10-KT

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

.  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended ___________________________

or

 X .  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from April 1, 2008 to December 31, 2008

Commission file number 001-32924

______________________

GREEN PLAINS RENEWABLE ENERGY, INC.

(Exact name of registrant as specified in its charter)

Iowa	84-1652107
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
9420 Underwood Ave, Suite 100 Omaha, NE 68114	(402) 884-8700
(Address of principal executive offices, including zip code)	(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:  Common Stock, $.001 par value

Name of exchanges on which registered:  NASDAQ Stock Market

Securities registered pursuant to Section 12(g) of the Act:  None

______________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes . No S

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes  X . No .

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  X .  No .

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  .

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer .      Accelerated filer .      Non-accelerated filer  X .      Smaller reporting company .

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes . No  X .

The aggregate market value of the Company’s voting common stock held by non-affiliates of the registrant as of June 30, 2008 (the last business day of the second quarter), based on the last sale price of the common stock on that date of $6.00, was approximately $34.9 million. For purposes of this calculation, executive officers, directors and holders of 10% or more of the registrant’s common stock are deemed to be affiliates of the registrant.

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As of March 20, 2009, there were 24,903,408 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement for the 2009 Annual Meeting of Shareholders are incorporated by reference in Part III herein. The Company intends to file such Proxy Statement with the Securities and Exchange Commission no later than 120 days after the end of the transition period covered by this report on Form 10-K.

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TABLE OF CONTENTS

		Page
	PART I
Item 1.	Business	4
Item 1A.	Risk Factors	12
Item 1B.	Unresolved Staff Comments	26
Item 2.	Properties	26
Item 3.	Legal Proceedings	27
Item 4.	Submission of Matters to a Vote of Security Holders	27
	Executive Officers of the Registrant	27
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	29
Item 6.	Selected Financial Data	31
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 8.	Financial Statements and Supplementary Data	47
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	47
Item 9A.	Controls and Procedures	47
Item 9B.	Other Information	48
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	49
Item 11.	Executive Compensation	49
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	49
Item 13.	Certain Relationships and Related Transactions, and Director Independence	49
Item 14.	Principal Accounting Fees and Services	49
	PART IV
Item 15.	Exhibits, Financial Statement Schedules	49
Signatures		53

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Cautionary Information Regarding Forward-Looking Statements

This report contains forward-looking statements based on current expectations that involve a number of risks and uncertainties. The Securities and Exchange Commission (“SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. Forward-looking statements generally do not relate strictly to historical or current facts, but rather to plans and objectives for future operations based upon management’s reasonable estimates of future results or trends, and include statements preceded by, followed by, or that include words such as “anticipates,”  “believes,” “continue,” “estimates,” “expects,” “intends,” “outlook,” “plans,” “predicts,” “may,” “could,” “should,” “will,” and words and phrases of s imilar impact, and include, but are not limited to, statements regarding future operating or financial performance, business strategy, business environment, key trends, and benefits of actual or planned acquisitions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements are based upon the current beliefs and expectations of management and are subject to significant risks and uncertainties. The forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Any or all forward-looking statements in this report may turn out to be incorrect. They may be based on inaccurate assumptions or may not account for known or unknown risks and uncertainties. Consequently, no forward-looking statement is guaranteed, and actual future results may vary materially from the results expressed or implied i n our forward-looking statements. The cautionary statements in this report expressly qualify all of our forward-looking statements. In addition, the Company is not obligated, and does not intend, to update any of its forward-looking statements at any time unless an update is required by applicable securities laws. Factors that could cause actual results to differ from those expressed or implied in the forward-looking statements include, but are not limited to, those discussed in Item 1A – Risk Factors of this report. Actual results may differ from projected results due, but not limited, to unforeseen developments.

You are cautioned not to place undue reliance on the forward-looking statements. You should read this report completely and with the understanding that actual future results may be materially different from what we expect. The forward-looking statements specified in this report have been compiled as of the date of this report, are not considered to be exclusive, and should be evaluated with consideration of any changes occurring after the date of this report.

PART I

ITEM 1.  BUSINESS.

References to “we,” “us,” “our,” “Green Plains,” or the “Company” in this report refer to Green Plains Renewable Energy, Inc., an Iowa corporation, and its subsidiaries.

Green Plains was formed in June 2004 to construct and operate dry mill, fuel-grade ethanol production facilities. Ethanol is a renewable, environmentally clean fuel source that is produced at numerous facilities in the United States, mostly in the Midwest. In the U.S., ethanol is produced primarily from corn and then blended with unleaded gasoline in varying percentages. The ethanol industry in the U.S. has grown significantly over the last few years as its use reduces harmful auto emissions, enhances octane ratings of the gasoline with which it is blended, offers consumers a cost-effective choice, and decreases the amount of crude oil the U.S. needs to import from foreign sources. Ethanol is most commonly sold as E10, the 10 percent blend of ethanol for use in all American automobiles. Increasingly, ethanol is also available as E85, a higher percentage ethanol blend for use in flexible fuel vehicles.

To execute our business plan, we entered into financial arrangements to build and operate two ethanol production facilities. Construction of our Shenandoah, IA plant began in April 2006, and operations commenced at the plant in August 2007. Construction of our Superior, IA plant began in August 2006, and operations commenced at the plant in July 2008. Each of these ethanol production facilities has expected production capacity of 55 million gallons per year (“mmgy”) of fuel-grade, denatured ethanol.

As part of our October 2008 merger with VBV and its majority-owned subsidiaries, which is discussed in further detail in Merger and Acquisition Activities below, the Company acquired two additional ethanol production facilities, located in Bluffton, IN and Obion, TN. Each of these ethanol production facilities has expected production capacity of 110 mmgy of fuel-grade, denatured ethanol.

At full capacity, the combined ethanol production of the four facilities is 330 million gallons per year. Processing at full capacity will (1) consume approximately 120 million bushels of corn, (2) produce approximately 1,020,000 tons of by-product known as distillers grains, and (3) produce approximately 960,000 tons of carbon dioxide. Although we are currently involved in research and development efforts surrounding the potential use of carbon dioxide to help produce an algae-based biofuel feedstock, we currently scrub and vent the carbon dioxide produced at the plants because we do not believe there is a viable market for carbon dioxide to justify the installation of the necessary capturing facilities at this time.

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Merger and Acquisition Activities

To add shareholder value, we have expanded our business operations beyond ethanol production to integrate a full-service grain and agronomy business, ethanol marketing services, terminal and distribution assets, and next generation research and development in algae-based biofuels.

Merger with VBV LLC

In May 2008, we entered into definitive merger agreements with VBV and its subsidiaries. At that time, VBV held majority interest in two companies that were constructing ethanol plants. These two companies were Indiana Bio-Energy, LLC (“IBE”) of Bluffton, IN, an Indiana limited liability company which was formed in December 2004; and Ethanol Grain Processors, LLC, (“EGP”) of Obion, TN, a Tennessee limited liability company which was formed in October 2004. Additionally, VBV was developing an ethanol marketing and distribution business at the time of the merger announcement. The merger transaction was completed on October 15, 2008 (the “Merger”). For accounting purposes, the Merger has been accounted for as a reverse merger, which will be discussed in further detail later in this report. Pursuant to the terms of the Merger, equity holders of VBV, IBE and EGP received Company common stock and options totaling 11,139,000 sh ares. Upon closing of the Merger, VBV, IBE and EGP were merged into subsidiaries of the Company. Simultaneously with the closing of the merger, NTR plc (“NTR”), a leading international developer and operator of renewable energy and sustainable waste management projects and majority equity holder of VBV prior to the Merger, through its wholly-owned subsidiaries, invested $60.0 million in Company common stock at a price of $10 per share, or an additional 6.0 million shares (the “Stock Purchase”). With this investment, NTR is our largest shareholder. This additional investment is being used for general corporate purposes and to finance future acquisitions.

Operations commenced at the Bluffton and Obion plants in September 2008 and November 2008, respectively. As previously discussed, the VBV plants are each expected to produce approximately 110 million gallons of ethanol and 350,000 tons of distillers grains annually.

Merger with Great Lakes Cooperative

To complement and enhance our ethanol production facilities, on April 3, 2008, the Company completed its merger with Great Lakes Cooperative (“Great Lakes”), a full-service cooperative with approximately $146 million in fiscal 2007 revenues that specializes in grain, agronomy, feed and petroleum products in northwestern Iowa and southwestern Minnesota. Upon closing the merger with Great Lakes, Green Plains Grain Company LLC, a wholly-owned subsidiary of the Company, assumed Great Lakes’ assets and liabilities, with the exception of certain investments in regional cooperatives that were excluded from the merger. Green Plains Grain has grain storage capacity of approximately 20 million bushels that are used to support our grain merchandising activities, as well as our Superior ethanol plant operations. We believe that incorporating Great Lakes’ businesses into our operations increases efficiencies and reduces commodity price and sup ply risks. Pursuant to the merger agreement, all outstanding Great Lakes common and preferred stock was exchanged for an aggregate of 550,352 shares of our common stock and approximately $12.5 million in cash.

Acquisition of Majority Interest in Blendstar, LLC

On January 20, 2009, which was subsequent to the Company’s year end, we acquired majority interest in Blendstar, LLC, a biofuel terminal operator. The transaction involved a membership interest purchase whereby the Company acquired 51% of Blendstar from Bioverda U.S. Holdings LLC, an affiliate of NTR, our largest shareholder, for $9.0 million. Blendstar operates terminal facilities in Oklahoma City, Little Rock, Nashville, Knoxville, Louisville and Birmingham and has announced commitments to build terminals in two additional cities. Blendstar facilities currently have splash blending and full-load terminal throughput capacity of over 200 million gallons per year.

Renaming of Ethanol Production Subsidiaries

Our ethanol production subsidiaries have been renamed for consistency as follows:

·

Green Plains Bluffton LLC was formerly known as Indiana Bio-Energy, LLC.

·

Green Plains Obion LLC was formerly known as Ethanol Grain Processors, LLC.

·

Green Plains Superior LLC was formerly known as Superior Ethanol, LLC.

·

Green Plains Shenandoah LLC was formerly known as GPRE Shenandoah LLC.

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Description of Dry Mill Ethanol Production Process

Primary Product – Ethanol

Ethanol is a chemical produced by the fermentation of sugars found in grains and other biomass. Ethanol can be produced from a number of different types of grains, such as corn, wheat and sorghum, as well as from agricultural waste products such as rice hulls, cheese whey, potato waste, brewery and beverage wastes and forestry and paper wastes. At present, the majority of ethanol in the U.S. is produced from corn because corn contains large quantities of carbohydrates and is in greater supply than other grains. Such carbohydrates convert into glucose more easily than most other kinds of biomass. Outside the U.S., sugarcane is the primary feedstock used in ethanol production.

Our plants use a dry mill process to produce ethanol and by-products. The corn is received by truck or rail, which is then weighed and unloaded in a receiving building. Storage bins are utilized to inventory grain, which is passed through a scalper to remove rocks and debris prior to processing. Thereafter, the corn is transported to a hammer mill where it is ground into a mash and conveyed into a slurry tank for enzymatic processing. We add water, heat and enzymes to break the ground grain into a fine slurry. The slurry is heated for sterilization and pumped to a liquefaction tank where additional enzymes are added. Next, the grain slurry is pumped into fermenters, where yeast, enzymes, and nutrients are added, to begin a batch fermentation process. A beer column, within the distillation system, separates the alcohol from the spent grain mash. Alcohol is then transported through a rectifier column, a side stripper and a molecular sieve system where it is dehydrated to 200 proof. The 200 proof alcohol is then pumped to a holding tank and then blended with approximately two percent denaturant (usually natural gasoline) as it is pumped into finished product storage tanks.

By-Products

The spent grain mash from the beer column is pumped into one of several decanter type centrifuges for dewatering. The water (“thin stillage”) is pumped from the centrifuges and then to an evaporator where it is dried into a thick syrup. The solids (“wet cake”) that exit the centrifuge are conveyed to the dryer system. The wet cake is dried at varying degrees, resulting in the production of distillers grains. Syrup might be reapplied to the wet cake prior to drying, providing nutrients if the distillers grains are to be used as animal feed. Under certain circumstances, the syrup is independently marketed as a by-product. Distillers grains, the principal by-product of the ethanol production process, are principally used as high-protein, high-energy animal fodder and feed supplements marketed to the dairy, beef, swine and poultry industries. Distillers grains have alternative uses as burning fuel, fertilizer and weed inhibitors.

Dry mill ethanol processing potentially creates three forms of distillers grains, depending on the number of times the solids are passed through the dryer system: Wet Distillers Grains (“WDG”), Modified Wet Distillers Grains (“MWDG”) and Dried Distillers Grains (“DDG”). WDG is processed wet cake that contains approximately 65% to 70% moisture. WDG have a shelf life of approximately three days and can be sold only to dairies or feedlots within the immediate vicinity of an ethanol plant. MWDG, which have been dried further to approximately 50% to 55% moisture, have a slightly longer shelf life of approximately three weeks and are marketed to regional dairies and feedlots. DDG, which have been dried more extensively to approximately 10% to 12% moisture, have an almost indefinite shelf life and may be stored, sold and shipped to any market regardless of its proximity to an ethanol plant. DDG are primarily marketed to domestic and international beef and poultry industries.

The thick syrup is also a marketable by-product for use as an animal feed supplement or as a base for further refining and processing. In particular, corn oil can be extracted from the thick syrup for production of biodiesel and other biofuel products.

Thermal Oxidizer

Ethanol plants such as ours may produce odors in the production of ethanol and its primary by-product, distillers grains, which some people find to be unpleasant. We employ thermal oxidizer emissions systems to reduce any unpleasant odors caused by the ethanol and distillers grains manufacturing process.

Corn Feedstock Supply

Our plants use corn as feedstock in the dry mill process. Our 55 million gallon plants each process approximately 20 million bushels of corn per year, or 54,800 bushels per day. At our 110 million gallon capacity plants, 40 million bushels of corn will be consumed on an annual basis, which equates to 109,600 bushels per day at each plant. Each bushel of corn produces approximately 2.8 gallons of denatured ethanol and 17 pounds of DDG. Our corn supply is obtained primarily from local markets. However, each of our plants is also situated on rail lines that we can use to receive corn from other regions of the country if local corn supplies are insufficient.

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The price and availability of corn are subject to significant fluctuations depending upon a number of factors that affect commodity prices in general, including crop conditions, weather, governmental programs and foreign purchases. Because the market price of ethanol is not directly related to corn prices, ethanol producers are generally not able to compensate for increases in the cost of corn feedstock through adjustments in prices charged for their ethanol. We therefore anticipate that our plants’ profitability may be negatively impacted during periods of high corn prices.

We acquired Essex Elevator, Inc. in September 2007 to receive and store corn in support of our Shenandoah ethanol plant. The elevator is located approximately five miles northeast of the Shenandoah plant on the same rail line we use to transport products from our plant. In April 2008, we closed on our merger with Great Lakes Cooperative which augments the feedstock procurement at the Superior ethanol plant. We believe the integration of elevators and grain businesses into our operations helps secure our supply of corn at lower prices.  

Green Plains Bluffton has contracted with Cargill Incorporated, through its AgHorizons Business Unit (“Cargill”), for all of its corn supplies. The contract runs for five consecutive years beginning in September 2008. Cargill will supply all of our corn requirements for ethanol production in such amounts and for delivery at such times as we may designate, subject to and in accordance with the terms and conditions of the agreement. Our Obion plant has entered into a sourcing agreement with Central States Enterprises, Inc. for its corn needs over and above that sourced locally and by Obion Grain Co., who is our exclusive supplier for corn obtained in Obion County, TN and the seven contiguous counties in Tennessee and Kentucky.

At our Shenandoah and Superior plants, we maintain relationships with local farmers, grain elevators and/or cooperatives to complement our grain origination programs. Most farmers in the areas where our plants are located have their own dry storage facilities, which allow us to purchase much of the corn needed to supply the plants directly from farmers throughout the year. We became licensed as an Iowa Grain Dealer in the fall of 2006, which allows us to contract to purchase Iowa grains. We purchase and sell futures contracts and options as a hedge in an effort to better manage margins. We also utilize cash and forward fixed-price contracts with grain producers and elevators for the physical delivery of corn to our plants.

Ethanol Markets

Ethanol has important applications as a gasoline extender and octane enhancer. Ethanol is a primary fuel that can be used in blended gasoline in quantities as high as 85% (E85) in flexible fuel vehicles. However, ethanol can also be used as a high quality octane enhancer and as an oxygenate capable of reducing air pollution and improving automobile performance. Historically, the ethanol industry has been dependent on economic incentives. However, the need for such incentives may diminish as the acceptance of ethanol as a primary fuel and as a fuel extender continues to increase.

Ethanol has replaced methyl tert-butyl ether (“MTBE”) as the most popular oxygenate used in domestic gasoline markets. In the U.S., ethanol is typically blended with gasoline at a rate of 10%. Most American automobiles can operate on 10% blends without modification. Late model cars can often run on significantly higher percentage blends. Ethanol use has grown consistently year over year from a concentration in high metropolitan areas to acceptance in less densely populated areas. The metropolitan markets represent the need for ethanol as the preferred oxygenate to be blended with RFG gasoline to help reduce Ozone contamination. The migration of ethanol as a blending component in the less densely populated, non-urban markets is partly a function of the renewable fuel standard (“RFS”) mandate, but also a function of the competitive price nature of ethanol to gasoline. Ethanol blenders in these new markets have realized the economic incen tive to be blending ethanol and have expedited the introduction into these market places. Ethanol blenders are generally engaged in the wholesale distribution of gasoline and other refined petroleum products. Flexible-fuel vehicles are becoming more common. We believe that the use of higher blends (up to E85) will continue to grow in the future. The proliferation of “blender pumps” across the nation will help accommodate these higher blends. At present, blend dispensers are not widely dispersed and flexible-fuel model vehicles are limited. However, as consumer acceptance increases, we expect this to have a significant impact on national ethanol markets. Additionally, Growth Energy, an ethanol industry trade organization, has requested a waiver from the Environmental Protection Agency (“EPA”) to increase the amount of ethanol blended into gasoline from the 10 percent blend up to a 15 percent blend (E15). We believe such a waiver, if granted, would have a positive and material impact on the business.

We market our products to many different customers on a local, regional and national basis. Local markets are, of course, the easiest to service because of their close proximity to our facilities. However, to achieve the best prices available, the majority of our ethanol is sold to regional and national markets. These markets are serviced by truck and rail. Each of our plants is designed with unit-train load out capabilities and access to railroad mainlines.

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Federal Ethanol Programs

Ethanol was favorably affected by the 1990 amendments to the Clean Air Act. In particular, the Federal Oxygen Program, which became effective on November 1, 1992, and the Reformulated Gasoline Program, which became effective January 1, 1995, have had a profound impact on the ethanol industry. The Federal Oxygen Program requires the sale of oxygenated motor fuels during the winter months in certain major metropolitan areas to reduce carbon monoxide pollution. The Reformulated Gasoline Program requires the sale of reformulated gasoline in nine major urban areas to reduce pollutants, including those that contribute to ground level ozone.

The use of ethanol as an oxygenate has been aided by federal tax policy. The Energy Tax Act of 1978 exempted ethanol blended gasoline from the federal gas tax as a means of stimulating the development of a domestic ethanol industry and mitigating the country’s dependence on foreign oil. The American Jobs Creation Act of 2004 created the Volumetric Ethanol Excise Tax Credit (“VEETC” or as commonly referred to, the “blender’s credit”). VEETC was established to replace the partial tax exemption ethanol-blended fuel received from the federal excise tax on gasoline. Under VEETC, the tax incentive was shifted from a partial exemption from the federal excise tax to a tax credit based on the volume of ethanol blended with gasoline. VEETC provides companies that blend ethanol into retail grades with a tax credit to blend ethanol with gasoline, totaling $0.45 per gallon of pure ethanol, or approximately 4.5 cents per gal lon for E10 and $0.38 per gallon on E85. VEETC provides the tax incentive through December 31, 2010.   

The Energy Policy Act of 2005 (H.R. 6) essentially eliminated the use of MTBE as an oxygenate. The bill mandated that at least 7.5 billion gallons of ethanol were to be used annually within the United States by the year 2012. It also gave “small ethanol producers” producing less than 60 million gallons of ethanol per year a 10 cent per gallon federal tax credit on the first 15 million gallons produced on an annual basis.

On December 19, 2007, the Energy Independence and Security Act of 2007 (the “Energy Act of 2007”) was enacted. The Energy Act of 2007 mandated certain levels for renewable fuels, known as the renewable fuel standard. The RFS identified two different categories of renewable fuels: conventional biofuel and advanced biofuel. Corn-based ethanol is considered conventional biofuel, which will be subject to an RFS level of 10.5 billion gallons per year in 2009, increasing to 15.0 billion gallons per year by 2015. Advanced biofuel includes ethanol derived from cellulose, hemicellulose or other non-corn starch sources, biodiesel, and other fuels derived from non-corn starch sources. Advanced biofuel RFS levels are set to reach 21.0 billion gallons per year, resulting in a total RFS from conventional and advanced biofuels of at least 36.0 billion gallons per year, by 2022.  

Beginning with the Energy Policy Act of 2005, energy independence has been a priority for federal lawmakers. Volatile petroleum prices, coupled with continued trouble in the Middle East, has led to policies, incentives and subsidies intended to reduce oil imports and create domestic capacity for producing alternatives to foreign oil.

To encourage growth in domestic production, federal policy has insulated the domestic ethanol industry from foreign competition, particularly from competition from Brazilian sugarcane ethanol. There is a $0.54 per gallon tariff on all imported ethanol. Legislative proposals have been introduced to eliminate the duty, citing as justification recent increases in food prices and the importance of Latin American agricultural development. However, as long as the duty remains in place, ethanol imports are not likely to depress domestic market prices significantly.

Changes in Corporate Average Fuel Economy (“CAFE”) standards have also benefited the ethanol industry by encouraging use of E85 fuel products. CAFE provides an effective 54% efficiency bonus to flexible-fuel vehicles running on E85. This variance encourages auto manufacturers to build more flexible-fuel models, particularly in trucks and sport utility vehicles that are otherwise unlikely to meet CAFE standards.

Utilities

The production of ethanol requires significant amounts of electricity and natural gas. Water supply and water quality are also important considerations.

Natural Gas

Ethanol plants produce process steam from their own boiler systems and dry the distillers grains by-product via a direct gas-fired dryer. Depending on certain production parameters, we believe our ethanol plants will use approximately 25,000 to 35,000 British thermal units (Btus) of natural gas per gallon of production. The price of natural gas is volatile; therefore we use hedging strategies to mitigate increases in gas prices. We have hired U.S. Energy Services, Inc. to assist us in procuring and hedging natural gas.

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We have entered into service agreements with Trunkline Gas Company, LLC (a division of Panhandle Energy) to deliver the natural gas required by the Obion plant for a ten-year term. We have entered into service agreements with Northern Indiana Public Service (“NIPSCO”) to deliver the natural gas required by the Bluffton plant for a three-year term. We have entered into service agreements with Natural Gas Pipeline of America (“NGPL”), a division of Kinder Morgan, and with MidAmerican Energy to deliver gas to the Shenandoah plant. The term of the NGPL agreement is extended annually. At our Superior plant, we have entered into a service agreement with Northern Natural Gas Company (“NNG”) for a ten-year term.

We purchase natural gas from the best possible sources at any given time and pay tariff fees to Trunkline, NIPSCO, NGPL, MidAmerican and NNG for transporting the gas through their pipelines to our plants.

Electricity

Each of our 55 million gallon plants require between 34 and 40 million kilowatt hours of electricity per year, while our 110 million gallon plants use between 61 and 77 million kilowatt hours per year. We have entered into agreements with MidAmerican Energy concerning the purchase of electricity for the Shenandoah plant. In Superior, we have entered into agreements with Iowa Lakes Electrical Cooperative to supply electricity to the facility. Our Obion plant purchases its electricity from Gibson Electric Company under a multi-year agreement. At our Bluffton facility, electricity is purchased from Bluffton Utilities, the local municipal electrical utility.

Water

Each of our plants requires a significant supply of water. The water requirements for our 55 mmgy plants range from approximately 400 to 800 gallons per minute, while our 110 mmgy plants consume 900 to 1,200 gallons per minute. Much of the water used in an ethanol plant is recycled back into the process. The plants require boiler makeup water and cooling tower water. Boiler makeup water is treated on-site to minimize minerals and substances that would harm the boiler. Recycled process water cannot be used for this purpose. Cooling tower water is deemed non-contact water (it does not come in contact with the mash) and, therefore, can be regenerated back into the cooling tower process.

We are using “grey water,” which is discharge water from the local municipal water treatment facility, at the Shenandoah plant for the cooling tower. The City of Shenandoah has agreed to provide us this water for the cost of pumping the water from their treatment plant to our site. It is anticipated that this water will comprise about two thirds of the water that we will use at this plant. We also purchase the potable water, which is needed for the fermentation process itself (water that comes into contact with the mash) and for other requirements of the facility, from the City of Shenandoah.   

At the Superior site, two onsite wells provide the water needed to operate the plant. The Superior plant operates a filtration system to purify the well water that is utilized for its operations.  

Although each of our 110 mmgy plants expects to satisfy the majority of its water requirements from wells located on the respective properties, each anticipates that it will obtain potable water for certain processes from local municipal water sources at prevailing rates. Each facility operates a filtration system to purify the well water that is utilized for its operations.  

Our Primary Competition

According to the Renewable Fuels Association, as of November 2008, there were 34 operational ethanol plants in Iowa, with an additional three ethanol plants under construction. The plants are concentrated, for the most part, in the northern and central regions of the state where a majority of the corn is produced. Green Plains Grain, which was acquired in April 2008, provides our Superior ethanol plant an integrated source of corn for ethanol production in an otherwise competitive market. This allows the plant to source corn directly from local producers who are customers of Green Plains Grain and at times provides a competitive advantage over other local ethanol producers. As of November 2008, the state of Indiana had ten operating ethanol plants with one under construction while the state of Tennessee had only two operational ethanol production facilities with one under construction. Competition for corn supply from other ethanol plants and other corn c onsumers exists in all areas and regions in which our plants operate.

We will also be in direct competition with numerous other ethanol producers located throughout the United States, many of whom have much greater resources. According to information obtained from the Renewable Fuel Association as of November 2008, there were 180 producing ethanol plants/companies within the United States, capable of producing 11.1 billion gallons of ethanol annually. As of that date, 21 new plants were under construction and two of the currently operating plants were expanding their capacity. Once completed, the new plants under construction and in various stages of expansion will be able to produce an additional 2.3 billion gallons per year. As a result, we believe that by the end of 2009, U.S. ethanol production capacity will be approximately 13.4 billion gallons on an annual basis. Therefore, we expect that our plants will compete with many other ethanol producers and we anticipate that such competition will be intense.

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Even with news of expansion and increased production, there are many ethanol companies that are facing shutdowns or foreclosure due to the unstable nature of the economy. Large ethanol companies are reducing production because of compressed margins and limited liquidity. VeraSun Energy Corporation, the second largest ethanol producer in the U.S. and currently operating under bankruptcy protection, has shut down 12 of its 16 ethanol production facilities. Several other plants have filed for bankruptcy protection. The Company believes these developments may affect supply and demand of ethanol, corn and distillers grains.  Bankruptcy filings and plant closures may also affect the pace of industry consolidation, which may provide additional opportunities for growth.

Proximity of other ethanol plants has increased competition for the supply of corn feedstock, which may cause higher prices for the corn we consume in our ethanol production. Our acquisitions of Green Plains Grain and the Essex grain elevator have helped our Iowa production facilities have a supply-side partner in the procurement of corn. In 2008, in addition to our production, the largest ethanol producers in the U.S. included Archer Daniels Midland, POET, VeraSun Energy Corporation and Aventine Renewable Energy Holdings, Inc.

We also face competition from foreign producers of ethanol and such competition may increase significantly in the future. Large international companies with much greater resources than ours have developed, or are developing, increased foreign ethanol production capacities. In 2006, the U.S. surpassed Brazil in the production of ethanol and became the world’s largest ethanol producer. Brazil is the world’s second largest ethanol producer. Brazil makes ethanol primarily from sugarcane for significantly less than what it costs to make ethanol from corn. This is due primarily to the fact that sugarcane does not need to go through the extensive cooking process to convert the feedstock to sugar. Although the U.S. has placed a tariff on imported ethanol, Brazil still markets significant amounts of ethanol in the U.S.

Competition from Alternative Feedstocks and Fuel Products

Alternative fuels, gasoline oxygenates and ethanol production methods are continually under development by ethanol and oil companies. New products or methods of ethanol production developed could provide competitors with advantages and harm our business.

Ethanol production technologies continue to change. Advances and changes in the technology of ethanol production are expected to occur primarily in the area of ethanol made from cellulose obtained from other sources of biomass such as switchgrass or fast growing poplar trees. If significant advances were made in the area of cellulosic ethanol production, such advances could make the current ethanol production technology that we use at our plants less desirable or even obsolete. Our plants are designed as single-feedstock facilities. There is limited ability to adapt the plants to a different feedstock or process system without substantial reinvestment and retooling. Additionally, our plants are strategically located in high-yield, low-cost corn production areas. At present, there is limited supply of alternative feedstocks near our facilities.  

Sales and Marketing

There is limited seasonality, if any, to the ethanol production, marketing and distribution businesses.

Ethanol Marketing Services

The Company markets ethanol in different geographic locations around the U.S. and has built an in-house, fee-based marketing business that provides ethanol marketing services to other producers in the ethanol industry.

Initially, Green Plains Shenandoah and Green Plains Superior had contracted with RPMG, Inc. (“RPMG”), an independent marketer, to purchase all of the ethanol produced at our Iowa plants. In September 2008, we terminated our ethanol marketing contract with respect to the Shenandoah plant. In January 2009, our ethanol marketing contract for the Superior plant terminated. We brought ethanol marketing and distribution in-house for both Shenandoah and Superior.

Green Plains Bluffton and Green Plains Obion entered into ethanol marketing agreements with Aventine Renewable Energy, Inc. (“Aventine”) for the sale of all of the ethanol the respective plants produced. Under the agreements, we sold our ethanol production exclusively to Aventine at a price per gallon based on a market price at the time of sale, less certain marketing, storage, and transportation costs, as well as a profit margin for each gallon sold. In February 2009, the Aventine agreements terminated and a settlement was negotiated with respect to the agreements and related matters. We brought ethanol marketing and distribution in-house for both Bluffton and Obion.

Both RPMG and Aventine had entered into lease arrangements to secure sufficient availability of railcars to ship the ethanol produced at the respective plants with which they had contracted. Green Plains Superior, Green Plains Bluffton and Green Plains Obion have now assumed the various railcar leases.

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Green Plains Trade Group LLC (“Green Plains Trade”), a wholly-owned subsidiary of the Company, is now responsible for the sales, marketing and distribution of all ethanol produced at our four production facilities. Green Plains Trade also provides ethanol marketing services to third-party ethanol producers with expected operating capacity of 305 million gallons per year. This ethanol is marketed in local, regional and national markets under short-term sales agreements with integrated energy companies, jobbers, retailers, traders and resellers. Under these agreements, ethanol is priced under fixed and indexed pricing arrangements. Our plan is to selectively expand our third-party ethanol marketing operations.  

Distillers Grains

The market for the distillers grains by-product generally consists of local markets for DDG, WDG and WMDG, and national markets for DDG. If all of our distillers grains were marketed in the form of DDG, we expect that our ethanol plants would produce approximately 1,020,000 tons of distillers grains annually. In addition, the market can be segmented by geographic region and livestock industry. The bulk of the current demand is for DDG delivered to geographic regions without significant local corn or ethanol production.

Green Plains Trade markets the distillers grains for our Shenandoah, Bluffton and Obion facilities. For our Superior facility, approximately two-thirds of the plant’s total distillers grains production is DDG, which is marketed by CHS, Inc. to the beef, dairy, swine, and poultry markets, along with various rail markets. The remaining one-third of our distillers grains production is marketed by Green Plains Trade in the form of WDG and syrup. The CHS marketing agreement for our Superior plant is set to expire in July 2009.

Most of the Shenandoah distillers grains are shipped in the form of MWDG and sold into the Iowa and Nebraska feedlot markets. The remainder is shipped as DDG into the Kansas feedlot and Arkansas poultry markets, as well as Texas and west coast rail markets. The eastern U.S. is a very important market for our Bluffton and Obion plants. The Bluffton plant ships distillers grains by truck to local dairy and beef operations, while our Obion plant ships distillers grains by truck to local dairy, beef and poultry operations. Also, with the proximity of Obion to the Mississippi River, at certain times of the year, the Obion plant will truck product to the Mississippi River to be loaded on a barge destined for export markets through the New Orleans export corridor. We also ship by railcars from both the Obion and Bluffton plants into Eastern and Southeastern feed mill, poultry and dairy operations, as well as to domestic trade companies. Access to these markets a llows us to move product into the market that provides the highest equity return to these plants.

Transportation and Delivery

The use of truck and rail allows the plants to quickly move large quantities of ethanol to the markets that provide the greatest return. Deliveries to the majority of the local markets, within 150 miles of the plants, are generally transported by truck, and deliveries to more distant markets are shipped by rail using major U.S. rail carriers.

Our market strategy includes shipping a substantial amount of distiller grains as DDG to regional and national markets by rail. We also move DDG to market from Obion by barge to ports down the Mississippi River from loading facilities in Kentucky and Tennessee.

Each of our plants is designed with unit-train load out capabilities and access to railroad mainlines. To meet the challenge of marketing ethanol and distillers grains to diverse market segments, each of our plants have extensive rail siding capable of handling more than 150 railcars at their production facilities. At the Bluffton, Obion and Superior locations, we built a large set of loop tracks, which enables us to load unit trains of both ethanol and DDGS. Our Bluffton plant has two spurs connecting the site’s rail loop to the Norfolk Southern railroad, which lies directly adjacent to the facility. Our Obion plant has a spur connecting the site’s rail loop to the Canadian National railroad, which lies adjacent to the facility. Our Superior plant lies adjacent to the rail lines of the Union Pacific railroad. A spur of the Burlington Northern Santa Fe railroad runs adjacent to our plant in Shenandoah, which allows us to move and store railcars at the site. These rail lines allow us to sell our products to various regional and national markets. The rail providers for our ethanol production facilities can switch cars to most of the other major railroads, allowing the plants to easily ship ethanol and distillers grain throughout the U.S.

Agribusiness Operations

Green Plains Grain is a grain and farm supply business, which operates four lines of business: bulk grain, agronomy, livestock feed and petroleum. It has facilities in seven communities in Northwest Iowa near our Superior ethanol plant.

Green Plains Grain buys bulk grain, primarily corn, soybeans and oats from area producers and provides grain drying and storage services to those producers. The grain is then sold to grain processing companies and area livestock producers. Green Plains Grain sells diesel, soydiesel, gasoline (including E10, E20, E30, E50 and E85 blends) and propane, primarily to farmers and consumers who buy at retail. We also sell feed to area farmers and integrators for the production of swine, cattle and poultry in the area. Green Plains Grain has agronomists on staff who consult with producers; sell anhydrous ammonia, dry and liquid agricultural nutrients, and agricultural inputs (nutrients, chemicals, seed and supplies); and provide application services to area producers.

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Seasonality is present within our agribusiness operations. The spring planting (fertilizer, seed, crop protection products, and fuel) and fall harvest (fuel, grain receipts, and grain drying and storage) periods have the largest seasonal impact, directly impacting the quarterly operating results of Green Plains Grain. This seasonality generally results in higher revenues and stronger financial results during the second and fourth quarters while the financial results of the first and third quarters generally will reflect periods of lower activity.

Segment Information

With the closing of the Merger, we began to review our operations in three separate operating segments. These segments are: (1) production of ethanol and related by-products (which we collectively refer to as “Ethanol Production”), (2) grain warehousing and marketing, as well as sales and related services of agronomy and petroleum products (which we collectively refer to as “Agribusiness”) and (3) marketing and distribution of Company-produced and third-party ethanol and distillers grains (which we refer to as “Marketing and Distribution”).

Financial information related to our business segments is included Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report and in the notes to the consolidated financial statements included elsewhere in this report.

Employees

As of December 31, 2008, we had 308 full-time, part-time and temporary or seasonal employees. At that date, we employed 30 people in Omaha, 98 at Green Plains Grain and the remainder at our four ethanol production facilities. Our ethanol plants and agribusiness facilities are in rural areas with low unemployment. There is no assurance that we will be successful in attracting and retaining qualified personnel in these locations at a reasonable cost.

We have and intend to continue to enter into written confidentiality and assignment agreements with our officers and employees. Among other things, these agreements require such officers and employees to keep strictly confidential all proprietary information developed or used by us in the course of our business.

Available Information

Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act) are available free of charge on our website at www.gpreinc.com as soon as reasonably practicable after we file or furnish such information electronically with the SEC. Also available on our website in our corporate governance section are the charters of our audit, compensation, and nominating committees, and a copy of our code of conduct and ethics that applies to our directors, officers and other employees, including our Chief Executive Officer and all senior financial officers. The information found on our website is not part of this or any other report we file with or furnish to the SEC.

ITEM 1A.  RISK FACTORS.

We operate in an evolving industry that presents numerous risks. Many of these risks are beyond our control and are driven by factors that often cannot be predicted. Prospective purchasers of our securities should carefully consider the risk factors set forth below, as well as the other information appearing in this report, before making any investment in our securities. If any of the risks described below or in the documents incorporated by reference in this Form 10-K actually occur, the respective business, financial results, financial conditions of the Company and the stock price of the Company could be materially adversely affected.  These risk factors should be considered in conjunction with the other information included in this Form 10-K.

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Risks Related to the Company

Our business success is dependent on our ability to attract and retain key personnel.

Our ability to operate our business and implement our strategies effectively depends, in part, on the efforts of our executive officers and other key personnel. Our executive officers have developed expertise in ethanol and related industries, and they have hired qualified managers and key personnel to operate our plants, our grain business, and our marketing and distribution business. However, they have limited experience in managing a vertically-integrated ethanol company. We are evaluating and continuing to recruit for the areas of expertise that we need to facilitate management of a large, complex ethanol company. There is no assurance that we will be successful in attracting or retaining such individuals because of the limited number of individuals with expertise in this area and a competitive market with many new plants in operation and several under development. The inability to retain our executive officers, managers or other key personnel, or rec ruit qualified replacements, may negatively impact us by impairing our ability to operate efficiently or execute our growth strategies.

We have limited operating histories in the ethanol industry.

We were formed in June of 2004 and our first ethanol plant, located in Shenandoah, IA, began operations in August 2007. Our other ethanol plants, located in Superior, IA, Bluffton, IN and Obion, TN commenced operations in the third, third and fourth quarters of calendar 2008, respectively. Neither we nor any of our subsidiaries have any other history of operations as ethanol producers or grain business operators. Our new and proposed operations are subject to all the risks inherent in the establishment of new business enterprises. Even though our management team has substantial experience, with much of it in ethanol, other energy-related businesses and grain operations, there is no assurance that we will be successful in our efforts to operate our ethanol facilities. Even if we successfully meet these objectives, there is no assurance that we will be able to market the ethanol and distillers grains produced or operate the plants profitably.

We have a history of operating losses under reverse merger accounting rules and may never achieve profitable operations.

As a result of reverse merger accounting, VBV was considered the acquiring entity for financial statement purposes. At the time of the merger, VBV had an accumulated deficit. Although the accumulated deficit originated during the period prior to initial operations when VBV was a development stage company, the Company has generated a net loss since that time. No assurance can be given that we will be able to operate profitably in the future.

In addition, since the Merger occurred toward the end of our fiscal year and involved complex legal and accounting issues, we performed a tentative allocation of the purchase price using preliminary estimates of the values of the assets and liabilities acquired. We have engaged an expert to assist in the determination of the purchase price allocation. We believe the final allocation will be determined during 2009 with prospective adjustments recorded to our financial statements at that time, if necessary. The true-up of the purchase price allocation could result in gains or losses recognized in our consolidated financial statements in future periods.

We may fail to realize all of the anticipated benefits of the merger with VBV.

In order to realize the anticipated benefits and cost savings of the Merger, we combined our businesses with those of VBV and its subsidiaries. If we are not able to achieve the objectives of the Merger, the anticipated benefits and cost savings may not be realized fully, or at all, or may take longer to realize than expected. It is possible that the integration process could result in the loss of key employees, disruption of the Company’s ongoing businesses, or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with clients, customers and employees. Integration efforts, including diversion of management’s attention and resources, could have an adverse effect on our results of operations during and following this transition period.

If we are unable to manage growth profitably, our business and financial results could suffer.

Our future financial results will depend in part on our ability to profitably manage our core businesses, including any growth that we may be able to achieve. We will need to maintain existing customers and attract new customers, recruit, train, retain and effectively manage employees, as well as expand operations, customer support and financial control systems. If we are unable to manage our businesses profitably, including any growth that we may be able to achieve, our business and financial results could suffer.

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If our cash flow from operations is insufficient to service our indebtedness, then the value of our stock could be significantly reduced and our business may fail.

Our ability to repay current and anticipated future indebtedness will depend on our financial and operating performance and on the successful implementation of our business strategies. Our financial and operational performance will depend on numerous factors including prevailing economic conditions, volatile commodity prices, and financial, business and other factors beyond our control. If we cannot pay our debt service, we may be forced to reduce or delay capital expenditures, sell assets, restructure our indebtedness or seek additional capital. If we are unable to restructure our indebtedness or raise funds through sales of assets, equity or otherwise, our ability to operate could be harmed and the value of our stock could be significantly reduced.

Our lenders hold security interests in the respective subsidiary assets upon which they have provided financing, including their property and plants, which means that our shareholders would be subordinate to such lenders in the event of a liquidation of our assets.

If we fail to make debt service payments or if we otherwise default under our loan agreements, our lenders will have the right to repossess the secured assets. Such action would end our ability to continue operations and your rights as a shareholder upon a liquidation of our business would be inferior to the rights of our lenders and other creditors. In the event of our insolvency, liquidation, dissolution or other winding up of affairs, all of our indebtedness must be paid in full before any payment is made to the holders of our common stock. In such event, there is no assurance that there would be any remaining funds after the payment of all of our indebtedness for any distribution to shareholders.

Distressed industry conditions may severely constrain our ability to access incremental debt financing.

Ethanol producers have faced significant distress recently, culminating with several bankruptcy filings by various companies. The capital markets experienced volatility and disruption during late 2008 and early 2009. As a result of these conditions, securing incremental credit commitments from lenders and refinancing existing credit facilities is difficult. Although construction of our plants, along with anticipated levels of required working capital, were funded under long-term credit facilities and we believe we have sufficient liquidity to operate our businesses, increases in liquidity requirements could occur due to, for example, increased commodity prices. Also, our debt facilities have ongoing payment requirements which we expect to meet from our operating cash flow. Our operating cash flow is dependent on our ability to profitably operate our businesses and overall commodity market conditions for corn, ethanol, distillers grains and natural gas. In addition, we may need to raise additional debt financing to fund growth of our businesses. In this market environment, we have limited access to incremental debt financing. This could cause us to defer or cancel growth projects, reduce our business activity or, if we are unable to meet our debt repayment schedules, cause a default in our existing debt agreements. These events could have a materially adverse effect on our operations and financial position.

Casualty losses may occur for which we have not secured adequate insurance.

We have acquired insurance that we believe to be adequate to prevent loss from foreseeable risks. However, events occur for which no insurance is available or for which insurance is not available on terms that are acceptable to us. Loss from such an event, such as, but not limited to, earthquake, tornados, war, riot, terrorism or other risks, may not be insured and such a loss may have a material adverse effect on our operations, cash flows and financial performance.

Our Obion plant is located within a recognized seismic zone. The design of this facility has been modified to fortify it to meet structural requirements for that region of the country. We have also obtained additional insurance coverage specific to earthquake risk for this plant. However, there is no assurance that this facility would remain in operation if a seismic event were to occur.

Disruption or difficulties with our information technology could impair our ability to operate.

Our business depends on the effective and efficient use of information technology. A disruption or failure of these systems could cause system interruptions, delays in production and a loss of critical data that could severely affect our ability to conduct normal business operations.

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We are subject to financial reporting and other requirements, for which our accounting and other management systems and resources may not be adequately prepared. Any failure to maintain effective internal controls could have a material adverse effect on our business, results of operations and financial condition.

We are subject to reporting and other obligations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Section 404 requires annual management assessment of the effectiveness of a company’s internal controls over financial reporting and a report by its independent registered public accounting firm addressing the effectiveness of our internal controls over financial reporting. These reporting and other obligations place significant demands on our management, administrative, operational, internal audit and accounting resources. If we are unable to meet these demands in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to us could be impaired.

In the past, we identified and reported a material weakness in our internal controls over financial reporting, which we have remediated. A “material weakness” is a deficiency, or a combination of control deficiencies, resulting in a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected. Any failure to remediate any material weaknesses or to implement new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations. As discussed in Item 9A – Controls and Procedures of this report, management did not perform an assessment of internal controls over financial reporting at December 31, 2008. We cannot provide assurance that management and/or our independent registered public accounting firm will be able to provide an assessment indicating effective operation of internal controls over financial reporting in 200 9. In addition, we cannot assure you that we will have no future deficiencies or weaknesses in our internal controls over financial reporting. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

We are exposed to credit risk resulting from the possibility that a loss may occur from the failure of another party to perform according to the terms of a contract with us.

We sell ethanol and distillers grains, which may result in concentrations of credit risk from a variety of customers, including major integrated oil companies, large independent refiners, petroleum wholesalers, other marketers and jobbers. We are also exposed to credit risk resulting from sales of grain to large commercial buyers, including other ethanol plants, which we continually monitor. Although payments are typically received within fifteen days from the date of sale for ethanol and distillers grains, we continually monitor this credit risk exposure. In addition, we may prepay for or make deposits on undelivered inventories. Concentrations of credit risk with respect to inventory advances are primarily with a few major suppliers of petroleum products and agricultural inputs. The inability of a third party to make payments to us for our accounts receivable or to provide inventory to us on advances made may cause us to experience losses and may advers ely impact our liquidity and our ability to make our payments when due.

Risks Related to Our Operations

Our ability to produce ethanol and operate at a profit is largely dependent on prices of corn, natural gas, ethanol and distillers grains.

Our operations and financial condition are significantly affected by the cost and supply of grain and natural gas and by the selling price for ethanol and distillers grains. Prices and supplies are subject to and determined by market forces over which we have no control. We are heavily dependent on the price and supply of corn. There is no assurance of consistent and continued availability of feedstock. There is significant price pressure on local corn markets caused by nearby ethanol plants, livestock industries and other value-added enterprises. Additionally, the local corn supplies could be adversely affected by rising prices for alternative crops, increasing input costs, changes in government policies, shifts in global markets or damaging growing conditions such as plant disease, weather or drought.

As a result of price volatility for these commodities, our operating results may fluctuate substantially. Based on recent forward prices of corn and ethanol, we may be operating our plants at low to possibly negative operating margins. Increases in corn prices or decreases in ethanol or distillers grains prices may result in it being unprofitable to operate our plants. No assurance can be given that we will be able to purchase corn at prices anywhere near the historic averages of corn in the states in which our plants are located; that we will be able to purchase natural gas at, or near, its current price; that we will be able to sell ethanol at, or near, current prices; or that we will be able to sell distillers grains at, or near, current prices. Commodities prices have been extremely volatile in the past and are likely to be volatile in the future due to factors beyond our control, such as weather, domestic and global demand, shortages, export prices a nd various governmental policies in the U.S. and around the world.

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We have been, and expect to continue, purchasing the corn for our plants, either directly in the case of Shenandoah and Superior, and indirectly in Obion and Bluffton, in the cash market from farmers and commercial elevators in the areas surrounding the plants, and hedging corn purchases through futures contracts or with options to reduce short-term exposure to price fluctuations. Additionally, when market conditions dictate, corn is purchased from other areas and transported to our plants by rail for our Obion and Bluffton plants. We may contract with third parties to manage our hedging activities and corn purchasing. Our purchasing and hedging activities may or may not lower our respective price of corn, and in a period of declining corn prices, these advance purchase and hedging strategies may result in paying a higher price for corn than our competitors. Further, hedging for protection against the adverse changes in the price of corn may be unsuccessful, and could result in substantial losses.

Substantial fluctuations in the price of corn over the past year have caused some ethanol plants to temporarily cease production or operate at a loss. Significant price fluctuations may occur in the future. Increased ethanol production from new or expanded ethanol production facilities may increase the demand for corn and increase the price of corn or decrease the availability of corn in areas where we intend to source corn for our plants. We may have to source corn from greater distances from our plants at a higher delivered cost. If a period of high corn prices were to be sustained for some time, such pricing may have a material adverse effect on our operations, cash flows and financial performance.

Our revenues will also be dependent on the market prices for ethanol and distillers grains. These prices can be volatile as a result of a number of factors. These factors include the overall supply and demand of ethanol and corn, the price of gasoline and corn, the level of government support, and the availability and price of competing products.

We attempt to manage price fluctuations of our inputs and outputs simultaneously using various hedging methods. We have been, and expect to continue, selling ethanol and distillers grains from our plants in the cash markets, and hedging through futures contracts or with options to reduce short-term exposure to price fluctuations. Our key objective is to lock in profitable margins between the cost of the corn and the value of the ethanol we process regardless of ethanol prices. Price relationships of ethanol, gasoline and corn are continually changing based on market forces and may result in reduced competitiveness of ethanol in the marketplace, which may have a material adverse effect on our operations, cash flows and financial performance.

Green Plains Obion and Green Plains Bluffton have entered into corn purchase agreements that limit their ability to purchase corn on the open market.

Green Plains Bluffton has contracted with Cargill Incorporated, through its AgHorizons Business Unit (“Cargill”), for all of its corn supplies. Green Plains Obion has contracted with Obion Grain as its exclusive supplier for corn obtained in Obion County, Tennessee and the seven contiguous counties in Tennessee and Kentucky. Our Obion plant has entered into an agreement with Central States Enterprises, Inc. (“Central States”) for its corn needs that are satisfied by rail shipment. Because of our Bluffton plant’s corn purchase agreement with Cargill and our Obion plant’s corn purchase agreements with Obion Grain and Central States, both our Obion and Bluffton plants are unable to purchase all, or any in the case of our Bluffton plant, of their corn supplies on the open market, which may place the plants at a greater risk to any price fluctuations that may arise and may have a material adverse effect on the operations, cash flo ws and financial performance of such plants.

We do not have shareholder corn delivery agreements to assure that our plants have a source for corn and to protect from corn price fluctuations.

Many producers of ethanol have corn delivery programs that require their members or shareholders to deliver specified quantities of corn to the producer at established, formula or market prices. These agreements may, at times, protect producers from supply and price fluctuations. We do not have corn delivery agreements and are required to acquire substantial quantities of corn in the marketplace based on prevailing market prices. If the supplies of corn available to us are not adequate, we may not be able to procure adequate supplies of corn at reasonable prices. This could result in a utilization of less than the full capacity of the plants, reduced revenues, higher operating costs, and reduced income or losses.

We cannot provide any assurance that there will be sufficient demand for ethanol to support current ethanol prices.

Ethanol production has expanded rapidly in recent years. To support this rapid expansion of the industry, domestic ethanol consumption must continue to increase. In the past, the domestic market for ethanol was largely dictated by federal mandates for blending ethanol with gasoline The RFS level for 2009 of 10.5 billion gallons is approximately equal to current domestic production levels. Future demand will be largely dependent upon the economic incentives to blend based upon the relative value of gasoline versus ethanol, taking into consideration the blender’s credit and the RFS. Any significant increase in production capacity beyond the RFS level might have an adverse impact on ethanol prices.

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Ethanol production from corn has not been without controversy. There have been questions of overall economic efficiency and sustainability, given the industrialized and energy-intensive nature of modern corn agriculture. Additionally, ethanol critics frequently cite the moral dilemma of redirecting corn supplies from international food markets to domestic fuel markets. The controversy surrounding corn ethanol is dangerous to the industry because ethanol demand is largely dictated by federal mandate. If public opinion were to erode, it is possible that the federal mandates will lose political support and the ethanol industry will be left without a market.

Beyond the federal mandates, there are limited markets for ethanol. Discretionary blending and E85 blending is an important secondary market. Discretionary blending is often determined by the price of ethanol versus the price of gasoline. In periods when discretionary blending is financially unattractive, the demand for ethanol may be reduced. A reduction in the demand for our products may depress the value of our products, erode our margins, and reduce our ability to generate revenue or to operate profitably. Consumer acceptance of E85 fuels and flexible-fuel technology vehicles is needed before there will be any significant growth in market share. Additional infrastructure is also needed to deliver high-level blends to the end consumer. International markets offer possible opportunities. Certain states have adopted policies to encourage the use of mid-level blends which do not require flexible-fuel technology. Ethanol also has foreseeable applications a s an aviation or locomotive fuel. Limited markets also exist for use of ethanol as an antiseptic, antidote or base compound for further chemical processing. Unfortunately, all these additional markets are undeveloped.  

At present, we cannot provide any assurance that there will be any material or significant increase in the demand for ethanol beyond the increases in mandated gasoline blending. Increased production in the coming years is likely to lead to lower ethanol prices. Additionally, the increased production of ethanol could have other adverse effects as well. For example, the increased production could lead to increased supplies of by-products from the production of ethanol, such as distillers grains. Those increased supplies could lead to lower prices for those by-products. Also, the increased production of ethanol could result in a further increase in the demand for corn. This could result in higher prices for corn creating lower profits. There can be no assurance as to the price of ethanol, corn or distillers grains in the future. Adverse changes affecting these prices may have a material adverse effect on our operations, cash flows and financial performance.< /P>

We expect to compete with existing and future ethanol plants and oil companies, which may result in diminished returns on your investment.

We operate in a very competitive environment. We compete with large, multi-product, multi-national companies that have much greater resources than we currently have or will have in the future. We may face competition for capital, labor, management, corn and other resources. There is clearly a consolidation trend in the ethanol industry. As a result, firms are growing in size and scope. Larger firms offer efficiencies and economies of scale, resulting in lower costs of production. Absent significant growth and diversification, we might not be able to operate profitably in a more competitive environment. No assurance can be given that we will be able to compete successfully or that such competition will not have a material adverse effect on our operations, cash flows and financial performance.

At present, the ethanol industry is primarily comprised of firms that engage exclusively in ethanol production and large integrated grain companies that produce ethanol along with their base grain businesses. Until recently, oil companies, petrochemical refiners and gasoline retailers have not been engaged in ethanol production to a large extent. These companies, however, form the primary distribution networks for marketing ethanol through blended gasoline. If these companies seek to engage further in direct ethanol production, there will be less of a need to buy ethanol from independent ethanol producers. Such a structural change in the market could result in a material adverse effect on our operations, cash flows and financial performance.  

The price of distillers grains is affected by the price of other commodity products, such as soybeans and corn, and decreases in the price of these commodities could decrease the price of distillers grains, which will decrease the amount of revenue we may generate.

Distillers grains compete with other protein-based animal feed products. The price of distillers grains may decrease when the prices of competing feed products decrease. The prices of competing animal feed products are based in part on the prices of the commodities from which these products are derived. Downward pressure on commodity prices, such as soybeans and corn, will generally cause the price of competing animal feed products to decline, resulting in downward pressure on the price of distillers grains. Decreases in the price of distillers grains will result in lower revenues.

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Engaging in hedging activities to minimize the potential volatility of ethanol, corn, distillers grains and natural gas prices could result in substantial costs and expenses.

In an attempt to minimize the effects of the volatility of ethanol, corn, distillers grains and natural gas prices on operating profits, we have entered into hedging positions in futures markets and have utilized other derivative contracts, and will likely take additional hedging positions in these commodities in the future. Hedging means protecting the price at which we buy or sell a commodity product in the future. It is a way to attempt to reduce the risk caused by price fluctuations. The effectiveness of such hedging activities is dependent upon, among other things, the cost and the market liquidity of the underlying commodities. Although we will attempt to link hedging activities to sales plans and purchasing activities, such hedging activities can themselves result in costs because price movements in these commodities are highly volatile and are influenced by many factors that are beyond our control.

To the extent we buy and sell commodity derivatives on registered and non-registered exchanges, our derivatives are subject to margin calls. If there is a significant movement in prices in the derivatives market, we could be subject to significant margin calls which would impact our liquidity and our interest expense. There is no assurance that our efforts to mitigate the impact of the volatility of the prices of commodities will be successful, and any sudden change in the price of these commodities could have an adverse affect on our liquidity and profitability.

Our ability to successfully operate is dependent on the availability of energy and water at anticipated prices.

Our plants require a significant and uninterrupted supply of electricity, natural gas and water to operate. There is no assurance that we will be able to secure an adequate supply of energy or water to support current and expected plant operations. If there is an interruption in the supply of energy or water for any reason, such as supply, delivery or mechanical problems, we may be required to halt production. If production is halted for an extended period of time, it may have a material adverse effect on our operations, cash flows and financial performance.

We have entered into agreements with third parties to negotiate and purchase natural gas and secure related natural gas pipeline capacity for our respective plants from third-party providers. There can be no assurance given that we will be able to obtain a sufficient supply of natural gas for our respective plants or that we will be able to procure alternative sources of natural gas on acceptable terms. Higher natural gas prices may have a material adverse effect on our operations, cash flows and financial performance.

We also purchase significant amounts of electricity to operate the plants. Currently, our plants do not have onsite electric generation capability to support plant operations. All electricity must be purchased from third-party electric utilities. We have negotiated an agreement with MidAmerican Energy to supply electricity to the plant in Shenandoah for a period of five years. We have entered into an agreement with the Iowa Lakes Electric Cooperative and the Corn Belt Cooperative to supply electricity to the Superior plant. The Obion plant purchases its electricity from Gibson Electric Company under a multi-year agreement that provided for the infrastructure and provision of electricity over the term of the agreement. Green Plains Bluffton is served by the local, municipal electric utility, Bluffton Utilities. No assurance can be given that we will be able to negotiate contract extensions at favorable rates after the current contract periods are completed . Electricity prices have historically fluctuated significantly. Sustained increases in the price of electricity in the future would increase the costs of production at the plants. As a result, these issues may have a material adverse effect on our operations, cash flows and financial performance.

Sufficient availability and quality of water are important requirements to produce ethanol. The water requirements at the Shenandoah plants are approximately 400 to 800 gallons per minute, depending on the quality of the water at the plants. We believe the City of Shenandoah has sufficient capacities of water to meet those needs and we have a contract with the city to supply grey water to the plant, which is discharge water from the local municipal water treatment facility, at a price that we believe is favorable to our operations. It is anticipated that this water will comprise about two thirds of the water that we will use at this plant. However, no assurance can be given that a prolonged drought could not diminish the water supplies in the areas of the Shenandoah plant, or that we would continue to have sufficient water supplies in the future. We obtain the water supply for the Superior ethanol plant from two wells on the site. The Obion and Bluffton p lants require approximately 900 to 1,200 gallons of water per minute. We use onsite wells, supplemented by city services as necessary, for our water needs. If a drought were to occur, we may have to purchase water from other sources, such as the local rural water company or the local municipal water utility, which would cost more. If we ever had to do this, it may have a material adverse effect on its operations, cash flows and financial performance and could even cause one or more of our plants to cease production for periods of time.

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Risk of foreign competition from producers who can produce ethanol at less expensive prices than producing it from corn in the United States.

There is an increased risk of foreign competition in the ethanol industry. At present, there is a $0.54 per gallon tariff on foreign ethanol. However, this tariff might not be sufficient to deter overseas producers from importing ethanol into the domestic market, resulting in depressed ethanol prices. It is also important to note that the tariff on foreign ethanol is the subject of ongoing controversy and disagreement amongst lawmakers. Many lawmakers attribute growth in the ethanol industry to increases in food prices. They see foreign competition in ethanol production as a means of controlling food prices. Additionally, the tariff on ethanol has sparked international criticism because it diverts corn from export and prevents Latin American agricultural development.

Foreign competitors are likely to have lower input, energy and labor costs, as well as less restrictive environmental practices and laws. International feedstocks might be less costly and more sustainable than corn. Additionally, the bulk of the domestic ethanol market is located on the coasts in areas of greater population density. It is possible that it could be cheaper to import foreign ethanol via tanker than transport our subsidiaries’ ethanol to coastal markets via rail or truck. The primary source of foreign competition is Brazil, which is the world’s second largest producer after the U.S. Brazil produces ethanol from sugarcane, which as a feedstock costs about 30% to 40% less than corn. Additionally, in comparison to the U.S., the Brazilian ethanol industry is more mature and more fully developed. Much of the industrial infrastructure that the U.S. is lacking is already in place in Brazil.

Ethanol produced or processed in certain countries in Central America and the Caribbean region is eligible for tariff reduction or elimination upon importation to the United States under a program known as the Caribbean Basin Initiative. Large ethanol producers, such as Cargill, have expressed interest in building dehydration plants in participating Caribbean Basin countries, such as El Salvador, which would convert ethanol into fuel-grade ethanol for shipment to the United States. Ethanol imported from Caribbean Basin countries may be a less expensive alternative to domestically produced ethanol. Materially, the threat of imported ethanol either directly from Brazil even with the import tariff, or from a Caribbean Basin source, is very real. While transportation and infrastructure constraints may temper the market impact throughout the U.S., competition from imported ethanol may affect our ability to sell our ethanol profitably, which may have a material adverse effect on our operations, cash flows and financial performance.

If significant additional foreign ethanol production capacity is created, such facilities could create excess supplies of ethanol on world markets which may result in lower prices of ethanol throughout the world, including the U.S. We believe that an increased supply of ethanol in world markets may be mitigated to some extent by increased ethanol demand, due in part to higher oil prices. Such foreign competition is a risk to our businesses. Further, if the tariff on foreign ethanol is ever lifted, overturned, expired, repealed or reduced, our ability to profitably compete with low-cost international producers is questionable. Any penetration of ethanol imports into the domestic market may have a material adverse effect on our operations, cash flows and financial performance.

We depend on our technology providers for ongoing support services.

We are dependent upon our technology providers for ongoing support services at our ethanol plants. Our process technologies are licensed from others. If the plants do not operate to the level anticipated by us in our business plan, we will rely on our technology providers to adequately address such deficiencies. There is no assurance that they will be able to address such deficiencies in an acceptable manner. Failure to do so could have a material adverse effect on our operations, cash flows and financial performance.

If there are defects in the construction of one or more plants, it may negatively affect our ability to operate the plants.

There is no assurance that defects in materials and/or workmanship in the plants will not occur. Under the terms of the design-build contracts, our builders have warranted that the material and equipment furnished to build the plant would be new, of good quality, and free from material defects in material or workmanship at the time of delivery. Though the design-build contracts require our builders to correct all defects in material or workmanship for a period of one year after substantial completion of the plant, material defects in material or workmanship may still occur. Such defects could cause us to halt or discontinue the plant’s operations. Any such event may have a material adverse effect on our operations, cash flows and financial performance.

Replacement technologies are under development that might result in product or process system obsolescence

Ethanol is primarily an additive and oxygenate for blended gasoline. Although use is currently mandated, there is always the possibility that a preferred alternative product will emerge and eclipse the current market. Critics of ethanol blends argue that ethanol decreases fuel economy, causes corrosion of ferrous components and damages fuel pumps. Any alternative oxygenate product would likely be a form of alcohol (like ethanol) or ether (like MTBE). Prior to federal restrictions and ethanol mandates, MTBE was the dominant oxygenate. It is possible that other ether products could enter the market and prove to be environmentally or economically superior to ethanol. More likely, it is possible that alternative biofuel alcohols such as methanol and butanol could evolve into ethanol replacement products. Such development an ethanol replacement product may have a material adverse effect on our operations, cash flows and financial performance.

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Even if ethanol remains the dominant additive and oxygenate, technological innovation could have a profound impact on the corn ethanol system. The development of cellulosic ethanol obtained from other sources of biomass, such as switchgrass or fast growing poplar trees, could ultimately displace corn ethanol production. Federal policies suggest a long-term political preference for cellulosic processes using alternative feedstocks such as switchgrass, silage, wood chips or other forms biomass. Cellulosic ethanol has a smaller carbon footprint because the feedstock does not require energy-intensive fertilizers and industrial production processes. Additionally, cellulosic ethanol is favored because it is unlikely that foodstuff is being diverted from the market. Several cellulosic ethanol plants are under development. At present, it is unlikely that cellulose is an economically-viable alternative to corn. However, if research and de velopment programs persist, there is the risk that cellulosic ethanol could displace corn ethanol at some point in the future. Although there are probably opportunities to incorporate cellulosic processes into our existing corn ethanol plants, it must be acknowledged that innovation in cellulose might have an adverse impact on our enterprises. Our plants are designed as single-feedstock facilities. Additionally, our plants are strategically located in high-yield, low-cost corn production areas. At present, there is limited supply of alternative feedstocks near our facilities. There is limited ability to adapt the plants to a different feedstock or process system without substantial reinvestment and retooling.

We use Delta T process technologies in Superior. The Shenandoah, Obion and Bluffton plants use ICM process technologies. These process technologies are industry standards. However, they use significant amounts of energy. There is the possibility that new process technologies will emerge that require less energy. The development of such process technologies would result in lower production costs. Our process technologies may become outdated and obsolete, placing us at a competitive disadvantage against competitors in the industry. The development of replacement technologies may have a material adverse effect on our operations, cash flows and financial performance.

Reductions to the RFS mandate or blending industry contraction could result in reduced or unprofitable operations for Blendstar.

Whereas Blendstar takes no commodity price risk associated with offering splash blending and transflowing facilities, it bears volumetric risks associated with industry contraction. Changes in RFS levels, the blender’s credit, or other factors affecting our customers’ ability to profitably blend volumes of ethanol may adversely affect throughput levels at Blendstar’s facilities. Blendstar attempts to mitigate this risk through longer term take or pay contracts. While we believe the RFS will likely force incremental blending regardless of near-term price factors, a contraction in blending volumes in Blendstar’s markets or general industry contraction related to the use of ethanol would likely have an adverse impact on Blendstar’s operations, cash flows and financial performance.  

We are exposed to the possibility that a loss may occur from the failure of another party to perform according to the terms of a marketing contract with Green Plains Trade.

Under our third-party marketing agreements, through Green Plains Trade, we purchase all of our contract third-party producers’ ethanol production. In turn, we sell the ethanol in various markets for deliveries in the future. The unexpected interruption or curtailment of production could cause us to be unable to deliver quantities of ethanol sold under the contracts. As a result, we may be forced to purchase replacement quantities of ethanol at higher prices to fulfill these contractual obligations. Costs we incur to acquire replacement quantities to fulfill these contractual obligations or to terminate our sales contracts are recoverable under our third-party marketing agreements. However, these recoveries would be dependent on our third-party producer’s ability to pay, and in the event they were unable to pay, Green Plains Trade’s profitability would be materially and adversely impacted.

The operation of new ethanol plants in Green Plains Grain’s trade territory could substantially reduce the volume of corn that it buys and merchandises, which would adversely affect the operating income of its grain division.

Green Plains Grain’s largest single source of operating income is from buying corn and soybeans from producers and share-crop landlords, drying and storing these grain products, and merchandising them to various purchasers. Four ethanol plants are currently operating within or near Green Plains Grain’s trade territory, which includes our plant in Superior and other plants at Ashton, Emmetsburg and Hartley, all located in northwest Iowa. Two additional ethanol plants, in Albert City, IA and Welcome, MN, have been built in or near Green Plains Grain’s trade territory and are idle at this time. In addition, another ethanol operator has announced its intention to complete construction of an ethanol plant at Fairmont, MN. If the Fairmont plant is eventually constructed and all plants in or near Green Plains Grains’ trade territory are operated at full capacity, we estimate that these ethanol plants would buy approximately 206 million bushel s of corn each year. This compares to approximately 23 and 18 million bushels of corn that Green Plains Grain merchandized during the 2008 and 2007 calendar years, respectively.

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The significant capital costs of an ethanol plant and the high costs of temporarily shutting down an ethanol plant provide strong incentives for these plants to be continuously operated, even during periods of high corn prices relative to the price of ethanol. As a result, the operators of ethanol plants often are willing to buy the corn necessary to maintain production at prices that may exceed the prices being paid by other corn end-users. In contrast, Green Plains Grain is limited in the price that it can pay for corn by the prices at which it can sell the corn to various buyers. This disparity in corn pricing may result in Green Plains Grain being unable to profitably buy corn during certain periods, which would reduce the annual volume of corn and its operating profits. Green Plains Grain may also be forced to pay higher prices for corn in order to fulfill contractual grain delivery obligations, resulting in a loss on the pu rchase and resale of corn or a reduction in the profit margin on such corn.

It is impossible to predict the impact of the operation of these ethanol plants within or near Green Plains Grain’s trade territory on Green Plains Grain’s profitability since there is no comparable historical experience.

The markets for Green Plains Grain’s products are highly competitive.

Competitive pressures in all of Green Plains Grain’s businesses could affect the price of and customer demand for its products, thereby negatively impacting its profit margins and resulting in a loss of market share. In addition to the special risks from the ethanol industry discussed above, Green Plains Grain’s grain business also competes with other grain merchandisers, grain processors and end-users for the purchase of grain, as well as with other grain merchandisers, private elevator operators and cooperatives for the sale of grain. Many of Green Plains Grain’s competitors are significantly larger and compete in more diverse markets. The failure of Green Plains Grain to effectively compete in its markets would reduce its profitability.

Green Plains Grain’s business may be adversely affected by conditions beyond its control, including weather conditions, political developments, disruptions in transportation, and international petroleum risks.

Many of Green Plains Grain’s business activities are dependent on weather conditions. Weather risks may result in: (1) a reduction in the sales of fertilizer and pesticides caused by too much rain during application periods, (2) a reduction in grain harvests caused by too little or too much rain during the growing season, (3) a reduction in grain harvests caused by too much rain or an early freeze during the harvest season, and (4) damage to corn stored on an open pile caused by too much rain and warm weather before the corn is dried, shipped, consumed or moved into a storage structure.

National and international political developments subject Green Plains Grain’s business to a variety of security risks, including bio-terrorism, and other terrorist threats to data security and physical loss to its facilities. In order to protect itself against these risks and stay current with new government legislation and regulatory actions, Green Plains Grain may need to incur significant costs. No level of regulatory compliance can guarantee that security threats will never occur.

If there were a disruption in available transportation due to natural disaster, strike or other factors, Green Plains Grain may be unable to get raw materials inventory to its facilities, product to its customers, or ship grain to market. This could disrupt Green Plains Grain’s operations and cause it to be unable to meet its customers’ needs or fulfill its contractual grain delivery obligations.

The international nature of petroleum production, import restrictions, embargoes and refining capacity limitations could severely impact the availability of petroleum products causing severe economic hardship on the performance of Green Plains Grain’s Petroleum Division.

Many of Green Plains Grain’s business lines are affected by the supply and demand of commodities, and are sensitive to factors outside of our control. Adverse price movements could adversely affect its profitability and results of operations.

Green Plains Grain buys, sells and holds inventories of various commodities, some of which are readily traded on commodity futures exchanges. Weather, economic, political, environmental and technological conditions and developments, both local and worldwide, as well as other factors beyond Green Plains Grain’s control, can affect the supply and demand of these commodities and expose it to liquidity pressures due to rapidly rising or falling market prices. Changes in the supply and demand of these commodities can also affect the value of inventories held by Green Plains Grain, as well as the price of raw materials. Increased costs of inventory and prices of raw materials could decrease profit margins and adversely affect profitability.

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While Green Plains Grain hedges the majority of its grain inventory positions with derivative instruments to manage risk associated with commodity price changes, including purchase and sale contracts, it is unable to hedge 100% of the price risk of each transaction due to timing, unavailability of hedge contracts counterparties, and third party credit risk. Furthermore, there is a risk that the derivatives Green Plains Grain employs will not be effective in offsetting the changes associated with the risks it is trying to manage. This can happen when the derivative and the hedged item are not perfectly matched. Green Plains Grain’s grain derivatives, for example, do not hedge the basis pricing component of its grain inventory and contracts. (Basis is defined as the difference between the cash price of a commodity in a Green Plains Grain facility and the nearest in time exchange-traded futures price.) Differences can reflect t ime periods, locations or product forms. Although the basis component is smaller and generally less volatile than the futures component of grain market price, significant unfavorable basis movement on a grain position as large as Green Plains Grain’s can significantly impact its profitability.

Green Plains Grain sells agronomy products to producers which necessitates the purchase of large volumes of fertilizer and chemicals for retail sale. Fixed-price purchase obligations and carrying inventories of these products subject us to the risk of market price fluctuations for periods of time between the time of purchase and final sale.

Green Plains Grain also sells petroleum products to their customers. Gasoline, diesel and propane are purchased for resale to our retail customers. We are also at risk for market changes of these products while in inventory or subject to fixed-price purchase agreements, and while Green Plains Grain uses contracts with customers to help mitigate these price risks, this risk could have a material adverse effect on Green Plains Grain’s profitability.

Green Plains Grain relies on a limited number of suppliers for its products, and the loss of one or several of these suppliers could increase its costs and have a material adverse effect on its business.

Green Plains Grain relies on a limited number of suppliers for its products. If it is unable to obtain these raw materials and products from its current vendors, or if there were significant increases in its suppliers’ prices, it could disrupt operations, thereby significantly increasing its costs and reducing profit margins.

Green Plains Grain may be subject to additional funding requirements for its pension plan, which could negatively impact profits.

Green Plains Grain maintains a defined benefit pension plan. Although benefits under the plan were frozen as of January 1, 2009, Green Plains Grain remains obligated to ensure that the plan is funded in accordance with applicable requirements. As of December 31, 2008, the pension plan’s liabilities exceeded its assets by approximately $1.3 million. Minimum funding standards generally require a plan’s underfunding to be made up over a seven-year period. The amount of underfunding could increase or decrease, based on investment returns of the plan’s assets or changes in the assumed discount rate used to value benefit obligations, which could adversely impact Green Plains Grain’s profitability.

Risks Related to Conflicts of Interest

We have conflicts of interest with our design builders and technology providers which could result in loss of capital and reduced financial performance.

We are and will continue to be advised by one or more employees or associates of our design builders and technology providers. Our design builders and technology providers are expected to continue to be involved in substantially all material aspects of their respective plant operations for some time. Some of our design builders and technology providers have an ownership interest in us. Consequently, the terms and conditions of our agreements and understandings with them may not have been negotiated at arm’s length. Therefore, there is no assurance that our arrangements with such parties are as favorable to them as could have been if obtained from unaffiliated third parties. In addition, because of the extensive role that they are expected to have in the operation of our plants, it may be difficult or impossible for us to enforce claims that it may have against them, if a claim were to arise. If this were to occur, it may have a material adverse impac t on our operations, cash flows and financial performance.

Our design builders and technology providers and their affiliates may also have conflicts of interest because employees or agents of the design builders and technology providers are involved as owners, creditors and in other capacities with other ethanol plants in the United States. We cannot require design builders and technology providers to devote their full time or attention to their activities.

Though we will attempt to address actual or potential material conflicts of interest as they arise or become known, we have not established any formal procedures to address or resolve conflicts of interest. There is no assurance that any conflict of interest will not have adverse consequences to our operations, cash flows and financial performance.

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Our consultants, vendors and contractors may have financial and other interests that conflict with their interests, and they may place their interests ahead of our interests.

Entities and individuals engaged as suppliers, consultants, vendors and contractors of ours will have financial interests that may conflict with our interests. In addition, the suppliers, consultants, vendors and contactors may have commitments to and financial interests in other ethanol plants located in the same geographic and market area as our plants. As a result, they may have a conflict of interest as they allocate personnel, materials and other resources to our plants and others.

Risks Related to Regulation and Governmental Action

The loss of favorable tax benefits for ethanol production could adversely affect the market for ethanol.

The American Jobs Creation Act of 2004 created the volumetric ethanol excise tax credit. Referred to as the blender’s credit, VEETC provides companies with a tax credit to blend ethanol with gasoline. VEETC expires on December 31, 2010. The Food, Conservation and Energy Act of 2008 (the “2008 Farm Bill”) amended the amount of tax credit provided under VEETC to 45 cents per gallon of pure ethanol beginning January 1, 2009 and 38 cents per gallon for E85. The elimination or further reduction of VEETC or other federal tax incentives to the ethanol industry would have a material adverse impact on our business by making it more costly or difficult for us to produce and sell ethanol.

The loss of favorable government usage mandates affecting ethanol production could adversely affect the market for ethanol.

Federal law requires the use of oxygenated gasoline. If these mandates are repealed, the market for domestic ethanol would be diminished significantly. Additionally, flexible-fuel vehicles receive preferential treatment in meeting CAFE standards. High blend ethanol fuels such as E85 result in lower fuel efficiencies. Absent the CAFE preferences, it is unlikely that flexible-fuel vehicles could meet standards. Any change in these CAFE preferences could reduce growth of E85 markets and result in lower ethanol prices.

There has been an increase in the number of claims against the use of ethanol as an alternative energy source. Many of such claims attempt to draw a link between recently increasing global food prices and the use of corn to produce ethanol. Others claim that the production of ethanol requires too much energy. Such claims have led some, including members of Congress, to urge the modification of current government policies which affect the production and sale of ethanol in the United States, such as the VEETC, the Renewable Fuels Standard and the Energy Independence and Security Act of 2007 (the “2007 Act”). Similarly, several states which currently have laws which affect the production and sale of ethanol, such as mandated usage of ethanol, have proposed to modify or eliminate such mandates. To the extent that such state or federal laws were modified, the demand for ethanol may be reduced, which could negatively and materially affect our ability to operate profitably.

The Renewable Fuel Standard mandate with respect to ethanol derived from grain could be reduced or waived entirely.

During 2008, the Governor of Texas petitioned the EPA for a waiver of 50 percent of the RFS mandate for the production of ethanol derived from grain, citing adverse economic impact due to higher corn, feed and food prices. The administrator of the EPA did not grant this waiver. However, similar petitions might be filed in the future. Any such RFS waiver, if granted in the future, could adversely affect prices of ethanol and our financial performance in the future.

Recent legislation indicates increasing federal support for cellulosic ethanol as an alternative to corn-derived ethanol.

Recent legislation, such as the American Recovery and Reinvestment Act of 2009 and the Energy Independence and Security Act of 2007, provides numerous funding opportunities in support of cellulosic ethanol. In addition, the amended RFS mandates an increasing level of production of biofuels which are not derived from corn. These policies suggest an increasing policy preference away from corn ethanol and toward cellulosic ethanol. The profitability of ethanol production depends heavily on federal incentives. The loss or reduction of incentives from the federal government in favor of corn-based ethanol production may reduce our profitability.

Our inability to obtain required regulatory permits and/or approvals will impede our ability and may prohibit completely our ability to successfully operate the plants.

Our ethanol production and agribusiness activities are subject to extensive air, water and other environmental regulation. We have had to obtain a number of environmental permits to construct and operate our plants. Ethanol production involves the emission of various airborne pollutants, including particulate, carbon dioxide, oxides of nitrogen, hazardous air pollutants and volatile organic compounds. We believe we have obtained the permits necessary for operation of the plants. In addition, the governing state agencies could impose conditions or other restrictions in the permits that are detrimental to us or which increase our costs above those assumed in any such project. Any such event could have a material adverse effect on our operations, cash flows and financial performance.

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A change in environmental and safety regulations or violations thereof could impede our ability to successfully operate the plants.

Currently, EPA rules and regulations do not require us to obtain separate EPA approval in connection with operation of the plants. Additionally, environmental laws and regulations, both at the federal and state level, are subject to change and changes can be made retroactively. It is possible that more stringent federal or state environmental rules or regulations could be adopted, which could increase our operating costs and expenses. Consequently, even if we have the proper permits at the present time, we may be required to invest or spend considerable resources to comply with future environmental regulations. Furthermore, ongoing plant operations are governed by the Occupational Safety and Health Administration (“OSHA”). OSHA regulations may change such that the costs of operations at the plants may increase. If any of these events were to occur, they may have a material adverse impact on our operations, cash flows and financial performance.

Our plants emit carbon dioxide as a by-product of the ethanol production process. The United States Supreme Court recently classified carbon dioxide as an air pollutant under the Clean Air Act in a case seeking to require the EPA to regulate carbon dioxide in vehicle emissions. Similar lawsuits have been filed seeking to require the EPA to regulate carbon dioxide emissions from stationary sources such as ethanol plants under the Clean Air Act. In addition, lawmakers have recently indicated an interest in adopting a comprehensive carbon dioxide regulatory scheme, such as a carbon tax or cap-and-trade system. While there are currently no applicable regulations, if state or federal authorities decide to regulate carbon dioxide emissions by plants such as ours, we may have to apply for additional permits or we may be required to install carbon dioxide mitigation equipment or take other steps unknown to us at this time in order to comply with such law or regul ation. Compliance with future regulation of carbon dioxide, if it occurs, could be costly and may prevent us from operating our plants profitably, which may have a material adverse impact on our operations, cash flows and financial performance.

We handle potentially hazardous materials in our businesses. If environmental requirements become more stringent or if we experience unanticipated environmental hazards, we could be subject to significant costs and liabilities.

A significant part of our business is regulated by environmental laws and regulations, including those governing the labeling, use, storage, discharge and disposal of hazardous materials. Because we use and handle hazardous substances in our businesses, changes in environmental requirements or an unanticipated significant adverse environmental event could have a material adverse effect on its business. There is no assurance that we have been, or will at all times be, in compliance with all environmental requirements, or that it will not incur material costs or liabilities in connection with these requirements. Private parties, including current and former employees, could bring personal injury or other claims against us due to the presence of, or exposure to, hazardous substances used, stored or disposed of by us, or contained in its products. We are also exposed to residual risk because some of our facilities and land may have environmental liabilities a rising from their prior use. In addition, changes to environmental regulations may require us to modify existing plant and processing facilities and could significantly increase the cost of those operations.

Our agribusiness operations are highly regulated and changes in government regulations or trade association policies could adversely affect our results of operations.

Green Plains Grain’s operations are subject to government regulation and regulation by certain private sector associations, compliance with which can impose significant costs on its business. Failure to comply with such regulations can result in additional costs, fines or criminal action.

Production levels, markets and prices of the grains Green Plains Grain merchandises are affected by federal government programs, which include acreage control and price support programs of the United States Department of Agriculture (“USDA”). In addition, grain sold by Green Plains Grain must conform to official grade standards imposed by the USDA. Other examples of government policies that can have an impact on Green Plains Grain’s business include tariffs, duties, subsidies, import and export restrictions and outright embargos. Changes in government policies and producer supports may impact the amount and type of grains planted, which in turn, may impact Green Plains Grain’s ability to buy grain in its market region. Because a portion of Green Plains Grain’s grain sales are to exporters, the imposition of export restrictions could limit its sales opportunities.

Risks Related to our Common Stock   

We have capitalized our company with substantial debt leverage, resulting in substantial debt service requirements that could reduce the value of our stock.

Our capital structure is highly leveraged and our debt service requirements could have important consequences which could reduce the value of our common stock, including:

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limiting our ability to borrow additional amounts for operating capital and other purposes or creating a situation in which such ability to borrow may be available on terms that are not favorable to us;

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reducing funds available for operations and distributions because a substantial portion of our cash flow will be used to pay interest and principal on our debt;

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making us vulnerable to increases in prevailing interest rates;

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placing us at a competitive disadvantage because it may be substantially more leveraged than some of our competitors, particularly older debt-free facilities and facilities that have been or will be reorganized due to bankruptcy;

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subjecting all, or substantially all of our assets to liens, which means that there will be few, if any, assets available for shareholders in the event of a liquidation; and

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limiting our ability to adjust to changing market conditions, which could increase our vulnerability to a downturn in our business or general economic conditions.

In the event that we are unable to pay our debt service obligations, we could be forced to: (1) reduce or eliminate dividends to stockholders, if they were to commence or (2) reduce or eliminate needed capital expenditures. It is possible that we could be forced to sell assets, seek to obtain additional equity capital or refinance or restructure all or a portion of our debt. In the event that we are unable to refinance our indebtedness or raise funds through asset sales, sales of equity or otherwise, our business would be adversely affected and we may be forced to liquidate, and investors could lose their entire investment.  

Our lenders require us to abide by certain restrictive loan covenants that may hinder our ability to operate and reduce our profitability.

The loan agreements governing our secured debt financing contain a number of restrictive affirmative and negative covenants. These covenants limit our ability to, among other things:

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incur additional indebtedness;

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make capital expenditures in excess of prescribed thresholds;

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pay dividends to stockholders;

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make various investments;

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create liens on our assets;

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acquire other companies or operations;

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utilize the proceeds of asset sales; or

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merge or consolidate or dispose of all or substantially all of our assets.

We are also required to maintain specified financial ratios, including minimum cash flow coverage, minimum working capital and minimum net worth. Our respective loan agreements require us to utilize a portion of any excess cash flow generated by operations to prepay the respective term debt. A breach of any of these covenants or requirements could result in a default under our loan agreements. If any of our subsidiaries default, and if such default is not cured or waived, our lenders could, among other remedies, accelerate their debt and declare that such debt is immediately due and payable. If this occurs, we may not be able to repay such debt or borrow sufficient funds to refinance. Even if new financing is available, it may not be on terms that are acceptable. No assurance can be given that the Company’s future operating results will be sufficient to achieve compliance with such covenants and requirements, or in the event of a default, to remedy s uch default.

Our stock price is volatile and our stock is thinly traded.

