Thereafter, at any time as the
amount on deposit in the Reimbursement Reserve Account is less than the
Commitment Amount, Lender will give Borrower written notice thereof and
thereafter one hundred percent (100%) of Project Free Cash Flow shall be
deposited in the Reimbursement Reserve Account until the reserve is restored to
the Commitment Amount then in effect.  As
and when an Advance is made hereunder and Borrower is unable to repay all or
part of such Advance under Sections 2.4(a) and 2.4(b), the Lender may withdraw
from the Reimbursement Reserve Account for credit to its account funds
sufficient to repay the Advance and accrued interest thereon.  If at any time during the term of this
Agreement the amount on deposit in the Reimbursement Reserve Account exceeds
the Commitment Amount, the Lender shall, upon Borrower’s written request,
promptly release from the Reimbursement Reserve Account and pay over to Borrower
such excess funds.  Other than Lender’s
obligation to release and pay excess funds, Lender shall have no obligation to
disburse any other portion of the Reimbursement Reserve Account for any other
purpose or to any other person other than for which the Reimbursement Reserve
Account was established, provided if an Event of Default has occurred, the
Lender may disburse any of the Reimbursement Reserve Account in its discretion
to the payment of the Obligations in such order and selection as Lender may elect.  Such application by the Lender may be made
without the requirement of any consent by or notice to the Borrower.  Lender shall provide to Borrower within ten
(10) days after each such payment its advice that it has so made such payment
and the amount of such payment. 
Notwithstanding the foregoing, Borrower recognizes and acknowledges that
its obligation to pay the Advances is absolute and unconditional and is not
dependent upon sufficient deposits being available to make payment and nothing
herein shall be construed to negate or modify the Borrower’s absolute and
unconditional obligation to pay an Advance in accordance with the terms and
conditions of this Agreement.

 26

To further secure
the Obligations of Borrower under this Agreement, Borrower hereby grants to
Lender a first perfected security interest in and to the Reimbursement Reserve
Account and all funds and other instruments and general intangibles contained
therein or related thereto.  Borrower
acknowledges that such security interest is perfected by Lender’s possession of
the Reimbursement Reserve Account, but Borrower agrees to execute any
additional documents or financing statements, and take such other actions, as
Lender may determine necessary or appropriate to grant and perfect such
security interest.  Borrower shall not
permit any other Lien  to attach to the
Reimbursement Reserve Account or the funds contained therein and, in the event
any such Lien shall so attach, Borrower shall cause the holder of such Lien to
execute such documentation as Lender may reasonably request to waive any such
Lien.

4.17         Intercreditor
Arrangements.  Lender acknowledges
that its rights and obligations hereunder are subject to the Intercreditor
Agreement and the Subordination Agreements.

5.

REPRESENTATIONS AND WARRANTIES.

To induce the Lender to
enter into this Agreement, the Borrower makes the following representations and
warranties to the Lender, each of which shall survive the execution and
delivery of this Agreement:

5.1           Borrower
Organization and Name.  The Borrower
is a limited liability company duly organized, existing and in good standing
under the laws of the State of South Dakota, with full and adequate power to
carry on and conduct its business as presently conducted.  The Borrower is duly licensed or qualified in
all foreign jurisdictions wherein the nature of its activities require such
qualification or licensing, except for such jurisdictions where the failure to
so qualify would not have a Material Adverse Effect.  The Borrower’s Organizational Identification
Number is DL009781.  The exact legal name
of the Borrower is as set forth in the first paragraph of this Agreement, and
the Borrower currently does not conduct, nor has it during the last five (5)
years conducted, business under any other name or trade name.

5.2           Authorization.  The Borrower has full right, power and
authority to enter into this Agreement, to make the borrowings and execute and
deliver the Loan Documents as provided herein and to perform all of its duties
and obligations under this Agreement and the other Loan Documents.  The execution and delivery of this Agreement
and the other Loan Documents will not, nor will the observance or performance
of any of the matters and things herein or therein set forth, violate or
contravene any provision of law or of the certificate of organization  of the Borrower.  All
necessary and appropriate action has been taken on the part of the Borrower to
authorize the execution and delivery of this Agreement and the Loan Documents.

5.3           Validity and Binding
Nature.  This Agreement and the other
Loan Documents are the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with their terms, subject to
bankruptcy, insolvency and similar laws affecting the enforceability of
creditors’ rights generally and to general principles of equity.

 27
 

5.4           Consent; Absence of
Breach.  The execution, delivery and
performance of this Agreement, the other Loan Documents and any other documents
or instruments to be executed and delivered by the Borrower in connection with
the Letters of Credit, do not and will not (a) require any consent, approval,
authorization of, or filings with, notice to or other act by or in respect of,
any governmental authority or any other Person (other than any consent or
approval which has been obtained and is in full force and effect); (b) conflict
with (i) any provision of law or any applicable regulation, order, writ, injunction
or decree of any court or governmental authority, (ii) the articles of
organization  of the Borrower, or (iii) any
material agreement, indenture, instrument or other document, or any judgment,
order or decree, which is binding upon the Borrower or any of its properties or
assets; or (c) require, or result in, the creation or imposition of any Lien on
any asset of Borrower, other than Liens in favor of the Lender created pursuant
to this Agreement.

5.5           Ownership of
Properties; Liens.  The Borrower is
the sole owner all of its properties and assets, real and personal, tangible
and intangible, of any nature whatsoever (including patents, trademarks, trade
names, service marks and copyrights), free and clear of all Liens, charges and
claims (including infringement claims with respect to patents, trademarks,
service marks, copyrights and the like), other than Permitted Liens.

5.6           Intellectual
Property.  The Borrower owns and
possesses or has a license or other right to use all intellectual property, as
are necessary for the conduct of the businesses of the Borrower, without any
infringement upon rights of others which could reasonably be expected to have a
Material Adverse Effect upon the Borrower, and no material claim has been
asserted and is pending by any Person challenging or questioning the use of any
intellectual property or the validity or effectiveness of any intellectual
property nor does the Borrower know of any valid basis for any such claim.

5.7           Financial Statements.  All financial statements submitted to the
Lender have been prepared in accordance with sound accounting practices and
GAAP on a basis, except as otherwise noted therein, consistent with the
previous fiscal year and present fairly the financial condition of the Borrower
and the results of the operations for the Borrower as of such date and for the
periods indicated.  Since the date of the
most recent financial statement submitted by the Borrower to the Lender, there
has been no change in the financial condition or in the assets or liabilities
of the Borrower having a Material Adverse Effect on the Borrower.

5.8           Litigation and
Contingent Liabilities.  There is no
litigation, arbitration proceeding, demand, charge, claim, petition or
governmental investigation or proceeding pending, or threatened, against the
Borrower, which, if adversely determined, which might reasonably be expected to
have a Material Adverse Effect upon the Borrower.  Other than any liability incident to such
litigation or proceedings, the Borrower has no material guarantee obligations,
contingent liabilities, liabilities for taxes, or any long-term leases or
unusual forward or long-term commitments, including any interest rate or
foreign currency swap or exchange transaction or other obligation in respect of
derivatives, that are not fully-reflected or fully reserved for in the most
recent audited financial statements delivered pursuant to Section 6 or
fully-reflected or fully reserved for in the most recent quarterly financial
statements delivered pursuant to Section 6 and not permitted by Section 7.1.

 28
 

5.9           Event of Default.  No Event of Default exists or would result
from the incurrence by the Borrower of any of the Obligations hereunder or
under any of the other Loan Document, and the Borrower is not in default
(without regard to grace or cure periods) under any other contract or agreement
to which it is a party.

5.10         Adverse Circumstances.  No condition, circumstance, event, agreement,
document, instrument, restriction, litigation or proceeding (or threatened
litigation or proceeding or basis therefor) exists which (a) would have a
Material Adverse Effect upon the Borrower, or (b) would constitute an Event of
Default.

5.11         Environmental Laws and
Hazardous Substances.  The Borrower
has not generated, used, stored, treated, transported, manufactured, handled,
produced or disposed of any Hazardous Substances, on or off any of the premises
of the Borrower (whether or not owned by it) in any manner which at any time
violates any Environmental Law or any license, permit, certificate, approval or
similar authorization thereunder.  The
Borrower will comply in all material respects with all Environmental Laws and
will obtain all licenses, permits certificates, approvals and similar
authorizations thereunder.  There has
been no investigation, proceeding, complaint, order, directive, claim, citation
or notice by any governmental authority or any other Person, nor is any pending
or, to the best of the Borrower’s knowledge, threatened, and the Borrower shall
immediately notify the Lender upon becoming aware of any such investigation,
proceeding, complaint, order, directive, claim, citation or notice, and shall
take prompt and appropriate actions to respond thereto, with respect to any
non-compliance with, or violation of, the requirements of any Environmental Law
by the Borrower or the release, spill or discharge, threatened or actual, of
any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Material or any other environmental, health or safety matter, which affects the
Borrower or its business, operations or assets or any properties at which the
Borrower has transported, stored or disposed of any Hazardous Substances.  The Borrower has no material liability,
contingent or otherwise, in connection with a release, spill or discharge,
threatened or actual, of any Hazardous Substances or the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Material.  The
Borrower further agrees to allow the Lender or its agent access to the
properties of the Borrower to confirm compliance with all Environmental Laws,
and the Borrower shall, following determination by the Lender that there is
non-compliance, or any condition which requires any action by or on behalf of
the Borrower in order to avoid any non-compliance, with any Environmental Law,
at the Borrower’s sole expense, cause an independent environmental engineer
acceptable to the Lender to conduct such tests of the relevant site as are
appropriate, and prepare and deliver a report setting forth the result of such
tests, a proposed plan for remediation and an estimate of the costs thereof.

5.12         Solvency, etc.  As of the date hereof, and immediately prior
to and after giving effect to the issuance of each Letter of Credit hereunder,
the Borrower is Solvent, and  (a) the
fair value of the Borrower’s assets is greater than the amount of its
liabilities (including disputed, contingent and unliquidated liabilities) as
such value is established and liabilities evaluated as required under the
Section 548 of the Bankruptcy Code, (b) the present fair saleable value of the
Borrower’s assets is not less than the amount that will be required to pay the
probable liability on its debts as they become absolute and matured, (c) the
Borrower is able to realize upon its assets and pay its debts and other
liabilities (including disputed, contingent and unliquidated liabilities)

 29
 

as they mature in the normal course of
business, (d) the Borrower does not intend to, and does not believe that it
will, incur debts or liabilities beyond its ability to pay as such debts and
liabilities mature, and (e) the Borrower is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
its property would constitute unreasonably small capital.