The trading price of our common stock is subject to significant fluctuations in response to many factors, including changes in:

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conditions in the biofuels industry generally;

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our business, operations and prospects;

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our quarterly operating results;

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market assessments of our business, operations and prospects;

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federal, state and local laws, governmental regulation and other legal developments affecting the biofuels industry; and

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market prices for ethanol, distillers grains or feedstocks such as corn or natural gas.

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In addition, the volume of trading in our stock is relatively low. For this reason, we have few institutional shareholders and do not receive a significant amount of analyst coverage. Consequently, any investment made in our stock may be relatively illiquid for an indefinite period.

Our common stock may be diluted in value and will be subject to further dilution in value.

As of December 31, 2008, we had outstanding stock options exercisable for 1,311,528 shares of common stock at exercise prices of between $0.14 and $30 per share.  If for any reason we are required in the future to raise additional equity capital, if options are granted or additional shares are issued to our employees, officers or directors, our current shareholders may suffer further dilution to their investment. There is no assurance that further dilution will not occur in the future.

Sales of a substantial number of shares of our common stock could cause the price of our common stock to decline.

We issued 3,373,103 shares of our common stock in the merger with VBV which are freely transferable and resalable without restriction on the Nasdaq Capital Market, and 7,498,369 shares of our common stock were issued to certain “affiliates” in the Merger which may be resold on the Nasdaq Global Market (or such other market as our common stock may be listed on), subject to compliance with Rule 144. In addition, we have granted parties to the shareholders’ agreement that was entered into in connection with the merger with VBV certain rights to demand registration of their shares for public resale, beginning 18 months after the closing of the merger.

Sales of a substantial number of these shares in the public market, or the perception that these sales may occur, could cause the market price of our common stock to decline and could impair the ability of our shareholders to sell their shares of common stock in the amounts and at such times and prices as they may desire. In addition, the sale of these shares could impair our ability to raise capital through the sale of additional equity securities.

Our focus on ethanol could result in the devaluation of our common stock if revenues from our primary products decrease.

Our success is primarily linked to the profitability of producing and selling ethanol and distillers grains. Our lack of business diversification means that we may not be able to adapt to changing market conditions or to handle any significant decline in the ethanol industry, which would have an adverse effect on our operations, cash flows and financial performance. Because we have limited alternative revenue sources and significant capital invested in ethanol production, shareholders could lose some or all of their investment if we are unable to produce and sell ethanol and distillers grains profitably or if the markets for those products decline.

Unidentified Risks

The foregoing discussion is not a complete list or explanation of the risks involved with an investment in this business. Additional risks will likely be experienced that are not presently foreseen by us. Investors are not to construe this report as constituting legal or tax advice. Before making any decision to invest in us, investors should read this entire report, including all of its exhibits, and consult with their own investment, legal, tax and other professional advisors. An investor should be aware that we will assert that the investor consented to the risks and the conflicts of interest described or inherent in this report if the investor brings a claim against us or any of our directors, officers, managers, employees, advisors, agents or representatives.

ITEM 1B.  UNRESOLVED STAFF COMMENTS.

None.

ITEM 2.  PROPERTIES.

We currently lease approximately 11,800 square feet of office space in Omaha, Nebraska for our corporate headquarters. This lease expires in October 2011. We believe that our current facilities are adequate for our present and short-term foreseeable needs and that additional suitable space will be available as required.

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We own approximately 108 acres of land on which we own and operate a 55 mmgy ethanol plant near Shenandoah, Iowa; approximately 264 acres of land on which we own and operate a 55 mmgy ethanol plant near Superior, Iowa; approximately 419 acres of land on which we own and operate a 110 mmgy ethanol plant near Bluffton, Indiana; and approximately 230 acres of land on which we own and operate a 110 mmgy ethanol plant near Obion, Tennessee. We also lease approximately 129 acres of land near our Obion plant. We believe that the property owned and leased at the sites of our four ethanol plants will be adequate to accommodate our current needs, as well as potential expansion, at those sites.

We own approximately 134 acres of land in seven locations in Northwest Iowa for our agribusiness operations. We own approximately 11 additional acres of land at our grain elevator in Essex, IA. We believe that the property owned at these sites will be adequate to accommodate our current needs, as well as potential expansion.

Our loan agreements grant a security interest in substantially all of our owned real property. See Note 9 – Long-Term Debt and Lines of Credit included herein as part of the Notes to Consolidated Financial Statements for a discussion of our loan agreements.

ITEM 3.  LEGAL PROCEEDINGS.

None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Company held a special meeting of stockholders on October 10, 2008. The matters voted upon at such meeting and the number of shares cast for, against or withheld, and abstained are as follows:

1)

Proposal to approve the VBV Merger, IBE Merger and EGP Merger transactions.

For: 4,340,031 Against: 117,015 Abstain: 6,619 Broker Non-Vote: -0-

2)

Proposal to approve the issuance of an aggregate of 17,139,000 shares of GPRE common stock (including shares subject to options assumed) pursuant to the Merger and the Stock Purchase.

For: 4,339,606 Against: 117,443 Abstain: 6,616 Broker Non-Vote: -0-

3)

Proposal to approve the amended and restated articles of incorporation of the Company.

For: 4,333,731 Against: 113,633 Abstain: 16,301 Broker Non-Vote: -0-

EXECUTIVE OFFICERS OF THE REGISTRANT.

As of December 31, 2008, our executive officers, their ages and their positions were as follows:  

Name	Age	Position
Wayne B. Hoovestol	50	Chief Executive Officer and Chairman of the Board
Todd A. Becker	43	President and Chief Operating Officer
Jerry L. Peters	51	Chief Financial Officer
Carl S. (Steve) Bleyl	49	Executive Vice President – Ethanol Marketing
Ron B. Gillis	59	Executive Vice President – Finance and Treasurer
Michael C. Orgas	50	Executive Vice President – Commercial Operations
Edgar E. Seward Jr.	41	Executive Vice President – Plant Operations

WAYNE HOOVESTOL has served as a Director since March 2006 was named as Chairman of the Board on October 15, 2008. Mr. Hoovestol resigned from his position as Chief Executive Officer effective January 1, 2009.  Mr. Hoovestol was appointed Chief Strategy Officer of the Company in March 2009. Mr. Hoovestol was appointed as the Company’s Chief Operating Officer in January 2007 and was named as Chief Executive Officer in February 2007. Mr. Hoovestol began operating Hoovestol Inc., a trucking company, in 1978 and he later formed an additional trucking company known as Major Transport. Mr. Hoovestol sold Major Transport so he could devote a substantial majority of his time to the leadership and strategic oversight of our operations. Mr. Hoovestol became involved with ethanol as an investor in 1995, and has served on the boards of two other ethanol companies.

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TODD BECKER was named President and Chief Executive Officer of the Company on January 1, 2009, and was appointed as a Director on March 10, 2009. Mr. Becker served as the Company’s President and Chief Operating Officer from the closing of the VBV merger on October 15, 2008 to December 31, 2008. Mr. Becker had served as Chief Executive Officer of VBV since May 2007. Mr. Becker was Executive Vice President of Sales and Trading at Global Ethanol from May 2006 to May 2007. He had responsibility for setting up the commercial operations of the company. Prior to that, Mr. Becker worked for ten years with ConAgra Foods in various management positions including Vice President of International Marketing for ConAgra Trade Group and President of ConAgra Grain Canada. He has over 20 years of related experience in various commodity processing businesses, risk management and supply chain management. In addition, he has extensive internatio nal trading experience in agricultural markets. Mr. Becker has a Masters degree in Finance from the Kelley School of Business at Indiana University and a Bachelor of Science degree in Business Administration with a Finance emphasis from the University of Kansas.

JERRY PETERS joined the Company as Chief Financial Officer in June 2007. Prior to then, Mr. Peters served as Senior Vice President - Chief Accounting Officer for ONEOK Partners, L.P. from May 2006 to April 2007, as its Chief Financial Officer from July 1994 to May 2006, and in various senior management roles prior to that. ONEOK Partners is a publicly-traded partnership engaged in gathering, processing, storage, and transportation of natural gas and natural gas liquids. Prior to joining ONEOK Partners in 1985, Mr. Peters was employed by KPMG LLP as a certified public accountant. Mr. Peters has a Masters degree in Business Administration from Creighton University and a Bachelor of Science degree in Business Administration from the University of Nebraska – Lincoln.

STEVE BLEYL joined the Company as Executive Vice President – Ethanol Marketing upon closing of the VBV merger on October 15, 2008. Mr. Bleyl joined VBV in October 2007 and served in the same position for them. From June 2003 until September 2007, Mr. Bleyl served as Chief Executive Officer of Renewable Products Marketing Group LLC, an ethanol marketing company, building it from a co-operative marketing group of five ethanol plants in one state to seventeen production facilities in seven states. Prior to that, Mr. Bleyl worked for over 20 years in various senior management and executive positions in the fuel industry.  Mr. Bleyl has a Masters degree in Business Administration from the University of Oklahoma and a Bachelor of Science degree in Aerospace Engineering from the United States Military Academy. 

RON GILLIS joined the Company as Executive Vice President – Finance and Treasurer upon closing of the VBV merger on October 15, 2008.  Mr. Gillis joined VBV in August 2007, serving as its Chief Financial Officer. From May 2005 until July 2007, Mr. Gillis served as Chief Financial Officer of Renewable Products Marketing Group LLC, an ethanol marketing company. Prior to that, Mr. Gillis served for over 20 years in senior financial management, control and audit positions with ConAgra Foods Inc. in the commodity trading area, both domestic and international. Mr. Gillis is a certified management accountant and holds an Honors Commerce degree from the University of Manitoba.

MIKE ORGAS joined the Company as Executive Vice President – Commercial Operations in November 2008. Mr. Orgas has extensive experience in supply chain management, logistics, risk management, and strategic planning. From May 2004 to October 2008, Mr. Orgas served as the Director of Raw Materials Strategic Sourcing and Risk Management for the Malt-O-Meal Company. From February 2003 to December 2003, Mr. Orgas was a Partner in the Agribusiness/Food Practice of McCarthy & Company, an advisory services firm. Prior to that, Mr. Orgas served as Regional Manager of the Northern States and Director of Integrated Supply Chain Management for ConAgra Foods, Inc. and as Senior Manager of Operations, Transportation and Trading of the northwest region for General Mills. Mr. Orgas has a Masters degree in Business Management from the University of Montana and a Bachelor of Science degree in Business Administration from the University of Minnesota.  

EDGAR SEWARD joined the Company as Executive Vice President – Plant Operations upon closing of the VBV merger on October 15, 2008. From May 2006 until the closing of the VBV merger, Mr. Seward served as the General Manager for Indiana Bio-Energy, LLC, where he managed development of the Bluffton ethanol facility from its inception through construction, staffing and operations. From January 2004 to April 2006, Mr. Seward served as a General Manager for United Bio-Energy, LLC, where he managed development of and provided technical support for multiple dry mill ethanol facilities. From October 2002 to December 2003, Mr. Seward served as a project manager for ICM, Inc., where he was actively involved in the design and specifications for dry milling technologies and facilities. Prior to that, Mr. Seward served in operations for a bio-technology business in the United Kingdom and in operations management at Aventine Renewable Energy. Mr. Seward has a Maste rs degree in Business Administration from the University of Illinois and a Bachelor of Science degree in Biology from Culver-Stockton College.

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PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Our common stock trades under the symbol “GPRE” on The NASDAQ Global Market. Pursuant to NASDAQ trading rules related to reverse merger transactions, our shares traded under the symbol “GPRED” for a period of 20 business days after closing of the Merger. We resumed trading under “GPRE” on November 10, 2008. Currently, our shares are thinly traded. No assurance can be given that our stock will continue to be traded on any market or exchange in the future, or that our shares will become more liquid. Our shares may continue to trade on a limited, sporadic and highly volatile basis. The following table sets forth, for the periods indicated, the high and low common stock sales price as reported by NASDAQ.

		High		Low
Year Ended December 31, 2008
Three months ended December 31, 2008  (1)	$	8.29	$	0.05
Three months ended September 30, 2008		7.75		4.00
Three months ended June 30, 2008		10.64		5.55
Three months ended March 31, 2008		14.14		6.69
Year Ended December 31, 2007
Three months ended December 31, 2007		15.84		8.52
Three months ended September 30, 2007		20.00		9.57
Three months ended June 30, 2007		23.35		16.50
Three months ended March 31, 2007		25.00		19.10
_________________ (1) Closing price of the Company’s common stock on December 31, 2008 was $1.84.

Issuer Purchases of Equity Securities

None.

Equity Compensation Plans

The following table sets forth, as of December 31, 2008, certain information related to the Company’s compensation plans under which shares of our common stock are authorized for issuance.  

Plan Category		Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights	Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
Equity compensation plans
	approved by security
	holders (1)	901,528	$15.08	231,777
Equity compensation plans
	not approved by
	security holders (2)	410,000	$  7.12	0
Total		1,311,528	$12.59	231,777

____________________

(1)  The maximum number of shares that may be issued under the 2007 Equity Incentive Plan as option grants, restricted stock awards, restricted stock units, stock appreciation rights, direct share issuances and other stock-based awards is 1,000,000 shares of our common stock. Also included are 267,528 shares assumed in the Merger.

(2)  In connection with the Merger, 150,000 fully-vested options were issued to Todd A. Becker on October 16, 2008 as an inducement grant pursuant to the Becker Employment Agreement. Grants were given to six individuals for a total of 260,000 options as inducement to enter into employment arrangements with Green Plains. One-quarter of those options vested on the date of grant, with one-quarter vesting on the same date in each of the three years thereafter.

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Holders of Record

As of December 31, 2008, as reported to us by our transfer agent, there were 1,925 holders of record of our common stock, not including beneficial holders whose shares are held in names other than their own. This figure does not include 3,817,689 shares held in depository trusts. Total active certificates, including depository trust shares, were 2,078.

Dividend Policy

To date, we have not paid dividends on our common stock. The payment of dividends on our common stock in the future, if any, is at the discretion of the board of directors and will depend upon our earnings, capital requirements, financial condition and other factors the board views as relevant. The payment of dividends is also limited by covenants in our loan agreements. The board does not intend to declare any dividends in the foreseeable future.

Performance Graph

In accordance with applicable SEC rules, the following table shows a line-graph presentation comparing cumulative stockholder return on an indexed basis with a broad equity market index and either a nationally-recognized industry standard or an index of peer companies selected by the Company for the two fiscal years ended November 30, 2006 and 2007, and for the 13-month period ended December 31, 2008. We have selected the NASDAQ Composite Index (IXIC) and the NASDAQ Clean Edge U. S. Index (CLEN) for comparison. The graph assumes that the value of the investment in the Company’s Common Stock and each index was $100 at November 30, 2005, the approximate date upon which the Company closed its first public offering (at an initial public offering price of $10 per share), and that all dividends were reinvested.

COMPARISON OF 3 YEAR CUMULATIVE TOTAL RETURN*

Among Green Plains Renewable Energy. The NASDAQ Composite Index

And The NASDAQ Clean Edge U.S. Liquid Series Index

* $100 invested on 11/30/05 in stock or index, including reinvestment of dividends

Fiscal year ending December 31.

	11/05	11/06	11/07	12/08
Green Plains Renewable Energy	$100.00	$227.10	$100.00	$18.40
NASDAQ Composite	$100.00	$111.76	$122.48	$71.01
NASDAQ Clean Edge U.S. Liquid Series	$100.00	$105.68	$187.43	$69.23

30

The information contained in the Performance Graph will not be deemed to be “soliciting material” or to be “filed” with the SEC, nor will such information be incorporated by reference into any future filing of the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except to the extent that the Company specifically incorporates it by reference into any such filing.

ITEM 6.  SELECTED FINANCIAL DATA.

Reverse Acquisition Accounting

The Company accounted for its merger with VBV under the purchase method of accounting for business combinations pursuant to Statement of Financial Accounting Standard (“SFAS”) No. 141, “Business Combinations.” Under the purchase method of accounting in a business combination effected through an exchange of equity interests, the entity that issues the equity interests is generally the acquiring entity. In some business combinations (commonly referred to as reverse acquisitions), however, the acquired entity issues the equity interests. SFAS No. 141 requires consideration of the facts and circumstances surrounding a business combination that generally involve the relative ownership and control of the entity by each of the parties subsequent to the merger. Based on a review of these factors, the merger with VBV was accounted for as a reverse acquisition (i.e., Green Plains was considered the acquired company and VBV was consider ed the acquiring company). As a result, Green Plains’ assets and liabilities as of October 15, 2008, the date of the merger closing, have been incorporated into VBV’s balance sheet based on the fair values of the net assets acquired, which equaled the consideration paid for the acquisition. SFAS No. 141 also requires an allocation of the acquisition consideration to individual assets and liabilities including tangible assets, financial assets, separately recognized intangible assets, and goodwill. Further, the Company’s operating results (post-merger) include VBV’s operating results prior to the date of closing and the results of the combined entity following the closing of the merger. Although VBV was considered the acquiring entity for accounting purposes, the merger was structured so that VBV became a wholly-owned subsidiary of Green Plains.

VBV was formed on September 28, 2006. Prior to completion of the Merger, VBV held a 78% ownership interest in Indiana Bio-Energy, LLC (which was constructing an ethanol plant in Bluffton, IN) and a 62% ownership interest in Ethanol Grain Processors, LLC (which was constructing an ethanol plant in Obion, TN). VBV reflected the interests held by others as minority interests in the consolidated balance sheet and recorded the minority interests in income and losses of the subsidiaries in its consolidated results of operations. The minority interests were exchanged for Green Plains common stock in conjunction with the Merger. Operations commenced at the Bluffton and Obion plants in September 2008 and November 2008, respectively. Accordingly, VBV, the acquiring entity for accounting purposes, was a development stage company until September 2008.

Historically, the predecessor company had a fiscal year end of November 30. Under reverse acquisition rules, the predecessor company would have been required to adopt VBV’s fiscal year end, which had been March 31. After the merger, the Company’s Board of Directors approved a resolution to change our fiscal year end to December 31 to more closely align our year end with that of most of our peer group.

Pursuant to reverse merger accounting rules, the historical consolidated financial statements and results of operations includes the historical financial results of VBV (and its subsidiaries) from its period of formation on September 28, 2006 through December 31, 2008, along with the acquired fair value of Green Plains’ assets and liabilities as of October 15, 2008 and the financial results of Green Plains (post-merger only) from October 15, 2008 through December 31, 2008.

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Selected Financial Data Table

The following selected financial data has been derived from our consolidated financial statements. This data should be read together with Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations of this report, and the consolidated financial statements and related notes thereto included elsewhere herein. The financial information below is not necessarily indicative of results to be expected for any future period. Future results could differ materially from historical results due to many factors, including those discussed in Item 1A – Risk Factors of this report.

As discussed above, pursuant to reverse acquisition accounting rules, this financial data includes the financial results of VBV (and its subsidiaries) from its period of formation on September 28, 2006 through December 31, 2008, along with the financial results of Green Plains (post-merger only) from October 15, 2008 through December 31, 2008.

(In thousands, except per share    and per unit information)					For the Nine- Month Transition Period Ended December 31, 2008		Year Ended March 31, 2008		Period from September 28, 2006 (Date of Inception) to March 31, 2007
Statement of Operations Data:
	Revenues			$	188,758	$	-	$	-
	Cost of goods sold				175,444		-		-
	Operating expenses				18,467		-		-
	Operating loss				(5,153)		-		-
	Other income (expense)				(2,896)		1,423		1,351
	Net income (loss)				(6,897)		(3,520)		(42)
	Earnings (loss) per
		common share:
			Basic	$	(0.56)	$	(0.47)	$	(0.01)
			Diluted	$	(0.56)	$	(0.47)	$	(0.01)
Operating and Other Data:
(Ethanol Production segment only)
	Ethanol sold (thousands of gallons)				61,547		-		-
	Distillers grains sold (equivalent dried tons)				177,875
	Average net price of ethanol sold
		($ per gallon)			1.76		-		-
	Average corn cost ($ per bushel)				4.33		-		-
	Average net price for distillers grains
		($ per equivalent dried ton)			125		-		-

			As of December 31, 2008		As of March 31,
					2008		2007
Balance Sheet Data:
	Cash and cash equivalents	$	64,839	$	1,432	$	87,466
	Current assets		192,969		5,285		89,070
	Total assets		693,066		254,175		175,454
	Current liabilities		108,249		26,856		2,085
	Long-term debt		304,832		80,710		64,845
	Total liabilities		413,081		107,566		27,829
	Stockholders’ equity		279,689		107,987		108,523

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Supplemental Historical Financial Data Table

The following supplemental historical financial data table has been derived from the consolidated historical activity of Green Plains (excluding VBV, which was merged with Green Plains on October 15, 2008) as of and for the fiscal years ended November 30, 2007, 2006 and 2005, and the nine months ended August 31, 2008. After the Merger, this information is considered to be non-GAAP financial information to the successor Company because historical financial results of the acquired company are not included in the successor Company’s financial results under reverse acquisition accounting rules. Since no GAAP measures of these data exist, no reconciliation is provided. However, management believes these data, which were prepared in accordance with GAAP for the predecessor company and previously filed with the SEC in Form 10-K and/or Form 10-Q filings, are beneficial to the users of these financial statements to better understand the historical operations of the organization. These data may not be reflective of future results of operations and is for information purposes only. The presentation of this additional historical non-GAAP financial information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP.

(In thousands, except per share and per unit information)					Nine Months Ended August 31, 2008		Year Ended November 30,
							2007		2006		2005
					(Unaudited)
Statement of Operations Data:
	Revenues			$	221,338	$	24,202	$	-	$	-
	Cost of goods sold				182,295		23,043		-		-
	Operating expenses				17,018		8,943		2,151		730
	Operating income (loss)				22,026		(7,784)		(2,151)		(730)
	Other income (expense)				(8,923)		351		3,395		332
	Net income (loss)				13,678		(7,138)		918		(398)
	Earnings (loss) per
		common share:
			Basic	$	1.81	$	(1.18)	$	0.19	$	(0.42)
			Diluted	$	1.81	$	(1.18)	$	0.19	$	(0.42)
Operating and Other Data:
	Ethanol sold (thousands of gallons)				45,531		11,046		-		-
	Average net price of ethanol sold
		($ per gallon)			2.22		1.64		-		-
	Average corn cost ($ per bushel)				4.59		3.56		-		-
	Average net price for distillers grains
		($ per equivalent dried ton)			157		122		-		-

			As of August 31, 2008		As of November 30,
Balance sheet Data:					2007		2006		2005
	Cash and cash equivalents	$	3,693	$	11,914	$	43,088	$	5,795
	Current assets		90,485		25,179		44,196		33,860
	Total assets		296,116		180,272		96,004		34,649
	Current liabilities		54,719		24,424		9,777		171
	Long-term debt		127,550		63,756		330		-
	Total liabilities		182,268		88,180		10,107		171
	Stockholders’ equity		113,847		92,092		85,896		34,479

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ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

General

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our consolidated financial condition and results of operations. This discussion should be read in conjunction with the consolidated financial statements included herewith and notes to the consolidated financial statements thereto and the risk factors contained therein.

Overview

Green Plains was formed in June 2004 to construct and operate dry mill, fuel-grade ethanol production facilities. To add shareholder value, we have expanded our business operations beyond ethanol production to integrate a full-service grain and agronomy business, ethanol marketing services, terminal and distribution assets, and next generation research and development in algae production.

Ethanol is a renewable, environmentally clean fuel source that is produced at numerous facilities in the United States, mostly in the Midwest. In the U.S., ethanol is produced primarily from corn and then blended with unleaded gasoline in varying percentages. The ethanol industry in the U.S. has grown significantly over the last few years as its use reduces harmful auto emissions, enhances octane ratings of the gasoline with which it is blended, offers consumers a cost-effective choice, and decreases the amount of crude oil the U.S. needs to import from foreign sources. Ethanol is most commonly sold as E10, the 10 percent blend of ethanol for use in all American automobiles. Increasingly, ethanol is also available as E85, a higher percentage ethanol blend for use in flexible fuel vehicles.

Operations commenced at our first ethanol plant, located in Shenandoah, IA, in late August 2007; at our second ethanol plant, located in Superior, IA, in July 2008; at our third ethanol plant, located in Bluffton, IN, in September 2008; and at our fourth ethanol plant, located in Obion, TN, in November 2008. At capacity, our four ethanol plants produce a total of approximately 330 million gallons of fuel-grade ethanol annually.

Previously, Green Plains Superior had contracted with RPMG, an independent marketer, to purchase all of its ethanol production, and Green Plains Bluffton and Green Plains Obion had contracted with Aventine to purchase all of their ethanol production. Under the agreements, we sold our ethanol production exclusively to them at a price per gallon based on a market price at the time of sale, less certain marketing, storage, and transportation costs, as well as a profit margin for each gallon sold. These agreements terminated in January and February 2009 and as a result, a one-time charge of approximately $5.1 million will be reflected in our 2009 first quarter financial results related to the termination of these agreements and certain related matters. We believe the termination of the agreements will allow us to market all of our own ethanol through Green Plains Trade, provide us a better opportunity to employ our risk management processes, mitigate our risk s of counterparty concentration and accelerate our collection of receivables.

Both RPMG and Aventine had entered into lease arrangements to secure sufficient availability of railcars to ship the ethanol produced at the respective plants with which they had contracted. Green Plains Superior, Green Plains Bluffton and Green Plains Obion have now assumed the various railcar leases.

Green Plains Trade is now responsible for the sales, marketing and distribution of all ethanol produced at our four production facilities. Local markets are the easiest to service because of their close proximity. However, the majority of our ethanol is sold to regional and national markets. The exception to this is at our Obion plant where we expect to market up to 50% of the production into the local Tennessee market. Through Green Plains Trade, we also market and distribute ethanol for three third-party ethanol producers with expected annual production totaling approximately 305 mmgy.

Our ethanol plants produce wet, modified wet and dried distillers grains. We had previously entered into exclusive marketing agreements with CHS Inc., a Minnesota cooperative corporation, for the sale of dried distillers grains produced at our Shenandoah and Superior plants. The agreement with CHS Inc. related to the Shenandoah plant terminated in July 2008. Green Plains Trade now markets all of the distillers grains that are produced at our Bluffton, Obion and Shenandoah plants.

Our operations are highly dependent on commodity prices, especially prices for corn, ethanol, distillers grains and natural gas. As a result of price volatility for these commodities, our operating results may fluctuate substantially. The price and availability of corn are subject to significant fluctuations depending upon a number of factors that affect commodity prices in general, including crop conditions, weather, federal policy and foreign trade. Because the market price of ethanol is not always directly related to corn prices, at times ethanol prices may lag movements in corn prices and compress the overall margin structure at the plants. As a result, at times, we may operate our plants at negative operating margins.

34

We attempt to hedge the majority of our positions by buying, selling and holding inventories of various commodities, some of which are readily traded on commodity futures exchanges. We focus on locking in margins based on an “earnings before interest, taxes, depreciation and amortization (“EBITDA”)” model that continually monitors market prices of corn, natural gas and other input costs against prices for ethanol and distillers grains at each of our production facilities. We create offsetting positions by using a combination of derivative instruments, fixed-price purchases and sales, or a combination of strategies in order to manage risk associated with commodity price fluctuations. Our primary focus is not to manage general price movements, for example minimize the cost of corn consumed, but rather to lock in favorable EBITDA margins whenever possible. We also employ a value-at-risk model with strict limits established by our Board of Directors to minimize commodity market exposures from open positions.

In particular, there has been a great deal of volatility in corn markets. The average Chicago Board of Trade (“CBOT”) near-month corn price during fiscal 2007 was $3.68 per bushel.  In the first six months of calendar 2008, corn prices rose to nearly $8.00 per bushel, and retreated to $4.07 per bushel as of December 31, 2008. The average corn price during calendar year 2008 was $5.27 per bushel. We believe that market volatility is attributable to a number of factors, including but not limited to export demand, speculation, currency valuation, ethanol demand and current production concerns. This corn market volatility poses a significant risk to our operations. The Company uses hedging strategies to lock in margins, leaving the Company less exposed to losses resulting from market fluctuations.  

Historically, ethanol prices have tended to track the wholesale price of gasoline. Ethanol prices can vary from state to state at any given time. During calendar year 2008, the average U.S. ethanol price, based on the Oil Price Information Service (“Opis”) Spot Ethanol Assessment, was $2.33 per gallon. For the same time period, the average U.S. gasoline price, based on New York Mercantile Exchange (“NYMEX”) reformulated blendstock for oxygen blending (“RBOB”) contracts was $2.49 per gallon, or approximately $0.16 per gallon above ethanol prices. We believe the higher ethanol prices were due to constraints in the ethanol blending and distribution infrastructure. For the fourth quarter of 2008, the average Opis Spot Ethanol Assessment was $1.77 per gallon and the average NYMEX RBOB was $1.34 per gallon, or approximately $0.43 per gallon below ethanol prices. During the fourth quarter of 2008, gasoline prices fell at a faster ra te than ethanol prices. As a result, discretionary blending slowed because ethanol traded above the blender’s credit value. We believe additional ethanol supply from newly completed plants and existing plants that were temporarily taken off-line may come on-line in the near future which may further reduce wholesale ethanol prices compared to gasoline.

Federal policy has a significant impact on ethanol market demand. Ethanol blenders benefit from incentives that encourage usage and a tariff on imported ethanol supports the domestic industry. Additionally, the renewable fuels standard (“RFS”) mandates increased level of usage of both corn-based and cellulosic ethanol. The RFS policies were challenged in a proceeding at the EPA by the State of Texas. The State of Texas sought a waiver of 50 percent of the RFS mandate for the production of ethanol derived from grain, citing the adverse economic impact due to higher corn, feed and food prices. The EPA denied this request in early August 2008. Any adverse ruling on, or legislation affecting, RFS mandates in the future could have an adverse impact on short-term ethanol prices and our financial performance in the future. Growth Energy, an ethanol industry trade organization, has requested a waiver from the EPA to increase the amount of ethanol blende d into gasoline from the 10 percent blend up to a 15 percent blend (E15). We feel there is a strong possibility to see increased blends without having to increase the RFS mandate. We believe such a waiver, if granted, would have a positive and material impact on the business.

We believe the ethanol industry will continue to expand due to these federal mandates and policies. However, we expect the rate of industry expansion to slow significantly because of the amount of ethanol production added during the past two years or to be added by plants currently under construction. This additional supply, along with a compressed margin structure, has resulted in reduced availability of capital for additional ethanol plant construction or expansion.

We believe that any reversal in federal policy could have a profound impact on the ethanol industry. Recently, a political debate has developed related to the alleged adverse impact that increased ethanol production has had on food prices. The high-profile debate focuses on conflicting economic theories explaining increased commodity prices and consumer costs. The food vs. fuel debate has waned as of late with the significant reduction in commodity prices in food and feedstocks around the world. Political candidates and elected officials have responded with proposals to reduce, limit or eliminate the RFS mandate, blender’s credit and tariff on imported ethanol. While at present no policy change appears imminent, we believe that the debates have created uncertainty and increased the ethanol industry’s exposure to political risk.

Companies involved in the production of ethanol are merging to increase efficiency and capture economies of scale. We have adopted a vertical-integration strategy and business model. Vertical integration has often been an effective strategy for reducing risk and increasing profits in other commodity-driven businesses. In recent years, many ethanol companies have focused primarily on ethanol refining and production. The overall ethanol value chain, however, consists of multiple steps involving agribusinesses, such as grain elevators, agronomy services, distributors of distillers grains, and downstream operations such as ethanol marketers and fuel blenders. By simultaneously engaging in multiple steps in the ethanol value chain, we believe we can increase efficiency, diversify cash flows and manage commodity price and supply risk. We are seeking strategic opportunities to further consolidate and integrate firms involved in the ethanol value chain.

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The ethanol industry has seen significant distress over the last year. There have been several well-publicized bankruptcies announced, including VeraSun Energy Corporation, which had been one of the largest producers of ethanol in the U.S. In addition, several other ethanol producers have also declared bankruptcy or indicated they were in financial distress. Margin compression and high commodity prices were the main reasons for this. In addition, destination market and non-advantaged location plants have seen additional hardship. Ethanol producers of all sizes were caught with corn contracts or inventory ownership in the significant price decline in the corn market without any ethanol sold against those positions. However, we believe a disciplined risk management program helps mitigate these types of occurrences from happening in a magnitude so as to cause material adverse consequences. Green Plains utilizes a disciplined risk management program with a co mprehensive policy to monitor and measure the risk of commodity price movements. We stay closely hedged between ethanol sales and corn purchases, and measure the “value at risk” of our open, unhedged position and must stay within limits established by our Board of Directors. In addition, our multiple business lines and revenue streams help diversify the Company’s operations and profitability.

Merger and Acquisition Activities

To add shareholder value, we have expanded our business operations beyond ethanol production to integrate a full-service grain and agronomy business, ethanol marketing services, terminal and distribution assets, and next generation research and development in algae-based biofuels.

Merger with Great Lakes Cooperative

To complement and enhance our ethanol production facilities, on April 3, 2008, the Company completed its merger with Great Lakes, a full-service cooperative with approximately $146 million in fiscal 2007 revenues that specializes in grain, agronomy, feed and petroleum products in northwestern Iowa and southwestern Minnesota. Upon closing the merger with Great Lakes, Green Plains Grain, a wholly-owned subsidiary of the Company, assumed Great Lakes’ assets and liabilities, with the exception of certain investments in regional cooperatives that were excluded from the merger. Green Plains Grain has grain storage capacity of approximately 20 million bushels that will be used to support our grain merchandising activities, as well as our Superior ethanol plant operations. We believe that incorporating Great Lakes’ businesses into our operations increases efficiencies and reduces commodity price and supply risks. Pursuant to the merger agreement, a ll outstanding Great Lakes common and preferred stock was exchanged for an aggregate of 550,352 shares of our common stock and approximately $12.5 million in cash.

Merger with VBV LLC

In May 2008, we entered into definitive merger agreements with VBV LLC and its subsidiaries. At that time, VBV held majority interest in two companies that were constructing ethanol plants. These two companies were Indiana Bio-Energy, LLC of Bluffton, IN, an Indiana limited liability company which was formed in December 2004; and Ethanol Grain Processors, LLC, of Obion, TN, a Tennessee limited liability company which was formed in October 2004. Additionally, VBV was developing an ethanol marketing and distribution business at the time of the merger announcement. The Merger was completed on October 15, 2008. For accounting purposes, the Merger has been accounted for as a reverse merger, which is discussed in further detail in Item 6 – Selected Financial Data. Pursuant to the terms of the Merger, current equity holders of VBV, IBE and EGP received Company common stock and options totaling 11,139,000 shares. Upon closing of the Merger, VBV, IBE and EGP were merged into subsidiaries of the Company. Simultaneously with the closing of the Merger, NTR, the majority equity holder of VBV prior to the Merger, through its wholly-owned subsidiaries, invested $60.0 million in Company common stock at a price of $10 per share, or an additional 6.0 million shares. This additional investment is being used for general corporate purposes and to finance future acquisitions.

Operations commenced at the Bluffton and Obion plants in September 2008 and November 2008, respectively. The VBV plants are each expected to produce approximately 110 million of gallons of ethanol and 340,000 tons of distillers grains annually.

Since the Merger occurred toward the end of our fiscal year and involved complex legal and accounting issues, we performed a tentative allocation of the purchase price using preliminary estimates of the values of the assets and liabilities acquired. We have engaged an expert to assist in the determination of the purchase price allocation. We believe the final allocation will be determined during 2009 with prospective adjustments recorded to our financial statements at that time, if necessary, in accordance with SFAS No. 141. A true-up of the purchase price allocation could result in gains or losses recognized in our consolidated financial statements in future periods.

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Acquisition of Majority Interest in Blendstar, LLC

On January 20, 2009, the Company acquired majority interest in Blendstar, a biofuel terminal operator. The transaction involved a membership interest purchase whereby the Company acquired 51% of Blendstar from Bioverda U.S. Holdings LLC, an affiliate of NTR, our largest shareholder, for $9.0 million. Blendstar operates terminal facilities in Oklahoma City, Little Rock, Nashville, Knoxville, Louisville and Birmingham and has announced commitments to build terminals in two additional cities. Blendstar facilities currently have splash blending and full-load terminal throughput capacity of over 200 million gallons per year.

General

Green Plains now has operations throughout the ethanol value chain, beginning “upstream” with our agronomy and grain handling operations, continuing through substantial ethanol production facilities and ending “downstream” with our ethanol marketing, distribution and blending facilities. We intend to continue to explore potential merger or acquisition opportunities, including those involving other ethanol producers and developers, other renewable fuels-related technologies, and grain and fuel logistics facilities. We believe that our vertical-integration model offers strategic advantages over participants operating in only one facet of the industry, such as production, and we continue to seek opportunities to incorporate upstream and downstream ethanol-related firms into our operations. We believe that we are well positioned to be a consolidator of strategic ethanol assets.  

Critical Accounting Policies and Estimates

This disclosure is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires that the Company make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and other assumptions that we believe are proper and reasonable under the circumstances. We continually evaluate the appropriateness of estimates and assumptions used in the preparation of our consolidated financial statements. Actual results could differ materially from those estimates. The following key accounting policies are impacted significantly by judgments, assumptions and estimates used in the preparation of the consolidated financial statements.

Revenue Recognition

We recognize revenue when all of the following criteria are satisfied: persuasive evidence of an arrangement exists; risk of loss and title transfer to the customer; the price is fixed and determinable; and collectability is reasonably assured.

We sell ethanol and distillers grains in-house through Green Plains Trade and, during the periods reported, to third-party marketers, who are our customers for purposes of revenue recognition. For sales of ethanol and distillers grains by Green Plains Trade, sales are recognized when title to the product and risk of loss transfer to the customer. The third-party marketers are responsible for subsequent sales, marketing, and shipping of the ethanol and distillers grains purchased from us. Accordingly, once the ethanol or distillers grains are loaded into railcars and bills of lading are generated, the criteria for revenue recognition are considered to be satisfied and sales are recorded.  As part of our contracts with these third-party marketers, shipping costs incurred by them reduce the sales price they pay us. Under our contract with CHS, Inc., certain shipping costs for dried distillers grains are incurred directly by us, which are reflected in cost of goods sold.  For distillers grains sold to local farmers, bills of lading are generated and signed by the driver for outgoing shipments, at which time sales are recorded.

Sales of agricultural commodities, fertilizers and other similar products are recognized when title to the product and risk of loss transfer to the customer, which is dependent on the agreed upon sales terms with the customer. These sales terms provide for passage of title either at the time shipment is made or at the time the commodity has been delivered to its destination and final weights, grades and settlement prices have been agreed upon with the customer. Shipping and handling costs are included as a component of cost of goods sold. Revenues from grain storage are recognized as services are rendered. Revenues related to grain merchandising are presented gross.

Cost of Goods Sold

Direct labor, direct materials and certain plant overhead costs are reflected in cost of goods sold. This includes shipping costs incurred directly by us, including inbound and outbound freight charges, inspection costs, internal transfer costs and railcar lease costs. Cost of goods sold also includes realized and unrealized gains and losses on related derivative financial instruments. We use exchange-traded futures and options contracts to minimize the effects of changes in the prices of agricultural commodities on our agribusiness grain inventories and forward purchase and sales contracts. Exchange-traded futures and options contracts are valued at quoted market prices. Forward purchase contracts and forward sale contracts are valued at market prices where available or other market quotes, adjusted for differences, primarily transportation, between the exchange traded market and the local markets on which the terms of the contracts are based. Changes in the market value of inventories, forward purchase and sale contracts, and exchange-traded futures and options contracts, are recognized in earnings as a component of cost of goods sold.

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Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation on our ethanol production facilities, grain storage facilities, railroad track, computer equipment and software, office furniture and equipment, vehicles, and other fixed assets has been provided on the straight-line method over the estimated useful lives of the assets, which currently range from 3-40 years.

Land and permanent land improvements are capitalized at cost. Non-permanent land improvements, construction in progress, and interest incurred during construction are capitalized and depreciated upon the commencement of operations of the property. The determination for permanent land improvements and non-permanent land improvements is based upon a review of the work performed and if the preparation activities would be destroyed by putting the property to a different use, the costs are not considered inextricably associated with the land and are depreciable. This determination will have an impact on future results because permanent land improvements are not depreciated whereas non-permanent improvements will be depreciated.

We periodically evaluate whether events and circumstances have occurred that may warrant revision of the estimated useful life of fixed assets or whether the remaining balance of fixed assets should be evaluated for possible impairment. We use an estimate of the related undiscounted cash flows over the remaining life of the fixed assets in measuring their recoverability.

Impairment of long-lived assets

Our long-lived assets consist of property and equipment, and acquired intangible assets. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Significant management judgment is required in determining the fair value of our long-lived assets to measure impairment, including projections of future cash flows.

Share-based compensation

We account for share-based compensation transactions using a fair-value-based method, which requires us to record noncash compensation costs related to payment for employee services by an equity award, such as stock options, in our consolidated financial statements over the requisite service period. Our outstanding stock options are subject only to time-based vesting provisions and include exercise prices that are equal to the fair market value of our common stock at the time of grant. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model using assumptions pertaining to expected life, interest rate, volatility and dividend yield. Expected volatilities are based on historical volatility of our common stock. The expected life of options granted represents an estimate of the period of time that options are expected to be outstanding, which is shorter than the term of the option. In addition, we are required to calculate estimated forfeiture rates on an ongoing basis that impact the amount of share-based compensation costs we record. If the estimates we use to calculate the fair value for employee stock options differ from actual results, or actual forfeitures differ from estimated forfeitures, we may be required to record gains or losses that could be material.

Derivative financial instruments

We use various financial instruments, including derivatives, to minimize the effects of the volatility of commodity price changes primarily related to corn, natural gas and ethanol. We monitor and manage this exposure as part of our overall risk management policy. As such, we seek to reduce the potentially adverse effects that the volatility of these markets may have on our operating results. We may take hedging positions in these commodities as one way to mitigate risk. We have put in place commodity price risk management strategies that seek to reduce significant, unanticipated earnings fluctuations that may arise from volatility in commodity prices, principally through the use of derivative instruments. While we attempt to link our hedging activities to our purchase and sales activities, there are situations where these hedging activities can themselves result in losses.

By using derivatives to hedge exposures to changes in commodity prices, we have exposures on these derivatives to credit and market risk. We are exposed to credit risk that the counterparty might fail to fulfill its performance obligations under the terms of the derivative contract. We minimize our credit risk by entering into transactions with high quality counterparties, limiting the amount of financial exposure we have with each counterparty and monitoring the financial condition of our counterparties. We also maintain a risk management policy requiring that all non-exchange traded derivative contracts with a duration greater than one year be formally approved by senior management. Market risk is the risk that the value of the financial instrument might be adversely affected by a change in commodity prices or interest rates. We manage market risk by incorporating monitoring parameters within our risk management strategy that limit the types of derivati ve instruments and derivative strategies we use, and the degree of market risk that may be undertaken by the use of derivative instruments.

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We evaluate our contracts to determine whether the contracts are derivatives as certain derivative contracts that involve physical delivery may be deemed as normal purchases or normal sales as they will be expected to be used or sold over a reasonable period in the normal course of business. Any derivative contracts that do not meet the normal purchase or sales criteria are brought to market with the corresponding gains and losses recorded in operating income unless the contracts qualify for hedge accounting treatment. We do not classify any of our commodity derivative contracts as hedging contracts. These derivative financial instruments are recognized in other current assets or liabilities at fair value.

Accounting for Income Taxes

Income taxes are accounted for under the asset and liability method in accordance with SFAS No. 109, “Accounting for Income Taxes,” and Financial Accounting Standards Board (“FASB”) Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109.” Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in operations in the period that includes the enactment dat e. A valuation allowance is recorded if it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Management’s evaluation of the realizability of deferred tax assets must consider positive and negative evidence, and the weight given to the potential effects of such positive and negative evidence is based on the extent to which it can be objectively verified.  

Recent Accounting Pronouncements

In September 2008, the FASB issued FASB Staff Position (“FSP”) No. 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees.” This FSP is intended to improve disclosures about credit derivatives by requiring more information about the potential adverse effects of changes in credit risk on the financial position, financial performance and cash flows of the sellers of credit derivatives. FSP No. 133-1 amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” to require disclosures by sellers of credit derivatives, including credit derivatives embedded in hybrid instruments. FSP No. 133-1 also amends FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others,” to require an additional disclosure about the current status of the payment/performance risk of a guarantee. The provisions of FSP No. 133-1 that amend SFAS No. 133 and FIN 45 are effective for reporting periods ending after November 15, 2008. FSP No. 133-1 clarifies the effective date of SFAS No. 161. The disclosures required by SFAS No. 161 should be provided for any reporting period beginning after November 15, 2008. This clarification of the effective date of SFAS No. 161 is effective upon issuance of FSP No. 133-1. We are currently evaluating the impact that this statement will have on our consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements presented in conformity with generally accepted accounting principles in the United States. The implementation of SFAS No. 162 did not have a material impact on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities.” The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. SFAS No. 161 achieves these improvements by requiring disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also provides more information about an entity’s liquidity by requiring disclosure of derivative features that are credit risk related. Finally, it requires cross-referencing within footnotes to enable financial statement users to locate important information about derivative instruments. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. We do not expect the adoption of SFAS No. 161 to have a material impact on our consolidated financial statements.

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In December 2007, the FASB issued “Summary of Statement No. 141 (revised 2007) (“SFAS No. 141R”),” which replaces SFAS No. 141, “Business Combinations,” to improve the relevance and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. SFAS No. 141R retains the fundamental requirements that the acquisition method of accounting (which SFAS No. 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. SFAS No. 141R requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. That replaces SFAS No. 141’s cost-allocation process, which required the cost of an acquisition to be a llocated to the individual assets acquired and liabilities assumed based on their estimated fair values. SFAS No. 141’s guidance resulted in not recognizing some assets and liabilities at the acquisition date, and it also resulted in measuring some assets and liabilities at amounts other than their fair values at the acquisition date. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. It may not be applied before that date. We do not expect the adoption of SFAS No. 141R to have a material impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51,” which establishes accounting and reporting standards for the noncontrolling interest (minority interest) in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. The amount of net income attributable to the noncontrolling interest is to be included in consolidated net income on the face of the income statement. SFAS No. 160 also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. It may not be applied before that date. We do not expect the adoption of SFAS No. 160 to have a material impact on our consolidated financial statements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our consolidated financial condition, results of operations or liquidity.

Results of Operations

VBV was formed on September 28, 2006. Prior to completion of the merger with Green Plains, VBV had a controlling interest in two development stage ethanol plants. Operations commenced at these plants in September 2008 and November 2008. Accordingly, VBV, the acquiring entity for accounting purposes, was a development stage company until September 2008. As discussed in Item 6 – Selected Financial Data of this report, pursuant to reverse acquisition accounting rules, results of operations include the financial results of VBV from its period of inception through December 31, 2008, along with the financial results of Green Plains from October 15, 2008 through December 31, 2008.

With the closing of the Merger in October 2008, the Company’s chief operating decision makers began to review its operations in three separate operating segments. For additional information related to operating segments, see Note 5 – Segment Information included herein as part of the Notes to the Consolidated Financial Statements. These segments are: (1) production of ethanol and related by-products (which we collectively refer to as “Ethanol Production”), (2) grain warehousing and marketing, as well as sales and related services of seed, feed, fertilizer, chemicals and petroleum products (which we collectively refer to as “Agribusiness”) and (3) marketing and distribution of Company-produced and third-party ethanol and distillers grains (which we refer to as “Marketing and Distribution”). Following are revenues, gross profit and operating income for our operating segments for the nine months ended December 3 1, 2008, the comparative nine-month period ended December 31, 2007 (which is unaudited), the year ended March 31, 2008, and the period from inception, September 28, 2006, to March 31, 2007 (in thousands):

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				For the Nine-Month Transition Period Ended December 31, 2008		For the Nine-Month Comparative Period Ended December 31, 2007		Year Ended March 31, 2008		Period from September 28, 2006 (Date of Inception) to March 31, 2007
						(unaudited)
Revenues:
	Ethanol Production		$	131,538	$	-	$	-	$	-
	Agribusiness			68,785		-		-		-
	Marketing and Distribution			76,521		-		-		-
	Intercompany eliminations			(88,086)		-		-		-
			$	188,758	$	-	$	-	$	-
Gross profit:
	Ethanol Production		$	4,857	$	-	$	-	$	-
	Agribusiness			8,554		-		-		-
	Marketing and Distribution			-		-		-		-
	Intercompany eliminations			(97)		-		-		-
			$	13,314	$	-	$	-	$	-
Operating income (loss):
	Ethanol Production		$	(9,113)	$	(3,463)	$	(5,423)	$	(1,421)
	Agribusiness			4,422		-		-		-
	Marketing and Distribution			(365)		-		-		-
	Intercompany eliminations			(97)		-		-		-
			$	(5,153)	$	(3,463)	$	(5,423)	$	(1,421)
Total assets:
	Ethanol Production		$	537,843	$	217,496	$	254,175	$	175,454
	Agribusiness			77,384		-		-		-
	Marketing and Distribution			33,867		-		-		-
	Corporate assets (not assigned
		to specific segments)		48,128		-		-		-
	Intercompany eliminations			(4,156)		-		-		-
			$	693,066	$	217,496	$	254,175	$	175,454

Total revenues during the nine months ended December 31, 2008 were $188.8 million. This amount includes revenues from our Bluffton and Obion plants from commencement of their operations on September 11, 2008 and November 9, 2008, respectively, until the end of the year.  Revenues for this period also include operations from our Shenandoah and Superior plants, as well as Green Plains Grain, from October 15, 2008 (date of the Merger) to December 31, 2008. We had no revenues from our inception in September 2006 until September 2008 as VBV did not begin operations until the Bluffton plant commenced production. Accordingly, there were no revenues from operations during the nine-month period ending December 31, 2007 to compare against.

We sold 61.5 million gallons of ethanol within the Ethanol Production segment during this nine-month period, primarily after the Merger, at an average net price of $1.73 per gallon. Our average corn cost was $3.98 per bushel. In addition, we recognized $28.3 million from sales of distillers grains and $14.9 million in revenues from grain merchandising and storage. Our distillers grain sales averaged $136 per equivalent dried ton.

Cost of goods sold during nine months ended December 31, 2008 was $175.4 million, resulting in a $13.3 million gross profit. We had no cost of goods sold from September 2006 until September 2008 as VBV was a development stage company until the Bluffton plant commenced production in September 2008. Accordingly, there was no cost of goods sold during the nine-month period ending December 31, 2007 to compare against.  

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Operating expenses were $18.5 million, and $3.5 million during the nine months ended December 31, 2008 and 2007, respectively. Operating expenses for the nine months ending December 31, 2008 include nine months of expenses for the former VBV companies and two and one-half months of expenses for the predecessor Green Plains companies. For the nine months ending December 31, 2007, only the VBV companies’ expenses are included. Our operating expenses are primarily general and administrative expenses for employee salaries, incentives and benefits; stock-based compensation expenses; office expenses; depreciation and amortization costs; board fees; and professional fees for accounting, legal, consulting, and investor relations activities. Personnel costs, which include employee salaries, incentives and benefits, are the largest single category of expenditures in operating expenses.

The $15.0 million increase in operating expenses during the nine-month period ended December 31, 2008, as compared to the same period during 2007, was partially due to an increase in employee salaries, incentives, benefits and other expenses resulting from the increase in employees hired to operate our ethanol plants in Bluffton and Obion, stock-based compensation costs, professional services and inclusion of operating expenses for the predecessor Green Plains companies since October 15, 2008. Operating expenses for the nine months ending December 31, 2008 included one-time Merger-related costs of $2.7 million. Additionally, comparative depreciation expense increased by $4.7 million as all four plants were operational by December 31, 2008. Other general and administrative expenses comprise the remainder of the comparative increase between periods.

Liquidity and Capital Resources

On December 31, 2008, we had $64.8 million in cash and equivalents and $21.0 million available under committed loan agreements (subject to satisfaction of specified lending conditions). Our business is highly impacted by commodity prices, including prices for corn, ethanol and natural gas. Based on recent forward prices of corn and ethanol, at times we may operate our plants at negative operating margins.

As of December 31, 2008, working capital balances at Green Plains Bluffton, Green Plains Obion and Green Plains Superior were less than those required by the respective financial covenants in the loan agreements of those subsidiaries. In addition, the debt service coverage ratio for Green Plains Superior was below levels required by its covenants. In February 2009, the Company contributed additional capital to these subsidiaries and as a result, the lenders provided waivers accepting our compliance with the financial covenants for these subsidiaries as of that date. Our forecasts for Green Plains Bluffton, Green Plains Obion and Green Plains Shenandoah indicate continued compliance with each of the material financial covenants. Current forecasts for Green Plains Superior indicate that we may fail to meet required working capital,  net worth and/or debt service coverage ratios at that subsidiary. In that event, we may seek additional waivers from the lenders to Green Plains Superior or may inject additional capital into this subsidiary to become compliant, though we have no obligation to make such an injection. Because of the volatility of our income and cash flow, we are unable to predict whether Green Plains Superior, or any of our other subsidiaries, will be able to independently comply with their respective covenants in the future. In the event a subsidiary is unable to comply with its respective debt covenants, the subsidiary’s lenders may determine that an event of default has occurred. Upon the occurrence of an event of default, and following notice, the lenders may terminate any commitment and declare the entire unpaid balance due and payable. Based upon our current forecasts, we believe we have sufficient liquidity available on a consolidated basis to resolve a subsidiary’s noncompliance; however, no obligation exists to provide such liquidity. Furthermore, no assurance can be provided that actual operating results will approximate our forecasts or that we will inject the necessary capital into a subsidiary to maintain compliance.

We believe that we have sufficient working capital for our existing operations. However, we can provide no assurance that we will be able to secure additional funding for any of our operations, if necessary, given the current state of credit markets. A sustained period of unprofitable operations may strain our liquidity and make it difficult to maintain compliance with our financing arrangements. While we may seek additional sources of working capital in response, we can provide no assurance that we will be able to secure this funding, if necessary. In the future, we may decide to improve or preserve our liquidity through the issuance of common stock in exchange for materials and services. We may also sell additional equity or borrow additional amounts to expand our ethanol plants; build additional or acquire existing ethanol plants; and/or build additional or acquire existing corn storage facilities. We can provide no assurance that we will be able to se cure the funding necessary for these additional projects or for additional working capital needs at reasonable terms, if at all.

Long-Term Debt

For additional information related to the Company’s long-term debt, see Note 9 – Long-Term Debt and Lines of Credit included herein as part of the Notes to Consolidated Financial Statements.

42

Ethanol Production Segment

Each of our Ethanol Production segment subsidiaries have credit facilities with lender groups that provided for term and revolving term loans to finance construction and operation of the production facilities.

The Green Plains Bluffton loan is comprised of a $70.0 million amortizing term loan and a $20.0 million revolving term facility (individually and collectively, the “Green Plains Bluffton Loan Agreement”). At December 31, 2008, the entire $70.0 million related to the term loan was outstanding, along with $18.7 million on the revolving term loan. In addition, Green Plains Bluffton has a $22.0 million revenue bond outstanding.

The Green Plains Obion loan is comprised of a $60.0 million amortizing term loan, a revolving term loan of $37.4 million and a $2.6 million revolving line of credit (individually and collectively, the “Green Plains Obion Loan Agreement”). At December 31, 2008, the entire $60.0 million related to the term loan was outstanding, along with $30.8 million on the revolving term loan. The Company had no borrowings outstanding under the revolving line of credit as of December 31, 2008.

The Green Plains Shenandoah loan is comprised of a $30.0 million amortizing term loan, a $17.0 million revolving term facility, and a statused revolving credit supplement (seasonal borrowing capability) of up to $4.3 million (individually and collectively, the “Green Plains Shenandoah Loan Agreement”). At December 31, 2008, $23.2 million related to the term loan was outstanding, along with the entire $17.0 million on the revolving term loan, and $3.3 million on the seasonal borrowing agreement.

The Green Plains Superior loan is comprised of a $40.0 million amortizing term loan and a $10.0 million revolving term facility (individually and collectively, the “Green Plains Superior Loan Agreement”). At December 31, 2008, $35.9 million related to the term loan was outstanding, along with the entire $10.0 million on the revolving term loan.

In addition, we had outstanding economic development grants totaling $3.4 million at December 31, 2008.

Key Loan Information

·

Term Loans – The term loans were available for advances until construction for each of the plants was completed.

o

Scheduled quarterly principal payments (plus interest) are as follows:

§

Green Plains Bluffton  

  $1.75 million

§

Green Plains Obion  

  $2.4 million (beginning May 20, 2009)

§

Green Plains Shenandoah

  $1.2 million

§

Green Plains Superior  

  $1.375 million

o

Final maturity dates (at the latest) are as follows:

§

Green Plains Bluffton  

  November 1, 2013

§

Green Plains Obion  

  May 20, 2015

§

Green Plains Shenandoah

  May 20, 2014

§

Green Plains Superior  

  July 20, 2015

o

Each term loan has a provision that requires the Company to make annual special payments equal to a percentage ranging from 65% to 75% of the available free cash flow from the related entity’s operations (as defined in the respective loan agreements), subject to certain limitations, generally provided, however, that if such payment would result in a covenant default under the respective loan agreements, the amount of the payment shall be reduced to an amount which would not result in a covenant default.

o

Free cash flow payments are discontinued when the aggregate total received from such payments meets the following amounts:

§

Green Plains Bluffton  

  $16.0 million

§

Green Plains Obion  

  $18.0 million

§

Green Plains Shenandoah

  $8.0 million

§

Green Plains Superior  

  $10.0 million

43

·

Revolving Term Loans – The revolving term loans are generally available for advances throughout the life of the commitment. Allowable advances under the Green Plains Shenandoah Loan Agreement are reduced by $2.4 million each six-month period commencing on the first day of the month beginning approximately six months after repayment of the term loan, but in no event later than November 1, 2014. Allowable advances under the Green Plains Superior Loan Agreement are reduced by $2.5 million each six-month period commencing on the first day of the month beginning approximately six months after repayment of the term loan, but in no event later than July 1, 2015. Interest-only payments are due each month on all revolving term loans until the final maturity date, with the exception of the Green Plains Obion Loan Agreement, which requires additional semi-annual payments of $4.675 million beginning November 1, 2015.

o

Final maturity dates (at the latest) are as follows:

§

Green Plains Bluffton  

  November 1, 2013

§

Green Plains Obion  

  November 1, 2018

§

Green Plains Shenandoah

  November 1, 2017

§

Green Plains Superior  

  July 1, 2017

·

The loans bear interest at either the Agent Base Rate (prime) plus from 0.0% to 0.5% or short-term fixed rates at LIBOR plus 250 to 390 basis points (each based on a ratio of total equity to total assets).

·

Certain loans were charged an application fee and have an annual recurring administrative fee.

·

Unused commitment fees, when charged, range from 0.375% to 0.75%.  

As security for the loans, the lenders received a first-position lien on all personal property and real estate owned by the respective entity borrowing the funds, including an assignment of all contracts and rights pertinent to construction and on-going operations of the plant. These borrowing entities are also required to maintain certain financial and non-financial covenants during the terms of the loans.

·

Bluffton Revenue Bond – Green Plains Bluffton also received $22.0 million in Subordinate Solid Waste Disposal Facility Revenue Bond funds from the City of Bluffton, IN. The revenue bond requires: (1) semi-annual interest only payments of $825,000 through September 1, 2009, (2) semi-annual principal and interest payments of approximately $1.5 million during the period commencing on March 1, 2010 through March 1, 2019, and (3) a final principal and interest payment of $3.745 million on September 1, 2019.

·

The revenue bond bears interest at 7.50% per annum.

·

Origination and other fees, as well as revenue bond issuance costs, have been recorded in financing costs in the consolidated balance sheets.

Agribusiness Segment

The Green Plains Grain loan is comprised of a $9.0 million amortizing term loan and a $35.0 million revolving term facility (individually and collectively, the “Green Plains Grain Loan Agreement”). Loan proceeds are used primarily for working capital purposes. The principal amount of the revolving credit note is reduced to $30.0 million on March 31, 2009. At December 31, 2008, $8.3 million related to the term loan was outstanding, along with $20.0 million on the revolving term loan. In addition, Green Plain Grain had outstanding equipment financing term loans totaling $1.5 million at December 31, 2008.

44

Key Loan Information

·

The term loan expires on April 3, 2013 and the revolving loan expires on April 3, 2010.

·

Payments of $225,000 under the term loan are due on the last business day of each calendar quarter, with any remaining amount payable at the expiration of the loan term.

·

The loans bear interest at either the Agent Base Rate (prime) minus 0.25% to plus 0.75% or short-term fixed rates at LIBOR plus 175 to 275 basis points (each depending on Green Plains Grain’s fixed charge ratio for the preceding four fiscal quarters).

·

As security for the loans, the lender received a first-position lien on real estate, equipment, inventory and accounts receivable owned by Green Plains Grain.

Contractual Obligations

Our contractual obligations as of December 31, 2008 were as follows:

				Payments Due By Period
Contractual Obligations				Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	Long-term debt obligations (1)		$	326,416	$	27,405	$	80,710	$	117,354	$	100,947
	Operating lease obligations (2)			21,208		4,970		6,763		4,418		5,057
	Purchase obligations (3)			966,874		303,308		329,269		328,919		5,378
		Total	$	1,314,498	$	335,683	$	416,742	$	450,691	$	111,382

________________

(1)   Includes current portion of long-term debt.

(2)   Operating lease costs are primarily for railcars and office space.

(3)   Includes forward corn purchase contracts.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are subject to market risks concerning our long-term debt, future prices of corn, natural gas, ethanol and distillers grains. From time to time, we may purchase corn futures and options to hedge a portion of the corn we anticipate we will need.  In addition, we have contracted for future physical delivery of corn. We are exposed to the full impact of market fluctuations associated with interest rates and commodity prices as discussed below. At this time, we do not expect to have exposure to foreign currency risk as we expect to conduct all of our business in U.S. dollars.

Interest Rate Risk  

We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from holding term and revolving loans that bear variable interest rates. Specifically, we have $326 million outstanding in long-term debt as of December 31, 2008, $297 million of which is variable-rate in nature. Interest rates on our variable-rate debt are determined based upon the market interest rate of either the lender’s prime rate or LIBOR, as applicable. A 10% change in interest rates would affect our interest cost on such debt by approximately $1.7 million per year in the aggregate. Other details of our outstanding debt are discussed in the notes to the consolidated financial statements included later as a part of this report.

Commodity Price Risk

We produce ethanol and distillers grains from corn and our business is sensitive to changes in the prices of each of these commodities. The price of corn is subject to fluctuations due to unpredictable factors such as weather; corn planted and harvested acreage; changes in national and global supply and demand; and government programs and policies. We use natural gas in the ethanol production process and, as a result, our business is also sensitive to changes in the price of natural gas. The price of natural gas is influenced by such weather factors as extreme heat or cold in the summer and winter, or other natural events like hurricanes in the spring, summer and fall. Other natural gas price factors include North American exploration and production, and the amount of natural gas in underground storage during both the injection and withdrawal seasons. Ethanol prices are sensitive to world crude-oil supply and demand; crude-oil refining capacity and utiliz ation; government regulation; and consumer demand for alternative fuels. Distillers grains prices are sensitive to various demand factors such as numbers of livestock on feed, prices for feed alternatives, and supply factors, primarily production by ethanol plants and other sources.

45

We attempt to reduce the market risk associated with fluctuations in the price of corn and natural gas by employing a variety of risk management and hedging strategies. Strategies include the use of derivative financial instruments, such as futures and options executed on the Chicago Board of Trade and/or the New York Mercantile Exchange, as well as the daily management of our physical corn and natural gas procurement relative to plant requirements for each commodity. The management of our physical corn procurement may incorporate the use of forward fixed-price contracts and basis contracts.

We attempt to hedge the majority of our positions by buying, selling and holding inventories of various commodities, some of which are readily traded on commodity futures exchanges. We focus on locking in net margins based on an “earnings before interest, taxes, depreciation and amortization (“EBITDA”)” model that continually monitors market prices of corn, natural gas and other input costs against prices for ethanol and distillers grains at each of our production facilities. We create offsetting positions by using a combination of derivative instruments, fixed-price purchases and sales, or a combination of strategies in order to manage risk associated with commodity price fluctuations. Our primary focus is not to manage general price movements, for example minimize the cost of corn consumed, but rather to lock in favorable EBITDA margins whenever possible. We also employ a value-at-risk model with strict limits established by our Boar d of Directors to minimize commodity market exposures from open positions.

Ethanol Production Segment

A sensitivity analysis has been prepared to estimate our Ethanol Production segment exposure to ethanol, corn, distillers grains and natural gas price risk. Market risk related to these factors is estimated as the potential change in pre-tax income resulting from hypothetical 10% adverse changes in prices of our expected corn and natural gas requirements, and ethanol and distillers grains output for a one-year period from December 31, 2008. This analysis excludes the impact of risk management activities that result from our use of fixed-price purchase and sale contracts and derivatives. The results of this analysis, which may differ from actual results, are as follows (in thousands):

Commodity	Estimated Total Volume Requirements for the Next 12 Months	Unit of Measure		Approximate Adverse Change to Income
Ethanol	330,000	Gallons	$	55,776
Corn	119,826	Bushels	$	51,392
Distillers grains	1,036	Tons *	$	14,104
Natural Gas	9,337	MMBTU	$	5,671
* Distillers grains quantities are stated on an equivalent dried ton basis.

At December 31, 2008, approximately 8% of our estimated corn usage for the next 12 months was subject to fixed-price contracts. This included inventory on hand and fixed-price future-delivery contracts for approximately 12 million bushels. As a result of these positions, the effect of a 10% adverse move in the price of corn shown above would be reduced by approximately $4.0 million.

At December 31, 2008, approximately 10% of our forecasted ethanol production during the next 12 months has been sold under fixed-price contracts. As a result of these positions, the effect of a 10% adverse move in the price of ethanol shown above would be reduced by approximately $5.3 million.

At December 31, 2008, approximately 24% of our forecasted distillers grain production for the next 12 months was subject to fixed-price contracts. As a result of these positions, the effect of a 10% adverse move in the price of distillers grains shown above would be reduced by approximately $3.4 million.

At December 31, 2008, approximately 16% of our forecasted natural gas requirements for the next 12 months has been purchased under fixed-price contracts. As a result of these positions, the effect of a 10% adverse move in the price of natural gas shown above would be reduced by approximately $0.9 million.

46

Agribusiness Segment

The risk inherent in our market risk-sensitive instruments and positions is the potential loss arising from adverse changes in commodity prices. The availability and price of agricultural commodities are subject to wide fluctuations due to unpredictable factors such as weather, plantings, domestic and foreign government farm programs and policies, changes in global demand created by population changes and changes in standards of living, and global production of similar and competitive crops. To reduce price risk caused by market fluctuations in purchase and sale commitments for grain and grain held in inventory, we enter into exchange-traded futures and options contracts that function as economic hedges. The market value of exchange-traded futures and options used for economic hedging has a high, but not perfect correlation, to the underlying market value of grain inventories and related purchase and sale contracts. The less correlated portion of inventor y and purchase and sale contract market value (known as basis) is much less volatile than the overall market value of exchange-traded futures and tends to follow historical patterns. We manage this less volatile risk by constantly monitoring our position relative to the price changes in the market. In addition, inventory values are affected by the month-to-month spread relationships in the regulated futures markets, as we carry inventories over time. These spread relationships are also less volatile than the overall market value and tend to follow historical patterns, but also represent a risk that cannot be directly offset. Our accounting policy for our futures and options, as well as the underlying inventory positions and purchase and sale contracts, is to mark them to the market and include gains and losses in the consolidated statement of operations in sales and merchandising revenues.

A sensitivity analysis has been prepared to estimate Agribusiness segment exposure to market risk of our commodity position (exclusive of basis risk). Our daily net commodity position consists of inventories related to purchase and sale contracts and exchange-traded contracts. The fair value of our position is a summation of the fair values calculated for each commodity by valuing each net position at quoted futures market prices. Market risk is estimated as the potential loss in fair value resulting from a hypothetical 10% adverse change in such prices. The result of this analysis, which may differ from actual results, is as follows (in thousands):

Fair Value	$	234
Market Risk	$	24

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The required consolidated financial statements and notes thereto are included in this report and are listed in Part IV, Item 15.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A.  CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial disclosure.

As of the end of the period covered by this report, the Company’s management carried out an evaluation, under the supervision of and with the participation of the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the Exchange Act). Based upon that evaluation, because management did not assess the effectiveness of our internal controls over financial reporting as discussed below, the Company’s Chief Executive Officer and the Chief Financial Officer were unable to conclude that our disclosure controls and procedures were effective, as of the end of the period covered by this report, to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and re ported, completely and accurately, within the time periods specified in SEC rules and forms.

Changes in Internal Control over Financial Reporting

Based on the numerous pervasive changes to the Company’s internal control environment following the closing of the Merger, as discussed more fully below, management did not assess whether or not our internal controls over financial reporting were effective as of the end of the period covered by this report.

47

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with generally accepted accounting principles. As a result of our mergers, the commencement of operations of our ethanol plants, and the expansion of our marketing and distribution activities, changes in our internal controls during the reporting period have been significant and pervasive. These changes are described in greater detail below. In the following paragraphs, the magnitude of these changes, most of which occurred in most recently completed quarter for the period covered by this transition period report, their pervasiveness, and the level of integration that has occurred are d escribed.

VBV and its subsidiaries became wholly-owned subsidiaries of Green Plains pursuant to the Merger completed on October 15, 2008. Based on a number of factors, the Merger was accounted for as a reverse acquisition (i.e., Green Plains was considered the acquired company and VBV was considered the acquiring company). As a result, the Company’s operating results (post-Merger) include VBV’s operating results prior to the date of closing and the results of the combined entity following the closing of the Merger.

At the time of the Merger, Green Plains’ Shenandoah ethanol plant had been operational for over one year and its Superior plant for three months. Green Plains acquired the agribusiness assets of Green Plains Grain in April 2008. VBV’s Bluffton plant, its first operational plant, commenced operations in September 2008, approximately one month prior to closing the Merger. VBV’s Obion plant commenced operations in November 2008. Additionally, VBV was developing an ethanol marketing and distribution business at the time of the Merger.

The Merger was intended to further develop an integrated ethanol marketing, blending and distribution business in addition to existing ethanol production and agribusiness operations. The vast majority of the Company’s material internal control processes changed as a result of the Merger and the related operational restructuring. Revised risk management policies were issued by the post-Merger Board of Directors, which were implemented during the period following the Merger, fundamentally changing our risk management strategy and operating practices. Additionally, following the Merger, we integrated the combined entities into one financial and accounting system.

Prior to the Merger, Green Plains sold all of its ethanol and nearly all of its distillers grains to two third-party marketers, primarily due to the lack of sufficient scale economics for its production volumes. Plant operations were largely decentralized, including corn and natural gas procurement, prior to the Merger. Follow the closing of the Merger, all ethanol-related margins, consisting principally of ethanol and distillers grains sales/hedging, as well as corn and natural gas procurement/hedging, are managed centrally in a newly-formed organization, Green Plains Trade. Throughout the period following the Merger until December 31, 2008, Green Plains Trade purchased and resold all of the ethanol production from the Green Plains’ Shenandoah directly, and our Bluffton and Obion plants indirectly through their third-party marketer. Similarly, throughout the period following the Merger until December 31, 2008, distillers grain marketing was the resp onsibility of Green Plains Trade, except for our Superior plant. Corn procurement for the Superior plant is the responsibility of Green Plains Grain personnel. While ethanol and distillers grains marketing, and corn and natural gas procurement, are executed in different manners, all risk management functions are the responsibility of a centralized staff comprised of a combination of Green Plains and VBV personnel.

As discussed above, the control environment of the Company has changed dramatically as a result of the Merger and many of the controls that were in place and applicable to previous Green Plains operations are no longer applicable to the post-Merger entity. The Merger was completed on October 15, 2008, which did not afford the Company sufficient time to complete the work it has begun with respect to establishing an effective internal control environment or to test such environment prior to the date that management would be required to attest to the effectiveness of such internal controls. VBV (the acquiring company for reverse merger accounting purposes) was not a public company prior to completion of the Merger and accordingly was not previously subject to Section 404 attestation requirements.

In addition, the changes to the Company’s commercial operations and risk management activities are so pervasive and integrated that it is difficult to isolate legacy operations for internal control assessments. Nearly all of the Company’s material internal control processes have changed as a result of the Merger and the related operational restructuring.

ITEM 9B.  OTHER INFORMATION.

None

48

PART III

ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

The information required by this item with respect to our directors is included in the section entitled “Proposal I – Election of Directors” in our Proxy Statement for the 2009 Annual Meeting of Stockholders (the “Proxy Statement”) and is incorporated herein by reference. Information included in the section entitled “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement is also incorporated herein by reference. Information related to the audit committee and the audit committee financial expert is included in the section entitled “Report of the Audit Committee” in the Proxy Statement and is incorporated herein by reference.

Certain information regarding our executive officers is included in Part 1 – Executive Officers of the Registrant of this report.

The Company has adopted a Code of Conduct and Ethics that applies to our Chief Executive Officer and all senior financial officers, including the Chief Financial Officer, principal accounting officer, other senior financial officers and persons performing similar functions. The full text of the Code of Ethics is published on our website at www.gpreinc.com in the “Investors – Corporate Governance” section. We intend to disclose future amendments to, or waivers from, certain provisions of the Code of Conduct and Ethics on our website within five business days following the adoption of such amendment or waiver.

ITEM 11.  EXECUTIVE COMPENSATION.

Information included in the sections entitled “General Information Regarding the Board and its Committees” and “Executive Compensation” in the Proxy Statement is incorporated herein by reference.

ITEM 12.  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Information included in the sections entitled “Principal Shareholders” and “Executive Compensation” in the Proxy Statement is incorporated herein by reference. Information concerning our equity compensation plans is set forth in Item 5 of this report.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Information included in the sections entitled “General Information Regarding the Board and its Committees,” and “Certain Relationships and Related Transactions,” if any, in the Proxy Statement is incorporated herein by reference.

ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES.

Information included in the section entitled “Independent Public Accountants” in the Proxy Statement is incorporated herein by reference.

49

PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(1)  Financial Statements.   The following index lists consolidated financial statements and notes thereto filed as part of this annual report on Form 10-K.

	Page
Report of Independent Registered Public Accountants	F-1
Independent Auditors’ Report (Predecessor Auditors)	F-2
Consolidated Balance Sheets as of December 31, 2008 and March 31, 2008	F-3
Consolidated Statements of Operations for the nine-month transition period ended December 31, 2008 and 2007, the year ended March 31, 2008, and the period from inception, September 28, 2006, to March 31, 2007	F-4
Consolidated Statements of Stockholders’ Equity for  period September 28, 2006 (date of inception) to December 31, 2008	F-5
Consolidated Statements of Cash Flows for the nine-month transition period ended December 31, 2008 and 2007, the year ended March 31, 2008, and the period from inception, September 28, 2006, to March 31, 2007	F-6
Notes to Consolidated Financial Statements	F-8

(2)  Financial Statement Schedules.   All schedules have been omitted because they are not applicable or the required information is included in the consolidated financial statements or notes thereto.

50

(3)  Exhibits.   The following exhibit index lists exhibits incorporated herein by reference, filed as a part of this annual report on Form 10-K, or furnished as part of this annual report on Form 10-K.

EXHIBIT INDEX

Exhibit No.	Description of Exhibit
2.1	Agreement and Plan of Merger between the Company, Green Plains Merger Sub, Inc. and VBV LLC (Incorporated by reference to Exhibit 99.1 of the Company’s Current Report on Form 8-K, dated May 8, 2008)
2.2	Stock Purchase Agreement between the Company, Bioverda International Holdings Limited and Bioverda US Holdings LLC (Incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K, dated May 8, 2008)
2.3	Agreement and Plan of Merger among the Company, IN Merger Sub, LLC and Indiana Bio-Energy, LLC (Incorporated by reference to Exhibit 99.3 of the Company’s Current Report on Form 8-K, dated May 8, 2008)
2.4	Agreement and Plan of Merger among the Company, TN Merger Sub, LLC and Ethanol Grain Processors, LLC (Incorporated by reference to Exhibit 99.4 of the Company’s Current Report on Form 8-K, dated May 8, 2008)
3(i).1	Second Amended and Restated Articles of Incorporation of the Company (Incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed October 15, 2008)
3(ii).1	Amended and Restated Bylaws of the Company (Incorporated by reference to Exhibit 3.2 of the Company’s Current Report on Form 8-K filed on October 15, 2008)
3(ii).2	First Amendment to the Amended and Restated Bylaws of the Company (Incorporated by reference to Exhibit 99.2 of the Company’s Current Report on Form 8-K filed on March 13, 2009)
4.1	Shareholders’ Agreement (Incorporated by reference to Appendix F of the Company’s Registration Statement on Form S-4/A filed September 4, 2008)
4.2	Form of Lock-Up and Voting Agreement between VBV and Certain Green Plains Shareholders (Incorporated by reference to Appendix E of the Company’s Registration Statement on Form S-4/A filed September 4, 2008)
4.3	Form of Lock-Up and Voting Agreement between GPRE and Certain VBV Affiliates (Incorporated by reference to Appendix E of the Company’s Registration Statement on Form S-4/A filed September 4, 2008)
4.4	Form of Lock-Up and Voting Agreement between GPRE and Wilon Holdings S.A. (Incorporated by reference to Appendix E of the Company’s Registration Statement on Form S-4/A filed September 4, 2008)
10.1	Master Loan Agreement, dated January 30, 2006, by and between the Company and Farm Credit Services of America, FLCA  (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated February 9, 2006)
10.2	Construction and Term Loan Supplement, dated January 30, 2006, by and between the Company and Farm Credit Services of America, FLCA (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, dated February 9, 2006)
10.3	Construction and Revolving Term Loan Supplement, dated January 30, 2006, by and between the Company and Farm Credit Services of America, FLCA  (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K, dated February 9, 2006)
10.4	Security Agreement, dated January 30, 2006, by and between the Company and Farm Credit Services of America, FLCA (Incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K, dated February 9, 2006)
10.5	Real Estate Mortgage and Financing Statement, dated January 30, 2006 by and between the Company and Farm Credit Services of America, FLCA (Incorporated by reference to Exhibit 10.14 of the Company’s Annual Report on Form 10-K, dated February 27, 2006)
10.6	Allowance Contract, by and between the Company and BNSF Railway Company, dated January 26, 2006 (Incorporated by reference to Exhibit 10.16 of the Company’s Annual Report on Form 10-K, dated February 27, 2006)
10.7	Master Loan Agreement, dated March 15, 2007, by and between Superior Ethanol, L.L.C. and Farm Credit Services of America, FLCA (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated March 23, 2006)
10.8	Construction and Term Loan Supplement, dated March 15, 2007, by and between Superior Ethanol, L.L.C. and Farm Credit Services of America, FLCA (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, dated March 23, 2006)
10.9	Construction and Revolving Term Loan Supplement, dated March 15, 2007, by and between Superior Ethanol, L.L.C. and Farm Credit Services of America, FLCA (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K, dated March 23, 2006)
10.10	Security Agreement and Real Estate Mortgage, dated March 15, 2007, by and between Superior Ethanol, L.L.C. and Farm Credit Services of America, FLCA (Incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K, dated March 23, 2006)
10.11	Amendment to the Master Loan Agreement, dated May 31, 2007 (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated June 18, 2007)
10.12	Revolving Credit Supplement, dated May 31, 2007 (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K, dated June 18, 2007)

51

10.13	Amendment to the Construction and Term Loan Supplement, dated May 31, 2007 (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K, dated June 18, 2007)
10.14	Amendment to the Construction and Revolving Term Loan Supplement, dated May 31, 2007 (Incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K, dated June 18, 2007)
10.15	Amended and Restated Employment Agreement dated October 24, 2008, by and between the Company and Jerry L. Peters (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated October 28, 2008)
10.16	Amendment to Master Loan Agreement dated October 31, 2007 between the Company and Farm Credit Services of America, FLCA (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed November 16, 2007)
10.17	Statuses Revolving Credit Supplement dated October 31, 2007 between the Company and Farm Credit Services of America, FLCA (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed November 16, 2007)
10.18	Amendment to the Master Loan Agreement dated February 1, 2008 between Superior Ethanol, L.L.C. and Farm Credit Services of America, FLCA (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed March 4, 2008)
10.19	Amendment to the Construction and Term Loan Supplement dated February 1, 2008 between Superior Ethanol, L.L.C. and Farm Credit Services of America, FLCA (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed March 4, 2008)
10.20	Amendment to the Construction Revolving Term Loan Supplement dated February 1, 2008 between Superior Ethanol, L.L.C. and Farm Credit Services of America, FLCA (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed March 4, 2008)
10.21	Asset Transfer Agreement dated March 31, 2008 between the Company and GPRE Shenandoah LLC (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed April 7, 2008)
10.22	Master Loan Agreement dated March 31, 2008 between GPRE Shenandoah LLC and Farm Credit Services of America, FLCA (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed April 7, 2008)
10.23	Credit Agreement dated April 3, 2008 between Green Plains Grain Company LLC and First National Bank of Omaha (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed April 9, 2008)
10.24	Revolving Credit Note dated April 3, 2008 between Green Plains Grain Company LLC and First National Bank of Omaha (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed April 9, 2008)
10.25	Term Loan Note dated April 3, 2008 between Green Plains Grain Company LLC and First National Bank of Omaha (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed April 9, 2008)
10.26	Security Agreement dated April 3, 2008 between Green Plains Grain Company LLC and First National Bank of Omaha (Incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed April 9, 2008)
10.27	2007 Equity Incentive Plan (Incorporated by reference to Appendix A of the Company’s Definitive Proxy Statement filed March 27, 2007)
10.28	Escrow Agreement dated June 30, 2006 by and among the Company, Anderson & Strudwick, Incorporated and U.S. National Bank Association (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed July 10, 2006)
10.29	Form of Indemnification Agreement (Incorporated by reference to Exhibit 10.53 of the Company’s Registration Statement on Form S-4/A filed August 1, 2008)
10.30	Employment Agreement with Todd Becker (Incorporated by reference to Exhibit 10.54 of the Company’s Registration Statement on Form S-4/A filed August 1, 2008)
10.31	Amendment to Master Loan Agreement between Farm Credit Services FLCA and Superior Ethanol, L.L.C. dated April 23, 2008 (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed May 19, 2008).
10.32	Amendment to the Construction and Term Loan Supplement dated April 23, 2008 between Farm Credit Services FLCA and Superior Ethanol, L.L.C. dated April 23, 2008 (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed May 19, 2008).
10.33	Amendment to the Construction and Revolving Term Loan Supplement dated April 23, 2008 between Farm Credit Services FLCA and Superior Ethanol, L.L.C. dated April 23, 2008 (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed May 19, 2008).
10.34	First Amendment to Credit Agreement by and among Green Plains Grain Company LLC and First National Bank of Omaha dated July 2, 2008 (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed July 8, 2008)
10.35	First Amendment to Revolving Credit Note by and among Green Plains Grain Company LLC and First National Bank of Omaha dated July 2, 2008 (Incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed July 8, 2008)
10.36	Statused Revolving Credit Supplement dated October 3, 2008 between GPRE Shenandoah LLC and Farm Credit Services of America, FLCA (Incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 10-Q filed October 10, 2008)

52

10.37	Amendment to the Master Loan Agreement dated October 3, 2008 between GPRE Shenandoah LLC and Farm Credit Services of America, FLCA Incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 10-Q filed October 10, 2008)
10.38	Amendment to the Master Loan Agreement dated October 6, 2008 between Superior Ethanol, L.L.C. and Farm Credit Services of America, FLCA (Incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 10-Q filed October 10, 2008)
10.39	Construction and Revolving Term Loan Supplement entered into as of August 31, 2007 by and between Farm Credit Services of Mid-America, FCLA and Green Plains Obion LLC (fka Ethanol Grain Processors, LLC)
10.40	Construction and Term Loan Supplement entered into as of August 31, 2007 by and between Farm Credit Services of Mid-America, FLCA and Green Plains Obion LLC (fka Ethanol Grain Processors, LLC)
10.41	Master Loan Agreement entered into as of August 31, 2007 by and between Farm Credit Services of Mid-America, PCA and Green Plains Obion LLC (fka Ethanol Grain Processors, LLC)
10.42	Statused Revolving Credit Supplement entered into as of August 31, 2007 by and between Farm Credit of Mid-America, PCA and Green Plains Obion LLC (fka Ethanol Grain Processors, LLC)
10.43	Master Loan Agreement dated as of February 27, 2007 by and among Green Plains Bluffton LLC (fka Indiana Bio-Energy, LLC) and AgStar Financial Services, PCA
10.44	First Supplement to Master Loan Agreement dated as of February 27, 2007 by and between Green Plains Bluffton LLC (fka Indiana Bio-Energy, LLC) and AgStar Financial Services, PCA
10.45	Second Supplement to Master Loan Agreement dated as of February 27, 2007 by and between Green Plains Bluffton LLC (fka Indiana Bio-Energy, LLC) and AgStar Financial Services, PCA
10.46	Loan Agreement between City of Bluffton, Indiana and Green Plains Bluffton LLC (fka Indian Bio-Energy, LLC) dates as of March 1, 2007
10.47	Indenture of Trust dated as of March 1, 2007 by and between the City of Bluffton, Indiana and U.S. Bank National Association
10.48	Construction/Permanent Mortgage Security Agreement, Assignment of Leases and Rents, Financing Statement and Fixture Filing dated as of February 27, 2007 by Green Plains Bluffton LLC (fka Indiana Bio-Energy, LLC) in favor of AgStar Financial Services, PCA
10.49	Subordinate Construction/Permanent Mortgage, Security Agreement, Assignment of Leases and Rents, Financing Statement and Fixture Filing dated as of March 1, 2007 between Green Plains Obion LLC (fka Indiana Bio-Energy, LLC) and U.S. Bank National Association
10.50	Non-Statutory Stock Option Agreement between Steve Bleyl and Green Plains Renewable Energy, Inc. dated October 15, 2008.
10.51	Non-Statutory Stock Option Agreement between Edgar Seward and Green Plains Renewable Energy, Inc. dated October 15, 2008
10.52	Non-Statutory Stock Option Agreement between Michael Orgas and Green Plains Renewable Energy, Inc. dated November 1, 2008
10.53	Non-Statutory Stock Option Agreement between Ron Gillis and Green Plains Renewable Energy, Inc. dated October 15, 2008
10.54	Restricted Stock Agreement between Michael Orgas and Green Plains Renewable Energy, Inc. dated November 1, 2008
10.55	Restricted Stock Agreement between Edgar Seward and Green Plains Renewable Energy, Inc. dated October 15, 2008
14.1	Code of Ethics
21.1	Schedule of Subsidiaries
23.1	Consent of L.L. Bradford & Company, LLC
23.2	Consent of KPMG LLP
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

53

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GREEN PLAINS RENEWABLE ENERGY, INC.