5.13         ERISA Obligations.  Neither
the Borrower nor any ERISA Affiliate (i) maintains or has maintained any Plan
(as defined by ERISA), (ii) contributes or has contributed to any Multiemployer
Plan (as defined by ERISA) or (iii) provides or has provided post-retirement
medical or insurance benefits with respect to employees or former employees
(other than benefits required under Section 601 of ERISA, Section 4980B of the
Internal Revenue Code or applicable state law). 
Neither the Borrower nor any ERISA Affiliate will (i) adopt, create,
assume or become a party to any Plan, (ii) incur any obligation to contribute
to any Multiemployer Plan, (iii) incur any obligation to provide
post-retirement medical or insurance benefits with respect to employees or
former employees (other than benefits required by law) or (iv) amend any Plan
in a manner that would materially increase its funding obligations without
giving prior written notice thereof to the Lender.

5.14         Labor Relations.  Except as could not reasonably be expected to
have a Material Adverse Effect, (i) there are no strikes, lockouts or other
labor disputes against the Borrower or threatened, (ii) hours worked by and
payment made to employees of the Borrower have not been in violation of the
Fair Labor Standards Act or any other applicable law, and (ii) no unfair labor
practice complaint is pending against the Borrower or threatened before any
governmental authority.

5.15         Security Interest.  This Agreement and the Mortgage create a
valid Lien in favor of the Lender in the Collateral and, when properly
perfected by filing in the appropriate jurisdictions, or by possession or
Control of such Collateral by the Lender or delivery of such Collateral to the
Lender, shall constitute a valid, perfected Lien in such Collateral, subject
only to Permitted Liens.

5.16         Lending Relationship.  The relationship hereby created between the
Borrower and the Lender is and has been conducted on an open and arm’s length
basis in which no fiduciary relationship exists, and the Borrower has not
relied and is not relying on any such fiduciary relationship in executing this
Agreement.

5.17         Business Loan.  Any Advances, including interest rate, fees
and charges as contemplated hereby, (i) will be an exempted transaction under
the Truth In Lending Act, 12 U.S.C. 1601 et  seq., as amended from
time to time, and (iii) will not violate the provisions of the South Dakota
usury laws, any consumer credit laws or the usury laws of any state which may
have jurisdiction over this transaction, the Borrower or any property securing
the Advances.

5.18         Taxes.  The Borrower has timely filed all tax returns
and reports required by law to have been filed by it and has paid all taxes,
governmental charges and assessments due and payable with respect to such
returns, except any such taxes or charges which are being diligently contested
in good faith by appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books, are insured against or bonded
over

 30
 

to the satisfaction of the Lender and the
contesting of such payment does not create a Lien on the Collateral which is
not a Permitted Lien.  There is no
controversy or objection pending, or threatened in respect of any tax returns
of the Borrower.  The Borrower has made
adequate reserves on its books and records in accordance with GAAP for all
taxes that have accrued but which are not yet due and payable.

5.19         Compliance with
Regulation U.  No portion of the
proceeds of any Advances shall be used by the Borrower, or any Affiliate of the
Borrower, either directly or indirectly, for the purpose of purchasing or
carrying any margin stock, within the meaning of Regulation U as adopted by the
Board of Governors of the Federal Reserve System or any successor thereto.

5.20         Governmental
Regulation.  The Borrower is  not, or after giving effect to any loan, will not be,
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the ICC Termination Act of 1995 or the Investment Company
Act of 1940 or to any federal or state statute or regulation limiting its
ability to incur indebtedness for borrowed money.

5.21         Bank Accounts.  The Borrower has no other deposit accounts
except those listed on Schedule 5.21 attached hereto.  All such deposit accounts (and any other bank
accounts of Borrower) shall be maintained at a financial institution as Lender
and its participants shall determine.

5.22         Place of Business.  As of the date of this Agreement, the
principal place of business and books and records of the Borrower is 300 North
Broadway, Marion, South Dakota 57043, and all of the Collateral is located at
such address, and the Borrower shall promptly notify the Lender of any change
in such location.  The Borrower will not
remove or permit the Collateral to be removed from such location without the
prior written consent of the Lender, except for inventory sold in the usual and
ordinary course of the Borrower’s business.

5.23         Complete Information.  This Agreement and all financial statements,
schedules, certificates, confirmations, agreements, contracts, and other
materials and information heretofore or contemporaneously herewith furnished in
writing by the Borrower to the Lender for purposes of, or in connection with,
this Agreement and the transactions contemplated hereby is, and all written
information hereafter furnished by or on behalf of the Borrower to the Lender
pursuant hereto or in connection herewith will be, true and accurate in every
material respect on the date as of which such information is dated or
certified, and none of such information is or will be incomplete by omitting to
state any material fact necessary to make such information not misleading in
light of the circumstances under which made (it being recognized by the Lender
that any projections and forecasts provided by the Borrower are based on good
faith estimates and assumptions believed by the Borrower to be reasonable as of
the date of the applicable projections or assumptions and that actual results
during the period or periods covered by any such projections and forecasts may
differ from projected or forecasted results).

5.24         Subordinate Debt.  The subordination provisions of the
Subordinate Debt are to Borrower’s knowledge (without Borrower having made any
independent inquiry or evaluation) enforceable against the holders of the
Subordinate Debt by the Lender.  The
Obligations constitute Senior Debt (as defined in the Subordination Agreements)
entitled to the benefits of

 31
 

the subordination provisions contained in the
Subordination Agreements.  The Borrower
acknowledges that the Lender is entering into this Agreement and is issuing the
Letter of Credit in reliance upon the subordination provisions of the
Subordination Agreements and this Section 5.24.

6.

AFFIRMATIVE COVENANTS.

6.1           Borrower Existence.  The Borrower shall at all times (a) preserve
and maintain its existence and good standing in the jurisdiction of its
organization, (b) preserve and maintain its qualification to do business and
good standing in each jurisdiction where the nature of its business makes such
qualification necessary (other than such jurisdictions in which the failure to
be qualified or in good standing could not reasonably be expected to have a
Material Adverse Effect), and (c) continue as a going concern in the business
which the Borrower is presently conducting. 
If the Borrower does not have an Organizational Identification Number
and later obtains one, the Borrower shall promptly notify the Lender of such
Organizational Identification Number.

6.2           Compliance With Laws.  The Letters of Credit shall be used for the
purpose described in Section 2.1 and not in contravention of any requirements
of law and not in violation of this Agreement, and Borrower shall comply in all
respects, including the conduct of its business and operations and the use of
its properties and assets, with all applicable laws, rules, regulations,
decrees, orders, judgments, licenses and permits, except where failure to
comply could not reasonably be expected to have a Material Adverse Effect.

6.3           Office of Foreign
Asset Control.  Borrower represents
and warrants that neither Borrower or any of its respective Affiliates is a
Prohibited Person and Borrower and all of its respective Affiliates are in full
compliance with all applicable orders, rules, regulations and recommendations
of The Office of Foreign Assets Control of the U.S. Department of the Treasury.  At all times throughout the term of this
Agreement, Borrower and all of its respective Affiliates shall: (i) not be a
Prohibited Person (defined below); and (ii) be in full compliance with all
applicable orders, rules, regulations and recommendations of The Office of
Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury.

The term “Prohibited
Person” shall mean any person or entity:

(i)            listed in the Annex to, or otherwise
subject to the provisions of, the Executive Order No. 13224 on Terrorist
Financing, effective September 24, 2001, and relating to Blocking Property and
Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or
Support Terrorism (the “Executive Order”);

(ii)           that is owned or controlled by, or acting
for or on behalf of, any person or entity that is listed to the Annex to, or is
otherwise subject to the provisions of, the Executive Order;

 32
 

(iii)          with whom Lender is prohibited from dealing
or otherwise engaging in any transaction by any terrorism or money laundering
law, including the Executive Order;

(iv)          who commits, threatens or conspires to commit
or supports “terrorism” as defined in the Executive Order;

(v)           that is named as a “specially designated
national and blocked person” on the most current list published by the U.S.
Treasury Department Office of Foreign Assets Control at its official website,
www.ustreas.gov/offices/enforcement/ofac , or at any replacement website or
other replacement official publication of such list; or

(vi)          who is an Affiliate of or affiliated with a
person or entity listed above; or

(vii)         who is a “disregarded entity” as defined in
IRS Regulation 1.1445-2(b)(2)(iii).

The term “Affiliate,”
as used herein, shall mean as to any person or entity, any other person or
entity that, directly or indirectly, is in control of, is controlled by or is
under common control with such person or entity or is a director or officer of
such person or entity or of an Affiliate of such person or entity.  As used herein, the term “control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of management, policies or activities of a person or entity, whether
through ownership of voting securities, by contract or otherwise.

6.4           Payment of Taxes and
Liabilities.  The Borrower shall pay
and discharge, prior to delinquency and before penalties accrue thereon, all
property and other taxes, and all governmental charges or levies against it or
any of the Collateral, as well as claims of any kind which, if unpaid, could
become a Lien on any of its property; provided that the foregoing shall not
require the Borrower to pay any such tax or charge so long as it shall contest
the validity thereof in good faith by appropriate proceedings and shall set
aside on its books adequate reserves with respect thereto in accordance with
GAAP and, in the case of a claim which could become a Lien on any of the
Collateral, such contest proceedings stay the foreclosure of such Lien or the
sale of any portion of the Collateral to satisfy such claim.

6.5           Maintain Property.  The Borrower shall at all times maintain,
preserve and keep its plant, properties and equipment, including any
Collateral, in good repair, working order and condition, and shall from time to
time make all needful and proper repairs, renewals, replacements, and additions
thereto so that at all times the efficiency thereof shall be fully preserved
and maintained.  The Borrower shall
permit the Lender to examine and inspect such plant, properties and equipment,
including any Collateral, at all reasonable times.

6.6           Maintain Insurance.  The Borrower shall at all times maintain with
insurance companies reasonably acceptable to the Lender, such insurance
coverage as may be required by any law or governmental regulation or court
decree or order applicable to it and such other insurance, to such extent and
against such hazards and liabilities, including employers’, public and
professional liability risks, as is customarily maintained by companies
similarly situated, and

 33
 

shall have insured amounts no less than, and
deductibles no higher than, are reasonably acceptable to the Lender.  The Borrower shall furnish to the Lender a
certificate setting forth in reasonable detail the nature and extent of all
insurance maintained by the Borrower, which shall be reasonably acceptable in
all respects to the Lender. The Borrower shall cause each issuer of an
insurance policy to provide the Lender with an endorsement (i) showing the
Lender as lender’s loss payee as its interest may appear with respect to each
policy of property or casualty insurance; and (ii) providing that thirty
(30) days notice will be given to the Lender prior to any cancellation of,
material reduction or change in coverage provided by or other material
modification to such policy.  The
Borrower shall execute and deliver to the Lender a collateral assignment, in
form and substance satisfactory to the Lender, of each business interruption
insurance policy maintained by the Borrower.

In the event the Borrower
either fails to provide the Lender with evidence of the insurance coverage
required by this Section or at any time hereafter shall fail to obtain or
maintain any of the policies of insurance required above, or to pay any premium
in whole or in part relating thereto, then the Lender, without waiving or
releasing any obligation or default by the Borrower hereunder, may at any time
(but shall be under no obligation to so act), obtain and maintain such policies
of insurance and pay such premiums and take any other action with respect
thereto, which the Lender deems advisable. 
This insurance coverage (a) may, but need not, protect the Borrower’s
interests in such property, including the Collateral, and (b) may not pay any
claim made by, or against, the Borrower in connection with such property,
including the Collateral. The Borrower may later cancel any such insurance
purchased by the Lender, but only after providing the Lender with evidence that
the Borrower has obtained the insurance coverage required by this Section.  If the Lender purchases insurance for the
Collateral, the Borrower will be responsible for the costs of that insurance,
including interest and any other charges that may be imposed with the placement
of the insurance, until the effective date of the cancellation or expiration of
the insurance.  The costs of the
insurance may be added to the principal amount of any Advances owing
hereunder.  The costs of the insurance
may be more than the cost of the insurance the Borrower may be able to obtain
on its own.

6.7           ERISA Liabilities; Employee Plans.  Borrower
is not an entity deemed to hold “plan assets” within the meaning of 29 C.F.R.
§2510.3-101 of any “employee benefit plan” (as defined in Section 3(3) of
ERISA) that is subject to Title I of ERISA or any “plan” (within the meaning of
Section 4975 of the Internal Revenue Code), and neither the execution of this
Agreement nor the issuance of any Letter of Credit gives rise to a prohibited
transaction within the meaning of Section 406 of ERISA or Section 4975 of the
Internal Revenue Code.

6.8           Financial Statements.  The Borrower shall at all times maintain a
standard and modern system of accounting, on the accrual basis of accounting
and in all respects in accordance with GAAP, and shall furnish to the Lender or
its authorized representatives such information regarding the business affairs,
operations and financial condition of the Borrower, including:

(a)           promptly when available, and in any event,
within one hundred fifty (150) days after the close of each of its fiscal
years, a copy of (i) the annual audited financial statements of the Borrower,
including balance sheet, statement of income and retained earnings, statement
of cash flows for the

 34
 

fiscal year then ended and such other information (including
nonfinancial information) as the Lender may request, in reasonable detail,
prepared and certified;

(b)           promptly when available, and in any event,
within thirty (30) days following the end of each month, a copy of the
financial statements of the Borrower regarding such month, including balance
sheet, statement of income and retained earnings, statement of cash flows for
the month then ended and such other information (including nonfinancial
information) as the Lender may request, in reasonable detail, prepared and
certified as true and correct by the Borrower’s treasurer or chief financial
officer;

(c)           within ten (10) days after the filing due
date (as such date may be extended in accordance with properly granted
extensions) each year, a signed copy of the complete income tax returns filed
with the Internal Revenue Service by the Borrower; and

(d)           Annual financial projections, including
balance sheet, income statement, and cash flow statement for the next fiscal
year (by month) thirty (30) days prior to the beginning of the next fiscal
year.

No change with respect to
such accounting principles shall be made by the Borrower without giving prior
notification to the Lender.  The Borrower
represents and warrants to the Lender that the financial statements delivered
to the Lender at or prior to the execution and delivery of this Agreement and
to be delivered at all times thereafter accurately reflect and will accurately
reflect the financial condition of the Borrower.  The Lender shall have the right at all times
during business hours to inspect the books and records of the Borrower and make
extracts therefrom.  In the event Lender
receives any of the foregoing in another capacity (such as a lender or
participant under the Revolving Loan Documents), then Lender shall not
separately exercise its rights under this Section.

6.9           Supplemental
Financial Statements.  The Borrower
shall immediately upon receipt thereof, provide to the Lender copies of interim
and supplemental reports if any, submitted to the Borrower by independent
accountants in connection with any interim audit or review of the books of the
Borrower.

6.10         Aged Accounts Schedule.  The Borrower shall, within thirty (30) days
after the end of each month, deliver to the Lender an aged schedule of the
accounts of the Borrower, listing the name and amount due from each account
debtor and showing the aggregate amounts due from (a) 0-30 days, (b) 31-60
days, (c) 61-90 days and (d) more than 90 days, and certified as accurate by
the Borrower’s treasurer or chief financial officer.

6.11         Inventory Reports.  The Borrower shall, within thirty (30) days
after the end of each month, deliver to the Lender an inventory report,
certified as accurate by the Borrower’s treasurer or chief financial officer,
and within such time as the Lender may specify, such other schedules and
reports as the Lender may require.

 35
 

6.12         Covenant Compliance
Certificate.  The Borrower shall,
contemporaneously with the furnishing of the financial statements pursuant to Section
6.8, deliver to the Lender a duly completed compliance certificate, dated
the date of such financial statements and certified as true and correct by an
appropriate officer of the Borrower, containing a computation of each of the
financial covenants set forth in Section 8.1 and stating that the
Borrower has not become aware of any Event of Default that has occurred and is
continuing or, if there is any such Event of Default describing it and the
steps, if any, being taken to cure it.

6.13         Field Audits.  The Borrower shall permit the Lender to
inspect the inventory, other tangible assets and/or other business operations
of the Borrower, to perform appraisals of the equipment of the Borrower, and to
inspect, audit, check and make copies of, and extracts from, the books,
records, computer data, computer programs, journals, orders, receipts, correspondence
and other data relating to inventory, accounts and any other Collateral, the
results of which must be satisfactory to the Lender in the Lender’s sole and
absolute discretion.  All such
inspections or audits by the Lender shall be at the Borrower’s sole expense,
subject to a limit of $5,000 per year unless an Event of Default occurs.  Notwithstanding the foregoing, unless
otherwise required by applicable law or regulation, in the event Lender
receives the results of such an inspection in another capacity (such as a
lender or participant under the Revolving Loan Documents), Lender shall not
separately exercise its rights under this Section.

6.14         Other Reports.  The Borrower shall, within such period of
time as the Lender may specify, deliver to the Lender such other schedules and
reports as the Lender may require.

6.15         Collateral Records.  The Borrower shall keep full and accurate
books and records relating to the Collateral and shall mark such books and
records to indicate the Lender’s Lien in the Collateral.

6.16         Intellectual Property.  The Borrower shall maintain, preserve and
renew all intellectual property necessary for the conduct of its business as
and where the same is currently located as heretofore or as hereafter conducted
by it.

6.17         Notice of Proceedings.  The Borrower, promptly upon becoming aware,
shall give written notice to the Lender of any litigation, arbitration or
governmental investigation or proceeding not previously disclosed by the
Borrower to the Lender which has been instituted or, to the knowledge of the
Borrower, is threatened against the Borrower or to which any of its properties
is subject which might reasonably be expected to have a Material Adverse
Effect.

6.18         Notice of Event of
Default or Material Adverse Effect. 
The Borrower shall, immediately after the commencement thereof, give
notice to the Lender in writing of the occurrence of any Event of Default, or
the occurrence of any condition or event having a Material Adverse Effect.

6.19         Environmental Matters.  If any release or threatened release or other
disposal of Hazardous Substances shall occur or shall have occurred on any real
property or any other assets of the Borrower, the Borrower shall  cause the prompt containment and removal of such Hazardous
Substances and the remediation of such real property or other assets as
necessary to comply with all Environmental Laws and to preserve the value of
such real property or other

 36
 

assets. 
Without limiting the generality of the foregoing, the Borrower shall  comply with any Federal or state judicial or administrative
order requiring the performance at any real property of the Borrower of
activities in response to the release or threatened release of a Hazardous
Substance.  To the extent that the
transportation of Hazardous Substances is permitted by this Agreement, the
Borrower shall  dispose of such Hazardous
Substances, or of any other wastes, only at licensed disposal facilities
operating in compliance with Environmental Laws.

6.20         Further Assurances.  The Borrower shall take  such
actions as are necessary or as the Lender may reasonably request from time to
time to ensure that the Obligations under the Loan Documents are secured by
substantially all of the assets of the Borrower, in each case as the Lender may
determine, including (a) the execution and delivery of security agreements,
pledge agreements, mortgages, deeds of trust, financing statements and other
documents, and the filing or recording of any of the foregoing, and (b) the
delivery of certificated securities and other collateral with respect to which
perfection is obtained by possession.

6.21         Management Agreement.  Borrower shall keep the Management Agreement
with Fremar Farmer Cooperative, Inc. in full force and effect with no amendment
thereto without the prior written consent of Lender.

6.22         Updated Appraisals.  Borrower agrees that the Lender shall have
the right to obtain, at Borrower’s expense, an updated MAI appraisal (in form
and substance reasonably satisfactory to Lender) of the Project from an
appraiser approved by Lender at any time (a) that an Event of Default shall
have occurred hereunder, or (b) Lender determines in its commercially
reasonable discretion that the security for the Obligations has been physically
or financially impaired in any material manner, or (c) or Final Completion of
the Project.  In the event that Lender
shall elect to obtain such an appraisal, Lender may immediately commission an
appraiser acceptable to Lender to prepare the appraisal and Borrower shall,
after reasonable request therefor, fully cooperate with Lender and the
appraiser in obtaining the necessary information to prepare such
appraisal.  In the event that Borrower
fails, after reasonable request therefor, to cooperate with Lender in obtaining
such an appraisal or in the event that Borrower shall fail to pay for the cost
of such appraisal as soon as practicable, but in no event later than ten (10)
business days after demand, such event shall constitute an Event of Default
hereunder and Lender shall be entitled to exercise all remedies available to it
hereunder.  Notwithstanding the
foregoing, unless otherwise required by applicable law or regulation, in the
event Lender receives the results of such an appraisal in another capacity
(such as a lender or participant under the Revolving Loan Documents), Lender
shall not separately exercise its rights under this Section.

7.

NEGATIVE COVENANTS.