(Registrant)

Date:  March 27, 2009

By:  /s/ Todd A. Becker                        

Todd A. Becker

President and Chief Executive Officer

(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Todd A. Becker	President and Chief Executive Officer and
Todd A. Becker	Director (Principal Executive Officer)	March 27, 2009
/s/ Jerry L. Peters	Chief Financial Officer (Principal Financial	March 27, 2009
Jerry L. Peters	Officer and Principal Accounting Officer)
/s/ Wayne B. Hoovesto	Chief Strategy Officer and	March 27, 2009
Wayne B. Hoovestol	Chairman of the Board of Directors
/s/ Jim Anderson	Director	March 27, 2009
Jim Anderson
/s/ Jim Barry	Director	March 27, 2009
Jim Barry
/s/ James F. Crowley	Director	March 27, 2009
James F. Crowley
/s/ Gordon F. Glade	Director	March 27, 2009
Gordon F. Glade
/s/ Gary R. Parker	Director	March 27, 2009
Gary R. Parker
/s/ Brian D. Peterson	Director	March 27, 2009
Brian D. Peterson
/s/ Alain Treuer	Director	March 27, 2009
Alain Treuer
/s/ Michael Walsh	Director	March 27, 2009
Michael Walsh

54

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of Green Plains Renewable Energy, Inc.

We have audited the accompanying consolidated balance sheet of Green Plains Renewable Energy, Inc. (formerly VBV LLC) (the “Company”) as of December 31, 2008, and the related statements of operations, stockholders’ equity / members’ capital and comprehensive income, and cash flows for the nine-month transition period ended December 31, 2008. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Green Plains Renewable Energy, Inc. as of December 31, 2008, and the results of its operations and its cash flows for the nine-month transition period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, on October 15, 2008, Green Plains Renewable Energy, Inc. and VBV LLC completed a business combination. For financial reporting purposes, VBV LLC was determined to be the accounting acquirer and the accounting predecessor to the Company. The consolidated financial statements of the Company for the nine-month transition period ended December 31, 2008 include the results of VBV LLC from April 1, 2008 through October 14, 2008, and the consolidated results of the combined entity for the period from October 15, 2008 through December 31, 2008.

/s/ L.L. Bradford & Company, LLC

March 26, 2009

Las Vegas, Nevada

F-1

KPMG LLP
303 East Wacker Drive
Chicago, IL 60601-5212

Independent Auditors’ Report

The Board of Directors

VBV LLC and Subsidiaries:

We have audited the accompanying consolidated balance sheets of VBV LLC and subsidiaries (a development stage company) (the Company) as of March 31, 2008 and 2007, and the related consolidated statements of operations, members’ capital, and cash flows for the year ended March 31, 2008 and for the periods from September 28, 2006 (date of inception) to March 31, 2007 and from September 28, 2006 (date of inception) to March 31, 2008. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of VBV LLC and subsidiaries (a development stage company) as of March 31, 2008 and 2007, and the results of their operations and their cash flows for the periods then ended in conformity with U.S. generally accepted accounting principles.

The accompanying consolidated financial statements of cash flows for the year ended March 31, 2008, and for the period from September 28, 2006 (date of inception) to March 31, 2007, and period from September 28, 2006 (date of inception) to March 31, 2008 have been restated, as discussed in note 2.

/s/ KPMG LLP

Chicago, Illinois

June 20, 2008, except as to

note 2, which is as of

August 1, 2008

F-2

GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
				December 31, 2008		March 31, 2008
ASSETS
Current assets
	Cash and cash equivalents		$	64,839	$	538
	Short-term investments			-		894
	Accounts receivable, net of allowances of $174 and $0, and including
		amounts from related parties of $2,177 and $0, respectively		54,306		-
	Inventories			47,033		-
	Prepaid expenses			13,341		3,853
	Deposits			10,385		-
	Derivative financial instruments and other			3,065		-
		Total current assets		192,969		5,285
Property and equipment, net				495,772		241,162
Restricted cash				-		4,224
Investment in unconsolidated subsidiaries				1,377		-
Financing costs and other				2,948		3,504
		Total assets	$	693,066	$	254,175
LIABILITIES AND STOCKHOLDERS’ EQUITY / MEMBERS’ CAPITAL
Current liabilities
	Accounts payable, including amounts to related parties
		of $9,824 and $9,267, respectively	$	61,711	$	10,038
	Accrued liabilities, including amounts to related parties
		of $0 and $13,501, respectively		14,595		14,974
	Derivative financial instruments			4,538		-
	Current maturities of long-term debt			27,405		1,843
		Total current liabilities		108,249		26,856
Long-term debt				299,011		80,711
Other liabilities				5,821		-
		Total liabilities		413,081		107,567
Minority interest				296		38,622
Stockholders’ equity / members’ capital
	Common stock, $0.001 par value; 50,000,000 shares authorized;
		24,659,250 shares issued and outstanding at December 31, 2008		25		-
	Members’ capital			-		107,986
	Additional paid-in capital			290,421		-
	Retained earnings (accumulated deficit)			(10,459)		-
	Accumulated other comprehensive loss			(298)		-
		Total stockholders’ equity / members’ capital		279,689		107,986
		Total liabilities and stockholders’ equity / members’ capital	$	693,066	$	254,175

See accompanying notes to the consolidated financial statements.

F-3

GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
				Nine-Month Transition Period Ended December 31, 2008		Nine-Month Comparative Period Ended December 31, 2007		Year Ended March 31, 2008		Period from September 28, 2006 (Date of Inception) to March 31, 2007
						(Unaudited)
Revenues
	Ethanol		$	108,960	$	-	$	-	$	-
	Grain			32,766		-		-		-
	Agronomy products			14,966		-		-		-
	Distillers grains			28,316		-		-		-
	Other			3,750		-		-		-
		Total revenues		188,758		-		-		-
Cost of goods sold				175,444		-		-		-
		Gross profit		13,314		-		-		-
Operating expenses				18,467		3,463		5,423		1,421
		Operating income (loss)		(5,153)		(3,463)		(5,423)		(1,421)
Other income (expense)
	Interest income			150		1,473		1,415		1,348
	Interest expense, net of
		amounts capitalized		(3,933)		-		-		-
	Other, net			887		6		8		3
		Total other income (expense)		(2,896)		1,479		1,423		1,351
Income (loss) before income taxes
	and minority interests			(8,049)		(1,984)		(4,000)		(70)
Income tax provision (benefit)				-		-		-		-
Minority interests in losses of
	consolidated subsidiaries			1,152		251		480		28
Net income (loss)			$	(6,897)	$	(1,733)	$	(3,520)	$	(42)
Earnings per share (1):
	Basic		$	(0.56)	$	(0.23)	$	(0.47)	$	(0.01)
	Diluted		$	(0.56)	$	(0.23)	$	(0.47)	$	(0.01)
Weighted average shares outstanding (1):
	Basic			12,365,819		7,498,369		7,498,369		7,498,369
	Diluted			12,365,819		7,498,369		7,498,369		7,498,369
(1) Unaudited for all periods prior to the nine-month transition period ended December 31, 2008.

See accompanying notes to the consolidated financial statements.

F-4

GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY / MEMBERS’ CAPITAL
AND COMPREHENSIVE INCOME
(in thousands)
			Common Stock				Members’ Capital		Additional Paid-in Capital		Retained Earnings (Accum. Deficit)		Accum. Other Comp. Loss		Total Stockholders’ Equity / Members’ Capital
			Shares		Amount
Balance, September 28, 2006
(date of inception)			-	$	-	$	-	$	-	$	-	$	-	$	-
	Capital contributions		-		-		108,148		-		-		-		108,148
	Costs of raising capital		-		-		75		-		-		-		75
	Stock-based compensation		-		-		342		-		-		-		342
	Net loss		-		-		(42)		-		-		-		(42)
Balance, March 31, 2007			-		-		108,523		-		-		-		108,523
	Capital contributions		-		-		2,474		-		-		-		2,474
	Stock-based compensation		-		-		509		-		-		-		509
	Net loss		-		-		(3,520)		-		-		-		(3,520)
Balance, March 31, 2008			-		-		107,986		-		-		-		107,986
	Capital contributions		-		-		4,484		-		-		-		4,484
	Conversion of members’
		equity at Merger	7,498		7		(112,470)		116,025		(3,562)		-		-
	Merger-related equity														-
		transactions	11,161		12		-		111,939		-		(298)		111,653
	Investment by related party		6,000		6		-		59,994		-		-		60,000
	Stock-based compensation		-		-		-		2,463		-		-		2,463
	Net loss		-		-		-		-		(6,897)		-		(6,897)
Balance, December 31, 2008			24,659	$	25	$	-	$	290,421	$	(10,459)	$	(298)	$	279,689

See accompanying notes to the consolidated financial statements.

F-5

GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
						Nine-Month Transition Period Ended December 31, 2008		Nine-Month Comparative Period Ended December 31, 2007		Year Ended March 31, 2008		Period from September 28, 2006 (Date of Inception) to March 31, 2007
								(Unaudited)		(Restated)		(Restated)
Cash flows from operating activities:
	Net income (loss)				$	(6,897)	$	(1,733)	$	(3,520)	$	(42)
	Adjustments to reconcile net income to net
	cash provided (used) by operating activities:
		Depreciation and amortization				4,717		13		20		3
		Unrealized (gains) losses on derivative
		financial instruments				(728)		-		-		-
		Stock-based compensation expense				2,463		373		509		342
		Minority interests in net loss of consolidated
			subsidiaries			-		-		(480)		(28)
		Changes in operating assets and liabilities:
			Accounts receivable			(32,274)		-		-		-
			Inventories			(1,026)		-		-		-
			Derivative financial instruments			(9,564)		-		-		-
			Prepaid expenses and other assets			(15,182)		(2,763)		(2,418)		(1,391)
			Accounts payable and accrued liabilities			13,322		(1,287)		968		(415)
			Other			1,816				-		-
				Net cash used by operating activities		(43,353)		(5,397)		(4,921)		(1,531)
Cash flows from investing activities:
	Purchase of property and equipment					(79,870)		(123,343)		(160,880)		(16,492)
	Investment in business					(1,377)		-		-		-
	(Investment in) withdrawal of restricted cash					4,224		15,135		17,339		(21,563)
	Cash acquired in acquisition of business					9,830		-		-		-
	Sale (purchase) of investments					877		-		(724)		(171)
	Other					(3,566)		169		-		-
				Net cash used by investing activities		(69,882)		(108,039)		(144,265)		(38,226)
Cash flows from financing activities:
	Proceeds from the issuance of long-term debt					196,634		25,837		60,160		22,000
	Payments of principal on long-term debt					(80,012)		-		-		-
	Proceeds from the issuance of common stock					60,000		-		-		-
	Capital and minority interest contributions					-		1,749		2,474		108,148
	Payment of loan fees and equity in creditors					914		158		(376)		(2,925)
				Net cash provided by financing activities		177,536		27,744		62,258		127,223
Net change in cash and cash equivalents						64,301		(85,692)		(86,928)		87,466
Cash and cash equivalents, beginning of period						538		87,466		87,466		-
Cash and cash equivalents, end of period					$	64,839	$	1,774	$	538	$	87,466

 Continued on the next page

F-6

GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Continued from the previous page
				Nine-Month Transition Period Ended December 31, 2008		Nine-Month Comparative Period Ended December 31, 2007		Year Ended March 31, 2008		Period from September 28, 2006 (Date of Inception) to March 31, 2007
						(Unaudited)		(Restated)		(Restated)
Supplemental disclosures of cash flow:
	Cash paid for income taxes			$	-	$	-	$	-	$	-
	Cash paid for interest			$	3,565	$	-	$	-	$	-
Noncash investing and financing activities:
	Common stock issued for merger
		activities		$	78,220	$	-	$	-	$	-
Noncash additions to property and equipment:
	Property and equipment acquired in Merger			$	179,401	$	-	$	-	$	-
	Capital lease obligations incurred for equipment				-		-		391		4
		Total noncash additions to property
			and equipment	$	179,401	$	-	$	391	$	4
Supplemental noncash investing
	and financing activities:
			Assets acquired in Merger	$	268,035	$	-	$	-	$	6,531
			Less liabilities assumed		(187,202)		-		-		(1,188)
			Net assets acquired	$	80,833	$	-	$	-	$	5,343
			Increase in property and equipment for amounts still owed	$	-	$	-	$	18,221	$	5,552
			Amortized financing costs capitalized in construction in progress	$	-	$	-	$	121	$	-

See accompanying notes to the consolidated financial statements.

F-7

GREEN PLAINS RENEWABLE ENERGY, INC.  AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  BASIS OF PRESENTATION AND DESCRIPTION OF BUSINESS

References to the Company

References to “we,” “us,” “our,” “Green Plains” or the “Company” in these notes to the consolidated financial statements refer to Green Plains Renewable Energy, Inc., an Iowa corporation, and its subsidiaries. As discussed below, the consolidated financial statements prior to the nine-month transition period ended December 31, 2008 are those of VBV LLC and its subsidiaries.

Reverse Acquisition Accounting

VBV LLC (“VBV”) and its subsidiaries became wholly-owned subsidiaries of the Green Plains Renewable Energy, Inc. pursuant to a merger on October 15, 2008. Under the purchase method of accounting in a business combination effected through an exchange of equity interests, the entity that issues the equity interests is generally the acquiring entity. In some business combinations (commonly referred to as reverse acquisitions), however, the acquired entity issues the equity interests. Statement of Financial Accounting Standard (“SFAS”)  No. 141, “Business Combinations,” requires consideration of the facts and circumstances surrounding a business combination that generally involve the relative ownership and control of the entity by each of the parties subsequent to the merger. Based on a review of these factors, the October 2008 merger with VBV (the “Merger”) was accounted for as a reverse acquisition (i.e., Gr een Plains was considered the acquired company and VBV was considered the acquiring company). As a result, Green Plains’ assets and liabilities as of October 15, 2008, the date of the Merger closing, have been incorporated into VBV’s balance sheet based on the fair values of the net assets acquired, which equaled the consideration paid for the acquisition. SFAS No. 141 also requires an allocation of the acquisition consideration to individual assets and liabilities including tangible assets, financial assets, separately recognized intangible assets, and goodwill. Further, the Company’s operating results (post-Merger) include VBV’s operating results prior to the date of closing and the results of the combined entity following the closing of the Merger. Although VBV was considered the acquiring entity for accounting purposes, the Merger was structured so that VBV became a wholly-owned subsidiary of Green Plains Renewable Energy, Inc.

Consolidated Financial Statements

In the consolidated financial statements and the notes thereto, all references to historical information, balances and results of operations are related to VBV and its subsidiaries as the predecessor company pursuant to reverse acquisition accounting rules. Although pre-merger Green Plains had been producing ethanol since August 2007, under reverse acquisition accounting rules, the merged Company’s consolidated financial statements reflect our results as a development stage company (from VBV’s inception on September 28, 2006 until September 2008) and as an operating company since September 2008. Accordingly, the Company’s operating results (post-Merger) include the operating results of VBV and its subsidiaries prior to the date of the Merger and the results of the combined entity following the closing of the Merger.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated. Certain amounts previously reported have been reclassified to conform to the current year presentation.

Fiscal Period

Historically, Green Plains had a fiscal year end of November 30. Under reverse acquisition rules, the combined organization would have been required to adopt VBV’s fiscal year end, which had been March 31. After the Merger, the Company’s Board of Directors approved a resolution to change our fiscal year end to December 31 to more closely align our year end with that of the majority of our peer group.

Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

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Description of Business

Green Plains was formed in June 2004 to construct and operate dry mill, fuel-grade ethanol production facilities. Ethanol is a renewable, environmentally clean fuel source that is produced at numerous facilities in the United States, mostly in the Midwest. In the U.S., ethanol is produced primarily from corn and then blended with unleaded gasoline in varying percentages. To add shareholder value, Green Plains expanded its business operations beyond ethanol production to integrate strategic agribusiness and ethanol marketing services. See Note 4 – Business Combination for discussion related to the April 2008 acquisition of Great Lakes Cooperative’s agribusiness assets and the October 2008 merger with VBV, which provided additional ethanol production and marketing services. As discussed above, under reverse acquisition accounting rules, VBV was considered the acquiring company in the October 2008 merger.

VBV was formed in September 2006 to capitalize on biofuels opportunities available within the United States.  The goal was to create a company in the ethanol business with an integrated network combining production, distribution and marketing. VBV purchased controlling interest in two development stage ethanol plants: Indiana Bio-Energy, LLC, now known as Green Plains Bluffton LLC, and Ethanol Grain Processors, LLC, now known as Green Plains Obion LLC. Both plants were designed as dry mill natural gas fired ethanol plants with estimated production capacity of 110 million gallons per year of fuel grade ethanol.

Operations commenced at our Shenandoah, IA plant in August 2007, and at our Superior, IA plant in July 2008. Each of these ethanol plants has expected production capacity of 55 million gallons per year (“mmgy”). In September 2008 and November 2008, respectively, the Bluffton, IN and Obion, TN facilities commenced ethanol production activities. Prior to the commencement of ethanol production at the Bluffton plant, VBV had no significant revenue-producing operations and had historically incurred net losses from operations during its development stage. At full capacity, the combined ethanol production of our four facilities is 330 million gallons per year. Processing at full capacity will consume approximately 120 million bushels of corn and produce approximately 1,020,000 tons of distillers grains.

The Company also has an in-house fee-based marketing business, Green Plains Trade Group LLC (“Green Plains Trade”), a wholly-owned subsidiary of the Company, which provides ethanol marketing services to other producers in the ethanol industry. We have entered into several ethanol marketing agreements with third parties, pursuant to which the Company has agreed to market substantially all of the ethanol that is expected to be produced by such parties on an annual basis. Annual production from these third-party plants is expected to be approximately 305 million gallons. Our plan is to expand our third-party ethanol marketing operations. Green Plains Trade is also now responsible for the sales, marketing and distribution of all ethanol produced at our four production facilities.

In April 2008, Green Plains completed the acquisition of Great Lakes Cooperative, a full-service cooperative that specializes in grain, agronomy, feed and petroleum products with seven locations in northwestern Iowa. Now known as Green Plains Grain Company LLC (“Green Plains Grain”), this business complements the ethanol plants in its grain handling and marketing, as well as grain procurement required in ethanol processing.

The Company believes that as a result of the 2008 mergers, the combined enterprise is a stronger, more competitive company capable of achieving greater financial strength, operating efficiencies, earning power, access to capital and growth than could have been realized previously.

2.  RESTATEMENT

The Company restated its previously issued financial statements for the year ended March 31, 2008, and for the period from September 28, 2006 (date of inception) to March 31, 2007, to correct the presentation in the consolidated statements of cash flows of certain purchases of property, plant and equipment.

A portion of the Company’s construction-in-progress was funded by the incurrence of accounts payable and accrued expenses, and the capitalization of financing costs, and had been included as a cash activity in the consolidated statements of cash flows. Since these portions of construction-in-progress were not funded by actual cash payments within the respective periods, the Company corrected this presentation in the consolidated statements of cash flows by reducing the investing outflows for the purchases of property, plant and equipment, reducing the corresponding change in accounts payable and accrued expenses in the operating section of the consolidated statements of cash flows and increasing the amount of financing outflows for financing costs. In addition, the Company added a noncash activity disclosure to properly reflect the portion of construction-in-progress funded by the incurrence of accounts payable, accrued expenses, retainage and the ca pitalization of financing costs.

The original and restated balances for the line items affected by these adjustments are (in thousands):

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		Year Ended March 31, 2008 As Reported		Year Ended March 31, 2008 As Restated		Period from September 28, 2006  (Date of Inception) to March 31, 2007 As Reported		Period from September 28, 2006  (Date of Inception) to March 31, 2007 As Restated		Period from September 28, 2006  (Date of Inception) to March 31, 2008 As Reported		Period from September 28, 2006  (Date of Inception) to March 31, 2008 As Restated
CASH FLOW STATEMENT
Increase (decrease) in accounts payable and accrued liabilities	$	10,815	$	968	$	1,398	$	(415)	$	12,213	$	553
Net cash provided by (used in) operating activities		5,090		(4,921)		281		(1,531)		5,372		(6,453)
Purchases of property and equipment		(171,012)		(160,880)		(18,305)		(16,492)		(189,315)		(177,370)
Net cash used in investing activities		(154,397)		(144,265)		(40,038)		(38,226)		(194,436)		(182,491)
Payments of loan fees		(256)		(376)		(2,925)		(2,925)		(3,180)		(3,301)
Net cash provided by financing activities		62,379		62,258		127,223		127,223		189,602		189,481

These adjustments did not affect the reported amounts of net income or the change in cash for any period.

3.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fair Value Measurement of Financial Instruments

We began to account for financial instruments according to SFAS No. 157, “Fair Value Measurements,” as of April 1, 2008. The following methods and assumptions were used by us in estimating the fair value of our financial instruments (which are separate line items in the consolidated balance sheet):

Level 1 – Market participant assumptions developed based on market data obtained from sources independent of the reporting entity (observable inputs):

Cash and cash equivalents – The carrying value of cash, cash equivalents and marketable securities is their fair value due to the high liquidity and relatively short maturity of these instruments. Marketable securities considered to be cash equivalents are invested in low-risk interest-bearing government instruments and bank deposits, and the carrying value is determined by the financial institution where the funds are held.

 Commodity inventories and contracts – Exchange-traded futures and options contracts are utilized to minimize the effects of changes in the prices of agricultural commodities on our agribusiness grain inventories and forward purchase and sales contracts. Exchange-traded futures and options contracts are valued at quoted market prices. Forward purchase contracts and forward sale contracts are valued at market prices where available or other market quotes, adjusted for differences, primarily transportation, between the exchange traded market and the local markets on which the terms of the contracts are based. Changes in the market value of inventories, forward purchase and sale contracts, and exchange-traded futures and options contracts are recognized in earnings as a component of cost of goods sold. These contracts are predominantly settled in cash. We are exposed to loss in the event of non-performance by the counter-p arty to forward purchase and forward sales contracts.

Derivative financial instruments – These instruments are valued at fair market value based upon information supplied by the broker at which these instruments are held. The fair value is determined by the broker based on closing quotes supplied by the Chicago Board of Trade or other commodity exchanges. The Chicago Board of Trade is an exchange with published pricing. See the “Derivative Financial Instruments” policy below for additional information.  

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Level 2 – The reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs):

Accounts receivable, accounts payable and accrued liabilities – The carrying value of accounts receivable, accounts payable and accrued expenses are reasonable estimates of their fair value because of the short duration of these items.  

Cash and Cash Equivalents

We consider our highly liquid investments with original maturities of three months or less to be cash equivalents. Cash and cash equivalents as of December 31, 2008 and March 31, 2008 included amounts invested in short-term government funds and bank deposits.

Short-Term Investments

Short-term investments consist of certificates of deposit that are stated at cost, which approximates the fair market value. These investments are held at a financial institution. The maturity dates on these securities are greater than 90 days when purchased.

Revenue Recognition and Accounts Receivable

We recognize revenue when all of the following criteria are satisfied: persuasive evidence of an arrangement exists; risk of loss and title transfer to the customer; the price is fixed and determinable; and collectability is reasonably assured. Amounts included in accounts receivable relate to unpaid amounts for sales of ethanol, distillers grains, farm commodities and agronomy merchandise.

Initially, third-party marketers were responsible for subsequent sales, marketing, and shipping of ethanol from each of ethanol plants. Green Plains Superior and Green Plains Shenandoah had contracted with RPMG, Inc. (“RPMG”), an independent marketer, to purchase the ethanol produced at each of the Iowa plants. In September 2008, our ethanol marketing contract with respect to our Shenandoah plant terminated. In January 2009, our ethanol marketing contract for the Superior plant terminated. Our Bluffton and Obion plants each entered into ethanol marketing agreements with Aventine Renewable Energy, Inc. (“Aventine”) for the sale of all of the ethanol the respective plants produce. Under the agreements, we sold our ethanol production to Aventine at a price per gallon based on a market price at the time of sale, less certain marketing, storage, and transportation costs, as well as a profit margin for each gallon sold. Aventine en tered into lease or other arrangements to secure sufficient availability of railcars to ship the ethanol produced at each plant. In February 2009, the Aventine agreements terminated and a settlement was reached relating to the termination of the Aventine agreements and related matters. Green Plains Trade is now responsible for the sales, marketing and distribution of all ethanol produced at our four production facilities and our production subsidiaries have taken over the railcar leases for sufficient railcars for the plants.

The market for distillers grains generally consists of local markets for wet, modified wet and dried distillers grains, and national markets for dried distillers grains. We had previously entered into exclusive marketing agreements with CHS Inc. for the sale of dried distillers grains produced at our Shenandoah and Superior plants. The agreement with CHS related to the Shenandoah plant terminated on July 1, 2008. CHS continues to market dried distillers grains produced at the Superior plant. In-house personnel currently market wet distillers grains produced at the Superior ethanol plant. Green Plains Trade markets the distillers grains by-product for our Shenandoah, Bluffton and Obion plants.

We sell ethanol and distillers grains in-house through Green Plains Trade and via third-party marketers, who are our customers for purposes of revenue recognition. For sales of ethanol and distillers grains by Green Plains Trade, sales are recognized when title to the product and risk of loss transfer to the customer. When third-party marketers are used, they are responsible for subsequent sales, marketing, and shipping of the ethanol and distillers grains. Accordingly, once the ethanol or distillers grains are loaded into railcars and bills of lading are generated, the criteria for revenue recognition are considered to be satisfied and sales are recorded.  As part of our contracts with these third-party marketers, shipping costs incurred by them reduce the sales price they pay us. Under our contract with CHS, who continues to market dried distillers grains produced at our Superior ethanol plant, certain shipping costs for dried distillers grains are incurred directly by us, which are reflected in cost of goods sold.  For distillers grains sold to local farmers, bills of lading are generated and signed by the driver for outgoing shipments, at which time sales are recorded.

For our fee-based marketing business, we purchase and sell all of the ethanol produced by certain third-party plants. The ethanol is purchased at a price per gallon based on a market price at the time of sale, less certain marketing, storage, and transportation costs, as well as a profit margin. We recognize revenues and related costs of goods sold for these transactions when title of the ethanol passes to our customers.

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Sales of agricultural commodities, fertilizers and other similar products are recognized when title to the product and risk of loss transfer to the customer, which is dependent on the agreed upon sales terms with the customer. These sales terms provide for passage of title either at the time shipment is made or at the time the commodity has been delivered to its destination and final weights, grades and settlement prices have been agreed upon with the customer. Shipping and handling costs are included as a component of cost of goods sold. Revenues from grain storage are recognized as services are rendered. Revenues related to grain merchandising are presented gross.

Concentrations of Credit Risk

In the normal course of business, we are exposed to credit risk resulting from the possibility that a loss may occur from the failure of another party to perform according to the terms of a contract. We transact sales of ethanol and distillers grains and are marketing products for third parties, which may result in concentrations of credit risk from a variety of customers, including major integrated oil companies, large independent refiners, petroleum wholesalers, other marketers and jobbers. We are also exposed to credit risk resulting from sales of grain to large commercial buyers, including other ethanol plants, which we continually monitor. Although payments are typically received within fifteen days of sale for ethanol and distillers grains, we continually monitor this credit risk exposure. In addition, we may prepay for or make deposits on undelivered inventories. Concentrations of credit risk with respect to inventory advances are primarily with a few major suppliers of petroleum products and agricultural inputs.

Inventories

Corn to be used in ethanol production, ethanol and distillers grains inventories are stated at the lower of average cost (determined monthly) or market.

Other grain inventories include readily-marketable physical quantities of grain, forward contracts to buy and sell grain, and exchange traded futures and option contracts (all stated at market value). The futures and options contracts, which are used to hedge the value of both owned grain and forward contracts, are considered derivatives under SFAS No. 133, as amended, “Accounting for Derivative Instruments and Hedging Activities.” All Agribusiness segment grain inventories are marked to the market price with changes reflected in cost of goods sold. The forward contracts require performance in future periods. Contracts to purchase grain from producers generally relate to the current or future crop years for delivery periods quoted by regulated commodity exchanges. Contracts for the sale of grain to processors or other consumers generally do not extend beyond one year. The terms of contracts for the purchase and sale of grain are consistent with industry standards.

Merchandise and petroleum products inventories are valued at the lower of cost (first-in, first-out) or market price.

Derivative Financial Instruments

We use various financial instruments, including derivatives, to minimize the effects of the volatility of commodity price changes primarily related to corn, natural gas and ethanol. We monitor and manage this exposure as part of our overall risk management policy. As such, we seek to reduce the potentially adverse effects that the volatility of these markets may have on our operating results. We may take hedging positions in these commodities as one way to mitigate risk. We have put in place commodity price risk management strategies that seek to reduce significant, unanticipated earnings fluctuations that may arise from volatility in commodity prices, principally through the use of derivative instruments. While we attempt to link our hedging activities to our purchase and sales activities, there are situations where these hedging activities can themselves result in losses. We cannot provide assurance that such losses will not occur.

By using derivatives to hedge exposures to changes in commodity prices, we have exposures on these derivatives to credit and market risk. We are exposed to credit risk that the counterparty might fail to fulfill its performance obligations under the terms of the derivative contract. We minimize our credit risk by entering into transactions with high quality counterparties, limiting the amount of financial exposure we have with each counterparty and monitoring the financial condition of our counterparties. We also maintain a risk management policy requiring that all non-exchange traded derivative contracts with a duration greater than one year be formally approved by senior management. Market risk is the risk that the value of the financial instrument might be adversely affected by a change in commodity prices or interest rates. We manage market risk by incorporating monitoring parameters within our risk management strategy that limit the types of derivati ve instruments and derivative strategies we use, and the degree of market risk that may be undertaken by the use of derivative instruments.

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We apply the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities.” SFAS No. 133 requires companies to evaluate their contracts to determine whether the contracts are derivatives as certain derivative contracts that involve physical delivery may be exempted from SFAS No. 133 treatment as normal purchases or normal sales. Commodity forward contracts generally qualify for the normal purchase or sale exception under SFAS No. 133 and are therefore not subject to its provisions as they will be expected to be used or sold over a reasonable period in the normal course of business.  

Any derivative contracts that do not meet the normal purchase or sales criteria are therefore brought to market with the corresponding gains and losses recorded in operating income unless the contracts qualify for hedge accounting treatment. We do not classify any of our commodity derivative contracts as hedging contracts for purposes of SFAS No. 133. These derivative financial instruments are recognized in other current assets or liabilities at fair value.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation of these assets is generally computed using the straight-line method over the following estimated useful lives of the assets:  

	Years
Land improvements	20
Plant, buildings and improvements	10-40
Railroad track and equipment	20
Ethanol production equipment	15-40
Other machinery and equipment	5-7
Computers and software	3-5
Office furniture and equipment	5-7

Property and equipment is capitalized at cost. Non-permanent land improvements, construction-in-progress and capitalized interest are depreciated upon the commencement of operations of the property (i.e. ethanol plant start-up). Expenditures for property betterments and renewals are capitalized. Costs of repairs and maintenance are charged to expense as incurred.

We periodically evaluate whether events and circumstances have occurred that may warrant revision of the estimated useful life of our fixed assets.

Impairment of Long-Lived Assets

Our long-lived assets currently consist of property and equipment. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Significant management judgment is required in determining the fair value of our long-lived assets to measure impairment, including projections of future discounted cash flows.

Financing Costs

Fees and costs related to securing debt financing are recorded as financing costs. Debt issuance costs are stated at cost and are amortized as interest expense over the life of the loans. However, during the period of construction, amortization of such costs is capitalized in construction-in-progress.

Minority Interests

Prior to completion of the Merger, the Company held a 78% ownership interest in Indiana Bio-Energy, LLC  (now known as Green Plains Bluffton) and a 62% ownership interest in Ethanol Grain Processors, LLC (now known as Green Plains Obion). The Company reflected the interests held by others as minority interests in the consolidated balance sheet and recorded the minority interests in income and losses of the subsidiaries in its consolidated results of operations. These minority interests were exchanged for Green Plains common stock in conjunction with the Merger. Remaining minority interests represent the minority partners’ shares of the equity and income of a majority-owned subsidiary of Green Plains Grain.

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Cost of Goods Sold

Cost of goods sold includes costs for direct labor, materials and certain plant overhead costs. Direct labor includes all compensation and related benefits of non-management personnel involved in the operation of our ethanol plants. Grain purchasing and receiving costs, other than labor costs for grain buyers and scale operators, are also included in cost of goods sold. Direct materials consist of the costs of corn feedstock, denaturant, and process chemicals. Corn feedstock costs include realized and unrealized gains and losses on related derivative financial instruments, inbound freight charges, inspection costs and internal transfer costs. Plant overhead costs primarily consist of plant utilities, sales commissions and outbound freight charges. Shipping costs incurred directly by us, including railcar lease costs, are also reflected in cost of goods sold.

We use exchange-traded futures and options contracts to minimize the effects of changes in the prices of agricultural commodities on our agribusiness grain inventories and forward purchase and sales contracts. Exchange-traded futures and options contracts are valued at quoted market prices. Forward purchase contracts and forward sale contracts are valued at market prices, where available, or other market quotes adjusted for differences, primarily transportation, between the exchange traded market and the local markets on which the terms of the contracts are based. Changes in the market value of inventories, forward purchase and sale contracts, and exchange-traded futures and options contracts, are recognized in earnings as a component of cost of goods sold. These contracts are predominantly settled in cash. We are exposed to loss in the event of non-performance by the counter-party to forward purchase and forward sales contracts.

Operating Expenses

Operating expenses are primarily general and administrative expenses for employee salaries, incentives and benefits; office expenses; director compensation; and professional fees for accounting, legal, consulting, and investor relations activities; as well as depreciation and amortization costs.  

Environmental Expenditures

Environmental expenditures that pertain to our current operations and relate to future revenue are expensed or capitalized consistent with our capitalization policy. Expenditures that result from the remediation of an existing condition caused by past operations and that do not contribute to future revenue are expensed as incurred.  

Stock-Based Compensation

The Company applies SFAS No. 123(R), “Accounting for Stock-Based Compensation,” for all compensation related to stock, options or warrants. SFAS No. 123(R) requires the recognition of compensation cost using a fair value based method whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The Company uses the Black-Scholes pricing model to calculate the fair value of options and warrants issued to both employees and non-employees. Stock issued for compensation is valued using the market price of the stock on the date of the related agreement.

Income Taxes

The Company accounts for its income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes,” and Financial Accounting Standards Board (“FASB”) Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109,” (FIN 48 was effective for us in the nine-month transition period ended December 31, 2008). The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between the financial reporting carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. The effect on deferr ed tax assets and liabilities of a change in tax rates is recognized in operating results in the period of enactment. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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Recent Accounting Pronouncements

In September 2008, the FASB issued FASB Staff Position (“FSP”) No. 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees.” This FSP is intended to improve disclosures about credit derivatives by requiring more information about the potential adverse effects of changes in credit risk on the financial position, financial performance and cash flows of the sellers of credit derivatives. FSP No. 133-1 amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” to require disclosures by sellers of credit derivatives, including credit derivatives embedded in hybrid instruments. FSP No. 133-1 also amends FIN 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others,” to require an additional disclosure about the current status of the payment/performance risk of a guarantee. The provisions of FSP No. 133-1 that amend SFAS No. 133 and FIN 45 are effective for reporting periods ending after November 15, 2008. FSP No. 133-1 clarifies the effective date of SFAS No. 161. The disclosures required by SFAS No. 161 should be provided for any reporting period beginning after November 15, 2008. This clarification of the effective date of SFAS No. 161 is effective upon issuance of FSP No. 133-1. We are currently evaluating the impact that this statement will have on our consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements presented in conformity with generally accepted accounting principles in the United States. The implementation of SFAS No. 162 did not have a material impact on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities.” The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. SFAS No. 161 achieves these improvements by requiring disclosure of the fair values of derivative instruments and their gains and losses in a tabular format. It also provides more information about an entity’s liquidity by requiring disclosure of derivative features that are credit risk related. Finally, it requires cross-referencing within footnotes to enable financial statement users to locate important information about derivative instruments. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. We do not expect the adoption of SFAS No. 161 to have a material impact on our consolidated financial statements.

In December 2007, the FASB issued “Summary of Statement No. 141 (revised 2007) (“SFAS No. 141R”),” which replaces SFAS No. 141, “Business Combinations,” to improve the relevance and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. SFAS No. 141R retains the fundamental requirements that the acquisition method of accounting (which SFAS No. 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. SFAS No. 141R requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. That replaces SFAS No. 141’s cost-allocation process, which required the cost of an acquisition to be allocated to the individual assets acquired and liabilities assumed based on their estimated fair values. SFAS No. 141’s guidance resulted in not recognizing some assets and liabilities at the acquisition date, and it also resulted in measuring some assets and liabilities at amounts other than their fair values at the acquisition date. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. It may not be applied before that date. We do not expect the adoption of SFAS No. 141R to have a material impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51,” which establishes accounting and reporting standards for the noncontrolling interest (minority interest) in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. The amount of net income attributable to the noncontrolling interest is to be included in consolidated net income on the face of the income statement. SFAS No. 160 also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. It may not be applied before that date. We do not expect the adoption of SFAS No. 160 to have a material impact on our consolidated financial statements.

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4.  BUSINESS COMBINATION

Merger of Green Plains Renewable Energy, Inc. and VBV LLC

In May 2008, definitive merger agreements were entered into by Green Plains and VBV. At that time, VBV held majority interest in two companies that were constructing ethanol plants. These two companies were Indiana Bio-Energy, LLC (“IBE”) of Bluffton, IN, an Indiana limited liability company which was formed in December 2004; and Ethanol Grain Processors, LLC, (“EGP”) of Obion, TN, a Tennessee limited liability company which was formed in October 2004. The Merger was completed on October 15, 2008. VBV and its subsidiaries became wholly-owned subsidiaries of Green Plains. Pursuant to the terms of the Merger, equity holders of VBV, IBE and EGP received Green Plains common stock and options totaling 11,139,000 shares. Upon closing of the Merger, VBV, IBE and EGP were merged into subsidiaries of the Green Plains. IBE has been renamed as Green Plains Bluffton LLC and EGP has been renamed as Green Plains Obion LLC. Simultaneously with t he closing of the Merger, NTR plc (“NTR”), a leading international developer and operator of renewable energy and sustainable waste management projects and majority equity holder of VBV prior to the Merger, through its wholly-owned subsidiaries, invested $60.0 million in Green Plains common stock at a price of $10 per share, or an additional 6.0 million shares. With this investment, NTR is our largest shareholder. This additional investment is being used for general corporate purposes and to finance future acquisitions.

As a result of accounting for the Merger as a reverse acquisition, Green Plains’ assets and liabilities as of October 15, 2008, the closing date of the Merger, have been incorporated into VBV’s balance sheet based on the fair values of the net assets acquired, which equaled the consideration paid for the acquisition. SFAS No. 141 requires an allocation of the acquisition consideration to individual assets and liabilities including tangible assets, financial assets, separately recognized intangible assets, and goodwill. Further, the Company’s operating results (post-Merger) include VBV’s operating results prior to the date of closing and the results of the combined entity following the closing of the Merger. Although VBV was considered the acquiring entity for accounting purposes, the Merger was structured so that VBV became a wholly-owned subsidiary of Green Plains.

F-16

Since the Merger occurred toward the end of our fiscal year and involved complex legal and accounting issues, Green Plains performed a tentative allocation of the purchase price using preliminary estimates of the values of the assets and liabilities acquired. We have engaged an expert to assist in the determination of the purchase price allocation for purposes of SFAS No. 141. We believe the final allocation will be determined during 2009 with prospective adjustments recorded to our financial statements at that time, if necessary, in accordance with SFAS No. 141. A true-up of the purchase price allocation could result in gains or losses recognized in our consolidated financial statements in future periods. The following table summarizes the acquisition purchase price and the tentative allocation to the assets acquired and liabilities assumed in connection with the acquisition (in thousands):

				Amount
Current assets
	Cash and cash equivalents		$	9,830
	Accounts receivable			22,031
	Inventories			46,007
	Prepaid expenses and other			5,840
	Derivative financial institutions			1,988
		Total current assets		85,696
	Property and equipment, net			179,401
	Other assets			2,938
		Total assets acquired		268,035
Current liabilities
	Accounts payable and accrued liabilities			37,666
	Purchase commitment			306
	Current maturities of long-term debt			17,085
	Derivative financial instruments			14,625
		Total current liabilities		69,682
Long-term liabilities
	Notes payable			559
	Pension costs			1,791
	Long-term debt			110,154
	Minority interest			299
	Other liabilities			4,717
		Total liabilities assumed		187,202
		Total	$	80,833

A reconciliation of consideration paid to the allocation of the purchase price to specific assets and liabilities is as follows (in thousands):

Fair value of outstanding common stock assumed	$	78,220
Merger-related cash expenditures		2,613
	$	80,833

The following represents the unaudited pro forma combined results of operations of Green Plains and VBV as if the Merger had occurred as of April 1, 2007 (in thousands, except per share amounts):

Unaudited pro forma information:			Nine-Month Transition Period Ended December 31, 2008		Nine-Month Comparison Period Ended December 31, 2007
	Revenues	$	454,732	$	24,202
	Net income (loss)		(8,124)		(11,771)
	Basic and diluted earnings per share		(0.33)		(0.47)

F-17

The pro forma financial information above includes historical Green Plains and VBV revenue and expenses adjusted to: (1) change the accounting base of Green Plains assets depreciated after the Merger to reflect purchase price adjustments, (2) adjust the income tax expense of the combined results, (3) revise compensation expense to reflect post-Merger executive salaries, (4) remove minority interests of VBV subsidiaries and (5) reverse Merger-related market price adjustments. This pro forma financial information is shown for illustrative purposes only and is not necessarily indicative of future results of operations of the Company or the results of operations of the Company that would have occurred had the Merger been in effect for the periods presented.

5.  SEGMENT INFORMATION

With the closing of the Merger, the Company’s chief operating decision makers began to review its operations in three separate operating segments. These segments are: (1) production of ethanol and related by-products (which we collectively refer to as “Ethanol Production”), (2) grain warehousing and marketing, as well as sales and related services of agronomy and petroleum products (which we collectively refer to as “Agribusiness”) and (3) marketing and distribution of Company-produced and third-party ethanol and distillers grains (which we refer to as “Marketing and Distribution”).

VBV was formed on September 28, 2006. Prior to completion of the Merger, VBV had controlling interests in two development stage ethanol plants. Operations commenced at these plants in September 2008 and November 2008, respectively. Accordingly, VBV, the acquiring entity for accounting purposes, was a development stage company until September 2008.

The following are revenues, gross profit, operating income and total assets for our operating segments for the periods indicated (in thousands):

				For the Nine-Month Transition Period Ended December 31, 2008		For the Nine- Month Comparative Period Ended December 31, 2007		Year Ended March 31, 2008		Period from September 28, 2006 (Date of Inception) to March 31, 2007
						(unaudited)
Revenues:
	Ethanol Production		$	131,538	$	-	$	-	$	-
	Agribusiness			68,785		-		-		-
	Marketing and Distribution			76,521		-		-		-
	Intercompany eliminations			(88,086)		-		-		-
			$	188,758	$	-	$	-	$	-
Gross profit:
	Ethanol Production		$	4,857	$	-	$	-	$	-
	Agribusiness			8,554		-		-		-
	Marketing and Distribution			-		-		-		-
	Intercompany eliminations			(97)		-		-		-
			$	13,314	$	-	$	-	$	-
Operating income (loss):
	Ethanol Production		$	(9,113)	$	(3,463)	$	(5,423)	$	(1,421)
	Agribusiness			4,422		-		-		-
	Marketing and Distribution			(365)		-		-		-
	Intercompany eliminations			(97)		-		-		-
			$	(5,153)	$	(3,463)	$	(5,423)	$	(1,421)
Total assets:
	Ethanol Production		$	537,843	$	217,496	$	254,175	$	175,454
	Agribusiness			77,384		-		-		-
	Marketing and Distribution			33,867		-		-		-
	Corporate assets (not assigned
		to specific segments)		48,128		-		-		-
	Intercompany eliminations			(4,156)		-		-		-
			$	693,066	$	217,496	$	254,175	$	175,454

F-18

Nearly all of our ethanol that was sold to third-party marketers was repurchased by Green Plains Trade, reflected in the Marketing and Distribution segment, and resold to other customers. Corresponding revenues and related costs of goods sold were eliminated in consolidation (see intercompany eliminations above).

Our consolidated revenues from all segments totaled $188.8 million. Three of our customers, all within in the Ethanol Production segment, comprised over 10 percent of consolidated revenues for the nine-month period ending December 31, 2008, with these customers representing approximately 17%, 12% and 10% of revenues. Management does not believe that the loss of any of these customers would have a significant impact on our consolidated financial statements.

6.  INVENTORIES

The components of inventories are as follows (in thousands):

		December 31, 2008		March 31, 2008
Petroleum & agronomy items held for sale	$	15,925	$	-
Grain held for sale		10,574		-
Raw materials		9,503		-
Work-in-process		7,371		-
Finished goods		2,171		-
Supplies and parts		1,489		-
	$	47,033	$	-

7.  PROPERTY AND EQUIPMENT

The components of property and equipment are as follows (in thousands):

			December 31,  2008		March 31, 2008
Construction-in-progress			$	1,180	$	237,083
Plant, buildings and improvements				264,474		-
Land and improvements				35,006		3,951
Railroad track and equipment				22,225		-
Computer and software				1,702		-
Plant equipment				180,276		-
Office furniture and equipment				575		164
Leasehold improvements and other				6		-
	Total property and equipment			505,444		241,198
		Less: accumulated depreciation		(9,672)		(36)
	Property and equipment, net		$	495,772	$	241,162

During the nine-month period ended December 31, 2008, production began at our facilities in Bluffton, IN and Obion, TN. Accordingly, the assets associated with these plants were reclassified from construction-in-progress to plant, buildings and improvements.

8.  ACCRUED EXPENSES

The components of accrued expenses are as follows (in thousands):

	December 31,  2008		March 31, 2008
Accrued liabilities	$	14,595	$	2,862
Accrued construction retainage		-		12,112
	$	14,595	$	14,974

F-19

9.  LONG-TERM DEBT AND LINES OF CREDIT

The components of long-term debt are as follows:

		December 31, 2008		March 31, 2008
Green Plains Bluffton:
	Term loan	$	70,000	$	29,560
	Revolving term loan		18,715		-
	Revenue bond		22,000		22,000
	Economic development grant		2,200		-
Green Plains Obion:
	Term loan		60,000		29,600
	Revolving term loan		30,839		-
	Commercial loan		-		1,000
	Note payable		714		-
	Capital lease		748		393
	Economic development grant		1,000		-
Green Plains Shenandoah:
	Term loan		23,200		-
	Revolving term loan		17,000		-
	Seasonal borrowing		3,300		-
	Economic development loan		165		-
Green Plains Superior:
	Term loan		35,875		-
	Revolving term loan		10,000		-
Green Plains Grain:
	Term loan		8,325		-
	Revolving term loan		20,000		-
	Equipment financing loan		1,517		-
Essex Elevator:
	Note payable		446		-
	Covenant not to compete		372		-
Total debt			326,416		82,553
	Less:  current portion		(27,405)		(1,843)
Long-term debt		$	299,011	$	80,710

Scheduled long-term debt repayments, are as follows (in thousands):

Year Ending December 31,			Amount
	2009	$	27,405
	2010		50,283
	2011		30,427
	2012		30,109
	2013		87,245
	Thereafter		100,947
	Total	$	326,416

F-20

Loan Terminology

Related to loan covenant discussions below, the following definitions will apply (all calculated in accordance with U.S. generally accepted accounting principles (“GAAP”) consistently applied):

·

Working capital – current assets over current liabilities.

·

Net worth – total assets over total liabilities plus subordinated debt.

·

Tangible owner’s equity – net worth divided by total assets.

·

Debt service coverage ratio – (1) net income (after taxes), plus depreciation and amortization, divided by (2) all current portions of regularly scheduled long-term debt for the prior period (previous year end).

·

Fixed charge ratio – adjusted EBITDAR divided by fixed charges, which are the sum of Green Plains Grain’s interest expense, current maturities under the term loan, rent expense and lease expenses.  

·

EBITDAR – net income plus interest expense, rent and lease expense, and noncash expenses (including depreciation and amortization expense, deferred income tax expense and unrealized gains and losses on futures contracts), less interest income and certain capital expenditures.

·

Senior leverage ratio – debt, excluding amounts under the Green Plains Grain revolving credit note, divided by EBITDAR.

Ethanol Production Segment

Each of our Ethanol Production segment subsidiaries has credit facilities with lender groups that provided for term and revolving term loans to finance construction and operation of the production facilities (“Production Credit Facilities”). The Green Plains Bluffton loan is comprised of a $70.0 million amortizing term loan and a $20.0 million revolving term facility (individually and collectively, the “Green Plains Bluffton Loan Agreement”). The Green Plains Obion loan is comprised of a $60.0 million amortizing term loan, a revolving term loan of $37.4 million and a $2.6 million revolving line of credit (individually and collectively, the “Green Plains Obion Loan Agreement”). The Green Plains Shenandoah loan is comprised of a $30.0 million amortizing term loan, a $17.0 million revolving term facility, and a statused revolving credit supplement (seasonal borrowing capability) of up to $4.3 million (individually and collective ly, the “Green Plains Shenandoah Loan Agreement”).  The Green Plains Superior loan is comprised of a $40.0 million amortizing term loan and a $10.0 million revolving term facility (individually and collectively, the “Green Plains Superior Loan Agreement”).

Loan Repayment Terms

·

Term Loans – The term loans were available for advances until construction for each of the plants was completed.

o

Scheduled quarterly principal payments (plus interest) are as follows:

§

Green Plains Bluffton  

  $1.75 million

§

Green Plains Obion  

  $2.4 million (beginning May 20, 2009)

§

Green Plains Shenandoah

  $1.2 million

§

Green Plains Superior  

  $1.375 million

o

Final maturity dates (at the latest) are as follows:

§

Green Plains Bluffton  

  November 1, 2013

§

Green Plains Obion  

  May 20, 2015

§

Green Plains Shenandoah

  May 20, 2014

§

Green Plains Superior  

  July 20, 2015

F-21

o

Each term loan has a provision that requires the Company to make annual special payments equal to a percentage ranging from 65% to 75% of the available free cash flow from the related entity’s operations (as defined in the respective loan agreements), subject to certain limitations, generally provided, however, that if such payment would result in a covenant default under the respective loan agreements, the amount of the payment shall be reduced to an amount which would not result in a covenant default.

o

Free cash flow payments are discontinued when the aggregate total received from such payments meets the following amounts:

§

Green Plains Bluffton  

  $16.0 million

§

Green Plains Obion  

  $18.0 million

§

Green Plains Shenandoah

  $8.0 million

§

Green Plains Superior  

  $10.0 million

·

Revolving Term Loans – The revolving term loans are generally available for advances throughout the life of the commitment. Allowable advances under the Green Plains Shenandoah Loan Agreement are reduced by $2.4 million each six-month period commencing on the first day of the month beginning approximately six months after repayment of the term loan, but in no event later than November 1, 2014. Allowable advances under the Green Plains Superior Loan Agreement are reduced by $2.5 million each six-month period commencing on the first day of the month beginning approximately six months after repayment of the term loan, but in no event later than July 1, 2015. Interest-only payments are due each month on all revolving term loans until the final maturity date, with the exception of the Green Plains Obion Loan Agreement, which requires additional semi-annual payments of $4.675 million beginning November 1, 2015.

o

Final maturity dates (at the latest) are as follows:

§

Green Plains Bluffton  

  November 1, 2013

§

Green Plains Obion  

  November 1, 2018

§

Green Plains Shenandoah

  November 1, 2017

§

Green Plains Superior  

  July 1, 2017

Pricing and Fees

·

The loans bear interest at either the Agent Base Rate (prime) plus from 0.0% to 0.5% or short-term fixed rates at LIBOR plus 250 to 390 basis points (each based on a ratio of total equity to total assets). In some cases, the lender may allow us to elect to pay interest at a fixed interest rate to be determined.

·

Certain loans were charged an application fee and have an annual recurring administrative fee.

·

Unused commitment fees, when charged, range from 0.375% to 0.75%.  

·

Origination and other fees have been recorded in financing costs in the consolidated balance sheets.

Security

As security for the loans, the lenders received a first-position lien on all personal property and real estate owned by the respective entity borrowing the funds, including an assignment of all contracts and rights pertinent to construction and on-going operations of the plant. These borrowing entities are also required to maintain certain financial and non-financial covenants during the terms of the loans.

F-22

Representations, Warranties and Covenants

The loan agreements contain representations, warranties, conditions precedent, affirmative covenants (including financial covenants) and negative covenants including:

·

Maintenance of working capital as follows: by Green Plains Bluffton of not less than $10.0 million at the commencement of operations, and increasing to $12.0 million no later than 12 months after the date construction for the plant has been completed and continuing thereafter.

o

Green Plains Bluffton  

  $10.0 million (increasing to $12.0 million by September 11, 2009)

o

Green Plains Obion  

  $9.0 million (increasing to $12.0 million by December 31, 2009)

o

Green Plains Shenandoah

  $6.0 million

o

Green Plains Superior  

  $5.0 million

·

Maintenance of net worth as follows:

o

Green Plains Bluffton  

  $80.0 million

o

Green Plains Obion  

  $67.0 million (increasing to $77.0 million by December 31, 2009)

o

Green Plains Shenandoah

  $37.5 million

o

Green Plains Superior  

  $58.3 million

·

Maintenance of tangible owner’s equity as follows:

o

Green Plains Bluffton  

  at least 40% (increasing to 50% by December 31, 2009)

·

Maintenance of debt service coverage ratio as follows:

o

Green Plains Bluffton  

  1.25 to 1.0

o

Green Plains Obion  

  1.25 to 1.0

o

Green Plains Shenandoah

  1.5 to 1.0

o

Green Plains Superior  

  1.25 to 1.0

·

Dividends or other annual distributions to the equity holder will be limited, subject to certain additional restrictions including maintenance with all loan covenants, terms and conditions, as follows:

o

Green Plains Bluffton  

  50% of profit, net of income taxes

o

Green Plains Obion  

  40% of profit, net of income taxes

o

Green Plains Shenandoah

  40% of profit, net of income taxes

o

Green Plains Superior  

  40% of profit, net of income taxes

As of December 31, 2008, working capital balances at Green Plains Bluffton, Green Plains Obion and Green Plains Superior were less than those required by the respective financial covenants in the loan agreements of those subsidiaries. In addition, the debt service coverage ratio for Green Plains Superior was below levels required by its covenants. In February 2009, the Company contributed additional capital to these subsidiaries and as a result, the lenders provided waivers accepting our compliance with the financial covenants for these subsidiaries as of that date.

F-23

Bluffton Revenue Bond

·

Bluffton Revenue Bond – Green Plains Bluffton also received $22.0 million in Subordinate Solid Waste Disposal Facility Revenue Bond funds from the City of Bluffton, IN. The revenue bond requires: (1) semi-annual interest only payments of $825,000 through September 1, 2009, (2) semi-annual principal and interest payments of approximately $1.5 million during the period commencing on March 1, 2010 through March 1, 2019, and (3) a final principal and interest payment of $3.745 million on September 1, 2019.

·

The revenue bond bears interest at 7.50% per annum.

·

Revenue bond issuance costs have been recorded in financing costs in the consolidated balance sheets.

Capitalized Interest

We capitalized $6.0 million, $2.6 million and $41,000 of interest and debt issuance costs during the nine-month transition period ended December 31, 2008, fiscal year ended March 31, 2008, and period from September 28, 2006 (date of inception) to March 31, 2007, respectively.

Agribusiness Segment

The Green Plains Grain loan is comprised of a $9.0 million amortizing term loan and a $35.0 million revolving term facility (individually and collectively, the “Green Plains Grain Loan Agreement”). Loan proceeds are used primarily for working capital purposes. The principal amount of the revolving credit note is reduced to $30.0 million on March 31, 2009.

Key Loan Information

·

The term loan expires on April 3, 2013 and the revolving loan expires on April 3, 2010.

·

Payments of $225,000 under the term loan are due on the last business day of each calendar quarter, with any remaining amount payable at the expiration of the loan term.

·

The loans bear interest at either the Agent Base Rate (prime) plus from 0.0% to 0.5% or short-term fixed rates at LIBOR plus 250 to 335 basis points (each based on a ratio of total equity to total assets). In some cases, the lender may allow us to elect to pay interest at a fixed interest rate to be determined.

·

The loans bear interest at either the Agent Base Rate (prime) minus 0.25% to plus 0.75% or short-term fixed rates at LIBOR plus 175 to 275 basis points (each depending on Green Plains Grain’s Fixed Charge Ratio for the preceding four fiscal quarters).

·

As security for the loans, the lender received a first-position lien on real estate, equipment, inventory and accounts receivable owned by Green Plains Grain.

The loan agreements contain certain financial covenants and restrictions, including the following:

·

Maintenance of working capital of at least $7.0 million, increasing to $9.0 million in fiscal 2009 and $11.0 million in fiscal 2010.

·

Maintenance of tangible net worth of at least $10.0 million, increasing to $12.0 million in fiscal 2009 and $15.0 million in fiscal 2010.

·

Maintenance of a fixed charge ratio of 1.10x or more and a senior leverage ratio that does not exceed 2.25x.

·

Capital expenditures for Green Plains Grain were restricted to $2.5 million during fiscal 2008. That amount is reduced to $1.0 million for subsequent years; provided, however, that any unused portion from any fiscal year may be added to the limit for the next succeeding year.

F-24

Equipment Financing Loans

Green Plains Grain has two separate equipment financing agreements with AXIS Capital Inc. totaling $1.75 million (individually and collectively, the “Equipment Financing Loans”). The Equipment Financing Loans provide financing for designated vehicles, implements and machinery. The Company agreed to guaranty the Equipment Financing Loans. Pursuant to the terms of the agreements, Green Plains Grain is required to make 48 monthly principal and interest payments of $43,341, which commenced in April 2008.

10.  STOCK-BASED COMPENSATION

We account for all share-based compensation transactions pursuant to SFAS No. 123R, “Share-Based Payment,” which is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation.” SFAS No. 123R requires entities to record noncash compensation expense related to payment for employee services by an equity award in their financial statements over the requisite service period.

Indiana Bio-Energy, LLC

VBV invested in IBE on December 22, 2006, at which time two non-employee individuals had outstanding options to purchase membership units in IBE. The options were issued to allow each of the individuals to purchase 164 units of IBE. The options had a weighted-average exercise price of $100, and a weighted-average contractual term of 0.9 years and 1.9 years as of March 31, 2008 and 2007, respectively. The fair value of the options was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions: dividend yield of 0%, volatility of 98%, weighted-average risk free interest rate of 4.2% and expected life of 3.5 years. Since IBE’s shares were not publicly traded, expected volatility was computed based on the average historical volatility of similar entities with publicly traded shares. The risk-free rate for the expected term of the options was based on the U.S. Treasury yield curve in effect at the time of the gr ant. The weighted-average fair value of the options granted was estimated to be $9,915 per unit. VBV recognized expense associated with the IBE options of $0 and $342,334 for the year ended March 31, 2008, and for the period from September 28, 2006 (Inception Date) to March 31, 2007, respectively. The aggregate intrinsic value of the awards was $3,247,200 as of March 31, 2008 and 2007 based on the weighted-average exercise price of the underlying awards of $100 and IBE’s estimated fair market value of $10,000 per unit.

In June 2007, IBE issued one its employees 16 restricted units. The weighted-average grant-date fair value of the award was $10,000 per unit. The award vested over five years at the time of the grant. As of March 31, 2008, there was $136,000 of total unrecognized compensation cost related to the non-vested share-based awards, which was expected to be recognized over a weighted-average period of 4.2 years at that time. The total fair value of shares vested during the year ended March 31, 2008 was $24,000.

Ethanol Grain Processors, LLC

VBV invested in EGP on January 19, 2007, at which time one non-employee individual had outstanding options to purchase 55,884 membership units in EGP at $0.45 per unit. The options, which were still outstanding at March 31, 2008 and 2007, had a weighted-average exercise price of $0.45 and weighted-average remaining contractual term of 3.9 and 4.9 years as of March 31, 2008 and 2007, respectively. The fair value of the option was estimated using the Black-Scholes option-pricing model. The weighted-average fair value of the option was estimated to be $1.86 per unit. All of the expense associated with the options had been recorded by EGP prior to VBV’s acquisition of EGP. The aggregate intrinsic value of the award was $86,620 as of March 31, 2008 and 2007 and was calculated as the difference between the weighted-average exercise price of the underlying awards and EGP’s estimated fair market value, which was the offering price, of $2.00 per unit.

In July 2007, VBV granted 20,000 restricted units to a related party member acting as a consultant in the roles of Chief Financial Officer and Chief Executive Officer of EGP, vesting upon substantial completion of the EGP plant. The weighted-average grant date fair value was $2.00 per unit. As of March 31, 2008, there was $17,500 of total unrecognized compensation cost related to the non-vested share-based awards. The cost was recognized during the nine months ended December 31, 2008. The total fair value of shares vested during the year ended March 31, 2008 was $22,500.

In December 2007, VBV granted 125,000 EGP options to a related party member acting as Chief Financial Officer and Chief Executive Officer of EGP, vesting immediately upon issue and expiring three years from date of issuance. The options had a weighted-average exercise price of $2.00 and weighted contractual term of 2.75 years as of March 31, 2008. The fair value of the option was estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions: dividend yield 0%, volatility 98%, weighted-average risk free interest rate 3.0% and expected life of three years. Since EGP’s shares were not publicly traded, expected volatility was computed based on the average historical volatility of similar entities with publicly traded shares. The risk-free rate for the expected term of the options was based on the U.S. Treasury yield curve in effect at the time of the grant. The weighted-average fair value of the option granted was estimated to be $1.25 per unit. VBV recognized expense associated with the options of $155,649 for the year ended March 31, 2008. The aggregate intrinsic value of the award was zero as of March 31, 2008 based on the weighted-average exercise price of the underlying awards and EGP’s estimated fair market value of $2.00 per unit.

F-25

VBV LLC

In May 2007, VBV granted to an executive officer restricted units of up to 0.3% of VBV’s units, to incrementally vest over a period of four 4 years. The weighted-average grant-date fair value of the award was $102,657 per unit. At March 31, 2008, the restricted units granted were equal to 3 units based on 0.3% of VBV’s common units. As of March 31, 2008, there was $147,035 of total unrecognized compensation cost related to the non-vested share-based awards. The cost was expected to be recognized over a weighted-average period of 3.2 years. The total fair value of shares vested during the year ended March 31, 2008 was $160,936.

In May 2007, VBV also granted the executive officer options to purchase 0.35% of VBV’s common units, to incrementally vest over a period of four 4 years. VBV granted the executive the options to purchase up to 0.35% of VBV’s common units at an exercise price equal to the actual percentage exercised under the option by the executive multiplied by the total invested equity in VBV at the time of the exercise of the option. The options had a weighted-average exercise price of $110,623 and weighted contractual term of 3.2 years as of March 31, 2008. The fair value of the option was estimated using the Black-Scholes option-pricing model at each reporting date. The following weighted-average assumptions were used in the model as of March 31, 2008: dividend yield 0%, volatility 98%, weighted-average risk free interest rate 4.7% and expected life of 4 years. Since VBV’s shares were not publicly traded, expected volatility was computed based on the a verage historical volatility of similar entities with publicly traded shares. The risk-free rate for the expected term of the options was based on the U.S. Treasury yield curve in effect at the time of the grant. The weighted-average fair value of the option granted was estimated to be $77,774 per unit. VBV recognized expense associated with the options of $142,249 for the year ended March 31, 2008. The aggregate intrinsic value of the award was zero as of March 31, 2008 based on the weighted-average exercise price of the underlying awards and VBV’s estimated fair market value of $110,623 per unit.

The VBV executive officer entered into an employment agreement at the time of the Merger to serve as the Company’s President and Chief Operating Officer. This employment agreement included long-term incentive awards that replaced the outstanding restricted units and options, and that were of a type and level that is competitive to benefits provided to officers of public companies of comparable size.

Stock-Based Compensation following the Merger

The Green Plains Renewable Energy, Inc. 2007 Equity Incentive Plan (“Equity Incentive Plan”) provides for the granting of stock-based compensation, including options to purchase shares of common stock, stock appreciation rights tied to the value of common stock, restricted stock and restricted stock unit awards to eligible employees, non-employee directors and consultants. We have reserved a total of 1.0 million shares of common stock for issuance under the Equity Incentive Plan. The maximum number of shares of common stock that can be granted to any employee during any year is 50,000.

Grants under the Equity Incentive Plan may include:

·

Options – Stock options may be granted that are currently exercisable, that become exercisable in installments, or that are not exercisable until a fixed future date. Certain options that have been issued are exercisable during their term regardless of termination of employment while other options have been issued that terminate at a designated time following the date employment is terminated. Options issued to date may be exercised immediately and/or at future vesting dates, and must be exercised no later than five to eight years after the grant date or they will expire.

·

Stock Awards – Stock awards may be granted to directors and key employees with ownership of the common stock vesting immediately or over a period determined by the Compensation Committee and stated in the award. Stock awards granted to date vested in some cases immediately and at other times over a period determined by the Compensation Committee and were restricted as to sales for a specified period. Compensation expense was recognized upon the grant award. The stock awards are measured at fair value on the grant date, adjusted for estimated forfeitures.

Pursuant to the Merger, each outstanding IBE unit was converted into the right to acquire 731.997469 shares of Green Plains common stock and each outstanding EGP unit was converted into the right to acquire 0.151658305 shares of Green Plains common stock. Outstanding stock options and restricted stock awards of the predecessor were assumed by the Company post-merger. At the time of the Merger, executive officers and other key employees of the Company were issued stock options and restricted stock awards.

For stock options granted at the time of the Merger, the fair value of options granted was estimated on the date of grant using the Black-Scholes option-pricing model, a pricing model acceptable under SFAS No. 123R, with the following weighted-average assumptions:

Expected life	5.4
Interest rate	3.0%
Volatility	63.9%
Dividend yield	—

F-26

The expected life of options granted represents the period of time in years that options granted are expected to be outstanding. The interest rate represents the annual interest rate a risk-free investment could potentially earn during the expected life of the option grant. Expected volatility is based on historical volatility of our common stock and other companies within our industry. We currently use a forfeiture rate of zero percent for all existing share-based compensation awards since we have no historical forfeiture experience under our share-based payment plans.

Following the Merger, our Board of Directors authorized the issuance of shares of our common stock to the five departing predecessor-company directors for a total of 18,000 shares in appreciation for services rendered. We recorded $107,820 of share-based expense for the value of these shares at the time of issuance, determined using the closing price of our common stock on the date of grant.

All of our existing share-based compensation awards have been determined to be equity awards. We recognize compensation costs for stock option awards which vest with the passage of time with only service conditions on a straight-line basis over the requisite service period.

A summary of stock options as of December 31, 2008 and changes during the nine-month transition period ended December 31, 2008 are as follows:

		Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at March 31, 2008		290,023	$	2.21
	Assumed at Merger	509,000		24.63
	Granted	802,528		4.95
	Exercised	-		-
	Cancellations	(290,023)		(2.21)
Outstanding at December 31, 2008		1,311,528	$	12.59		5.1	$	-
Exercisable at December 31, 2008		942,361	$	14.74		4.1	$	-

All fully-vested stock options as of December 31, 2008 are exercisable and are included in the above table. Since weighted-average option prices exceeded the closing stock price at December 31, 2008, the aggregate intrinsic value was zero. Our stock awards allow employees to exercise options through cash payment to us for the shares of common stock or through a simultaneous broker-assisted cashless exercise of a share option, through which the employee authorizes the exercise of an option and the immediate sale of the option shares in the open market. We use original issuances of common stock to satisfy our share-based payment obligations.

Compensation costs expensed for our share-based payment plans described above were approximately $2.5 million and $0.4 million during the nine-month transition period ended December 31, 2008, and during the fiscal year ended March 31, 2008. The potential tax benefit realizable for the anticipated tax deductions of the exercise of share-based payment arrangements approximated $1.0 million during the nine-month transition period ended December 31, 2008. However, due to uncertainty that the tax benefits will be realized, these potential benefits were not recognized currently.

11.  EARNINGS PER SHARE

Basic earnings per common shares (“EPS”) is calculated by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period, adjusted for the dilutive effect of any outstanding dilutive securities. The calculation of diluted earnings per share gives effect to common stock equivalents. For periods prior to the Merger, to determine the weighted average number of common shares outstanding, the number of Green Plains common shares issued for outstanding VBV member shares was equated to member shares issued and outstanding during prior periods.

F-27

12.  INCOME TAXES

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

VBV intended to be taxed as a corporation from its inception. However, the election required to be filed with Internal Revenue Service (“IRS”) was accepted effective on April 11, 2007, not the inception date of September 28, 2006 as requested. As a result, VBV was considered a flow-through entity for tax purposes for the reporting period from September 28, 2006 to April 10, 2007. VBV appealed the tax treatment of the effective date of the election with the IRS. An IRS decision allowing VBV to be treated as a corporation prior to April 11, 2007 was received in late March 2009.

VBV, as a development stage company, has incurred losses for each of the periods since its inception. Those losses have appropriately been recorded as a deferred tax asset with an offsetting valuation allowance as the losses are not more likely than not to be utilized prior to their expiration.

Due to the merger transaction, VBV is now treated as a corporation for income tax purposes and will be taxed as such for the earnings during the period April 1, 2008 to December 31, 2008.

The provision for income taxes for the nine months ended December 31, 2008 and 2007, respectively, has been determined to be zero as the Company had net operating losses for tax purposes and has determined that any benefit from these tax losses may not be realized prior to their expiration.  Accordingly, no tax provision or benefit was recognized during each of the periods presented.

Differences between the income tax provision (benefit) computed at the statutory federal income tax rate and per the consolidated statements of operations are summarized as follows (in thousands):

		Nine-Month Transition Period Ended December 31, 2008		Nine-Month Comparative Period Ended December 31, 2007		Year Ended March 31, 2008
				(unaudited)		(unaudited)
Tax expense (benefit) at federal statutory
	rate of 34%	$	(2,756)	$	(674)	$	(1,360)
State income tax expense (benefit), net of
	federal benefit		(544)		(111)		(224)
Increase (decrease) in valuation allowance
	against deferred tax assets		3,297		785		1,584
Other			3		-		-
Income tax provision (benefit)		$	-	$	-	$	-

The amounts in the table above for the year ended March 31, 2008 have not been audited as VBV was a non-public company for this period and SFAS No. 109 does not require these numerical disclosures for non-public companies and accordingly, such amounts have been labeled as unaudited. As VBV was considered a flow-through entity for tax purposes for the period from September 28, 2006 to April 10, 2007, no taxes were computed for the fiscal period from inception to March 31, 2007. An IRS decision allowing VBV to be treated as a corporation prior to April 11, 2007 was received in late March 2009.

F-28

Deferred federal and state income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax assets and liabilities are as follows (in thousands):

				December 31, 2008		March 31, 2008
						(unaudited)
Deferred tax assets:
	Net operating loss carryforwards		$	7,003	$	-
	Tax credit carryforwards			1,264		-
	Derivatives			4,955		-
	Investment in partnerships			4,003		-
	Organizational and start-up costs			3,080		1,746
	Stock options			2,522		126
	Inventory valuation			665		-
	Other			447		39
		Total deferred tax assets		23,939		1,911
Deferred tax liabilities:
	Fixed assets			(11,196)		-
		Total deferred tax liabilities		(11,196)		-
Valuation allowance				(12,743)		(1,911)
Deferred income taxes			$	-	$	-

The amounts in the table above for the year ended March 31, 2008 have not been audited as VBV was a non-public company for this period and SFAS No. 109 does not require these numerical disclosures for non-public companies and accordingly, such amounts have been labeled as unaudited.

As of December 31, 2008, we had federal and state net operating loss carryforwards of $17.2 million and $17.0 million, respectively. These losses will expire in years 2026 through 2028.

We continue to maintain a valuation allowance against the value of all deferred tax assets at December 31, 2008 due to the uncertainty of realizing these assets in the future. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

FIN 48 provides guidance in regard to the recognition of tax benefits for positions claimed or to be claimed in tax returns. Management has evaluated the tax positions claimed and expected to be claimed in its tax returns and has concluded that all positions are more likely than not to be sustained upon examination by applicable taxing authorities. Management has also concluded that no liability for uncertain tax positions should be recorded under FIN 48 as of December 31, 2008.

F-29

13.  COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company currently leases or is committed to paying operating leases extending to 2019 that have been executed by the Company. For accounting purposes, rent expense is based on a straight-line amortization of the total payments required over the lease term. The Company incurred lease expenses of $743,034, $1,412 and $1,200 during the nine-month transition period ended December 31, 2008 and the fiscal periods ending March 31 2008 and 2007, respectively. Aggregate minimum lease payments under these agreements in future fiscal years are as follows:

Year Ending December 31,		Amount
2009	$	4,970
2010		4,289
2011		2,449
2012		2,286
2013		2,157
Thereafter		5,057
Total	$	21,208

Commodities - Corn and Natural Gas

As of December 31, 2008, we had contracted for future corn deliveries valued at $122.8 million, natural gas deliveries valued at approximately $12.8 million, ethanol product deliveries valued at approximately $9.5 million and DDG product deliveries valued at approximately $13.9 million.

14.  EMPLOYEE BENEFIT PLANS

The Company offers eligible employees a comprehensive employee benefits plan that includes health, dental, vision, life and accidental death, short-term disability, long-term disability, and flexible spending accounts. Additionally, the Company offers a 401(k) retirement plan that enables eligible employees to save on a tax-deferred basis up to the limits allowable under the Internal Revenue Code. The Company matches up to 4% of eligible employee contributions. Employee and employer contributions are 100% vested immediately.

Green Plains Grain maintains a defined benefit pension plan. Although benefits under the plan were frozen as of January 1, 2009, Green Plains Grain remains obligated to ensure that the plan is funded in accordance with applicable requirements. As of December 31, 2008, the pension plan’s liabilities exceeded its assets by approximately $1.3 million, which is included in other liabilities. Minimum funding standards generally require a plan’s underfunding to be made up over a seven-year period. The amount of underfunding could increase or decrease, based on investment returns of the plan’s assets or changes in the assumed discount rate used to value benefit obligations.

15.  RELATED PARTY TRANSACTIONS

Construction Contracts

In May 2006 and August 2006, respectively, IBE and EGP signed lump-sum design-build agreements with Fagen, Inc., a general contractor who was also a member of IBE and EGP prior to the Merger. IBE has incurred costs of $111.9 million under their agreement since its inception:  $8.0 million for the period from September 28, 2006 to March 31, 2007; $87.4 million for fiscal year ended March 31, 2008; and $16.5 million for the nine-month transition period ended December 31, 2008. EGP has incurred costs of $112.2 million under their agreement since its inception:  $24.0 million for the period from September 28, 2006 to March 31, 2007; $65.7 million for the period from April 1, 2007 to March 31, 2008; and $22.5 million for the nine-month transition period ended December 31, 2008. Included in current liabilities were amounts due to Fagen totaling $6.1 million at December 31, 2008 and $21.6 million at March 31, 2008.

In December 2006, EGP entered into an agreement with Harold Coffey, a general contractor who was also a member of EGP for Phase 1 (grading and drainage) and Phase 2 (rail spur track) for the site work. EGP has incurred costs of $12.3 million under this agreement since its inception:  $3.9 million for the period from September 28, 2006 to March 31, 2007; $6.3 million for the fiscal year ended March 31, 2008; and $2.1 million for the nine-month transition period ended December 31, 2008. Included in current liabilities were amounts due to Harold Coffey Construction Company, Inc. totaling $1.2 million at December 31, 2008 and $0.6 million at March 31, 2008.

F-30

Jackson-Briner Joint Venture LLC, owned and managed by James Jackson and Michael Swinford, both investors in IBE, had a contract with IBE to provide owner’s scope services. IBE incurred $13.0 million for these services since inception of the contract:  $2.8 million during the period from September 28, 2006 to March 31, 2007 and $10.2 million during the fiscal year ended March 31, 2008. There was $0.6 million included in current liabilities at March 31, 2008. No expenses were incurred during the nine-month transition period ended December 31, 2008, and no further amounts are owed on this contract.

Grain Origination Contracts

Obion Grain, who is Green Plains Obion’s exclusive supplier of corn produced in the seven counties surrounding the plant, had an ownership interest in EGP prior to the Merger, and will have a subordinate lien on Green Plains Obion’s real property if it defaults under its corn purchase agreement with Obion Grain. In addition, Obion Grain is controlled by Dyersburg Elevator Company, James Baxter Sanders, Michael D. Miller and William H. Latimer, all of whom had ownership interests in EGP prior to the Merger, and the latter two of whom also served as directors of the EGP board. EGP did not incur costs under this agreement prior to April 1, 2008. During the nine-month transition period ended December 31, 2008, EGP incurred costs of $3.6 million under this arrangement. Included in current liabilities were amounts due to Obion Grain totaling $0.4 million at December 31, 2008.

Cargill Biofuels Investment, a related party of IBE, has contracted with Cargill Incorporated, through its AgHorizons Business Unit (“Cargill”), for all of IBE’s corn supplies. IBE has agreed to pay Cargill for its cost of procuring the corn plus a per bushel origination fee. IBE did not contract for corn prior to April 1, 2008. IBE incurred $53.2 million to Cargill for corn and corn procurement fees under this agreement during the nine-month transition period ended December 31, 2008. Included in current liabilities were amounts due to Cargill under this arrangement totaling $2.1 million at December 31, 2008.

Consulting Contracts

In July 2005, EGP entered into a management consulting agreement with a related party, The Patterson Group, LLC, to provide management services in the capacity of Chief Executive Officer and Chief Financial Officer. EGP has incurred $0.3 million since the inception of this contract: $0.2 million for the year ending March 31, 2008 and $0.1 million for the nine-month transition period ended December 31, 2008 to James K. Patterson for consulting fees under this agreement. There were no outstanding amounts due under this agreement at March 31, 2008 or December 31, 2008. On January 1, 2009, the terms of this agreement were extended through June 30, 2009 at a reduced fee. The cost for the six-month period is expected to total $36,000.

Steve Hogan and Troy Flowers were investors in IBE prior to the Merger and they are the principles of Midwest Bio-Management LLC. Midwest Bio-Management LLC entered an agreement for consulting and services with IBE in August 2005. The contract for services and consulting is for $13,000 a month and expires July 31, 2009. IBE incurred $0.2 million during the year ended March 31, 2008 and $0.1 million during the nine–month transition period ended December 31, 2008 under this arrangement. There were no outstanding amounts due under this agreement at December 31, 2008 or March 31, 2008.

David Dale of Dale & Huffman was an investor in IBE prior to the Merger, and Dale & Huffman provided legal services to IBE. IBE incurred $0.1 million legal services from this related party from the period from inception to March 31, 2007. There were payments of less than $0.1 million during the year ended March 31, 2008 and the nine-month transition period ended December 31, 2008. There were no outstanding amounts due to this firm at December 31, 2008 or March 31, 2008.

Marketing Contracts

IBE entered into an agreement with Aventine, an investor in IBE prior to the Merger, to sell to them all of the ethanol produced at the plant. IBE pays Aventine a certain percentage of the sales price determined on a pooled basis for certain marketing, storage, and transportation costs. Green Plains Trade (on behalf of Green Plains Bluffton) incurred $13.6 million in payments to Aventine during the period October 15, 2008 to December 31, 2008. No payments were due under this arrangement prior to the date of the Merger. Included in accounts receivable were amounts owed by Aventine to Green Plains Bluffton totaling $2.2 million at December 31, 2008.

Sales and Financing Contracts

Green Plains Grain executed two separate leases for equipment with Axis Capital Inc. Gordon F. Glade, President and Chief Executive Officer of Axis Capital, is a member of our Board of Directors. A total of $1.5 million is included in debt at December 31, 2008 under these financing arrangements.

At the time of the Merger, the predecessor company had outstanding fixed-price ethanol purchase and sale agreements with Center Oil Company. Gary R. Parker, President and Chief Executive Officer of Center Oil, is a member of our Board of Directors. The sales agreements had been executed to hedge prices on a portion of our expected ethanol production. Rather than delivering all of the ethanol, offsetting purchase agreements for a portion of this ethanol production had also been entered into with Center Oil. During the nine-month transition period ended December 31, 2008, cash receipts and payments totaled $18.8 million and $0.4 million, respectively, on these contracts. At December 31, 2008, the Company did not have any outstanding payables or receivables under these purchase and sale agreements.

F-31

VBV and its subsidiaries entered into fixed-price ethanol sales and distillers grains purchase agreements with Green Plains subsequent to the execution of the merger agreement in May 2008. The sales agreements were executed for future deliveries of 1.5 million gallons of ethanol for approximately $4.1 million. The purchase agreements were executed for future receipts of 180,000 tons of dried distillers grains for approximately $27.5 million. Prior to the Merger, no ethanol sales and $2.0 million in distillers grains sales were executed under these agreements.

16.  SUBSEQUENT EVENTS

On January 20, 2009, the Company acquired majority interest in Blendstar, LLC, a biofuel terminal operator. The transaction involved a membership interest purchase whereby Green Plains acquired 51% of Blendstar from Bioverda U.S. Holdings LLC, an affiliate of NTR, for $9.0 million. Blendstar operates terminal facilities in Oklahoma City, Little Rock, Nashville, Knoxville, Louisville and Birmingham and has announced commitments to build terminals in two additional cities. Blendstar facilities currently have splash blending and full-load terminal throughput capacity of over 200 million gallons per year.

Previously, Green Plains Superior had contracted with RPMG, an independent marketer, to purchase all of its ethanol production, and Green Plains Bluffton and Green Plains Obion had contracted with Aventine to purchase all of their ethanol production. Under the agreements, we sold our ethanol production exclusively to them at a price per gallon based on a market price at the time of sale, less certain marketing, storage, and transportation costs, as well as a profit margin for each gallon sold. These agreements terminated in January and February 2009 and as a result, a one-time charge of approximately $5.1 million will be reflected in our 2009 first quarter financial results related to the termination of these agreements and certain related matters. We believe the termination of the agreements will allow us to market all of our own ethanol through Green Plains Trade, provide us a better opportunity to employ our risk management processes, mitigate our risk s of counterparty concentration and accelerate our collection of receivables. 

17.  QUARTERLY FINANCIAL DATA (Unaudited)

After the Merger, we changed our fiscal year end to December 31. Prior to that, our fiscal year end had been March 31. The following table sets forth certain unaudited financial data for each of the quarters within the transition nine-month period ended December 31, 2008 and the fiscal year ended March 31, 2008. This information has been derived from our consolidated financial statements and in management’s opinion, reflects all adjustments necessary for a fair presentation of the information for the quarters presented. The operating results for any quarter are not necessarily indicative of results for any future period.

(Amounts in thousands, except per share amounts)
				Three Months Ended
				December 31, 2008		September 30, 2008		June 30, 2008
Nine-Month Transition Period Ended December 31, 2008
	Revenues			$	186,869	$	1,889	$	-
	Cost of goods sold				171,631		3,813		94
	Operating income (loss)				880		(4,487)		(1,546)
	Other income (expense)				(2,089)		646		5
	Income tax provision (benefit)				-		-		-
	Net income (loss)				(1,849)		(3,876)		(1,172)
	Basic and diluted earnings per share				(0.08)		(0.52)		(0.16)
		Three Months Ended
		March 31, 2008		December 31, 2007		September 30, 2007		June 30, 2007
Year Ended March 31, 2008
	Revenues	$	-	$	-	$	-	$	-
	Cost of goods sold		-		-		-		-
	Operating income (loss)		-		-		-		-
	Other income (expense)		(2,120)		90		440		937
	Income tax provision (benefit)		-		-		-		-
	Net income (loss)		(2,120)		(1,859)		(104)		563
	Basic and diluted earnings per share		(0.32)		(0.22)		(0.01)		0.08

F-32

EX-10

Exhibit 10.39

Loan No. RI0487T02A

CONSTRUCTION AND REVOLVING TERM LOAN SUPPLEMENT

THIS SUPPLEMENT to the Master Loan Agreement dated August 31,2007, (the “MLA”), is entered into as of August 31, 2007, and effective April 1, 2008, or such earlier date as Agent (as that term is defined in the MLA) may establish in its sale discretion, (the “Effective Date”), between FARM CREDIT SERVICES OF MID-AMERICA, FLCA (“Farm Credit”) and ETHANOL GRAIN PROCESSORS, LLC, Rives, Tennessee (the “Company”) and amends and restates the Supplement dated January 18,2007, and numbered RI0487T02.