7.1           Indebtedness.  The Borrower will not incur, create, assume
or permit to exist any indebtedness or liability on account of deposits or advances
or any indebtedness for borrowed money or letters of credit issued on the
Borrower’s behalf, or obligations under any Operating Lease or Capital Lease
(except as permitted by Section 7.13 and Section 7.19 hereafter) any other
indebtedness or liability evidenced by notes, bonds, debentures, leases or
similar obligations, except:

 37
 

(a)           the indebtedness arising hereunder;

(b)           the indebtedness arising under the Revolving
Loan Agreement;

(c)           the indebtedness arising under the Plant
Loan Agreement;

(d)           the Unsecured Debt.

(e)           the Subordinate Debt from Rex Radio and
Television, Inc., or its designee, or any replacement indebtedness fully
replacing the Subordinate Debt in the full principal amount of up to
$17,500,000.00 and obligations arising thereunder;

(f)            the Subordinate Debt
from Turner County Regional Railroad Authority or any replacement indebtedness
fully replacing such Subordinate Debt in the full principal amount of up to
$2,000,000.00 and obligations arising thereunder; and

(g)           the Impositions due any Governmental
Authority.

7.2           Encumbrances.  The Borrower shall not, either directly or
indirectly, create, assume, incur or suffer or permit to exist any Lien or
charge of any kind or character upon any asset of the Borrower, whether owned
at the date hereof or hereafter acquired, except for Permitted Liens.

7.3           Transactions with
Affiliates.  The Borrower shall not,
directly or indirectly, enter into or permit to exist any transaction with any
of its Affiliates or with any director, officer or employee of the Borrower
other than transactions in the ordinary course of, and pursuant to the
reasonable requirements of, the business of the Borrower and upon fair and
reasonable terms which are fully disclosed to the Lender and are no less
favorable to the Borrower than would be obtained in a comparable arm’s length
transaction with a Person that is not an Affiliate of the Borrower.  Lender acknowledges that the Management
Agreement complies with this Section 7.3.

7.4           Unconditional
Purchase Obligations.  The Borrower
shall not enter into or be a party to any contract for the purchase of
materials, supplies or other property or services if such contract requires
that payment be made by it regardless of whether delivery is ever made of such
materials, supplies or other property or services.

7.5           Cancellation of Debt.  The Borrower shall not cancel any claim or
debt owing to it, except for reasonable consideration or in the ordinary course
of business.

7.6           Inconsistent
Agreements.  The Borrower shall not
enter into any agreement containing any provision which would (a) be violated
or breached by any borrowing by the Borrower hereunder or by the performance by
the Borrower of any of its Obligations hereunder or under any other Loan
Document, (b) prohibit the Borrower from granting to the Lender a Lien on any
of its assets.

 38
 

7.7           Bank Accounts.  Except for the Reimbursement Reserve Account
hereunder, the Borrower shall not establish any new deposit accounts or other
bank accounts without the prior written consent of the Lender.

7.8           Guaranties.  The Borrower will not assume, guarantee,
endorse or otherwise become directly or contingently liable in connection with
any obligations of any other Person, except the endorsement of negotiable
instruments by the Borrower for deposit or collection or similar transactions
in the ordinary course of business.

7.9           Member Loans and
Distributions. Borrower:

(a)           Subordinates all loans, advances, and
indebtedness owing from Borrower to Members of Borrower from time to time,
whether or not evidenced by promissory notes.

(b)           Shall not make any Distributions (other than
Tax Distributions) to its Members if the Debt Service Coverage Ratio is less
than 1.25 to 1.00.

(c)           Shall not pay any dividend or distribution,
excluding Tax Distributions, whether in cash or otherwise, to any of its
Members (i) unless and until the Debt Service Reserve Account (as created and
defined under the Plant Loan) is fully funded, the Reimbursement Reserve
Account is fully funded as required under Section 4.16 above, all Fixed Charges
are paid current and the FF&E Reserve (as created and defined under the
Plant Loan) is currently funded and (ii) then only in aggregate amounts not to
exceed 50% of Net Income, which dividend or distribution (other than Tax
Distribution) shall be made not more frequently than once annually under a
request made by Borrower to Lender accompanied by Borrower’s accountant’s
calculations of the distributions subject to Lender’s approval of the same not
to be unreasonably withheld. After the principal balance of the Plant Loan is
less than $50,000,000.00, distributions may be made quarterly.

7.10         Sale or Transfer of
Assets; Suspension of Business Operations. 
The Borrower will not sell, lease, assign, transfer or otherwise dispose
of (i) the Project, (ii) all or a substantial part of its assets, or
(iii) any Collateral or any interest therein (whether in one transaction
or in a series of transactions) to any other Person other than the sale of
inventory in the ordinary course of business and will not liquidate, dissolve
or suspend business operations, provided, however, that Borrower may in the
ordinary course of business sell or dispose of equipment constituting
Collateral that is obsolete or otherwise being replaced in the ordinary course
of business up to $500,000 in the aggregate per year.  The Borrower will not transfer any part of
its ownership interest in any intellectual property rights and will not permit
any agreement under which it has licensed intellectual property to lapse,
except that the Borrower may transfer such rights or permit such agreements to
lapse if it shall have reasonably determined that the applicable intellectual
property rights are no longer useful in its business.  If the Borrower transfers any intellectual
property rights for value, subject to the terms of any applicable intercreditor
or subordination arrangements, the Borrower will pay over the proceeds to the
Lender for

 39
 

application to the Obligations.  The Borrower will not license any other
Person to use any of the Borrower’s intellectual property rights, except that
the Borrower may grant licenses in the ordinary course of its business in
connection with sales of inventory or provision of services to its customers.

7.11         Consolidation and
Merger; Asset Acquisitions. The Borrower will not consolidate with or merge
into any Person, or permit any other Person to merge into it, or acquire (in a
transaction analogous in purpose or effect to a consolidation or merger) all or
substantially all the assets of any other Person.

7.12         Sale and Leaseback.  The Borrower will not enter into any
arrangement, directly or indirectly, with any other Person whereby the Borrower
shall sell or transfer any real or personal property, whether now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such
property or any part thereof or any other property that the Borrower intends to
use for substantially the same purpose or purposes as the property being sold
or transferred.

7.13         Capital Leases.
Borrower will not enter into any Capital Leases in excess of $250,000.00 in the
aggregate without the prior written consent of Lender.

7.14         Restrictions on Nature
of Business.  The Borrower will not
engage in any line of business materially different from that presently engaged
in by the Borrower and will not purchase, lease or otherwise acquire assets not
related to its business.

7.15         Accounting. The
Borrower will not adopt any material change in accounting principles other than
as required by GAAP.  The Borrower will
not adopt, permit or consent to any change in its fiscal year.

7.16         Discounts, etc.  The Borrower will not at any time discount,
modify, amend, subordinate, cancel or terminate the obligation of any account
debtor or other obligor of the Borrower except in the ordinary course of
business.

7.17         Place of Business;
Name. The Borrower will not transfer its chief executive office or
principal place of business, or move, relocate, close or sell any business
location.  At the current time, the
Borrower’s address is 300 North Broadway, P. O. Box 357, Marion, South Dakota;
however, after construction of the Plant, Borrower’s address will be 27283
447th Avenue, Marion, South Dakota; provided Borrower shall give prompt notice
to Lender immediately prior to such change of address as required by Section
5.22.  The Borrower will not permit any
tangible Collateral or any records pertaining to the Collateral to be located
in any state or area in which, in the event of such location, a financing
statement covering such Collateral would be required to be, but has not in fact
been, filed in order to perfect the security interest of Lender. The Borrower
will not change its name or jurisdiction of organization.

7.18         No Purchase of
Perishable Agricultural Commodities. 
The Borrower will not purchase perishable agricultural products that are
subject to the Perishable Agricultural Commodities Act.

7.19         Lease.  Borrower shall not enter into any Operating
Lease with annual rental in excess of $100,000.00 without the prior written
consent of the Lender.

 40
 

7.20         Amendment
to Plant Loan and Security Agreement or Revolving Loan Agreement.  The Borrower will not amend or otherwise
modify the Plant Loan and Security Agreement or the Revolving Loan Agreement
without the prior written consent of the Lender, which consent will not be
unreasonably withheld.

8.

financial covenants

8.1           Financial Covenants.
The Borrower covenants that during the term of this Agreement and any
extensions:

(a)           Retained Earnings. Twenty-Five
percent (25%) of pre-tax Net Income available for Distributions are to be
retained with Borrower.

(b)           Debt Service Coverage.  As of the end of each fiscal quarter of the
Borrower, the Borrower shall maintain a Debt Service Coverage Ratio for such
period, of not less than 1.20 to 1.00.

9.

EVENTS OF DEFAULT.

The Borrower, without
notice or demand of any kind, shall be in default under this Agreement upon the
occurrence of any of the following events (each an “Event of Default”).

9.1           Nonpayment of
Obligations.  Any amount due and
owing under this Agreement or the Promissory Note, or any of the Obligations,
whether by its terms or as otherwise provided herein, is not paid when due.

9.2           Misrepresentation.  Any oral or written warranty, representation,
certificate or statement of the Borrower in this Agreement, the other Loan
Documents or any other agreement with the Lender shall be false when made or at
any time thereafter, or if any financial data or any other information now or
hereafter furnished to the Lender by or on behalf of the Borrower shall prove
to be false, inaccurate or misleading in any material respect.

9.3           Nonperformance.  Any failure to perform or default in the
performance of any covenant, condition or agreement contained in this Agreement
or in the other Loan Documents or any other agreement with the Lender.

9.4           Default under Loan
Documents.  A default under any of
the other Loan Documents, all of which covenants, conditions and agreements
contained therein are hereby incorporated in this Agreement by express
reference, shall be and constitute an Event of Default under this Agreement and
any other of the Obligations.

9.5           Default under Other
Loans.  If an event of default shall
occur under the Plant Loan Documents or Revolving Loan Documents which is not
cured within the applicable cure period and/or the Plant Loan or Revolving Loan
is terminated or cancelled or the obligation of a lender thereunder to advance
loan proceeds is terminated or rescinded.

 41
 

9.6           Default under Other
Debt.  Any default by the Borrower in
the payment of any Debt for any other obligation beyond any period of grace
provided with respect thereto or in the performance of any other term,
condition or covenant contained in any agreement (including any capital or
operating lease or any agreement in connection with the deferred purchase price
of property) under which any such obligation is created, the effect of which
default is to cause or permit the holder of such obligation (or the other party
to such other agreement) to cause such obligation to become due prior to its
stated maturity or terminate such other agreement.

9.7           Other Material
Obligations.  Any default in the
payment when due, or in the performance or observance of, any material
obligation of, or condition agreed to by, the Borrower with respect to any
material purchase or lease of goods or services where such default, singly or
in the aggregate with all other such defaults, might reasonably be expected to
have a Material Adverse Effect.

9.8           Bankruptcy,
Insolvency, etc.  The Borrower shall
fail to pay its debts as they become due, or shall make an assignment for the
benefit of its creditors, or shall admit in writing its inability to pay its
debts as they become due, or shall file a petition under any chapter of the
Federal Bankruptcy Code or any similar law, state or federal, now or hereafter
existing, or shall become “insolvent” as that term is generally defined under
the Federal Bankruptcy Code, or shall in any involuntary bankruptcy case
commenced against it file an answer admitting insolvency or inability to pay
its debts as they become due, or shall fail to obtain a dismissal of such case
within one hundred twenty (120) days after its commencement or convert the case
from one chapter of the Federal Bankruptcy Code to another chapter, or be the
subject of an order for relief in such bankruptcy case, or be adjudged a
bankrupt or insolvent, or shall have a custodian, trustee or receiver appointed
for, or have any court take jurisdiction of its property, or any part thereof,
in any voluntary proceeding for the purpose of reorganization, arrangement,
dissolution or liquidation and such custodian, trustee or receiver shall not be
discharged, or such jurisdiction shall not be relinquished, vacated or stayed
within one hundred twenty (120) days of the appointment.

9.9           Judgments.  The entry of any final judgment, decree,
levy, attachment, garnishment or other process, or the filing of any Lien
against the Borrower which is not fully covered by insurance, or such action
shall not be released or bonded over to Lender’s satisfaction within fifteen
(15) days after the assertion or filing thereof.

9.10         Collateral Impairment.  The entry of any judgment, decree, levy,
attachment, garnishment or other process, or the filing of any Lien against,
any of the Collateral or any collateral under a separate security agreement
securing any of the Obligations, or the loss, theft, destruction, seizure or
forfeiture, or the occurrence of any deterioration or impairment of any of the
Collateral or any of the collateral under any security agreement or mortgage
securing any of the Obligations, or any decline or depreciation in the value or
market price thereof (whether actual or reasonably anticipated), which causes
the Collateral, in the sole opinion of the Lender acting in good faith, to
become unsatisfactory as to value or character, or which causes the Lender to
reasonably believe that it is insecure and that the likelihood for repayment of
the Obligations is or will soon be impaired, time being of the essence. The
cause of such deterioration, impairment, decline or depreciation shall include,
but is not limited to, the failure

 42
 

by the Borrower to do any act deemed
necessary by the Lender to preserve and maintain the value and collectability
of the Collateral.

9.11         Material Adverse
Effect.  The occurrence of any
development, condition or event which has a Material Adverse Effect on the
Borrower.

9.12         Subordinate Debt.  The subordination provisions of the
Subordinate Debt shall for any reason be revoked or invalid or otherwise cease
to be in full force and effect.  The
Borrower shall contest in any manner, or any other holder thereof shall contest
in any judicial proceeding, the validity or enforceability of the Subordinate
Debt or deny that it has any further liability or obligation thereunder, or the
Obligations shall for any reason not have the priority contemplated by the
subordination provisions of the Subordinate Debt.

9.13         Natural
Gas Supply Agreements.  Any default
by the Borrower under any Natural Gas Supply Agreement which is not cured
within the applicable cure period.

10.

REMEDIES.

Upon the occurrence of an
Event of Default, the Lender shall have all rights, powers and remedies set
forth in the Loan Documents, in any written agreement or instrument (other than
this Agreement or the Loan Documents) relating to any of the Obligations or any
security therefor, as a secured party under the UCC or as otherwise provided at
law or in equity.  Without limiting the
generality of the foregoing, the Lender may, at its option upon the occurrence
of an Event of Default, declare its commitments to the Borrower to be
terminated and all Obligations to be immediately due and payable, provided,
however, that upon the occurrence of an Event of Default under Section 9.8,
all commitments of the Lender to the Borrower shall immediately terminate and
all Obligations shall be automatically due and payable, all without demand,
notice or further action of any kind required on the part of the Lender.  The Borrower hereby waives any and all
presentment, demand, notice of dishonor, protest, and all other notices and
demands in connection with the enforcement of Lender’s rights under the Loan
Documents, and hereby consents to, and waives notice of release, with or
without consideration, of any Collateral, notwithstanding anything contained
herein or in the Loan Documents to the contrary.  In addition to the foregoing:

10.1         Possession and
Assembly of Collateral.  The Lender
may, without notice, demand or legal process of any kind, take possession of
any or all of the Collateral (in addition to Collateral of which the Lender
already has possession), wherever it may be found, and for that purpose may
pursue the same wherever it may be found, and may at any time enter into any of
the Borrower’s premises where any of the Collateral may be or is supposed to
be, and search for, take possession of, remove, keep and store any of the
Collateral until the same shall be sold or otherwise disposed of and the Lender
shall have the right to store and conduct a sale of the same in any of the
Borrower’s premises without cost to the Lender. 
At the Lender’s request, the Borrower will, at the Borrower’s sole
expense, assemble the Collateral and make it available to the Lender at a place
or places to be designated by the Lender which is reasonably convenient to the
Lender and the Borrower.

 43

10.2         Sale
of Collateral.  The Lender may sell
any or all of the Collateral at public or private sale, upon such terms and
conditions as the Lender may deem proper, and the Lender may purchase any or
all of the Collateral at any such sale. 
The Borrower acknowledges that the Lender may be unable to effect a
public sale of all or any portion of the Collateral because of certain legal
and/or practical restrictions and provisions which may be applicable to the
Collateral and, therefore, may be compelled to resort to one or more private
sales to a restricted group of offerees and purchasers.  The Borrower consents to any such private
sale so made even though at places and upon terms less favorable than if the
Collateral were sold at public sale.  The
Lender shall have no obligation to clean-up or otherwise prepare the Collateral
for sale.  The Lender may apply the net
proceeds, after deducting all costs, expenses, attorneys’ and paralegals’ fees
incurred or paid at any time in the collection, protection and sale of the
Collateral and the Obligations, to the payment of the Promissory Note and/or
any of the other Obligations, returning the excess proceeds, if any, to the
Borrower.  The Borrower shall remain
liable for any amount remaining unpaid after such application, with interest at
the Default Rate.  Any notification of
intended disposition of the Collateral required by law shall be conclusively
deemed reasonably and properly given if given by the Lender at least ten (10)
calendar days before the date of such disposition.  The Borrower hereby confirms, approves and
ratifies all acts and deeds of the Lender relating to the foregoing, and each
part thereof, and expressly waives any and all claims of any nature, kind or
description which it has or may hereafter have against the Lender or its
representatives, by reason of taking, selling or collecting any portion of the
Collateral.  The Borrower consents to
releases of the Collateral at any time (including prior to default) and to
sales of the Collateral in groups, parcels or portions, or as an entirety, as
the Lender shall deem appropriate.  The
Borrower expressly absolves the Lender from any loss or decline in market value
of any Collateral by reason of delay in the enforcement or assertion or
nonenforcement of any rights or remedies under this Agreement.

10.3         Standards
for Exercising Remedies.  To the extent that applicable law
imposes duties on the Lender to exercise remedies in a commercially reasonable
manner, the Borrower acknowledges and agrees that it is not commercially
unreasonable for the Lender (a) to fail to incur expenses reasonably deemed
significant by the Lender to prepare Collateral for disposition or otherwise to
complete raw material or work-in-process into finished goods or other finished
products for disposition, (b) to fail to obtain third party consents for access
to Collateral to be disposed of, or to obtain or, if not required by other law,
to fail to obtain governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of, (c) to fail to
exercise collection remedies against account debtors or other Persons obligated
on Collateral or to remove liens or encumbrances on or any adverse claims
against Collateral, (d) to exercise collection remedies against account debtors
and other Persons obligated on Collateral directly or through the use of
collection agencies and other collection specialists, (e) to advertise
dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (f) to
contact other Persons, whether or not in the same business as the Borrower, for
expressions of interest in acquiring all or any portion of the Collateral, (g)
to hire one or more professional auctioneers to assist in the disposition of
Collateral, whether or not the collateral is of a specialized nature, (h) to
dispose of Collateral by utilizing internet sites that provide for the auction
of assets of the types included in the Collateral or that have the reasonable
capability of doing so, or that match buyers and sellers of assets, (i) to
dispose of assets in wholesale rather than retail markets, (j) to disclaim
disposition warranties, including any warranties of title, (k) to purchase
insurance or credit enhancements to insure the

 44
 

Lender against risks of loss, collection or disposition of Collateral
or to provide to the Lender a guaranteed return from the collection or
disposition of Collateral, or (l) to the extent deemed appropriate by the
Lender, to obtain the services of other brokers, investment bankers,
consultants and other professionals to assist the Lender in the collection or
disposition of any of the Collateral. 
The Borrower acknowledges that the purpose of this section is to provide
non-exhaustive indications of what actions or omissions by the Lender would not
be commercially unreasonable in the Lender’s exercise of remedies against the
Collateral and that other actions or omissions by the Lender shall not be
deemed commercially unreasonable solely on account of not being indicated in
this section.  Without limitation upon
the foregoing, nothing contained in this section shall be construed to grant
any rights to the Borrower or to impose any duties on the Lender that would not
have been granted or imposed by this Agreement or by applicable law in the
absence of this section.

10.4         UCC
and Offset Rights.  The Lender may
exercise, from time to time, any and all rights and remedies available to it
under the UCC or under any other applicable law in addition to, and not in lieu
of, any rights and remedies expressly granted in this Agreement or in any other
agreements between the Borrower and the Lender.