SECTION 1. The Construction and Revolving Term Loan Commitment. On the terms and conditions set forth in the MLA and this Supplement, Farm Credit agrees to make loans to the Company from time to time during the period set forth below in an aggregate principal amount not to exceed, at any one time outstanding, $37,400,000.00 less the amounts scheduled to be repaid during the period set forth below in Section 6 (the “Commitment”). Within the limits of the Commitment, the Company may borrow, repay and reborrow. No advance shall be made until evidence has been provided to the Agent (as that term is defined in the MLA) as required in Section 7(A)(vi) of the MLA that all requisite equity funds have been received by the Company and that such funds shall have been utilized for the construction of the Improvements (as defined herein).

The Company may, in its sole discretion, elect to permanently reduce the amount of the Commitment by giving Agent ten (10) days prior written notice. Said election shall be made only if the Company is not in default at the time of the election and will remain in compliance with all financial covenants after such reduction. Any such reduction shall be treated as an early, voluntary reduction of the Commitment amount and shall not delay or reduce the amount of any scheduled Commitment reduction under Section 6 hereof (which reductions shall continue in increments specified in, on the dates determined in accordance with, Section 6), but rather shall result in an earlier expiration of the Commitment and final maturity of the loans.

SECTION 2. Purpose. The purpose of the Commitment is to partially finance the Company’s construction of a 100 million gallon (annual capacity) dry-mill ethanol production facility (the “Improvements”) identified in the plans and specifications provided to and approved by Agent pursuant to Section 7(A)(v) of the MLA (as the same may be amended pursuant to Section I2(A) herein, the “Plans”), on real property owned by the Company near Rives, Tennessee (the “Property”), and to provide working capital to the Company, and the Company agrees to utilize the proceeds of the Commitment for these purposes only.

SECTION 3. Term. The term of the Commitment shall be from the Effective Date hereof, up to and including May 1, 2019, or such later date as Agent may, in its sole discretion, authorize in writing.

SECTION 4. Disbursements of Proceeds.

(A)

Disbursement Procedures.

(1)

Limits on Advances. Agent shall not be required to advance funds: (i) for any category or line item of acquisition or construction cost in an amount greater than the amount specified therefore in the Project Budget (as defined in Section 7(A)(v) of the MLA) (notwithstanding the foregoing, however, the Company may request Agent to advance, and Agent shall not unreasonably refuse to advance, funds in excess of such amount if an offsetting amount has not been advanced for a category or line item in the Project Budget such that the budgeted amounts saved under one category or line item can be transferred to another category or line item); or (ii) for any services not yet performed or for materials or goods not yet incorporated into the Improvements or delivered to and properly stored on the Property. No advance hereunder shall exceed 100% of the aggregate costs actually paid or currently due and payable and represented by invoices accompanying a Req uest for Construction Loan Advance submitted pursuant to Section 9(B)(1) herein less the amount of retainage (“Retainage”) set out in the construction contract dated August 25, 2006, between the Company and Fagen, Inc., and other construction contracts of the Company for the Improvements.

(2)

Advance of Retainage. The Retainage (but in no case greater than the unused balance of the Commitment allocated for construction) will be advanced by Agent to the Company pursuant to the conditions set forth in such construction contracts, upon written request by the Company certifying the satisfaction of such conditions precedent for payment of Retainage.

(3)

Advances for Working Capital Purposes. Company may request advances for pre-production expenses or working capital at any time upon written verification to Agent of the purpose of such advance request.

(B)

Payments to Third Parties. At its option and without further authorization from the Company, Agent is authorized to make advances under the Commitment by paying, directly or jointly with the Company, any person to whom Agent in good faith determines payment is due and any such advance shall be deemed made as of the date on which Agent makes such payment and shall be secured under the deed of trust/mortgage securing the Commitment and any other loan documents securing the Commitment as fully as if made directly to the Company.

SECTION 5. Interest and Fees.

(A)

Interest. The Company agrees to pay interest on the unpaid principal balance of the loans in accordance with one or more of the following interest rate options, as selected by the Company:

(1)

Agent Base Rate. At a rate per annum equal at all times to the rate of interest established by Agent from time to time as its Agent Base Rate, which Rate is intended by Agent to be a reference rate and not its lowest rate plus the Pricing Adjustment set forth in Section 5(A)(4) below. The Agent Base Rate will change on the date established by Agent as the effective date of any change therein and Agent agrees to notify the Company of any such change.

(2)

Quoted Rate. At a fixed rate per annum to be quoted by Agent in its sale discretion in each instance. Under this option, rates may be fixed on such balances and for such periods, as may be agreeable to Agent in its sole discretion in each instance, provided that: (1) the minimum fixed period shall be 180 days; (2) amounts may be fixed in increments of $500,000.00 or multiples thereof; and (3) the maximum number of fixes in place at anyone time shall be 10.

(3)

LIBOR. At a fixed rate per annum equal to “LIBOR” (as hereinafter defined) plus the Pricing Adjustment set forth in Section 5(A)(4) below. Under this option: (1) rates may be fixed for “Interest Periods” (as hereinafter defined) of 1, 2, 3, 6, 9 or 12 months as selected by the Company; (2) amounts may be fixed in increments of $500,000.00 or multiples thereof; (3) the maximum number of fixes in place at anyone time shall be 10; and (4) rates may only be fixed on a “Banking Day” (as hereinafter defined) on 3 Banking Days’ prior written notice. For purposes hereof: (a) “LIBOR” shall mean the rate (rounded upward to the nearest sixteenth and adjusted for reserves required on “Eurocurrency Liabilities” (as hereinafter defined) for banks subject to “FRB Regulation D” (as herein defined) or required by any other federal law or regulation) quoted by the British Bankers Association (the “BBA”) at 11 :00 a.m. London time 2 Banking Days before the commencement of the Interest Period for the offering of U.S. dollar deposits in the London interbank market for the Interest Period designated by the Company; as published by Bloomberg or another major information vendor listed on BBA’s official website; (b) “Banking Day” shall mean a day on which Agent is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England; (c) “Interest Period” shall mean a period commencing on the date this option is to take effect and ending on the numerically corresponding day in the next calendar month or the month that is 2, 3, 6, 9 or 12 months thereafter, as the case may be; provided, however, that: (i) in the event such ending day is not a Banking Day, such period shall be extended to the next Banking Day unless such next Banking Day falls in the next calendar month, in which case it shall end on the preceding Banking Day; and (ii) if there is no numerically corresponding day in the month, then such period shall end on the last Banking Day in the relevant month; (d) “Eurocurrency Liabilities” shall have meaning as set forth in “FRB Regulation D”; and (e) “FRB Regulation D” shall mean Regulation D as promulgated by the Board of Governors of the Federal Reserve System, 12 CFR Part 204, as amended.

2

(4)

Pricing Adjustment. The interest rate spread parameters set forth in Subsections (1) and (3) above shall be decreased in accordance with the following schedule upon full payment of $18,000,000.00 in Free Cash Flow Payments (as defined in Section 6 of Construction and Term Loan Supplement numbered RI0487TOIA hereof):

Pricing Type	Initial Spread	Spread After Completion of $18,000,000.00 of Free Cash Flow Payments
Agent Base Rate	+25 Basis Points	0 Basis Points
LIBOR	+315 Basis Points	+290 Basis Points

The applicable interest rate adjustment shall (i) become effective 30 calendar days after completion of $18,000,000.00 in Free Cash Flow Payments; and (ii) shall be effective on a prospective basis only and shall not affect existing fixed rate pricing.

The Company shall select the applicable rate option at the time it requests a loan hereunder and may, subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. Upon the expiration of any fixed rate period, interest shall automatically accrue at the variable rate option unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. Notwithstanding the foregoing, rates may not be fixed in such a manner as to cause the Company to have to break any fixed rate balance in order to pay any installment of principal. All elections provided for herein shall be made electronically (if applicable), telephonically or in writing and must be received by Agent not later than 12:00 Noon Company’s local time in order to be considered to have been received on that day; provided, however, that in the case of LIBOR rate loans, all such elections must be confirmed in writing upon Agent’s request. Interest shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable monthly in arrears by the 20th day of the following month or on such other day in such month as Agent shall require in a written notice to the Company; provided, however, in the event the Company elects to fix all or a portion of the indebtedness outstanding under the LIBOR interest rate option above, at Agent’s option upon written notice to the Company, interest shall be payable at the maturity of the Interest Period and if the LIBOR interest rate fix is for a period longer than 3 months, interest on that portion of the indebtedness outstanding shall be payable quarterly in arrears on each three month anniversary of the commencement date of such Interest Period, and at maturity.

(B)

Commitment Fee. In consideration of the Commitment, the Company agrees to pay to Agent a commitment fee on the average daily unused portion of the Commitment at a rate of 1/2 of 1 % per annum (calculated on a 360 day basis), payable monthly in arrears by the 20th day following each month. Such fee shall be payable for each month (or portion thereof) occurring during the original or any extended term of the Commitment.

(C)

Loan Origination Fee. In consideration of the Commitment, the Company agrees to pay to Agent on the execution hereof a loan origination fee in the amount of $50,000.00. The Arrangement Fee of $225,000.00 has already been received.

SECTION 6. Promissory Note. The Company promises to repay on the dates set forth below, the outstanding principal, if any, that is in excess of the listed amounts:

Payment Date		Reducing Commitment Amount
November 1, 2015	$	32,725,000.00
May 1, 2016	$	28,050,000.00
November 1, 2016	$	23,375,000.00
May 1, 2017	$	18,700,000.00
November 1, 2017	$	14,025,000.00
May 1, 2018	$	9,350,000.00
November 1, 2018	$	4,675,000.00
May 1, 2019	$	0.00

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Provided, however, that if Construction and Term Loan Supplement No. RI0487T01A dated August 31, 2007, has been repaid prior to its maturity date of November 20, 2015, then commitment reduction for this loan shall begin on the first day of the month that is six months after the first day of the month following the repayment of RI0487TOIA, and reductions in the commitment as noted above shall occur every six months thereafter.

In the event that any Free Cash Flow payments are applied to this Supplement in accordance with Section 6 of Supplement No. RI04871T01A referenced above, they shall be applied hereto as reductions in the Commitment as of their due date under RI0487T02A. Any such reductions shall not delay or reduce the amount of any subsequent scheduled Commitment reductions as specified above.

If any installment due date is not a day on which Agent is open for business, then such installment shall be due and payable on the next day on which Agent is open for business. In addition to the above, the Company promises to pay interest on the unpaid principal balance hereof at the times and in accordance with the provisions set forth in Section 5 hereof. This note replaces and supersedes, but does not constitute payment of the indebtedness evidenced by, the promissory note set forth in the Supplement being amended and restated hereby.

SECTION 7. Prepayment. Subject to the broken funding surcharge provision of the MLA, the Company may on one Business Day’s prior written notice prepay all or any portion of the loan(s). Unless otherwise agreed, all prepayments will be applied to principal installments in the inverse order of their maturity. However, in addition to the foregoing, prepayment of any Loan balance due to refinancing, or refinancing of any unadvanced Commitment with another lender, up to and including October 31, 2011, will result in a 2% prepayment charge in addition to any broken funding surcharges which may be applicable, based on the amounts prepaid and on the total amount of the Commitments in effect at such time.

SECTION 8. Security. Security is set forth in the MLA.

SECTION 9. Additional Conditions Precedent.

(A)

Initial Advance. Agent’s obligation to make the initial advance is subject to the satisfaction of each of the following additional conditions precedent on or before the date of such advance:

(1)

List of Permits. Receipt by Agent of a detailed list of all permits required for both the construction of the improvements and the operation of the facility setting forth for each listed permit whether such permit is required for commencement of construction or required for commencement of operation, and identifying to Agent’s reasonable satisfaction whether such permits have been issued or can reasonably be expected to be issued.

(2)

Construction Permits. Receipt by Agent of evidence of issuance of all permits that are required to be obtained prior to the commencement of construction of the improvements.

(3)

Engineer’s Certificate. Receipt by Agent of a report of Agent’s retained engineer (pursuant to the provisions of Section 14(D)) indicating that the current plans and specifications of the Improvements and the related contracts establish that the finished project will have adequate natural gas, electricity, water and waste water treatment to service the requirements of the project.

(B)

Each Advance. Agent’s obligation to make each advance hereunder, including

the initial advance, is subject to the satisfaction of each of the following additional conditions precedent on or before the date of such advance:

(1)

Request for Construction Loan Advance. That Agent receives an executed request for construction loan advance from the Company in the form of Exhibit A attached hereto (the “Request for Construction Loan Advance”), together with all items called for therein.

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(2)

Construction Certificate. If an independent inspector has been employed by Agent pursuant to Section 14(D), a certificate or report of such inspector to the effect that the construction of the Improvements to the date thereof has been performed in a good and workmanlike manner and in accordance with the Plans, stating the estimated total cost of construction of the Improvements, stating the percentage of in-place construction of the Improvements, and stating that the remaining non-disbursed portion of the Commitment is adequate to complete the construction of the Improvements.

SECTION 10. Representations and Warranties. In addition to the representations and warranties contained in the MLA, the Company represents and warrants as follows:

(A)

Project Approvals; Consents; Compliance. The Company has obtained all Project Approvals relating to the construction and operation of the Improvements, except those the Company has disclosed to Agent in writing. All such Project Approvals heretofore obtained remain in full force and effect and the Company has no reason to believe that any such Project Approval not heretofore obtained will not be obtained by the Company in the ordinary course during or following completion of the construction of the Improvements. No such Project Approval will terminate, or become void or voidable or terminable, upon any sale, transfer or other disposition of the Property or the Improvements, including any transfer pursuant to foreclosure sale under the Mortgage. No consent, permission, authorization, order, or license of any governmental authority is necessary in connection with the execution, delivery, performance, or enforcement of the loan documents to which t he Company is a party, except such as have been obtained and are in full force and effect. The Company is in compliance in all material respects with all Project Approvals having application to the Property or the Improvements except as the Company has disclosed to Agent in writing. Without limiting the foregoing, there are no unpaid or outstanding real estate or other taxes or assessments on or against the Property or the Improvements or any part thereof (except only real estate taxes not yet due and payable). The Company has received no notice nor has any knowledge of any pending or contemplated assessments against the Property or the Improvements which have not been disclosed to Agent in writing.

(B)

Environmental Compliance. Without limiting the provisions of the MLA, all property owned or leased by the Company, including, without limitation, the Property and the Improvements, and all operations conducted by it are in compliance in all material respects with all Laws and all Project Approvals relating to environmental protection, the failure to comply with which could have a material adverse effect on the condition, financial or otherwise, operations, properties, or business of the Company, or on the ability of the Company to perform its obligations under the loan documents, except as the Company has disclosed to Agent in writing.

(C)

Feasibility. Each of the Project Budget, the Project Schedule and the Disbursement Schedule is realistic and feasible.

SECTION 11. Affirmative Covenants. In addition to the affirmative covenants contained in the MLA, the Company agrees to:

(A)

Reports and Notices. Furnish to Agent:

(1)

Regulatory and Other Notices. Promptly after receipt thereof, copies of any notices or other communications received from any governmental authority with respect to the Property, the Improvements, or any matter or proceeding the effect of which could have a material adverse effect on the condition, financial or otherwise, operations, properties, or business of the Company, or the ability of the Company to perform its obligations under the loan documents.

(2)

Notice of Nonpayment. Promptly after the filing or receipt thereof, a description of or a copy of any lien filed by or any notice, whether oral or written, from any laborer, contractor, subcontractor or materialman to the effect that such laborer, contractor, subcontractor or materialman has not been paid when due for any labor or materials furnished in connection with the construction of the Improvements.

(3)

Notice of Suspension of Work. Prompt notice of any suspension in the construction of the Improvements, regardless of the cause thereof, in excess of ten (10) days and a description of the cause for such suspension.

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(B)

Construction Liens. Pay or cause to be removed, within fifteen (15) days after notice from Agent, any lien on the Improvements or Property, provided, however, that Company shall have the right to contest in good faith and with reasonable diligence the validity of any such lien or claim upon furnishing to the appropriate title insurance company such security or indemnity as it may reasonably require to induce said title insurance company to issue its title insurance commitment or its mortgage title insurance policy insuring against all such claims or liens, and provided further that Agent will not be required to make any further advances of the proceeds of the Commitment until any mechanic’s lien claims shown by the title insurance company or interim binder have been so insured against by the title insurance company.

(C)

Identity of Contractors, etc. Furnish to Agent from time to time on request by Agent, in a form reasonably acceptable to Agent, correct lists of all contractors, subcontractors and suppliers of labor and material supplied in connection with construction of the Improvements and true and correct copies of all executed contracts, subcontracts and supply contracts. Agent may contact any contractor, subcontractor or supplier to verify any facts disclosed in the lists and contracts. All contracts and subcontracts relating to construction of the Improvements must contain provisions authorizing Company to supply to Agent the listed information and copies of contracts.

(D)

Lien Waivers. Furnish to Agent, at any time and from time to time upon the request of Agent, lien waivers bearing a then current date and prepared on a form reasonably satisfactory to Agent from such contractor, subcontractor, or supplier as Agent shall designate.

(E)

Operating Permits. Furnish to Agent, unless as otherwise consented to in writing by Agent, as soon as possible but prior to the commencement of operation of the constructed facility, evidence of the issuance of all necessary permits for such operation.

SECTION 12. Negative Covenants. In addition to the negative covenants contained in the MLA, the Company will not:

(A)

Change Orders. Allow any substantial deviation, addition, extra, or change order to the Plans, Project Budget or Project Schedule, the cost of which in the aggregate exceeds $1,000,000.00, without Agent’s prior written approval. All requests for substantial changes shall be made using a Change Order Request in the form of Exhibit B attached hereto. Agent will have a reasonable time to evaluate any requests for its approval of any changes referred to in this covenant, and will not be required to consider approving any changes unless all other approvals that may be required have been obtained. Agent may approve or disapprove changes in its discretion. All contracts and subcontracts relating to the construction of the Improvements must contain provisions reasonably satisfactory to Agent implementing the above provisions of this covenant. Company shall promptly provide to Agent copies of all change orders that, pursuant to the above described pro cedures, did not require Agent’s prior written approval.

(B)

Materials. Purchase or install any materials, equipment, fixtures or articles of personal property for the Improvements if such shall he covered under any security agreement or other agreement where the seller reserves or purports to reserve title or the right of removal or repossession, or the right to consider them personal property after their incorporation in the Improvements, except for Permitted Liens (as defined in the MLA).

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SECTION 13. Casualties.

(A)

Right To Elect To Apply Proceeds. In case of material loss or damage to the Property or to the Improvements by fire, by a taking by condemnation for public use or the action of any governmental authority or agency, or the transfer by private sale in lieu thereof, either temporarily or permanently, or otherwise, if in the sole judgment of Agent there is reasonable doubt as to Company’s ability to complete construction of the Improvements on or before October 31, 2008, by reason of such loss or damage or because of delays in making settlements with governmental agencies or authorities or with insurers, Agent may terminate its obligations to make advances hereunder and elect to collect, retain and apply to the Commitment all proceeds of the taking or insurance after deduction of all expense of collection and settlement, including attorneys’ and adjusters’ fees and charges. In the event such proceeds are insufficient to pay the Comm itment in full, Agent may declare the balance remaining unpaid on the Commitment to be due and payable forthwith and avail itself on any of the remedies afforded thereby as in any case of default.

(B)

Election Not To Apply Proceeds. In case Agent does not elect to apply such proceeds to the Commitment, Company will:

(1)

Settle. Proceed with diligence to make settlement with the governmental agencies or authorities or the insurers and cause the proceeds of insurance to be paid to Company.

(2)

Resume Construction. Promptly proceed with the resumption of construction of the Improvements, including the repair of all damage resulting from such fire or other cause and restoration to its former condition.

(C)

Use of Proceeds. All such proceeds shall be fully used before the disbursement of any orther proceeds of the Commitment.

SECTION 14. Other Rights of Agent.

(A)

Right To Inspect. Agent or its agent may enter on the Property at any time and inspect the Improvements. If the construction of the Improvements is not reasonably satisfactory to Agent, Agent may reasonably and in good faith stop the construction and order its replacement or the correction thereof or additions thereto, whether or not said unsatisfactory construction has been incorporated in the Improvements, and withhold all advances hereunder until such construction is satisfactory to Agent. Such construction shall promptly be made reasonably satisfactory to Agent; provided, however, that Agent may not stop construction unless it first delivers a report from a qualified engineer specifying that the construction is not satisfactory and offering the Company a reasonable opportunity to correct the unsatisfactory construction.

(B)

Obligation of Agent. Neither Agent nor any inspector hired pursuant to Subsection (D) below is obligated to construct or supervise construction of the Improvements. Inspection by Agent or such inspector thereof is for the sale purpose of protecting Agent’s security and is not to be construed as a representation that there will be compliance on anyone’s part with the Plans or that the construction will be free from faulty material or workmanship. Neither Agent nor such inspector shall be liable to the Company or any other person concerning the quality of construction of the Improvements or the absence therefrom of defects. The Company will make or cause to be made such other independent inspections as it may desire for its own protection.

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(C)

Right To Complete Upon Event of Default. Upon the occurrence and during the continuance of any Event of Default hereunder, Agent may complete construction of the Improvements, subject to Agent’s right at any time to discontinue any work without liability, and apply the proceeds of the Commitment to such completion, and may demand such additional sums from the Company as may be necessary to complete construction, which sums the Company shall promptly pay to Agent. In connection with any construction of the Improvements undertaken by Agent pursuant to this Subsection, Agent may (i) enter upon the Property; (ii) employ existing contractors, architects, engineers and subcontractors or terminate them and employ others; (iii) make such addition, changes and corrections in the Plans as shall, in the reasonable judgment of Agent, be necessary or desirable; (iv) take over and use any personal property, materials, fixtures, machinery, or equipment of the Company to be incorporated into or used in connection with the construction or operation of the Improvements; (v) pay, settle, or compromise all existing or future bills and claims which are or may be liens against the Property or the Improvements; and (vi) take such other action, as Agent may in its reasonable discretion determine, to complete the construction of the Improvements. The Company shall be liable to Agent for all costs paid or incurred for construction of the Improvements, and all payments made hereunder shall be deemed advances by Agent, shall be evidenced by the Note and shall be secured by the Mortgage and any other loan document securing the Commitment (including any amounts in excess of the Commitment).

(D)

Right To Employ Independent Engineer. Agent reserves the right to employ an independent construction engineer, among other things, to review the Project Budget, the Project Schedule and the Plans, inspect all construction of the Improvements and the periodic progress of the same, and review all Draw Requests and change orders, the cost therefore to be the sole responsibility of the Company and shall be paid by the Company upon demand by Agent.

(E)

Indemnification and Hold Harmless. The Company shall indemnify and hold Farm Credit and Agent harmless from and against all liability, cost or damage arising out of this Agreement or any other loan document or the transactions contemplated hereby and thereby, including, without limitation, (i) any alleged or actual violation of any Law or Project Approval relating to the Property or the Improvements and (ii) any condition of the Property or the Improvements whether relating to the quality of construction or otherwise and whether Agent elects to complete construction upon an Event of Default or discontinues or suspends construction pursuant to this Section 14. Agent may commence, appear in or defend any such action or proceeding or any other action or proceeding purporting to affect the rights, duties or liabilities of the parties hereunder, or the Improvements, or the Property, or the payment of the Commitment, and the Company agrees to pay al l of Agent’s costs and expenses, including its reasonable attorneys’ fees, in any such actions. The obligations of the Company under this Subsection 14(E) shall survive the termination of this Agreement. As to any action or inaction taken by Agent hereunder, Agent shall not be liable for any error of judgment or mistake of fact or law, absent gross negligence or willful misconduct on its part. The Company’s obligation to indemnify and hold Agent harmless hereunder will exclude any liability, cost, or damage related to Agent’s breach of this Agreement or for Agent’s gross negligence or willful misconduct.

SECTION 15. Notice of Completion. Company irrevocably appoints Agent as Company’s agent to file of record any notice of completion, cessation of labor or any other notice that Agent deems necessary to file to protect any of the interests of Agent. Agent, however, shall have no duty to make such filing.

SECTION 16. Signs and Publicity. At Farm Credit’s and Agent’s request, Company will allow Farm Credit and Agent to post signs on the Property at the construction site for the purpose of identifying Farm Credit and Agent as the “Construction Lenders”, At the request of Farm Credit and Agent, Company will use its reasonable best efforts to identify Farm Credit and Agent as the construction lenders in publicity concerning the project.

SECTION 17. Cooperation. Company will cooperate at all times with Agent in bringing about the timely completion of the Improvements, and Company will resolve all disputes arising during the work of construction in a manner which will allow work to proceed expeditiously.

SECTION 18. Events of Default. In addition to the events of default set forth in the MLA, each of the following shall constitute an “Event of Default” hereunder:

8

(A)

Cessation of Construction. Any cessation at any time in the construction of the Improvements for more than thirty (30) consecutive days, except for strikes, acts of God, or other causes beyond the Company’s control, or any cessation at any time in construction of the Improvements for more than thirty (30) consecutive days, regardless of the cause.

(B)

Insufficiency of Loan Proceeds. Agent, in its reasonable discretion shall determine that the remaining undisbursed portion of the Commitment is or will be insufficient to fully complete the Improvements in accordance with the Plans; provided, however, that upon such determination Agent shall provide the Company with written notice and a period of thirty (30) days to cure such default.

SECTION 19. Remedies Upon Default. In addition to the remedies set forth in the MLA, upon the occurrence of and during the continuance of each and every Event of Default:

Construction. Agent may (but shall not be obligated to) take over and complete construction of the Improvements in accordance with plans and specifications approved by Agent with such changes as Agent may, in its reasonable discretion, deem appropriate, all at the risk, cost, and expense of the Company. Agent may assume or reject any contracts entered into by the Company in connection with the Improvements, and may enter into additional or different contracts for services, labor, and materials required, in the judgment of Agent, to complete the construction of the Improvements and may pay, compromise, and settle all claims in connection with the construction of the Improvements. All sums, including reasonable attorneys’ fees, charges, or fees for supervision and inspection of the construction, and for any other necessary purpose in the discretion of Agent, expended by Agent in completing the construction of the Improv ements (whether aggregating more or less than the amount of this Commitment) shall be deemed advances made by Agent to the Company under this Commitment, and the Company shall be liable to Agent for the repayment of such sums, together with interest on such amounts from the date of their expenditure at the default rate specified above. Agent may, in its sale discretion, at any time, abandon work on the construction of the Improvements after having commenced such work, and may recommence such work at any time, it being understood that nothing in this Section shall impose any obligation on Agent to either complete or not to complete the construction of the

Improvements, For the purposes of carrying out the provisions of this Section, the Company irrevocably appoints Agent, its attorney-in-fact, with full power of substitution, to execute and deliver all such documents, pay and receive such funds, and take such action as may be necessary, in the judgment of Agent, to complete the construction of the Improvements.

SECTION 20. Letters of Credit. If agreeable to Agent in its sole discretion in each instance, in addition to loans, the Company may utilize the Commitment to open irrevocable letters of credit for its account. Each letter of credit will be issued within a reasonable period of time after receipt of a duly completed and executed copy of Agent’s then current form of application or, if applicable, in accordance with the terms of any CoTrade Agreement between the parties, and shall reduce the amount available under the Commitment by the maximum amount capable of being drawn thereunder. Any draw under any letter of credit issued hereafter shall be deemed an advance under the Commitment. Each letter of credit must be in form and content acceptable to Agent and must expire no later than the maturity date of the loan.

IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above.

FARM CREDIT SERVICES OF		ETHANOL GRAIN PROCESSORS, LLC
MID-AMERICA, FCLA
By:	/s/ Ralph M. Bowman	By:	/s/ James K. Patterson
Title: :  Vice President		Title:  Chief Executive Officer

9

EXHIBIT A

REQUEST FOR CONSTRUCTION LOAN ADVANCE

Request No:			Date:
To:	CoBank, ,ACB
From:	Ethanol Grain Processors, LLC
	(Name of Borrower)
Loan Agreement No.		RI0487T02A		Dated:	August 31, 2007
Project Description:		100 million gallon ethanol plant
Project Location:		Near Rives, Tennessee

In accordance with the terms of the above referenced Loan Agreement, you are hereby authorized and requested to make a construction advance, as set forth in said Loan Agreement, of the amount and for the construction items set forth in the request schedule attached hereto as Schedule “A” and incorporated herein.

The undersigned hereby certify that:

1.

The labor, services and/or materials covered hereby have been performed upon or furnished to the above referenced project and are accurately described in the supporting invoices attached to the request schedule;

2.

There have been no material changes in the cost breakdown for the project dated _________ supplied to CoBank, except those approved in writing by CoBank;

3.

All construction to date has been substantially performed in accordance with the Plans for the Improvements, and there have been no material changes in the Plans except as approved in writing by CoBank;

4.

There have been no material changes in the scope or time of performance of the work of construction, nor any extra work, labor or materials ordered or contracted for, nor are any such changes or extras contemplated, except as may be expressly permitted by the Loan Agreement or as have been approved in writing by CoBank;

5.

The payments to be made with the requested funds will pay all bills received to date, less any required withholds, for labor, materials, equipment and/or services furnished in connection with the construction of the Improvements;

6.

All amounts previously advanced by CoBank for labor, services, equipment and/or materials for the above referenced project pursuant to previous Requests for Construction Loan Disbursement have been paid to the parties entitled thereto in the manner required in the Loan Agreement; and

7.

All conditions to the advance of Loan funds required herein as set forth in the Loan Agreement have been fulfilled, and to the actual knowledge of the undersigned, no Event of Default under the Loan Agreement has occurred and is continuing.

1

BORROWER: Ethanol Grain Processors, LLC
	Signature
	Printed Name and Title
ENGINEER & CONTRACTOR: Fagen, Inc.
	Signature
	Printed Name and Title

We have reviewed the Pay Application Numbered                                    and dated                                   . Based on our conversations with the Contractor and the Owner, our review of the current schedule, and our site observations, the construction in place is judged to be in general accordance with industry standards and in general conformity with the approved plans and specifications, proceeding generally on schedule, and the request for payment is a reasonable representation of the materials ordered and the work effort of the Contractor to date.

AGENT CONSULTING ENGINEER:
	Signature - BKBM ENGINEERS

APPROVED FOR PAYMENT BY AGENT:
	Signature - CoBank	Printed Name & Title –CoBank	Date

2

SCHEDULE A

to Exhibit A - Request for Loan Advance

Request No:			Date:
To:	CoBank,, ACB
From:	Ethanol Grain Processors, LLC
	(Name of Borrower)
Loan Agreement No.		RI0487T02A		Dated:	August 31, 2007
Project Description:		100 million gallon ethanol plant
Project Location:		Near Rives, Tennessee

Loan advance to be used to pay General Contractor:	$
Loan advance to be used to reimburse Owners Costs:	$
(construction costs, development costs, start-up
expenses, or working capital)
Total advance requested:	$

Please attach supporting documentation for all requested amounts.

3

EXHIBIT B

CHANGE ORDER REQUEST

Request No:		CO#		Date:
To:	CoBank,, ACB
From:	Ethanol Grain Processors, LLC
	(Name of Borrower)
Loan Agreement No.			RI0487T02A		Dated:	August 31, 2007
Project Description:			100 million gallon ethanol plant
Project Location:			Near Rives, Tennessee

In accordance with the terms of the above referenced Loan Agreement, the undersigned hereby requests that Agent approve the change orders more particularly described in the schedule attached hereto as Schedule “A” and incorporated herein.

The undersigned hereby certifies that:

1.

There have been no material changes in the Plans and or contracts except those permitted in the Loan Agreement and/or approved in writing by Agent; and

2.

Copies of the proposed changes to the Plans and/or contracts are attached hereto as Schedule “B” and that all such documents are complete and fully comply with all applicable permits and approvals, subject to the written approval of Agent.

BORROWER:	CONTRACTOR & ENGINEER:
Ethanol Grain Processors, LLC	Fagen, Inc.
By:	By:
CHANGE ORDER APPROVED BY AGENT:
CoBANK, ACB
By:
Date:

1

EX-10

Exhibit 10.40

Loan No. RI0487T01A

CONSTRUCTION AND TERM LOAN SUPPLEMENT

THIS SUPPLEMENT to the Master Loan Agreement dated August 31, 2007, (the “MLA”), is entered into as of August 31, 2007, between FARM CREDIT SERVICES OF MID-AMERICA, FLCA (“Farm Credit”) and ETHANOL GRAIN PROCESSORS, LLC, Rives, Tennessee (the “Company”), and amends and restates the Supplement dated January 18, 2007, and numbered RI0487TOl.

SECTION 1. The Construction and Term Loan Commitment. On the terms and conditions set forth in the MLA and this Supplement, Farm Credit agrees to make construction loans to the Company from time to time during the period set forth below in an aggregate principal amount not to exceed, at any one time outstanding, $60,000,000.00 (the “Commitment”). Under the Commitment, amounts borrowed and later repaid may not be reborrowed. No advance shall be made until evidence has been provided to the Agent (as that term is defined in the MLA) as required in Section 7(A)(vi) of the MLA that all requisite equity funds have been received by the Company and that such funds shall have been utilized for the construction of the Improvements (as defined herein).

SECTION 2. Purpose. The purpose of the Commitment is to partially finance the Company’s construction of a 100 million gallon (annual capacity) dry-mill ethanol production facility (the “Improvements”) identified in the plans and specifications provided to and approved by Agent pursuant to Section 7(A)(v) of the MLA (as the same may be amended pursuant to Section l2(A) herein, the “Plans”), on real property owned by the Company near Rives, Tennessee (the “Property”), and the Company agrees to utilize the proceeds of the Commitment for this purpose only.

SECTION 3. Term. The term of the Commitment shall be from the date hereof, up to and including October 31, 2008, or such later date as Agent may, in its sale discretion, authorize in writing.

SECTION 4. Disbursements of Proceeds.

(A)

Disbursement Procedures.

(1)

Limits on Advances. Agent shall not be required to advance funds: (i) for any category or line item of acquisition or construction cost an amount greater than the amount specified therefore in the Project Budget (as defined in Section 7(A)(v) of the MLA) (notwithstanding the foregoing, however, the Company may request Agent to advance, and Agent shall not unreasonably refuse to advance, funds in excess of such amount if an offsetting amount has not been advanced for a category or line item in the Project Budget such that the budgeted amounts saved under one category or line item can be transferred to another category or line item); or (ii) for any services not yet performed or for materials or goods not yet incorporated into the Improvements or delivered to and properly stored on the Property. No advance hereunder shall exceed 100% of the aggregate costs actually paid or currently due and payable and represented by invoices accompanying a Requ est for Construction Loan Advance submitted pursuant to Section 9(B)(l) herein less the amount of retainage (“Retainage”) set out in the construction contract dated August 25, 2006, between the Company and Fagen, Inc., and other construction contracts of the Company for the Improvements.

(2)

Advance of Retainage. The Retainage (but in no case greater than the unused balance of the Commitment allocated for construction) will be advanced by Agent to the Company pursuant to the conditions set forth in such construction contracts, upon written request by the Company certifying the satisfaction of such conditions precedent for payment of Retain age.

(B)

Payments to Third Parties. At its option and without further authorization from the Company, Agent is authorized to make advances under the Commitment by paying, directly or jointly with the Company, any person to whom Agent in good faith determines payment is due and any such advance shall be deemed made as of the date on which Agent makes such payment and shall be secured under the deed of trust/mortgage securing the Commitment and any other loan documents securing the Commitment as fully as if made directly to the Company.

Construction and Term Loan Supplement RI0487T01A

SECTION 5. Interest and Fees.

(A)

Interest. The Company agrees to pay interest on the unpaid principal balance of the loans in accordance with one or more of the following interest rate options, as selected by the Company:

(1)

Agent Base Rate. At a rate per annum equal at all times to the rate of interest established by Agent from time to time as its Agent Base Rate, which Rate is intended by Agent to be a reference rate and not its lowest rate plus the Pricing Adjustment set forth in Section 5(A)(4) below. The Agent Base Rate will change on the date established by Agent as the effective date of any change therein and Agent agrees to notify the Company of any such change.

(2)

Quoted Rate. At a fixed rate per annum to be quoted by Agent in its sale discretion in each instance. Under this option, rates may be fixed on such balances and for such periods, as may be agreeable to Agent in its sole discretion in each instance, provided that: (1) the minimum fixed period shall be 180 days; (2) amounts may be fixed in increments of $500,000.00 or multiples thereof; and (3) the maximum number affixes in place at anyone time shall be 10.

(3)

LIBOR. At a fixed rate per annum equal to “LIBOR” (as hereinafter defined) plus the Pricing Adjustment set forth in Section 5(A)(4) below. Under this option: (1) rates may be fixed for “Interest Periods” (as hereinafter defined) of 1, 2, 3, 6, 9 or 12 months as selected by the Company; (2) amounts may be fixed in increments of $500,000.00 or multiples thereof; (3) the maximum number of fixes in place at anyone time shall be 10; and (4) rates may only be fixed on a “Banking Day” (as hereinafter defined) on 3 Banking Days’ prior written notice. For purposes hereof: (a) “LIBOR” shall mean the rate (rounded upward to the nearest sixteenth and adjusted for reserves required on “Eurocurrency Liabilities” (as hereinafter defined) for banks subject to “FRB Regulation D” (as herein defined) or required by any other federal law or regulation) quoted by the British Bankers Association (the “BBA”) at 11 :00 a.m. London time 2 Banking Days before the commencement of the Interest Period for the offering of U.S. dollar deposits in the London interbank market for the Interest Period designated by the Company; as published by Bloomberg or another major information vendor listed on BBA’s official website; (b) “Banking Day” shall mean a day on which Agent is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England; (c) “Interest Period” shall mean a period commencing on the date this option is to take effect and ending on the numerically corresponding day in the next calendar month or the month that is 2,3,6,9 or 12 months thereafter, as the case may be; provided, however, that: (i) in the event such ending day is not a Banking Day, such period shall be extended to the next Banking Day unless such next Banking Day falls in the next calendar month, in which case it shall end on the preceding Banking Day; and (ii) if there is no numerically corresponding day in the month, then such period shall end on the last Banking Day in the relevant month; (d) “Eurocurrency Liabilities” shall have meaning as set forth in “FRB Regulation D”; and (e) “FRB Regulation D” shall mean Regulation D as promulgated by the Board of Governors of the Federal Reserve System, 12 CFR Part 204, as amended.

(4)

Pricing Adjustment. The interest rate spread parameters set forth in Subsections (1) and (3) above shall be decreased in accordance with the following schedule upon full payment of $18,000,000.00 in Free Cash Flow Payments (as defined in Section 6 hereof):

Pricing Type	Initial Spread	Spread After Completion of $18,000,000.00 of Free Cash Flow Payments
Agent Base Rate	+25 Basis Points	0 Basis Points
LIBOR	+315 Basis Points	+290 Basis Points

The applicable interest rate adjustment shall (i) become effective 30 calendar days after completion of $18,000,000.00 in Free Cash Flow Payments; and (ii) shall be effective on a prospective basis only and shall not affect existing fixed rate pricing.

2

Construction and Term Loan Supplement RI0487T01A

The Company shall select the applicable rate option at the time it requests a loan hereunder and may, subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. Upon the expiration of any fixed rate period, interest shall automatically accrue at the variable rate option unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. Notwithstanding the foregoing, rates may not be fixed in such a manner as to cause the Company to have to break any fixed rate balance in order to pay any installment of principal. All elections provided for herein shall be made electronically (if applicable), telephonically or in writing and must be received by Agent not later than 12:00 Noon Company’s local time in order to be considered to have been received on that day; provided, however, that in the case of LIBOR rate loans, all such elections must be conf irmed in writing upon Agent’s request. Interest shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable monthly in arrears by the 20th day of the following month or on such other day in such month as Agent shall require in a written notice to the Company; provided, however, in the event the Company elects to fix all or a portion of the indebtedness outstanding under the LIBOR interest rate option above, at Agent’s option upon written notice to the Company, interest shall be payable at the maturity of the Interest Period and if the LIBOR interest rate fix is for a period longer than 3 months, interest on that portion of the indebtedness outstanding shall be payable quarterly in arrears on each three month anniversary of the commencement date of such Interest Period, and at maturity.

(B)

Arrangement Fee. In consideration of the Commitment, the Company agrees to pay to Agent on the execution hereof an arrangement fee in the amount of $450,000.00. This fee has already been received.

SECTION 6. Promissory Note. The Company promises to repay the loans as follows: (i) in 25 equal, consecutive quarterly installments of $2,400,000.00 with the first such installment due on May 20, 2009, and the last such installment due on February 20, 2015; and (ii) followed by a final installment in an amount equal to the remaining unpaid principal balance of the loans on May 20, 2015.

In addition, for each fiscal year end, beginning with the fiscal year ending 2008, and ending with the fiscal year ending 2013 the Company shall also, within ninety (90) days after the end of such fiscal year, make a special payment of an amount equal to 75% of the “Free Cash Flow” (as defined below) of the Company, such payment not to exceed $8,000,000.00 in any fiscal year of the Company; provided, however, that: (i) if such payment would result in a covenant default under this Supplement or the MLA, the amount of the payment shall be reduced to an amount which would not result in a covenant default; (ii) if such payment would result in a breakage of a fixed interest rate, the applicable broken funding surcharges would still apply; and (iii) the aggregate of such payments shall not exceed $18,000,000.00. The term “Free Cash Flow” is defined as the Company’s annual profit net of taxes, plus the respective fiscal year’s de preciation and amortization expense, minus allowable capitalized expenditures for fixed assets during fiscal year 2009 and thereafter, allowed distributions to members/owners, and scheduled term loan payments to Agent. This special payment shall be applied to the principal installments in the inverse order of their maturity.

In the event that all outstanding principal balances under this Supplement are paid in full prior to the end of fiscal year 2013, Free Cash Flow payments, as described above, shall nevertheless continue, and the amount thereof (including any remaining portion in the event that part of such payment is applied to the remaining balance under this Supplement) shall be applied to the Construction and Revolving Term Loan Supplement dated August 31,2007, and numbered RI0487T02A, and any restatements and amendments thereto, in the form of early reductions in the Commitment thereunder, as specified therein, of a like dollar amount. The foregoing requirement shall survive payment in full of this Supplement.

If any installment due date is not a day on which Agent is open for business, then such installment shall be due and payable on the next day on which Agent is open for business. In addition to the above, the Company promises to pay interest on the unpaid principal balance hereof at the times and in accordance with the provisions set forth in Section 5 hereof. This note replaces and supersedes, but does not constitute payment of the indebtedness evidenced by, the promissory note set forth in the Supplement being amended and restated hereby.

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Construction and Term Loan Supplement RI0487T01A

SECTION 7. Prepayment. Subject to the broken funding surcharge provision of the MLA, the Company may on one Business Day’s prior written notice prepay all or any portion of the loan(s). Unless otherwise agreed, all prepayments will be applied to principal installments in the inverse order of their maturity. However, in addition to the foregoing, prepayment of any Loan balance due to refinancing, or refinancing of any unadvanced Commitment with another lender, up to and including October 31, 2011, will result in a 2% prepayment charge in addition to any broken funding surcharges which may be applicable, based on the amounts prepaid and on the total amount of the Commitments in effect at such time.

SECTION 8. Security. Security is set forth in the MLA.

SECTION 9. Additional Conditions Precedent.

(A)

Initial Advance. Agent’s obligation to make the initial advance is subject to the satisfaction of each of the following additional conditions precedent on or before the date of such advance:

(1)

List of Permits. Receipt by Agent of a detailed list of all permits required for both the construction of the improvements and the operation of the facility setting forth for each listed permit whether such permit is required for commencement of construction or required for commencement of operation, and identifying to Agent’s reasonable satisfaction whether such permits have been issued or can reasonably be expected to be issued.

(2)

Construction Permits. Receipt by Agent of evidence of issuance of all permits that are required to be obtained prior to the commencement of construction of the improvements.

(3)

Engineer’s Certificate. Receipt by Agent of a report of Agent’s retained engineer (pursuant to the provisions of Section 14(D)) indicating that the current plans and specifications of the Improvements and the related contracts establish that the finished project will have adequate natural gas, electricity, water and waste water treatment to service the requirements of the project.

(B)

Each Advance. Agent’s obligation to make each advance hereunder, including the initial advance, is subject to the satisfaction of each of the following additional conditions precedent on or before the date of such advance:

(1)

Request for Construction Loan Advance. That Agent receives an executed request for construction loan advance from the Company in the form of Exhibit A attached hereto (the “Request for Construction Loan Advance”), together with all items called for therein.

(2)

Construction Certificate. If an independent inspector has been employed by Agent pursuant to Section 14(D), a certificate or report of such inspector to the effect that the construction of the Improvements to the date thereof has been performed in a good and workmanlike manner and in accordance with the Plans, stating the estimated total cost of construction of the Improvements, stating the percentage of in-place construction of the Improvements, and stating that the remaining non-disbursed portion of the Commitment is adequate to complete the construction of the Improvements.

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Construction and Term Loan Supplement RI0487T01A

SECTION 10. Representations and Warranties. In addition to the representations and warranties contained in the MLA, the Company represents and warrants as follows:

(A)

Project Approvals; Consents; Compliance. The Company has obtained all Project Approvals relating to the construction and operation of the Improvements, except those the Company has disclosed to Agent in writing. All such Project Approvals heretofore obtained remain in full force and effect and the Company has no reason to believe that any such Project Approval not heretofore obtained will not be obtained by the Company in the ordinary course during or following completion of the construction of the Improvements. No such Project Approval will terminate, or become void or voidable or terminable, upon any sale, transfer or other disposition of the Property or the Improvements, including any transfer pursuant to foreclosure sale under the Mortgage. No consent, permission, authorization, order, or license of any governmental authority is necessary in connection with the execution, delivery, performance, or enforcement of the loan documents to which the Company is a party, except such as have been obtained and are in full force and effect. The Company is in compliance in all material respects with all Project Approvals having application to the Property or the Improvements except as the Company has disclosed to Agent in writing. Without limiting the foregoing, there are no unpaid or outstanding real estate or other taxes or assessments on or against the Property or the Improvements or any part thereof (except only real estate taxes not yet due and payable). The Company has received no notice nor has any knowledge of any pending or contemplated assessments against the Property or the Improvements which have not been disclosed to Agent in writing.

(B)

Environmental Compliance. Without limiting the provisions of the MLA, all property owned or leased by the Company, including, without limitation, the Property and the Improvements, and all operations conducted by it are in compliance in all material respects with all Laws and all Project Approvals relating to environmental protection, the failure to comply with which could have a material adverse effect on the condition, financial or otherwise, operations, properties, or business of the Company, or on the ability of the Company to perform its obligations under the loan documents, except as the Company has disclosed to Agent in writing.

(C)

Feasibility. Each of the Project Budget, the Project Schedule and the Disbursement Schedule is realistic and feasible.

SECTION 11. Affirmative Covenants. In addition to the affirmative covenants contained in the MLA, the Company agrees to:

(A)

Reports and Notices. Furnish to Agent:

(1)

Regulatory and Other Notices. Promptly after receipt thereof, copies of any notices or other communications received from any governmental authority with respect to the Property, the Improvements, or any matter or proceeding the effect of which could have a material adverse effect on the condition, financial or otherwise, operations, properties, or business of the Company, or the ability of the Company to perform its obligations under the loan documents.

(2)

Notice of Nonpayment. Promptly after the filing or receipt thereof, a description of or a copy of any lien filed by or any notice, whether oral or written, from any laborer, contractor, subcontractor or materialman to the effect that such laborer, contractor, subcontractor or materialman has not been paid when due for any labor or materials furnished in connection with the construction of the Improvements,

(3)

Notice of Suspension of Work. Prompt notice of any suspension in the construction of the Improvements, regardless of the cause thereof, in excess of ten (10) days and a description of the cause for such suspension.

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Construction and Term Loan Supplement RI0487T01A

(B)

Construction Liens. Payor cause to be removed, within fifteen (15) days after notice from Agent, any lien on the Improvements or Property, provided, however, that Company shall have the right to contest in good faith and with reasonable diligence the validity of any such lien or claim upon furnishing to the appropriate title insurance company such security or indemnity as it may reasonably require to induce said title insurance company to issue its title insurance commitment or its mortgage title insurance policy insuring against all such claims or liens, and provided further that Agent will not be required to make any further advances of the proceeds of the Commitment until any mechanic’s lien claims shown by the title insurance company or interim binder have been so insured against by the title insurance company.

(C)

Identity of Contractors, etc. Furnish to Agent from time to time on request by Agent, in a form reasonably acceptable to Agent, correct lists of all contractors, subcontractors and suppliers of labor and material supplied in connection with construction of the Improvements and true and correct copies of all executed contracts, subcontracts and supply contracts. Agent may contact any contractor, subcontractor or supplier to verify any facts disclosed in the lists and contracts. All contracts and subcontracts relating to construction of the Improvements must contain provisions authorizing Company to supply to Agent the listed information and copies of contracts.

(D)

Lien Waivers. Furnish to Agent, at any time and from time to time upon the request of Agent, lien waivers bearing a then current date and prepared on a form reasonably satisfactory to Agent from such contractor, subcontractor, or supplier as Agent shall designate.

(E)

Operating Permits. Furnish to Agent, unless as otherwise consented to in writing by Agent, as soon as possible but prior to the commencement of operation of the constructed facility, evidence of the issuance of all necessary permits for such operation.

SECTION 12. Negative Covenants. In addition to the negative covenants contained in the MLA, the Company will not:

(A)

Change Orders. Allow any substantial deviation, addition, extra, or change order to the Plans, Project Budget or Project Schedule, the cost of which in the aggregate exceeds $1,000,000.00, without Agent’s prior written approval. All requests for substantial changes shall be made using a Change Order Request in the form of Exhibit B attached hereto. Agent will have a reasonable time to evaluate any requests for its approval of any changes referred to in this covenant, and will not be required to consider approving any changes unless all other approvals that may be required have been obtained. Agent may approve or disapprove changes in its discretion. All contracts and subcontracts relating to the construction of the Improvements must contain provisions reasonably satisfactory to Agent implementing the above provisions of this covenant. Company shall promptly provide to Agent copies of all change orders that, pursuant to the above described pro cedures, did not require Agent’s prior written approval.

(B)

Materials. Purchase or install any materials, equipment, fixtures or articles of personal property for the Improvements if such shall be covered under any security agreement or other agreement where the seller reserves or purports to reserve title or the right of removal or repossession, or the right to consider them personal property after their incorporation in the Improvements, except for Permitted Liens (as defined in the MLA).

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Construction and Term Loan Supplement RI0487T01A

SECTION 13. Casualties.

(A)

Right To Elect To Apply Proceeds. In case of material loss or damage to the Property or to the Improvements by fire, by a taking by condemnation for public use or the action of any governmental authority or agency, or the transfer by private sale in lieu thereof, either temporarily or permanently, or otherwise, if in the sole judgment of Agent there is reasonable doubt as to Company’s ability to complete construction of the Improvements on or before October 31,2008, by reason of such loss or damage or because of delays in making settlements with governmental agencies or authorities or with insurers, Agent may terminate its obligations to make advances hereunder and elect to collect, retain and apply to the Commitment all proceeds of the taking or insurance after deduction of all expense of collection and settlement, including attorneys’ and adjusters’ fees and charges. ill the event such procee ds are insufficient to pay the Commitment in full, Agent may declare the balance remaining unpaid on the Commitment to be due and payable forthwith and avail itself on any of the remedies afforded thereby as in any case of default.

(B)

Election Not To Apply Proceeds. In case Agent does not elect to apply such proceeds to the Commitment, Company will:

(1)

Settle. Proceed with diligence to make settlement with the governmental agencies or authorities or the insurers and cause the proceeds of insurance to be paid to Company.

(2)

Resume Construction. Promptly proceed with the resumption of construction of the Improvements, including the repair of all damage resulting from such fire or other cause and restoration to its former condition.

(C)

Use of Proceeds. All such proceeds shall be fully used before the disbursement of any further proceeds of the Commitment.

SECTION 14. Other Rights of Agent.

(A)

Right To Inspect. Agent or its agent may enter on the Property at any time and inspect the Improvements. If the construction of the Improvements is not reasonably satisfactory to Agent, Agent may reasonably and in good faith stop the construction and order its replacement or the correction thereof or additions thereto, whether or not said unsatisfactory construction has been incorporated in the Improvements, and withhold all advances hereunder until such construction is satisfactory to Agent. Such construction shall promptly be made reasonably satisfactory to Agent; provided, however, that Agent may not stop construction unless it first delivers a report from a qualified engineer specifying that the construction is not satisfactory and offering the Company a reasonable opportunity to correct the unsatisfactory construction.

(B)

Obligation of Agent. Neither Agent nor any inspector hired pursuant to Subsection (D) below is obligated to construct or supervise construction of the Improvements. Inspection by Agent or such inspector thereof is for the sole purpose of protecting Agent’s security and is not to be construed as a representation that there will be compliance on anyone’s part with the Plans or that the construction will be free from faulty material or workmanship. Neither Agent nor such inspector shall be liable to the Company or any other person concerning the quality of construction of the Improvements or the absence therefrom of defects. The Company will make or cause to be made such other independent inspections as it may desire for its own protection.

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Construction and Term Loan Supplement RI0487T01A

(C)

Right To Complete Upon Event of Default. Upon the occurrence and during the continuance of any Event of Default hereunder, Agent may complete construction of the Improvements, subject to Agent’s right at any time to discontinue any work without liability, and apply the proceeds of the Commitment to such completion, and may demand such additional sums from the Company as may be necessary to complete construction, which sums the Company shall promptly pay to Agent. In connection with any construction of the Improvements undertaken by Agent pursuant to this Subsection, Agent may (i) enter upon the Property; (ii) employ existing contractors, architects, engineers and subcontractors or terminate them and employ others; (iii) make such addition, changes and corrections in the Plans as shall, in the reasonable judgment of Agent, be necessary or desirable; (iv) take over and use any personal property, materials, fixtures, machinery, or equipment of the Company to be incorporated into or used in connection with the construction or operation of the Improvements; (v) pay, settle, or compromise all existing or future bills and claims which are or may be liens against the Property or the Improvements; and (vi) take such other action, as Agent may in its reasonable discretion determine, to complete the construction of the Improvements. The Company shall be liable to Agent for all costs paid or incurred for construction of the Improvements, and all payments made hereunder shall be deemed advances by Agent, shall be evidenced by the Note and shall be secured by the Mortgage and any other loan document securing the Commitment (including any amounts in excess of the Commitment).

(D)

Right To Employ Independent Engineer. Agent reserves the right to employ an independent construction engineer, among other things, to review the Project Budget, the Project Schedule and the Plans, inspect all construction of the Improvements and the periodic progress of the same, and review all Draw Requests and change orders, the cost therefore to be the sale responsibility of the Company and shall be paid by the Company upon demand by Agent.

(E)

Indemnification and Hold Harmless. The Company shall indemnity and hold Farm Credit and Agent harmless from and against all liability, cost or damage arising out of this Agreement or any other loan document or the transactions contemplated hereby and thereby, including, without limitation, (i) any alleged or actual violation of any Law or Project Approval relating to the Property or the Improvements and (ii) any condition of the Property or the Improvements whether relating to the quality of construction or otherwise and whether Agent elects to complete construction upon an Event of Default or discontinues or suspends construction pursuant to this Section 14. Agent may commence, appear in or defend any such action or proceeding or any other action or proceeding purporting to affect the rights, duties or liabilities of the parties hereunder, or the Improvements, or the Property, or the payment of the Commitment, and the Company agrees to pay al l of Agent’s costs and expenses, including its reasonable attorneys’ fees, in any such actions. The obligations of the Company under this Subsection 14(E) shall survive the termination of this Agreement. As to any action or inaction taken by Agent hereunder, Agent shall not be liable for any error of judgment or mistake of fact or law, absent gross negligence or willful misconduct on its part. The Company’s obligation to indemnify and hold Agent harmless hereunder will exclude any liability, cost, or damage related to Agent’s breach of this Agreement or for Agent’s gross negligence or willful misconduct.

SECTION 15. Notice of Completion. Company irrevocably appoints Agent as Company’s agent to file of record any notice of completion, cessation of labor or any other notice that Agent deems necessary to file to protect any of the interests of Agent. Agent, however, shall have no duty to make such filing,

SECTION 16. Signs and Publicity. At Farm Credit’s and Agent’s request, Company will allow Farm Credit and Agent to post signs on the Property at the construction site for the purpose of identifying Farm Credit and Agent as the “Construction Lenders”. At the request of Farm Credit and Agent, Company will use its reasonable best efforts to identify Farm Credit and Agent as the construction lenders in publicity concerning the project.

SECTION 17. Cooperation. Company will cooperate at all times with Agent in bringing about the timely completion of the Improvements, and Company will resolve all disputes arising during the work of construction in a manner which will allow work to proceed expeditiously.

SECTION 18. Events of Default. In addition to the events of default set forth in the MLA, each of the following shall constitute an “Event of Default” hereunder:

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Construction and Term Loan Supplement RI0487T01A

(A)

Cessation of Construction. Any cessation at any time in the construction of the Improvements for more than thirty (30) consecutive days, except for strikes, acts of God, or other causes beyond the Company’s control, or any cessation at any time in construction of the Improvements for more than thirty (30) consecutive days, regardless of the cause.

(B)

Insufficiency of Loan Proceeds. Agent, in its reasonable discretion shall determine that the remaining undisbursed portion of the Commitment is or will be insufficient to fully complete the Improvements in accordance with the Plans; provided, however, that upon such determination Agent shall provide the Company with written notice and a period of thirty (30) days to cure such default.

SECTION 19. Remedies Upon Default. In addition to the remedies set forth in the MLA, upon the occurrence of and during the continuance of each and every Event of Default:

Construction. Agent may (but shall not be obligated to) take over and complete construction of the Improvements in accordance with plans and specifications approved by Agent with such changes as Agent may, in its reasonable discretion, deem appropriate, all at the risk, cost, and expense of the Company. Agent may assume or reject any contracts entered into by the Company in connection with the Improvements, and may enter into additional or different contracts for services, labor, and materials required, in the judgment of Agent, to complete the construction of the Improvements and may pay, compromise, and settle all claims in connection with the construction of the Improvements. All sums, including reasonable attorneys’ fees, charges, or fees for supervision and inspection of the construction, and for any other necessary purpose in the discretion of Agent, expended by Agent in completing the construction of the Improvemen ts (whether aggregating more or less than the amount of this Commitment) shall be deemed advances made by Agent to the Company under this Commitment, and the Company shall be liable to Agent for the repayment of such sums, together with interest on such amounts from the date of their expenditure at the default rate specified above. Agent may, in its sole discretion, at any time, abandon work on the construction of the Improvements after having commenced such work, and may recommence such work at any time, it being understood that nothing in this Section shall impose any obligation on Agent to either complete or not to complete the construction of the Improvements. For the purposes of carrying out the provisions of this Section, the Company irrevocably appoints Agent, its attorney-in-fact, with full power of substitution; to execute and deliver all such documents, pay and receive such funds, and take such action as may be necessary, in the judgment of Agent, to complete the construction of the Improvements. < /P>

IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above.

FARM CREDIT SERVICES OF		ETHANOL GRAIN PROCESSORS, LLC
MID-AMERICA, FCLA
By:	/s/ Ralph M. Bowman	By:	/s/ James K. Patterson
Title: Vice President		Title: Chief Executive Officer

9

EXHIBIT A

REQUEST FOR CONSTRUCTION LOAN ADVANCE

Request No:			Date:
To:	CoBank, ACB
From:	Ethanol Grain Processors, LLC
	(Name of Borrower)
Loan Agreement No.		RI0487T01A		Dated:	August 31, 2007
Project Description:		100 million gallon ethanol plant
Project Location:		Near Rives, Tennessee

In accordance with the terms of the above referenced Loan Agreement, you are hereby authorized and requested to make a construction advance, as set forth in said Loan Agreement, of the amount and for the construction items set forth in the request schedule attached hereto as Schedule “A” and incorporated herein.

The undersigned hereby certify that:

1.

The labor, services and/or materials covered hereby have been performed upon or furnished to the above referenced project and are accurately described in the supporting invoices attached to the request schedule;

2.

There have been no material changes in the cost breakdown for the project dated _________ supplied to CoBank, except those approved in writing by CoBank;

3.

All construction to date has been substantially performed in accordance with the Plans for the Improvements, and there have been no material changes in the Plans except as approved in writing by CoBank;

4.

There have been no material changes in the scope or time of performance of the work of construction, nor any extra work, labor or materials ordered or contracted for, nor are any such changes or extras contemplated, except as may be expressly permitted by the Loan Agreement or as have been approved in writing by CoBank;

5.

The payments to be made with the requested funds will pay all bills received to date, less any required withholds, for labor, materials, equipment and/or services furnished in connection with the construction of the Improvements;

6.

All amounts previously advanced by CoBank for labor, services, equipment and/or materials for the above referenced project pursuant to previous Requests for Construction Loan Disbursement have been paid to the parties entitled thereto in the manner required in the Loan Agreement; and

7.

All conditions to the advance of Loan funds required herein as set forth in the Loan Agreement have been fulfilled, and to the actual knowledge of the undersigned, no Event of Default under the Loan Agreement has occurred and is continuing.

1

BORROWER: Ethanol Grain Processors, LLC
	Signature
	Printed Name and Title
ENGINEER & CONTRACTOR: Fagen, Inc.
	Signature
	Printed Name and Title

We have reviewed the Pay Application Numbered                                    and dated                                   . Based on our conversations with the Contractor and the Owner, our review of the current schedule, and our site observations, the construction in place is judged to be in general accordance with industry standards and in general conformity with the approved plans and specifications, proceeding generally on schedule, and the request for payment is a reasonable representation of the materials ordered and the work effort of the Contractor to date.

AGENT CONSULTING ENGINEER:
	Signature - BKBM ENGINEERS

APPROVED FOR PAYMENT BY AGENT:
	Signature - CoBank	Printed Name & Title –CoBank	Date

2

SCHEDULE A

to Exhibit A - Request for Loan Advance

Request No:			Date:
To:	CoBank, ,ACB
From:	Ethanol Grain Processors, LLC
	(Name of Borrower)
Loan Agreement No.		RI0487T01A		Dated:	August 31, 2007
Project Description:		100 million gallon ethanol plant
Project Location:		Near Rives, Tennessee

Loan advance to be used to pay General Contractor:	$
Loan advance to be used to reimburse Owners Costs:	$
(construction costs, development costs, start-up
expenses, or working capital)
Total advance requested:	$

Please attach supporting documentation for all requested amounts.

3

EXHIBIT B

CHANGE ORDER REQUEST

Request No:		CO#		Date:
To:	CoBank, ,ACB
From:	Ethanol Grain Processors, LLC
	(Name of Borrower)
Loan Agreement No.			RI0487T01A		Dated:	August 31, 2007
Project Description:			100 million gallon ethanol plant
Project Location:			Near Rives, Tennessee

In accordance with the terms of the above referenced Loan Agreement, the undersigned hereby requests that Agent approve the change orders more particularly described in the schedule attached hereto as Schedule “A” and incorporated herein.

The undersigned hereby certifies that:

1.

There have been no material changes in the Plans and or contracts except those permitted in the Loan Agreement and/or approved in writing by Agent; and

2.

Copies of the proposed changes to the Plans and/or contracts are attached hereto as Schedule “B” and that all such documents are complete and fully comply with all applicable permits and approvals, subject to the written approval of Agent.

BORROWER:	CONTRACTOR & ENGINEER:
Ethanol Grain Processors, LLC	Fagen, Inc.
By:	By:
CHANGE ORDER APPROVED BY AGENT:
CoBANK, ACB
By:
Date:

1

EX-10

Exhibit 10.41

MLA No. RI0487A

MASTER LOAN AGREEMENT

THIS MASTER LOAN AGREEMENT is entered into as of August 31, 2007, between FARM CREDIT SERVICES OF MID-AMERICA, FLCA (“FLCA”), FARM CREDIT SERVICES OF MID-AMERICA, PCA (“PCA”) and ETHANOL GRAIN PROCESSORS, LLC, Rives, Tennessee (the “Company”).

BACKGROUND

FLCA, PCA and the Company are parties to a Master Loan Agreement dated January 18, 2007 (the “Existing Agreement”). Hereinafter, the term “Farm Credit” shall mean FLCA, PCA or both, as applicable in the context. Pursuant to the terms of the Existing Agreement, the parties entered into one or more Supplements thereto. Farm Credit and the Company now desire to amend and restate the Existing Agreement and to apply such new agreement to the Existing Supplements, as well as any new Supplements that may be issued thereunder. For that reason and for valuable consideration (the receipt and sufficiency of which are hereby acknowledged), Farm Credit and the Company hereby agree that the Existing Agreement shall be amended and restated to read as follows:

SECTION 1. Supplements. In the event the Company desires to borrow from Farm Credit and Farm Credit is willing to lend to the Company, or in the event Farm Credit and the Company desire to consolidate any existing loans hereunder, the parties will enter into a Supplement to this agreement (a “Supplement”). Each Supplement will set forth the amount of the loan, the purpose of the loan, the interest rate or rate options applicable to that loan, the repayment terms of the loan, and any other terms and conditions applicable to that particular loan. Each loan will be governed by the terms and conditions contained in this agreement and in the Supplement relating to the loan. As of the date hereof, the following Supplements are outstanding hereunder and shall be governed by the terms and conditions hereof: (a) the Statused Revolving Credit Supplement dated August 31, 2007, and numbered RI0487S01A; (b) the Construction and Term Loan Supplement da ted August 31, 2007, and numbered RI0487TOlA; and (c) the Construction and Revolving Term Loan Supplement dated August 31, 2007, and numbered RI0487T02A.

SECTION 2. Sale of Participation Interests and Appointment of Administrative Agent. The Company acknowledges that concurrent with the execution of this Master Loan Agreement and related Supplements, Farm Credit is selling a participation interest in this Master Loan Agreement and Supplements executed concurrently herewith (including all security therefore) to CoBank, ACB (“CoBank”) (up to and including a 100% interest). Pursuant to an Administrative Agency Agreement dated January 18, 2007, (“Agency Agreement”), Farm Credit and CoBank appointed CoBank to act as Administrative Agent (“Agent”) to act in place of Farm Credit hereunder and under the Supplements and any security documents to be executed thereunder. All funds to be advanced hereunder shall be made by Agent, all repayments by the Company hereunder shall be made to Agent, and all notices to be made to Farm Credit hereunder shall be made to Agent. Agent shall be solely responsible for the administration of this agreement, the Supplements and the security documents to be executed by the Company thereunder and the enforcement of all rights and remedies of Farm Credit hereunder and thereunder. Company acknowledges the appointment of the Agent and consents to such appointment. In addition, the Company agrees that this Master Loan Agreement, all Supplements hereto, as well as all related security and other documents shall inure to the benefit of CoBank as participant and to any other participants and subparticipants of Farm Credit and/or CoBank: and their respective participants and subparticipants as their interests may appear.

SECTION 3. Availability. Loans will be made available on any day on which Agent and the Federal Reserve Banks are open for business upon the telephonic or written request of the Company. Requests for loans must be received no later than 12:00 Noon Company’s local time on the date the loan is desired. Loans will be made available by wire transfer of immediately available funds to such account or accounts as may be authorized by the Company. The Company shall furnish to Agent a duly completed and executed copy of a CoBank Delegation and Wire and Electronic Transfer Authorization Form of the Agent, and Agent shall be entitled to rely on (and shall incur no liability to the Company in acting on) any request or direction furnished in accordance with the terms thereof.

SECTION 4. Repayment. The Company’s obligation to repay each loan shall be evidenced by the promissory note set forth in the Supplement relating to that loan or by such replacement note as Agent shall require. Agent shall maintain a record of all loans, the interest accrued thereon, and all payments made with respect thereto, and such record shall, absent proof of manifest error, be conclusive evidence of the outstanding principal and interest on the loans. All payments shall be made by wire transfer of immediately available funds, by check, or by automated clearing house or other similar cash handling processes as specified by separate agreement between the Company and Agent. Wire transfers shall be made to ABA No. 307088754 for advice to and credit of Agent (or to such other account as Agent may direct by notice). The Company shall give Agent telephonic notice no later than 12:00 Noon Company’s local time of it s intent to pay by wire and funds received after 3:00 p.m. Company’s local time shall be credited on the next business day. Checks shall be mailed to CoBank, ACB, Department 167, Denver, Colorado 80291-0167 (or to such other place as Agent may direct by notice). Credit for payment by check will not be given until the later of: (a) the day on which Agent receives immediately available funds; or (b) the next business day after receipt of the check.

SECTION 5. Capitalization. The Company agrees to purchase voting (Class D) stock in Farm Credit Services of Mid-America, ACA (“ACA”), (currently a minimum of $1,000.00 worth of stock consisting of at least 200 shares of $5.00 par value stock) as required under the policy of ACA at the time of acquisition. ACA policy may change from time to time. Farm Credit shall have a first lien on the stock for payment of any liability of the Company to Farm Credit. Said stock shall be owned as follows:

Owner Name: Ethanol Grain Processors, LLC  SSN/TIN: 20-1834045

The Company authorizes and appoints the following to act on behalf of all owners, to vote the Class D stock, and to accept, receive and receipt for any dividends declared on the stock:

Jim Patterson, voter

Upon repayment of a loan, retirement of the stock shall occur only at the discretion of ACAs board of directors, and then only if ACA meets capital adequacy standards established under Section 4.3A of the Farm Credit Act. Should ACA’s capital become impaired, so the book value of the stock is less than par value or face amount, the stock may be retired for an amount equal to book value. The Company shall be obligated to repay the full amount of any loan, including the amount attributable to the purchase of stock, regardless of whether ACA’s capital is impaired.

Company further agrees that a security interest is granted to ACA in all such stock now owned and hereafter acquired, however designated or classified, and all equity reserve and allocated surplus in ACA, its successors and assigns, to secure the loans.

SECTION 6. Security. The Company’s obligations under this agreement, all Supplements (whenever executed), and all instruments and documents contemplated hereby or thereby, shall be secured by a statutory first lien on all equity which the Company may now own or hereafter acquire in Farm Credit. In addition, the Company agrees to grant to Farm Credit, by means of such instruments and documents as Agent shall reasonably require, a first lien (subject only to exceptions approved in writing by Agent and Permitted Liens, as hereinafter defined) on all personal property of the Company, and on all real property of the Company, whether now existing or hereafter acquired. As additional security for those obligations: (i) the Company agrees to grant to Farm Credit, by means of such instruments and documents as Agent shall reasonably require, a first priority lien on such of its other assets, whether now existing or hereafter acquired, as Agent may from time to time require; and (ii) the Company agrees to grant to Farm Credit, by means of such instruments and documents as Agent shall require, a first priority lien on all realty which the Company may from time to time acquire after the date hereof. Farm Credit may at its discretion assign collateral to the Agent under the Agency Agreement.

SECTION 7. Conditions Precedent.

(A)

Conditions to Initial Supplement. Farm Credit’s obligation to extend credit under the initial Supplement hereto is subject to the conditions precedent that Agent receive, in form and content satisfactory to Agent, each of the following:

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(i)

This Agreement, Etc. A duly executed copy of this agreement and all instruments and documents contemplated hereby.

(ii)

Security Agreement. A security agreement granting to Farm Credit a first lien (subject only to exceptions approved in writing by Agent and Permitted Liens) on all personal property of the Company, whether now owned or hereafter acquired.

(iii)

Mortgage/Deed of Trust. A mortgage or deed of trust granting to Farm Credit a first lien (subject only to exceptions approved in writing by Agent and Permitted Liens) on the Company’s owned Property (as that term is defined in the applicable Supplements) located near Rives, Tennessee.

(iv)

Title Commitment/Policy. A commitment from a title insurance company acceptable to Agent to issue an ALTA lender’s policy of title insurance in the face amount of $100,000,000.00 insuring the Company’s Mortgage or Deed of Trust to Farm Credit as a first priority lien on the property encumbered thereby, subject only to exceptions approved in writing by Agent. The Company agrees to pay the cost of such commitment and the related policy, together with such endorsements as may be reasonably requested by Agent, and also agrees that if, for any reason, a final policy is not issued by the date that is ninety (90) days after the date of this agreement or such later date as may be agreeable to Agent, then an “Event of Default” shall be deemed to have occurred under this agreement.

(v)

Project Budget and Schedule, Contracts and Plans. Project budget, schedule, contracts and plans as follows: (i) a budget setting forth the total estimated direct costs for construction (including real property acquisition, site preparation, railroad siding, sales taxes related to construction, capitalized interest and contingencies, but excluding working capital) not to exceed an aggregate total of $152,500,000.00 for the Improvements (as that term is defined in the applicable Supplements), including line item cost breakdowns for all direct costs by trade, job, and subcontractor, and a schedule of all sources of funds to pay such costs (the “Project Budget”); (ii) a schedule setting forth, by trade, job, and subcontractor, the estimated dates of commencement and completion of construction of the Improvements (the “Project Schedule”); (iii) a schedule of the amounts and times of advances anticipated to be requisitioned by the Co mpany from time to time during the term of construction of the Improvements (the “Disbursement Schedule”); (iv) a list of all subcontractors and materialmen who have been, or, to the extent then determined by the Company, will be supplying labor, materials or goods for the Improvements; (v) two sets of the Plans with a certification from the Company and from the Company’s architect or engineer, or with other evidence satisfactory to Agent as to the following matters: (a) that the Improvements can be completed by October 31, 2008, (the “Completion Date”); (b) that the Project Budget, Project Schedule, Disbursement Schedule and the Plans satisfactorily provide for the construction of the Improvements; and (c) that the Improvements upon completion will comply in all material respects with all Laws (as defined in Section 9(B) hereof), including, without limitation, all Laws relating to the environment, and all approvals, consents, permits and licenses required under such Laws (the “ Project Approvals”) which have been obtained or are to be obtained by the Company relating in any way to the acquisition, construction or the contemplated operation of the Improvements (including, without limitation, those relating to zoning, building, use and occupancy, fire prevention and health); and (vi) a list of the Project Approvals indicating those Project Approvals obtained and to be obtained (and a schedule for obtaining such Project Approvals).

(vi)

Evidence of Capital and Other Debt. Such evidence as Agent may require that the Company has obtained equity capital, including non-repayable grants in an amount up to and including $1,200,000.00, or acceptable binding commitments thereof, in an amount totaling no less than $70,000,000.00 with terms and conditions acceptable to Agent.

(vii)

Appraisal. An appraisal of the Property by a licensed, independent appraiser satisfactory to Agent, such appraisal to include a value for the proposed ethanol facility to be located on the Company’s real property located near Rives, Tennessee.

(viii)

Survey. An ALTA quality survey of the Property by a licensed surveyor satisfactory to Agent verifying no encroachments by any Improvements on the Property onto adjoining property, or such other information as may be required by Agent.

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(ix)

Environmental Audit. Such environmental audit or report pertaining to the Company’s real property located near Rives, Tennessee, as Agent may require.

(x)

Flood Insurance. A flood zone determination on all real property security and evidence of flood insurance if such determination requires flood insurance.

(xi)

Opinion of Counsel. An opinion of the Company’s counsel (in form and substance reasonably acceptable to Agent) confirming that all loan and security documents have been duly authorized and executed and constitute binding obligations of the Company enforceable according to their terms.

(xii)

Engineering and Construction Contracts. Copies of all engineering and construction contracts with warranty provisions acceptable to Agent.

(xiii)

Process/Yield Guarantee. Acceptable Process/Yield Guarantee from the design engineer and contractor, acceptable to Agent, as well as a minimum one-year warranty on all work performed.

(xiv)

Insurance. Certificates from the insurance carrier for the general contractor or contractors (and if the Company is not adequately insured therein, from the Company’s insurance carrier) evidencing workers’ compensation and liability insurance (including contractual liability) carried during the course of construction, with liability limits for death of or injury to persons and for damages to property in amounts acceptable to Agent or such other limits if any are established under the construction contract(s). Without limiting the provision in Section 9(D) herein or the foregoing, the Company agrees to obtain Builder’s Risk casualty insurance covering fire and other casualty with extended coverage including vandalism and malicious mischief.

(xv)

Earthquake and Business Interruption Insurance: Certificates from the insurance carriers) evidencing coverage and amounts acceptable to Agent.

(xvi)

Utilities; Access. A certificate from the Company or the Company’s engineer, a report from Agent’s inspection engineer or other evidence satisfactory to Agent, as to the methods of access to and egress from the property and the availability of water supply, electricity, natural gas, and other utilities, and for the disposal of wastewater, all in locations and capacities sufficient to meet the reasonable requirements of the property and the improvements and otherwise satisfactory to Agent.

(xvii) Escrow Agreement. An escrow agreement for distribution of loan funds reasonably acceptable to Agent specifically providing for a Title/Abstract Company to distribute all loan proceeds. Costs of said agreement are to be paid by the Company.

(xviii) Risk Management Policies. Risk management policies and programs/strategies acceptable to Agent pertaining to grain procurement and marketing of ethanol and related byproducts and distiller’s grain, ethanol and carbon dioxide marketing plans and retention of marketing organizations.

(xix) Contracts. All applicable contracts acceptable to Agent including management, risk management, ethanol marketing, DDGS marketing, hedging account and com procurement contracts.

(B)

Conditions to Each Supplement. Farm Credit’s obligation to extend credit under each Supplement, including the initial Supplement, is subject to the conditions precedent that Agent receive, in form and content satisfactory to Agent, each of the following:

(i)

Supplement. A duly executed copy of the Supplement and all instruments and documents contemplated thereby.

(ii)

Evidence of Authority. Such certified board resolutions, certificates of incumbency, and other evidence that Agent may reasonably require that the Supplement, all instruments and documents executed in connection therewith, and, in the case of initial Supplement hereto, this agreement and all instruments and documents executed in connection herewith, have been duly authorized and executed.

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(iii)

Fees and Other Charges. All fees and other charges provided for herein or in the Supplement.

(iv)

Evidence of Perfection, Etc. Such evidence as Agent may require that Farm Credit has a duly perfected first priority lien on all security for the Company’s obligations, and that the Company is in compliance with Section 9(D) hereof.

(C)

Conditions to Each Loan. Farm Credit’s obligation under each Supplement to make any loan to the Company thereunder is subject to the condition that no “Event of Default” (as defined in Section 12 hereof) or event which with the giving of notice and/or the passage of time would become an Event of Default hereunder (a “Potential Default”), shall have occurred and be continuing, provided, however, that in the case of a Potential Default under Subsection (B), (C), (D), or (E) of Section 9 of this agreement, the foregoing condition shall only apply if the Potential Default would have a materially adverse effect on the Company’s ability to meet it’s obligations under this agreement

SECTION 8. Representations and Warranties.

(A)

This Agreement. The Company represents and warrants to Farm Credit and Agent that as of the date of this Agreement:

(i)

Compliance. The Company and, to the extent contemplated hereunder, each “Subsidiary” (as defined below), is in compliance with all of the terms of this agreement, and no Event of Default or Potential Default exists hereunder.

(ii)

Subsidiaries. The Company has no “Subsidiary(ies)” (as defined below). For purposes hereof, a “Subsidiary” shall mean a corporation of which shares of stock having ordinary voting power to elect a majority of the board of directors or other managers of such corporation are owned, directly or indirectly, by the Company.

(B)

Each Supplement. The execution by the Company of each Supplement hereto shall constitute a representation and warranty to Agent that:

(i)

Applications. Each representation and warranty and all information set forth in any application or other documents submitted in connection with, or to induce Farm Credit to enter into, such Supplement, is correct in all material respects as of the date of the Supplement.

(ii)

Conflicting Agreements, Etc. This agreement, the Supplements, and all security and other instruments and documents relating hereto and thereto (collectively, at any time, the “Loan Documents”), do not conflict with, or require the consent of any party to, any other agreement to which the Company is a party or by which it or its property may be bound or affected, and do not conflict with any provision of the Company’s operating agreement, articles of organization, or other organizational documents.

(iii)

Compliance. The Company and, to the extent contemplated hereunder, each Subsidiary, is in compliance with all of the terms of the Loan Documents (including, without limitation, Section 9(A) of this agreement on eligibility to borrow from Farm Credit).

(iv)

Binding Agreement. The Loan Documents create legal, valid, and binding obligations of the Company which are enforceable in accordance with their terms, except to the extent that enforcement may be limited by applicable bankruptcy, insolvency, or similar laws affecting creditors’ rights generally.

SECTION 9. Affirmative Covenants. Unless otherwise agreed to in writing by Agent while this agreement is in effect, the Company agrees to, and with respect to Subsections 9(B) through 9(G) hereof, agrees to cause each Subsidiary to:

(A)

Eligibility. Maintain its status as an entity eligible to borrow from Farm Credit.

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(B)

Company Existence, Licenses, Etc. (i) Preserve and keep in full force and effect its existence and good standing in the jurisdiction of its formation; (ii) qualify and remain qualified to transact business in all jurisdictions where such qualification is required, except where the failure to so quality will not have a material adverse effect on the Company, its business or prospects; and (iii) obtain and maintain all licenses, certificates, permits, authorizations, approvals, and the like which are material to the conduct of its business or required by law, rule, regulation, ordinance, code, order, and the like (collectively, “Laws”).

(C)

Compliance with Laws. Comply in all material respects with all applicable Laws, including, without limitation, all Laws relating to environmental protection. In addition, the Company agrees to cause all persons occupying or present on any of its properties, and to cause each Subsidiary to cause all persons occupying or present on any of its properties, to comply in all material respects with all environmental protection Laws.

(D)

Insurance. Maintain insurance with insurance companies or associations reasonably acceptable to Agent in such amounts and covering such risks as are usually carried by companies engaged in the same or similar business and similarly situated, and make such increases in the type or amount of coverage as Agent may request. All such policies insuring any collateral for the Company’s obligations to Farm Credit shall have mortgagee or lender loss payable clauses or endorsements in form and content reasonably acceptable to Agent. At Agent’s request, all policies (or such other proof of compliance with this Subsection as may be satisfactory to Agent) shall be delivered to Agent.

(E)

Property Maintenance. Maintain all of its property that is necessary to or useful in the proper conduct of its business in good working condition, ordinary wear and tear excepted.

(F)

Books and Records. Keep adequate records and books of account in which complete entries will be made in accordance with generally accepted accounting principles (“GAAP”) consistently applied.

(G)

Inspection. Permit Agent or its agents, upon reasonable notice and during normal business hours or at such other times as the parties may agree, to examine its properties, books, and records, and to discuss its affairs, finances, and accounts, with its respective officers, directors, employees, and independent certified public accountants.

(H)

Reports and Notices. Furnish to Agent:

(i)

Annual Financial Statements. As soon as available, but in no event more than 90 days after the end of each fiscal year of the Company occurring during the term hereof, annual consolidated and consolidating financial statements of the Company and its consolidated Subsidiaries, if any, prepared in accordance with GAAP consistently applied. Such financial statements shall: (a) be audited by independent certified public accountants selected by the Company and reasonably acceptable to Agent; (b) be accompanied by a report of such accountants containing an opinion thereon reasonably acceptable to Agent; (c) be prepared in reasonable detail and in comparative form; and (d) include a balance sheet, a statement of income, a statement of retained earnings, a statement of cash flows, and all notes and schedules relating thereto.

(ii)

Interim Financial Statements. Effective with the earlier of the commencement of operations or October 31, 2008, as soon as available, but in no event more than 30 days after the end of each month (other than the last month in each fiscal year of the Company), a consolidated balance sheet of the Company and its consolidated Subsidiaries, if any, as of the end of such month, a consolidated statement of income for the Company and its consolidated Subsidiaries, if any for such period and for the period year to date, and such other interim statements as Agent may specifically request, all prepared in reasonable detail and in comparative form in accordance with GAAP consistently applied and, if required by written notice from Agent, certified by an authorized officer or employee of the Company acceptable to Agent.

(iii) Notice of Default. Promptly after becoming aware thereof, notice of the occurrence of an Event of Default or a Potential Default.

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(iv) Notice of Non-Environmental Litigation. Promptly after the commencement thereof, notice of the commencement of all actions, suits, or proceedings before any court, arbitrator, or governmental department, commission, board, bureau, agency, or instrumentality affecting the Company or any Subsidiary which, if determined adversely to the Company or any such Subsidiary, could have a material adverse effect on the financial condition, properties, profits, or operations of the Company or any such Subsidiary.

(v) Notice of Environmental Litigation, Etc. Promptly after receipt thereof, notice of the receipt of all pleadings, orders, complaints, indictments, or any other communication alleging a condition that may require the Company or any Subsidiary to undertake or to contribute to a cleanup or other response under environmental Laws, or which seek penalties, damages, injunctive relief, or criminal sanctions related to alleged violations of such Laws, or which claim personal injury or property damage to any person as a result of environmental factors or conditions.

(vi) Formation Documents. Promptly after any change in the Company’s operating agreement or articles of organization (or like documents), copies of all such changes, certified by the Company’s Secretary.

(vii) Budgets. As soon as available, but in no event more than 90 days after the end of any fiscal year of the Company occurring during the term hereof, copies of the Company’s board approved annual budgets and forecasts of operations and capital expenditures.