10.5         Additional
Remedies.  The Lender shall have the
right and power to:

(a)                                  instruct
the Borrower, at its own expense, to notify any parties obligated on any of the
Collateral, including any account debtors, to make payment directly to the
Lender of any amounts due or to become due thereunder, or the Lender may
directly notify such obligors of the security interest of the Lender, and/or of
the assignment to the Lender of the Collateral and direct such obligors to make
payment to the Lender of any amounts due or to become due with respect thereto,
and thereafter, collect any such amounts due on the Collateral directly from
such Persons obligated thereon;

(b)                                 enforce
collection of any of the Collateral, including any accounts, by suit or
otherwise, or make any compromise or settlement with respect to any of the
Collateral, or surrender, release or exchange all or any part thereof, or
compromise, extend or renew for any period (whether or not longer than the
original period) any indebtedness thereunder;

(c)                                  take
possession or control of any proceeds and products of any of the Collateral,
including the proceeds of insurance thereon;

(d)                                 extend,
renew or modify for one or more periods (whether or not longer than the
original period) the Promissory Note, any other of the Obligations, any
obligation of any nature of any other obligor with respect to the Promissory
Note or any of the Obligations;

(e)                                  grant
releases, compromises or indulgences with respect to the Promissory Note, any
of the Obligations, any extension or renewal of any of the Obligations, any
security therefor, or to any other obligor with respect to the Promissory Note
or any of the Obligations;

 45
 

(f)                                    transfer
the whole or any part of securities which may constitute Collateral into the
name of the Lender or the Lender’s nominee without disclosing, if the Lender so
desires, that such securities so transferred are subject to the security
interest of the Lender, and any corporation, association, or any of the
managers or trustees of any trust issuing any of such securities, or any
transfer agent, shall not be bound to inquire, in the event that the Lender or
such nominee makes any further transfer of such securities, or any portion
thereof, as to whether the Lender or such nominee has the right to make such
further transfer, and shall not be liable for transferring the same;

(g)                                 make
an election with respect to the Collateral under Section 1111 of the Bankruptcy
Code or take action under Section 364 or any other section of the Bankruptcy
Code; provided, however, that any such action of the Lender as set forth herein
shall not, in any manner whatsoever, impair or affect the liability of the
Borrower hereunder, nor prejudice, waive, nor be construed to impair, affect,
prejudice or waive the Lender’s rights and remedies at law, in equity or by
statute, nor release, discharge, nor be construed to release or discharge, the
Borrower, any guarantor or other Person liable to the Lender for the
Obligations; and

(h)                                 at
any time, and from time to time, accept additions to, releases, reductions,
exchanges or substitution of the Collateral, without in any way altering, impairing,
diminishing or affecting the provisions of this Agreement, the Loan Documents,
or any of the other Obligations, or the Lender’s rights hereunder, under the
Promissory Note or under any of the other Obligations.

The Borrower hereby
ratifies and confirms whatever the Lender may do with respect to the Collateral
and agrees that the Lender shall not be liable for any error of judgment or
mistakes of fact or law with respect to actions taken in connection with the
Collateral, except to the extent such error or mistake constitutes gross
negligence or willful misconduct of Lender.

10.6         Attorney-in-Fact.  The Borrower hereby irrevocably makes,
constitutes and appoints the Lender (and any officer of the Lender or any
Person designated by the Lender for that purpose) as the Borrower’s true and
lawful proxy and attorney-in-fact (and agent-in-fact) in the Borrower’s name,
place and stead, with full power of substitution, to (i) take such actions as
are permitted in this Agreement, (ii) execute such financing statements and
other documents and to do such other acts as the Lender may require to perfect
and preserve the Lender’s security interest in, and to enforce such interests
in the Collateral, and (iii) carry out any remedy provided for in this
Agreement, including endorsing the Borrower’s name to checks, drafts,
instruments and other items of payment, and proceeds of the Collateral,
executing change of address forms with the postmaster of the United States Post
Office serving the address of the Borrower, changing the address of the
Borrower to that of the Lender, opening all envelopes addressed to the Borrower
and applying any payments contained therein to the Obligations.  The Borrower hereby acknowledges that the
constitution and appointment of such proxy and attorney-in-fact are coupled
with an interest and are irrevocable. 
The Borrower hereby ratifies and confirms all

 46
 

that such attorney-in-fact may do or cause to
be done by virtue of any provision of this Agreement.

10.7         No Marshaling.  The Lender shall not be required to marshal
any present or future collateral security (including this Agreement and the
Collateral) for, or other assurances of payment of, the Obligations or any of
them or to resort to such collateral security or other assurances of payment in
any particular order.  To the extent that
it lawfully may, the Borrower hereby agrees that it will not invoke any law
relating to the marshaling of collateral which might cause delay in or impede
the enforcement of the Lender’s rights under this Agreement or under any other
instrument creating or evidencing any of the Obligations or under which any of
the Obligations is outstanding or by which any of the Obligations is secured or
payment thereof is otherwise assured, and, to the extent that it lawfully may,
the Borrower hereby irrevocably waives the benefits of all such laws.

10.8         Application of
Proceeds.  The Lender will within
three (3) Business Days after receipt of cash or solvent credits from
collection of items of payment, proceeds of Collateral or any other source,
apply the whole or any part thereof against the Obligations secured
hereby.  The Lender shall further have
the exclusive right to determine how, when and what application of such
payments and such credits shall be made on the Obligations, and such
determination shall be conclusive upon the Borrower.  Any proceeds of any disposition by the Lender
of all or any part of the Collateral may be first applied by the Lender to the
payment of expenses incurred by the Lender in connection with the Collateral,
including attorneys’ fees and legal expenses as provided for in Section 11
hereof.

10.9         No Waiver.  No Event of Default shall be waived by the
Lender except in writing. No failure or delay on the part of the Lender in
exercising any right, power or remedy hereunder shall operate as a waiver of
the exercise of the same or any other right at any other time; nor shall any
single or partial exercise of any such right, power or remedy preclude any
other or further exercise thereof or the exercise of any other right, power or
remedy hereunder.  There shall be no
obligation on the part of the Lender to exercise any remedy available to the
Lender in any order.  The remedies provided
for herein are cumulative and not exclusive of any remedies provided at law or
in equity.  The Borrower agrees that in
the event that the Borrower fails to perform, observe or discharge any of its
Obligations or liabilities under this Agreement or any other agreements with
the Lender, no remedy of law will provide adequate relief to the Lender, and
further agrees that the Lender shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages.

11.

MISCELLANEOUS.

11.1         Obligations Absolute.  None of the following shall affect the
Obligations of the Borrower to the Lender under this Agreement or the Lender’s
rights with respect to the Collateral:

(a)                                  acceptance or
retention by the Lender of other property or any interest in property as
security for the Obligations;

 47
 

(b)                                 release by the Lender
of all or any part of the Collateral or of any party liable with respect to the
Obligations;

(c)                                  release, extension,
renewal, modification or substitution by the Lender of the Promissory Note, or
any note evidencing any of the Obligations,; or

(d)                                 failure of the Lender
to resort to any other security or to pursue the Borrower or any other obligor
liable for any of the Obligations before resorting to remedies against the
Collateral.

11.2         Entire Agreement;
Subject to Intercreditor Agreement. 
This Agreement and the other Loan Documents (i) are valid, binding and
enforceable against the Borrower and the Lender in accordance with their
respective provisions and no conditions exist as to their legal effectiveness;
(ii) constitute the entire agreement between the parties with respect to the
subject matter hereof and thereof; and (iii) are the final expression of the
intentions of the Borrower and the Lender. 
No promises, either expressed or implied, exist between the Borrower and
the Lender, unless contained herein or therein. 
This Agreement, together with the other Loan Documents, supersedes all
negotiations, representations, warranties, commitments, term sheets,
discussions, negotiations, offers or contracts (of any kind or nature, whether
oral or written) prior to or contemporaneous with the execution hereof with
respect to any matter, directly or indirectly related to the terms of this
Agreement and the other Loan Documents. 
This Agreement and the other Loan Documents are the result of negotiations
among the Lender, the Borrower and the other parties thereto, and have been
reviewed (or have had the opportunity to be reviewed) by counsel to all such
parties, and are the products of all parties. 
Accordingly, this Agreement and the other Loan Documents shall not be
construed more strictly against the Lender merely because of the Lender’s
involvement in their preparation. 
Notwithstanding anything to the contrary herein, this Agreement and the
other Loan Documents are subject in all respects to the terms and conditions of
the Intercreditor Agreement.

11.3         WAIVER OF DEFENSES.  THE BORROWER WAIVES EVERY PRESENT AND FUTURE
DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH THE BORROWER MAY NOW
HAVE OR HEREAFTER MAY HAVE TO ANY ACTION BY THE LENDER IN ENFORCING THIS
AGREEMENT.  PROVIDED THE LENDER ACTS IN
GOOD FAITH, THE BORROWER RATIFIES AND CONFIRMS WHATEVER THE LENDER MAY DO
PURSUANT TO THE TERMS OF THIS AGREEMENT. 
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER GRANTING ANY
FINANCIAL ACCOMMODATION TO THE BORROWER.

11.4         Binding Effect.  This Agreement shall become effective upon
execution by the Borrower and the Lender. 
If this Agreement is not dated or contains any blanks when executed by
the Borrower, the Lender is hereby authorized, without notice to the Borrower,
to date this Agreement as of the date when it was executed by the Borrower, and
to complete any such blanks according to the terms upon which this Agreement is
executed.

11.5         Enforceability.  Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by, unenforceable or invalid under any jurisdiction, such

 48
 

provision shall as to such jurisdiction, be
severable and be ineffective to the extent of such prohibition or invalidity,
without invalidating the remaining provisions of this Agreement or affecting
the validity or enforceability of such provision in any other jurisdiction.

11.6         Survival of Borrower
Representations.  All covenants,
agreements, representations and warranties made by the Borrower herein shall,
notwithstanding any investigation by the Lender, be deemed material and relied
upon by the Lender and shall survive the making and execution of this Agreement
and the Loan Documents and the issuance of the Letters of Credit, and shall be
deemed to be continuing representations and warranties until such time as the
Borrower has fulfilled all of its Obligations to the Lender, Lender’s commitments
hereunder have terminated, and the Lender has been indefeasibly paid in full in
cash.  The Lender, in extending financial
accommodations to the Borrower, is expressly acting and relying on the
aforesaid representations and warranties.

11.7         Extensions of Lender’s
Commitment.  This Agreement shall
secure and govern the terms of (i) any extensions or renewals of the Lender’s
commitment hereunder, (ii) the extension or renewal of any Letter of Credit
issued hereunder, and (iii) any replacement note executed by the Borrower and
accepted by the Lender in its sole and absolute discretion in substitution for
the Promissory Note.

11.8         Time of Essence.  Time is of the essence in making payments of
all amounts due the Lender under this Agreement and in the performance and
observance by the Borrower of each covenant, agreement, provision and term of
this Agreement.