(viii) Compliance Certificate. Together with each set of financial statements furnished to Agent pursuant to Section 9(H) hereof, a certificate of an officer or employee of the Company reasonably acceptable to Agent setting forth calculations showing compliance with the financial covenants set forth in Section 11 hereof.

(ix) Other Information. Such other information regarding the condition or operations, financial or otherwise, of the Company or any Subsidiary as Agent may from time to time reasonably request, including but not limited to copies of all pleadings, notices, and communications referred to in Subsections 9(H)(iv) and (v) above.

(I)

Performance Bonds. Provide performance bonds, in form and content acceptable to Agent, for construction and related contracts upon request by Agent.

SECTION 10. Negative Covenants. Unless otherwise agreed to in writing by Agent, while this agreement is in effect the Company will not:

(A)

Borrowings. Create, incur, assume, or allow to exist, directly or indirectly, any indebtedness or liability for borrowed money (including trade or bankers’ acceptances), letters of credit, or the deferred purchase price of property or services (including capitalized leases), except for: (i) debt to Farm Credit; (ii) accounts payable to trade creditors incurred in the ordinary course of business; (iii) current operating liabilities (other than for borrowed money) incurred in the ordinary course of business; (iv) debt of the Company to miscellaneous creditors, in an aggregate amount not to exceed $1,500,000.00 on terms and conditions reasonably satisfactory to Agent; and (v) debt of the Company to the Tennessee Valley Authority in an aggregate amount not to exceed $1,000,000.00.

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(B)

Liens. Create, incur, assume, or allow to exist any mortgage, deed of trust, pledge, lien (including the lien of an attachment, judgment, or execution), security interest, or other encumbrance of any kind upon any of its property, real or personal (collectively, “Liens”). The foregoing restrictions shall not apply to (“Permitted Liens”); (i) Liens in favor of Farm Credit; (ii) Liens for taxes, assessments, or governmental charges that are not past due by more than thirty (30) days; (iii) Liens and deposits under workers’ compensation, unemployment insurance, and social security Laws; (iv) Liens and deposits to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), and like obligations arising in the ordinary course of business, as conducted on the date hereof or planned to be conducted; (v) Liens imposed by Law in favor of mechanics, carriers, materialmen, warehousemen, and like persons that secure obligations that are not past due by more than thirty (30) days, unless the Company is in good faith contesting the same or the validity thereof by appropriate legal proceedings which shall operate to prevent the collection or enforcement of the Lien so contested; (vi) easements, rights-of-way, restrictions, and other similar encumbrances which, in the aggregate, do not materially interfere with the occupation, use, and enjoyment of the property or assets encumbered thereby in the normal course of its business or materially impair the value of the property subject thereto; (vii) Liens arising from VCC financing statements regarding personal property leases not prohibited by this Agreement; and (viii) subordinate Liens in favor of miscellaneous creditors to secure indebtedness permitted hereunder.

(C)

Mergers, Acquisitions, Etc. Merge or consolidate with any other entity or acquire all or a material part of the assets of any person or entity, or form or create any new Subsidiary or affiliate, or commence operations under any other name, organization, or entity, including any joint venture.

(D)

Transfer of Assets. Sell, transfer, lease, or otherwise dispose of any of its assets, except in the ordinary course of business.

(E)

Loans. Lend or advance money, credit, or property to any person or entity, except for trade credit extended in the ordinary course of business.

(F)

Contingent Liabilities. Assume, guarantee, become liable as a surety, endorse, contingently agree to purchase, or otherwise be or become liable, directly or indirectly (including, but not limited to, by means of a maintenance agreement, an asset or stock purchase agreement, or any other agreement designed to ensure any creditor against loss), for or on account of the obligation of any person or entity, except by the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of the Company’s business.

(G)

Change in Business. Engage in any business activities or operations substantially different from or unrelated to the Company’s present business activities or operations.

(H)

Capital Expenditures. During any fiscal year of the Company after commencement of operations, the Company will not, without prior Agent consent, expend more than $1,000,000.00 in aggregate for the acquisition of assets, including leases which are capitalized in accordance with GAAP.

(I)

Dividends, Etc. Company will not declare or pay any dividends, or make any distribution of assets to the stockholders, or purchase, redeem, retire or otherwise acquire for value any of its capital stock, or allocate or otherwise set apart any sum, except that in any fiscal year of the Company a distribution may be made to the Company’s members/owners of up to 40% of the net profit (according to GAAP) for each fiscal year after receipt of the audited financial statements for the pertinent fiscal year, provided that the Company is and will remain in compliance with all loan covenants, terms and conditions. Furthermore, with respect to each fiscal year of the Company beginning with fiscal year 2009, a distribution may be made in excess of 40% of the net profit for such fiscal year if the Company has made the required “Free Cash Flow” payment to Agent for such fiscal year as provided in Construction and Term Loan Supplement No. RI0487TO lA and any replacements thereof, and provided that the Company is and will remain in compliance with all loan covenants, terms and conditions on a pro forma basis net of said additional payment.

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(J)

Leases. Create, incur, assume, or permit to exist any obligation as lessee under operating leases or leases which should be capitalized in accordance with GAAP for the rental or hire of any real or personal property, except leases which do not in the aggregate require the Company to make scheduled payments to the lessors in any fiscal year of the Company in excess of$100,000.00.

(K)

Changes to Operating Agreements, Etc. Amend or otherwise make any material changes to the Company’s articles of organization, operating agreement, management contracts, ethanol and distillers grain marketing contracts, or other contracts required herein without prior written consent of Agent.

SECTION 11. Financial Covenants. Unless otherwise agreed to in writing, while this agreement is in effect:

(A)

Working Capital. Effective with the earlier of the commencement of operations or October 31, 2008, the Company will have at the end of each period for which financial statements are required to be furnished pursuant to Section 9(H) hereof, an excess of current assets over current liabilities (both as determined in accordance with GAAP consistently applied) of not less than $9,000,000.00, and increasing to $12,000,000.00 at fiscal year ending 2009, and continuing thereafter, except that in determining current assets, any amount available under the Construction and Revolving Term Loan Supplement hereto (less the amount that would be considered a current liability under GAAP if fully advanced) may be included.

(B)

Net Worth. Effective with the initial loan advance, the Company will have an excess of total assets over total liabilities (both as determined in accordance with GAAP consistently applied) (“Net Worth”) of not less than $66,000,000.00. Thereafter, the Company shall have at the end of each period for which financial statements are required to be furnished pursuant to Section 9(H) hereof Net Worth of$66,000,000.OO, increasing to $67,000,000.00 at fiscal year ending 2008, and further increasing to $70,000,000.00 at fiscal year ending 2009 and continuing thereafter.

(C)

Debt Service Coverage Ratio. The Company will have at the end of each fiscal year of the Company, effective with the fiscal year ending 2009, a “Debt Service Coverage Ratio” (as defined below) for that year of not less than 1.25 to 1.00. For purposes hereof, the term “Debt Service Coverage Ratio” shall mean the following (all as calculated for the most current year-end in accordance with GAAP consistently applied): (i) net income (after taxes), plus depreciation and amortization; divided by (ii) all current portion of long term debt for the prior period (all scheduled long term debt payments, but not to include any Free Cash Flow payments as defined in Section 6 of the applicable Supplement).

SECTION 12. Events of Default. Each of the following shall constitute an “Event of Default” under this agreement:

(A)

Payment Default. The Company should fail to make any payment to Agent, or purchase any equity in Farm Credit, when due.

(B)

Representations and Warranties. Any representation or warranty made or deemed made by the Company herein or in any Supplement, application, agreement, certificate, or other document related to or furnished in connection with this agreement or any Supplement, shall prove to have been false or misleading in any material respect on or as of the date made or deemed made.

(C)

Certain Affirmative Covenants. The Company or, to the extent required hereunder, any Subsidiary should fail to perform or comply with Sections 9(A) through 9(H)(ii), 9(H)(vi) through 9(H)(viii) or any reporting covenant set forth in any Supplement hereto, and such failure continues for thirty (30) days after written notice thereof shall have been delivered by Agent to the Company.

(D)

Other Covenants and Agreements. The Company or, to the extent required hereunder, any Subsidiary should fail to perform or comply with any other covenant or agreement contained herein or in any other Loan Document or shall use the proceeds of any loan for an unauthorized purpose.

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(E)

Cross-Default. The Company should, after any applicable grace period, breach or he in default under the terms of any other agreement between the Company and Farm Credit.

(F)

Other Indebtedness. The Company or any Subsidiary should fail to pay when due any indebtedness to any other person or entity for borrowed money or any long-term obligation for the deferred purchase price of property (including any capitalized lease), or any other event occurs which, under any agreement or instrument relating to such indebtedness or obligation, has the effect of accelerating or permitting the acceleration of such indebtedness or obligation, whether or not such indebtedness or obligation is actually accelerated or the right to accelerate is conditioned on the giving of notice, the passage of time, or otherwise.

(G)

Judgments. A judgment, decree, or order for the payment of money shall be rendered against the Company or any Subsidiary and either: (i) enforcement proceedings shall have been commenced, (ii) a Lien prohibited under Section l0(B) hereof shall have been obtained, or (iii) such judgment, decree, or order shall continue unsatisfied and in effect for a period of 20 consecutive days without being vacated, discharged, satisfied, or stayed pending appeal.

(H)

 Insolvency, Etc. The Company or any Subsidiary shall: (i) become insolvent or shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they come due; or (ii) suspend its business operations or a material part thereof or make an assignment for the benefit of creditors; or (iii) apply for, consent to, or acquiesce in the appointment of a trustee, receiver, or other custodian for it or any of its property or, in the absence of such application, consent, or acquiescence, a trustee, receiver, or other custodian is so appointed; or (iv) commence or have commenced against it any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, or liquidation Law of any jurisdiction, provided the same shall not be vacated, stricken, discharged or dismissed within sixty (60) days after the commencement thereof.

(I)

Material Adverse Change. Any material adverse change occurs, as reasonably determined by Agent, in the Company’s financial condition, results of operation, or ability to perform its obligations hereunder or under any instrument or document contemplated hereby.

(J)

Revocation of Guaranty. Any guaranty, suretyship, subordination agreement, maintenance agreement, or other agreement furnished in connection with the Company’s obligations hereunder and under any Supplement shall, at any time, cease to be in full force and effect, or shall be revoked or declared null and void, or the validity or enforceability thereof shall be contested by the guarantor, surety or other maker thereof (the “Guarantor”), or the Guarantor shall deny any further liability or obligation thereunder, or shall fail to perform its obligations thereunder, or any representation or warranty set forth therein shall be breached, or the Guarantor shall breach or be in default under the terms of any other agreement with Agent (including any loan agreement or security agreement), or a default set forth in Subsections (F) through (H) hereof shall occur with respect to the Guarantor.

SECTION 13. Remedies. Upon the occurrence and during the continuance of an Event of Default or any Potential Default, Farm Credit shall have no obligation to continue to extend credit to the Company and may discontinue doing so at any time without prior notice. For all purposes hereof, the term “Potential Default” means the occurrence of any event which, with the passage of time or the giving of notice or both would become an Event of Default. In addition, upon the occurrence and during the continuance of any Event of Default, Farm Credit or Agent may, upon notice to the Company, terminate any commitment and declare the entire unpaid principal balance of the loans, all accrued interest thereon, and all other amounts payable under this agreement, all Supplements, and the other Loan Documents to be immediately due and payable. Upon such a declaration, the unpaid principal balance of the loans and all such other amounts shall become immediat ely due and payable, without protest, presentment, demand, or further notice of any kind, all of which are hereby expressly waived by the Company. In addition, upon such an acceleration:

10

(A)

Enforcement. Farm Credit or Agent may proceed to protect, exercise, and enforce such rights and remedies as may be provided by this agreement, any other Loan Document or under Law. Each and every one of such rights and remedies shall be cumulative and may be exercised from time to time, and no failure on the part of Farm Credit or Agent to exercise, and no delay in exercising, any right or remedy shall operate as a waiver thereof, and no single or partial exercise of any right or remedy shall preclude any other or future exercise thereof, or the exercise of any other right. Without limiting the foregoing, Agent may hold, upon the occurrence and during the continuance of an Event of Default, and/or set off and apply against the Company’s obligations to Farm Credit cash collateral held by Farm Credit or Agent, or any balances held by Farm Credit or Agent for the Company’s account (whether or not such balances are then due).

(B)

Application of Funds. Agent may apply all payments received by it to the Company’s obligations to Farm Credit in such order and manner as Agent may elect in its sale discretion.

In addition to the rights and remedies set forth above: (i) if the Company fails to purchase any equity in Farm Credit when required or fails to make any payment to Agent when due, then at Agent’s option in each instance, such payment shall bear interest from the date due to the date paid at 4% per annum in excess of the rate(s) of interest that would otherwise be in effect on that loan; and (ii) after the maturity of any loan (whether as a result of acceleration or otherwise), the unpaid principal balance of such loan (including without limitation, principal, interest, fees and expenses) shall automatically bear interest at 4% per annum in excess of the rate(s) of interest that would otherwise be in effect on that loan. All interest provided for herein shall be payable on demand and shall be calculated on the basis of a year consisting of 360 days.

SECTION 14. Broken Funding Surcharge. Notwithstanding any provision contained in any Supplement giving the Company the right to repay any loan prior to the date it would otherwise be due and payable, the Company agrees that in the event it repays any fixed rate balance prior to its scheduled due date or prior to the last day of the fixed rate period applicable thereto (whether such payment is made voluntarily, as a result of an acceleration, or otherwise), the Company will pay to Agent a surcharge in an amount equal to the greater of: (i) an amount which would result in Farm Credit, Agent, and all subparticipants being made whole (on a present value basis) for the actual or imputed funding losses incurred by Farm Credit, Agent, and all subparticipants as a result thereof; or (ii) $300.00. Notwithstanding the foregoing, in the event any fixed rate balance is repaid as a result of the Company refinancing the loan with another lender or by other means , then in lieu of the foregoing, the Company shall pay to Agent a surcharge in an amount sufficient (on a present value basis) to enable Farm Credit, Agent, and all subparticipants to maintain the yield they would have earned during the fixed rate period on the amount repaid. Such surcharges will be calculated in accordance with methodology established by Farm Credit, Agent, and all subparticipants (copies of which will be made available to the Company upon request).

SECTION 15. Complete Agreement, Amendments. This agreement, all Supplements, and all other instruments and documents contemplated hereby and thereby, are intended by the parties to be a complete and final expression of their agreement. No amendment, modification, or waiver of any provision hereof or thereof, and no consent to any departure by the Company herefrom or therefrom, shall be effective unless approved by Agent and contained in a writing signed by or on behalf of Agent, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. In the event this agreement is amended or restated, each such amendment or restatement shall be applicable to all Supplements hereto.

SECTION 16. Other Types of Credit. From time to time, Farm Credit may extend other types of credit to or for the account of the Company. In the event the parties desire to do so under the terms of this agreement, such extensions of credit may be set forth in any Supplement hereto and this agreement shall be applicable thereto.

SECTION 17. Applicable Law. Except to the extent governed by applicable federal law, this agreement and each Supplement shall be governed by and construed in accordance with the laws of the State of Colorado, without reference to choice of law doctrine.

SECTION 18. Notices. All notices hereunder shall be in writing and shall be deemed to be dilly given upon delivery if personally delivered or sent by telegram or facsimile transmission, or three days after mailing if sent by express, certified or registered mail, to the parties at the following addresses (or such other address for a party as shall be specified by like notice):

11

If to Agent, as follows:	If to the Company, as follows:
For general correspondence purposes:	Ethanol Grain Processors, LLC
CoBank, ACB	P.O. Box 95
P.O. Box 5110	Obion, Tennessee 38240
Denver, Colorado 80217-5110
	Attention: CEO/Board Chairman
For direct delivery purposes, when desired:	Fax No.: (731) 536-1286
CoBank, ACB
5500 South Quebec Street	With a copy to:
Greenwood Village, Colorado 80111-1914
	Lindquist & Vennum, P .L.L.P.
Attention: Credit Information Services	80 South Eighth Street, Suite 4200
Fax No.: (303) 224-6101	Minneapolis, Minnesota 55402
	Attn: Michael Weaver
	Fax No.: (612) 371-3207

SECTION 19. Taxes and Expenses. To the extent allowed by law, the Company agrees to pay all reasonable out-of-pocket costs and expenses (including the fees and expenses of counsel retained or employed by Agent, including expenses of in-house counsel of Agent) incurred by Agent and any participants from Farm Credit in connection with the origination, administration, collection, and enforcement of this agreement and the other Loan Documents, including, without limitation, all costs and expenses incurred in perfecting, maintaining, determining the priority of, and releasing any security for the Company’s obligations to Farm Credit, and any stamp, intangible, transfer, or like tax payable in connection with this agreement or any other Loan Document.

SECTION 20. Effectiveness and Severability. This agreement shall continue in effect until: (i) all indebtedness and obligations of the Company under this agreement, all Supplements, and all other Loan Documents shall have been paid or satisfied; (ii) Agent has no commitment to extend credit to or for the account of the Company under any Supplement; and (iii) either party sends written notice to the other terminating this agreement. Any provision of this agreement or any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or thereof.

SECTION 21. Successors and Assigns. This agreement, each Supplement, and the other Loan Documents shall be binding upon and inure to the benefit of the Company and Farm Credit and their respective successors and assigns, except that the Company may not assign or transfer its rights or obligations under this agreement, any Supplement or any other Loan Document without the prior written consent of Agent.

SECTION 22. Participations, Etc. From time to time, Farm Credit may sell to one or more banks, financial institutions or other lenders a participation in one or more of the loans or other extensions of credit made pursuant to this agreement. However, no such participation shall relieve Farm Credit of any commitment made to the Company under any Supplement hereto. In connection with the foregoing, Farm Credit may disclose information concerning the Company and its Subsidiaries to any participant or prospective participant, provided that such participant or prospective participant agrees to keep such information confidential. Farm Credit agrees that all Loans that are made by Farm Credit and that are retained for its own account or repurchased may be entitled to patronage distributions in accordance with the bylaws of Farm Credit and its practices and procedures related to patronage distribution. Accordingly, all Loans that are included in a sale of participation interest and not retained or repurchased shall not be entitled to patronage distributions from Farm Credit. A sale of participation interest may include certain voting rights of the participants regarding the loans hereunder (including without limitation the administration, servicing and enforcement thereof). Farm Credit agrees to give written notification to the Company of any sale of participation interests.

12

SECTION 23. Counterparts. This agreement, each Supplement and any other Loan Document may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and shall be binding upon all parties and their respective permitted successors and assigns, and all of which taken together shall constitute one and the same agreement.

SECTION 24. Administrative Fee. The Company agrees to pay to Agent an administrative fee in the amount of $40,000.00 on November 1, 2007, followed by an annual $30,000.00 administrative fee beginning November 1, 2008 and on each November 1 thereafter, for as long as the Company has any obligations to Farm Credit hereunder.

IN WITNESS WHEREOF, the parties have caused this agreement to be executed by then- duly authorized officers as of the date shown above.

FARM CREDIT SERVICES OF MID-		ETHANOL GRAIN PROCESSORS, LLC
AMERICA, FCLA
By:	/s/ Ralph M. Bowman	By:	/s/ James K. Patterson
Title:  Vice President		Title:  Chief Executive Officer
FARM CREDIT SERVICES OF MID-
AMERICA, PCA
By:	/s/ Ralph M. Bowman
Title:  Vice President

13

EX-10

Statused Revolving Credit Supplement RI0487S01A

Exhibit 10.42

Loan No. Rl0487S01A

STATUSED REVOLVING CREDIT SUPPLEMENT

THIS SUPPLEMENT to the Master Loan Agreement dated August 31, 2007 (the “MLA”), is entered into as of August 31,2007, and effective October 1, 2008, or such earlier date as Agent (as that term is defined in the MLA) may establish in its sole discretion, (the “Effective Date”) between FARM CREDIT SERVICES OF MID-AMERICA, PCA (“Farm Credit”) and ETHANOL GRAIN PROCESSORS, LLC, Rives, Tennessee (the “Company”), and amends and restates the Supplement dated January 18, 2007, and numbered Rl0487S01.

SECTION 1. The Revolving Credit Facility. On the terms and conditions set forth in the MLA and this Supplement, Farm Credit agrees to make loans to the Company during the period set forth below in an aggregate principal amount not to exceed, at anyone time outstanding, the lesser of $2,600,000.00 (the “Commitment”), or the “Borrowing Base” (as calculated pursuant to the Borrowing Base Report attached hereto as Exhibit A). Within the limits of the Commitment, the Company may borrow, repay and reborrow. No advance shall be made until evidence has been provided to the Agent (as that term is defined in the MLA) as required in Section 7(A)(vi) of the MLA that all requisite equity funds have been received by the Company and that such funds shall have been utilized for the construction of the Improvements (as defined herein).

SECTION 2. Purpose. The purpose of the Commitment is to finance eligible inventory and receivables.

SECTION 3. Term. The term of the Commitment shall be from the Effective Date hereof, up to and including October 1, 2009, or, if earlier, the date which is twelve (12) months after the Effective Date or such later date as Agent may, in its sale discretion, authorize in writing. Notwithstanding the foregoing, the Commitment shall be renewed for an additional year only if, on or before the last day of the term (the “Expiration Date”), Agent provides to the Company a written notice of renewal for an additional year (a “Renewal Notice”). If on or before the Expiration Date, Agent grants a short-term extension of the Commitment, the Commitment shall be renewed for an additional year only if Agent provides to the Company a Renewal Notice on or before such extended expiration date. All annual renewals shall be measured from, and effective as of, the same day as the Expiration Date in any year.

SECTION 4. Interest. The Company agrees to pay interest on the unpaid balance of the loans in accordance with one or more of the following interest rate options, as selected by the Company:

(A)

Agent Base Rate. At a rate per annum equal at all times to the rate of interest established by Agent from time to time as its Agent Base Rate, which Rate is intended by Agent to be a reference rate and not its lowest rate plus the Pricing Adjustment set forth in Section 4(D) below. The Agent Base Rate will change on the date established by Agent as the effective date of any change therein and Agent agrees to notify the Company of any such change.

(B)

Quoted Rate. At a fixed rate per annum to be quoted by Agent in its sale discretion in each instance. Under this option, rates may be fixed on such balances and for such periods, as may be agreeable to Agent in its sale discretion in each instance, provided that: (1) the minimum fixed period shall be 180 days; (2) amounts may be fixed in increments of $500,000.00 or multiples thereof; and (3) the maximum number of fixes in place at anyone time shall be 10.

(C)

LIBOR. At a fixed rate per annum equal to “LIBOR” (as hereinafter defined) plus the Pricing Adjustment set forth in Section 4(D) below. Under this option: (1) rates may be fixed for “Interest Periods” (as hereinafter defined) of 1,2,3,6, 9 or 12 months as selected by the Company; (2) amounts may be fixed in increments of $500,000.00 or multiples thereof; (3) the maximum number of fixes in place at anyone time shall be 10; and (4) rates may only be fixed on a “Banking Day” (as hereinafter defined) on 3 Banking Days’ prior written notice. For purposes hereof: (a) “LIBOR” shall mean the rate (rounded upward to the nearest sixteenth and adjusted for reserves required on “Eurocurrency Liabilities” (as hereinafter defined) for banks subject to “FRB Regulation D” (as herein defined) or required by any other federal law or regulation) quoted by the British Bankers Association (the “BBA& #148;) at 11:00 a.m. London time 2 Banking Days before the commencement of the Interest Period for the offering of U.S. dollar deposits in the London interbank market for the Interest Period designated by the Company; as published by Bloomberg or another major information vendor listed on BBA’s official website; (b) “Banking Day” shall mean a day on which Agent is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England; (c) “Interest Period” shall mean a period commencing on the date this option is to take effect and ending on the numerically corresponding day in the next calendar month or the month that is 2,3,6, 9 or 12 months thereafter, as the case may be; provided, however, that: (i) in the event such ending day is not a Banking Day, such period shall be extended to the next Banking Day unless such next Banking Day falls in the next calendar month, in which case it shall end on the preceding Banking Day; and (ii) if there is no numerically corresponding day in the month, then such period shall end on the last Banking Day in the relevant month; (d) “Eurocurrency Liabilities” shall have meaning as set forth in “FRB Regulation D”; and (e) “FRB Regulation D” shall mean Regulation D as promulgated by the Board of Governors of the Federal Reserve System, 12 CFR Part 204, as amended.

(D)

Pricing Adjustment. The interest rate spread parameters set forth in Subsections (A) and (C) above shall be decreased in accordance with the following schedule upon full payment of $18,000,000.00 in Free Cash Flow Payments (as defined in Section 6 of Construction and Term Loan Supplement numbered RI0487TOIA hereof):

Pricing Type	Initial Spread	Spread After Completion of $18,000,000.00 of Free Cash Flow Payments
Agent Base Rate	+25 Basis Points	0 Basis Points
LIBOR	+315 Basis Points	+290 Basis Points

The applicable interest rate adjustment shall (i) become effective 30 calendar days after completion of $18,000,000.00 in Free Cash Flow Payments; and (ii) shall be effective on a prospective basis only and shall not affect existing fixed rate pricing.

The Company shall select the applicable rate option at the time it requests a loan hereunder and may, subject to the limitations set forth above, elect to convert balances bearing interest at the variable rate option to one of the fixed rate options. Upon the expiration of any fixed rate period, interest shall automatically accrue at the variable rate option unless the amount fixed is repaid or fixed for an additional period in accordance with the terms hereof. Notwithstanding the foregoing, rates may not be fixed in such a manner as to cause the Company to have to break any fixed rate balance in order to pay any installment of principal. All elections provided for herein shall be made electronically (if applicable), telephonically or in writing and must be received by Agent not later than 12:00 Noon Company’s local time in order to be considered to have been received on that day; provided, however, that in the case of LIBOR rate loans, all such elections must be conf irmed in writing upon Agent’s request. Interest shall be calculated on the actual number of days each loan is outstanding on the basis of a year consisting of 360 days and shall be payable monthly in arrears by the 20th day of the following month or on such other day in such month as Agent shall require in a written notice to the Company; provided, however, in the event the Company elects to fix all or a portion of the indebtedness outstanding under the LIBOR interest rate option above, at Agent’s option upon written notice to the Company, interest shall be payable at the maturity of the Interest Period and if the LIBOR interest rate fix is for a period longer than 3 months, interest on that portion of the indebtedness outstanding shall be payable quarterly in arrears on each three month anniversary of the commencement date of such Interest Period, and at maturity.

2

SECTION 5. Promissory Note. The Company promises to repay the unpaid principal balance of the loans on the last day of the term of the Commitment. In addition to the above, the Company promises to pay interest on the unpaid principal balance of the loans at the times and in accordance with the provisions set forth in Section 4 hereof. This note replaces and supersedes, but does not constitute payment of the indebtedness evidenced by, the promissory note set forth in the Supplement being amended and restated hereby.

SECTION 6. Borrowing Base Reports, Etc. The Company agrees to furnish a Borrowing Base Report to Agent at such times or intervals as Agent may from time to time request. Until receipt of such a request, the Company agrees to furnish a Borrowing Base Report to Agent within 30 days after each month end calculating the Borrowing Base as of the last day of the month for which the Report is being furnished. However, if no balance is outstanding hereunder on the last day of such month, then no Report need be furnished. Regardless of the frequency of the reporting, if at any time the amount outstanding under the Commitment exceeds the Borrowing Base, the Company shall immediately notify Agent and repay so much of the loans as is necessary to reduce the amount outstanding under the Commitment to the limits of the Borrowing Base.

SECTION 7. Letters of Credit. If agreeable to Agent in its sole discretion in each instance, in addition to loans, the Company may utilize the Commitment to open irrevocable letters of credit for its account. Each letter of credit will be issued within a reasonable period of time after receipt of a duly completed and executed copy of Agent’s then current form of application or, if applicable, in accordance with the terms of any CoTrade Agreement between the parties, and shall reduce the amount available under the Commitment by the maximum amount capable of being drawn thereunder. Any draw under any letter of credit issued hereunder shall be deemed an advance under the Commitment. Each letter of credit must be in form and content acceptable to Agent and must expire no later than the maturity date of the loans. Notwithstanding the foregoing or any other provision hereof, the maximum amount capable of being drawn under each letter of credit must be statused against the Borrowing Base in the same manner as if it were a loan, and in the event that (after repaying all loans) the maximum amount capable of being drawn under the letters of credit exceeds the Borrowing Base, then the Company shall immediately notify Agent and pay to Agent (to be held as cash collateral) an amount equal to such excess.

SECTION 8. Commitment Fee. In consideration of the Commitment, the Company agrees to pay to Agent a commitment fee on the average daily unused portion of the Commitment at the rate of 2/5 of 1 % per annum (calculated on a 360 day basis), payable monthly in arrears by the 20th day following each month. Such fee shall be payable for each month (or portion thereof) occurring during the original or any extended term of the Commitment. For purposes of calculating the commitment fee only, the “Commitment” shall mean the dollar amount specified in Section 1 hereof, irrespective of the Borrowing Base.

SECTION 9. Arrangement Fee. In consideration of the Commitment, the Company agrees to pay to Agent on the execution hereof an arrangement fee in the amount of $37,500.00. This fee has already been received.

IN WITNESS WHEREOF, the parties have caused this Supplement to be executed by their duly authorized officers as of the date shown above.

FARM CREDIT SERVICES OF		ETHANOL GRAIN PROCESSORS, LLC
MID-AMERICA, FCLA
By:	/s/ Ralph M. Bowman	By:	/s/ James K. Patterson
Title:  Vice President		Title:  Chief Executive Officer

3

EXHIBIT A

Seasonal Borrowing Base Report

		CIF - 41504
ETHANOL GRAIN PROCESSORS, LLC	Rives, Tennessee	ß For Period Ending

For purposes hereof, ELIGIBLE INVENTORY shall mean inventory which: (a) is of a type shown below; (b) is owned by the borrower and not held by the borrower on consignment or similar basis; (c) is not subject to a lien except in favor of Farm Credit Services of Mid-America; (d) is in commercially marketable condition; and (e) is not deemed ineligible by Farm Credit Services of Mid-America. Furthermore, market price shall mean the commodity FOB at the plant. For purposes hereof, ELIGIBLE RECEIVABLES shall mean rights to payment for goods sold and delivered or for services rendered which (a) are not subject to any dispute, set-off, or counterclaim; (b) are not owing by an account debtor that is subject to a bankruptcy, reorganization, receivership or like proceeding; (e) are not subject to a lien in favor of any third party, other than liens authorized by Farm Credit Services of Mid-America in writing; (d) are not owing by an account debtor th at is owned or controlled by the borrower; and (e) are not deemed ineligible by Farm Credit Services of Mid-America.

Line	Type of Eligible Asset	Amount/Price/Value	Advance Rate	Collateral Value
1	Owned Corn Inventory (bushels)	$
2	Corn Price (lower of cost or market - $/bu)	$
3	Corn Value (Line 1 x Line 2)	$	85%	$
4	Less All Grain Payables (if applicable to above corn)	$	-100%	$
5	Owned DDGS Inventory (tons)	$
6	DDGS Price (market - $/ton)	$
7	DDGS Value (Line 5 x Line 6)	$	65%	$
8	Owned WDGS Inventory (tons)	$
9	WDGS Price (market - $/ton)	$
10	WDGS Value (Line 8 x Line 9)	$	65%	$
11	Owned Ethanol Inventory (gallon)	$
12	Ethanol Price (market - $/gallon)	$
13	Ethanol Value (Line 1 I x Line 12)	$	80%	$
14	Ethanol Receivables less than 10 days Past Due	$	85%	$
15	DDGS & WDGS Receivables less than 10 days Past Due	$	85%	$
16	Total Borrowing Base à			$
17	Less: Book Overdraft(s)	$	100%	$
18	Less: Demand Patron Notes/Deposits	$	100%	$
19	Less: Outstanding Balance of Loan(s)	$	100%	$
20	Less: Issued Letters of Credit	$	100%	$
21.	Total Deducts (Lines 17+18+19+20) à			$
22.	EXCESS OR DEFICIT* (Line 16 - Line 21) à			$

*NOTE: if a deficit exists, funds must be remitted to CoBank within 5 business days of month end.

I HEREBY CERTIFY THAT TO THE BEST OF MY KNOWLEDGE THIS INFORMATION IS TRUE AND CORRECT.

Authorized Signature	Title	Date
Printed Name:

EX-10

Exhibit 10.43

MASTER LOAN AGREEMENT

by and among

INDIANA BIO-ENERGY, LLC

and

AGSTAR FINANCIAL SERVICES, PCA

dated

as of

February 27, 2007

TABLE OF CONTENTS

ARTICLE I.	DEFINITIONS AND ACCOUNTING MATTERS	1
Section 1.01	Certain Defined Terms	1
Section 1.02	Accounting Matters	8
Section 1.03	Construction	8
ARTICLE II.	AMOUNTS AND TERMS OF THE TERM LOANS	8
Section 2.01	Supplements	8
Section 2.02	Construction Loan	9
Section 2.03	Term Revolving Loan	9
Section 2.04	Conversion of Construction Loan Into Term Loan	9
Section 2.05	Letters of Credit Procedures/Fees/Reimbursement	9
Section 2.06	Adjustments to Interest Rate	10
Section 2.07	Default Interest.	11
Section 2.08	Late Charge	11
Section 2.09	Prepayment of Loans	11
Section 2.10	Changes in Law Rendering Certain LIBOR Rate Loans Unlawful	12
Section 2.11	Payments and Computations	12
Section 2.12	Maximum Amount Limitation	13
Section 2.13	Lender Records	13
Section 2.14	Loan Payments	13
Section 2.15	Purchase of Equity Interests in AgStar Financial Services, PCA	13
Section 2.16	Compensation	14
Section 2.17	Excess Cash Flow	14
ARTICLE III	CONDITIONS PRECEDENT	14
Section 3.01	Conditions Precedent to Funding	14
ARTICLE IV.	REPRESENTATIONS AND WARRANTIES	17
Section 4.01	Representations and Warranties of the Borrower	17
ARTICLE V.	COVENANTS OF THE BORROWER	20
Section 5.01	Affirmative Covenants	20
Section 5.02	Negative Covenants	27
ARTICLE VI.	EVENTS OF DEFAULT AND REMEDIES	29
Section 6.01	Events of Default	29
Section 6.02	Remedies	32
Section 6.03	Remedies Cumulative	33
ARTICLE VII.	MISCELLANEOUS	33
Section 7.01	Amendments, etc	33
Section 7.02	Notices, etc	33
Section 7.03	No Waiver; Remedies	33
Section 7.04	Costs, Expenses and Taxes	33
Section 7.05	Right of Set-off	33
Section 7.06	Severability of Provisions	33
Section 7.07	Binding Effect; Successors and Assigns; Participations	33
Section 7.08	Consent to Jurisdiction	34
Section 7.09	Governing Law	34
Section 7.10	Execution in Counterparts	34
Section 7.11	Survival	35
Section 7.12	Waiver of Jury Trial	35
Section 7.13	Entire Agreement	35

i

LIST OF SCHEDULES AND EXHIBITS

Schedule 3.01(d)	Real Property
Schedule 4.01(a)	Description of Certain Transactions Related to the Borrower’s Stock
Schedule 4.0] (f)	Description of Certain Threatened Actions, etc.
Schedule 4.01 (k)	Location of Inventory and Farm Products; Third Parties in Possession; Crops
Schedule 4.01 (1)	Office Locations; Fictitious Names; Etc.
Schedule 4.01(p)	Intellectual Property
Schedule 4.01(t)	Environmental Compliance
Schedule 5.01(0)	Management
Schedule 5.02(a)	Description of Certain Liens, Lease Obligations, etc.
Schedule 5.02(k)	Transactions with Affiliates
Exhibit A	Compliance Certificate
Exhibit B	Project Sources and Uses Statement

ii

MASTER LOAN AGREEMENT

THIS MASTER LOAN AGREEMENT (this “Agreement”), dated as of February 27, 2007, between AGSTAR FINANCIAL SERVICES, PCA, a United States instrumentality (the “Lender”) and INDIANA BIO-ENERGY, LLC, an Indiana limited liability company (the “Borrower”).

RECITALS

A.

The Borrower has requested the Lender extend to the Borrower various credit facilities for the purposes of acquiring, constructing, equipping, furnishing, and operating an ethanol production facility to he located near the City of Bluffton, Wells County, Indiana (the “Project”).

B.

Lender has agreed to make such loans to the Borrower, and in order to reduce the amount of paperwork associated therewith, Lender and the Borrower would like to enter into a master loan agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing, intending to be legally bound hereby, and in consideration of Lender making one or more loans to the Borrower, Lender and the Borrower agree as follows:

ARTICLE I.

DEFINITIONS AND ACCOUNTING MATTERS

Section 1.01.

Certain Defined Terms. As used in this Agreement and in the Supplements, the following terms shall have the following meanings. Terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code, as amended from time to time. All references to dollar amounts shall mean amounts in lawful money of the United States of America.

“Advances” means the Loans or Letters of Credit provided the Borrower pursuant to this Agreement and the Supplements to this Agreement.

“Affiliate” means, as to any Person, any other Person: (a) that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, such Person; (b) that directly or indirectly beneficially owns or holds ten percent (10%) or more of any class of voting stock or membership interests (units) of such Person; or (c) ten percent (10%) or more of the voting stock or membership interests (units) of which is directly or indirectly beneficially owned or held by the Person in question. The term “control” means the possession, directly or indirectly, of the power to direct or cause direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise; provided, however, in no event shall the Lender or any bank be deemed an Affiliate of the Borrower or any of their subsidiaries.

“Agreement” means this Agreement, as this Agreement may be amended, modified or supplemented from time to time, together with all exhibits and schedules attached to or made a part of this Agreement from time to time.

“Allowed Distributions” has the meaning specified in Section 5.02(b).

“Borrower” means Indiana Bio-Energy, LLC, an Indiana limited liability company.

“Borrower’s Equity” means funds of at least 48.3% of Project Costs consisting of member cash equity of not less than $61,800,000.00 plus subordinated debt in an amount not less than $22,000,000.00.

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“Business Day” means any day other than a Saturday, Sunday, or other day on which commercial banks are authorized to close under the Laws of the State of Minnesota, or are in fact closed in, the state where the Lender’s Office is located and, if such day relates to any LIBOR Rate, means any such day on which Lender is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England.

“Capital Expenditures” means, for any period, the sum of all amounts that would, in accordance with GAAP consistently applied, be included as additions to property, plant and equipment on a statement of cash flows for the Borrower during such period, with respect to: (a) the acquisition, construction, improvement, replacement or betterment of land, buildings, machinery, equipment or of any other fixed assets or leaseholds; or (b) other capital expenditures and other uses recorded as capital expenditures having substantially the same effect.

“Closing Date” means February 27, 2007.

“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended.

“Collateral” means and includes, without limitation, all property and assets granted as collateral security for the Loans or other indebtedness, whether real or personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, assignment of rents, deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract or otherwise.

“Commitment” means the respective amounts committed to by Lender under this Agreement, the Supplements and the Notes.

“Completion Date” means the earlier of (i) December 31, 2008, or (ii) the date a Completion Certificate is issued for the Project executed by the Borrower, General Contractor and Inspecting Engineer.

“Completion Certificate” means a certificate in form and substance reasonably acceptable to Lender, executed by the Borrower, General Contractor and Inspecting Engineer stating that the Project is completed and that the processing equipment and fixtures are fully operational.

“Compliance Certificate” means a certificate of the Treasurer, or any other officer reasonably acceptable to the Lender, of the Borrower, substantially in the form attached hereto as Exhibit A, setting forth the calculations of current financial covenants and stating: (a) the Financial Statements are true and correct and, other than the unaudited interim financial statements, have been prepared in accordance with GAAP consistently applied; (b) whether they have knowledge of the occurrence of any Event of Default under this Agreement, and if so, stating in reasonable detail the facts with respect thereto; and (c) reaffirm and ratify the representations and warranties, as of the date of the certificate, contained in this Agreement.

“Construction Advance” means any Advance for the payment of Project Costs.

“Construction Contracts” means any and all contracts between the Borrower and any Contractor and any subcontractor and between any of the foregoing and any other person or entity relating in any way to the construction of the Project, including the performing of labor or the furnishing of standard or specially fabricated materials in connection therewith.

“Construction Letters of Credit” has the meaning given in Section 7(b) of the First Supplement.

“Construction Loan” means the loan from the Lender to the Borrower in the amount of $90,000,000.00 and pursuant to the terms and conditions provided for in this Agreement and in the First Supplement to this Agreement.

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“Construction Note” means that certain promissory note of even date herewith executed and delivered to the Lender by the Borrower in the amount of$90,000,000.00 and pursuant to the terms and conditions provided for in this Agreement and the First Supplement to this Agreement.

“Contractor” means and includes any person or entity, including the General Contractor, engaged to work on or to furnish materials or supplies for the Project.

“Conversion Date” means the date which is within 60 days after the Completion Date.

“Debt” means: (A) indebtedness for borrowed money or for the deferred purchase price of property or services; (B) obligations as lessee under leases which shall have been or should be, in accordance with GAAP, recorded as capital leases; (C) obligations under direct or indirect guaranties in respect of and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clause (A) or (B) above or (E) through (0) below; (D) liabilities in respect of unfunded vested benefits under plans covered by Title N of ERISA; (E) indebtedness in respect of mandatory redemption or mandatory dividend rights on equity interests but excluding dividends payable solely in additional equity interests; (F) all obligations of a Person, contingent or otherwise, for the payment of money under any noncompete, consulting or simila r agreement entered into with the seller of a company or its assets or any other similar arrangements providing for the deferred payment of the purchase price for an acquisition permitted hereby or an acquisition consummated prior to the date hereof; and (G) all obligations of a Person under any Hedging Agreement.

“Default Rate” means the lesser of: (a) the Maximum Rate; or (b) the rate per annum which shall from day-to-day be equal to two percent (2%) in excess of the then applicable rate of interest under any Supplement or Note.

“Disbursing Account” means a deposit or escrow account established by Home Federal Savings Bank for purposes of making all Advances under the Disbursing Agreement. This shall be established prior to the Closing Date and Home Federal Savings Bank shall provide a commitment to the Disbursing Agent of the Borrower’s Equity prior to the Closing Date.

“Disbursing Agent” means Chicago Title Insurance Company through its Crown Point, Indiana office, its successors and assigns.

“Disbursing Agreement” means the Disbursing Agreement, of even date herewith, executed by the Disbursing Agent, the Borrower, and the Lender, as the same may be from time to time amended, modified, or supplemented from time to time.

“Distribution” means any dividend, distribution, payment, or transfer of property by the Borrower to any member of the Borrower, including Allowed Distributions, Reinvestment Distributions and Excess Distributions.

“Environmental Laws” shall have the meaning ascribed to such term in the Environmental Indemnity Agreement.

“EBITDA” means for any period, the total of the following each calculated without duplication for the Borrower for such period: (i) net income; plus (ii) any provision for (or less any benefit from) income taxes included in determining such net income; plus (iii) Interest Expense deducted in determining such net income; plus (iv) amortization and depreciation expense deducted in determining such net income.

“ERISA” means the Employee Retirement Income Security Act of 1974.

“Events of Default” has the meaning specified in Section 6.01.

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“Excess Cash Flow” means EBITDA, less the sum of: (i) required payments in respect of Funded Debt; (ii) Maintenance Capital Expenditures; and (iii) Allowed Distributions.

“Excess Cash Flow Payment” has the meaning specified in Section 2.17.

“Excess Distributions” shall have the meaning specified in Section 5.02(b).

“Extraordinary Items” means items which are material and significantly different from the Borrower’s typical business activities, determined in accordance with GAAP, consistently applied.

“First Supplement” means that certain First Supplement to the Master Loan Agreement (Construction and Term Loan) dated as of the date hereof between the Borrower and the Lender, as the same may be amended, restated, supplemented or modified from time to time.

“Fixed Charge Coverage Ratio” means the ratio of EBITDA divided by the sum of (i) scheduled principal payments for the Loans, (ii) scheduled principal payments for Subordinated Debt, (iii) interest on the Loans, (iv) interest on Subordinated Debt, (v) Distributions, and (vi) Maintenance Capital Expenditures.

“Fixed Rate Loan” means that portion of the unpaid principal balance of the Construction Loan that is converted to a Term Loan and will accrue interest at a fixed rate of interest pursuant to Section 2.04.

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

“Funded Debt” means the principal amount of all Debt of the Borrower having a final maturity of more than one year from the date of origin thereof (or which is renewable or extendible at the option of the obligor for a period or periods more than one year from the date of origin) excluding, however, the principal amount due under any Term Revolving Note or any other line of credit used by Borrower for working capital purposes, all determined in accordance with GAAP, consistently applied for the period in question.

“GAAP” means generally accepted accounting principals, consistently applied.

“General Contractor” means Fagen, Inc., a Minnesota corporation, its successors and permitted assigns.

“Governmental Authority” means and includes any and all courts, boards, agencies, commissions, offices, or authorities of any nature whatsoever for any governmental unit (federal, state, county, district, municipal, city, or otherwise) whether now or hereafter in existence.

“Income Taxes” means the applicable state, local or federal tax on the net income of the Borrower.

“Inspecting Engineer” means Harris Group, and its successors and permitted assigns.

“Intellectual Property” has the meaning specified in Section 4.01 (P).

“Interest Expense” means for any period, the total interest expense of the Borrower.

“Interest Period” means the period commencing on the date of an Advance and ending on the numerically corresponding day in the first calendar month thereafter, except that each such Interest Period which commences on the last Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Business Day of the appropriate subsequent calendar month. Notwithstanding the foregoing: (a) each Interest Period which would otherwise end on a day which is not a Business Day shall end on the next succeeding Business Day or if such succeeding Business Day falls in the next succeeding calendar month, on the next preceding Business Day; (b) any Interest Period which would otherwise extend beyond the Maturity Date shall end on the Maturity Date; and (c) no Interest Period shall have a duration of less than one (1) month.

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“Inventory” means all of the Borrower’s inventory, as such term is defined in the UCC, whether now owned or hereafter acquired, whether consisting of whole goods, spare parts or components, supplies or materials, whether acquired, held or furnished for sale, for lease or under service contracts or for manufacture or processing, and wherever located.

“Lender” means AgStar Financial Services, PCA, and its successors and assigns.

“Letter of Credit” means the Construction Letters of Credit and Revolving Letters of Credit issued by Lender pursuant to the terms of this Agreement and Supplements.

“Letter of Credit Liabilities” means, at any time, the aggregate maximum amount available to be drawn under all outstanding Letters of Credit (in each case, determined without regard to whether any conditions to drawing could then be met) and all unreimbursed drawings under Letters of Credit.

“LIBOR Rate” (London Interbank Offered Rate) means the rate (rounded upward to the nearest sixteenth and adjusted for reserves required on Eurocurrency Liabilities (as hereinafter defined) for banks subject to FRB Regulation D (as hereinafter defined) or required by any other federal law or regulation), quoted by the British Bankers Association (the “BBA”) at 11 :00 a.m. London time two Banking Days (as hereinafter defined) before the commencement of the Interest Period for the offering of U.S. Dollar deposits in the London interbank market for an Interest Period of one month, as published by Bloomberg or another major information vendor listed on BBA’s official website. “Banking Day” shall mean a day on which Lender is open for business, dealings in U.S. dollar deposits are being carried out in the London interbank market, and banks are open for business in New York City and London, England. “Eurocurrency L iabilities” has the meaning as set forth in FRB Regulation D. “FRB Regulation D” means Regulation D as promulgated by the Board of Governors of the Federal Reserve System, 12 CFR Part 204, as amended from time to time.

“Loan and Carrying Charges” means all commitment fees to the Lender, brokerage fees, standby fees, interest charges, service fees, attorneys’ fees, contractors’ fees, developers’ fees, funding fees, title insurance fees and charges, recording fees, registration taxes, real estate taxes, special assessments, insurance premiums, and utility charges incurred by the Borrower in the construction of the Project and issuance of the Notes, all costs incurred in acquisition of the Real Property (to the extent applicable) and any other costs incurred in the development of the Project.

“Loan Documents” means this Agreement, any and all Supplements to this Agreement, the Notes, Letters of Credit, the Security Agreement, the Mortgage, the Environmental Indemnity Agreement and all other agreements, documents, instruments, and certificates of the Borrower delivered to, or in favor of, the Lender under this Agreement or in connection herewith or therewith, including, without limitation, all agreements, documents, instruments, and certificates delivered in connection with the extension of Advances by the Lender.

“Loan Obligations” means all obligations, indebtedness, and liabilities of the Borrower to the Lender, including the Reimbursement Obligations, arising pursuant to any of the Loan Documents, whether now existing or hereafter arising, whether direct, indirect, related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, including, without limitation, the obligation of the Borrower to repay the Advances, interest on the Advances, and all fees, costs, and expenses (including, without limitation, reasonable attorneys’ fees and expenses) provided for in the Loan Documents.

“Loan/Loans” means and includes the Construction Loan, the Term Loan, and the Term Revolving Loan and any other financial accommodations extended to the Borrower by the Lender pursuant to the terms of this Agreement and any Supplements.

“Long Term Debt” means indebtedness that matures more than one year after the date of determination thereof.

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“Long Term Marketing Agreement” means any contract, agreement or understanding of the Borrower having a term of one year or more after the date of determination thereof relating to the sale of any raw materials, inventory, products or by-products of the Borrower.

“Maintenance Capital Expenditures” means all Capital Expenditures made in the ordinary course of business to maintain existing business operations of the Borrower in any fiscal year, determined in accordance with GAAP, consistently applied.

“Material Adverse Effect” means any set of circumstances or events which: (i) has or could reasonably be expected to have any material adverse effect upon the validity or enforceability of any Loan Documents or any material term or condition contained therein; (ii) is or could reasonably be expected to be material and adverse to the condition (financial or otherwise), business assets, operations, or property of the Borrower when considered as a whole; or (iii) materially impairs or could reasonably be expected to materially impair the ability of the Borrower to perform the obligations under the Loan Documents.

“Material Contract” means (i) any contract or any other agreement, written or oral, or any of the Borrower or its Subsidiaries involving monetary liability of or to any such person in an amount in excess of $250,000.00 per annum; and (ii) any other contract or agreement, written or oral, of the Borrower or any of its Subsidiaries the failure to comply with which could reasonably be expected to have a Material Adverse Effect on the Borrower or its Subsidiaries; provided, however, that any contract or agreement which is terminable by a party other than the Borrower or its Subsidiaries without cause upon notice of 90 days or less shall not be considered a Material Contract.

“Maturity Date” means the fifth annual anniversary of the Conversion Date.

“Maximum Rate” means the maximum nonusurious interest rate, if any, at any time, or from time to time, that may be contracted for, taken, reserved, charged or received under applicable state or federal laws.

“Mortgage” means that certain Construction/Permanent Mortgage, Security Agreement, Assignment of Leases and Rents, Financing Statement and Fixture Filing of even date herewith, pursuant to which a mortgage interest shall be given by the Borrower to the Lender in the Real Property to secure payment to the Lender of the Loan Obligations.

“Net Income” means net income as determined in accordance with GAAP.

“Note/Notes” means and includes the Construction Note and Term Revolving Note and all other promissory notes executed and delivered to the Lender by the Borrower pursuant to the terms of this Agreement and any Supplements as the same may be amended, modified, supplemented, extended or restated from time to time.

“Ordinary Trade Payable Dispute” means trade accounts payable, in an aggregate amount not in excess of $150,000:00 with respect to the Borrower, and with respect to which: (a) there exists a bona fide dispute between Borrower and the vendor; (b) the Borrower is contesting the same in good faith by appropriate proceedings; and (c) the Borrower has established appropriate reserves on its financial statements.

“Permitted Liens” shall have the meaning as set forth in Section 5.02(a) hereof.

“Person” means any individual, corporation, business trust, association, company, partnership, joint venture, governmental authority, or other entity.

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“Personal Property” means all buildings, structures, equipment, fixtures, improvements, building supplies and materials and other personal property now or hereafter attached to, located in, placed in or necessary to the use of the improvements on the Real Property including, but without being limited to, all machinery, fixtures, equipment, furnishings, and appliances, as well as all renewals, replacements, additions, and substitutes thereof, and all products and proceeds thereof, and including without limitation all accounts, instruments, chattel paper, other rights to payment, money, deposit accounts, insurance proceeds and general intangibles of the Borrower, whether now owned or hereafter acquired.

“Plans and Specifications” means the final plans and specifications for the construction of the Project, to be prepared by the General Contractor, and approved by the Lender, and all amendments and modifications and supplements thereof approved by Lender.

“Project” means any and all buildings, structures, fixtures, and other improvements made to the Real Property and other uses identified in the Project Sources and Uses Statement as part of the acquisition and construction of ethanol production facility in Bluffton, Indiana, for which the Loans to Borrower are being made hereunder.

“Project Costs” means the total of all costs of acquiring the Real Property and constructing the Project as identified in the Project Sources and Uses Statement, together with all Loan and Carrying Charges.

“Project Sources and Uses Statement” means the statement attached hereto as Exhibit B which identifies the sources and uses of monies in a total amount of $173,800,000.00 related to the Project.

“Real Property” means that real property located in the County of Wells, State of Indiana, owned by the Borrower, upon which the Project is to be constructed and which is described in Schedule 3.01(d).

“Reimbursement Obligation” means the obligation of the Borrower to reimburse the Lender for any demand for payment or drawing under a Letter of Credit.

“Revolving Loan” means the Term Revolving Loan and any other revolving loan provided by the Lender to the Borrower pursuant to the terms and conditions provided for in this Agreement and in any revolving loan supplement.

“SARA” means the Superfund Amendment and Reauthorizations Act of 1986, as amended.

“Second Supplement” means that certain Second Supplement to the Master Loan Agreement (Term Revolving Loan) dated as of the date here of between the Borrower and the Lender, as the same may be amended, restated, supplemented or modified from time to time.

“Security Agreement” means the Security Agreement of even date, pursuant to which a security interest shall be granted by Borrower to the Lender in the Personal Property to secure payment to the Lender to the Loan Obligations and includes any agreements executed by Borrower which evidence, govern, represent, or create a Security Interest, as the same has· been and may hereafter be amended or otherwise modified.

“Security Interest” means and includes without limitation any type of collateral security, whether in the form of a lien, charge, mortgage, assignment of rents, deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created by law, contract, or otherwise.

“Subordinated Debt” means Debt held by the US Bank, National Association, as trustee.

“Supplement” has the meaning set forth in Section 2.01 of this Agreement.

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“Tangible Net Worth” means the excess of total assets over total liabilities except subordinated debt, total assets and total liabilities each to be determined in accordance with GAAP consistent with those applied in the preparation of the financial statements referred to in Section 5.01(c) for the Borrower, excluding, however, from the determination of total assets: (i) goodwill, organizational expenses, research and development expenses, trademarks, trade names, copyrights, patents, patent applications, licenses and rights in any thereof, and other similar intangibles; (ii) treasury stock; (iii) securities which are not readily marketable; (iv) any write-up in the book value of any asset resulting from a revaluation thereof subsequent to the Closing Date; and (v) any items not included in clauses (i) through (v) above which are treated as intangibles in conformity with GAAP.

“Tangible Owner’s Equity” means the Tangible Net Worth divided by total assets, measured annually at the end of each fiscal year, and expressed as a percentage.

“Term Loan” means any amortizing loan with a maturity of greater than one year provided by the Lender to the Borrower pursuant to the terms and conditions of this Agreement and the First Supplement to this Agreement.

“Term Revolving Loan” means that certain loan from the Lender to the Borrower in the amount of $20,000,000.00 and pursuant to the terms and conditions provided for in this Agreement and the Second Supplement.

“Term Revolving Note” means that certain promissory note to be executed and delivered to the Lender by the Borrower on the Conversion Date pursuant to the terms and conditions provided for in this Agreement and the Second Supplement to this Agreement.

“Working Capital” means current assets of the Borrower less current liabilities of the Borrower as determined in accordance with GAAP. Working capital may include any unused commitment in the Revolving Term Loan less any current portion due.

Section 1.02.

Accounting Matters. All accounting terms not specifically defined herein shall be construed in accordance with GAAP consistently applied, except as otherwise stated herein. To enable the ready and consistent determination of compliance by the Borrower with its obligations under this Agreement, the Borrower will not change the manner in which either the last day of its fiscal year or the last days of the first three fiscal quarters of its fiscal years is calculated.

Section 1.03.

Construction. Wherever herein the singular number is used, the same shall include the plural where appropriate, and words of any gender shall include each other gender where appropriate. The headings, captions or arrangements used in any of the Loan Documents are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of the Loan Documents, nor affect the meaning thereof.

ARTICLE II

AMOUNTS AND TERMS OF THE LOANS

Section 2.01.

Supplements. In the event the Borrower desires to borrow from Lender and Lender is willing or otherwise committed to lend to the Borrower, or in the event Lender and Borrower desire to consolidate any existing loans hereunder, the parties will enter into a supplement to this Agreement (each supplement, as it may be amended, modified, supplemented, extended or restated from time to time, a “Supplement” and, collectively, the “Supplements”). Each Supplement will set forth Lender’s commitment to make a Loan to the Borrower, the amount of the Loan(s), the purpose of the Loan(s), the interest rate or rate options applicable to the Loan(s), the repayment terms of the Loan(s), and any other terms and conditions applicable to the Loan(s). Each Supplement will also be accompanied by a Note of the Borrower setting forth the Borrower’s obligation to make payments of interest on the unpaid principal balance o f the Loan(s), and fees and premiums, if any, and to repay the principal balance of the Loan(s). Each Loan will be governed by the terms and conditions contained in this Agreement and in the Note and the Supplement relating to that Loan.

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Section 2.02.

Construction Loan. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties set forth in this Agreement, the Lender has agreed to lend to Borrower and Borrower has agreed to borrow from Lender $90,000,000.00 for Project Costs. Such amount shall be loaned by Lender pursuant to the terms and conditions set forth in this Agreement and the First Supplement to this Agreement.

Section 2.03.

Term Revolving Loan. Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties set forth in this Agreement, the Lender has agreed to lend to Borrower and Borrower has agreed to borrow from Lender, as of the Conversion Date and from time to time thereafter, on a revolving basis an amount not to exceed $20,000,000.00. Such amount shall be loaned by Lender pursuant to the terms and conditions set forth in this Agreement and the Second Supplement to this Agreement. Pursuant to the terms and conditions in this Agreement, the Lender may extend additional term Revolving Loans to the Borrower. Any such future term Revolving Loans shall be provided by Lender pursuant to the terms and conditions of a future term Revolving Loan Supplement.

Section 2.04.

Conversion of Construction Loan Into Term Loan and Term Revolving Loan. The Lender agrees to convert the Construction Loan into a Term Loan and Term Revolving Loan on the Conversion Date, provided all of the terms, conditions, warranties, representations, and covenants of the Borrower set forth in this Agreement, the First Supplement and the Second Supplement are satisfied in all material respects to the reasonable satisfaction of Lender. Any such amount shall be provided by Lender pursuant to the terms and conditions set forth in this Agreement, the First Supplement and the Second Supplement to this Agreement setting forth the terms and conditions of such Term Loan and Term Revolving Loan, provided, however, that (i) all unpaid principal and all accrued interest on the Term Loan and the Term Revolving Loan shall be due and payable on the Maturity Date and (ii) the Borrower shall have the right to convert up to 50% of the Term Loan into a F ixed Rate Loan, which shall bear interest at a rate equal to the rate listed in the “Government Agency and Similar Issues” section of the Wall Street Journal for the Federal Farm Credit Bank or the Federal Horne Loan Bank having a maturity approximately equal to the Maturity Date, which is in effect at the time of the Conversion Date plus 300 basis points, or another rate as agreed upon by the Lender and Borrower. Should the Borrower elect such fixed rate option, such rate of interest shall not be subject to any adjustments under Section 2.06 of this Agreement.

Section 2.05.

Letter of Credit Procedures J Fees / Reimbursement. All Letters of Credit that are issued under this Agreement and any supplements to this Agreement are subject to the following:

(a)

Letter of Credit Request Procedure. The Borrower shall give the Lender irrevocable prior notice (effective upon receipt) on or before 3:00 P.M. (Minneapolis, Minnesota time) on the Business Day three Business Days prior to the date of the requested issuance of a Letter of Credit specifying the requested amount, expiry date and issuance date of each Letter a f Credit to be issued and the nature of the transactions to be supported thereby. Any such notice received after 3:00 P.M. (Minneapolis, Minnesota time) on a Business Day shall be deemed to have been received and be effective on the next Business Day. Each Letter of Credit shall be in a form reasonably acceptable to Lender, have an expiration date that occurs on or before the date required pursuant to Section 7(b) of the First Supplement or Section 8 of the Second Supplement, as applicable, shall be payable in U.S. dollars, must be satisfactory in form and substance to the Lender, and sh all be issued pursuant to such documentation as the Lender may require, including, without limitation, the Lender’s standard form letter of credit request and reimbursement agreement; provided that, in the event of any conflict between the terms of such agreement and the other Loan Documents, the terms of the other Loan Documents shall control.

(b)

Letter of Credit Fees. The Borrower shall pay to the Lender (i) all fees, costs, and expenses of the Lender arising in connection with any Letter of Credit, including the Lender’s customary fees for amendments, transfers, and drawings on Letters of Credit and (ii) on the date of the issuance of the Letter of Credit, and at the anniversary date of issuance of such Letter of Credit, an issuance fee equal to two and one-half (2.5%) percent, on an annualized basis, of the maximum amount available to be drawn under the Letter of Credit.

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(c)

Funding of Drawings. Upon receipt from the beneficiary of any Letter of Credit of any demand for payment or other drawing under such Letter of Credit, the Lender shall promptly notify the Borrower as to the amount to be paid as a result of such demand or drawing and the respective payment date. Any notice pursuant to the forgoing sentence shall specify the amount to be paid as a result of such demand or drawing and the respective payment date.

(e)

Reimbursements. After receipt of the notice delivered pursuant to clause (c) of this Section 2.05 with respect to a Letter of Credit, the Borrower shall be irrevocably and unconditionally obligated to reimburse the Lender for any amounts paid by the Lender upon any demand for payment or drawing under the applicable Letter of Credit, without presentment, demand, protest, or other formalities of any kind other than the notice required by clause (c) of this Section 2.05. Such reimbursement shall occur no later than 3:00 P.M. (Minneapolis, Minnesota time) on the date of payment under the applicable Letter of Credit if the notice under clause (c) of this Section 2.05 is received by 2:00 P.M. (Minneapolis, Minnesota time) on such date or by 11:00 AM. (Minneapolis, Minnesota time) on the next Business Day, if such notice is received after 2:00 P.M. (Minneapolis, Minnesota time). All payments on or of the Reimbursement Obligations (including any in terest earned thereon) shall be made to the Lender for the account of the Lender in U.S. dollars and in immediately available funds, without set-off, deduction, or counterclaim.

(f)

Reimbursement Obligations Absolute. The Reimbursement Obligations of the Borrower under this Agreement shall be absolute, unconditional, and irrevocable, and shall be performed strictly in accordance with the terms of the Loan Documents under all circumstances whatsoever and the Borrower hereby waives any defense to the payment of the Reimbursement Obligations based on any circumstance whatsoever, including, without limitation, in any case, the following circumstances: (i) any lack of validity or enforceability of any Letter of Credit or any other Loan Document; (ii) any amendment or waiver of or any consent to departure from any Loan Document; (iii) the existence of any claim, set-off, counterclaim, defense, or other rights which any Borrower or any other Person may have at any time against any beneficiary of any Letter of Credit, the Lender or any other Person, whether in connection with any Loan Document or any unrelated transaction; (iv ) any statement, draft, or other documentation presented under any Letter of Credit proving to be forged, fraudulent, invalid, or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever; or (v) payment by the Lender under any Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit; provided that Reimbursement Obligations with respect to a Letter of Credit may be subject to avoidance by a Borrower if the Borrower proves in a final non-appealable judgment that it was damaged and that such damage arose directly from the Lender’s willful misconduct or gross negligence in determining whether the documentation presented under the Letter of Credit in question complied with the terms thereof.

(g)

Issuer Responsibility. Borrower assumes all risks of the acts or omissions of any beneficiary of any Letter of Credit with respect to its use of such Letter of Credit. Neither the Lender, nor any of its respective officers or directors shall have any responsibility or liability to the Borrower or any other Person for: (a) errors, omissions, interruptions, or delays in transmission or delivery of any messages; or (b) the validity, sufficiency, or genuineness of any draft or other document, or any endorsement(s) thereon, even if any such draft, document or endorsement should in fact prove to be in any and all respects invalid, insufficient, fraudulent, or forged or any statement therein is untrue or inaccurate in any respect. The Lender may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary.

Section 2.06.

Adjustments to Interest Rate. Notwithstanding any other provision of this Agreement, the Supplements, the Notes, or the Loan Documents, after the Conversion Date, the rate of interest under any Loan which bears interest on a variable rate, shall be adjusted according to the following schedule should the Tangible Owner’s Equity of the Borrower, achieve the levels set forth below:

Tangible Owner’s Equity	Interest Rate
Less than 49.99%	Applicable LIBOR Rate plus 325 basis points
From 50% through 60%	Applicable LIBOR Rate plus 300 basis points
From 61 % through 70%	Applicable LIBOR Rate plus 275 basis points
Greater than 70%	Applicable LIBOR Rate plus 250 basis points

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Upon delivery of the audited financial statements pursuant to Section 5.01 (c)(i) for each fiscal year end beginning with the first fiscal year end after the Conversion Date, the rate of interest for any month shall automatically be adjusted in accordance with the Tangible Owner’s Equity set forth therein and the rates set forth above. Such automatic adjustment to the rate of interest shall take effect as of the first Business Day of the month following the month in which the Lender received the related audited financial statements pursuant to Section 5.01 (c)(i). The term “Adjustment Date” shall mean each such Business Day when such rates, margins or fees change pursuant to the immediately prior sentence or the next following sentence. If the Borrower fails to deliver such audited financial statement which so sets forth the Tangible Owner’s Equity within the period of time required by Section 5.01 (c)( i) hereof or if any Event of Default occurs, the rate of interest shall automatically be adjusted to a rate equal to the applicable LIBOR Rate plus 325 basis points, such automatic adjustments: (a) to take effect as of the first Business Day after the last day on which the Borrower was required to deliver the applicable audited financial statement in accordance with Section 5.01 (c)(i) hereof or in the case of an Event of Default, on the date the written notice is given to the Borrower; and (b) to remain in effect until subsequently adjusted in accordance herewith upon the delivery of such audited financial statements or, in the case of an Event of Default, when such Event of Default has been cured to the satisfaction of the Lender.

Section 2.07.

Default Interest. In addition to the rights and remedies set forth in this Agreement and notwithstanding any Note: (i) if the Borrower fails to make any payment to Lender when due, subject to any applicable cure periods (including, without limitation, any purchase of equity of Lender as required by Section 2.15 of this Agreement), then at Lender’s option in each instance, such obligation or payment shall bear interest from the date due (subject to any applicable cure periods) to the date paid at 2% per annum in excess of the rate of interest that would otherwise be applicable to such obligation or payment; (ii) upon the occurrence and during the continuance of an Event of Default beyond any applicable cure period, if any, at Lender’s option in each instance, the unpaid balances of the Loans shall bear interest from the date of the Event of Default or such later date as Lender shall elect at 2% per annum in excess of the rate(s) of interest that would otherwise be in effect on the Loans under the terms of the applicable Note; (iii) after the maturity of any Loan, whether by reason of acceleration or otherwise, the unpaid principal balance of the Loan (including without limitation, principal; interest, fees and expenses) shall automatically bear interest at 2% per annum in excess of the rate of interest that would otherwise be in effect on the Loan under the terms of the applicable Note. Interest payable at the Default Rate shall be payable from time to time on demand or, if not sooner demanded, on the first day of each calendar month.

Section 2.08.

Late Charge. If any payment of principal or interest due under the Supplements or the Notes is not paid within ten (10) days of the due date thereof (other than following acceleration of the Maturity Date by Lender, or any required principal prepayments pursuant to this Agreement), the Borrower shall, in addition to such amount, pay a late charge equal to five percent (5%) of the amount of such payment.

Section 2.09.

Prepayment of Term Loan. The Borrower may, by notice to the Lender, prepay the outstanding amount of the Loans in whole or in part with accrued interest to the date of such prepayment on the amount prepaid; without penalty or premium, except as provided in this Section 2.09. In the event the Construction Loan or Term Loan is prepaid, in whole or in part, or the outstanding principal balance of the Loans is prepaid in its entirety, from the Closing Date through the first twenty-four (24) months after the Conversion Date, and such prepayment is as a result of refinancing obtained by the Borrower from a third party lender and not as a result of (a) income generated by the Borrower incidental to its operations or (b) casualty insurance proceeds or condemnation proceeds received by the Borrower as a result of an involuntary loss or other disposition of Collateral, Borrower shall pay a prepayment fee equal to the following specified percentage of the amount of principal prepaid:

Closing Date to Conversion Date	2.00%
Months 1 - 24 from Conversion Date	1.00%

Notwithstanding-the foregoing, no prepayment fee shall be required if such prepayment is made pursuant to Section 2.17 of this Agreement. In addition, in the event any Loan is converted to a fixed rate loan, the Borrower shall pay the prepayment fee applicable to that fixed interest rate, if any.

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Section 2.10.

Changes in Law Rendering Certain LIBOR Rate Loans Unlawful. In the event that any change in any applicable law (including the adoption of any new applicable law) or any change in the interpretation of any applicable law by any judicial; governmental or other regulatory body charged with the interpretation, implementation or administration thereof, should make it (or in the good-faith judgment of the Lender should raise a substantial question as to whether it is) unlawful for the Lender to make, maintain or fund LIBOR Rate Loans, then: (a) the Lender shall promptly notify Borrower; and (b) the obligation of the Lender to make LIBOR rate loans of such type shall, upon the effectiveness of such event, be suspended for the duration of such unlawfulness. During the period of any suspension, Lender shall make loans to Borrower that are deemed lawful and that as closely as possible reflect the terms of this Agreement.

Section 2.11.

Payments and Computations.

(a)

Method of Payment. Except as otherwise expressly provided herein, all payments of principal, interest, and other amounts to be made by the Borrower under the Loan Documents shall be made to the Lender in U.S. dollars and in immediately available funds, without set-off, deduction, or counterclaim, not later than 2:00 P.M. (Minneapolis, Minnesota time) on the date on which such payment shall become due (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Business Day). The Borrower shall, at the time of making each such payment, specify to the Lender the sums payable under the Loan Documents to which such payment is to be applied and in the event that the Borrower fails to so specify or if an Event of Default exists, the Lender may apply such payment and any proceeds of any Collateral to the Loan Obligations in such order and manner as it may elect in its sole discretion.

(b)

Application of Funds. Lender may apply all payments received by it to the Loan Obligations in such order and manner as Lender may elect in its sole discretion; provided that any payments received from any guarantor or from any disposition of any collateral provided by such guarantor shall only be applied against obligations guaranteed by such guarantor.

(c)

Payments on a Non-Business Day. Whenever any payment under any Loan Document shall be stated to be due on a day that is not a Business Day, such payment may be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of the payment of interest and fees, as the case may be.

(d)

Proceeds of Collateral. All proceeds received by the Lender from the sale or other liquidation of the Collateral when an Event of Default exists shall first be applied as payment of the accrued and unpaid fees and expenses of the Lender hereunder, including, without limitation, under Section 7.04 and then to all other unpaid or unreimbursed Loan Obligations (including reasonable attorneys’ fees and expenses) owing to the Lender and then any remaining amount of such proceeds shall be applied to the unpaid amounts of Loan Obligations, until all the Loan Obligations have been paid and satisfied in full or cash collateralized. After all the Loan Obligations (excluding any contingent Loan Obligations for which no claim has been asserted) have been paid and satisfied in full, all Commitments terminated and all other obligations of the Lender to the Borrower otherwise satisfied, any remaining proceeds of Collateral shall be delivered to the P erson entitled thereto as directed by the Borrower or as otherwise determined by applicable law or applicable court order.

(e)

Computations. Except as expressly provided otherwise herein, all computations of interest and fees shall be made on the basis of actual number of days lapsed over a year of 365 or 366 days, as appropriate. Interest shall accrue from and include the date of borrowing, but exclude the date of payment.

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Section 2.12.

Maximum Amount Limitation. Anything in this Agreement, any Supplement, any Note, or the other Loan Documents to the contrary notwithstanding, Borrower shall not be required to pay unearned interest on any Note or any of the Loan Obligations, or ever be required to pay interest on any Note or any of the Loan Obligations at a rate in excess of the Maximum Rate, if any. If the effective rate of interest which would otherwise be payable under this Agreement, any Note or any of the other Loan Documents would exceed the Maximum Rate, if any, then the rate of interest which would otherwise be contracted for, charged, or received under this Agreement, any Note or any of the other Loan Documents shall be reduced to the Maximum Rate, if any. If any unearned interest or discount or property that is deemed to constitute interest (including, without limitation, to the extent that any of the fees payable by Borrower for the Loan Obligations to the Lender under this Agreement, any Supplement, any Note, or any of the other Loan Documents are deemed to constitute interest) is contracted for, charged, or received in excess of the Maximum Rate, if any, then such interest in excess of the Maximum Rate shall be deemed a mistake and canceled, shall not be collected or collectible, and if paid nonetheless, shall, at the option of the holder of such Note, be either refunded to the Borrower, or credited on the principal of such Note. It is further agreed that, without limitation of the foregoing and to the extent permitted by applicable law, all calculations of the rate of interest or discount contracted for, charged or received by the Lender under its Note, or under any of the Loan Documents, that are made for the purpose of determining whether such rate exceeds the Maximum Rate applicable to the Lender, if any, shall be made, to the extent permitted by applicable laws (now or hereafter enacted), by amortizing, prorating and spreading during the period of the full te rms of the Advances evidenced by the Notes, and any renewals thereof all interest at any time contracted for, charged or received by Lender in connection therewith. This Section 2.12 shall control every other provision of all agreements among the parties to this Agreement pertaining to the transactions contemplated by or contained in the Loan Documents, and the terms of this Section 2.12 shall be deemed to be incorporated in every Loan Document and communication related thereto.

Section 2.13.

Lender Records. All advances and all payments or prepayments made thereunder on account of principal or interest may be evidenced by the Lender in accordance with its usual practice in an account or accounts evidencing such advances and all payments or prepayments thereunder from time to time and the amounts of principal and interest payable and paid from time to time thereunder; in any legal action or proceeding in respect of the Notes, the entries made in such account or accounts shall be prima facie evidence of the existence and amounts of all advances and all payments or prepayments made thereunder on account of principal or interest. Lender shall provide monthly statements of such entries to Borrower for the purpose of confirming the accuracy of such entries.

Section 2.14.

Loan Payments. During the continuance of an Event of Default, the Lender may deduct any obligations due or any other amounts due and payable by the Borrower under the Loan Documents from any accounts maintained with the Lender.

Section 2.15.

Purchase of Equity Interests in AgStar Financial Services, PCA. In addition to (and not in lieu of) the other amounts payable by Borrower under this Agreement or any Supplement, Borrower shall purchase $1,000.00 of equity interests in AgStar Financial Services, PCA. The purchase price for the equity interests shall be payable in full on or prior to the date hereof. Such purchase of equity interests shall comply with AgStar Financial Services, PCA’s by­laws and capital plans applicable to borrowers generally. Borrower hereby acknowledges receipt of the following information and materials pertaining to AgStar Financial Services, PCA prior to the execution of this Agreement: (i) copies of the by-laws of AgStar Financial Services, PCA; (ii) a written description of the terms and conditions under which the equity interests are issued; (iii) a copy of the most recent annual reports of AgStar Financial Services, PCA; and (iv) if more rece nt than the latest annual reports, the latest quarterly reports of AgStar Financial Services, PCA. AgStar Financial Services, PCA shall possess a statutory security interest in its equity interests.

Borrower acknowledges and agrees that: (a) only the portions of the Loans provided to Borrower by AgStar Financial Services, PCA are entitled to patronage distributions in accordance with the bylaws of AgStar Financial Services, PCA and its practices and procedures; and (b) any patronage or similar payments to which Borrower is entitled as a result of its ownership of the equity interests in AgStar Financial Services, PCA will not be based on any of the Loans not belonging to AgStar Financial Services, PCA or in which AgStar Financial Services, PCA has granted a participation interest at any time.

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Section 2.16.

Compensation. Upon the request of the Lender, the Borrower shall pay to the Lender such amount or amounts as shall be sufficient (in the reasonable opinion of the Lender and as verified and computed in an accounting provided to Borrower) to compensate it for any loss, cost, or expense (excluding loss of anticipated profits incurred by it) as a result of: (i) any payment, prepayment, or conversion of a LIBOR rate loan for any reason on a date other than the last day of the Interest Period for such Loan; or (ii) any failure by the Borrower for any reason (including, without limitation, the failure of any condition precedent specified in Section 3.01 to be satisfied) to borrow, extend, or prepay a LIB OR rate loan on the date for such borrowing, extension, or prepayment specified in the relevant notice of borrowing, extension or prepayment under this Agreement.

Such indemnification may include any amount equal to the excess, if any, of: (a) the amount of interest which would have accrued on the amount so prepaid, or not so borrowed, converted or extended, for the period from the date of such prepayment or of such failure to borrow, convert or extend to the last day of the applicable Interest Period (or in the case of a failure to borrow, convert or extend, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such loan as provided for herein; over (b) the amount of interest (as reasonably determined by the Lender) which would have accrued to the Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank LIBOR market. The covenants of the Borrower set forth in this Section 2.16 shall survive the repayment of the Loans and other obligations under the Loan Documents hereunder.

Section 2.17.

Excess Cash Flow. In addition to all other payments of principal and interest required under this Agreement, the Supplements and the Notes, at the end of the first full fiscal quarter following nine months after the Conversion Date, and at the end of each fiscal quarter thereafter until the Maturity Date, the Borrower shall remit to Lender, an amount equal to 75% of the Borrower’s Excess Cash Flow, calculated based upon that fiscal quarter’s interim financial statements, on or before 45 days after the end of each fiscal quarter of the Borrower (the “Excess Cash Flow Payment”), provided however, that the total Excess Cash Flow Payments required hereunder shall not exceed $4,000,000.00 in any fiscal year (the “Maximum Excess Cash Flow Payment”). Such payment shall be applied first to the reduction of the outstanding principal of the Term Loan and then to the reduction of the outstanding principal ba lance of the Term Revolving Loan. The Excess Cash Flow Payment shall be re-calculated annually based upon audited fiscal year-end financial statements required by Section 5.0l(c)(i) of this Agreement. Borrower shall, within 30 days of Lender’s request remit to Lender any additional amounts due Lender under this Section in an amount not to exceed the Maximum Excess Cash Flow Payment. Any Excess Cash Flow Payment shall not constitute a prepayment with respect to which a prepayment fee under Section 2.09 or Section 2.16 of this Agreement is required to be paid. Notwithstanding the foregoing, the Excess Cash Flow Payment shall not exceed an aggregate amount of $16,000,000.00 for the term of this Agreement. No Excess Cash Flow Payments shall be required during any calendar year should the Tangible Owner’s Equity be greater than 70% at the end of the immediately preceding fiscal year of the Borrower.

ARTICLE III.

CONDITIONS PRECEDENT

Section 3.01.

Conditions Precedent to Funding. The effectiveness of this Agreement and the obligation of the Lender to make any Advance, are subject to the conditions precedent that the Lender shall have received the following, in form and substance reasonably satisfactory to the Lender:

(a)

This Agreement, duly executed by the Borrower and the Lender;

(b)

The Supplements, duly executed by the Borrower and the Lender;

(c)

The Construction Note and the Term Revolving Note dilly executed by the Borrower;

(d)

The Mortgage, fully executed and notarized, to secure the Loans encumbering on a first lien basis the fee interest of the Borrower in the Real Property and the fixtures thereon described in Schedule 3.01(d);

(e)

A Security Agreement duly executed by the Borrower and in a form as provided by the Lender by which security agreement the Lender is granted a security interest by the Borrower in the Collateral;

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(f)

A copy of the Construction Contract(s), together with copies of all permits and government approvals obtained relating to the construction of the Project;

(g)

An assignment of contract for each of the Construction Contracts and the Plans and Specifications, duly executed by the Borrower and pursuant to which the Borrower shall have assigned to the Lender all of the Borrower’s right, title and interest in and to each such Construction Contract, and which assignment shall have been consented to and certified in writing by the other party(ies) to each such Construction Contract;

(h)

Copies of all Material Contracts between Borrower and third parties used in the normal operations of Borrower, including but not limited to management agreements, marketing agreements, and corn delivery agreements;

(i)

Assignments of the Material Contracts by Borrower, duly executed by the Borrower and pursuant to which the Borrower shall have assigned to the Lender all of the Borrower’s right, title and interest in and to each such contracts, and which assignment shall have been consented to and certified in writing by the other party(ies) to each such contract;

(j)

Financing Statements in form and content satisfactory to the Lender and in proper form under the Uniform Commercial Code of all jurisdictions as may be necessary or, in the opinion of the Lender, desirable to perfect the security interests created by the Security Agreement;

(k)

Copies of UCC, tax and judgment lien search reports listing all financing statements and other encumbrances which name the Borrower (under its present name and any previous name) and which are filed in the jurisdictions in which the Borrower is located, organized or maintains collateral, together with copies of such financing statements (none of which shall cover the collateral purported to be covered by the Security Agreement);

(1)

Evidence that all other actions necessary or, in the reasonable opinion of the Lender, desirable to enable the Lender to perfect and protect the security interests created by the Security Agreement have been taken;

(m)

An ALTA mortgagee title insurance policy issued by a title insurance company acceptable to Lender, with respect to the Real Property, assuring the Lender that the Mortgage creates a valid and enforceable encumbrance on the Real Property, free and clear of all defects and encumbrances except Permitted Liens and containing: (i) a comprehensive endorsement (ALTA form 9); (ii) a zoning endorsement (ALTA form 3.0) specifying an ethanol production facility as a permitted use for all of the parcels included in the Real Property; and (iii) a restrictions, encroachments, minerals-owners endorsement (ALTA Form 9.2) and (iv) such endorsements as the Lender shall reasonably require. All such title insurance policies shall be in form and substance reasonably satisfactory to the Lender and shall provide for affirmative insurance and such reinsurance as the Lender may reasonably request, all of the foregoing in form and substance reasonably satisfactory to the Lender;

(n)

Maps or plats of the Real Property certified to the Lender and the title insurance company issuing the policy referred to in Subsection 3.01 (m) (the “Title Insurance Company”) in a manner reasonably satisfactory to each of the Lender and the Title Insurance Company, dated a date reasonably satisfactory to each of the Lender and the Title Insurance Company by an independent professional licensed land surveyor, which maps or plats and the surveys on which they are based shall be sufficient to delete any standard printed survey exception contained in the applicable title policy and be made in accordance with the Minimum Standard Detail Requirements for Land Title Surveys jointly established and adopted by the American Land Title Association and the American Congress on Surveying and Mapping in 1992, and, without limiting the generality of the foregoing, there shall be surveyed and shown on such maps, plats or surveys the following: (i) the locati ons on such sites of all the buildings, structures and other improvements and the established building setback lines; (ii) the lines of streets abutting the sites and width thereof; (iii) all access and other easements appurtenant to the sites necessary to use the sites; (iv) all roadways, paths, driveways, easements, encroachments and overhanging projections and similar encumbrances affecting the site, whether recorded, apparent from a physical inspection of the sites or otherwise known to the surveyor; (v) any encroachments on any adjoining property by the building structures and improvements on the sites; and (vi) if the site is described as being on a filed map, a legend relating the survey to said map;

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(o)

Evidence as to: (i) whether any portion of the Real Property is in an area designated by the Federal Emergency Management Agency as having special flood or mud slide hazards (a “Flood Hazard Property”); and (ii) if any portion of the Real Property is a Flood Hazard Property: (A) whether the community in which such Real Property is located is participating in the National Flood Insurance Program; (B) the Borrower’s written acknowledgment of receipt of written notification from the Lender (1) as to the fact that such Real Property is a Flood Hazard Property and (2) as to whether the community in which each such Flood Hazard Property is located is participating in the National Flood Insurance Program; and (C) copies of insurance policies or certificates of insurance of the Borrower evidencing flood insurance satisfactory to the Lender and naming the Lender as sole loss payee on behalf of the Lender;

(p)

Evidence reasonably satisfactory to the Lender that the Real Property and the contemplated use of the Real Property, arc in compliance in all material respects with all applicable Laws including without limitation health and Environmental Laws, including, but not limited to all concentrated animal feedlot operations rules and regulations, erosion control ordinances, storm drainage control laws, doing business and/or licensing laws, zoning laws (the evidence submitted as to zoning should include the zoning designation made for the Real Property, the permitted uses of the Real Property under such zoning designation and zoning requirements as to parking, lot size, ingress, egress and building setbacks) and laws regarding access and facilities for disabled persons including, but not limited to, the Federal Architectural Barriers Act, the Fair Housing Amendments Act of 1988, the Rehabilitation Act of 1973 and the Americans with Disabilities Act of 1990;

(q)

A certificate of an officer of the Borrower together with true and correct copies of the following: (i) the organizational documents of the Borrower, including all amendments thereto, certified by the Office of the Secretary of State of the state of its formation and dated within 30 days prior to the date hereof; (it) the Operating Agreement of the Borrower, including all amendments thereto; (iii) the resolutions of the Board of Directors of the Borrower authorizing the execution, delivery and performance of this Agreement, the other Loan Documents, and all documentation executed and delivered in connection therewith to which the Borrower is a party; (iv) certificates of the appropriate government officials of the state of organization of the Borrower as to its existence, and certificates of the appropriate government officials in each state where each corporate Borrower does business and where failure to qualify as a foreign corporation would have a mat erial adverse effect on the business and financial condition of the Borrower, as to its good standing and due qualification to do business in such state, each dated within 30 days prior to the date hereof; and (v) the names of the officers of the Borrower authorized to sign this Agreement and the other Loan Documents to be executed by each corporate Borrower, together with a sample of the true signature of each such officer;

(r)

Legal opinion of Krieg DeVault LLP, legal counsel for the Borrower, reasonably acceptable to Lender in form and substance;

(s)

An intercreditor and subordination agreement between the Lender and any holder of Subordinated Debt, including without limitation the tax increment financing debt evidenced by that certain Indenture of Trust by and between the US Bank, National Association, as Trustee, and Borrower, as to the priority of the Lender’s security interests in the Collateral, rights to payment following an Event of Default, and as to such other matters as reasonably requested by the Lender;

(t)

Evidence that the costs and expenses (including, without limitation, attorney’s fees) referred to in Section 7.04, to the extent incurred and invoiced, shall have been paid in full;

(u)

The results of the Lender’s inspection of the Collateral, and the Lender’s receipt of an appraisal of the Collateral acceptable to Lender in its sole discretion;

(v)

Satisfactory review by the Lender of any pending litigation relating to the Borrower;

(w)

An environmental site assessment that complies with the standards set forth in the ASTM E1527-05 Phase I Environmental Site Assessment Process and such additional information as Lender shall require in order to establish that Lender has made “all appropriate inquiries” as provided under Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and 40 C.F.R. Part 312;

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(x)

The Borrower shall have ordered the General Contractor to begin construction of the Project, and construction shall have commenced;

(y)

A schedule, certified by Borrower as accurate and complete, setting forth: (i) the necessary licenses, permits and consents required by applicable federal, state, and local governmental entities required for the lawful construction and operation of the Project; and (ii) the deadlines to obtain such licenses, permits and consents so that the Completion Date occurs as scheduled;

(z)

Lender shall have received in form and substance acceptable to Lender, an agreement with an Inspecting Engineer of recognized standing and acceptable to Lender, by which agreement such Inspecting Engineer agrees to assist Lender in its inspection of the Project during construction, review and approve requests for Advances on the Construction Loan on behalf of Lender, and provide such additional services as Lender may reasonably require at the sole expense of Borrower;

(aa)

The Borrower shall have provided commitment to the Lender of its Borrower’s Equity;

(bb) A deposit account control agreement for all deposit accounts kept and maintained by the Borrower;

(cc)

Evidence that the insurance required by Sections 5.010) and 5.01 (r)(xii) has been obtained by the Borrower;

(dd) Borrower shall have established and shall maintain all its primary deposit accounts including the Disbursing Account but excluding payroll accounts with Home Federal Savings Bank as long as Home Federal Savings Bank is a participant in the Loans with Lender;

(ee)

Copies of all permits necessary to begin the construction of the Project; and

(ff)

The Borrower shall have fully complied with the requirements of Indiana and United States law regarding storm water runoff pursuant to “Rule 5” (329 lAC 15-5 et seq.), the Indiana Department of Environmental Management shall have issued a “Notice of Intent” letter, and there shall be no pending administrative, civil or criminal actions of any kind arising out of or related to the issuance of, the failure to obtain or the violation of a storm water runoff permit by Borrower.