11.9         Release of Claims
Against Lender.  In consideration of
the Lender issuing the Letters of Credit, the Borrower hereby releases and
discharges the Lender of and from any and all claims, harm, injury, and damage
of any and every kind, known or unknown, legal or equitable, which the Borrower
may have against the Lender from the date of their respective first contact
with the Lender until the date of this Agreement, including any claim arising
from any reports (environmental reports, surveys, appraisals, etc.) prepared by
any parties hired or recommended by the Lender. 
The Borrower confirms to Lender that they have reviewed the effect of
this release with competent legal counsel of their choice, or have been
afforded the opportunity to do so, prior to execution of this Agreement and the
Loan Documents and do each acknowledge and agree that the Lender is relying
upon this release in issuing the Letters of Credit for the account of the
Borrower.

11.10       Costs, Fees and Expenses.  The Borrower shall pay or reimburse the
Lender for all reasonable costs, fees and expenses incurred by the Lender or
for which the Lender becomes obligated in connection with the negotiation,
preparation, consummation, collection of the Obligations or enforcement of this
Agreement,  the other Loan Documents and
all other documents provided for herein or delivered or to be delivered
hereunder or in connection herewith (including any amendment, supplement or
waiver to any Loan Document), or during
any workout, restructuring or negotiations in respect thereof, including
reasonable consultants’ fees and attorneys’ fees and time charges of counsel to
the Lender, which shall also include attorneys’ fees and time charges of
attorneys who may be employees of the Lender or any Affiliate of the Lender,
plus costs and expenses of such attorneys or of the Lender; search fees, costs
and expenses; and all taxes payable in connection with this Agreement or the
other Loan

 49
 

Documents, whether or not the transaction
contemplated hereby shall be consummated. 
In furtherance of the foregoing, the Borrower shall pay any and all
stamp and other taxes, UCC search fees, filing fees and other costs and expenses
in connection with the execution and delivery of this Agreement, the Promissory
Note and the other Loan Documents to be delivered hereunder, and agrees to save
and hold the Lender harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such costs
and expenses.  That portion of the
Obligations consisting of costs, expenses or advances to be reimbursed by the
Borrower to the Lender pursuant to this Agreement or the other Loan Documents
which are not paid on or prior to the date hereof shall be payable by the
Borrower to the Lender on demand.  If at
any time or times hereafter the Lender: (a) employs counsel for advice or
other representation (i) with respect to this Agreement or the other Loan
Documents, (ii) to represent the Lender in any litigation, contest,
dispute, suit or proceeding or to commence, defend, or intervene or to take any
other action in or with respect to any litigation, contest, dispute, suit, or
proceeding (whether instituted by the Lender, the Borrower, or any other
Person) in any way or respect relating to this Agreement, the other Loan
Documents or the Borrower’s business or affairs, or (iii) to enforce any
rights of the Lender against the Borrower or any other Person that may be
obligated to the Lender by virtue of this Agreement or the other Loan
Documents; (b) takes any action to protect, collect, sell, liquidate, or
otherwise dispose of any of the Collateral; and/or (c) attempts to or
enforces any of the Lender’s rights or remedies under the Agreement or the
other Loan Documents, the costs and expenses incurred by the Lender in any
manner or way with respect to the foregoing, shall be part of the Obligations,
payable by the Borrower to the Lender on demand.

11.11       Indemnification.  The Borrower agrees to defend (with counsel
satisfactory to the Lender), protect, indemnify, exonerate and hold harmless
each Indemnified Party from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and distributions of any kind or nature (including the disbursements and the
reasonable fees of counsel for each Indemnified Party thereto, which shall also
include, without limitation, reasonable attorneys’ fees and time charges of
attorneys who may be employees of any Indemnified Party), which may be imposed
on, incurred by, or asserted against, any Indemnified Party (whether direct,
indirect or consequential and whether based on any federal, state or local laws
or regulations, including securities laws, Environmental Laws, commercial laws
and regulations, under common law or in equity, or based on contract or
otherwise) in any manner relating to or arising out of this Agreement or any of
the Loan Documents, or any act, event or transaction related or attendant
thereto, the preparation, execution and delivery of this Agreement and the Loan
Documents, including the issuance and management of the Letters of Credit, the
enforcement of the Lender’s rights and remedies under this Agreement, the Loan
Documents, the Promissory Note, any other instruments and documents delivered
hereunder, or under any other agreement between the Borrower and the Lender;
provided, however, that the Borrower shall not have any obligations hereunder
to any Indemnified Party with respect to matters determined by a court of
competent jurisdiction by final and non-appealable judgment to have been  caused by or resulting from the willful
misconduct or gross negligence of such Indemnified Party.  To the extent that the undertaking to
indemnify set forth in the preceding sentence may be unenforceable because it
violates any law or public policy, the Borrower shall satisfy such undertaking
to the maximum extent permitted by applicable law.  Any liability, obligation, loss, damage,
penalty, cost or expense covered by this indemnity shall be paid to each
Indemnified Party on demand, and failing prompt payment,

 50
 

together with interest thereon at the Default
Rate from the date incurred by each Indemnified Party until paid by the
Borrower, shall be added to the Obligations of the Borrower and be secured by
the Collateral.  The provisions of this
Section shall survive the satisfaction and payment of the other Obligations and
the termination of this Agreement.

11.12       Revival and
Reinstatement of Obligations.  If the
incurrence or payment of the Obligations by the Borrower or the transfer to the
Lender of any property should for any reason subsequently be declared to be
void or voidable under any state or federal law relating to creditors’ rights,
including provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (collectively, a “Voidable Transfer”), and if the Lender is required
to repay or restore, in whole or in part, any such Voidable Transfer, or elects
to do so upon the reasonable advice of its counsel, then, as to any such
Voidable Transfer, or the amount thereof that the Lender is required or elects
to repay or restore, and as to all reasonable costs, expenses, and attorneys
fees of the Lender, the Obligations shall automatically shall be revived,
reinstated, and restored and shall exist as though such Voidable Transfer had
never been made.

11.13       Customer Identification
- USA Patriot Act Notice.  The Lender
hereby notifies the Borrower that pursuant to the requirements of the USA
Patriot Act (Title III of Pub. L. 107-56, signed into law October 26, 2001)
(the “Act”), and the Lender’s policies and practices, the Lender is required to
obtain, verify and record certain information and documentation that identifies
the Borrower, which information includes the name and address of the Borrower
and such other information that will allow the Lender to identify the Borrower
in accordance with the Act.

11.14       Rights of Third Parties.  All conditions of the obligations of Borrower
hereunder are imposed solely and exclusively for the benefit of Lender and no
other person shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Lender will refuse to
make advances in the absence of strict compliance with any or all thereof, and
no other person shall, under any circumstances, be deemed to be a beneficiary
of such conditions, any and all of which may be freely waived in whole or in
part by Lender at any time if in its sole discretion it deems it desirable to
do so.  In particular, Lender makes no
representations and assumes no duties or obligations as to third parties concerning
the quality of the construction of the Plant or the absence therefrom of
defects.  In this connection, Borrower
agrees to and shall indemnify Lender from any liability, claims or losses
resulting from the issuance of the Letters of Credit or from the condition of
the Plant whether related to the quality of construction or otherwise and
whether arising during or after the term of this Agreement.  This provision shall survive the repayment of
the Obligations and shall continue in full force and effect so long as the
possibility of any such liability, claims or losses exists.

11.15       Evidence of Satisfaction
of Conditions.  Any condition of this
Agreement which requires the submission of evidence of the existence or
non-existence of a specified fact or facts implies as a condition the existence
or non-existence, as the case may be, of such fact or facts, and Lender shall,
at all times, be free independently to establish to its satisfaction and in its
absolute discretion such existence or non-existence at its sole cost and
expense except as otherwise expressly provided in the Loan Documents.

 51
 

11.16       Assignment.  Borrower may not assign this Agreement or any
of its rights or obligations hereunder without the prior written consent of
Lender.

11.17       Successors and Assigns
Including in Parties.  Whenever in
this Agreement one of the parties hereto is named or referred to, the heirs,
legal representatives, successors and assigns of such parties shall be included
and all covenants and agreements contained in this Agreement by or on behalf of
the Borrower or by or on behalf of the Lender shall bind and inure to the
benefit of their respective heirs, legal representatives, successors and
assigns, whether so expressed or not.

11.18       Headings.  The headings of the sections, paragraphs and
subdivisions of this Agreement are for the convenience of reference only, and
are not to be considered a part hereof and shall not limit or otherwise affect
any of the terms hereof.

11.19       Invalid Provisions to
Affect no Others.  If fulfillment of
any provision hereof, or any transaction related thereto at the time
performance of any such provision shall be due, shall involve transcending the
limit of validity prescribed by law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity; and such clause or
provision shall be deemed invalid as though not herein contained, and the
remainder of this Agreement shall remain operative in full force and effect.

11.20       Number and Gender.  Whenever the singular or plural number,
masculine or feminine or neuter gender is used herein, it shall equally include
the other.

11.21       Amendments.  Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.

11.22       Notices.  Any notices and other communications
permitted or required by the provisions of this Agreement (except for
telephonic notices expressly permitted) shall be in writing and shall be deemed
to have been properly given or served by depositing the same with the United
States Postal Service, or any official successor thereto, designated as
Certified Mail, Return Receipt Requested, bearing adequate postage, or
deposited with reputable private courier or overnight delivery service, and
addressed as hereinafter provided.  Each
such notice shall be effective upon being deposited as aforesaid.  The time period within which a response to
any such notice must be given, however, shall commence to run from the date of
receipt of the notice by the addressee thereof. 
Rejection or other refusal to accept or the inability to deliver because
of changed address of which no notice was given shall be deemed to be receipt
of the notice sent.  By giving to the
other party hereto at least ten (10) days’ notice thereof, either party hereto
shall have the right from time to time to change its address and shall have the
right to specify as its address any other address within the United States of
America.

 52
 

Each notice to Lender
shall be addressed as follows:

First Bank &
Trust

2220 6th Street

P. O. Box 5057

Brookings, SD 57006-5057

Attention:  Letter of Credit Department

Each notice to Borrower
shall be addressed as follows:

Millennium
Ethanol, LLC

300 North Broadway

Marion, South
Dakota 57043

Attention:  CEO

11.23       Governing Law.  Notwithstanding the place of execution of
this instrument, the parties to this instrument have contracted for South
Dakota law to govern this instrument and it is controllingly agreed that this
instrument is made pursuant to and shall be construed and governed by the laws
of the State of South Dakota without regard to the principles of conflicts of
law.

11.24       Participation.  Lender may in its sole and exclusive
discretion issue participations and/or assign all or a portion of its
obligation to issue the Letters of Credit. The Lender may assign the Letters of
Credit and its rights and obligations to another lender or to a Person that the
Lender merges with, is merged into, or who acquires the assets of Lender or
whose assets are acquired by Lender. 
Subject to the confidentiality restrictions in the participation
agreement, Lender may divulge all information received by it from Borrower or
any other source to the Project and to Borrower, to any such participant(s) or
other lenders, and Borrower shall cooperate with Lender, at Lender’s expense,
in satisfying the reasonable requirements of any such participant(s) or other
lenders for consummating such a purchase or participation.

11.25       Consent to Jurisdiction.  The Borrower submits and consents to personal
jurisdiction of the Courts of the State of South Dakota and Courts of the
United States of America sitting in such State for the enforcement of this
instrument and waives any and all personal rights under the laws of any state
or the United States of America to object to jurisdiction in the State of South
Dakota.  Litigation may be commenced in
any state court of general jurisdiction for the State of South Dakota or the
United States District Court located in that state, at the election of the
Lender.  Nothing contained herein shall
prevent Lender from bringing any action against any other party or exercising
any rights against any security given to Lender, or against the Borrower
personally, or against any property of the Borrower, within any other
state.  Commencement of any such action
or proceeding in any other state shall not constitute a waiver of consent to
jurisdiction or of the submission made by the Borrower to personal jurisdiction
within the State of South Dakota.

11.26       Counterparts.  This instrument may be executed in any number
of counterparts with the same effect as if all parties hereto had signed the
same document.  All such counterparts
shall be construed together and shall constitute one instrument, but in making
proof hereof it shall only be necessary to produce one such counterpart.  The signatures to this instrument may

 53
 

be executed on separate pages and when
attached to this instrument shall constitute one complete document.

11.27       Waiver. THE
UNDERSIGNED WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH ANY PARTIES
TO THIS INSTRUMENT ARE INVOLVED DIRECTLY OR INDIRECTLY AND ANY MATTER IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS INSTRUMENT OR THE
RELATIONSHIP ESTABLISHED HEREUNDER, AND WHETHER ARISING OR ASSERTED BEFORE OR
AFTER THE DATE OF THIS INSTRUMENT.

 54
 

IN WITNESS WHEREOF, the
Borrower and the Lender have executed this Letter of Credit Application,
Reimbursement and Security Agreement as of the date first above written.

	
  

  	
  MILLENNIUM ETHANOL, LLC,

  
	
   

  	
  A South Dakota
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FIRST BANK &
  TRUST,

  
	
   

  	
  A South Dakota
  state bank

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 55
 

EXHIBIT A

IRREVOCABLE
STANDBY LETTER OF CREDIT FORMAT

	
  

  	
  Date:

  	
                                          

  	
   

  
	
   

  	
  Letter of Credit
  No.:

  	
                                          

  	
   

  
	
   

  	
  Expiration Date:

  	
                 

  	
   

  
	
                ,
  20     

  	
   

  	
   

  	
   

  

 

Beneficiary:

Gentlemen:

We hereby establish our IRREVOCABLE standby letter
of credit (“Letter of Credit”) in your favor for the account of Millennium
Ethanol, LLC, a South Dakota limited liability company (“Millennium” or “Applicant”),
available at sight on First Bank & Trust, Brookings, South Dakota (the “Bank”),
for any sum or sums not exceeding a total of USD $                                 
(                                                
and no/100’s USD), subject to the terms and conditions set forth herein.

1.             Subject to the terms and conditions contained
herein, the Bank authorizes NorthWestern Services Corporation (“NSC”) to draw
on it at any time or times before the Expiration Date (as defined below), by
its draft (the “Draft”), in the form of Appendix 1 hereto, an amount up to an
aggregate amount of $                                    ,
as set forth on an accompanying certificate (the “Draw Certificate”), in the
form of Appendix 2 hereto.

2.             This Letter of Credit shall expire at the
close of business on                         ,
20       (the “Expiration Date”), unless
extended.

3.             This Letter of Credit is issued in
conjunction with a Natural Gas Distribution Delivery Agreement between NSC and
Millennium dated May 30, 2006 (the “Agreement”), under which Millennium agreed
to transport a minimum quantity of natural gas to its plant at a fixed price
for delivery by NSC through a pipeline constructed by NSC to serve the plant
and the obligations of Millennium under the Agreement.  The terms and conditions of the Agreement are
incorporated herein by reference.

 56
 

4.             Funds under this Letter of Credit are
available to NSC in accordance with and against its Draft and Draw Certificate,
each dated the date of presentation and executed by an officer of NSC,
referring to the number of this Letter of Credit and presented along with the
original Letter of Credit at Bank’s office at 2220 6th Street, Brookings, South
Dakota 57006, during normal banking hours on or prior to the Expiration Date or
any extension thereof.    Within 48 hours
following presentation of the Draft, Draw Certificate and original Letter of
Credit, the funds drawn shall be payable by the Bank to NSC.

5.             This Letter of Credit sets forth in full the
terms of our undertaking, and such undertaking shall not in any way be modified
or amended, without the written consent of the Bank, except as to the
completion of the Draft and Draw Certificates referred to herein.

Except as otherwise expressly stated herein, any
charges or commission in respect to the negotiation of documents under this
Letter of Credit are for Applicant’s account.

Except as otherwise stated herein, this credit is
subject to the Uniform Customs and Practice for Documentary Credits (1993
Revision), International Chamber of Commerce, Publication No. 500.

Approved as issued.

	
  

  	
   

  	
   

  

Authorized Signature

AGREED AND ACCEPTED

this         day of                      ,
20     .

NORTHWESTERN SERVICES CORPORATION

	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Its

  	
   

  	
   

  

 

 57

Appendix 1

DRAFT

Date:                                            

To:          First Bank
& Trust

2220 6th Street

P. O. Box 5057

Brookings, SD 57006-5057

Within 48 hours of
presentation of this Draft, a signed and completed Draw Certificate and the
original Letter of Credit, PAY TO THE ORDER OF NorthWestern Services
Corporation the sum of $                  
under that certain Natural Gas Distribution Delivery Agreement between
NorthWestern Services Corporation. and Millennium Ethanol, L.L.C. dated May 30,
2006.

Drawn under
Irrevocable Standby Letter of Credit No.                     
dated                        ,
20     ..

	
  

  	
  NORTHWESTERN SERVICES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its

  	
   

  	
   

  

Appendix 2

DRAW CERTIFICATE

Letter of Credit No.                   

Date:
                                            

To:          First Bank & Trust

2220 6th Street

P. O. Box 5057

Brookings, SD 57006-5057

The undersigned, a duly authorized officer of NorthWestern Services
Corporation (“NSC”), certifies to First Bank & Trust that:

1.             NSC is making a draw under Irrevocable
Standby Letter of Credit No.           
dated                           ,
20     , with respect to (check the applicable box):

o a failure by Millennium Ethanol, LLC  to
meet the Minimum Annual Obligation for 20       
established under the Natural Gas Distribution Delivery Agreement between NSC
and Millennium Ethanol, LLC
dated May 30, 2006 (the “Agreement”),

o a failure by Millennium Ethanol, LLC  to
meet the Minimum Total Obligation established under the Agreement, or

o the termination of the Agreement by Millennium
Ethanol, LLC  for any reason other than for NSC ‘s refusal
to perform its obligations under the Agreement.

2.             The amount of the Draft accompanying this
Certificate is $                      ,
such sum being (check the applicable box):

o the remaining Minimum Annual Obligation for
20         , or

o the entire outstanding balance of Millennium
Ethanol, LLC’s Minimum Total Obligation
in accordance with the terms of the Agreement.

3.             The amount of the Draft accompanying this
Certificate was computed in accordance with the terms and conditions of the
Agreement and does not exceed, when combined with any prior amount drawn by
NSC, the amount available to be so drawn.

	
  

  	
  NORTHWESTERN SERVICES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its

  	
   

  	
   

  

 

EXHIBIT B

APPLICATION
FOR STANDBY LETTER OF CREDIT

To:          First Bank & Trust

2220 6th Street

P. O. Box 5057

Brookings, SD 57006-5057

Attention:  Letter of Credit Department

Please
issue a standby letter of credit substantially in accordance with this Application
and transmit it to the Beneficiary indicated below.  In issuing the Letter of Credit you are
expressly authorized to make such changes from the terms hereinbelow set forth
as you, in your sole discretion, may deem advisable provided that no such
changes shall vary the principal terms hereof.

Requested Date of
Issuance:                                       ,
20     .

Date of Expiry:                                    ,
20     .

	
  For account of (Applicant):

  	
  In favor of
  (Beneficiary):

  
	
   

  	
   

  
	
   

  	
  Millennium
  Ethanol, LLC

  	
   

  
	
   

  	
  300 North
  Broadway

  	
   

  
	
   

  	
  Marion, SD 57043

  	
   

  
	
   

  	
   

  	
   

  
	
  Attention:   CEO

  	
  Attention:

  
	
  Telephone:

  	
  Fax:

  	
  Telephone:

  	
  Fax:

  
	
   

  	
   

  	
   

  	
   

  
	
  Bank Account #:

  	
   

  
	
  Applicant’s Bank
  (if not First Bank & Trust)

   

   

  	
   

  
					

 

Currency Amount (US Dollars)
$                                                      

Written Amount

	
  o
  Partial Drawings

  	
   

  	
  o
  Permitted

  	
   

  	
  o
  Not Permitted

  

 

Each drawing must be
accompanied by Beneficiary’s signed statement reading as follows:

[To
be based upon requested language from utility providers]

To pay fees/drawings under
the Letter of Credit we authorize you or your correspondent bank to debit our
account number stipulated above.

Important:  The
following individual(s) is/are authorized to waive discrepancies found in presented
documentation, and to be contacted in case of need regarding this transaction.

	
   

  	
   

  	
   

  	
   

  
	
  (Name, Title, and Telephone #)

  	
   

  	
  (Name, Title, and Telephone #)

  

 

This Application is made
subject to the Letter of Credit Application, Reimbursement and Security
Agreement dated December 18, 2006, between the undersigned and First Bank &
Trust, the provisions of which are hereby made applicable to this Application
and the Letter of Credit.

Dated                                                ,
20     .

	
  MILLENNIUM ETHANOL, LLC

  
	
   

  
	
   

  
	
  By

  	
   

  	
   

  
	
  Its

  	
   

  	
   

  

 

SCHEDULE 5.21

DEPOSIT ACCOUNTS

Farmers State Bank -
Checking   Account No. 158643001

Farmers State Bank -
Savings     Account No. 158643010

Goldman Sachs – Escrow in
the name of Farmers State Bank

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