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

Section 4.01

Representations and Warranties of the Borrower. The Borrower represents and warrants as follows:

(a)

Borrower. The Borrower is a limited liability company duly organized and validly existing under the laws of the State of Indiana and is qualified to do business in all jurisdictions in which the nature of its business makes such qualification necessary and where failure to so qualify would have a Material Adverse Effect on its respective financial condition or operations. The Borrower has the power and authority to own and operate its assets and to carry on its business and to execute, deliver, and perform its obligations under the Loan Documents to which it is or may become a party. There are no outstanding subscriptions, options, warrants, calls, or rights (including preemptive rights) to acquire, and no outstanding securities or instruments convertible into, membership interests (units) of the Borrower, except for those transactions set forth on Schedule 4.01(a);

(b)

The Loan Documents. The execution, delivery and performance by the Borrower of the Loan Documents are within the Borrower’s powers, have been duly authorized by all necessary action, do not contravene: (i) the articles of organization or operating agreements of the Borrower; or (ii) any law or any contractual restriction binding on or affecting the Borrower, and do not result in or require the creation of any lien, security interest or other charge or encumbrance (other than pursuant to the terms thereof) upon or with respect to any of its respective properties;

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(c)

Governmental Approvals. As of the Closing Date, no consent, permission, authorization, order or license of any Governmental Authority or of any party to any agreement to which the Borrower is a party or by which it or any of its respective property may be bound or affected, is necessary in connection with the construction of the Project, acquisition or other activity being financed by this Agreement, the execution, delivery, performance or enforcement of the Loan Documents or the creation and perfection of the liens and security interest granted thereby, except as such have been obtained and are in full force and effect or which are required in connection with the exercise of remedies hereunder;

(d)

Enforceability. This Agreement is, and each other Loan Document to which the Borrower is a party when delivered will be, legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditor’s rights generally and by general principles of equity;

(e)

Financial Condition and Operations. The balance sheet of the Borrower with respect to the period ended December 31, 2006, the related statement of cash flow of the Borrower for the fiscal period then ended, copies of which have been furnished to the Lender, fairly present in all material respects the financial condition of the Borrower as at such date, and the results of the operations of the Borrower for the period ended on such dates and since December 31, 2006, there has been no material adverse change in such condition or operations;

(f)

Litigation. Except as described on Schedule 4.01(f), there is no pending or threatened action or proceeding affecting the Borrower or any of the transactions contemplated hereby before any court, governmental agency or arbitrator, which, if adversely determined, may result in a Material Adverse Effect. As of the Closing Date, there are no outstanding judgments against the Borrower;

(g)

Use of Proceeds of Advances, etc. (i) No proceeds of the Loans will be used to acquire any security in any transaction which is subject to Sections 13 and 14 of the Securities Exchange Act of 1934 (provided, however, that this provision shall not prohibit Borrower from investing in certain value added cooperatives for the purposes of carrying out their overall business operations); (ii) the Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U issued by the Board of Governors of the Federal Reserve System); and (iii) no proceeds of the Loans will be used .to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock;

(h)

Liens. Except as created by the Loan Documents and as constitute Permitted Liens, there is no lien, security interest or other charge or encumbrance, and no other type of preferential arrangement, upon or with respect to any of the properties or income of the Borrower, which secures Debt of any Person;

(i)

Taxes. The Borrower has filed or caused to be filed all federal, state and local tax returns that are required to be filed and has paid all other taxes, assessments, and governmental charges or levies upon it and its property, income, profits and assets which are due and payable, except where the payment of such tax, assessment, government charge or levy is being contested in good faith and by appropriate proceedings and adequate reserves in compliance with GAAP have been set aside on the Borrower’s books therefore;

(j)

Solvency. As of and from and after the date of this Agreement, the Borrower: (i) owns and will own assets the fair saleable value of which are: (A) greater than the total amount of liabilities (including contingent liabilities); and (B) greater than the amount that will be required to pay the probable liabilities of its then existing debts as they become absolute and matured considering all financing alternatives and potential asset sales reasonably available to it; (ii) has capital that is not unreasonably small in relation to its business as presently conducted or any contemplated or undertaken transaction; and (iii) does not intend to incur and does not believe that it will incur debts beyond its ability to pay such debts as they become due;

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(k)

Location of Inventory and Farm Products; Third Parties in Possession; Crops. The Borrower’s inventory and farm products pledged as collateral under the Security Agreement are located at the places (or, as applicable, jurisdictions) specified in Schedule 4.01(k) for the Borrower, except to the extent any such inventory and farm products are in transit. Schedule 4.01(k) correctly identifies, as of the date hereof, the landlords or mortgagees, if any, of each of its locations identified in Schedule 4.01(k) currently leased or owned by the Borrower. Except for the Persons identified on Schedule 4.01(k), no Person other than the Borrower and the Lender has possession of any of the Collateral. Except as described in above, none of its Collateral has been located in any location within the past four months other than as set forth on Schedule 4.01(k) for the Borrower;

(1)

Office Locations; Fictitious Names; Predecessor Companies; Tax I.D. Number. The Borrower’s chief place of business , its chief executive office, and its jurisdiction of organization is located at the place identified for the Borrower on Schedule 4.01(1). Within the last four months it has not had any other chief place of business, chief executive office, or jurisdiction of organization. Schedule 4.01(1) also sets forth all other places where the Borrower keeps its books and records and all other locations where the Borrower has a place of business. The Borrower does not do business nor has the Borrower done business during the past five (5) years under any trade name or fictitious business name except as disclosed on Schedule 4.01(1). Schedule 4.01(1) sets forth an accurate list of all names of all predecessor companies of the Borrower including the names of any entities it acquired (by stock purchase, asset purchase, merger or otherwi se) and the chief place of business and chief executive office of each such predecessor company. For purposes of the foregoing, a “predecessor company” shall mean any Person whose assets or equity interests are acquired by the Borrower or who was merged with or into the Borrower within the last four months prior to the date hereof. The Borrower’s United States Federal Income Tax I.D. Number and state organizational identification number are identified on Schedule 4.01(1);

(m)

Title to Properties. The Borrower has such title or leasehold interest in and to the Real Property owned or leased by it as is necessary or desirable to the conduct of its business and valid and legal title or leasehold interest in and to all of its Personal Property, including those reflected on the financial statements of the Borrower previously delivered to Lender, except those which have been disposed of by the Borrower subsequent to the date of such delivered financial statements which dispositions have been in the ordinary course of business or as otherwise expressly permitted hereunder;

(n)

Disclosure. All factual information furnished by or on behalf of the Borrower or its subsidiaries in writing to the Lender (including, without limitation, all factual information contained in the Loan Documents) for purposes of or in connection with this Agreement, the other Loan Documents or any transaction contemplated herein or therein is, and all other such factual information hereafter furnished by or on behalf of the Borrower to the Lender, will be true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any fact necessary to make such information not misleading in any material respect at such time in light of the circumstances under which such information was provided;

(o)

Operation of Business. The Borrower possesses or will possess prior to the Completion Date all licenses, permits, franchises, patents, copyrights, trademarks, and trade names, or rights thereto, necessary to conduct its business substantially as now conducted and will obtain all such licenses, permits, franchises, patents, copyrights, trademarks, and trade names, or rights thereto necessary to conduct its business as presently proposed to be conducted except those that the failure to so possess could not reasonably be expected to have a Material Adverse Effect on its financial condition or operations, and the Borrower is not in violation of any valid rights of others with respect to any of the foregoing except violations that could not reasonably be expected to have such a Material Adverse Effect;

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(p)

Intellectual Property. The Borrower owns, or will own prior to the Completion Date, or otherwise has or will have the legal right to use, all patents, trademarks, trade names, copyrights, technology, know-how and processes necessary for it to conduct its business as currently conducted and will own or obtain the legal right to use all patents, trademarks, trade names, copyrights, technology, know-how and processes necessary for it to conduct its business as currently conducted (collectively the “Intellectual Property”), except for those the failure to own or have such legal right to use could not reasonably be expected to have a Material Adverse Effect. As of the Closing Date, set forth in Schedule 4.01(P) is a list of all Intellectual Property registered with the United States Copyright Office or the United States Patent and Trademark Office and owned by the Borrower or that the Borrower has the right to use. Except as provided i n Schedule 4.01(P), no claim has been asserted and is pending by any Person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does the Borrower know of any such claim, and, to the knowledge of the Borrower, the use of such Intellectual Property by the Borrower does not infringe on the rights of any Person, except for such claims and infringements that, in the aggregate, could not reasonably be expected to have a Material Adverse Effect;

(q)

Employee Benefit Plans. The Borrower is in compliance in all material respects with the applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder, the failure to comply with which could have a Material Adverse Effect on the Borrower;

(r)

Investment Company Act. The Borrower is not required to be registered as an “investment company” within the meaning of the Investment Company Act of 1940, as amended;

(s)

Compliance with Laws. The Borrower is in compliance in all material respects with all laws, rules, regulations, ordinances, codes, orders, and the like, the failure to comply with which could have a Material Adverse Effect on the Borrower;

(t)

Environmental Compliance. Borrower, except as set forth in Schedule 4.01(t), is in material compliance with all applicable Environmental Laws; and

(u)

Material Change. The Borrower has performed all of its material obligations, other than those obligations for which performance is not yet due, under all Material Contracts and, to the best knowledge of the Borrower, each other party thereto is in compliance with each such Material Contract. Each such Material Contract is in full force and effect in accordance with the terms thereof. The Borrower has made available a true and complete copy of each such Material Contract for inspection by Lender.

ARTICLE V.

COVENANTS OF THE BORROWER

Section 5.01.

Affirmative Covenants. So long as any Loan Obligations (other than contingent claims for which no claim has been asserted) remain unpaid or the Lender shall have any commitment hereunder, the Borrower shall, unless the Lender shall otherwise consent in advance in writing:

(a)

Compliance with Laws, etc. Comply in all material respects with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, (i) all applicable zoning and land use laws; (ii) all employee benefit and Environmental Laws, and (iii) paying before the same become delinquent all taxes, assessments and governmental charges imposed upon it or upon its property except to the extent contested in good faith;

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(b)

Visitation Rights; Field Examination. At any reasonable time and from time to time, permit the Lender or representatives, to (i) examine and make copies of and abstracts from the records and books of account of the Borrower (at Lender’ s expense), and (ii) enter onto the property of the Borrower to conduct unannounced field examinations and collateral inspections, provided if no Event of Default has occurred and is then continuing, Lender shall, after the Conversion Date, limit its field examinations to one (1) per each twelve month period, and (iii) discuss the affairs, finances, and accounts of the Borrower with any of Borrower’s officers or directors. Borrower consents to and authorizes Lender to enter onto the property of Borrower for purposes of conducting the examinations, inspections and discussions provided above. Upon and during the occurrence of an Event of Default or in the event that there are deemed by the Lender to b e any material inconsistencies and/or material noncompliance with respect to any financial or other reporting on the part of the Borrower, any and all visits and inspections deemed necessary or desirable on account of such Event of Default, inconsistency and/or noncompliance shall be at the expense of the Borrower. In addition to the foregoing, at any reasonable time and from time to time, the Borrower also shall permit the Lender or representatives thereof, at the expense of the Lender, to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Borrower, and to discuss the affairs, finances and accounts of the Borrower with any of its respective officers or directors;

(c)

Reporting Requirements. Furnish to the Lender:

(i)

As soon as available, but in no event later than 120 days after the end of each fiscal year of the Borrower occurring during the term hereof, annual consolidated financial statements of the Borrower, prepared in accordance with GAAP consistently applied and in a format that demonstrates any accounting or formatting change that may be required by the various jurisdictions in which the business of the Borrower is conducted (to the extent not inconsistent with GAAP). Such financial statements shall: (i) be audited by independent certified public accountants selected by the Borrower and acceptable to Lender; (ii) be accompanied by a report of such accountants containing an certified opinion, without qualification, thereon acceptable to Lender; (iii) be prepared in reasonable detail, and in comparative form; and (iv) include a balance sheet, a statement of income, a statement of stockholders’, members’ or partner’s equity, a statement of cash f lows, and all notes and schedules relating thereto and any management letter;

(ii)

Beginning with the first (1st) month following the Completion Date, as soon as available and in any event within 30 days after the end of each month, balance sheets of the Borrower as of the end of such month and statement of income of the Borrower for the period commencing at the end of the previous fiscal year and ending with the end of such month, prepared in accordance with GAAP and certified by an authorized officer of the Borrower;

(iii)

As soon as available but in no event later than 30 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower occurring during the term hereof, unaudited quarterly consolidated financial statements of the Borrower, in each case prepared in accordance with GAAP consistently applied (except for the omission of footnotes and for the effect of normal year-end audit adjustments) and in a format that demonstrates any accounting or formatting change that may be required by various jurisdictions in which the business of the Borrower is conducted (to the extent not inconsistent with GAAP). Each of such financial statements shall (i) be prepared in reasonable detail and in comparative form, including a comparison of actual performance to the budget for such quarter and year-to-date, delivered to Lender under Subsection 5.01(c ) (vi) below, and (ii) include a balance sheet, a statement of income for such quarter and for the pe riod year-to-date, and such other quarterly statements as Lender may specifically request which quarterly statements shall include any and all supplements thereto. Such quarterly statements shall be certified by an authorized officer of the Borrower, and be accompanied by a Compliance Certificate which: (A) states that no Event of Default, and no event or condition that but for the passage of time, the giving of notice or both would constitute an Event of Default, has occurred or is in existence; and (B) shows in detail satisfactory to the Lender the calculation of, and the Borrower’ compliance with, each of the covenants contained in Sections 5.01 (d), 5.01(c), 5.01(f), and 5.01(g);

(iv)

promptly upon the Lender’s request therefore, copies of all reports and notices which the Borrower or any of its subsidiaries files under ERISA with the Internal Revenue Service or the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or which the Borrower receives from such Corporation;

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(v)

notwithstanding the foregoing Section 5.01(c)(iv), provide to Lender within 30 days after it becomes aware of the occurrence of any Reportable Event (as defined in Section 4043 of ERISA) applicable to the Borrower, a statement describing such Reportable Event and the actions it proposes to take in response to such Reportable Event;

(vi)

by November 1 of each fiscal year of the Borrower, an annual (with monthly break out) operating and capital assets budget of the Borrower for the immediately succeeding fiscal year containing, among other things, pro forma financial statements and forecasts for all planned lines of business;

(vii)

as soon as available but in any event not more than 30 days after the end of each month, production reports for the immediately preceding calendar month setting forth corn inputs, ethanol output, DDGS and, to the extent applicable, CO2 output, and natural gas usage, together with such additional production information as requested by Lender;

(viii)

promptly, upon the occurrence of an Event of Default or an event or condition that but for the passage of time or the giving of notice or both would constitute an Event of Default, notice of such Event of Default or event;

(ix)

promptly after the receipt thereof, a copy of any management letters or written reports submitted to the Borrower by its independent certified public accountants with respect to the business, financial condition or operation of the Borrower;

(x)

promptly after the receipt thereof, a copy of any notice of default under any Long-Term Marketing Agreement;

(xi)

furnish to the Lender, promptly after transmittal or filing thereof by the Borrower, copies of all proxy statements, notices and reports as it shall send to its members and copies of all registration statements (without exhibits) and all reports which it files with the Securities and Exchange Commission (or any governmental body or agency succeeding to the functions of the Securities and Exchange Commission), and promptly after the receipt thereof by the Borrower, copies of all management letters or similar documents submitted to the Borrower by independent certified public accountants in connection with each annual and any interim audit of the accounts of the Borrower;

(xii)

such other information respecting the condition or operations, financial or otherwise, of the Borrower as the Lender may from time to time reasonably request;

(xiii)

promptly after the commencement thereof, notice of the commencement of all actions, suits, or proceedings before any court, arbitrator, or government department, commission, board, bureau, agency, or instrumentality affecting the Borrower or any of its subsidiaries which, if determined adversely, could have a Material Adverse Effect on the Borrower;

(xiv)

without limiting the provisions of Section 5.01(c)(xiii) above, promptly after receipt thereof, notice of the receipt of all pleadings, orders, complaints, indictments, or any other communication alleging a condition that may require the Borrower to undertake or to contribute to a cleanup or other response under all laws relating to environmental protection, or which seek penalties, damages, injunctive relief, or criminal sanctions related to alleged violations of such laws, or which claim personal injury or property damage to any person as a result of environmental factors or conditions;

(xx)

promptly after filing, receipt or becoming aware thereof, copies of any filings or communications sent to and notices or other communications received by the Borrower from any Governmental Authority, including, without limitation, the Securities and Exchange Commission, the FCC, the PUC, or any other state utility commission relating to any material noncompliance by the Borrower or any of its subsidiaries with any laws or with respect to any matter or proceeding the effect of which, if adversely determined, could have a Material Adverse Effect on the Borrower;

22

(xxi)

promptly after becoming aware thereof, notice of any matter which has had or could have a Material Adverse Effect on the Borrower;

(xxii)

copies of all plans and applications submitted to the Indiana Department of Environmental Management and the u.s. Army Corps of Engineers required by Section 5.01(t) of this Agreement on or before March 19, 2007.

(xxiii)

a written report on the status of the plans and applications required by Section 5.01(t) within ten (10) days after the end of each month, beginning Apri110, 2007, and continuing until all such plans are approved and all such permits are obtained;

(d)

Working Capital. Achieve Working Capital of at least $10.0 million at the Completion Date, achieve and maintain Working Capital of $12.0 million no later than twelve (12) months after the Completion Date, and continually thereafter;

(e)

Tangible Net Worth, On the Completion Date and continually thereafter, the Borrower’s Tangible Net Worth shall be not less than $80,000,000.00;

(f)

Tangible Owner’s Equity. Achieve and maintain Tangible Owner’s Equity of at least 40% beginning at the end of the first fiscal year following the Completion Date and achieve and maintain Tangible Owner’s Equity of at least 50% beginning at the end of the second fiscal year following the Completion Date and continually thereafter. Tangible Owner’s Equity shall be measured annually at the end of each fiscal year;

(g)

Fixed Charge Coverage Ratio. Maintain a Fixed Charge Coverage Ratio of not less than 1.25 to 1.00, measured initially at the end of the 12th month following the Completion Date and maintained and measured annually thereafter.

(h)

Liens. There shall be no lien, security interest or other charge or encumbrance, and no other type of preferential arrangement, upon or with respect to any of the properties or income of the Borrower, which secures Debt of any Person, except for the security interests of the Security Agreement or except for the Permitted Liens as described in Schedule 5.02(a);

(i)

Landlord and Mortgagee Waivers. Obtain and furnish to the Lender as soon as available, waivers, acknowledgments and consents, duly executed by each: (i) real property owner, landlord and mortgagee having an interest in any of the premises owned or leased by the Borrower or in which any Collateral of the Borrower is located or to be located (and if no Collateral of Borrower is located at a parcel of property not owned or leased by a Borrower, no such waivers, acknowledgments or consents will be required); and (ii) each third party holding any Collateral, all in form and substance acceptable to the Lender, except as otherwise agreed to by the Lender;

(j)

Insurance. Maintain insurance with financially sound and reputable insurance companies in such amounts and covering such risks as are usually carried by entities engaged in similar businesses and owning similar properties in the same general areas in which the Borrower operates, and make such increases in the type of amount or coverage as Lender may reasonably request, provided that in any event the Borrower will maintain workers’ compensation insurance, property insurance and comprehensive general liability insurance reasonably satisfactory to the Lender. The Borrower shall maintain, at a minimum, directors and officer’s liability insurance, commercial liability insurance, business interruption insurance, builder’s risk insurance and general commercial property insurance. All such policies insuring any collateral for the Borrower’s obligations to Lender shall have lender or mortgagee loss payable clauses or endorsements in form and substance acceptable to Lender. Each insurance policy covering Collateral shall be in compliance with the requirements of the Security Agreement and the Mortgage;

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(k)

Property and Insurance Maintenance. Maintain and preserve all of its property and each and every part and parcel thereof that is necessary to or useful in the proper conduct of its business in good repair, working order, and condition, ordinary wear and tear excepted, and in substantial compliance with all applicable laws, and make all alterations, replacements, and improvements thereto as may from time to time be necessary in order to ensure that its properties remain in good working order and condition and compliance. The Borrower agrees that upon the occurrence and continuing existence of an Event of Default, at Lender’s request, which request may not be made more than once a year, the Borrower will furnish to Lender a report on the condition of the Borrower’s property prepared by a professional engineer satisfactory to Lender;

(1)

Keeping Books and Records. Maintain proper books of record and account in which full, true, and correct entries in conformity with GAAP shall be made of all dealings and transactions in relation to its business and activities;

(m)

Food Security Act Compliance. If the Borrower acquires any Collateral which may have constituted farm products in the possession of the seller or supplier thereof, such Borrower shall, at its own expense, use its commercially reasonable efforts to take such steps to insure that all Liens (except the liens granted pursuant hereto) in such acquired Collateral are terminated or released, including, without limitation, in the case of such farm products produced in a state which has established a Central Filing System (as defined in the Food Security Act), registering with the Secretary of State of such state (or such other party or office designated by such state) and otherwise take such reasonable actions necessary, as prescribed by the Food Security Act, to purchase farm products free of lens (except the liens granted pursuant hereto); provided, however, that such Borrower may contest and need not obtain the release or termination of any lien asserted by any creditor of any seller of such farm products, so long as it shall be contesting the same by proper proceedings and maintain appropriate accruals and reserves therefore in accordance with the GAAP. Upon the Lender’s request made, the Borrower agrees to forward to the Lender promptly after receipt copies of all notices of liens and master lists of Effective Financing Statements delivered to the Borrower pursuant to the Food Security Act, which notices and/or lists pertain to any of the Collateral. Upon the Lender’s request, the Borrower agrees to provide the Lender with the names of Persons who supply the Borrower with such farm products and such other information as the Lender may reasonably request with respect to such Persons;

(n)

Warehouse Receipts. If any warehouse receipt or receipts in the nature of a warehouse receipt is issued in respect of any portion of the Collateral, then the Borrower; (i) will not permit such warehouse receipt or receipts in the nature thereof to be “negotiable” as such term is used in Article 7 of the Uniform Commercial Code; and (ii) will deliver all such receipts to the Lender (or a Person designated by the Lender) within five (5) days of the Lender’s request and from time to time thereafter. If no Event of Default exists, the Lender agrees to deliver to such Borrower any receipt so held by the Lender upon such Borrower’s request in connection with such sale or other disposition of the underlying inventory, if such disposition is in ordinary course of such Borrower’s business;

(o)

Management of Borrower. Management of the Borrower shall be maintained as set forth on Schedule 5.01(0) hereto, unless prior written notice is provided to the Lender of any change;

(p)

Compliance with Other Agreements. Borrower will perform in all material respects all obligations and abide in all material respects by all covenants and agreements contained in the following agreements: (i) any and all Long Term Marketing Agreements; and (ii) any other Material Contracts.

(q)

Additional Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, financing statements, control agreements, instruments, documents and other agreements as Lender or its counsel may reasonably request to evidence and secure the Loans and to perfect all Security Interests;

(r)

Release of Restrictive Covenants. Borrower shall use its commercially reasonable efforts to obtain release of the Restrictive Covenants Southwest Bluffton Industrial Park dated June 15, 2004 and recorded with the Wells County Recorder on June 17, 2004, as Document Number 139039;

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(s)

Construction of Project. Borrower shall:

(i)

subject to force majeure events, diligently proceed with construction of the Project in accordance with the Plans and Specifications and in accordance with all applicable laws and ordinance and will complete the Project on or before the Completion Date;

(ii)

use the proceeds of all Advances solely to pay the Project Costs as specified in the Project Sources and Uses Statement;

(iii)

use its commercially reasonable efforts to require the Contractor(s) to comply with all rules, regulations, ordinances and laws relating to work on the Project;

(iv)

obtain the Lender’s prior written approval of any change in the Plans and Specifications for the Project approved by the Lender which has a cost in the aggregate of $150,000.00 or greater. The Lender will have a reasonable time to evaluate any requests for its approval of any changes referred to in this paragraph. The Lender may approve or disapprove changes in its discretion, subject to the foregoing provisions of this Section 5.01(r)(iv). If it reasonably appears to the Lender that any change may increase the Project Costs (in excess of any contingency budget items), the Lender may require the Borrower to deposit additional funds with the Lender pursuant to the provisions of this Agreement in an amount sufficient to cover the increased costs as a condition to giving its approval;

(v)

comply with and keep in effect all necessary permits and approvals obtained from any Governmental Authority relating to the lawful construction and operation of the Project. The Borrower will comply in all material respects with all applicable existing and future laws, regulations, orders, and requirements of any Governmental Authority) judicial, or legal authorities having jurisdiction over the Real Property or Project, and with all recorded restrictions affecting the Real Property except for such noncompliance as will not have a Material Adverse Effect;

(vi)

furnish to the Lender from time to time on request by the Lender, in a form acceptable to the Lender, correct lists of all contractors and subcontractors employed in connection with construction of the Project and true and correct copies of all executed contracts and subcontracts which constitute Material Contracts. The Lender may contact any contractor or subcontractor to verify any facts disclosed in the lists, Borrower must consent to the disclosure of such information by the contractors and subcontractors to Lender or its agents upon Lender) s request, and Borrower must assist Lender or its agents in obtaining such information upon Lender’s request;

(vii)

upon completion of the building foundation of the Project, deliver to the Lender an “as-built” survey of the Real Property which: (a) sets forth the location and exterior lines and egress and other improvements completed on the Real Property and demonstrates compliance with all applicable setback requirements; (b) demonstrates that the Project is entirely within the exterior boundaries of the Real Property and any building restriction lines and does not encroach upon any easements or rights-of-way; and (c) contains such other information as the Lender may reasonably request;

(viii)

not purchase any materials, equipment, fixtures, or articles of personal property placed in the Project prior to the Conversion Date under any security agreement or other agreement where the seller reserves or purports to reserve title or the right of removal or repossession, or the right to consider them personal property after their incorporation in the work of construction, unless authorized by the Lender in writing;

(ix)

provide the Lender and its representatives with access to the Real Property and the Project at any reasonable time and upon reasonable notice to enter the Real Property and inspect the work or construction and all materials, plans, specifications, and other matters relating to the construction;

25

(x)

pay and discharge all claims and liens for labor done and materials and services furnished in connection with the construction of the Project. The Borrower will have the right to contest in good faith any claim or lien, provided that it does so diligently and without prejudice to the Lender or the ability to obtain title insurance in the manner required by this Agreement and the Disbursing Agreement. Upon the Lender’s request, the Borrower will promptly provide a bond, cash deposit, or other security reasonably satisfactory to the Lender to protect the Lender’s interest and security should the contest be unsuccessful;

(xi)

at the Lender’s request and expense prior to the Completion Date, post signs on the Real Property for the purpose of identifying the Lender as the “Lender” in compliance with applicable laws, ordinances and codes. At the request of the Lender, or the participating local community banks, the Borrower will use its best efforts to identify the Lender as the lender in publicity concerning the Project;

(xii)

maintain in force until full payment of the builder’s risk insurance in such amounts, form, risk coverage, deductibles, insurer, loss payable and cancellation provisions as required by the Lender. The Lender’s approval, however, will not be a representation of the solvency of any insurer or the sufficiency of any amount of insurance;

(xiii)

cooperate at all times with the Lender in bringing about the timely completion of the Project, and resolve all disputes arising during the work of construction in a manner which will allow work to proceed expeditiously. With respect to such disputes, the Borrower will have the right to contest in good faith claims resulting in disputes, provided that it does so diligently and without prejudice to the Lender. Upon the Lender’s request, the Borrower will promptly provide a bond, cash deposit, or other security reasonably satisfactory to the Lender to protect the Lender’s interest and security should the contest be unsuccessful;

(xiv)

pay the Lender’s and the Disbursing Agent’s reasonable out -of-pocket costs and expenses incurred in connection with the making or disbursement of the Loans or in the exercise of any of its rights or remedies under this Agreement, including but not limited to title insurance and escrow charges, disbursing agent fees, recording charges, and mortgage taxes, reasonable legal fees and disbursements, and reasonable fees and costs for services which are not customarily performed by the Lender’s salaried employees and are not specifically covered by the fees charged to originate the Loan, if any. The provision of this paragraph will survive the termination of this Agreement, the Supplements and the repayment of the Loans;

(xv)

keep true and correct financial books and records on a cash basis for the construction of the Project and maintain adequate reserves for all contingencies. If required by the Lender, the Borrower will submit to the Lender at such times as it requires (which will in no event be more often than monthly) a statement which accurately shows the application of all funds expended to date for construction of the Project and the source of those funds as well as the Borrower’s best estimate of the funds needed to complete the Project and the source of those funds. The Borrower will promptly supply the Lender with any financial statements or other information concerning its affairs and properties as the Lender may reasonably request, and will promptly notify the Lender of any material adverse change in its financial condition or in the physical condition of the Property or Project;

(xvi)

comply with the requirements of any commitment or agreement entered into by Borrower with any Governmental Authority to assist the construction or financing of the Real Property and/or Project and with the terms of all applicable laws, regulations, and requirements governing such assistance;

(xvii)

indemnify and hold the Lender harmless from and against all liabilities, claims, damages, reasonable costs, and reasonable expenses (including but not limited to reasonable legal fees and disbursements) arising out of or resulting from any defective workmanship or materials occurring in the construction of the Project. Upon demand by the Lender, the Borrower will defend any action or proceeding brought against the Lender alleging any defective workmanship or materials, or the Lender may elect to conduct its own defense at the reasonable expense of the Borrower. The provisions of this paragraph will survive the termination of this Agreement and the repayment of the Loan;

(xviii)

obtain and deliver to the Lender copies of all necessary occupancy certificates relating to the Project; and

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(t)

Mitigation Plan. Borrower shall have submitted a mitigation plan for the encroachments of the wetlands and streams located on the Property and an application for a permit pursuant to Section 401 Application for Authorization to Discharge Dredged or Fill Material to Isolated Wetlands and /or Waters of the State from the Indiana Department of Environmental Management and a permit from the u.s. Army Corps of Engineers pursuant to Section 404 of the Clean Water Act, and such other permits as may be required by the Indiana Department of Environmental Management and any other governmental agencies having jurisdiction on or before March 15, 2007, and shall use its best efforts to obtain approval of the mitigation plan and all such permits prior to Lender making the initial Construction Advance.

Section 5.02.

Negative Covenants. So long as any of the Loan Obligations remain unpaid (other than contingent obligations for which no claim has been asserted) or the Lender shall have any commitment hereunder, the Borrower will not, without the prior written consent of the Lender:

(a)

Liens, etc. Create or suffer to exist, or permit any of its subsidiaries to create or suffer to exist, any lien, security interest or other charge or encumbrance, or any other type of preferential arrangement, upon or with respect to any of its properties, whether now owned or hereafter acquired, or assign, or permit any of its subsidiaries to assign, any right to receive income, in each case to secure any Debt (as defined below) of any Person, other than (collectively referred to as “Permitted Liens”):

(i)

those described on Schedule 5.02(a) hereto and renewals and extensions on the same or substantially the same terms and conditions and at no increase in the debt or obligation; or

(ii)

liens or security interests which are subject to an intercreditor and subordination agreement in form and substance reasonably acceptable to Lender in Lender’s sole but reasonable discretion; or

(iii)

the liens or security interests of the Security Agreement and Mortgage; or

(iv)

liens (other than liens relating to environmental liabilities or ERISA) for taxes, assessments, or other governmental charges that are not more than 30 days overdue or, if the execution thereof is stayed, which are being contested in good faith by appropriate proceedings diligently pursued and for which adequate reserves have been established; or

(v)

after the Conversion Date, liens of warehousemen, carriers, landlords, mechanics, materialmen, or other similar statutory or common law liens securing obligations that are not yet due and are incurred in the ordinary course of business or, if the execution thereof is stayed, which are being contested in good faith by appropriate proceedings diligently pursued and for which adequate reserves have been established in accordance with GAAP; or

(vi)

liens resulting from good faith deposits to secure payments of workmen’s compensation unemployment insurance, or other social security programs or to secure the performance of tenders, leases, statutory obligations, surety, customs and appeal bonds, bids or contracts (other than for payment of Debt); or

(vii) any attachment or judgment lien not constituting an Event of Default; or

(viii) liens arising from filing UCC financing statements regarding leases not prohibited by this Agreement; or

(ix)

customary offset rights of brokers and deposit banks arising under the terms of securities account agreements and deposit agreements; or

(x)

any real estate easements and easements, covenants and encumbrances that customarily do not affect the marketable title to real estate or materially impair its use; or

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(b)

Distributions, etc. Declare or pay any dividends, purchase or otherwise acquire for value any of its membership interests (units) now or hereafter outstanding, or make any distribution of assets to its stockholders, members or general partners as such, or permit any of its subsidiaries to purchase or otherwise acquire for value any stock, membership interest or partnership interest of the Borrower, provided, however, the Borrower may: (i) declare and pay dividends and distributions payable in membership interests (units); (ii) purchase or otherwise acquire shares of the membership interests (units) of the Borrower with the proceeds received from the issuance of new membership interests (units); (iii) beginning at the end of the first full fiscal year following the Completion Date, and annually thereafter, pay an amount not to exceed, in the aggregate, 35% of the Borrower’s immediately preceding fiscal year’s Net Income for the pay ment of taxes only (“ Allowed Distributions”); (iv) pay dividends or distributions which are immediately reinvested in the Borrower (“Reinvestment Distributions”); (v) complete the transactions reflected on Schedule 4.01(a) and (vi) after payment of the Excess Cash Flow Payment required by Section 2.17, if any, and after all loan covenants are met on a post-dividend basis, pay additional distributions in an amount up to 15% of the Borrower’s immediately preceding fiscal year’s Net Income (“Excess Distributions”), provided, however, that immediately prior to the proposed payment of any dividends or distributions permitted by this Section 5.02(b), or after giving effect thereto, no Default or Event of Default shall exist, and provided, however, that aggregate distributions will not exceed 50% of the Borrower’s immediately preceding fiscal year’s Net Income; or

(c)

Capital Expenditures. Except for costs identified in the Project Costs and Uses Statement, make any investment in fixed assets in the aggregate amount of $1,000,000.00 during any fiscal year during the term of this Agreement; or

(d)

Consolidation, Merger, Dissolution, Etc. Directly or indirectly, merge or consolidate with any other Person or permit any other Person to merge into or with or consolidate with the Borrower or any of its subsidiaries if Borrower is not the surviving entity to such merger; or

(e)

Indebtedness, etc. Create, incur, assume or suffer to exist any Debt or other indebtedness, liabilities or obligations, whether matured or unmatured, liquidated or unliquidated, direct or contingent, joint or several, without the prior written consent of the Lender, except: (i) the liabilities of the Borrower to the Lender hereunder; (ii) trade accounts payable and accrued liabilities (other than Debt) arising in the ordinary course of the Borrower’s business; (iii) subordinated debt; and (iv) the liabilities of the Borrower described on Schedule 5.02(a); or

(f)

Organization; Name; Chief Executive Office. Change its state of  organization, name or the location of its chief executive office without the prior written consent of the Lender, except that the principal office shall be moved to the plant site when construction of the administration office is substantially complete; or

(g)

Loans, Guaranties, etc. Make any loans or advances to (whether in cash, in-kind, or otherwise) any Person, or directly or indirectly guaranty or otherwise assure a creditor against loss in respect of any indebtedness, obligations or liabilities (contingent or otherwise) of any Person; or

(h)

Subsidiaries; Affiliates. Form or otherwise acquire any subsidiary or affiliated business, or acquire the assets of or acquire any equity or ownership interest in any Person, unless such subsidiary, affiliate or Person executes and delivers to the Lender: (i) a guaranty of all of the Loan Obligations, in form and substance acceptable to the Lender in its sale but reasonable discretion; (ii) security agreements in form substantially similar to the Security Agreement; and (iii) such other documents and amendments to this Agreement and the other Loan Documents as the Lender shall reasonably require; or

(i)

Transfer of Assets. Sell, lease, assign, transfer, or otherwise voluntarily dispose of any of its assets, or permit any of its subsidiaries to sell, lease, assign, transfer, or otherwise voluntarily dispose of any of its assets except: (i) dispositions of inventory in the ordinary course of business; and (ii) dispositions of: (A) obsolete or worn out equipment; (B) equipment or real property not necessary for the operation of its business; or (C) equipment or real property which is replaced with property of equivalent or greater value as the property which is disposed;

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(j)

Lines of Business. Engage in any line or lines of business activity other than the production of ethanol and related by products;

(k)

Transactions with Affiliates. Directly or indirectly enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate or with any director, officer or employee of the Borrower or any Affiliate, except (i) transactions listed on Schedule 5.02(k), (ii) transactions in the ordinary course of and pursuant to the reasonable requirements of the business of the Borrower or any of its subsidiaries and upon fair and reasonable terms which are fully disclosed to Lender and are no less favorable to the Borrower or such subsidiary than would be obtained in a comparable arm’s length transaction with a person or entity that is not an Affiliate, and (iii) payment of compensation to directors, officers and employees in the ordinary course of business for services actually rendered in their capacities as directors, officers and employees, provided such com pensation is reasonable and comparable with compensation paid by companies of like nature and similarly situated. Notwithstanding the foregoing, upon the election of Lender, no payments may be made with respect to any items set forth in clauses (i) and (ii) of the preceding sentence upon the occurrence and during the continuation of an Event of Default; or

(l)

Management Fees and Compensation. Directly or indirectly pay any management (other than management fees paid pursuant to the Project Development Agreement between Borrower and Midwest Bio-Management, LLC), consulting or other similar fees to any person, except legal or consulting fees paid to persons or entities that are not Affiliates of the Borrower or its subsidiaries for services actually rendered and in amounts typically paid by entities engaged in the Borrower’s or such subsidiary’s business;

(m)

Material Control or Management. (i) One or more of the members of the Borrower as of the date hereof shall fail, in the aggregate, to own, directly or indirectly, 51% of the common (voting) membership interests in the Borrower, or (ii) there should be any change in the chief executive officer of the Borrower, unless within 90 days of such event a person reasonably acceptable to Lender is appointed to such position;

(o)

Amendments to Organizational Documents. Amend its operating agreement, management agreement or any other organizational documents in any respect without the prior written consent of the Lender; or

(p)

Flood Insurance. Borrower shall not build, construct, place or otherwise located any Building at any location on the Property for which flood insurance is required under 12 C.F.R. Part 339 or other applicable U.S. or state law or regulation without the prior written consent of the Lender and without first obtaining flood insurance on such Building acceptable to Lender and providing evidence thereof to the Lender in a form acceptable to Lender. For purposes of this Section, “Building” has the meaning provided in 12 C.F.R. 339.2(c).

ARTICLE VI.

EVENTS OF DEFAULT AND REMEDIES

Section 6.01.

Events of Default. Each of the following events shall be an “Event of Default”:

(a)

The Borrower shall fail to pay any installments of principal or interest, fees, expenses, charges or other amounts payable hereunder or under the other Loan Documents or to make any deposit of funds required under this Agreement within ten (10) days of when due; or

(b)

Any representation or warranty made by the Borrower, or any of its officers, members or managers or directors under or in connection with any Loan Document shall prove to have been incorrect in any material respect when made; or

(c)

The Borrower shall fail to perform or observe any term, covenant or agreement contained in Sections 5.0l(d), (e), (f) or (g) or take any action as prohibited by Section 5.02; or

(d)

The Borrower shall fail to deliver the financial statements or Compliance Certificate under Section 5.01(c) within ten (10) days of the date due; or

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(e)

The Borrower shall fail to perform or observe any term, covenant or agreement contained in any Loan Document (other than those listed in clauses (a) through (d) of this Section 6.01) on its part to be performed or observed (other than the covenants to pay the Loan Obligations) and any such failure shall remain unremedied for thirty (30) days after written notice thereof shall have been given to the Borrower by the Lender, provided, however, that no Event of Default shall be deemed to exist if, within said thirty (30) day period, Borrower have commenced appropriate action to remedy such failure and shall diligently and continuously pursue such action until such cure is completed, unless such cure is or cannot be completed within sixty (60) days after written notice shall have been given; or

(f)

The Borrower shall fail to pay any indebtedness in an amount in excess of $100, 000.00 (either in any individual case or in the aggregate) excluding indebtedness evidenced by the Notes and excluding Ordinary Trade Payable Disputes, or any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise) and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such indebtedness; or any other default under any agreement or instrument relating to any such indebtedness, or any other event, shall occur and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such default or event is to cause a Material Adverse Effect or accelerate, or to permit the acceleration of, the maturity of such indebtedness (excluding Ordinary Trade Payable Disputes); or any such indebtedness in excess of $150,000.00 shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof (excluding Ordinary Trade Payable Disputes); or

(g)

The Borrower shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Borrower seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its property, and, in the case of any such proceeding instituted against it (but not instituted by it) either such proceeding shall remain undismissed or unstayed for a period of 30 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against it or the appointment of a recei ver, trustee, custodian or other similar official for it or for any substantial part of its property) shall occur; or the Borrower shall take any corporate action to authorize any of the actions set forth above in this subsection; or

(h)

Anyone or more judgment(s) or order(s) for the payment of money in excess of$150,000.00 in the aggregate shall be rendered against the Borrower and either: (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order; or (ii) there shall be any period of 10 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

(i)

Without cause by Lender, any provision of any Loan Document shall for any reason cease to be valid and binding on the Borrower or the Borrower shall so state in writing; or

(j)

The Mortgage or the Security Agreement shall for any reason, except to the extent permitted by the terms thereof, cease to create a valid lien, encumbrance or security interest in any of the property purported to be covered thereby; or

(k)

The termination of any Long Term Marketing Agreement prior to its stated expiration date, unless such Long Term Marketing Agreement is replaced by another Long Term Marketing Agreement acceptable to the Lender, within thirty (30) days of the termination of such Long Term Marketing Agreement; or

(l)

The Borrower dissolves, suspends, or discontinues doing business; or

(m)

Construction of the Project is halted or abandoned prior to completion for any period of thirty (30) consecutive days for any cause which is not beyond the reasonable control of the Borrower, its contractors and subcontractors; or

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(n)

The construction of the Project shall be delayed for any reason and for such period that, in the reasonable judgment of the Lender, the Project will not be completed by the Completion Date. If such delay is curable and if Borrower has not been given a notice of a similar breach within the preceding twelve (12) months, it may be cured (and no Event of Default will have occurred) if Borrower cures the failure within thirty (30) days, which shall include advancing the progress of the Project to the point that, in the reasonable judgment of the Lender, the Project will be completed by the Completion Date; or

(o)

Any event, change or condition not referred to elsewhere in this Section 6.01 should occur which results in a Material Adverse Effect on the Borrower, any subsidiary or any guarantor of the Borrower’s obligations hereunder; or

(p)

Any guarantee, suretyship, subordination agreement, maintenance agreement, or other agreement furnished in connection with the Borrower’s obligations hereunder and under any Note shall, at any time, cease to be in full force and effect, or shall be revoked or declared null and void, or the validity or enforceability thereof shall be contested by the guarantor, surety or other maker thereof, or the guarantor shall deny any further liability or obligations thereunder, or shall fail to perform its obligations thereunder, or any representation or warranty set forth therein shall be breached, or the guarantor shall breach or be in default under the terms of any other agreement with Lender (including any loan agreement or security agreement); or

(q)

The loss, suspension or revocation of, or failure to renew, any franchise, license, certificate, permit, authorization, approval or the like now held or hereafter acquired by the Borrower or any of its subsidiaries, if such loss, suspension, revocation or failure to renew could reasonably be expected to have a Material Adverse Effect on the Borrower and the Project; or (ii) any regulatory or Governmental Authority replaces the management of the Borrower or any of its subsidiaries or assumes control over the Borrower or such subsidiary; or

(r)

The Borrower should breach or be in default under a Material Contract in any material respect, including any material breach or default, or any termination shall have occurred, or any other event which would permit any party other than the Borrower to cause a termination, or any Material Contract shall have ceased for any reason to be in full force and effect prior to its stated or optional expiration date;

(s)

The Borrower terminates, changes, amends or restates, without the Lender’s prior consent any Material Contract, or any material Construction Contract;

(t)

The Borrower fails to (a) implement and maintain the stream mitigation site as required by the U.S. Army Corps of Engineers and the Indiana Department of Environmental Management, (b) provide and maintain such financial assurances as may be required by the U.S. Army Corps of Engineers and the Indiana Department of Environmental Management in conjunction with the issuance of permits pursuant to Borrower’s Section 401 / 404 Permit Application, as amended, modified and resubmitted from time to time, or (c) comply with all of the requirements of the permits issued by the U.S. Army Corps of Engineers and Indiana Department of Environmental Management;

(u)

Any enforcement action is commenced by the Indiana Department of Environmental Management or the U.S. Army Corps of Engineers as a result of any encroachments of the wetlands and streams located on the Property; or

(v)

There shall have been entered or docketed any order or ruling by either the Indiana Department of Environmental Management or the U.S. Army Corps of Engineers in connection with the plans and applications required by Section 5.01(t) of this Agreement which, in the reasonable opinion of the Lender, may adversely impact the construction or operation of the Project and on or before five (5) business Days following the entry of such order or ruling, the Borrower shall have failed to deliver to the Lender an irrevocable standby letter of credit in the amount of $1,000,000.00 issued by a financial institution reasonably acceptable to the Lender with an expiration date of not less than twelve months after the date of issuance and automatically renewable for additional periods of at least twelve months which may be drawn upon by the Lender in the event Borrower shall fail to make any payments required by this Agreement or any of the Loan Documents. Such irrevoca ble standby letter of credit shall be surrendered by Lender on or before five (5) Business Days following Lender’s receipt of a copy a final order releasing, dismissing or reversal of such adverse ruling or order.

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Section 6.02.

Remedies. Upon the occurrence of an Event of Default and at any time while such Event of Default is continuing, the Lender to the extent permitted by applicable law:

(a)

may accelerate the due date of the unpaid principal balance of the Notes, all accrued but unpaid interest thereon and all other amounts payable under this Agreement making such amounts immediately due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith immediately due and payable, without presentment, notice of intent to accelerate or notice of acceleration, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to any of the Borrower under the Federal Bankruptcy Code, the Notes, all such interest and all such amounts shall automatically become due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower;

(b)

may withhold or direct the Disbursing Agent to withhold anyone or more Advances in its discretion, and terminate the Lender’s obligations, if any, under this Agreement to make any Advances whereupon the commitment and obligations of the Lender to extend credit or to make Advances hereunder shall terminate, and no disbursement of Loan funds by the Lender will cure any default of the Borrower, unless the Lender agrees otherwise in writing;

(c)

may, by notice to the Borrower, obtain the appointment of a receiver to take possession of all Collateral of the Borrower, including, but not limited to all personal property, including all fixtures and equipment leased, occupied or used by any of the Borrower. To the extend permitted by applicable law, Borrower hereby irrevocably consents to the appointment of such receiver and agrees to cooperate and assist any such receiver as reasonably requested to facilitate the transfer of possession of the Collateral to such receiver and to provide such receiver access to all books, records, information and documents as requested by such receiver;

(d)

in its discretion, enter the Real Property and take any and all actions necessary in its reasonable judgment to complete construction of the Project, including but not limited to making changes in Plans and Specifications, work or materials, and entering into, modifying, or terminating any contractual arrangements, subject to the Lender’s right at any time to discontinue any work without liability. If the Lender elects to complete the Project, except as otherwise set forth in the Loan Documents, it will not assume any liability to the Borrower or any other person for completing the Project or for the manner or quality of construction of the Project, and the Borrower expressly waives any such liability. Following the occurrence and during the continuation of an Event of Default, the Borrower irrevocably appoints the Lender as its attorney-in-fact, with full power of substitution, to complete the Project in the Borrower’s name, or the Lender may elect to complete construction in its own name. In any event, all sums expended by the Lender in completing construction will be considered to have been disbursed to the Borrower and will be secured by the Mortgage and any other instruments or documents securing the Loans, and any such sums that cause the principal amount of the Loans to exceed the face amount of the Notes will be considered to be an additional loan to the Borrower bearing interest at the rate provided in the Notes and will be secured by the Mortgage and any other instrument or documents securing the Loans. The Lender will not have any obligation under the Plans and Specifications prepared for the Project, any studies, data, and drawings with respect thereto prepared by or for Borrower, or the contracts and agreements relating to the Plans and Specifications, or the aforesaid studies, data, and drawings, or to the construction of the Project unless it expressly hereafter agrees in writing. The Lender will have the right to exercise any right s of the Borrower under those contracts and agreements or with respect to such Plans and Specifications, studies, data, and drawings upon any default by the Borrower under this Agreement, and shall have such other rights and remedies with respect thereto as are afforded a secured creditor under applicable law; and

(e)

may, by notice to the Borrower, require the Borrower to pledge to the Lender as security for the Loan Obligations an amount in immediately available funds equal to the then outstanding Letter of Credit Liabilities, such funds to be held in an interest bearing cash collateral account at the Lender without any right of withdrawal by the Borrower; provided, however, that in the event of an actual or deemed entry of an order for relief with respect to the Borrower or any of its subsidiaries under the Federal Bankruptcy Code, the Borrower shall, without notice, pledge to the Lender as security for the Loan Obligations an amount in immediately available funds equal to the then outstanding Letter of Credit Liabilities, such funds to be held in such an interest bearing cash collateral account at the Lender; and

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(f)

may exercise all other rights and remedies afforded to the Lender under the Loan Documents or by applicable law or equity.

Section 6.03.

Remedies Cumulative. Each and every power or remedy herein specifically given shall be in addition to every other power or remedy, existing or implied, given now or hereafter existing at law or in equity, and each and every power and remedy herein specifically given or otherwise so existing may be exercised from time to time and as often and in such order as may be deemed expedient by Lender, and the exercise or the beginning of the exercise of one power or remedy shall not be deemed a waiver of the right to exercise at the same time or thereafter any other power or remedy. No delay or omission of Lender in the exercise of any right or power accruing hereunder shall impair any such right or power or be construed to be a waiver of any default or acquiescence therein.

ARTICLE VII.

MISCELLANEOUS

Section 7.01.

Amendments, etc. No amendment or waiver of any provision of any Loan Document to which the Borrower is a party, nor any consent to any departure by the Borrower therefrom, shall in any event be effective unless the same shall be agreed or consented to by the Lender and the Borrower, and each such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

Section 7.02.

Notices, etc. All notices and other communications provided for under any Loan Document shall be in writing and mailed, faxed, or delivered at the addresses set forth below, or at such other address as such party may specify by written notice to the other parties hereto:

If to the Borrower:	Indiana Bio-Energy, LLC
	969 North Main Street, P.O. Box 297
	Bluffton, IN 46714
	Telephone: (260) 846-0011
	Fax: (260) 353-1100
	Attention: President
With a copy (which shall not constitute notice) to:	3800 One Indiana Square
	Krieg DeVault LLP
	Indianapolis, IN 46204
	Fax: (317) 636-1507
	Attn. John R. Kirkwood, Esq.
If to the Lender:	AgStar Financial Services, PCA
	3555 9th Street NW Suite 400
	Rochester MN 55903
	Telephone: (507) 386-4242
	Facsimile: (507) 344-5088
	Attention: Mark Schmidt
With copies (which shall not constitute notice) to:	Gray Plant Mooty
	1010 West St. Germain,
	Suite 600 St. Cloud, MN 56301
	Facsimile: (320) 252-4482
	Attention: Phillip L Kunkel

All such notices and communications shall have been duly given and shall be effective: (a) when delivered; (b) when transmitted via facsimile to the number set forth above; (c) the Business Day following the day on which the same has been delivered prepaid (or pursuant to an invoice arrangement) to a reputable national overnight air courier service; or (d) the third Business Day following the day on which the same is sent by certified or registered mail, postage prepaid. Any confirmation sent by the Lender to the Borrower of any borrowing under this Agreement shall, in the absence of manifest error, be conclusive and binding for all purposes.

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Section 7.03.

No Waiver; Remedies. No failure on the part of the Lender to exercise, and no delay in exercising, any right under any Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right under any Loan Document preclude any other or further exercise thereof or the exercise of any other right. The remedies provided in the Loan Documents are cumulative and not exclusive of any remedies provided by law.

Section 7.04.

Costs, Expenses and Taxes.

(a)

The Borrower agrees to pay on demand all reasonable and necessary costs and expenses in connection with the preparation, execution, delivery, filing, recording and administration of the Loan Documents and the other documents to be delivered under the Loan Documents, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Lender (who may be in-house counsel), and local counsel who may be retained by said counsel, with respect thereto and with respect to advising the Lender as to its respective rights and responsibilities under the Loan Documents, and all costs and expenses (including reasonable counsel fees and expenses) for the Lender in connection with the filing of the Financing Statements and the enforcement of the Loan Documents and the other documents to be delivered under the Loan Documents, including, without limitation, in the context of any bankruptcy proceedings. In addition, the Borrower agrees to pay o n demand the expenses described in Section 5.01(b). In addition, the Borrower shall pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of the Loan Documents and the other documents to be delivered under the Loan Documents, and agrees to save 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 taxes and fees.

(b)

If, due to payments made by the Borrower pursuant to Section 2.09 or due to acceleration of the maturity of the Advances pursuant to Section 6.01 or due to any other reason (other than payments made pursuant to Section 2.17 of this Agreement), the Lender receives payments of principal of any Loan other than on the 1st day of an Interest Period relating thereto, the Borrower shall pay to the Lender on demand any amounts required to compensate the Lender for any additional losses, costs or expenses which it may incur as a result of such payment, including, without limitation, any loss (including loss of anticipated profits), cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by the Lender to fund or maintain such Loan.

(c)

Upon the request of Borrower, Lender shall provide copies of all invoices for costs and expenses to be reimbursed by Borrower under this Agreement or under any of the Loan Documents.

Section 7.05.

Right of Set-off. The Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law following the occurrence and only during the continuation of an Event of Default, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Lender to or for the credit or the account of the Borrower against any and all of the Loan Obligations, irrespective of whether or not the Lender shall have made any demand under such Loan Document and although deposits, indebtedness or such obligations may be unmatured or contingent. The Lender agrees promptly to notify the Borrower after any such set-off and application, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Lender under this Section are in addition to other rights and remedies (includi ng, without limitation, other rights of set-off) which the Lender may have.

Section 7.06.

Severability of Provisions. Any provision of this Agreement or of any other Loan Document which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or thereof or affecting the validity or enforceability of such provision in any other jurisdiction.

Section 7.07.

Binding Effect; Successors and Assigns; Participations.

(a)

This Agreement shall be binding upon and inure to the benefit of the Borrower, the Lender and their respective successors and assigns, except that the Borrower shall not have the right to assign or otherwise transfer its rights hereunder or any interest herein without the prior written consent of the Lenders.

34

(b)

Provided Lender provides notice of such transfer or participation to Borrower, Borrower agrees and consents to Lender’s sale or transfer, whether now or later, of one or more participation interests in the Loans to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to anyone or more purchasers, or potential purchasers) any information or knowledge Lender may have about Borrower or about any other matter relating to the Loans, and Borrower hereby waives any rights to privacy it may have with respect to such matters; provided, however, that any information received by any such purchaser or potential purchaser under this provision which concerns the personal) financial or other affairs of the Borrower shall be received and kept by the purchaser or potential purchaser in full confidence and will not be revealed to any other persons, firms or organizations nor used for any purpose whatso ever other than for determining whether or not to participate in the Loans and in accord with the rights of Lender if a participation interest is acquired. Provided Borrower has been provided notice by Lender of Lender’s sale of a participation interest to such party or parties, Borrower also agrees that the purchasers of any such participation interests will be considered as the absolute owners of such interests in the Loans and will have all the rights granted under the participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest arising out of or by virtue of the participation and unconditionally agrees that either Lender or such purchaser may enforce Borrower’s obligation under the Loans irrespective of the failure or insolvency of any holder of any interests in the Loans. Borrower further agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against Lender.

Section 7.08.

Consent to Jurisdiction.

(a)

The Borrower hereby irrevocably submits to the jurisdiction of any Minnesota state court or federal court over any action or proceeding arising out of or relating to this Agreement, the Note and any instrument, agreement or document related hereto or thereto, and the Borrower hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Minnesota state court or federal court. The Borrower hereby irrevocably waives, to the fullest extent it may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The Borrower irrevocably consents to the service of copies of the summons and complaint and any other process which may be served in any such action or proceeding by the mailing of copies of such process to Borrower at its address specified in Section 7.02. The Borrower agrees that a final judgment in any such action or proceeding shall be conclusive and ma y be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(b)

Nothing in this Section 7.08 shall affect the right of the Lender to serve legal process in any other manner permitted by law or affect the right of the Lender to bring any action or proceeding against the Borrower or its property in the courts of other jurisdictions.

Section 7.09.

Governing Law. THIS AGREEMENT, THE SUPPLEMENTS AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF MINNESOTA.

Section 7.10.

Execution in Counterparts. This Agreement may be executed in any number of counterparts and on telecopy counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute but one and the same agreement.

35

Section 7.11.

Survival. All covenants, agreements, representations and warranties made by the Borrower in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Advances and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that Lender may have had notice or knowledge of any Event of Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as any Loan Obligations are outstanding and unpaid (other than contingent claims for which no claim has been asserted) and so long as the Lender has any unexpired commitments under this Agreement o r the Loan Documents. The expense reimbursement, additional cost, capital adequacy and indemnification provisions of this Agreement shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loan Obligations or the termination of this Agreement or any provision hereof.

Section 7.12.

WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER HEREBY IRREVOCABLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT TO WHICH IT IS A PARTY OR ANY INSTRUMENT OR DOCUMENT DELIVERED THEREUNDER.

Section 7.13.

Entire Agreement. THIS AGREEMENT, THE NOTES, AND THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PAR TIES THERETO.

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

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS MASTER LOAN AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF THE DATE FIRST ABOVE STATED.

[SIGNATURE PAGE ON FOLLOWING PAGE]

36

SIGNATURE PAGE TO:

MASTER LOAN AGREEMENT

by and among

INDIANA BIO-ENERGY, LLC

and

AGSTAR FINANCIAL SERVICES, PCA

Date: February 27,2007

BORROWER:	LENDER:
INDIANA BIO-ENERGY, LLC an	AGSTAR FINANCIAL SERVICES, PCA,
Indiana limited liability company	a United States instrumentality
/s/ Stephen J. Hogan	/s/ Mark Schmidt
By: Stephen J. Hogan	By: Mark Schmidt
Its President	Its Vice President

STATE OF INDIANA

)

) SS:

COUNTY OF MARION

)

Before me the undersigned, a Notary Public in and for said County and State personally appeared Stephen J. Hogan, the President of Indiana Bio-Energy, LLC, an Indiana limited liability company, who executed the foregoing instrument on behalf of such entity.

Witness my hand and Notarial Seal this 27^th day of February, 2007.

My Commission Expires:                              

/s/ Bradley S. Fuson

Notary Public

My county of Residence:                               

Seal

Bradley S. Fuson

State of Indiana Notary Public

Resident of Hamilton County

My Commission Expires 8/20/2014

37

EXHIBIT A

COMPLIANCE CERTIFICATE

TO:

AgStar Financial Services, PCA (the “Lender”)

Pursuant to that certain Master Loan Agreement dated February 27, 2007, by and between INDIANA BIO-ENERGY, LLC, an Indiana limited liability company (the “Borrower”), and the Lender, and any amendments thereto and extensions thereof (the “Loan Agreement”), the undersigned hereby represents, warrants and certifies to the Lender as follows:

1.

The financial statement(s) attached hereto are complete and correct in all material respects and fairly present the financial condition of the Borrower as of the date of said financial statement(s) and the result of its business operations for the period covered thereby;

2.

Repeats and reaffirms to the Lender each and all of the representations and warranties made by the Borrower in the Loan Agreement and the agreements referred to therein or related thereto (except as such representations and warranties relate to financial statements as of the date thereof, and represents and warrants to the Lender that each and all of said warranties and representations are true and correct as of the date hereof, except as disclosed in writing to the Lender;

3.

No Event of Default (as that term is defined in the Loan Agreement), and no event which with the giving of notice or the passage of time or both would constitute an Event of Default, has occurred and is continuing as of the date hereof; and

4.

All the calculations set forth below are made pursuant to the terms of the Loan Agreement and are true and accurate as of the date of the attached financial statements:

1.

Section 5.01(d) - Working Capital.

(tested annually)

(a)

Required Working Capital

(@ Completion Date $10,000,000.00)

(first fiscal year after Completion Date $12,000,000.00 & continually thereafter)

(a)

Current Assets

$                              

(b)

Current Liabilities

$                              

Line (a) less line (b)

$                              

In Compliance

Yes           

No           

2.

Section 5.0l(e) - Tangible Net Worth.

(tested annually)

(a)

Required Tangible Net Worth

($80,000,000.00 @ Completion Date and continually thereafter)

1

(b)

Actual Tangible Net Worth

$                              

(1) Total Assets

$                              

(2) Less Intangible Assets (per definition)

$                              

(3) Total Tangible Assets (line (I) minus line (2)

$                              

(4) Total Liabilities

$                              

(5) Sub Debt

$                              

(6) Tangible Net Worth

$                              

(line (3) minus line (4) plus Line 5))

$                              

In Compliance

Yes           

No           

3.

Section 5.01(f) - Owner Equity Ratio

(tested annually beginning at the end of the second fiscal year following the Completion Date and continually thereafter)

(a)

Tangible Net Worth

$                              

(b)

Total Assets

$                              

(c)

Owner Equity Percentage

(percent of line (b) to (c)

            %

Required Percentage of 50% beginning at the end of the second fiscal year following the Completion Date and continually thereafter

In Compliance

Yes           

No           

4.

Section 5.0l(g) - Fixed Charge Ratio

(tested annually beginning at the end of the first operating year)

(a)

EBITDA

$                              

(b)

Scheduled Principal Payments for the Loans

$                              

(c)

Scheduled Principal Payments for Subordinated Debt

$                              

(d)

Interest on the Loans

$                              

(e)

Interest on the Subordinated Debt

$                              

(f)

Distributions

$                              

(g)

Maintenance Capital Expenditures

$                              

(h)

Denominator (sum of lines (b) through (g))

$                              

Ratio of line (a) to (h)

                     to 1.00

Required Ratio of 1.25 to 1.00

In Compliance

Yes           

No           

2

IN WITNESS WHEREOF, the undersigned has signed and delivered this Certificate to the Lender as of the _____ day of                          ,             .

BORROWER:

INDIANA BIO-ENERGY, LLC

an Indiana limited liability company

By                                                        

Its                                                     

3

EXHIBIT B

PROJECT SOURCES AND USE STATEMENT

INDIANA BIO-ENERGY, LLC

100 MILLION GALLON NATURAL GAS

Budget from Inception to Startup

Revised 11/07/2006		11/7/2006
		Revised
		Budget
Sources:
Member equity	$	62,644,670
Member equity- Seed Capital		1,360,000
Grants		500,000
Interest income		595,330
Tax Increment Financing		-
Subordinated debt financing Solid Waste Bonds		22,000,000
Total equity		87,100,000
Line of credit
Senior debt		90,000,000
Total	$	177,100,000
Uses:
Plant Construction Costs
Plant design-build contract - Fagen	$	113,416,576
Allowance-Fagen cost increase per CCI index		5,000,000
Additional corn storage - IBE responsibility		-
Allowance for City/County Road Improvements		1,500;000
Administration Building		400,000
Office Equipment		100,000
Computers, Software, Network		180,000
Construction Performance Bond		-
Construction Insurance-Builders Risk		200,000
Capitalized Interest on Senior Debt		4,900,000
Capitalized Interest on bond financing		2,417,673
Interest on Bond		-
Debt Services reserve on Bond		2,200,000
Additional required equity for Bonds		482,500
Contingency on Bond		-
Construction Contingency		2,030,251
Total	$	132,827,000

1 of 4

INDIANA BIO-ENERGY, LLC

100 MILLION GALLON NATURAL GAS

Budget from Inception to Startup

Revised 11/07/2006		11/7/2006
		Revised
		Budget
Site Costs
Land Acquisition	$	2,750,000
Site Engineering (survey and borings)		45,000
Water Discharge.		500,000
Site Improvements (includes Phase 1)		4,100,000
Hard Surface Roads		2,600,000
Site Maintenance		-
Site Utilities (includes Phase 2)		1,500,000
Construction manager fees		120,000
Permitting		100,000
Liquid Propane Fuel Storage		-
Total	$	11,715,000
Railroad
Mainline Rail Switch	$	440,000
Yard Rail Switches		360,000
Rail Track		4,581,818
Railroad Contingency		458,182
Total	$	5,840,000
Fire Protection/Water Supply
Fire Protection Loop	$	800,000
Fire Water Tank		435,000
Fire Water Pumps		160,000
Process Building Fire Suppression		360,000
Energy Center Fire Suppression		150,000
Water Treatment Building/Fire Pump House		350,000
Fire Protection		60,000
RO Water System w/Tank		2,500,000
Wells or Water System Access		800,000
Water Pre-Treatment System		500,000
Water System Pump		-
Drain Field & Septic Tank		50,000
Blowdown Pond		150,000
Total	$	6,315,000

2 of 4

INDIANA BIO-ENERGY, LLC

100 MILLION GALLON NATURAL GAS

Budget from Inception to Startup

Revised 11/07/2006		11/7/2006
		Revised
		Budget
Rolling Stock
Used front-end loaders - 2	$	200,000
New Skid Loader		35,000
New Fork Lift		30,000
New Scissor Lift - 30 ft		20,000
Rail Car Mover		300,000
Used Pick-Ups - 2		50,000
Total	$	635,000
Financing Costs
Loan origination fees - Senior Lender	$	800,000
Commissions on financing		-
Bond issue costs, includes legal. Feasibility study		1,100,000
Bond Insurance		-
Bank underwriting fee		150,000
Bank unused commitment fee		-
Bank annual facility fee		40,000
Construction Inspections -Bank Required		40,000
Bank, IBE Attorney Fees		200,000
Title Insurance		70,000
Disbursement Agent Fee		15,000
Appraisal Cost		10,000
Total	$	2,425,000
Pre Production Period Costs
Startup Costs
Administration labor		340,000
Production Labor		250,000
Utilities		400,000
Training costs		30,000
Total	$	1,020,000
Total Inventory - Working Capital
Inventory- working capital	$	6,880,000
Inventory - Corn		3,600,000
Inventory - Ethanol & DDGS		3,000,000
Denaturant, chemicals, yeasts; enzymes		420,000
Inventory - Corn Hedged		-
Inventory-spare parts		750,000
Total	$	14,650,000

3 of 4

INDIANA BIO-ENERGY, LLC

100 MILLION GALLON NATURAL GAS

Budget from Inception to Startup

Revised 11/07/2006		11/7/2006
		Revised
		Budget
Organizational Costs
Entity organization
Legal	$	30,000
Accounting		40,000
Miscellaneous		25,000
	$	95,000
Cost of raising capital
Legal	$	70,000
Accounting		25,000
Consulting fees - Midwest		240,000
Printing, Power Point Presentation		20,000
Other		200,000
Contingency		200,000
Advertising		15,000
	$	770,000
Operating costs
Development labor fee	$	251,000
Office labor		90,000
Office expense		97,000
Office equipment		5,000
Telephone		13,000
Internet service		2,000
Postage		15,000
Directors’ expense		10,000
Directors travel expense		20,000
SEC annual reporting		-
Payroll tax expense		10,000
401K expense		-
Accounting fees		75,000
Legal		100,000
Consulting fees		30,000
Membership fees		2,000
Membership meetings		15,000
Bank Charges		2,000
Depreciation		-
Miscellaneous		10,000
Donations		-
Dues		1,000
Insurance- operations		20.000
Insurance- D&O		40,000
Bond issuance costs		-
Bond insurance		-
Advertising		-
	$	808,000
Organizational Cost Total	$	1,673,000
Grand Total	$	177,100,000

4 of 4

Schedule 3.01(d)

Real Property

LEGAL DESCRIPTION

The following described real estate located in Wells County, Indiana:

Parcel No. 90-08-08-100-001.000-002

Part of the Northeast Quarter of Section 8, Township 26 North, Range 12 East, Harrison Township, Wells County, Indiana, described as follows: Beginning at the Northwest corner of said Northeast Quarter found per record witness; thence easterly, 2229.08 feet along the north line of said Northeast Quarter to a 5/8” rebar stake set on the westerly right-of-way line of the Norfolk and Western Railway Company; thence southwesterly, deflecting right 111 degrees 41 minutes PO seconds, 2861.11 feet along said westerly right-of-way line to a 5/8” rebar stake set on the south line of said Northeast Quarter; thence westerly, deflecting right 67 degrees 21 minutes 40 seconds, 1121.70 feet along said south line to a 5/8” rebar stake set at the Southwest Corner of said Northeast Quarter; thence northerly, deflecting right 89 degrees 52 minutes 40 seconds, 2677.84 feet along the west line of said Northeast Quarter to the place of beginning. Containing 102.50 acres.

Parcel No. 90-08-08-200-001.000-010; 90-08-08-200·002.000-010

Part of the Northwest Quarter of Section 8, Township 26 North, Range 12 East, Harrison Township, Wells County, Indiana, described as follows: .

Beginning at the Southwest corner of said Northwest Quarter found per record witness; thence Northerly, 1208.78 feet along the West line of said Northwest Quarter to a P.K. nail at the Southwest corner of the 17.04 acre tract described in Deed Record 130, Page 872; thence Northeasterly, deflecting right 65 degrees 20 minutes 38 seconds, 2931.66 feet along the South line of said 17.04 acre tract to a 5/8” rebar stake on the East line of said Northwest Quarter; thence Southerly, deflecting right 114 degrees 57 minutes 47 seconds, 1112.76 feet along said East line to a 5/8” rebar stake at the Southeast corner of the Northeast Quarter of said Northwest Quarter; thence Westerly, deflecting right 90 degrees 04 minutes 33 seconds, 1329.23 feet to a 5/8” rebar stake at the Southwest corner of the Northeast Quarter of said Northwest Quarter; thence Southerly, deflecting left 90 degrees 13 minutes 45 seconds, 1337.85 feet to a 5/8” rebar stak e at the Southeast corner of the Southwest Quarter of said Northwest Quarter, thence Westerly, deflecting right 90 degrees 16 minutes 33 seconds, 1325.66 feet along the South line of said Northwest Quarter to the place of beginning. Containing 70.79 acres more or less.

Parcel No. 90-08-08--300-002.000-002

Tract I: The Southeast Quarter of the Northwest Quarter of Section 8, Township 26 North, Range 12 East, Wells County, Indiana, containing 40 acres, more or less.

Tract It The east half of the Southwest Quarter of Section 8, Township 26 North, Range 12 East, Wells County, Indiana, containing 80 acres, more or less.

EXCEPTING THEREFROM, Part of the Southwest Quarter of Section 8, Township 26 North, Range 12 East, Harrison Township, Wells County, Indiana, described as follows: Starting at the southeast corner of said Southwest Quarter found per record Witness; thence westerly, 451.42 feet along the south line of said Southwest Quarter to a P.K. nail which shall be the place of beginning; thence continuing westerly, 253.58 feet along said south line, to a P.K. nail; thence northerly, deflecting right 90 degrees 00 minutes 00 seconds, 280.00 feet to a 5/8” rebar stake; thence easterly, deflecting right 90 degrees 00 minutes 00 seconds, 253.58 feet parallel with the south line of said Southwest Quarter to a 5/8” rebar stake; thence southerly, deflecting right 90 degrees 00 minutes 00 seconds, 280.00 feet to the place of beginning. Containing 1.63 acres, more or less.

Containing in all 118.37 acres, after exception.

Parcel No. 90·08-08-400-027.000-010

Part of the Northwest Quarter of Section B, Township 26 North, Range 12 East, Harrison Township, Wells

County, Indiana, described as follows:

Starting at the northwest corner of said Northwest Quarter; thence southerly, 1185.11 feet, along the west line of said Northwest Quarter to its intersection with the southerly right-of-way line of the Norfolk and Western Railway Company, which shall be the place of beginning; thence northeasterly, deflecting left 114 degrees 39 minutes 22 seconds, 2804.95 feet, along said right-or-way line to the north line of said Northwest Quarter; thence easterly, deflecting right 24 degrees 59 minutes 26 seconds, 116.37 feet, along said north line to the northeast corner of said Northwest Quarter; thence southerly, deflecting right 89 degrees 58 minutes 17 seconds, 226.16 feet, along the east line of said Northwest Quarter; thence southwesterly, deflecting right 65 degrees 02 minutes 17 seconds, 2931.66 feet, parallel with the southerly right-at-way line of the Norfolk and Western Railway Company to the west line of said Northwest Quarter; thence northerly, deflecting right 114 degree s 39 minutes 22 seconds, 279.69 feet, along said west line to the place of beginning. Containing 17.04 acres.

Parcel No. 90-08-08-200-001.000-010; 90-l8-08-200-002.000-010

Part of the Northwest Quarter of Section 8, Township 26 North, Range 12 East, Harrison Township, Wells County, Indiana, described as follows:

Beginning at the Southwest corner of said Northwest Quarter found per record witness; thence Northerly, 1208.78 feet along the West line of said Northwest Quarter to a P. K. nail at the Southwest corner of the 17.04 acre tract described in Deed Record 130, Page 872; thence Northeasterly, deflecting right 65 degrees 20 minutes 38 seconds, 2931.66 feet along the South line of said 17.04 acre tract to a 5/8” rebar stake on the East tine of said Northwest Quarter; thence Southerly, deflecting right 114 degrees 57 minutes 47 seconds, 1112.76 feet along said East line to a 5/8” rebar stake at the Southeast corner of the Northeast Quarter of said Northwest Quarter; thence Westerly, deflecting right 90 degrees 04 minutes 33 seconds, 1329.23 feet to a 5/8” rebar stake at the Southwest corner of the Northeast Quarter at said Northwest Quarter; thence Southerly, deflecting left 90 degrees 13 minutes 45 seconds, 1337.85 feet to a 5/8” rebar stake at the Sout heast corner of the Southwest Quarter of said Northwest Quarter; thence Westerly, deflecting right 90 degrees 16 minutes 33 seconds, 1325.66 feet along the South tine of said Northwest Quarter to the place of beginning. Containing 70.79 acres more or less.

Parcel No. 90-08-08-300-l01.000·002

Part of the Southwest Quarter of Section 8, Township 26 North, Range 12 East, Harrison Township, Wells County, Indiana, described as follows: Starting at the southeast corner of said Southwest Quarter found per record witness; thence westerly, 451.42 feet along the south line of said Southwest Quarter to a P. K. nail which shall be the place of beginning; thence continuing westerly, 253.58 feet along said south line, to a P. K. nail; thence northerly, deflecting right 90 degrees 00 minutes 00 seconds, 280.00 feet to a 5/8” rebar stake; thence easterly, deflecting right 90 degrees 00 minutes 00 seconds, 253.58 feet parallel with the south line of said Southwest Quarter to a 5/8” rebar stake; thence southerly, deflecting right 90 degrees 00 minutes 00 seconds, 280.00 feet to the place of beginning. Containing 1.63 acres, more or less.

Parcel No. 90-08-08-300-006.000-010

THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, CONTAINING 40A6 ACRES.

Parcel No. 90-08-08-300-004.000.010

ALSO: THE SOUTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, CONTAINING 40.40 ACRES.

EXCEPTING THEREFROM: PART OF THE SOUTHWEST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, DESCRIBED AS FOLLOWS:

BEGINNING AT THE SOUTHWEST CORNER OF SAID SOUTHWEST QUARTER FOUND PER RECORD WITNESS; THENCE NORTHERLY, 527.00 FEET ALONG THE WEST LINE OF SAID SOUTHWEST QUARTER TO A P.K. NAIL; THENCE EASTERLY, DEFLECTING RIGHT 90 DEGREES 00 MINUTES 16 SECONDS, 655.00 FEET PARALLEL WITH THE SOUTH LINE OF SAID SOUTHWEST QUARTER TO A 5/8” REBAR STAKE; THENCE SOUTHERLY, DEFLECTING RIGHT 89 DEGREES 59 MINUTES 44 SECONDS, 527.00 FEET PARALLEL WITH THE WEST LINE OF SAID SOUTHWEST QUARTER TO A P.K. NAIL ON THE SOUTH LINE OF SAID SOUTHWEST QUARTER; THENCE WESTERLY, DEFLECTING RIGHT 90 DEGREES 00 MINUTES 16 SECONDS, 655.00 FEET ALONG SAID SOUTH LINE TO THE PLACE OF BEGINNING. CONTAINING 7.92 ACRES.

CONTAINING AFTER SAID EXCEPTION 32.48 ACRES.

Parcel No. 90-08-08-400-004.000-002

Commencing at the southwest corner of the southeast quarter of section eight (8), in township 26 north, range 12 east, and running thence north 1324.70 feet to the northwest corner of the south half of said quarter, thence east 558.20 feet to the west line of the right of way of the Ft Wayne, Cincinnati and Louisville railroad company, thence in a southwesterly direction along the west line of said Railroad right of way a distance of 1437.50 feet to the south line of said Section 8, thence west 12 feet to the place of beginning, containing 8.67 acres.

Parcel No. 90-0B-08-40Q.-020.000-002

PART OF THE NORTH HALF OF THE SOUTHEAST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, DESCRIBED AS FOLLOWS:

STARTING AT THE NORTHEAST CORNER OF SAID SOUTHEAST QUARTER FOUND PER RECORD WITNESS; THENCE WESTERLY, 1528.71 FEET ALONG THE NORTH LINE OF SAID SOUTHEAST QUARTER TO THE WESTERLY RIGHT-Of-WAY LINE Of THE NORFOLK & WESTERN RAILROAD, WHICH SHALL BE THE PLACE OF BEGINNING; THENCE SOUTHWESTERLY, DEFLECTING LEFT 67 DEGREES 21 MINUTES 32 SECONDS, 617.57 FEET ALONG SAID WESTERLY RIGHT-Of-WAY LINE; THENCE SOUTHWESTERLY, DEFLECTING RIGHT 00 DEGREES 02 MINUTES 05 SECONDS, 816.82 FEET ALONG SAID WESTERLY RIGHT-OF-WAY LINE TO THE SOUTH LINE OF THE NORTH HALF Of SAID SOUTHEAST QUARTER; THENCE WESTERLY, DEFLECTING RIGHT 67 DEGREES 09 MINUTES 58 SECONDS, 565.65 FEET ALONG THE SOUTH LINE OF THE NORTH HALF OF SAID SOUTHEAST QUARTER TO THE WEST LINE OF SAID SOUTHEAST QUARTER; THENCE NORTHERLY, DEFLECTING RIGHT 90 DEGREES 03 MINUTES 19 SECONDS, 1325.61 FEET ALONG THE WEST LINE OF SAID SOUTHEAST QUARTER TO THE NORTHWEST CORNER OF SAID SOUTHEAST QUARTER; THENCE EASTERLY, DEFLECTING RIGHT 90 DEGREES 07 MINUTES 21 SECONDS, 1120.66 FEET ALONG THE NORTH LINE OF SAID SOUTHEAST QUARTER TO THE PLACE OF BEGINNING. CONTAINING 25.64 ACRES MORE OR LESS.

NOW KNOWN AS

PARCEL 1:

PART OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, DESCRIBED AS FOLLOWS;

BEGINNING AT THE SOUTHWEST CORNER OF THE NORTHWEST QUARTER OF SAID SECTION 8; THENCE NORTH 00 DEGREES 09 MINUTES 53 SECONDS WEST, (ASSUMED AND THE BASIS FOR THESE BEARINGS), 1488.47 FEET ALONG THE WEST LINE OF SAID NORTHWEST QUARTER TO THE SOUTHERLY RIGHT-Of-WAY LINE OF THE NORFOLK AND SOUTHERN RAILROAD; THENCE NORTH 65

DEGREES 10 MINUTES 45 SECONDS EAST, 2804.95 FEET ALONG SAID SOUTHERLY RIGHT-OF-WAY LINE TO THE NORTH LINE OF SAID NORTHWEST QUARTER; THENCE SOUTH 89 DEGREES 49 MINUTES 48 SECONDS EAST 116.37 FEET ALONG SAID NORTH LINE TO THE NORTHWEST CORNER OF THE NORTHEAST QUARTER OF SAID SECTION 8; THENCE SOUTH 88 DEGREES 46 MINUTES 46 SECONDS EAST, 2227.06 FEET ALONG THE NORTH LINE OF SAID NORTHEAST QUARTER TO THE WESTERLY RIGHT-OF-WAY LINE OF THE NORFOLK AND SOUTHERN RAILROAD; THENCE SOUTH 22 DEGREES 53 MINUTES 10 SECONDS WEST, 3478.34 FEET ALONG SAID WESTERLY RIGHT-OF-WAY LINE; THENCE SOUTH 22 DEGREES 55 MINUTES 15 SECONDS WEST, 2255.13 FEET ALONG SAID WESTERLY RIGHT-OF-WAY LINE TO THE SOUTH LINE OF THE SOUTHEAST QUARTER OF SAID SECTION 8; THENCE SOUTH 89 DEGREES 54 MINUTES 33 SECONDS WEST, 8.77 FEET ALONG THE SOUTH LINE OF SAID SOUTHEAST QUARTER TO THE SOUTHEAST CORNER OF THE SOUTHWEST QUARTER OF SAID SECTION 8; THENCE NORTH 90 DEGREES 00 MINUTES 00 SECONDS WEST, 1322.25 FEET ALONG THE SOUTH LINE OF SAID SOUTHWEST QUARTER TO THE SOUTHWEST CORNER OF THE EAST HALF OF SAID SOUTHWEST QUARTER; THENCE NORTH 00 DEGREES 04 MINUTES 08 SECONDS, EAST, 2657.35 FEET ALONG THE WEST LINE OF THE EAST HALF OF SAID SOUTHWEST QUARTER TO THE NORTH LINE OF SAID SOUTHWEST QUARTER; THENCE NORTH 89 DEGREES 44 MINUTES 08 SECONDS WEST, 1325.66 FEET ALONG SAID NORTH LINE TO THE PLACE OF BEGINNING. CONTAINING 346.08 ACRES MORE OR LESS.

PARCEL 2:

Tract 1:

THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, CONTAINING 40.46 ACRES.

Tract 2:

ALSO: THE SOUTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, CONTAINING 40.40 ACRES.

EXCEPTING THEREFROM: PART OF THE SOUTHWEST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, DESCRIBED AS FOLLOWS:

BEGINNING AT THE SOUTHWEST CORNER OF SAID SOUTHWEST QUARTER FOUND PER RECORD WITNESS; THENCE NORTHERLY, 527.00 FEET ALONG THE WEST LINE OF SAID SOUTHWEST QUARTER TO A PK NAIL; THENCE EASTERLY, DEFLECTING RIGHT90 DEGREES 00 MINUTES 16 SECONDS, 655.00 FEET PARALLEL WITH THE SOUTH LINE OF SAID SOUTHWEST QUARTER TO A 5/8” REBAR STAKE: THENCE SOUTHERLY, DEFLECTING RIGHT 89 DEGREES 59 MINUTES 44 SECONDS, 527.00 FEET PARALLEL WITH THE WEST LINE OF SAID SOUTHWEST QUARTER TO A P.K. NAIL ON THE SOUTH LINE OF SAID SOUTHWEST QUARTER; THENCE WESTERLY, DEFLECTING RIGHT 90 DEGREES 00 MINUTES 16 SECONDS, 655.00 FEET ALONG SAID SOUTH LINE TO THE PLACE OF BEGINNING. CONTAINING 7.92 ACRES.

CONTAINING AFTER SAID EXCEPTION 32.48 ACRES

Schedule 4.01(a)

Description of Certain Transactions Related to the Borrowers’ Stock

The Borrower has entered into a Project Management and Development Agreement with Midwest Bio Management LLC pursuant to which it has granted to each of Stephen J, Hogan and Troy D. Flowers an option to purchase additional membership units of the Borrower in an amount equal to 2 1/2% of the membership units outstanding at the time of closing the loan with AgStar Financial Services, PCA, for an option price of $100 per unit. Additionally, the Borrower has granted options to purchase additional membership units to the following persons and in the following amounts: Bonnie S. Jones -1 unit; Bruce Barger-1 unit; and David C. Dale- 3 units, all of such options being exercisable at a price of $1.00 per unit.

Schedule 4.01(1)

Description of Certain Threatened Actions, etc.

On March 3, 2006, the Borrower terminated a Financial Consulting Agreement (“FCA”) between the Borrower and Corporate Financial Associates, LLC (“CFA”) and its principal, Mr. Charles A. Spillman, CPA. The FCA was for consulting services to be performed for the securing of equity and debt financing for the Borrower’s proposed ethanol plant in Bluffion, Indiana. The Borrower terminated the FCA on two bases:

1.

It was not enforceable because neither CFA nor Mr. Spillman was a licensed broker to sell securities, and therefore could not perform an illegal contract;

2.

FCA and Mr. Spillman did not perform under the terms of the FCA, thereby delaying the commencement of the Borrower’s project and increasing its ultimate costs.

On March 13, 2006, CFA and Mr. Spillman, by their counsel, requested the Borrower to rescind the termination which the Borrower refused to do. On April 12, 2006 and July 14, 2006, counsel for CFA threatened to sue the company. On July 27, the Borrower replied to CFA and its counsel that the Borrower has been significantly damaged by CFA and Mr. Spillman’s actions, and forwarded to them a draft of Demand for Arbitration in the event that CFA made any further overtures toward litigation. The Borrower has heard nothing from CFA or its counsel since the July 27 letter. No claim has been formally asserted by either side pursuant to any arbitration tribunal or in a court of competent jurisdiction. The amount of monetary damages sought by CFA is unknown. At this point, absent the filing of any formal action and absent any discovery we are unable to offer any evaluation as to the likelihood of a favorable or unfavorable outcome, or to estimate amount of an y potential loss to the Borrower.

Schedule 4.01(k)

Location of Inventory and Farm Products; Third Parties in, Possession; Crops

1441 South Adams, PO Box 297, Bluffton, Indiana 46714

969 North Main, PO Box 297, Bluffton, Indiana 46714

Schedule 4.01(1)

Office Locations; Fictitious Names; Etc.

969 North Main Street, P.O. Box 297, Bluffton, Indiana 46714

Office of President and CEO

55 South State Avenue, Suite 315, Indianapolis, Indiana 46201

Schedule 4.01(p)

Intellectual Property

(see attached)

EXHIBIT D

ICM License Agreement

THIS LICENSE AGREEMENT (this “License Agreement”) is entered into and made effective as of the 6th day of December, 2006 (“Effective Date”) by and between Indiana Bio-Energy, LLC, an Indiana limited liability company (“OWNER”), and ICM, Inc., a Kansas corporation (“ICM’’).

WHEREAS, OWNER has entered into that certain Design-Build Lump Sum Contract dated December 6, 2006 (the “Contract”) with Fagen, Inc., a Minnesota corporation (“Fagen’’), under which Fagen is to design and construct a one hundred (100) million gallon per year ethanol plant for OWNER to be located in or near Bluffton, Indiana (the “Plant”);

WHEREAS, ICM has granted Fagen the right to use certain proprietary technology and information of ICM in the design and construction of the Plant; and

WHEREAS, OWNER desires from ICM, and ICM desires to grant to OWNER, a license to use such proprietary technology and information in connection with OWNER’s ownership, operation, maintenance and repair of the Plant, all upon the terms and conditions set forth herein;

NOW, THEREFORE, the parties, in consideration of the foregoing premises and the mutual promises contained herein and for other good and valuable consideration receipt of which is hereby acknowledged, agree as follows:

1.

Upon substantial completion of the Plant by Fagen pursuant to the terms of the Contract or, if later, payment by OWNER of all amounts due and owing to Fagen under the Contract, ICM grants to OWNER a limited license to use the Proprietary Property (hereinafter defined) solely in connection with the ownership, operation, maintenance and repair of the Plant, subject to the limitations provided herein (the “Purpose”).

2.

The “Proprietary Property” means, without limitation, documents, Operating Procedures (hereinafter defined), materials and other information that are furnished by ICM to OWNER in connection with the Purpose, whether orally, visually, in writing, or by any other means, whether tangible or intangible, directly or indirectly (including, without limitation, through Fagen) and in whatever form or medium including, without limitation, the design, arrangement, configuration, and specifications of (i) the combinations of distillation, evaporation, and alcohol dehydration equipment (including, but not limited to, pumps, vessels, tanks, heat exchangers, piping, valves and associated electronic control equipment) and all documents supporting those combinations; (ii) the combination of the distillers grain drying (DGD), and heat recovery steam generation (HRSG) equipment (including, but not limited to, pumps, vessels, tanks, heat exchangers, piping and associated electronic control equipment) and all documents supporting those combinations; and (iii) the computer system, known as the distributed control system (DCS and/or PLC) (including, but not limited to, the software configuration, programming, parameters, set points, alarm points, ranges, graphical interface, and system hardware connections) and all documents supporting that system. The “Operating Procedures” means, without limitation, the process equipment and specifications manuals, standards of quality, service protocols, data collection methods, construction specifications, training methods, engineering standards and any other information prescribed by ICM from time to time concerning the Purpose. Proprietary Property shall not include any information or materials that OWNER can demonstrate by clear and convincing written evidence: (i) was lawfully in the possession of OWNER prior to disclosure by ICM or Fagen; (ii) was in the public domain prior to disclosure by I CM or Fagen; (iii) was disclosed to OWNER by a third party other than Fagen having the legal right to possess and disclose such information or materials; or (iv) after disclosure by ICM or Fagen comes into the public domain through no fault of OWNER or its members, directors, officers, employees, agents, contractors, consultants or other representatives (hereinafter collectively referred to as “Representatives”). Information and materials shall not be deemed to be in the public domain merely because such information is embraced by more general disclosures in the public domain, and any combination of features shall not be deemed to be within the foregoing exceptions merely because individual features are in the public domain if the combination itself and its principles of operation are not in the public domain.

Indiana Bio-Energy, LLC D-1 December 6, 2006

3.

OWNER shall not use the Proprietary Property for any purpose other than the Purpose. OWNER shall not use the Proprietary Property in connection with any expansion or enlargement of the Plant. ICM and its Representatives shall have the express right at any time to enter upon the premises of the Plant to inspect the Plant and its operation to ensure that OWNER is complying with the terms of this License Agreement.

4.

OWNER’s failure to materially comply with the Operating Procedures shall void all guarantees, representations and warranties, whether expressed or implied, if any, that were given by ICM to OWNER, directly or indirectly through Fagen, concerning the performance of the Plant that ICM reasonably determines are materially affected by OWNER’s failure to materially comply with such Operating Procedures. OWNER agrees to indemnify, defend and hold harmless ICM, Fagen and their respective Representatives from any and all losses, damages and expenses including, without limitation, reasonable attorneys’ fees resulting from, relating to or arising out of Owner’s or its Representatives’ (a) failure to materially comply with the Operating Procedures or (b) negligent use of the Proprietary Property.

5.

Any and all modifications to the Proprietary Property made by OWNER or its Representatives shall be the property of ICM. OWNER shall promptly notify ICM of any such modification and OWNER agrees to assign all right, title and interest in such modification to ICM; provided, however, OWNER shall retain the right, at no cost, to use such modification in connection with the Purpose.

6.

ICM has the exclusive right and interest in and to the Proprietary Property and the goodwill associated therewith. OWNER will not, directly or indirectly, contest ICM’s ownership of the Proprietary Property. OWNER’s use of the Proprietary Property does not give OWNER any ownership interest or other interest in or to the Proprietary Property except for the limited license granted to OWNER herein.

7.

OWNER shall pay no license fee or royalty to ICM for OWNER’s use of the Proprietary Property pursuant to this License Agreement, the consideration for the limited license granted herein is certain payments by Fagen to ICM which is funded by and included in the amounts payable by OWNER to Fagen for the construction of the Plant under the Contract.

8.

OWNER may not assign the limited license granted herein, in whole or in part, without the prior written consent of ICM which will not be unreasonably withheld or delayed. Prior to any assignment, OWNER shall obtain from such assignee a written instrument, in form and substance reasonably acceptable to ICM, agreeing to be bound by all the terms and provisions of this License Agreement. Any assignment of this License Agreement shall not release OWNER from (i) its duties and obligations hereunder concerning the disclosure and use of the Proprietary Property by OWNER or its Representatives, or (ii) damages to ICM resulting from, or arising out of. a breach of such duties or obligations by OWNER or its Representatives. ICM may assign its right, title and interest in the Proprietary Property, in whole or part, subject to the limited license granted herein.

Indiana Bio-Energy, LLC D-2 December 6, 2006

9.

The Proprietary Property is confidential and proprietary. OWNER shall keep the Proprietary Property confidential and shall use all reasonable efforts to maintain the Proprietary Property as secret and confidential for the sole use of OWNER and its Representatives for the Purpose. OWNER shall retain all Proprietary Property at its principal place of business and/or the Plant. OWNER shall not at any time without ICM ‘s prior written consent, copy, duplicate, record, or otherwise reproduce the Proprietary Property, in whole or in part, or otherwise make the same available to any unauthorized person provided, OWNER shall be permitted to copy, duplicate or otherwise reproduce the Proprietary Property in whole or in part in connection with, and to the extent it is necessary and essential for, the Purpose so long as all such copies, duplicates or reproductions are kept at its principal place of business and/or the Plant and are treated th e same as any other Proprietary Property. OWNER shall not disclose the Proprietary Property except to its Representatives who are directly involved with the Purpose, and even then only to such extent as is necessary and essential for such Representative’s involvement. OWNER shall inform such Representatives of the confidential and proprietary nature of such information and, if requested by ICM, OWNER shall obtain from such Representative a written instrument, in form and substance reasonably acceptable to ICM, agreeing to be bound by all of the terms and provisions of this License Agreement to the same extent as OWNER. OWNER shall make all reasonable efforts to safeguard the Proprietary Property from disclosure by its Representatives to anyone other than permitted hereby. OWNER shall notify ICM immediately upon discovery of any unauthorized use or disclosure of the Proprietary Property, or any other breach of this License Agreement by OWNER or its Representatives, and shall cooperate with ICM in every r easonable way to help ICM regain possession of the Proprietary Property and prevent its further unauthorized use or disclosure. In the event that OWNER or its Representatives are required by law to disclose the Proprietary Property, OWNER shall provide ICM with prompt written notice of same so that ICM may seek a protective order or other appropriate remedy. In the event that such protective order or other appropriate remedy is not obtained, OWNER or its Representatives will furnish only that portion of the Proprietary Property which in the reasonable opinion of its or their legal counsel is legally required and will exercise its reasonable efforts to obtain reliable assurance that the Proprietary Property so disclosed will be accorded confidential treatment.

10.

OWNER agrees to indemnify ICM for any and all damages (including, without limitation, reasonable attorneys’ fees) arising out of or resulting from any unauthorized disclosure or use of the Proprietary Property by OWNER or its Representatives. OWNER agrees that ICM would be irreparably damaged by reason of a violation of the provisions contained herein and that any remedy at law for a breach of such provisions would be inadequate. OWNER agrees that ICM shall be entitled to seek injunctive or other equitable relief in a court of competent jurisdiction against OWNER or its Representatives for any unauthorized disclosure or use of the Proprietary Property without the necessity of proving actual monetary loss or posting any bond. It is expressly understood that the remedy described herein shall not be the exclusive remedy of ICM for any breach of such covenants, and ICM shall be entitled to seek such other relief or remedy, at law or in equity, to which it may be entitled as a consequence of any breach of such duties or obligations.

11.

The duties and obligations of OWNER under this License Agreement, and all provisions relating to the enforcement of such duties and obligations shall survive and remain in full force and effect notwithstanding any termination or expiration of the Contract or this License Agreement.

12.

ICM may terminate this License Agreement upon written notice to OWNER if OWNER willfully or wantonly (a) uses the Proprietary Property for any purpose, or (b) discloses the Proprietary Property to anyone, in each case other than permitted herein. Upon termination of this License Agreement, OWNER shall cease using the Proprietary Property for any purpose (including the Purpose) and. upon request by ICM, shall promptly return to ICM all documents or other materials in OWNER) s or its Representatives’ possession that contain Proprietary Property in whatever format, whether written or electronic, including any and all copies or reproductions of the Proprietary Property. OWNER shall permanently delete all such Proprietary Property from its computer hard drives and any other electronic storage medium (including any backup or archive system). OWNER shall deliver to ICM a written certificate which certifies that all electronic copies or re productions of the Proprietary Property have been permanently deleted.

Indiana Bio-Energy, LLC D-3 December 6, 2006

13.

The laws of the Stale of Kansas, United States of America (or US), shall govern the validity of the provisions contained herein, the construction of such provisions, and the interpretation of the rights and duties of the parties. Any legal action brought to enforce or construe the provisions of this License Agreement shall be brought in the federal or state courts located in Wichita, Kansas, and the parties agree to and hereby submit to the exclusive jurisdiction of such courts and agree that they will not invoke the doctrine of forum non conveniens or other similar defenses in any such action brought in such courts. Notwithstanding the foregoing, nothing in this License Agreement will affect any right ICM may otherwise have to bring any action or proceeding relating to this License Agreement against OWNER or its properties in the courts of any jurisdiction. In the event the Plant is located in, or OWNER is organized under the laws of, a country other than the US, OWNER hereby specifically agrees that any injunctive or other equitable relief granted by a court located in the State of Kansas, US, or any award. by a court located in the State of Kansas, shall be specifically enforceable as a foreign judgment in the country in which the Plant is located, OWNER is organized or both, as the case may be, and agrees not to contest the validity of such relief or award in such foreign jurisdiction, regardless of whether the laws of such foreign jurisdiction would otherwise authorize such injunctive or other equitable relief, or award.

14.

OWNER hereby agrees to waive all claims against ICM and ICM’s Representatives for any consequential damages that may arise out of or relate to this License Agreement, the Contract or the Proprietary Property whether arising in contract, warranty, tort (including negligence), strict liability or otherwise, including but not limited to losses of use, profits, business, reputation or financing. OWNER further agrees that the aggregate recovery of OWNER and Fagen (and everyone claiming by or through OWNER and Fagen), as a whole, against ICM and ICM’s Representatives, collectively, for any and all claims that arise out of, relate to or result from this License Agreement, the Proprietary Property or the Contract, whether arising in contract, warranty, tort (including negligence), strict liability or otherwise, shall not exceed One Million US Dollars ($1,000,000).

15.

The terms and conditions of this License Agreement constitute the entire agreement between the parties with respect to the subject matter hereof and supersede any prior understandings, agreements or representations by or between the parties, written or oral. Any rule of construction to the effect that any ambiguity is to be resolved against the drafting party shall not be applicable in the Indiana Bio-Energy, LLC interpretation of this License Agreement. This License Agreement may not be modified or amended at any time without the written consent of the parties.

16.

All notices, requests, demands reports, statements or other communications (herein referred to collectively as “Notices”) required to be given hereunder or relating to this License Agreement shall be in writing and shall be deemed to have been duly given if transmitted by personal delivery or mailed by certified mail, return receipt requested, postage prepaid, to the address of the party as set forth below. Any such Notice shall be deemed to be delivered and received as of the date so delivered, if delivered personally. or as of the third business day following the day sent, if sent by certified mail. Any party may, at any time, designate a different address to which Notices shall be directed by providing written notice in the manner set forth in this paragraph.

17.

In the event that any of the terms. conditions, covenants or agreements contained in this License Agreement, or the application of any thereof, shall be held by a court of competent jurisdiction to be invalid, illegal or unenforceable, such term, condition, covenant or agreement shall be deemed void ab initio and shall be deemed severed from this License Agreement. In such event, and except if such determination by a court of competent jurisdiction materially changes the rights, benefits and obligations of the parties under this License Agreement, the remaining provisions of this License Agreement shall remain unchanged unaffected and unimpaired thereby and, to the extent possible, such remaining provisions shall be construed such that the purpose of this License Agreement and the intent of the parties can be achieved in a lawful manner.

18.

The duties and obligations herein contained shall bind, and the benefits and advantages shall inure to, the respective successors and permitted assigns of the parties hereto.

Indiana Bio-Energy, LLC D-4 December 6, 2006

19.

The waiver by any party hereto of the breach of any term, covenant agreement or condition herein contained shall not be deemed a waiver of any subsequent breach of the same or any other term, covenant, agreement or condition herein, nor shall any custom. practice or course of dealings arising among the parties hereto in the administration hereof be construed as a waiver or diminution of the right of any party hereto to insist upon the strict performance by any other party of the terms, covenants, agreement and conditions herein contained.

20.

In this License Agreement, where applicable, (i) references to the singular shall include the plural and references to the plural shall include the singular, and (ii) references to the male, female, or neuter gender shall include references to all other such genders where the context so requires.

December 6, 2006.

IN WITNESS WHEREOF, the parties hereto have executed this License Agreement, the Effective Date of which is indicated on page 1 of this License Agreement

OWNER:			ICM:
INDIANA BIO-ENERGY, LLC an			ICM, Inc.
By:	/s/		By:	/s/
Title:	Chairman		Title:	President and CEO
Date Signed:		12/06/2006	Date Signed:		12/14/2006
Address for giving notices:			Address for giving notices:
969 North Main Street			301 N First Street
P.O. Box 297			Colwich, KS 67030
Bluffton, IN 46714

Indiana Bio-Energy, LLC D-5 December 6, 2006

Schedule 4.01(t)

Environmental Compliance

(See attached)

Confidential- Attachment A

October 6, 2005

Attn: Troy Flowers

Midwest Bio Management

(Project: Indiana Bio Energy)

Troyflowers@hotmail.com

317-638-2306

Subject: Environmental Permitting Proposal for a 100 MM GPY Ethanol

Manufacturing Plant (gas, 100% DDGS) in Bluffton, IN

Dear Mr. Flowers:

Per your request for assistance in securing state approval to start construction, the attached is my estimate to prepare the appropriate environmental applications and plans for a selected site. You will be required to obtain other local permits in order to start construction – this proposal is strictly for environmental permitting. All billing will be on a Time & Material basis at the following rates:

Personnel	Rate
Engineering Specialist I	$150 per hour
Process Engineer I	$150 per hour
Engineering Specialist II	$110 per hour
Designer II	$70 per hour
Administrative	$46 per hour

ICM’s billing for time is based on the above hourly rates with no additional markup. Travel and travel expenses are billed at cost plus 15%. Other billings may include subcontractor and/or necessary consultant costs and will be billed biweekly on a time & material plus 15% basis. Applicable sales tax, if any, will be added accordingly. Any use, gross receipts, or other excise taxes and charges imposed by any federal, state, or municipal law, ordinance, or regulation upon the provision of services covered under this Agreement are also not included and will be billed as required.

ICM’s experience is that a Time and Materials type agreement is generally preferable for the client due to the unexpected circumstances that may arise during environmental permitting. Additional costs may be imposed on the project of ICM is required to address significant public comment and/or assist in lengthy agency negotiations regarding specific permit terms and conditions.

The following costs (if required) are not included in the proposal, permit application fees, amended submittals, ambient air sampling, continuous emission monitoring, health risk.

Attachment A

Before Ground Breaking		Estimated Costs	Check Box For ICM Task
201.	Air construction Permit (Modeling Costs Included)	$10,000 - $25,000	X .
202.	Stormwater Notice of Intent (General Permit) – Construction	$500 - $1000	X .
203.	Stormwater Pollution Prevention Plan – Construction	$4,000 - $6,000	X .
204.	State Historical Society Research	$450	.
205.	Endangered Species Research	$450	.
206.	Health Risk Assessment (state dependent)	$20,000 - $50,000	.
207.	Above Ground Storage Tank General Permit Application (state dependant)	$3,000 - $5,000	X .
208.	Odor Action Plan (Optional)	$1,500	.
209.	Basic Environmental Assessment (state dependent)	$4,500 - $10,000	X .
211.	Corps of Engineers Section 404 Permit (if wetlands are present)	$1,500 - $5,000	X .
212.	Ethanol ECS (Environmental Compliance System) (optional)	$5,500	.
295.	Environmental Project Management	$1,000 - $5,000	See Notes
Before Operation
221.	Industrial Well Permit/Registration (ICM recommends application prior to construction)	$3,000 - $40,000	X .
222.	Water Discharge Permit (NPDES, POTW, Irrigation, and/ or Irrigation Plan)	$4,000 - $15,000	X .
223.	Hydrostatic Testing Water Discharge Permit	$1,500 - $2,500	.
224.	Stormwater Notice of Intent (General Permit) - Industrial Operation	$500 - $1,000	X .
225.	Stormwater Pollution Prevention Plan - Industrial Operation	$4,000 - $6,000	X .
226.	Risk Management Plan	$1,500 - $3,000	X .
227.	Spill Prevention Controls and Countermeasures Plan (PE Certification Not Included)	$5,000 - $12,000	X .
228.	Public Water Supply Permit	$3,500 - $5,500	X .
229.	Permit from the Alcohol, Tobacco Tax and Trade Bureau	$500 - $1,000	X .
231.	County Health Department Septic System Permit (geological work extra)	$1,500 - $3,000	.
232.	Facility Response Plan	$5,000 - $12,000	X .
233.	Site Security Plan	$1,200 – $1,700	X .
234.	NSPS Notifications (includes 4 notifications)	$500 - $1,200	X .
30 – 90 Days After Startup
241.	CESQG Plan (including classification of waste)	$5,000 - $8,000	.
242.	Tier II Initial Reporting	$2,500	.
243.	Emissions Testing Contractor Support	$2,500 - $5,000	.
244.	Operations Monitoring Plan, CEMs, PEMs – evaluation, selection and/or preparation	$ 2,500 - $5,000	.
180 Days After Startup (After Emissions Testing)
251.	Air Permit to Operate	$10,000 - $12,000	.
Annually After Startup
261	Annual Emission Inventory	$3,500 - $4,500 per year	.
262.	Tier II Reporting	$2,500 - $3,000 per year	.
263.	Form R Reporting	$3,000 $4,000 per year	.

Confidential- Attachment A

SERVICE AGREEMENT

Concluded

11.

TIME TO BAR TO LEGAL ACTION

A.

Period: All legal actions, including claims for indemnity, by either party against the other for failure to perform or to perform properly under this Agreement or any legal action however denominated essentially based upon such breach shall be barred 2 years from commencement of the period defined in B.

B.

Commencement of Period: The period commences when the claimant knew or should have known of its claim. But, in any event, the period commences for:

1.

Client claims when Consultant’s performance is substantially complete; and

2.

Consultant claims when final payment by client has been made.

12.

ENTIRE AGREEMENT. In the event any services provided for herein are authorized by the client to be performed or caused to be performed by Consultant prior to the effective date of this agreement, such Services shall be deemed to have been performed under this Agreement. This Agreement, including all attachments incorporated herein by reference, constitutes the entire Agreement between the parties. Any oral agreements, understandings, proposals, purchase orders or negotiations are intended to be integrated herein and to be superseded by the terms and conditions of this Agreement.

AUTHORIZATION TO PROCEED:

INDIANA BIO-ENERGY, LLC an		ICM, Inc.
By:	/s/ Stephen J. Hogan	By:	/s/
Title:	President	Title:	Env. Mgr.
Date	10/17/2005	Date	10/06/2005

SA-3

Attachment B

Explanation of Permits and Scope of Work

201.)   

Air Construction Permit:

An air construction permit application package will be prepared for the owners review and approval. It will then be submitted to the state for review. The air construction permit allows a company to build, initially operate, and test a new source of air pollution. This permit typically is valid from 12 to 24 months (depending on which state) and extensions may be granted. Application fees for the construction permit vary by state and will be paid by the owner. The air permit must be obtained before construction (pouring concrete) and in some states before dirt work can occur.

202.)   

Storm Water Notice Of Intent (General Permit) - Construction

A Storm Water Notice of Intent must be submitted before grading can begin. This Notice is to make the state aware that grading activities are to begin. State and federal storm water programs are in place to protect rainfall, snow melt, and other storm water from becoming contaminated with pollutants. The amount of time that this permit must be submitted prior to work commencing varies by state. ICM will prepare the NOI for the owners review. Any fees associated with the NOI will be paid by the owner.

203.)   

Storm Water Pollution Prevention Plan - Construction

A Storm Water Pollution Prevention Plan for Construction details how storm waters will be protected from exposure to pollutants. Also, included in this plan are details to prevent excessive soil erosion until vegetation begins growing. Once the final plant footprint and grading plan have been prepared by the civil engineering company, ICM will prepare the construction Plan that must be maintained on the construction site before grading commences.

204.)   

State Historical Society Research

State Historical Society checks for the existence of historical sites (including Indian burial grounds) at the site where construction and industry are to occur. ICM will initiate a historical review in the surrounding area and obtain state approval that there are no historical issues associated with the site. Any filing fees are the owner’s responsibility.

205.)   

Endangered Species Research

Endangered Species reviews consist of a record of review for protected species (state and federal listed endangered or threatened), rare natural communities, state lands and waters in the project area, including review by personnel representing state parks, preserves, recreation areas, wetlands, fisheries, and wildlife. ICM will initiate an endangered species review in the surrounding area and obtain state approval that there are no endangered species issues associated with the site. Any filing fees are the owner’s responsibility.

206.)   

Health Risk Assessment

A Health Risk Assessment looks at the potential for risks to human health due to the existence and operation of the facility. The requirement for this assessment varies by state. If this is required, ICM will contract with a consultant skilled in the preparation of approvable health risk assessment techniques for the given state. Any filing fees are the owner’s responsibility.

207.)   

Above Ground Storage Tank General Permit Application

Storage tanks are typically registered through the state environmental agency and the fire marshal for environmental and fire safety reasons. ICM in cooperation with the tank manufacturing and construction company prepare the required permit application package. Any filing fees are the owner’s responsibility.

Confidential – Attachment B

208.)   

Odor Action Plan

An Odor Action Plan is a “Good Neighbor” approach to looking at community concerns regarding odor from a facility. If requested by the owner, ICM will prepare an “Odor Action Plan.” The plan typically contains methods of validating the odor complaint and mitigation of the odor.

209.)   

Basic Environmental Assessment

Some States require that reasonably available environmental data about a project’s environmental be researched and presented in a document made available for public review and comment. If required by a state, ICM will prepare the Environmental Assessment. In some cases, experts may need to be retained. Any filing fees are the owner’s responsibility.

211.)

Corps Of Engineers Section 404 Permit

Building on or disturbing land that is wet even part of the year may qualify the land as a “wetland” under federal regulations. The section 404 permit allows and/or restricts activities that can occur with the land. This permit also addresses development of areas in floodplains. ICM will prepare the permit application. Any filing fees are the owner’s responsibility.

212.)

Environmental Compliance System (ECS)

The ECS is a user friendly Microsoft© Excel Spreadsheet designed to help a facility monitor, track, and· record all required permits and permit requirements. This program is designed to help a facility meet environmental permitting obligations for every stage of permitting from the very early stages of environmental permitting, through several years of operations. This tool is not required from a permitting standpoint, but highly recommended. Additional assistance can be provided to help set up and populate the spreadsheet.

221.)

Industrial Well Permit/Registration

Industrial Well Permit/Registration is typically required for construction of a new well and use of water in large quantities from a well or body of water so that interference with neighboring wells does not occur. ICM will prepare the permit/registration application. Depending on the state, this permit may require that ICM retain independent and local consultants skilled in water allocation approval. Any filing fees are the owner’s responsibility.

222.)

Water Discharge Permit (NPDES, POTW, Irrigation, and/or Irrigation Plan)

These permits are associated with discharging wastewater from the facility (typically process wastewater, cooling tower blow-down, boiler blow-down, etc.) to either a body of water (NPDES), a public treatment system (POTW), and/or to ground applications in the form of irrigation. If irrigation to crop land occurs an Irrigation Plan is also necessary, and details how the irrigation amounts and contents will affect certain soils and crops. These permits aid in the prevention of pollutants from entering natural waters and crops where natural ecosystems and food supplies can be endangered. ICM will prepare the water discharge permit application package depending on the customer’s requirements. Any filing fees are the owner’s responsibility.

223.)

Hydrostatic Testing Water Discharge Permit

A Hydrostatic Testing Water Discharge Permit allows for the temporary discharge of water used for testing the integrity of vessels and equipment as a part of construction activities. ICM will prepare the discharge permit application package or obtain approval from a facility (POTW) licensed to discharge such water. Any filing fees are the owner’s responsibility.

Confidential – Attachment B

224.)

Storm Water Notice of Intent (General Permit) -- Industrial Operation

A Storm Water Pollution Prevention Plan for Industrial Operation is similar to the same permit for construction in that it details how storm waters will be protected from exposure to pollutants after the plant begins operation. Also, included in this plan are details to prevent excessive soil erosion until vegetation begins growing. ICM will prepare the NOI for the owners review. Any fees associated with the NOI will be paid by the owner.

225.)   

Storm Water Pollution Prevention Plan -- Industrial Operation

A Storm Water Pollution Prevention Plan for Industrial Operation is similar to the same permit for construction in that it details how storm waters will be protected from exposure to pollutants, however, this plan focuses on normal industrial activities at the site after the plant begins operation. ICM will prepare the Industrial SWPPP for the owner’s review.

226.)   

Risk Management Plan

This goal of this plan is to prevent the release of chemicals that could cause serious harm to human health or the environment and to reduce the severity of releases that do occur. Included in this plan are an offsite consequence analysis, a five-year accident history, an accident prevention program, and an emergency response program. This plan requires updating at least every five years, and within 6 months of making certain changes onsite. Ethanol plants typically require a risk management plan that covers storing denaturants and/or ammonia. This plan must be in place prior to storage of covered chemicals on-site. ICM will prepare the Risk Management Plan for the owner’s review and submission.

227.)   

Spill Prevention Controls And Countermeasures Plan

Spill Prevention Controls and Countermeasures Plans are written to address the likelihood and prevention of spills of petroleum based substances as well as what actions are to be taken in the event that a spill does occur. Proposed regulations require the plan be in place before storage of denaturant. ICM will prepare the SPCC Plan for the owner’s review.

228.)   

Public Water Supply Permit

There are two reasons to receive a Public Water Supply Permit. One, if there are more than 25 people on a site the access to the public water supply must be permitted, and two, if the process water is going to come from the public water supply, the quantity of water will necessitate a permit. Public water supplies can not always supply quantities required by some industries, and other sources may need to be evaluated. ICM will prepare the Public Water Supply Permit for the owner’s review.

229.)   

Permit From Of Alcohol, Tobacco Tax And Trade Bureau

This permit allows the facility to manufacture ethanol. In some states, registration with the state agency may also be required. ICM will prepare the BATF permit application for the owner’s review. Any filing fees are the owner’s responsibility.

231.)   

County Health Department Septic System Permit

A septic system permit must be obtained if the sanitary sewer for a facility is to be tied into a leach field or septic pond instead of a local POTW. ICM will prepare the septic system permit application for the owner’s review. Any filing fees are the owner’s responsibility.

Confidential – Attachment B

232.)

Facility Response Plan

A Facility Response Plan is required when a facility stores oil or oil containing products in quantities greater than 1,000,000 gallons and there is a potential for that oil to come in contact with navigable waters. The FRP is designed to ensure that certain facilities have adequate oil spill response capabilities. This plan is part of the SPCC requirements. ICM will prepare this plan in conjunction with the SPCC for review and implementation.

233.)

Site Security Plan

A site security plan is required by the Department of Transportation and is a plan designed to enhance the security of hazardous materials being transported. ICM has prepared a site security plan which has been approved by the DOT. This plan can easily be modified to suit an individual. Additional assistance can be provided to modify this plan to a specific facility.

234.)

NSPS Notifications

A NSPS notification is required before and after the start of construction and operations for several processes or pieces of equipment. ICM will prepare a notification letter (and form if needed) for the owner to submit to comply with these regulations. This activity consists of four (4) notifications.

241.)

CESQG Plan

The Resource Conservation and Recovery Act covers disposal of solid and hazardous wastes. Typically, ethanol plants generate such a small quantity of hazardous and solid waste that they are either classified as a conditionally exempt small quantity generator (CESQG). The classification is entirely dependent on the amount of hazardous waste generated and can change over time. While a Plan is not required by regulation for CESQG sources, a Plan can be prepared by ICM so that the plant can document on a monthly basis that it is a CESQG and therefore not subject to hazardous waste regulations.

242.)   

Tier II Initial Reporting

Tier II reporting lists hazardous chemicals stored on-site. The information provides the local emergency officials and the fire department that potential hazards exist at a site. A Tier II report must be completed with in 90 days of operating. After the initial report, the Tier II is due annually. ICM will help prepare and submit this report to the appropriate authorities.

243.)

Emissions Testing Contractor Support

Each facility will be required to complete stack testing after the plant begins operations. ICM will help obtain bid specification, select a vendor, review testing protocol, and review final text reports in accordance with the facility’s air permit.

244.)

Operations Monitoring Plan, CEMs, PEMs

Depending on the size of boiler or thermal oxidizer, a facility may be required to install a CEMs or PEMs, or complete an operational monitoring plan. ICM will help the facility find a vendor or prepare the operations monitoring plan as required by a facility’s air permit

251.)   

Air Permit To Operate

The Air Operation Permit allows the company to operate the pollutant source within certain requirements detailed in the permit. This permit is typically valid for up to five years, and may be renewed. There is an annual fee associated with this permit that is based upon the previous year’s actual emissions. ICM will prepare the Air Operating Permit Application package for the owner’s review. Any filing fees are the owner’s responsibility.

Confidential – Attachment B

261.)   

Annual Emission Inventory

This is an annual accounting to the governing agencies of actual pollution generated by the facility. Annual Air Operating Permit Fees are based upon this report. ICM will prepare the annual air emission inventory for the owner’s review and submission. Any emission fees are the owner’s responsibility.

262.)   

Tier 2 Reporting

As mentioned above, Tier II reporting lists hazardous chemicals stored on-site. The information provides the local emergency officials and the fire department that potential hazards exist at a site. This is an annual requirement. ICM will prepare the annual Tier II report for the owner’s review and submission. Any submission fees are the owner’s responsibility.

263.)   

Form R Reporting

Form R reporting is required for facilities that process or otherwise use certain listed chemicals above a regulated quantity. Reporting includes documenting all releases to the environment for those chemicals. This is an annual requirement. ICM will prepare the annual Form R report for the owner’s review and submission. Any submission fees are the owner’s responsibility.

295.)   

Environmental Project Management

This category is for ICM’s project management costs and includes project management and miscellaneous work that arises during the preparation of deliverables not specifically anticipated. An example could be extended or unpredicted research at the request of the customer or agency.

Confidential – Attachment B

Schedule 5.01(o)

Management

Edgar Seward, Jr., General Manager and Director

Indiana Bio- Energy, LLC

969 North Main Street

P. O. Box 297

Bluffton, Indiana 46714

Indiana Bio-Energy, LLC

Board Members

Troy Flowers

Dave Geary

Steve Hogan

Jim Jackson

Michael King

Ron Miller

John Mullins

Michael Odai

Randy Plummer

John Roembke

Jim Schriver

Edgar Seward

Alani Treuer

Mike Willis

Schedule 5.02(a)

Description of Certain Liens, Lease Obligations, etc.

None

Schedule 5.02(k)

Transactions with Affiliates

(see attached)

IBE Investor	Entity	Transaction
Steve Hogan	Midwest Bio-Management	Management services agreement with IBE
Troy Flowers	Midwest Bio-Management	Management services agreement with IBE
David Dale	Dale & Huffman Law Firm	Provide legal services to IBE. Contractual relationship with David Dale through December 2006. Currently, David Dale is providing services on a limited basis on T & M for property related items.
Mike Swinford	Jackson-Briner JV	J-B has contractual agreement in place with IBE to manage construction on site for items outside of design-builder’s scope of work.
Tom Jackson	Jackson-Briner JV	J-B has contractual agreement in place with IBE to manage construction on site for items outside of design-builder’s scope of work.
Jim Swinford	Jackson-Briner JV	J-B has contractual agreement in place with IBE to manage construction on site for items outside of design-builder’s scope of work.
Aventine Renewable Energy	Aventine Renewable Energy	Aventine has a contractual agreement in place with IBE to provide ethanol marketing services
Commodity Specialists Company	Commodity Specialists Co.	Commodity Specialists Company has a contractual agreement in place with IBE to provide DOGS marketing services
Cargill Biofuels Investments, LLC	Cargill AgHorizons	Cargill AgHorizons has a contractual agreement in place with IBE to provide corn origination services
Edgar Seward	Edgar Seward	Edgar Seward has a management contract with IBE to provide General management services
Fagen Energy, Inc.	Fagen, Inc.	Fagen, Inc. has a contractual agreement in place with IBE to provide design-build services.

EX-10

Exhibit 10.44

FIRST SUPPLEMENT

TO THE MASTER LOAN AGREEMENT

(CONSTRUCTION AND TERM LOAN)

THIS FIRST SUPPLEMENT TO THE MASTER LOAN AGREEMENT (this “First Supplement”), dated as of February 27, 2007, is between AGSTAR FINANCIAL SERVICES, PCA (the “Lender”) and INDIANA BIO-ENERGY, LLC, an Indiana limited liability company (the “Borrower”), and supplements and incorporates all of the provisions of that certain Master Loan Agreement, dated as of even date herewith, between the Lender and the Borrower (as the same may be amended, modified, supplemented, extended or restated from time to time, the “MLA”).

1.

Definitions. As used in this First Supplement, the following terms shall have the following meanings, Capitalized terms used and not otherwise defined in this First Supplement shall have the meanings attributed to such terms in the MLA. Terms not defined in either this First Supplement or the MLA shall have the meanings attributed to such terms in the Uniform Commercial Code, as enacted in the State of Minnesota and as amended from time to time.

“Construction Letters of Credit” shall have the meaning specified in Section 7(b).

“Construction Letter of Credit Liabilities” means, at any time, the aggregate maximum amount available to be drawn under all outstanding Construction Letters of Credit (in each case, determined without regard to whether any conditions to drawing could then be met) and all unreimbursed drawings under Construction Letters of Credit.

“Draw Request” means a request for an advance against the Construction Note prior to the Conversion Date, submitted by the Borrower to the Lender and the Disbursing Agent, in accordance with the terms and conditions of the Disbursing Agreement.

“Sworn Construction Statement” means a sworn construction statement, sworn to by the Borrower and the General Contractor, and of a form and substance acceptable to the Lender, a sample of which is attached hereto as Exhibit A.

2.

The Construction Loan. On the terms and conditions set forth in the MLA and this First Supplement, Lender agrees to make a Construction Loan to the Borrower (the “Construction Loan”), by means of multiple advances in an amount not to exceed $90,000,000.00 (the “Construction Loan Commitment”). Under the Construction Loan, amounts borrowed and repaid or prepaid may not be re-borrowed.

3.

Purpose. Advances under the Construction Loan may be used to fund the payment of Project Costs, including closing costs and fees associated with the Construction Loan. The Borrower agrees that the proceeds of the Construction Loan are to be used only for the purposes set forth in this Section 3.

4.

Construction Loan Interest Rate. Subject to the provisions of the MLA, the Construction Loan shall bear interest at a rate equal to the LIBOR Rate plus 350 basis points. The computation of interest, amortization, maturity and other terms and conditions of the Construction Loan shall be as provided in the Construction Note, provided, however, in no event shall the applicable rate exceed the Maximum Rate.

5.

Construction Loan Payments. The Borrower will pay interest on the Construction Loan (i) quarterly in arrears on the first day of each January, April, July and October (each such date a “Quarterly Payment Date”), commencing on the first Quarterly Payment Date following the date on which the first Advance is made on the Construction Loan, and continuing on each Quarterly Payment Date thereafter until the Conversion Date. If any Quarterly Payment Date is not a Business Day, then the interest payment then due shall be paid on the next Business Day and shall continue to accrue interest until paid. On the Conversion Date, all outstanding accrued interest shall be paid in full.

6.

Construction Loan Term. The Construction Loan shall be available to Borrower for a period beginning on the Closing Date and ending on the Conversion Date. On the Conversion Date, the amount of the then unpaid principal balance of the Construction Loan and any and all other amounts due and owing hereunder or under any other Construction Loan Document relating to the Construction Loan shall be due and payable, except for that part, if any, of the Construction Loan which is converted into a Term Loan pursuant to the terms of the MLA and this First Supplement and a Term Revolving Loan pursuant to the Second Supplement to the Master Loan Agreement.

7.

Disbursement of Construction Loan.

(a)

Deposit Account. Disbursements of the Construction Loan will be made by the Lender in the manner provided in the Disbursing Agreement. Subject to Section 7(c) below, all disbursements will be made by wire transferring such funds to the Disbursing Account established pursuant to the Disbursing Agreement in the amount of each Draw Request which is approved pursuant to the Disbursing Agreement. All Construction Loan funds will be considered to have been advanced to and received by the Borrower upon, and interest on such funds will be payable by the Borrower from and after, their deposit in such deposit account.

(b)

Letter of Credit Commitment to Issue. The Borrower may request Advances by the Lender, and the Lender, subject to the terms and conditions of the MLA and this First Supplement, may, in its sale discretion, issue letters of credit under the Construction Loan for any Borrower’s account (such letters of credit, being hereinafter referred to collectively as the “Construction Letters of Credit”); provided, however, that:

(i)

the aggregate amount of outstanding Construction Letter of Credit Liabilities under the Construction Loan shall not at any time exceed the amount of $3,000,000.00;

(ii)

the sum of the outstanding Construction Letters of Credit plus the outstanding Construction Advances shall not at any time exceed the Construction Loan;

(iii)

the expiration date of a Construction Letter of Credit advanced under the Construction Loan shall be no later than the Conversion Date.

Any Construction Letter of Credit issued under this Section 7 is subject to the provisions of Section 2.05 of the MLA.

(c)

Lender’s Application of Loan Proceeds. Notwithstanding the provisions of Section 7(a), above, the Lender may elect, upon ten (10) days’ notice to the Borrower, to use the Construction Loan funds to pay, as and when due, any Construction Loan fees owing to Lender, interest on the Construction Loan, release charges under prior mortgages on the Property, and legal fees and disbursements of the Lender’s attorneys which are payable by the Borrower, unless Borrower causes such amount(s) to be paid within said ten (10) days. Such payments may be made, at the option of the Lender, by debiting or charging the Construction Loan funds in the amount of such payments.

(d)

Cost Information. All disbursements will be based upon a detailed breakdown of the Project Costs as set forth in the Sworn Construction Statement attached as Exhibit A to the MLA. In the event that the Borrower becomes aware of any change in the approved Project Costs, which would increase the total cost in excess of $50,000.00 above the amount shown on the attached Sworn Construction Statement, the Borrower shall immediately notify the Lender in writing and promptly submit to the Lender for its approval a revised Sworn Construction Statement. No further disbursements need be made by the Disbursing Agent unless and until the revised Sworn Construction Statement is approved. The Lender reserves the right to approve or disapprove any revised Sworn Construction Statement in its reasonable discretion.

2

(e)

Loan in Balance, Deposit of Funds by Borrower. The Borrower shall keep the Loan in balance as provided in this Section. If the Lender at any time reasonably determines that the amount of the undisbursed Construction Loan proceeds together with contributed equity to Borrower and the undisbursed proceeds of subordinate indebtedness extended to Borrower, will not be sufficient to fully pay for all costs required to complete the construction of the Project in accordance with the approved Plans and Specifications and for all Project Costs to be incurred by the Borrower, whether such deficiency is attributable to changes in the work of construction or in the Plans and Specifications or to any other cause, the Lender may make written demand on the Borrower to deposit in an escrow fund to be established with the Lender an amount equal to the amount of the shortage reasonably determined by the Lender. The Borrower shall then deposit the required fun ds with the Lender within ten (l0) days after the date of the Lender’s written demand. No further disbursements shall be made by the Disbursing Agent until those funds are deposited by the Borrower in the escrow fund. Whenever the Lender has any such funds on deposit in such escrow fund, it shall make all future advances for Project Costs from the escrow fund before making any further advances under the Loan.

(f)

Additional Security. The Borrower grants to the Lender a security interest in, as additional security for the performance of the Borrower’s obligations under the MLA and this First Supplement and the Loan Documents, its interest in all funds held by the Disbursing Agent, whether or not disbursed, all funds deposited by the Borrower with the Lender under this First Supplement, all governmental permits obtained for the lawful construction of the Project, and all reserves, deferred payments, deposits, refunds, cost savings, and payments of any kind relating to the construction of the Project. Upon any default of the Borrower, the Lender may use any of the foregoing for any purpose for which the Borrower could have used them under this First Supplement or with respect to the construction or financing of the Project. The Lender will also have all other rights and remedies as to any of the foregoing which are provided under applicable law or in equity.

(g)

Conditions Precedent to Construction Advances. The Lender’s obligation to make Construction Advances under the Construction Note shall be subject to the terms, conditions and covenants set forth in the MLA and this First Supplement, including, without limitation, the following further conditions precedent:

(i)

Representations and Warranties. The representations and warranties set forth in the MLA and this First Supplement are true and correct in all material respects as of the date of the request for any Advance, except as disclosed in writing to the Lender, to the same extent and with the same effect as if made at and as of the date thereof;

(ii)

Draw Request. The Borrower has submitted to the Lender and the Disbursing Agent a Draw Request for each such Advance, which such Draw Request shall comply with the requirements contained in the MLA, this First Supplement and the Disbursing Agreement;

(iii)

Compliance With Disbursing Agreement. All of the terms and conditions of the Disbursing Agreement have been satisfied in all material respects with respect to each such Advance;

(iv)

Sworn Construction Statement. The Borrower shall furnish to the Lender an updated Sworn Construction Statement setting forth the Contractor(s) providing services or materials with respect to specific portions of the construction of the Project and setting forth the amounts actually incurred and paid, or to be incurred, in completing construction of the Project. Such updated Sworn Construction Statement shall be sworn to by the Borrower and the General Contractor to be a true, complete and accurate account of all costs actually incurred and an accurate estimate of all costs to be incurred in the future;

(v)

No Defaults. The Borrower is not in default under the terms of the MLA, the Loan Documents or any other agreement to which the Borrower is a party and which relates to the construction of the Project;

(vi)

Loan in Balance. The Loan is in balance, as required by the provisions of Section 7(e), above;

3

(vii) Government Action. No license, permit, permission or authority necessary for the construction of the Project has been revoked or challenged by or before any Governmental Authority; and

(viii) Permits. Provide to the Lender copies of all permits obtained for construction of the Project.

(h)

Suspension of Construction. If the Lender in reasonably good faith determines that any work or materials do not conform to the approved Plans and Specifications or sound building practice, or otherwise departs from any of the requirements of the MLA and this First Supplement, the Lender may require the work to be stopped and withhold disbursements until the matter is corrected. In such event, the Borrower will promptly correct the work to the Lender’s reasonable satisfaction. Provided Lender’s actions were reasonable, in good faith, and the work or materials did not conform to the approved Plans and Specifications or sound building practice, no such action by the Lender will affect the Borrower’s obligation to complete the Project on or before the Completion Date.

(i)

Inspections. The Borrower and the Inspecting Engineer shall be responsible for making inspections of the Project during the course of construction and shall determine to their own reasonable satisfaction that the work done or materials supplied by the Contractors to whom payment is to be made out of each Advance has been properly done or supplied in accordance with the applicable contracts with such Contractors. If any work done or materials supplied by a Contractor are not satisfactory to the Borrower or the Inspecting Engineer, the Borrower will immediately notify the Lender in writing of such fact. It is expressly understood and agreed that the Lender or its authorized representative may conduct such inspections of the Project as it may deem necessary for the protection of the Lender’s interest, and, specifically, an architectural or engineering firm acceptable to the Lender may, at the option of the Lender and at the expense of the Borrower, conduct such periodic inspections of the Project, prepare such written progress reports during the period of construction, prepare such written reports upon completion of the Project and sign such Draw Requests, as the Lender may reasonably request, provided that no inspection shall unreasonably delay progress on the Project. - Any inspections which may be made of the Project by-the Lender or its representative will be made, and all certificates issued by the Lender’s representative will be issued, solely for the benefit and protection of the Lender, and that Borrower may not rely thereon. The Lender is under no duty to supervise or inspect construction or examine any books and records. Any inspection or examination by the Lender is for the sale purpose of protecting the Lender’s security and preserving the Lender’s rights under the MLA and this First Supplement. No default of the Borrower will be waived by any inspection by the Lender. In no event will any inspection by the Lender be a representation that there has been or will be compliance with the Plans or Specifications or that the construction is free from defective materials or workmanship.

(j)

No Waiver. Any waiver by the Lender of any condition of disbursement must be expressly made in writing. The making of a disbursement prior to fulfillment of one or more conditions thereof shall not be construed as a waiver of such conditions, and the Lender reserves the right to require their fulfillment prior to making any subsequent disbursements.

8.

Conversion of Construction Loan Into Term Loan. Subject to the terms and conditions contained in the MLA and this First Supplement, a portion of the Construction Loan may be converted into a Term Loan.

(a)

Conditions Precedent. In addition to the terms and conditions of disbursement set forth in the MLA and this First Supplement and as incorporated from the Disbursing Agreement, the Lender shall not be obligated to convert any part of the Construction Loan into a Term Loan unless and until:

(i)

Completion of Project. The Project shall have been completed per the Plans and Specifications and a Completion Certificate shall have been obtained;

(ii)

Amount of Term Loan. The maximum principal amount of the Construction Loan which is converted to a Term Loan shall be $70,000,000.00. The Term Loan shall be payable in full on the Maturity Date.

4

(iii)

Construction Loan Exceeds Term Loan. In the event that the amount of the Construction Loan advanced by Lender exceeds the maximum amount of the Term Loan to be made by the Lender, including after conversion of those portions of the Construction Loan which are eligible for conversion into the Term Revolving Loan pursuant to the MLA and any applicable additional supplement, the Borrower shall immediately repay the amount of the Construction Loan which is not being converted into a Term Loan and the Term Revolving Loan;

(iv)

Representations and Warranties. The representations and warranties set forth in the MLA and this First Supplement are true and correct in all material respects as of the Conversion Date to the same extent and with the same effect as if made at and as of the date thereof;

(v)

No Defaults. The Borrower is not in default under the terms of the MLA, this First Supplement, the Loan Documents or any other agreement to which the Borrower is a party and which relates to the-construction or operation of the Project.;

(vi)

Government Action. No license, permit, permission or authority necessary for the construction, continued operation or use of the Project has been revoked or challenged by or before any Governmental Authority;

(vii)

Marketing Agreements. The Borrower has executed marketing agreements for ethanol and DDGS to be produced at the Project and provided Lender with collateral assignments of all such agreements in form and content which is reasonably satisfactory to Lender and its counsel and acknowledged by the non-Borrower party to all such agreements; and

(viii)

Operating Permits. The Borrower shall have obtained and provided to the Lender copies all permits necessary for the operation of the Project.

(b)

Term Loan Interest Rate. Subject to the provisions of the MLA and this First Supplement, the portion of the Term Loan that has not been converted to a Fixed Rate Loan pursuant to Section 8(e) of this First Supplement shall bear interest at a rate equal to the LIBOR Rate plus 325 basis points. The computation of interest, amortization, maturity and other terms and conditions of the Term Loan shall be as provided in the Construction Note, provided, however, in no event shall the applicable rate exceed the Maximum Rate.

(c)

Term Loan Payments. Beginning on the first (1st) day of the month following the month in which the Conversion Date occurs, and continuing on the first (1st) day of each succeeding month thereafter until the Maturity Date, the Borrower shall make monthly payments of accrued interest. In addition to the payment of accrued interest, beginning on the first (1st) day of the second month following the month in which the Conversion Date occurs, and continuing on the first (1st) day of each succeeding month thereafter until the Maturity Date, the Borrower shall make equal monthly payments of principal in the amount of $583,333.00. Following the Conversion Date, and in addition to all other payments of principal and interest required under the MLA, the Borrower shall annually remit to Lender the Excess Cash Flow Payment pursuant to Section 12 of this First Supplement.

(d)

Term Loan Term. The Term Loan term shall be available to Borrower for a period beginning on the Conversion Date and ending on the Maturity Date.

5

(e)

Conversion to Fixed Rate Loan. As provided in Section 2.04 of the MLA, on the Conversion Date, the Borrower shall have the right to convert up to fifty (50%) percent of the outstanding principal balance of the Term Loan into a Fixed Rate Loan, with the consent of the Lender which shall not be unreasonably withheld, which shall bear interest at a fixed rate per annum equal to the rate listed in the “Government Agency and Similar Issues” section of the Wall Street Journal for the Federal Farm Credit Bank or the Federal Home Loan Bank having a maturity approximately equal to the Maturity Date, or another rate as agreed upon by the Lender and Borrower, which is in effect at the time of conversion plus 300 basis points. Borrower shall provide written notice to Lender at least 30 days prior to the Conversion Date of its intention to convert any portion of the Term Loan to a Fixed Rate Loan. Such written notice shall specify the specific dollar amount that Borrower is electing to convert to a Fixed Rate Loan. Any amount subject to a fixed rate of interest pursuant to this Section shall not be subject to any adjustments under Section 2.06 of the MLA.

(f)

Renewal. Lender agrees that on or before the Maturity Date Borrower may request in writing that Lender renew the Term Loan for a period of up to five (5) years on such terms and conditions as the Lender and Borrower may agree upon in writing. Nothing in this Agreement shall commit the Lender to renew, extend or extend any other accommodations to the Borrower regarding the Term Loan.

9.

Prepayment of the Loan. The Construction and Term Loans are subject to prepayment fees pursuant to Section 2.09 of the MLA.

10.

Funds Held Program. Lender, in its sole discretion, may offer a funds held program (the “Program”) to permit the Borrower to make advance conditional payments on designated loans, on such terms and conditions as the Lender may establish from time to time. Lender reserves the right, in its discretion, to amend or terminate the Program at any time upon notice to Borrower. The following terms and conditions apply to all Program accounts in connection with loans from Lender:

(a)

Advance Payments. Subject to Lender’s rights to direct the application of payments, an advance payment made to be applied to any amounts due and owing to the Lender on the Loan Obligations in the future, or used for any other purpose allowed by the Program, will be in a designated Program account as of the date received. If a special prepayment of principal is desired, Borrower must so specify when an advance payment is made.

(b)

Program Interest. Interest will accrue on funds in the Program account at such times and at such rates determined by Lender. Lender may change the interest rate or accrual period from time to time without notice. The Program may provide for different interest rates for different categories of loans.

(c)

Application of Funds. Funds in the Program account for a designated loan will be automatically applied by Lender on a payment date toward payment of the installment or related charges when the loan installment or other related charge becomes due. Any accrued interest in the Program account will be applied first to the installment or related charges. If the funds in the Program account are insufficient to pay the entire installment or related charges, Borrower shall pay the difference by the payment date. Funds received after a loan installment or related charges have been billed will be applied to the installment or related charges due. Funds received in excess of the billed installment amount or related charges will be placed in the Program account unless otherwise designated as a special principal payment by Borrower or designated for another purpose allowed by the Program.

(d)

Withdrawal of Funds. Lender may, in its sole discretion, permit Borrower to withdraw funds from the Program account in accordance with Lender’s Program.

(e)

Limitations. Lender, in its sole discretion; may restrict the availability of any funds in the Borrower’s Program account

(f)

Lender Options. The Lender may, in its sole discretion, apply funds from the Program account without notice to Borrowers for the following reasons:

6

(i)

Protective Advance. If the Borrower fails to pay when due any amounts Borrower is required to pay pursuant to the Loan Documents, Lender may apply funds in the Program account to pay such amounts.

(ii)

Account Ceiling. If at any time the Program account balance exceeds the unpaid balance on the designated loan, Lender may apply the funds in the Program account to payoff the loan. Any excess funds will be returned to Borrower.

(iii)

Transfer of Security. If Borrower sells, assigns, or transfers any interest in any collateral for the loan, Lender may apply the funds in the Program account to the remaining loan balance.

(iv)

Termination. In the event the Lender, in its sole discretion, terminates the Program, Lender may apply all funds in the Program account to the remaining loan balance effective on the termination date.

(g)

No Program Account Insurance. Neither the advance payments nor the accrued interest in a Program account are insured by a governmental agency or instrumentality.

(h)

Liquidation of Lender. If Lender is placed in liquidation, Borrower shall be sent by the receiver such notices as required by the Farm Credit Administration regulations then in effect. Such regulations currently provide for advance notice from the receiver that funds in the Program account will be applied to the loan and that funds in the Program account will not earn interest after the receiver is appointed.

11.

Security. The Borrower’s obligations hereunder and, to the extent related thereto, the MLA, shall be secured as provided in the MLA.

IN WITNESS WHEREOF, the parties have caused this First Supplement to the Master Loan Agreement to be executed by their duly authorized officers as of the date shown above.

INDIANA BIO-ENERGY, LLC

an Indiana limited liability company

By: /s/ Stephen J. Hogan

Name: Stephen J. Hogan

Title: President

AGSTAR FINANCIAL SERVICES, PCA

a United States instrumentality

By: Mark Schmidt          

Name: Mark Schmidt

Its: Vice President

7

EXHIBIT A

SWORN CONSTRUCTION STATEMENT

SWORN CONSTRUCTION STATEMENT

OWNER:

INDIANA BIO-ENERGY, LLC

PROPERTY AT:

	IMPORTANT NOTICE: This statement must be complete as to names of all persons and companies furnishing labor and/or material on the premises herein. Any increase in cost, from changes in construction or otherwise, must be forthwith reported to the DISBURSING AGENT with additional deposits to cover such increase in cost.
	ITEMS	FURNISH BY	TOTAL COST	AMT PAID	BALANCE
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
34
35

8

36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
	SUBTOTAL	0

STATE OF INDIANA)

>

SS.

COUNTY OF WELLS)

The undersigned being first duly sworn, each for himself, as General Contractor and Borrower, deposes and says that the foregoing are the names of all parties having contracts or subcontracts for specified portions of the work on said property and building or material entering into the construction thereof. and the amounts due and to become due to each of said parties, that the items mentioned include all labor and material required to complete said buildings according to plans and specifications, that there are no other contracts outstanding; and that there is not due or to become due to any person for material, labor or other work of any kind done upon said building other than as above stated.

The undersigned further deposes and says that no increase in the cost of construction will be made under any circumstances without furnishing information on same to the DISBURSING AGENT with additional deposits to cover such increase; that, in the event of any such increase, no orders or claims will be made to said company until such information and additional deposits shall have been completed; that the purpose of said statement is to induce said company to payout the proceeds of a loan of $90,000,000.00 secured by a leasehold mortgage on said property; and that, upon payment of the specific unpaid items listed herein, the undersigned General Contractor hereby agrees to waive all claims of priority to said leasehold mortgage and both parties herein will save said company harmless as to any claims of priority of lien for any labor or material, furnished or to be furnished, for completion of construction

General Contractor

INDIANA BID-ENERGY, LLC

The foregoing instrument was acknowledged before me this                 day of                                 , 20                .

by                                                                     

NOTARY STAMP:

Signature of Notary Public

9

EX-10

Exhibit 10.45

SECOND SUPPLEMENT

TO THE MASTER LOAN AGREEMENT

(TERM REVOLVING LOAN)

THIS SECOND SUPPLEMENT TO THE MASTER LOAN AGREEMENT (this “Second Supplement”), dated as of February 27, 2007, is between AGSTAR FINANCIAL SERVICES, PCA (the “Lender”) and INDIANA BIO-ENERGY, LLC, an Indiana limited liability company (the “Borrower”), and supplements and incorporates all of the provisions of that certain Master Loan Agreement, dated as of even date herewith, between the Lender and the Borrower (as the same may be amended, modified, supplemented, extended or restated from time to time, the “MLA”).

1.

Definitions. As used in this Second Supplement, the following terms shall have the following meanings. Capitalized terms used and not otherwise defined in this Second Supplement shall have the meanings attributed to such terms in the MLA. Terms not defined in either this Second Supplement or the MLA shall have the meanings attributed to such terms in the Uniform Commercial Code, as enacted in the State of Minnesota and as amended from time to time.

“Availability Date” shall have the meaning specified in Section 6 of this Second Supplement.

“Maximum Rate” shall have the meaning specified in Section 9 of this Second Supplement.

“Monthly Payment Date” mean s the first (1 5t) day of each calendar month.

“Outstanding Credit” means, at any time of determination, the aggregate amount of Advances then outstanding.

“Outstanding Revolving Advance” means the total Outstanding Credit under this Second Supplement and the Term Revolving Note.

“Request for Advance” shall have the meaning specified in Section 7(a) of this Second Supplement.

“Revolving Advance” means an advance under this Second Supplement and the Revolving Note.

“Revolving Letters of Credit” shall have the meaning specified in Section 8.

“Revolving Letter of Credit Liabilities” means, at any time, the aggregate maximum amount available to be drawn under all outstanding Revolving Letters of Credit (in each case, determined without regard to whether any conditions to drawing could then be met) and all unreimbursed drawings under Revolving Letters of Credit.

“Term Revolving Note” means that certain promissory note to be executed and delivered to the Lender by the Borrower on the Closing Date pursuant to the terms and conditions provided for in this Second Supplement and the MLA.

“Term Revolving Loan Commitment” shall have the meaning specified in Section 3 of this Second Supplement.

“Term Revolving Loan Termination Date” shall have the meaning specified in Section 3 of this Second Supplement.

“Unused Commitment Fee” shall have the meaning specified in Section 7(d) of this Supplement.

2.

Conversion of Construction Loan into Term Revolving Loan. Pursuant to the terms and conditions contained in the MLA and this Second Supplement, on the Conversion Date a portion of the Construction Loan shall be converted into a Term Revolving Loan to be used for cash and inventory management purposes.

(a)

Conditions Precedent. In addition to the terms and conditions set forth in the MLA, this Second Supplement and as incorporated from the Disbursing Agreement, the Lender shall not be obligated to convert any part of the Construction Loan into a Term Revolving Loan unless and until:

(i)

Amount of Term Revolving Loan. The maximum amount of the Construction Loan that is converted into a Term Revolving Loan shall be at Borrower’s option, but in any event not greater than $20,000,000.00;

(ii)

Completion Certificate. The Lender shall have received a Completion Certificate in a form and substance satisfactory to the Lender in its sole discretion;

(iii)

No Defaults. There shall be no uncured and continuing Events of Default under the MLA or any of the Loan Documents as of the Conversion Date;

(iv)

Representations and Warranties. The representations and warranties contained in the MLA and this Second Supplement are correct on and as of the Conversion Date, except to the extent that they relate solely to an earlier date; and

(v)

Marketing Agreements. The Borrower has executed marketing agreements for ethanol and distiller’s grains to be produced at the Project and provided Lender with collateral assignments of all such agreements in form and content which is satisfactory to Lender and its counsel and acknowledged by the non-Borrower party to all such agreements.

3.

Term Revolving Loan Commitment. Lender agrees, on the terms and conditions set forth in the MLA and this Second Supplement, to convert, at Borrower’s option but in any event not greater than $20,000,000.00 of the Construction Loan into a Term Revolving Loan on the Conversion Date, and to make one or more advances to the Borrower, during the period beginning on the Conversion Date and ending on the Business Day immediately preceding the Maturity Date (the “Term Revolving Loan Termination Date”), in an aggregate principal amount outstanding at anyone time not to exceed $20,000,000.00 (the “Term Revolving Loan Commitment”). The Term Revolving Loan Commitment shall expire at 12:00 noon Central time on the Maturity Date. Under the Term Revolving Loan Commitment amounts borrowed and repaid or prepaid may be reborrowed at any time prior to and including the Term Revolving Loan Termination Date provided, however, that at no time shall the sum of the Outstanding Revolving Advances exceed $20,000,000.00.

4.

Purpose. Advances under the Loan may be used for cash, inventory management and general working capital purposes of the Borrower and its subsidiaries, including closing costs and fees associated with the Term Revolving Loan. The Borrower agrees that the proceeds of the Loan are to be used only for the purposes set forth in this Section 4.

5.

Repayment of the Term Revolving Loan. The Borrower will pay interest on the Term Revolving Loan on the first (1st) day of each month, commencing on the first (1st) Monthly Payment Date following the date on which the first Advance is made on the Term Revolving Loan, and continuing on each Monthly Payment Date thereafter until the Maturity Date. On the Maturity Date, the amount of the then unpaid principal balance of the Term Revolving Loan and any and all other amounts due and owing hereunder or under any other Loan Document relating to the Term Revolving Loan shall be due and payable. If any Payment Date is not a Business Day, then the principal installment then due shall be paid on the next Business Day and shall continue to accrue interest until paid.

6.

Availability. Subject to the provisions of the MLA and this Second Supplement, during the period commencing on the date on which all conditions precedent to the initial advance under the Term Revolving Loan are satisfied (the “Availability Date”) and ending on the Term Revolving Loan Termination Date, advances under the Term Revolving Loan will be made as provided in this Second Supplement.

2

7.

Making the Advances.

(a)

Revolving Advances. Each Revolving Advance shall be made, on notice from the Borrower (a “Request for Advance”) to the Lender delivered before 12:00 Noon (Minneapolis, Minnesota time) on a Business Day which is at least three (3) Business Days prior to the date of such Revolving Advance specifying the amount of such Revolving Advance, provided that, no Revolving Advance shall be made while an Event of Default exists or if the interest rate for such LIBOR Rate Loan would exceed the Maximum Rate. Any Request for Advance applicable to a Revolving Advance received after 12:00 Noon (Minneapolis, Minnesota time) shall be deemed to have been received and be effective on the next Business Day. The amount so requested from the Lender shall, subject to the terms and conditions of this Second Supplement, be made available to the Borrower by: (i) depositing the same, in same day funds, in an account of the Borrowe r; or (ii) wire transferring such funds to a Person or Persons designated by the Borrower in writing.

(b)

Requests for Advances Irrevocable. Each Request for Advance shall be irrevocable and binding on the Borrower and the Borrower shall indemnify the Lender against any loss or expense it may incur as a result of any failure to borrow any Advance after a Request for Advance (including any failure resulting from the failure to fulfill on or before the date specified for such Advance the applicable conditions set forth in this Section 7 of this Second Supplement and the MLA), including, without limitation, any loss (including loss of anticipated profits) or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by the Lender to fund such Advance when such Advance, as a result of such failure, is not made on such date.

(c)

Minimum Amounts. Each Revolving Advance shall be in a minimum amount equal to $50,000.00.

(d)

Unused Commitment Fee. In addition to the fees payable on the Closing Date, Borrower agrees to pay to the Lender an Unused Commitment Fee on the average daily unused portion of the Lender’s commitment under the Term Revolving Loan from the Conversion Date until the Term Revolving Loan Maturity Date at the rate of 0.35% per annum, payable in arrears in quarterly installments payable on the first (1st) day of each January, April, July and October after the Conversion Date.

(e)

Conditions Precedent to All Advances. The Lender’s obligation to make each Advance under the Term Revolving Note shall be subject to the terms, conditions and covenants set forth in the MLA and this Second Supplement, including, without limitation, the following further conditions precedent:

(i)

Representations and Warranties. The representations and warranties set forth in the MLA and this Second Supplement are true and correct in-all material respects as of the date of the request for any Advance, except as disclosed in writing to the Lender, to the same extent and with the same effect as if made at and as of the date thereof except as disclosed in writing to the Lender;

(ii)

No Defaults. The Borrower is not in default under the terms of the MLA, this Second Supplement, the Loan Documents or any other Material Contracts to which the Borrower is a party and which relates to the construction of the Project or the operation of the Borrower’s business; and

(iii)

Government Action. No license, permit, permission or authority

necessary for the construction or operation of the Project has been revoked or challenged by or before any Governmental Authority.

8.

Letters of Credit.

Commitment to Issue. The Borrower may request Revolving Advances by the Lender, and the Lender, subject to the terms and conditions of this Second Supplement, may in its sole discretion, issue letters of credit for any Borrower’s account (such letters of credit, being hereinafter referred to collectively as the “Revolving Letters of Credit”); provided, however, that:

(i)

the aggregate amount of outstanding Revolving Letter of Credit Liabilities shall not at any time exceed the amount of $3,000,000.00.

3

(ii)

the sum of the outstanding Revolving Letters of Credit plus the Outstanding Revolving Advances shall not at any time exceed the Term Revolving Loan Commitment.

(iii)

the expiration date of a Revolving Letter of Credit advanced under the Term Revolving Loan shall be no later than the Maturity Date.

Any Revolving Letters of Credit issued under this Section 8 are subject to the provisions of Section 2.05 of the MLA.

9.

Interest Rate. Subject to the provisions of the MLA and this Second Supplement, the Term Revolving Loan shall bear interest at a rate equal to the LIBOR Rate plus 325 basis points. The computation of interest, amortization, maturity and other terms and conditions of the Term Revolving Loan shall be as provided in the Term Revolving Note, provided, however, in no event shall the applicable rate exceed the maximum nonusurious interest rate, if any, that at any time, or from time to time, may be contracted for, taken, reserved, charged, or received under applicable state or federal laws (the “Maximum Rate”).

10.

Security. The Borrower’s obligations hereunder and, to the extent related thereto, the MLA, shall be secured as provided in the MLA.

IN WITNESS WHEREOF, the parties have caused this Second Supplement to the Master Loan Agreement to be executed by their duly authorized officers as of the date shown above.

BORROWER:		LENDER:
INDIANA BIO-ENERGY, LLC		AGSTAR FINANCIAL SERVICES,
an Indiana limited liability company		PCA, a United States instrumentality
By:	/s/ Stephen J. Hogan	By:	/s/ Mark Schmidt
Printed: Stephen J. Hogan		Printed: Mark Schmidt
Title: President		Title: Vice President

4

EX-10

Exhibit 10.46

LOAN AGREEMENT

between

CITY OF BLUFFTON, INDIANA

and

INDIANA BIO-ENERGY, LLC

$22,000,000

CITY OF BLUFFTON, INDIANA

SUBORDINATE SOLID WASTE DISPOSAL FACILITY REVENUE BONDS,

SERIES 2007 A

(INDIANA BIO-ENERGY, LLC ETHANOL PLANT PROJECT)

Dated as of March 1, 2007

The amounts payable to the Issuer and certain other rights of the Issuer under this Loan Agreement (except for Unassigned Rights) have been pledged and assigned to U.S. Bank National Association, as Trustee under the Indenture of Trust, dated as of March 1, 2007, between the Issuer and the Trustee. For the purpose of perfecting the security interest of the Trustee in such amounts payable and such rights assigned to the Trustee under the Indiana Uniform Commercial Code - Secured Transactions, the counterpart of this Loan Agreement actually delivered to the Trustee shall be deemed the original thereof.

TABLE OF CONTENTS

SECTION		PAGE
Recitals		1
ARTICLE I	DEFINITIONS	1
ARTICLE II	REPRESENTATIONS, WARRANTIES AND AGREEMENTS	2
Section 2.01.	Representations, Warranties and Agreements of Issuer	2
Section 2.02.	Representations, Warranties and Agreements of Company	3
ARTICLE III	ACQUISITION, CONSTRUCTION, EQUIPPING, COMPLETION AND OPERATION OF PROJECT	4
Section 3.01.	Agreement to Acquire, Construct, Equip and Complete Project	4
Section 3.02.	Plans and Specifications	5
Section 3.03.	Records	5
Section 3.04.	Operation of Project	5
Section 3.05.	Right of Access to the Plant and Inspection of Records	5
Section 3.06.	Authorized Company Representative	6
Section 3.07.	Company to Repair, Replace, Rebuild or Restore	6
ARTICLE IV	ISSUANCE OF BONDS; LOAN TO COMPANY; OTHER OBLIGATIONS	7
Section 4.01.	Issuance of Bonds; Loan to Company	7
Section 4.02.	Issuance of Other Obligations	7
ARTICLE V	LOAN PAYMENTS; ADDITIONAL PAYMENTS	8
Section 5.01.	Loan Payments; Additional Payments	8
Section 5.02.	Payments Assigned; Obligation Absolute	9
Section 5.03.	Payment of Administration Expenses and Other Expenses	9
Section 5.04.	Payment of Taxes and Charges in Lieu Thereof..	9
ARTICLE VI	SPECIAL COVENANTS	10
Section 6.01.	Conversion, Consolidation and Merger.	10
Section 6.02.	Permits or Licenses	10
Section 6.03.	Arbitrage Covenant	10
Section 6.04.	Financing Statements	10
Section 6.05.	Covenants with Respect to Tax-Exempt Status of the Bonds	10
Section 6.06.	No Recourse to Issuer	11
Section 6.07.	Indemnification	11
Section 6.08.	Exemption from Personal Liability	11
Section 6.09.	Notice to Trustee of Certain Events	12
Section 6.10.	Debt Service Coverage	12
Section 6.11.	Insurance	12
ARTICLE VII	ASSIGNMENT	12
Section 7.01.	Conditions	12
Section 7.02.	Documents Furnished to Trustee	12
Section 7.03.	Limitation	12
ARTICLE VIII	EVENTS OF DEFAULT AND REMEDIES	13
Section 8.01.	Events of Default.	13
Section 8.02.	Force Majeure	14
Section 8.03.	Remedies	14
Section 8.04.	No Remedy Exclusive	14
Section 8.05.	Reimbursement of Attorneys’ Fees	14

i

Section 8.06.	Waiver of Breach	15
ARTICLE IX	REDEMPTION OR PURCHASE OF BONDS	15
Section 9.01.	Redemption of Bonds	15
Section 9.02.	Obligation to Prepay	15
Section 9.03.	Compliance With Indenture	16
ARTICLE X	MISCELLANEOUS	16
Section 10.01.	Term of Agreement	16
Section 10.02.	Notices	16
Section 10.03.	Parties in Interest	16
Section 10.04.	Documents to be Delivered to the Trustee in Relation to the Closing	17
Section 10.05.	Amendments	17
Section 10.06.	Counterparts	17
Section 10.07.	Severability	17
Section 10.08.	Governing Law	17
Signatures		18
EXHIBIT A	Project Description	A-1
EXHIBIT B	Form of Notice of Completion	B-1

ii

LOAN AGREEMENT

This LOAN AGREEMENT, dated as of March 1, 2007, is between CITY OF BLUFFTON, INDIANA, a municipal corporation of the State of Indiana (the “Issuer”), and INDIANA BIO­-ENERGY, LLC, a limited liability company organized and existing under and by virtue of the laws of the State of Indiana (the “Company”).

RECITALS:

A. The Issuer is authorized by the provisions of Indiana Code Sections 36-7-11.9-1 et seq., as supplemented and amended, and Indiana Code Sections 36-7-12-1 et seq., as supplemented and amended (collectively, the “Act”) to issue its revenue bonds for the purpose of financing “pollution control facilities” (within the meaning of the Act) within the territorial jurisdiction of the Issuer.

B. The governing body of the Issuer has, by ordinance adopted pursuant to and in accordance with the provisions of the Act, authorized the financing of a portion of the cost of acquiring, constructing and equipping certain solid waste disposal facilities which constitute “pollution control facilities” (within the meaning of the Act) and which are more particularly described in Exhibit A hereto (the “Project”).

C. The Issuer proposes to issue its Subordinate Solid Waste Disposal Facility Revenue Bonds, Series 2007A (Indiana Bio-Energy, LLC Ethanol Plant Project) (the “Bonds”) in order to provide funds to loan to the Company for the purpose of financing a portion of the costs of the Project, paying a portion of the interest on the Bonds, funding a debt service reserve fund and paying certain costs relating to the issuance of the Bonds.

D. The Bonds shall be issued under and pursuant to the Indenture of Trust, dated as of March 1, 2007 (the “Indenture”), between the Issuer and U.S. Bank National Association, as Trustee, pursuant to which the Issuer shall pledge and assign to the Trustee certain rights of the Issuer hereunder.

E. Pursuant to this Agreement, the Issuer will loan the proceeds of the Bonds to the Company to finance the foregoing costs, secured by (1) the Subordinate Construction/Permanent Mortgage, Subordinate Security Agreement, Assignment of Leases and Rents, Financing Statement and Fixture Filing dated as of March 1, 2007 from the Company to the Trustee (the “Subordinate Mortgage”) and (2) the Subordinate Security Agreement dated as of March 1, 2007, from the Company to the Trustee, as amended and supplemented from time to time (the “Subordinate Security Agreement”), and the Company agrees to make, or cause to be made, payments sufficient to pay when due (whether at stated maturity, by acceleration or otherwise) the principal of and premium, if any, and interest on the Bonds.

F. The issuance, sale and delivery of the Bonds and the execution and delivery of this Agreement and the Indenture have been in all respects duly and validly authorized in accordance with the Act and the Bond Ordinance (as defined in the Indenture).

In consideration of the respective representations and agreements contained in this Agreement, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

All words and terms used but not otherwise defined in this Agreement, shall for all purposes of this Agreement have the meanings specified in Article I of the Indenture, unless the context clearly requires otherwise. In addition, the following terms shall have the following meanings when used in this Agreement:

“Indenture” means the Indenture of Trust, dated as of March 1, 2007, between the Issuer and the Trustee, relating to the issuance of the Bonds, as such Indenture may be supplemented and amended from time to time as therein permitted.

The words “hereto,” “hereunder” and other words of similar import refer to this Agreement as a whole.

1

ARTICLE II

REPRESENTATIONS, WARRANTIES AND AGREEMENTS

Section 2.01. Representations, Warranties and Agreements of Issuer. The Issuer represents, warrants and agrees that:

(a)

The Issuer (1) is a municipal corporation of the State, (2) has full power and authority to enter into the transactions contemplated by this Agreement, the Tax Agreement and the Indenture and to carry out its obligations under this Agreement, the Tax Agreement and the Indenture, including the issuance of the Bonds and (3) by proper corporate action has duly authorized the execution and delivery of this Agreement, the Bonds, the Tax Agreement and the Indenture.

(b)

Under existing statutes and decisions, no taxes on income or profits are imposed on the Issuer. The Issuer will not knowingly take or omit to take any action reasonably within its control which action or omission would impair the exclusion of interest paid on the Bonds from the federal gross income of the owners of the Bonds. The Issuer will file or cause to be filed with the United States Department of Treasury the information required by Section 149(e) of the Code.

(c)

To the actual knowledge of the Issuer, neither the execution and delivery by the Issuer of this Agreement, the Tax Agreement, the Bonds or the Indenture, nor the consummation by the Issuer of the transactions contemplated by this Agreement, the Tax Agreement, the Bonds or the Indenture, conflicts with, will result in a breach of or default under or will (except with respect to the lien of the Indenture) result in the imposition of any lien on any property of the Issuer pursuant to the terms, conditions or provisions of any statute, ordinance, resolution, order, rule, regulation, agreement or instrument to which the Issuer is a party or by which it is bound.

(d)

Each of this Agreement, the Tax Agreement and the Indenture has been duly authorized, executed and delivered by the Issuer and each constitutes the legal, valid and binding special, limited obligation of the Issuer enforceable against the Issuer in accordance with its terms.

(e)

To the actual knowledge of the Issuer, there is no litigation or proceeding pending or threatened against the Issuer, or affecting it, which would adversely affect the validity of this Agreement, the Tax Agreement, the Indenture or the Bonds or the ability of the Issuer to comply with its obligations under this Agreement, the Indenture, the Tax Agreement or the Bonds.

(f)

The Issuer hereby finds and determines that all requirements of the Act have been complied with and that the financing of the Project through the issuance of the Bonds will further the public purposes of the Act.

(g)

Pursuant to Indiana Code Section 36-7-12-16, no member of the City of Bluffton, Indiana Economic Development Commission or the Common Council of the Issuer has any pecuniary interest in any aspect of the proposed financing or in the Company.

(h)

The Issuer will apply the proceeds from the sale of the Bonds as specified in the Indenture, the Tax Agreement and this Agreement. So long as any of the Bonds remain outstanding and except as may be authorized by the Indenture, the Issuer will not issue or sell any bonds or obligations, other than the Bonds, the principal of or premium, if any, or interest on which will be payable from the Trust Estate.

(i)

To the actual knowledge of the Issuer, no approval, authorization or consent of any governmental or public agency or authority or officer (other than those which have been obtained) is required in connection with the execution and delivery by the Issuer of this Agreement, the Indenture, the Tax Agreement or the Bonds and other than those required under the securities laws of the United States or any state or the Code, as to all of which no representation is made by the Issuer.

2

(j)

The Issuer has taken proper action to submit an Application for Volume Cap to the Indiana Finance Authority and has received verification that the volume cap was awarded in the amount of $22,000,000.

(k)

The Bonds are to be issued under and secured by the Indenture, pursuant to which certain of the Issuer’s interests in this Agreement, and the revenues and income to be derived by the Issuer pursuant to this Agreement, will be pledged and assigned to the Trustee as security for payment of the principal, or premium, if any, and interest on the Bonds. The Issuer covenants that it has not and will not pledge or assign its interest in this Agreement, or the revenues and income derived pursuant to this Agreement, excepting Unassigned Rights, other than to the Trustee under the Indenture to secure the Bonds.

Concurrently with the Closing Date, the Issuer shall execute and deliver a certificate reaffirming the foregoing representations, warranties and agreements as of the date thereof.

Section 2.02. Representations, Warranties and Agreements of Company. The Company represents, warrants and agrees that:

(a)

It is a corporation duly organized, validly existing and in good standing under the laws of the State, is not in violation of any provision of its Articles of Organization or Fifth Amended and Restated Operating Agreement, in each case as the same have been amended, has full corporate power to own its properties and conduct its business, and has the corporate power to enter into, and by proper corporate action has duly authorized the execution and delivery of, this Agreement, the Subordinate Mortgage, the Subordinate Security Agreement, the Subordination Agreement and the Tax Agreement.

(b)

Neither the execution and delivery of this Agreement, the Subordinate Mortgage, the Subordinate Security Agreement, the Subordination Agreement or the Tax Agreement, the consummation of the transactions contemplated by each such instrument, nor the fulfillment of or compliance with the terms and conditions of this Agreement, the Subordinate Mortgage, the Subordinate Security Agreement, the Subordination Agreement or the Tax Agreement conflicts with or will result in a breach of any of the terms, conditions or provisions of any law or judgment to which the Company or its property or assets are subject or of any corporate restriction contained in its Articles of Organization or Fifth Amended and Restated Operating Agreement, in each case as the same have been amended, or any agreement or instrument to which the Company is now a party or by which it is bound, or constitutes, with or without the giving of notice or lapse of time or both, a default under any of the foregoing, or, except as set forth in the Subordinate Mortgage and the Subordinate Security Agreement, results in the creation or imposition of any lien, charge or encumbrance whatsoever upon any of the property or assets of the Company under the terms of any instrument or agreement.

(c)

This Agreement, the Subordinate Mortgage, the Subordinate Security Agreement, the Subordination Agreement and the Tax Agreement have been duly and validly authorized, executed and delivered by the Company and are legal, valid and binding obligations of the Company, enforceable in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium, usury or other similar laws affecting the rights of creditors generally, equitable principles relating to the availability of remedies and principles of public or governmental policy limiting the enforceability of the indemnification and contribution provisions.

(d)

All orders and approvals have been received and will be in effect prior to the Closing Date, and, no further consent, approval, authorization or order of, or registration with, any court or governmental or regulatory agency or body is required with respect to the Company for the execution, delivery and performance by the Company of this Agreement, the Subordinate Mortgage, the Subordinate Security Agreement, the Subordination Agreement and the Tax Agreement.

(e)

The Company has received an executed counterpart of the Indenture and hereby consents to and approves of the provisions thereof.

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(f)

The information relating to the Project and use of the proceeds of the Bonds furnished by the Company in writing to Chapman and Cutler LLP, as Bond Counsel, in connection with the issuance of the Bonds, is, to the best of the Company’s knowledge, true and correct in all material respects.

(g)

The Company does not, as of the date of issuance of the Bonds, reasonably expect any use of moneys derived from the proceeds of the Bonds or any investment or reinvestment thereof or from the sale of the Project which would cause the Bonds to be classified as “arbitrage bonds” within the meaning of Section 148 of the Code.

(h)

The Project constitutes and will constitute Exempt Facilities and consist of those facilities described in Exhibit A hereto (as such Exhibit A is from time to time amended or supplemented in accordance with Section 3.02), and the Company shall not consent to any changes in the Project which would adversely affect the qualification of the Project as “pollution control facilities” under the Act or adversely affect the Tax-Exempt status of the Bonds. The Company covenants that at all times when any Bonds are outstanding, the Project will be geographically located in the corporate limits of the Issuer.

(i)

The Company will cooperate with the Issuer in filing or causing to be filed with the United States Department of Treasury the information required by Section 149(e) of the Code.

(j)

There is no litigation or proceeding pending, or to the knowledge of the Company threatened, against the Company which could adversely affect the validity of this Agreement or the ability of the Company to comply with its obligations under this Agreement, the Subordinate Mortgage, the Subordinate Security Agreement, the Subordination Agreement or the Tax Agreement.

Concurrently with the Closing Date, the Company shall execute and deliver a certificate reaffirming the foregoing representations, warranties and agreements as of the Closing Date.

ARTICLE III

ACQUISITION, CONSTRUCTION, EQUIPPING,

COMPLETION AND OPERATION OF PROJECT

Section 3.01. Agreement to Acquire, Construct, Equip and Complete Project. The Company will complete the acquisition, construction and equipping of the Project as soon as practicable in accordance with the plans and specifications kept, and as they may be revised, under Section 3.02. The Company will use the proceeds of the Bonds, including investment income thereon, solely in accordance with the provisions of the Indenture, this Agreement, the Tax Agreement and the Project Certificate. The Issuer does not represent that the proceeds of the Bonds will be sufficient to pay the costs of completing the Project. If the proceeds from the Bonds are not sufficient for completion of the Project, the Company will complete the Project with its own funds (or will borrow funds necessary for such completion) and will not thereby be entitled to reimbursement of any amount from the Issuer, the Trustee or any Bondholder or to an y reduction in any amounts payable by the Company hereunder.

Subject to the Subordinate Mortgage and the Subordinate Security Agreement, the Company may at its own expense cause a portion of the Project to be remodeled or cause such substitutions, modifications and improvements to be made to a portion of the Project from time to time as the Company, in its discretion, may deem to be desirable for its uses and purposes, which remodeling, substitutions, modifications and improvements shall be included under the terms of this Agreement as part of the Project and subject to the lien and security interest of the Subordinate Mortgage and the Subordinate Security Agreement.

Within seven Business Days after the Completion Date, the Company shall provide the Notice of Completion to the Trustee and the Issuer, which shall be substantially in the form as attached hereto as Exhibit B.

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Section 3.02. Plans and Specifications. Subject to the provisions of the next paragraph, the Company may make, authorize or permit changes or amendments in the components of the Project or may determine not to complete any portion of the Project for which Bond proceeds (and investment income thereon) are available, or may finance such portion of the Project from any other source; provided, however, that Bond proceeds (and investment income thereon) otherwise allocable to such portion of the Project must be used either (i) to pay costs of the remaining parts of the Project, (ii) to pay the cost of other solid waste disposal facilities qualifying under the Act and the Code, subject to the provisions of this Section and with the approval of the Issuer, or (iii) to pay or redeem principal on the Bonds in accordance with the provisions of this Agreement and the Indenture, provided < /I>that in the case of (ii) or (iii), the Company shall have received a Favorable Opinion of Bond Counsel with respect to such application. If the Company determines not to complete any portion of the Project or to fund such portion of the Project from any other source, such portion of the Project shall no longer be deemed to be within the meaning of the term “Project” for any purpose of this Agreement or the Indenture.

If the Company and the Issuer consider it necessary or desirable to supplement or amend Exhibit A to this Agreement to reflect changes in the description of the Project, such supplement or amendment will not be considered as an amendment to this Agreement requiring the consent of any Owner or the Trustee for the purposes of Article XI of the Indenture.

No change or amendment in the components of the Project pursuant to the terms of this Section shall be made if such change or amendment causes the weighted average economic life of the Project to be reduced unless the Company shall have delivered to the Trustee a Favorable Opinion of Bond Counsel with respect to such change or amendment. A copy of each such change in or amendment to Exhibit A hereof shall be filed promptly with the Issuer and the Trustee. In addition, the Company shall deliver to the Issuer a certificate of an Authorized Company Representative detailing the proposed changes.

Section 3.03. Records. The Company will maintain such records in connection with the acquisition, construction and equipping of the Project as are required to permit ready identification of the Project and the items of Project Costs.

Section 3.04. Operation of Project. So long as the Company owns the Project and the Bonds are outstanding, the Project will be operated as “pollution control facilities” as contemplated by the Act and as solid waste disposal facilities as contemplated by Section 142(a)(6) of the Code. To the extent that such definitions are amended after the date of this Agreement, the Company will use its reasonable best efforts to operate the Project in accordance with such amendments or changes; provided, however, that the Company’s failure to operate the Project in such manner will not, in and of itself, constitute a default under this Agreement and further provided, that in the event of a conflict between the provisions of this Section and the provisions of Section 6.05, Section 6.05 shall control.

Section 3.05. Right of Access to the Plant and Inspection of Records. The Company agrees that during the term of this Agreement the Issuer, the Trustee and the duly authorized agents of either of them shall have the right (but not any duty or obligation) at all reasonable times during normal business hours to inspect the records maintained by the Company pursuant to Section 3.03 and to enter upon the site of the Plant to examine and inspect the Plant; provided, however, that this right is subject to federal and State laws and regulations applicable to the site of the Plant. The rights of inspection and access hereby reserved to the Issuer and the Trustee may be exercised only after the Issuer, the Trustee or such agent shall have executed a secrecy agreement if requested by the Company in the form then currently used by Company, and nothing contained in this Section or in any other provision of this Agreem ent shall be construed to entitle the Issuer or the Trustee to any information or inspection involving the confidential know-how of the Company.

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Section 3.06. Authorized Company Representative. The Company shall appoint an Authorized Company Representative (who, until another person or officer is designated, shall be the Treasurer of the Company) for the purpose of acting on behalf of the Company and taking all actions and making all certifications required to be taken and made by an Authorized Company Representative under the provisions of this Agreement and the Indenture, and shall appoint alternate Authorized Company Representatives to take any such action or make any such certification if the same is not taken or made by the Authorized Company Representative. In the event any of said persons, or any successor appointed pursuant to the provisions of this Section, should resign or become unavailable or unable to take any action or make any certificate provided for in this Agreement or the Indenture, another Authorized Company R epresentative or alternate Authorized Company Representative shall thereupon be appointed by the Company. If the Company fails to make such designation within 10 days following the date when the then incumbent resigns or becomes unavailable or unable to take any of the said actions, the Treasurer of the Company shall serve as the Authorized Company Representative.

Whenever under the provisions of this Agreement or the Indenture the approval of the Company is required or the Issuer is required to take some action at the request of the Company, such approval or such request shall be made by the Authorized Company Representative or alternate Authorized Company Representative unless otherwise specified in this Agreement or the Indenture, and the Issuer or the Trustee shall be authorized to act on any such approval or request.

Section 3.07. Company to Repair, Replace, Rebuild or Restore. To the extent not inconsistent with any agreement between the Company and the Senior Lender, if there are any Outstanding Bonds when all or any part of the Plant is taken by eminent domain or threat thereof, or destroyed or damaged, the Company shall comply with the provisions of the Subordinate Mortgage, and the following subsections shall also apply:

(a)

Immediately after all or any part of the Plant is taken by eminent domain or threat thereof, or destroyed or damaged, the Company shall notify the Independent Engineer, the Trustee and the Issuer in writing of such event.

(b)

If the condemnation award or insurance claim is less than $100,000, the Trustee shall pay the Net Proceeds, subject to the provisions of the Senior Mortgage, to the Company. The Company shall proceed promptly to replace, repair, rebuild and restore the Plant to substantially the same condition as existed before the taking or event causing the damage or destruction, with such changes, alterations and modifications (including substitution or addition of other property) as may be desired by the Company and will be suitable for continued operation of the Plant for the business purposes of the Company, and the Company will pay all costs thereof. If the Net Proceeds are not sufficient to pay such costs in full, the Company shall pay that portion of the cost in excess of the amount of the Net Proceeds and shall complete such repair, replacement, rebuilding or restoration as provided in Section 5.02(d) of the Indenture.

(c)

If the condemnation award or insurance claim is $100,000 or more, all Net Proceeds of the condemnation award or insurance claim, subject to the provisions of the Senior Mortgage, shall be retained by the Trustee, deposited in the Condemnation and Awards Fund and disbursed therefrom in accordance with the Subordinate Mortgage and Section 5.02(d) of the Indenture, subject to all of the following conditions precedent:

(i)

there shall be no Event of Default in existence at the time of any disbursement of the insurance or condemnation proceeds, unless such Event of Default would be cured upon the application of such Net Proceeds; provided, however, this condition precedent shall be waived if the Trustee is otherwise directed by the Owners of a majority in aggregate principal amount of the Bonds Outstanding;

(ii)

the Company shall have determined, based upon a certificate of an Independent Engineer, that the cost of restoration, repair and rebuilding is and will be equal to or less than the amount of insurance or condemnation proceeds and other funds deposited by the Company with the Trustee; and

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(iii)

the Company shall have determined, based upon a certificate of an Independent Engineer, that the restoration, repair and rebuilding can be completed in accordance with plans and specifications approved by Independent Engineer (such approval not to be unreasonably withheld), in accordance with codes and ordinances.

The Company hereby agrees that the Trustee shall apply amounts in the Condemnation and Awards Fund in accordance with the Subordinate Mortgage and Section 5.02(d) of the Indenture.

(d)

The Company shall not, by reason of the payment of any costs of repair, rebuilding, replacement or restoration, be entitled to any reimbursement from the Issuer or any abatement or diminution of the amounts payable hereunder.

(e)

All buildings, improvements and equipment acquired in the repair, rebuilding, replacement or restoration of the Plant, together with any interests in land acquired by the Company necessary for such restoration, shall be deemed a part of the Plant and available for use and occupancy by the Company without the payment of any additional amounts other than those provided herein except as otherwise allowed herein, provided that no land, interest in land, buildings or improvements shall be acquired subject to any lien or encumbrance except as otherwise allowed herein.

ARTICLE IV

ISSUANCE OF BONDS; LOAN TO COMPANY; OTHER OBLIGATIONS

Section 4.01. Issuance of Bonds; Loan to Company. In order to finance a portion of the costs of the Project, the Issuer will issue, sell and deliver the Bonds to the initial purchasers thereof and deposit the proceeds of the Bonds with the Trustee as provided in Article V of the Indenture. Such deposit shall constitute a loan by the Issuer to the Company under this Agreement. The obligations of the Company under this Agreement, including specifically the obligation to make Loan Payments as provided in Section 5.01(a) hereof are absolute and unconditional and shall be secured by the Subordinate Mortgage and the Subordinate Security Agreement. The Issuer authorizes the Trustee to disburse the proceeds of the Bonds in accordance with Section 5.02 of the Indenture. The Company hereby approves the Indenture and the issuance by the Issuer of the Bonds and all of the terms and conditions thereof.

Section 4.02. Issuance of Other Obligations. While any of the Bonds are outstanding, the Company agrees not to incur any indebtedness except for the Senior Loan, this Agreement and any debt as described in the immediately succeeding sentence. The Company shall have the right to incur Additional Senior Indebtedness in a principal amount of up to $20,000,000. Additional Senior Indebtedness may be secured by a mortgage lien having priority over the lien of the Subordinate Mortgage and the Subordinate Security Agreement and creditors holding Additional Senior Indebtedness (the “Additional Senior Lenders”) may have the right to receive payment of regularly scheduled debt service payments before payments may be made with respect to the Bonds.

The Company shall only be permitted to incur Additional Senior Indebtedness if the Company provides to the Trustee the written certification of an independent public accountant stating that either (a) during the two years immediately preceding the date on which the Additional Senior Indebtedness will be incurred, the Debt Service Coverage Ratio, calculated as though the proposed Additional Senior Indebtedness had been outstanding during such period, would not have been less than 1.25 to 1 or (b) that for the five years immediately succeeding the date on which the Additional Senior Indebtedness will be incurred, the Debt Service Coverage Ratio, taking into account the Additional Senior Indebtedness to be incurred, is expected to be not less than 1.25 to 1. Upon receipt of the certification described above, and a Favorable Opinion of Bond Counsel stating that all conditions to the incurrence of such Additional Senior Indebtedness under the Agreement and the Indenture have been met and that the incurrence of such Additional Senior Indebtedness will not affect the Tax-Exempt status of interest on the Bonds, the Trustee will execute a subordination agreement in favor of the Additional Senior Lenders providing such Additional Senior Indebtedness. The Issuer and the Company hereby direct the Trustee to enter into any necessary subordination agreement with Additional Senior Lenders to cause the Additional Senior Indebtedness to have priority over the Bonds.

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ARTICLE V

LOAN PAYMENTS; ADDITIONAL PAYMENTS

Section 5.01. Loan Payments; Additional Payments. (a) In consideration of and in repayment of the Loan, the Company shall, under all circumstances, make or cause to be made, as Loan Payments, to the Trustee for the account of the Issuer, payments in immediately available funds which correspond, as to time, and are equal in amount as of the Loan Payment date, to the corresponding payment of principal of, premium, if any, and interest due on the Bonds and which are secured by the Subordinate Mortgage and the Subordinate Security Agreement. The Company agrees to make payments to the Trustee in the amounts and at the times so as to enable the Trustee to make the deposits required by Section 5.03(a)(i)(3) and 5.03(a)(i)(4) of the Indenture. All Loan Payments received by the Trustee shall be held and disbursed in accordance with the provisions of the Indenture and this Agreement for the application to the payment of principal of, premium, i f any, and interest on the Bonds.

The Company shall be entitled to a credit against the Loan Payments required to be made to the extent provided in the Indenture, including as set forth in Section 5.03(a)(i)(3).

(b) The Company shall pay or cause to be paid to the Trustee, as Additional Payments hereunder, the Administration Expenses within 30 days after receipt of a bill therefore, for application as provided in this Agreement and the Indenture.

The Company may, without creating a default hereunder, contest in good faith the reasonableness of any such Administration Expense claimed to be due to the Issuer or any Securities Depository.

The Company shall also pay to the Trustee, as Additional Payments hereunder, amounts and at the times necessary to cure any “deficiency” in the Debt Service Reserve Fund, as described in Section 5.03(c)(ii).

In the event the Company should fail to pay or cause to be paid any Administration Expenses as provided herein when due, the payment in default shall continue as an obligation of the Company until the amount in default shall have been paid together with interest thereon during the default period at the interest rate for any Trustee advances pursuant to the Indenture.

(c) In the event the Company shall fail to make any Loan Payment or an Additional Payment in order to satisfy a deficiency in the Debt Service Reserve Fund, the payment so in default shall continue as an obligation of the Company under this Agreement until the amount in default shall have been fully paid, and the Company will pay interest on any overdue amount with respect to principal of such Bond and, to the extent permitted by law, on any overdue amount with respect to premium, if any, and interest on such Bond, at the interest rate then borne by such Bond until paid.

(d) If the Company has deposited moneys and/or Government Obligations pursuant to Section 7.01 of the Indenture, and thereafter the Bonds become subject to mandatory redemption upon a Determination of Taxability (as defined in Section 9.02 herein) and there are insufficient moneys available under the Indenture to effect such redemption, the Company covenants and agrees to pay to the Trustee under the Indenture any such deficiency amount as is necessary to redeem such Bonds on the date fixed for redemption.

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Section 5.02. Payments Assigned; Obligation Absolute. It is understood and agreed that the Loan Payments are pledged and assigned by the Issuer to the Trustee pursuant to the Indenture, and that all right, title and interest of the Issuer hereunder (except for Unassigned Rights) are pledged and assigned to the Trustee pursuant to the Indenture. The Company assents to such pledge and assignment and agrees that the obligation of the Company to make the Loan Payments shall be absolute, irrevocable and unconditional and shall not be subject to cancellation, termination or abatement, or to any defense other than payment, or to any right of setoff, counterclaim or recoupment arising out of any breach under this Agreement or the Indenture or otherwise by the Company, the Trustee, the Registrar or any other party, and, further, that the Loan Payments and the other payments due hereunder shall continue to be payable a t the times and in the amounts herein and therein specified whether or not the Plant, or any portion thereof, shall have been destroyed by fire or other casualty, or title thereto, or the use thereof, shall have been taken by the exercise of the power of eminent domain, and that there shall be no abatement of or diminution in any such payments by reason thereof, whether or not the Plant shall be used or useful and whether or not any applicable laws, regulations or standards shall prevent or prohibit the use of the Plant or for any other reason. The Issuer shall, by the Indenture, grant a security interest to the Trustee, its successors in trust and its and their assigns forever, in all of its rights to and interest in the Revenues including, without limitation, all Loan Payments and other amounts receivable by or on behalf of the Issuer under the Agreement in respect of repayment of the Loan. The Company hereby agrees and consents to that grant of a security interest. The Issuer and the Company direct the Tr ustee to enter into the Subordination Agreement. The Company shall furnish the Subordinate Security Agreement and the Subordinate Mortgage to the Trustee, as the assignee of the Issuer.

Section 5.03. Payment of Administration Expenses and Other Expenses. The Company shall direct the Trustee to pay, within 30 days after receipt of a bill therefor, all of the Administration Expenses of the Issuer, the Trustee, the Registrar and the Securities Depository under the Indenture directly to each such entity; provided that the Authorized Company Representative shall have approved such expenses in writing prior to their occurrence. No fee will be paid by the Company to the City of Bluffton, Indiana Economic Development Commission in connection with the issuance of the Bonds. The Company shall also pay all other reasonable fees and expenses incurred in connection with the issuance of the Bonds, including, but not limited to, all costs associated with any discontinuance of the book-entry system described in Section 2.10 of the Indenture. The obligations of the Company under this Section 5.03 shall survive the termination of this Agreement.

Section 5.04. Payment of Taxes and Charges in Lieu Thereof. (a) The Company covenants and agrees that it will, from time to time, promptly pay and discharge or cause to be paid and discharged when due the Company’s share of all taxes, assessments, levies, duties, imposts and governmental, utility and other charges lawfully imposed upon the Plant or any part thereof or upon income and profits thereof or any payments hereunder.

(b) The Company shall pay or cause to be satisfied and discharged or make adequate provision to satisfy and discharge (including the provisions of adequate bonding therefor) within 60 days after the same shall accrue, any lien or charge upon the Loan Payments, and all lawful claims or demands for labor, materials, supplies or other charges which, if unpaid, might be or become a lien thereon.

(c) Notwithstanding subsections (a) and (b) of this Section, the Company may, at its expense and in its own name and behalf or in the name and behalf of the Issuer, in good faith contest any such liens, taxes, assessments and other charges and, in the event of any such contest, may permit such liens, taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom; provided further that during such period enforcement of such contested item is effectively stayed, unless by nonpayment of any such items the lien of the Indenture as to the amounts payable hereunder will be materially endangered, in which event the Company shall promptly pay and cause to be satisfied and discharged all such unpaid items. The Issuer will cooperate fully with the Company in any such contest.

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ARTICLE VI

SPECIAL COVENANTS

Section 6.01. Conversion, Consolidation and Merger. The Company covenants that during the term hereof it will not convert to, will not transfer all or substantially all of its assets to, and will not consolidate with or merge into, another limited liability company, corporation or other entity; provided that the Company may consolidate with or merge into another domestic limited liability company or corporation (i.e., a limited liability company or corporation organized and existing under the laws of one of the states of the United States or the District of Columbia), or transfer to another domestic limited liability company or corporation all or substantially all of its assets; provided that the surviving, resulting or transferee limited liability company or corporation, as the case may be, if it is other than the Company, (i) is a domestic limited liability company or corporation as aforesa id and qualified to do business in the State, and (ii) assumes in writing all of the obligations of the Company under this Agreement, the Tax Agreement, the Subordination Agreement, the Subordinate Mortgage and the Subordinate Security Agreement. The Company shall within 15 days after the execution thereof, furnish to the Issuer and the Trustee appropriate documentation demonstrating that the surviving, resulting or transferee limited liability company or corporation, as the case may be, has a Net Worth at least equal to the Net Worth of the Company prior to such transfer, merger or consolidation, is a domestic limited liability company or corporation, is qualified to do business in the State, and has assumed in writing all of the obligations of the Company under this Agreement, the Tax Agreement, the Subordination Agreement, the Subordinate Mortgage and the Subordinate Security Agreement.

Section 6.02. Permits or Licenses. In the event that it may be necessary for the proper performance of this Agreement on the part of the Company or the Issuer that any application or applications for any permit or license to do or to perform certain things be made to any governmental or other agency by the Company or the Issuer, the Company and the Issuer each shall, upon the request of either, execute such application or applications.

Section 6.03. Arbitrage Covenant. The Company covenants and represents to the Issuer and to and for the benefit of the Owners that so long as any of the Bonds remain Outstanding, moneys on deposit in any fund in connection with the Bonds, whether such moneys were derived from the proceeds of the sale of the Bonds or from any other sources, will not be used in a manner which will cause the Bonds to be “arbitrage bonds” within the meaning of Section 148 of the Code and any lawful regulations promulgated thereunder, as the same exist on this date or may from time to time hereafter be amended, supplemented or revised. The Company also covenants for the benefit of the Beneficial Owners to comply with all of the provisions of the Tax Agreement. The Company reserves the right, however, to make any investment of such moneys permitted by State law, if, when and to the extent that said Section 148 or regulations promulgated thereunder shall be repealed or relaxed or shall be held void by final judgment of a court of competent jurisdiction, but only upon receipt of a Favorable Opinion of Bond Counsel with respect to such investment.

Section 6.04. Financing Statements. The Company shall, to the extent required by law, file and record, refile and re-record, or cause to be filed and recorded, refiled and re-recorded, all documents or notices, including the financing statements and continuation statements, referred to in Section 4.04 of the Indenture. The Issuer shall cooperate fully with the Company in taking any such action.

Section 6.05. Covenants with Respect to Tax-Exempt Status of the Bonds. The Company covenants for the benefit of the Owners of the Bonds and the Issuer that it (a) has not taken, and will not take or permit to be taken on its behalf, any action which would adversely affect the Tax-Exempt status of the Bonds and (b) will take, or require to be taken, such actions as may, from time to time, be required under applicable law or regulation to continue to cause the Bonds to be Tax-Exempt.

The Company acknowledges that in the event of an examination by the Internal Revenue Service of the exclusion of interest on the Bonds from the gross income of the owners thereof for federal income tax purposes, the Issuer may be treated as the “taxpayer” in such examination and agrees that it will respond, and will direct the Issuer to respond, in a commercially reasonable manner to any inquiries from the Internal Revenue Service in connection with such an examination. The Issuer covenants that it will cooperate with the Company, at the Company’s expense and at its direction, in connection with such examination.

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Section 6.06. No Recourse to Issuer. The Issuer will not be obligated to pay the Bonds except from Loan Payments made by the Company under this Agreement. The issuance of the Bonds will not directly or indirectly or contingently obligate the Issuer or the State to levy or pledge any form of taxation whatever. The Bonds do not now and shall never constitute a charge against the general credit of the Issuer.

Section 6.07. Indemnification. The Company releases the Issuer (including any person at any time serving as an officer of the Issuer) and the Trustee from, agrees that the Issuer (including any person at any time serving as an officer of the Issuer) and the Trustee shall not be liable for, and agrees to indemnify and hold the Issuer (including any person at any time serving as an officer of the Issuer) and the Trustee harmless from: (i) any liability for any loss or damage to property or any injury to, or death of, any person that may be occasioned by any cause whatsoever pertaining to the Plant, or (ii) any liabilities, losses or damages, or claims therefore, arising out of the failure, or claimed failure, of the Subordinate Mortgage or the Subordinate Security Agreement, including, in each such case, any attorneys’ fees or expenses. The Company agrees to indemnify and hold the Issuer (including any person at any time serving as an officer of the Issuer) and the Trustee harmless to the fullest extent permitted by law from any losses, costs, charges, expenses (including attorneys’ fees and expenses), judgments and liabilities incurred by it or them, as the case may be, in connection with any action, suit or proceeding instituted or threatened in connection with the transactions contemplated by this Agreement; provided, however, that such indemnification shall not extend with respect to the Issuer to any such losses, costs, charges, expenses, judgments or liabilities arising out of or based upon any untrue statement contained under the heading “The Issuer” or under the heading “Litigation” (but only insofar as it relates to litigation pending or threatened against the Issuer) in the official statement or preliminary official statement (as both may be amended from time to time) utilized in connection with the offering for sale of the Bonds, or with respect to the Trustee, to any su ch losses, costs, damages, expenses, judgments or liabilities arising out of any breach by the Trustee of its obligations under the Indenture or for bad faith or negligence on the part of the Trustee. If any such claim is asserted, the Issuer, any individual indemnified herein or the Trustee, as the case may be, will give prompt notice to the Company and the Company will assume the defense thereof, with full power to litigate, compromise or settle the same in its sole discretion, it being understood that neither the Trustee, the Issuer nor any indemnified individual will settle or consent to the settlement of the same without the written consent of the Company. The obligation of the parties under this Section 6.07 shall survive the termination of this Agreement.

The Company agrees to pay to, or on behalf of, the Issuer such reasonable costs and expenses, including legal fees, as may be incurred by the Issuer in performing its covenants under this Agreement and under the Indenture to the extent not paid from the proceeds of any Bonds, provided that upon the assumption by the Company of the defense of any asserted claim as aforesaid, the Company will not be liable to any indemnified party hereunder for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof, other than reasonable costs of investigation.

Section 6.08. Exemption from Personal Liability. (a) No recourse under or upon any obligation, covenant or agreement created by this Agreement, or for any claim based thereon or otherwise in respect thereof, shall be had against any incorporator, organizer, stockholder, member, director, officer or employee, as such, past, present or future, of the Company or of any predecessor or successor limited liability company or corporation, either directly or through the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that this Agreement is solely a company obligation, and that no such personal liability whatever shall attach to, or is or shall be incurred by, the incorporators, organizers, stockholders, members, directors, officers or employees, as such, of the Company or any predecessor or successor limited li ability company or corporation, or any of them, under or by reason of the obligations, covenants or agreements contained in this Agreement or implied therefrom; and that any and all such personal liability, either at common law or in equity or by constitution or statute, of, and any and all such rights and claims against, every such incorporator, organizer, stockholder, director, officer, member or employee, as such, under or by reason of the obligations, covenants or agreements contained in this Agreement, or implied therefrom, are hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Agreement.

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(b) No recourse shall be had for the payment of the principal of or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained herein or in the Indenture or in any other document executed by the Issuer in connection with the transaction contemplated by this Agreement, against any past, present or future officer, employee or agent of the Issuer, or through the Issuer, or any successor corporation, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such officer, employee or agent as such is hereby expressly waived and released as a condition of and in consideration for the execution of this Agreement, the Indenture and the issuance of any of the Bonds.

Section 6.09. Notice to Trustee of Certain Events. If, at any time during the term of this Agreement, the Company changes its state of organization or incorporation, changes its form of organization, changes its name, or takes any other action which could affect the proper location for filing of Uniform Commercial Code financing statements or continuation statements or which could render existing filings seriously misleading or invalid, the Company shall immediately provide written notice of such change to the Issuer and the Trustee and thereafter promptly deliver to the Issuer or the Trustee such additional information or documentation regarding such change as the Issuer or the Trustee respectively may reasonably request for the purpose of amendment and/or refiling, at the expense of the Company, as may be reasonably determined to be necessary by the Issuer or the Trustee or their respective attorneys.

Section 6.10. Debt Service Coverage. Commencing in the Company’s first full fiscal year following the commencement of the operation of the Plant, and in each fiscal year thereafter while the Bonds are Outstanding, the Company covenants to take all action required to have and maintain a Debt Service Coverage Ratio of not less than 1.25:1 based upon the audited financial statements of the Company; provided, however, that a failure to maintain such Debt Service Coverage Ratio for any fiscal year shall not be an “Event of Default” under Section 8.01 hereof so long as the Senior Lender has waived compliance with said debt service coverage requirements under the Senior Loan Agreement and the Company is not in default with respect to any payments due under this Agreement.

Section 6.11. Insurance. The Company shall maintain insurance with financially sound and reputable insurance companies in such amounts and covering such risks as are usually carried by entities engaged in similar businesses and owning similar properties in the same general areas in which the Company operates, and make such increases in the type of amount or coverage as appropriate to reflect the risks covered by such insurance, provided that in any event the Company will maintain workers’ compensation insurance, property insurance and comprehensive general liability insurance reasonably meeting the foregoing requirements. The Company shall maintain, at a minimum, directors and officers liability insurance, commercial liability insurance, business interruption insurance, builder’s risk insurance, and general commercial property insurance. All such policies insuring any collateral for the Company’s o bligation under this Agreement or the Subordinate Mortgage shall have lender or mortgagee loss payable clauses or endorsements in form and substance acceptable to Trustee. Each insurance policy covering Collateral shall be in compliance with the requirements of the Subordinate Security Agreement.

ARTICLE VII

ASSIGNMENT

Section 7.01. Conditions. The Company’s interest in this Agreement may be assigned in whole or in part by the Company to another entity, subject, however, to the conditions that such assignment shall not relieve (other than as described in Section 6.01) the Company from primary liability for its obligations to make the Loan Payments or for any other of its obligations hereunder.

Section 7.02. Documents Furnished to Trustee. The Company shall, within 30 days after the delivery of the agreements or other documents effectuating any assignment pursuant to Section 7.01, furnish to the Issuer and the Trustee a true and complete copy thereof.

Section 7.03. Limitation. This Agreement shall not be assigned in whole or in part, except as provided in this Article VII or in Section 5.02 or Section 6.01 herein.

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ARTICLE VIII

EVENTS OF DEFAULT AND REMEDIES

Section 8.01. Events of Default. Each of the following events shall constitute and is referred to in this Agreement as an “Event of Default”:

(a)

a failure by the Company to make when due any Loan Payment or any payment required under Section 5.01 hereof, which failure shall have resulted in an “Event of Default” under Section 8.01(a) or Section 8.01(b) of the Indenture;

(b)

a failure by the Company to pay when due any amount required to be paid under this Agreement or to observe and perform any covenant, condition or agreement on its part to be observed or performed under this Agreement (other than a failure described in Section 8.01(a) above), which failure shall continue for a period of 90 days (or such longer period as the Issuer and the Trustee may agree to in writing) after written notice, specifying such failure and requesting that it be remedied, shall have been given to the Company by the Trustee or to the Company and the Trustee by the Issuer; provided, however, that if such failure is other than for the payment of money and is of such nature that it cannot be corrected within the applicable period, such failure shall not constitute an “Event of Default” so long as the Company institutes corrective action within the applicable period and such action is being diligently pursued;

(c)

the dissolution or liquidation of the Company; or the filing by the Company of a voluntary petition in bankruptcy; or failure by the Company promptly to lift or bond any execution, garnishment or attachment of such consequence as will impair its ability to make any payments under this Agreement; or the filing of a petition or answer proposing the entry of an order for relief by a court of competent jurisdiction against the Company under Title 11 of the United States Code, as the same may from time to time be hereafter amended, or proposing the reorganization, arrangement or debt readjustment of the Company under the provisions of any bankruptcy act or under any similar act which may be hereafter enacted and the failure of said petition or answer to be discharged or denied within 90 days after the filing thereof or the entry of an order for relief by a court of competent jurisdiction in any proceeding for its liquidation or reorganizatio n under the provisions of any bankruptcy act or under any similar act which may be hereafter enacted; or an assignment by the Company for the benefit of its creditors; or the entry by the Company into an agreement of composition with its creditors (the term “dissolution or liquidation of the Company,” as used in this subsection (c), shall not be construed to include the cessation of the corporate existence of the Company resulting either from a merger or consolidation of the Company into or with another corporation or a dissolution or liquidation of the Company following a transfer of all or substantially all of its assets as an entirety, under the conditions permitting such actions contained in Section 6.01 hereto);

(d)

a failure by the Company to observe or perform any of the covenants, agreements or conditions of the Company contained in the Subordinate Mortgage, the Subordinate Security Agreement or the Subordination Agreement and such failure shall continue for 90 days after written notice specifying such failure and requesting that it be remedied shall have been provided to the Company; or

(e)

an acceleration of the Company’s payments under the Senior Loan Agreement or under any loan agreement executed in connection with the issuance of Additional Senior Indebtedness.

13

Section 8.02. Force Majeure. The provisions of Section 8.01(b) hereof are subject to the following limitations: if by reason of acts of God; strikes, lockouts or other industrial disturbances; acts of public enemies; orders of any kind of the government of the United States or the State, or any department, agency, political subdivision, court or official of any of such State or any other state which asserts regulatory jurisdiction over the Company; orders of any kind of civil or military authority; insurrections; riots; epidemics; landslides; lightning; earthquakes; volcanoes; fires; hurricanes; tornadoes; storms; floods; washouts; droughts; arrests; restraint of government and people; civil disturbances; explosions; breakage or accident to machinery; partial or entire failure of utilities; or any cause or event not reasonably within the control of the Company, the Company is unable in whole or in part to carry out anyone or more of its agreements or obligations contained herein, other than its obligations under Section 5.01 hereof, the Company shall not be deemed in default by reason of not carrying out said agreement or agreements or performing said obligation or obligations during the continuance of such inability. The Company shall make reasonable effort to remedy with all reasonable dispatch the cause or causes preventing it from carrying out its agreements, provided that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of the Company, and the Company shall not be required to make settlement of strikes, lockouts and other industrial disturbances by acceding to the demands of the opposing party or parties when such course is in the judgment of the Company unfavorable to the Company.

Section 8.03. Remedies. (a) Upon the occurrence and continuance of any Event of Default described in Section 8.01(a), Section 8.01(c) or Section 8.01(e) hereof, and further upon the condition that, in accordance with the terms of the Indenture, the Bonds shall have been declared to be immediately due and payable pursuant to any provision of the Indenture, the Loan Payments shall without further action, become and be immediately due and payable and the Trustee may take whatever action may appear necessary or desirable to collect the payment then due and to become due.

(b) Any waiver of any “Event of Default” under the Indenture and a rescission and annulment of its consequences shall constitute a waiver of the corresponding Event or Events of Default under this Agreement and a rescission and annulment of the consequences thereof.

(c) Upon the occurrence and continuance of any Event of Default, the Trustee (or the Issuer, but only with respect to the enforcement of Unassigned Rights) may take any action at law or in equity to collect any payments then due and thereafter to become due hereunder or to seek injunctive relief or specific performance of any obligation, agreement or covenant of the Company hereunder.

(d) Any amounts collected from the Company pursuant to this Section 8.03 shall be applied in accordance with the Indenture. No action taken pursuant to this Section 8.03 shall relieve the Company from the Company’s obligations pursuant to Section 5.01 hereof.

Section 8.04. No Remedy Exclusive. No remedy conferred upon or reserved to the Issuer hereby is intended to be exclusive of any other available remedy or remedies, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. No delay or omission to exercise any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right or power may be exercised from time to time and as often as may be deemed expedient. In order to entitle the Issuer to exercise any remedy reserved to it in this Article VIII, it shall not be necessary to give any notice, other than such notice as may be herein expressly required.

Section 8.05. Reimbursement of Attorneys’ Fees. If the Company shall default under any of the provisions hereof and the Issuer or the Trustee shall employ attorneys or incur other reasonable and proper expenses for the collection of payments due hereunder or for the enforcement of performance or observance of any obligation or agreement on the part of the Company contained herein, the Company will on demand therefore reimburse the Issuer or the Trustee, as the case may be, for the reasonable and proper fees and expenses of such attorneys and such other reasonable and proper expenses so incurred.

14

Section 8.06. Waiver of Breach. In the event any obligation created hereby shall be breached by either of the parties hereto and such breach shall thereafter be waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder. In view of the assignment of certain of the Issuer’s rights and interest hereunder to the Trustee, the Issuer shall have no power to waive any Event of Default hereunder by the Company in respect of such rights and interest without the consent of the Trustee, and the Trustee may exercise any of the rights of the Issuer hereunder.

ARTICLE IX

REDEMPTION OR PURCHASE OF BONDS

Section 9.01. Redemption of Bonds. The Issuer shall take or cause to be taken the actions required by the Indenture (other than the payment of money) to discharge the lien thereof through the redemption, or provision for payment or redemption, of all Bonds then Outstanding, or to effect the redemption, or provision for payment or redemption, of less than all the Bonds then Outstanding, upon receipt by the Issuer and the Trustee from an Authorized Company Representative of a written notice designating the principal amount of the Bonds to be redeemed and specifying the date of redemption (which, unless waived by the Issuer and the Trustee, shall not be less than 45 days from the date such notice is given, or such shorter period as the Trustee and the Company may agree from time to time) and the applicable redemption provision of the Indenture. Unless otherwise stated therein and except with respect to a redempt ion under Section 3.03 of the Indenture, such notice shall be revocable by the Company at any time prior to the time at which the Bonds to be redeemed, or for the payment or redemption of which provision is to be made, are first deemed to be paid in accordance with Article VII of the Indenture. The Company shall furnish any moneys required by the Indenture to be deposited with the Trustee or otherwise paid by the Issuer in connection with any of the foregoing purposes.

Section 9.02. Obligation to Prepay. (a) The Company shall be obligated to prepay in whole or in part the amounts payable hereunder upon a Determination of Taxability (as defined below) giving rise to a mandatory redemption of the Bonds pursuant to Section 3.03(b) of the Indenture, by paying an amount equal to, when added to other funds on deposit in the Redemption Account, the aggregate principal amount of the Bonds to be redeemed pursuant to the Indenture plus accrued interest to the redemption date.

(b) The Company shall cause a mandatory redemption to occur within 180 days after a Determination of Taxability (as defined below) shall have occurred. A “Determination of Taxability” shall be deemed to have occurred if, as a result of the failure of the Company to observe any covenant, agreement or representation in this Agreement, a final decree or judgment of any federal court or a final action of the Internal Revenue Service determines that interest paid or payable on any Bond is or was includible in the gross income of an Owner of the Bonds for federal income tax purposes under the Code (other than an Owner who is a “substantial user” or “related person” within the meaning of Section 147(a) of the Code). However, no such decree or action will be considered final for this purpose unless the Company has been given written notice of the same, either directly or in the name of any Owner of a Bond, and, if it so desires and is legally allowed, has been afforded the opportunity to contest the same, either directly or in the name of any Owner of a Bond, and until conclusion of any appellate review, if sought. If the Trustee receives written notice from any Owner of a Bond stating (a) that the Owner has been notified in writing by the Internal Revenue Service that it proposes to include the interest on any Bond in the gross income of such Owner for the reasons described therein or any other proceeding has been instituted against such Owner which may lead to a final decree or action as described herein, and (b) that such Owner will afford the Company the opportunity to contest the same, either directly or in the name of the Owner, until a conclusion of any appellate review, if sought, then the Trustee shall promptly give notice thereof to the Company, the Issuer and the Owner of each Bond then Outstanding. If a final decree or action as described above thereafter occurs and the Trustee has received w ritten notice thereof as provided in Section 9.01 hereof at least 45 days (or such shorter period as the Trustee and the Company may agree) prior to the redemption date, the Trustee shall request prepayment from the Company of the amounts payable hereunder and give notice of the redemption of the Bonds at the earliest practical date, but not later than the date specified in this Article, and in the manner provided by Section 3.05 of the Indenture.

15

At the time of any such prepayment of the amounts payable hereunder pursuant to this Section, the prepayment amount shall be applied, together with other available moneys in the Redemption Account, to the redemption of the Bonds on the date specified in the notice as provided in the Indenture, whether or not such date is an Interest Payment Date, to the Trustee’s fees and expenses under the Indenture accrued to such redemption of the Bonds, and to all sums due to the Issuer under this Agreement.

Whenever the Company shall have given any notice of prepayment of the amounts payable hereunder pursuant to this Article IX, which includes a notice for redemption of the Bonds pursuant to the Indenture, all amounts payable under the first paragraph of Section 9.02(a) herein shall become due and payable on the date fixed for redemption of such Bonds.

Section 9.03. Compliance With Indenture. Anything in this Agreement to the contrary notwithstanding, the Issuer and the Company shall take all actions required by this Agreement and the Indenture in order to comply with the provisions of Article III of the Indenture.

ARTICLE X

MISCELLANEOUS

Section 10.01. Term of Agreement. This Agreement shall remain in full force and effect from the date of delivery hereof until the right, title and interest of the Trustee in and to the Trust Estate shall have ceased, terminated and become void in accordance with Article VII of the Indenture and until all payments required under this Agreement shall have been made. The date first above written shall be for identification purposes only and shall not be construed to imply that this Agreement was executed on such date.

Section 10.02. Notices. Except as otherwise provided in this Agreement, all notices, certificates, requests, requisitions and other communications hereunder shall be in writing and shall be sufficiently given and shall be deemed given when delivered or mailed as provided in the Indenture.

Section 10.03. Parties in Interest. This Agreement shall inure to the benefit of and shall be binding upon the Issuer, the Company and their respective successors and assigns, and no other person, firm or corporation shall have any right, remedy or claim under or by reason of this Agreement except for rights of payment and indemnification hereunder of the Trustee and the Registrar. Section 10.05 hereof to the contrary notwithstanding, for purposes of perfecting a security interest in this Agreement by the Trustee, only the counterpart delivered, pledged and assigned to the Trustee shall be deemed the original. No security interest in this Agreement may be created by the transfer of any counterpart thereof other than the original counterpart delivered, pledged and assigned to the Trustee.

16

Section 10.04. Documents to be Delivered to the Trustee in Relation to the Closing. In connection with the issuance and delivery of the Bonds, the Trustee shall receive executed copies (either in original or photostatic form) of the following documents: (i) this Agreement; (ii) the Indenture; (iii) that certain Bond Purchase Agreement among the Issuer, Oppenheimer & Co. and the Company; (iv) that certain Continuing Disclosure Agreement by and among the Company, the Trustee and Oppenheimer & Co.; (v) the Senior Loan Agreement; (vi) the Subordinate Mortgage; (vii) the Subordinate Security Agreement; (viii) the Subordination Agreement; (ix) that certain Environmental Indemnity Agreement dated as of March 1, 2007 between the Company and the Trustee; (x) that certain Assignment of Design-Build Contract (Fagen, Inc.) dated as of March 1, 2007 by and between the Company and the Trus tee; (xi) that certain Assignment of Design-Build Contract (Jackson-Briner Joint Venture, LLC) dated as of March 1, 2007 by and between the Company and the Trustee; (xii) that certain the Assignment of License Agreement (ICM, Inc.) dated as of March 1,2007 by and between the Company and the Trustee; (xiii) that certain Collateral Assignment of Com Supply Agreement (Cargill, Incorporated) dated as of March 1,2007 by and between the Company and the Trustee; (xiv) that certain Assignment of Ethanol Marketing Agreement (Aventine Renewable Energy, Inc.) dated as of March 1,2007 by and between the Company and the Trustee; (xv) that certain Assignment of Distiller’s Grain Marketing Agreement (Commodity Specialist Company) dated as of March 1, 2007 by and between the Company and the Trustee; (xvi) the Tax Agreement; (xvii) that certain Certificate and Request of Issuer dated March 22, 2007; (xviii) that certain Certificate and Approval of Indiana Bio-Energy, LLC dated March 22, 2007; (xix) that certain Loan Pol icy issued by Chicago Title Insurance Company showing the Trustee as the insured thereunder; (xx) the VCC Financing Statement with the Issuer as the debtor and the Trustee as the secured party filed with the office of the Indiana Secretary of State; and (xxi) Cross Receipts dated March 22,2007 from Oppenheimer & Co. and the Trustee.

Section 10.05. Amendments. This Agreement may be amended only by written agreement of the Company and the Issuer and with the written consent of the Trustee in accordance with the provisions of Section 11.05 or Section 11.06 of the Indenture, as applicable; provided, however, that Exhibit A to this Agreement may be amended upon compliance only with the requirements of Section 3.02 hereof.

Section 10.06. Counterparts. This Agreement may be executed in any number of counterparts, each of which, when so executed and delivered, shall be an original (except as expressly provided in Section 10.03 hereof), and such counterparts shall together constitute but one and the same Agreement.

Section 10.07. Severability. If any clause, provision or Section of this Agreement shall, for any reason, be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof.

Section 10.08. Governing Law. This Agreement shall be governed exclusively by and construed in accordance with the laws of the State.

17

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

CITY OF BLUFFTON, INDIANA

By: /s/ Ted L. Ellis                           

Ted L. Ellis

Mayor

[SEAL]

ATTEST:

By:  /s/ Nancy Hewitt               

Nancy Hewitt

Clerk -Treasurer

INDIANA BIO-ENERGY, LLC

By: /s/ Stephen J. Hogan                 

Stephen J. Hogan President

Signature Page to Loan Agreement

Signature Page to Loan Agreement

18

EXHIBIT A

PROJECT DESCRIPTION

The Project consists of certain solid waste disposal facilities constituting pollution control facilities under the Act at the Plant, all as more fully described in the Project Certificate.

A-1

EXHIBIT B

[Form of Notice of Completion]

[Date]

U.S. Bank National Association

City of Bluffton

10 West Market Street, Suite 1150

City Hall

Indianapolis, Indiana 46204

128 East Market Street

Attention:  Corporate Trust

Bluffton, Indiana 46714

Attention:  Clerk-Treasurer

Ladies and Gentlemen:

This Notice of Completion is submitted pursuant to the provisions of Section 3.01 of the Loan Agreement dated as of March 1, 2007 between the City of Bluffton, Indiana (the “Issuer”) and Indiana Bio-Energy, LLC (the “Company”), relating to City of Bluffton, Indiana Subordinate Solid Waste Disposal Facility Revenue Bonds, Series 2007A (Indiana Bio-Energy, LLC Ethanol Plant Project). Capitalized terms used herein have the same meanings herein as when used in the Indenture of Trust (except where the context otherwise requires), dated as of March 1, 2007 between the Issuer and U.S. Bank National Association, as trustee.

The undersigned is an Authorized Company Representative and hereby certifies that the Completion Date for the Project was                     , 20    , and on such date all portions of the Project were fully completed in accordance with the plans and specifications therefore, as then amended.

IN WITNESS WHEREOF, the undersigned Authorized Company Representative has caused this Notice of Completion to be executed as of the day first above written.

INDIANA BIO-ENERGY, LLC

By:                                                                                 

       Authorized Company Representative

B-1

EX-10

Exhibit 10.47

_____________________________________________________________________________

INDENTURE OF TRUST

between

CITY OF BLUFFTON, INDIANA

and

U.S. BANK NATIONAL ASSOCIATION, as Trustee

providing for the issuance of

$22,000,000

CITY OF BLUFFTON, INDIANA

SUBORDINATE SOLID WASTE DISPOSAL FACILITY REVENUE BONDS, SERIES 2007A (INDIANA BIO-ENERGY, LLC ETHANOL PLANT PROJECT)

Dated as of March 1, 2007

_____________________________________________________________________________

TABLE OF CONTENTS

SECTION		PAGE
Recitals		1
Granting Clauses		1
ARTICLE I	DEFINITIONS AND RULES OF CONSTRUCTION	2
Section 1.01	General Definitions	2
Section 1.02	Rules of Construction	13
ARTICLE II	THE BONDS	14
Section 2.01	Authorization of Bonds	14
Section 2.02	Date, Denomination, Interest Rate, and Maturity	14
Section 2.03	Form of Bonds	15
Section 2.04	Execution of Bonds	15
Section 2.05	Transfer and Exchange of Bonds	16
Section 2.06	Bond Register	16
Section 2.07	Bonds Mutilated, Lost, Destroyed or Stolen	17
Section 2.08	Bonds; Limited Obligations	17
Section 2.09	Disposal of Bonds	18
Section 2.10	Book-Entry System	18
Section 2.11	CUSIP Numbers	20
ARTICLE III	REDEMPTION OF BONDS	20
Section 3.01	Redemption of Bonds Generally	20
Section 3.02	Redemption upon Optional Prepayment	21
Section 3.03	Redemption upon Mandatory Prepayment	22
Section 3.04	Selection of Bonds for Redemption	23
Section 3.05	Notice of Redemption	24
Section 3.06	Partial Redemption of Bonds	24
Section 3.07	No Partial Redemption after Default	25
Section 3.08	Payment of Redemption Price	25
Section 3.09	Effect of Redemption	25
ARTICLE IV	GENERAL COVENANTS	25
Section 4.01	Payment of Bonds	25
Section 4.02	Performance of Covenants by Issuer; Authority; Due Execution	26
Section 4.03	Defense of Issuer’s Rights	27
Section 4.04	Recording and Filing; Further Instruments	27
Section 4.05	Rights under Agreement.	28
Section 4.06	Arbitrage and Tax Covenants	28

ii

SECTION		PAGE
Section 4.07	No Disposition of Trust Estate	28
Section 4.08	Access to Books	28
Section 4.09	Source of Payment of Bonds	29
ARTICLE V	FUND AND ACCOUNTS; DEPOSIT AND	29
	APPLICATION OF BOND PROCEEDS; REVENUES
Section 5.01	Creation of Bond Fund and Accounts; Debt Service	29
	Reserve Fund; Rebate Fund; Condemnation and Awards Fund
Section 5.02	Application of Bond Proceeds and Equity Contribution	28
Section 5.03	Deposits into the Funds; Use of Moneys in the Funds	38
Section 5.04	Bonds Not Presented for Payment of Principal	43
Section 5.05	Payment to the Company	43
ARTICLE VI	INVESTMENTS	44
Section 6.01	Investment of Moneys in Funds	44
Section 6.02	Conversion of Investment to Cash	44
Section 6.03	Credit for Gains and Charge for Losses	44
Section 6.04	Payments into Rebate Fund; Application of Rebate Fund	45
ARTICLE VII	DEFEASANCE	46
Section 7.01	Defeasance	46
ARTICLE VIII	DEFAULTS AND REMEDIES	48
Section 8.01	Events of Default	48
Section 8.02	Acceleration; Other Remedies	49
Section 8.03	Restoration to Former Position	50
Section 8.04	Owners’ Right to Direct Proceedings	51
Section 8.05	Limitation on Owners’ Right to Institute Proceedings	51
Section 8.06	No Impairment of Right to Enforce Payment	51
Section 8.07	Proceedings by Trustee Without Possession of Bonds	52
Section 8.08	No Remedy Exclusive	52
Section 8.09	No Waiver of Remedies	52
Section 8.10	Application of Moneys	52
Section 8.11	Severability of Remedies	54
Section 8.12	Limitation of Actions; Subordination Agreement	54

iii

SECTION		PAGE
ARTICLE IX	TRUSTEE; REGISTRAR	54
Section 9.01	Acceptance of Trusts	54
Section 9.02	No Responsibilities for Recitals	54
Section 9.03	Limitations on Liability	54
Section 9.04	Compensation, Expenses and Advances	56
Section 9.05	Notice of Events of Default and Determination of Taxability	57
Section 9.06	Action by Trustee	57
Section 9.07	Good-Faith Reliance	57
Section 9.08	Dealings in Bonds; Allowance of Interest	59
Section 9.09	Several Capacities	59
Section 9.10	Resignation of Trustee	59
Section 9.11	Removal of Trustee	59
Section 9.12	Appointment of Successor Trustee	60
Section 9.13	Qualifications of Successor Trustee	60
Section 9.14	Judicial Appointment of Successor Trustee	61
Section 9.15	Acceptance of Trusts by Successor Trustee	61
Section 9.16	Successor by Merger or Consolidation	61
Section 9.17	Standard of Care	61
Section 9.18	Intervention in Litigation of the Issuer	62
Section 9.19	Registrar	62
Section 9.20	Qualifications of Registrar; Resignation; Removal	62
Section 9.21	Additional Duties of Trustee	63
ARTICLE X	EXECUTION OF INSTRUMENTS BY OWNERS	63
	AND PROOF OF OWNERSHIP OF BONDS

iv

SECTION		PAGE
ARTICLE XI	MODIFICATION OF THIS INDENTURE, THE	62
	AGREEMENT AND THE SUBORDINATE MORTGAGE
Section 11.01	Supplemental Indentures Without Owner Consent..	62
Section 11.02	Supplemental Indentures Requiring Owner Consent	66
Section 11.03	Effect of Supplemental Indenture	67
Section 11.04	Consent of the Company and Other Parties	67
Section 11.05	Amendment of Agreement Without Owner Consent.	67
Section 11.06	Amendment of Agreement Requiring Owner Consent	69
Section 11.07	Amendment of Subordinate Mortgage Without Owner Consent	70
Section 11.08	Amendment of Subordinate Mortgage or the Subordinate	70
	Security Agreement Requiring Owner Consent
ARTICLE XII	MISCELLANEOUS	70
Section 12.01	Successors of the Issuer	70
Section 12.02	Parties in Interest	70
Section 12.03	Severability	71
Section 12.04	No Personal Liability of Issuer Officials	71
Section 12.05	Bonds Owned by the Issuer or the Company	71
Section 12.06	Documents to be Delivered to the Trustee in Relation the to Closing	72
Section 12.07	Counterparts	72
Section 12.08	Governing Law	72
Section 12.09	Notices	72
Section 12.10	Holidays	73
Signatures		74
EXHIBIT A	FORM OF BOND	A-1
EXHIBIT B	FORM OF REQUISITION	B-1

v

INDENTURE OF TRUST

THIS INDENTURE OF TRUST (this “Indenture”) is made and entered into as of March 1, 2007, between the CITY OF BLUFFTON, INDIANA, a municipal corporation of the State of Indiana (the “Issuer”), and U.S. BANK NATIONAL ASSOCIATION, as trustee (the “Trustee”).

RECITALS

A.

In furtherance of its public purposes, the Issuer has entered into a Loan Agreement, dated as of March 1, 2007, with Indiana Bio-Energy, LLC, an Indiana limited liability company (the “Company”), providing for the issuance by the Issuer of the Bonds for the purpose of loaning the proceeds thereof to the Company in order to provide funds (i) to finance a portion of the costs of the Project (hereinafter defined), (ii) to pay a portion of the interest accruing on the Bonds during construction of the Project, (iii) to fund a debt service reserve fund for the Bonds, and (iv) to pay certain costs of issuance relating to the Bonds.

B.

The execution and delivery of this Indenture and the issuance and sale of the Bonds have been in all respects duly and validly authorized by proper action duly adopted by the governing body of the Issuer.

C.

The execution and delivery of the Bonds and of this Indenture have been duly authorized and all things necessary to make the Bonds, when executed by the Issuer and authenticated by the Registrar, valid and binding legal obligations of the Issuer and to make this Indenture a valid and binding agreement have been done.

NOW, THEREFORE, THIS INDENTURE OF TRUST WITNESSETH:

GRANTING CLAUSES

The Issuer, in consideration of the premises and the acceptance by the Trustee of the trusts hereby created and of the purchase and acceptance of the Bonds by the Owners thereof, and for other good and valuable consideration, the receipt of which is hereby acknowledged, in order to secure the payment of the principal of, and premium, if any, and interest on, the Bonds according to their tenor and effect and to secure the performance and observance by the Issuer of all the covenants expressed or implied herein and in the Bonds, does hereby grant, bargain, sell convey, mortgage and warrant, and assign, pledge and grant a security interest in, the Trust Estate to the Trustee, and its successors in trust and assigns forever for the benefit of the Owners:

TO HAVE AND TO HOLD all and singular the Trust Estate, whether now owned or hereafter acquired, to the Trustee and its respective successors in trust and assigns forever;

IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for the equal and proportionate benefit, security and protection of all present and future Owners of the Bonds issued under and secured by this Indenture without privilege, priority or distinction as to the lien or otherwise of any of the Bonds over any of the other Bonds, subordinate to the rights of the Senior Lender under the Senior Loan;

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PROVIDED, HOWEVER, that if the Issuer, its successors or assigns, shall well and truly pay, or cause to be paid, the principal of, and premium, if any, and interest on, the Bonds due or to become due thereon, at the times and in the manner mentioned in the Bonds and as provided in Article VII hereof according to the true intent and meaning thereof, and shall cause the payments to be made as required under Article IV hereof, or shall provide, as permitted hereby, for the payment thereof in accordance with Article VII hereof, and shall well and truly keep, perform and observe all the covenants and conditions pursuant to the terms of this Indenture to be kept, performed and observed by it, and shall pay, or cause to be paid, the principal of, and premium, if any, and interest on, the Bonds due or to become due in accordance with the terms and provisions hereof, then and in that case this Indenture and the rights hereby granted shall cease, terminate and be v oid and the Trustee shall thereupon cancel and discharge this Indenture and execute and deliver to the Issuer and the Company such instruments in writing as shall be reasonably requested to evidence the discharge hereof, otherwise this Indenture shall be and remain in full force and effect.

THIS INDENTURE OF TRUST FURTHER WITNESSETH, and it is expressly declared, that all Bonds issued and secured hereunder are to be issued, authenticated and delivered, and all of the Trust Estate is to be dealt with and disposed of, under, upon and subject to the terms, conditions, stipulations, covenants, agreements, trusts, uses and purposes hereinafter expressed, and the Issuer has agreed and covenanted, and does hereby agree and covenant, with the Trustee and with the respective Owners, from time to time, of the Bonds, or any part thereof, as follows:

ARTICLE I

DEFINITIONS AND RULES OF CONSTRUCTION

Section 1.01.

General Definitions. The terms defined in this Section 1.01 shall have the meanings provided herein for all purposes of this Indenture and the Agreement, unless the context clearly requires otherwise.

“Act” means Indiana Code Sections 36-7-11.9-1 et seq., as supplemented and amended, and Indiana Code Sections 36-7-12-1 et seq., as supplemented and amended heretofore and hereafter.

“Additional Payments” means the amounts required to be paid by the Company pursuant to the provisions of Section 5.01(b) of the Agreement.

“Additional Senior Indebtedness” means any indebtedness of the Company which is in addition to the indebtedness under the Senior Loan Agreement which additional indebtedness is or will be secured by a mortgage lien against all or part of the Plant, or any other asset of the Company, having priority over the Subordinate Mortgage and the Subordinate Security Agreement.

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“Administration Expenses” means reasonable compensation and reimbursement of reasonable expenses and advances (including, without limitation, reasonable attorneys’ fees and expenses) payable to the Issuer, the Trustee, the Registrar and the Securities Depository.

“Agreement” means the Loan Agreement, dated as of March 1, 2007, between the Issuer and the Company, as amended and supplemented from time to time as permitted therein.

“Authorized Company Representative” means each person at the time designated to act on behalf of the Company by written certificate furnished to the Issuer and the Trustee containing the specimen signature of such person and signed on behalf of the Company by its President, any Vice President, its Secretary, any Assistant Secretary, its Treasurer or any Assistant Treasurer. Such certificate may designate an alternate or alternates.

“Authorized Denomination” means $5,000 or any integral multiple thereof.

“Authorized Senior Lender Representative” means each person at the time designated to act on behalf of the Senior Lender by written certificate furnished to the Company, the Issuer and the Trustee containing the specimen signature of such person and signed on behalf of the Senior Lender by its President, any Vice President, its Secretary, any Assistant Secretary, its Treasurer or any Assistant Treasurer. Such certificate may designate an alternate or alternates.

“Beneficial Owner” has, when the Bonds are held in book-entry form, the meaning ascribed to such term in Section 2.10 hereof.

“Bond” or “Bonds” means the Issuer’s Subordinate Solid Waste Disposal Facility Revenue Bonds, Series 2007A (Indiana Bio-Energy, LLC Ethanol Plant Project), issued pursuant to this Indenture in the aggregate principal amount of $22,000,000.

“Bond Counsel” means Chapman and Cutler LLP or any other firm of nationally recognized bond counsel familiar with the type of transactions contemplated under this Indenture selected by the Company and acceptable to the Trustee.

“Bond Documents” means this Indenture, the Agreement, the Subordinate Mortgage, the Subordinate Security Agreement, the Subordination Agreement and the Bonds.

“Bond Fund” means the trust fund by that name created pursuant to Section 5.01(a) hereof.

“Bond Ordinance” means Ordinance No. 1254 adopted by the Common Council of the Issuer on the 14th day of November, 2006, authorizing the issuance of the Bonds.

“Bond Payment Date” means any Interest Payment Date, any Principal Payment Date and any other date on which the principal of, and premium, if any, and interest on, the Bonds is to be paid to the Owners thereof, whether upon redemption, at maturity or upon acceleration of maturity of the Bonds.

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“Business Day” means any day on which interbank wire transfers can be made on the Fedwire System, except a Saturday, Sunday or other day (a) on which commercial banks located in the cities in which the Principal Office of the Trustee or the Principal Office of the Company are located are required or authorized by law or regulation to remain closed or are closed, or (b) on which The New York Stock Exchange is closed.

“Capitalized Interest Account” means the trust account of that name created pursuant to Section 5.01(a) hereof.

“Capitalized Interest Period” means the period from the Issue Date until (i) December 1, 2008 or (ii) the Completion Date, if such date is earlier.

“Closing” and “Closing Date” means the date of the first authentication and delivery of fully executed and authenticated Bonds under this Indenture being March 22, 2007.

“Code” means the Internal Revenue Code of 1986, as amended. Each reference to a section of the Code herein shall be deemed to include the United States Treasury Regulations, including temporary and proposed regulations, relating to such section which is applicable to the Bonds or the use of the proceeds thereof.

“Collateral” means the property pledged by the Company to the Trustee pursuant to the Subordinate Security Agreement.

“Company” means Indiana Bio-Energy, LLC, a limited liability company organized and existing under the laws of the State of Indiana, or its successors and assigns pursuant to Section 6.01 of the Agreement.

“Company’s Certificate” means a certificate signed on behalf of the Company by an Authorized Company Representative.

“Completion Certificate” means the certificate of that name defined in Section 5.02(b) hereof.

“Completion Date” means the date when all portions of the Project have been fully completed in accordance with the plans and specifications therefor, as then amended, and as identified in the Notice of Completion.

“Condemnation and Awards Fund” means the trust fund of that name created pursuant to Section 5.01(d) hereof.

“Construction Fund” means the trust fund of that name created pursuant to Section 5.02(a) hereof.

“Costs of Issuance Fund” means the trust fund of that name created pursuant to Section 5.02(a) hereof.

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“Dated Date” means the date of initial issuance of the Bonds.

“Debt Service Coverage Ratio” means for any period, the ratio of EBITDA to interest expense and scheduled principal payments payable during such period in respect of the Senior Loan Agreement, any Additional Senior Indebtedness, and the Bonds existing at the time the calculation is made.

“Debt Service Reserve Fund” means the trust fund by that name created pursuant to Section 5.01(b) hereof.

“Debt Service Reserve Fund Requirement” means the lesser of (i) $2,200,000; (ii) the maximum annual debt service on the Bonds for any year or (iii) 125% of average annual debt service on the Bonds.

“Determination of Taxability” shall have the meaning set forth in Section 9.02 of the Agreement. The Trustee shall give notice of a Determination of Taxability as provided in Section 9.05 hereof.

“DTC” means The Depository Trust Company and its successors and assigns.

“DTC Participants” means those brokers, securities dealers, banks, trust companies, clearing corporations and certain other organizations from time to time for which DTC holds Bonds as securities depository.

“DTC Representation Letter” has the meaning assigned thereto in Section 2.l0(c) hereof.

“EBITDA” means for any period, an amount determined in accordance with generally accepted accounting principles, equal to (a) Net Income for such period, plus (b) to the extent deducted in determining Net Income for such period, the sum of (1) interest expense, (2) payments to the members of the Company in respect of estimated tax amounts (payments of estimated tax amounts shall be deemed to have been made in the tax fiscal quarter to which the applicable payment related), (3) depreciation and amortization and (4) all other non-cash charges, in each case for such period.

“Event of Default” means any occurrence or event specified in Section 8.01 hereof.

“Executive Officer” means the Mayor of the Issuer.

“Exempt Facilities” means facilities which qualify as “solid waste disposal facilities” as defined in Section 142(a)(6) of the Code and which qualify as “pollution control facilities” under the Act.

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“Favorable Opinion of Bond Counsel” means an opinion of Bond Counsel addressed to the Issuer and the Trustee to the effect that the proposed action is not prohibited by the Act or this Indenture or the Agreement, as applicable, and will not adversely affect the Tax-Exempt status of the Bonds. Bond Counsel, with the consent of the Company, may take such actions as it deems necessary in order to enable it to deliver a Favorable Opinion of Bond Counsel, including, but not limited to, the filing of a Form 8038 with the Internal Revenue Service. See Section 9.03.

“Government Obligations” means direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed as to full and timely payment by, the United States of America, which are not subject to redemption or prepayment prior to stated maturity.

“Indenture” means this Indenture of Trust between the Issuer and the Trustee relating to issuance of the Bonds, as amended or supplemented from time to time as permitted herein.

“Independent Engineer” means R.W. Beck, Inc., Malcolm Pirnie, Inc., Stone & Webster, Inc., or such other recognized firm acceptable to the Company and the Trustee, and its successors and assigns.

“Independent Engineer’s Certificate” means a certificate of a representative of the Independent Engineer.

“Information Services” means Financial Information, Inc.’s “Daily Called Bond Service,” 30 Montgomery Street, 10th Floor, Jersey City, New Jersey 07302, Attention: Editor; Kenny Information Services’ “Called Bond Service,” 55 Water Street, 45th Floor, New York, New York 10041; Moody’s “Municipal and Government,” 99 Church Street, 8th Floor, New York, New York 10007, Attention: Municipal News Reports; the Municipal Securities Rulemaking Board, CDI Pilot, 1640 King Street, Suite 300, Alexandria, Virginia 22314 and XCITE, Inc. “Called Bond Dept.,” 5 Hanover Square, New York, New York 10004; or, in accordance with then-current guidelines of the Securities and Exchange Commission, such other addresses and/or such other services providing information with respect to called bonds, or no such services, as the Company may designate in a certificate delivered to the Trustee.

“Interest Account” means the trust account by that name established within the Bond Fund pursuant to Section 5.01(a) hereof.

“Interest Payment Date” means each of the dates specified in Section 2.02 hereof on which interest is due and payable with respect to the Bonds.

“Investment Securities” means any of the following obligations or securities, to the extent permitted by law and subject to the provisions of Article VI hereof:

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(a)

Direct obligations of the United States of America and Canada and obligations fully guaranteed by any agency thereof;

(b)

Direct obligations of, and obligations fully guaranteed by, any of the 50 states of the United States of America or the ten provinces of Canada rated a minimum of A1 or AA by S&P or any equivalent rating by any equivalent rating service (such rating requirement can be met by an attached letter of credit from any bank meeting the requirements stated in clause (e) below or by municipal bond insurance);

(c)

Indebtedness of any county or other local government body within the United States of America rated at least A1 or AA by S&P or any equivalent rating by any equivalent rating service (such rating requirement can be met by an attached letter of credit from any bank meeting the requirements stated in clause (e) below or by municipal bond insurance);

(d)

Indebtedness of any corporation rated A1 or AA by S&P or any equivalent rating by any equivalent rating service;

(e)

Certificates of deposit, banker’s acceptances, trust deposits, demand deposits, including interest bearing money market accounts, or time deposits of any commercial bank, branch or Edge Act (12 USC 611 et seq.) branch which is a member of the Federal Reserve System, including the Trustee or any of its affiliates, has a net worth of at least $100 million and whose short term bank deposits have an A prefix by Moody’s or S&P or any equivalent rating by any equivalent rating service;

(f)

Repurchase agreements or reverse repurchase agreements with financial institutions whose commercial paper is Al or whose debt rating is AA, or any bank who meets the requirements as stated in clause (e) above, provided that in all cases the market value of the collateral used for such transactions must be adequate to insure safety; liquidity and preservation of capital: AAA-102%, AA-110%;

(g)

Securities and Exchange Commission Rule 2a-7 money market funds with a net asset value of one dollar and a parent company rating of A1 or better by S&P or any equivalent rating by any equivalent rating service, including, without limitation, any mutual fund for which the Trustee or an affiliate of the Trustee serves as investment manager, administrator, shareholder servicing agent, and/or custodian or subcustodian, notwithstanding that (a) the Trustee or an affiliate of the Trustee receives fees from such funds for services rendered, (b) the Trustee charges and collects fees for services rendered pursuant to the Indenture, which fees are separate from the fees received from such funds, and (c) services performed for such funds and pursuant to this Indenture may at times duplicate those provided to such funds by the Trustee or its affiliates; and

(h)

any other obligations or securities approved by the Senior Lender.

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“Issue Date” means the date of the initial authentication and delivery of the Bonds.

“Issuer” means City of Bluffton, Indiana and its successors, and any municipal corporation resulting from or surviving any consolidation or merger to which it or its successors may be a party.

“Loan” means the loan by the Issuer to the Company of the proceeds received from the sale of the Bonds.

“Loan Documents” means the Agreement, the Subordinate Mortgage, the Subordinate Security Agreement, that certain Environmental Indemnity Agreement dated as of March 1, 2007 between the Company and the Trustee, that certain Assignment of Design-Build Contract (Fagen, Inc.) dated as of March 1, 2007 by and between the Company and the Trustee, that certain Assignment of Design-Build Contract (Jackson-Briner Joint Venture, LLC) dated as of March 1, 2007 by and between the Company and the Trustee, that certain the Assignment of License Agreement (ICM, Inc.) dated as of March 1, 2007 by and between the Company and the Trustee, that certain Collateral Assignment of Corn Supply Agreement (Cargill, Incorporated) dated as of March 1, 2007 by and between the Company and the Trustee, that certain Assignment of Ethanol Marketing Agreement (Aventine Renewable Energy, Inc.) dated as of March 1, 2007 by and between the Company and the Trustee, that certa in Assignment of Distiller’s Grain Marketing Agreement (Commodity Specialist Company) dated as of March 1, 2007 by and between the Company and the Trustee, and any future assignments of an electric service agreement and a natural gas agreement by and between the Company and the Trustee.

“Loan Payments” means the payments required to be made by the Company pursuant to Section 5.01(a) of the Agreement.

“Mail” means by first-class mail postage prepaid.

“Moody’s” means Moody’s Investors Service, a corporation organized and existing under the laws of the State of Delaware, its successors and assigns, and, if such corporation shall for any reason no longer perform the functions of a securities rating agency, “Moody’s” shall be deemed to refer to any other nationally recognized rating agency designated by the Company by notice to the Issuer and the Trustee.

“Net Income” means for any period, the net income (or loss) of the Company for such period determined in accordance with generally accepted accounting principles, but excluding therefrom (to the extent otherwise included therein) (a) any extraordinary gains or losses, (b) any gains attributable to write-ups of assets, (c) any equity interest in the unremitted earnings of any Person that is not a subsidiary of the Company, and (d) any income (or loss) of any Person accrued prior to the date it becomes a subsidiary of, or is merged into or consolidated with, the Company on the date that such Person’s assets are acquired by the Company.

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“Net Proceeds” means the gross proceeds of an insurance claim or a condemnation award after payment of all expenses (including attorneys’ fees and any extraordinary fees or expenses of the Trustee) incurred in its collection.

“Net Worth” of any Person means, as of any given date, the aggregate of capital, surplus and retained earnings (including any cumulative translation adjustment) of such Person as would be shown on a consolidated balance sheet of such Person prepared as of such date in accordance with generally accepted accounting principles which may be in part established with respect to asset value by an appraisal firm established in accordance with generally accepted accounting principles.

“Notice of Completion” means the written notice provided by and signed on behalf of the Company by an Authorized Company Representative substantially in the form attached to the Agreement as Exhibit B.

“Outstanding” or “Bonds Outstanding” or “Outstanding Bonds” means, as of any given date, all Bonds which have been authenticated and delivered by the Registrar under this Indenture, except:

(a)

Bonds canceled or purchased by or delivered to the Trustee for cancellation;

(b)

Bonds that have become due (at maturity or upon redemption, acceleration or otherwise) and for the payment, including premium if any, and interest accrued to the due date, of which sufficient moneys are held by the Trustee;

(c)

Bonds deemed paid in accordance with Article VII hereof;

(d)

Bonds in lieu of which others have been authenticated under Section 2.05 (relating to transfer and exchange of Bonds) or Section 2.07 (relating to mutilated, lost, stolen or destroyed Bonds) or Bonds paid pursuant to the Indenture; and

(e)

for purposes of any direction, consent or waiver under this Indenture, Bonds owned as described in Section 12.05.

“Person” means one or more individuals, estates, joint ventures, joint-stock companies, partnerships, associations, corporations, limited liability companies, trusts or unincorporated organizations, and one or more governments or agencies or political subdivisions thereof.

“Plant” means the 100,000,000 gallon-per-year dry mill ethanol plant to be located at 1441 S. Adams Street, Bluffton, Indiana and owned by the Company.

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“Principal Account” means the trust account by that name established within the Bond Fund pursuant to Section 5.01(a) hereof.

“Principal Payment Date” means the maturity date of the Bonds and each of the dates on which a Sinking Fund Installment is due and payable with respect to the Bonds.

“Principal Office of the Company” means the office of the Company, as follows: 969 North Main Street, Bluffton, Indiana 46714.

“Principal Office of the Registrar” means the office or offices designated as such by the Registrar in writing to the Trustee, the Company and the Issuer.

“Principal Office of the Trustee” means the office designated as such by the Trustee in writing to the Registrar, the Issuer and the Company.

“Project” means the facilities financed from the proceeds of the Bonds and described in Exhibit A to the Agreement, as Exhibit A may be modified in accordance with Section 3.02 of the Agreement.

“Project Certificate” means the certificate or certificates, delivered by the Company on the Closing Date, with respect to certain facts which are within the knowledge of the Company to enable Bond Counsel to determine whether interest on the Bonds is includible in the gross income of the Owners thereof under applicable provisions of the Code.

“Project Costs” has the meaning ascribed thereto in Section 5.02(a) hereof.

“Rebate Fund” means the trust fund by that name created pursuant to Section 5.01 (c) hereof.

“Record Date” means the fifteenth day of the month immediately preceding each Interest Payment Date.

“Redemption Account” means the trust account of that name created pursuant to Section 5.01(a) hereof.

“Registered Owner” or “Bondholder” or “Owner” or “Holder” when used in reference to the Bonds means the person or persons in whose name or names a Bond shall be registered in the books of Issuer maintained by the Registrar in accordance with the terms of this Indenture; provided, however, that when used in the context of the Tax-Exempt status of the Bonds, such terms shall include a Beneficial Owner.

“Registrar” means U.S. Bank National Association, Indianapolis, Indiana, or any successor Registrar appointed in accordance with Section 9.20.

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“Reserve Fund Credit Instrument” means an insurance policy, surety bond or irrevocable letter of credit which may be delivered to the Trustee in lieu of or in partial substitution for cash or securities required to be on deposit in the Debt Service Reserve Fund. In the case of an insurance policy or surety bond, the company providing the same shall be an insurer which, at the time of issuance of the policy, has been assigned the highest rating accorded insurers by Moody’s and S&P, and the policy or bond shall be subject to the irrevocable right of the Trustee to draw thereon in a timely fashion upon satisfaction of any conditions set forth in this Indenture. In the case of a letter of credit, the letter of credit shall be irrevocable and shall be payable to the Trustee and shall be issued by a banking institution having a credit rating on its long-term unsecured debt within one of the two highest rating categories from Moody’s and S&P.

“Revenues” means (a) the Loan Payments, (b) all other moneys pledged hereunder and paid or payable to the Trustee for the account of the Issuer in accordance with the Agreement, and (c) all receipts credited under the provisions of this Indenture against such payments; provided, however, that “Revenues” shall not include moneys held by the Trustee in the Rebate Fund, or any moneys held by the Issuer raised by taxation or otherwise.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, its successors and assigns, and, if such corporation shall for any reason no longer perform the functions of a securities rating agency, “S &P” shall be deemed to refer to any other nationally recognized securities rating agency designated by the Company by notice to the Issuer and the Trustee.

“Securities Depositories” means The Depository Trust Company, Call Notification Department, 711 Stewart Avenue, Garden City, New York 11530, Telephone: (516) 227-4070, Fax: (516) 227-4190, or, in accordance with then-current guidelines of the Securities and Exchange Commission, such other addresses and/or such other securities depositories, or no such depositories, as the Company may designate in a certificate delivered to the Trustee.

“Senior Lender” means AgStar Financial Services, PCA, and its successors and assigns.

“Senior Loan” means the loan in the initial principal amount of $90,000,000 from the Senior Lender to the Company.

“Senior Loan Agreement” means the Master Loan Agreement dated as of February 27, 2007 between the Senior Lender and the Company, as supplemented and amended in accordance with its terms.

“Senior Mortgage” means the Construction/Permanent Mortgage, Security Agreement, Assignment of Leases and Rents, Financing Statement and Fixture Filing dated February 27, 2007 made by the Company in favor of the Senior Lender, as amended and supplemented from time to time.

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“Sinking Fund Installment” means the amount designated pursuant to Section 3.03(a) for mandatory redemption on the date specified therein. This amount may be reduced pursuant to Section 5.03(b) hereof.

“State” means the State of Indiana.

“Subordinate Mortgage” means the Subordinate Construction/Permanent Mortgage, Subordinate Security Agreement, Assignment of Leases and Rents, Financing Statement and Fixture Filing dated as of March 1, 2007 made by the Company in favor of the Trustee, as amended and supplemented from time to time.

“Subordinate Security Agreement” means the Subordinate Security Agreement dated as of March 1, 2007 from the Company to the Trustee, as amended and supplemented from time to time.

“Subordination Agreement” means the Intercreditor Agreement dated as of February 27, 2007 between the Trustee and the Senior Lender.

“Supplemental Indenture” means any indenture supplemental to this Indenture entered into between the Issuer and the Trustee pursuant to the provisions of Section 11.01 or Section 11.02 hereof.

“Tax Agreement” means the Tax Exemption Certificate and Agreement relating to the Bonds, dated the Closing Date, among the Company and the Issuer, as amended and supplemented from time to time as permitted therein.

“Tax-Exempt” means, with respect to interest on any obligations of a state or local government, including the Bonds, that such interest is not includible in gross income of the owners of such obligations for federal income tax purposes, except for interest on any such obligations for any period during which such obligations are owned by a person who is a “substantial user” of any facilities financed with such obligations or a “related person” within the meaning of Section 147(a) of the Code, whether or not such interest is includible as an item of tax preference or otherwise includible directly or indirectly for purposes of calculating other tax liabilities, including any alternative minimum tax under the Code.

“Treasury Regulations” means the United States Treasury Regulations dealing with the tax-exempt bond provisions of the Code.

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“Trust Estate” means (i) all right, title and interest of the Issuer in and to the Agreement (except for Unassigned Rights), including, without limitation, all right, title and interest of the Issuer in the Revenues, all moneys and other obligations which are, from time to time, deposited or required to be deposited with or held or required to be held by or on behalf of the Trustee in trust in the Bond Fund and the Debt Service Reserve Fund under any of the provisions of this Indenture (except moneys or obligations deposited with or paid to the Trustee for payment or redemption of Bonds that are deemed no longer Outstanding hereunder); (ii) all right, title and interest in and to the Subordinate Mortgage (including the real estate described therein) and the other Loan Documents; (iii) all proceeds of any casualty insurance or condemnation awards payable with respect to the Plant; and (iv) all other property of any kind conveyed, transferr ed, mortgaged, pledged, assigned or hypothecated at any time as and for additional security under this Indenture in favor of the Trustee, which is authorized to receive all such property at any time and to hold it and apply it subject to the terms of this Indenture; provided, however, that the “Trust Estate” shall not include moneys held by the Trustee in the Rebate Fund or any moneys held by the Issuer raised by taxation or otherwise.

‘Trustee” means U.S. Bank National Association, as trustee and paying agent under this Indenture, and any successor Trustee appointed hereunder.

“Unassigned Rights” means the rights of the Issuer under Section 5.03 (relating to fees and expenses), Section 6.06 (relating to no recourse to Issuer), Section 6.07 (relating to indemnification), Section 6.08 (relating to exemption from personal liability) and Section 8.05 (relating to expenses of collection) of the Agreement and any rights of the Issuer to receive notices, certificates, requests, requisitions, directions and other communications under the Agreement.

Section 1.02.

Rules of Construction. Unless the context otherwise requires:

(a)

an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles;

(b)

references to Articles and Sections are to the Articles and Sections of this Indenture or the Agreement, as the case may be;

(c)

words importing the singular number shall include the plural number and vice versa and words importing the masculine shall include the feminine and vice versa; and

(d)

the headings and Table of Contents herein are solely for convenience of reference and shall not constitute a part of this Indenture nor shall they affect its meanings, construction or effect.

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ARTICLE II

THE BONDS

Section 2.01.

Authorization of Bonds. There is hereby authorized and created under this Indenture an issue of bonds designated as “City of Bluffton, Indiana Subordinate Solid Waste Disposal Facility Revenue Bonds, Series 2007A (Indiana Bio-Energy, LLC Ethanol Plant Project)”. The total aggregate principal amount of Bonds that may be issued and Outstanding under this Indenture is expressly limited to $22,000,000, exclusive of Bonds executed and authenticated as provided in Section 2.07 hereof; provided, however, that no Bonds shall be delivered hereunder until the Registrar receives a request and authorization of the Issuer signed by the Executive Officer to authenticate and deliver the principal amount of the Bonds therein specified to the purchaser or purchasers therein identified upon payment to the Trustee, for the account of the Issuer, of the sum specified in such request and authorization.

Section 2.02.

Date, Denomination, Interest Rate, and Maturity. (a) The Bonds shall be dated as of the Dated Date. The Bonds shall be issued as registered bonds without coupons. The Bonds shall be issued only in Authorized Denominations. The Bonds shall be numbered consecutively from R-1 upwards.

The Bonds shall mature on September 1, 2019 and bear interest at the rate of 7.50% per annum, payable on March 1 and September 1 of each year, commencing September 1, 2007. The Bonds shall bear interest from the Dated Date or from and including the most recent Interest Payment Date with respect to which interest has been paid or duly provided for. Interest shall be calculated on the basis of a 360-day year consisting of twelve 30-day months.

(b) Each Bond shall bear interest from the Interest Payment Date next preceding the date of registration and authentication thereof unless it is registered and authenticated on or prior to the first Interest Payment Date, in which event it shall bear interest from the Dated Date; provided, however, that if, as shown by the records of the Trustee, interest on the Bonds shall be in default, Bonds issued in exchange for Bonds surrendered for registration of transfer or exchange shall bear interest from the last date to which interest has been paid in full or duly provided for on the Bonds, or, if no interest has been paid or duly provided for on the Bonds, from the Dated Date. Payment of the interest on any Bond shall be made to the person appearing on the bond registration books of the Registrar as the registered Owner thereof on the Record Date (except that, if and to the extent that there shall be a default in the payment of the interest due on an Interest Payment Date, such defaulted interest shall be paid to the Owners in whose name any such Bonds are registered as of a special record date to be fixed by the Trustee, notice of which shall be given to such Owners not less than ten days prior thereto), such interest to be paid by the Trustee to such registered Owner, as follows:

(1)

in respect of any Bond which is registered in the book-entry system pursuant to Section 2.10 hereof, in immediately available funds by no later than 2:30 p.m., New York City time, and

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(2)

in respect of any Bond which is not registered in the book-entry system pursuant to Section 2.10 hereof, (i) by bank check mailed by first-class mail on the Interest Payment Date, to such Owner’s address as it appears on the registration books of the Registrar or at such other address as has been furnished to the Registrar in writing by such Owner, or (ii) by wire transfer on the Interest Payment Date to any owner of at least $1,000,000 in aggregate principal amount of Bonds (or such lesser amount if such Bonds constitute all of the Bonds then outstanding).

Both the principal of and premium, if any, on the Bonds shall be payable upon surrender thereof in lawful money of the United States of America at the Principal Office of the Trustee.

Section 2.03.

Form of Bonds. The Bonds and the certificate of authentication to be executed thereon shall be in substantially the form attached hereto as Exhibit A, with such appropriate variations, omissions and insertions as are permitted or required by this Indenture.

Section 2.04.

Execution of Bonds. The Bonds shall be signed in the name and on behalf of the Issuer with the manual or facsimile signature of its Mayor and attested by the manual or facsimile signature of the Clerk-Treasurer. The Bonds shall then be delivered to the Registrar for authentication by it. In case any officer who shall have signed any of the Bonds shall cease to be such officer before the Bonds so signed or attested shall have been authenticated or delivered by the Registrar or issued by the Issuer, such Bonds may nevertheless be authenticated, delivered and issued and, upon such authentication, delivery and issuance, shall be as binding upon the Issuer as though those who signed and attested the same had continued to be such officers of the Issuer. Also, any Bond may be signed on behalf of the Issuer by such persons as on the actual date of the execution of such Bond shall be the proper officers although on the nominal date of such Bond any such pe rson shall not have been such officer.

Only such of the Bonds as shall bear thereon a certificate of authentication in the form set forth in Exhibit A hereto, manually executed by an authorized signatory of the Registrar, shall be valid or obligatory for any purpose or entitled to the benefits of this Indenture, and such certificate of the Registrar shall be conclusive evidence that the Bonds so authenticated have been duly authenticated and delivered hereunder and are entitled to the benefits of this Indenture. Upon authentication of any Bond, the Registrar shall set forth on such Bond the date of such authentication.

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Section 2.05.

Transfer and Exchange of Bonds. Registration of any Bond may, in accordance with the terms of this Indenture, be transferred at the Principal Office of the Registrar, upon the books of the Registrar required to be kept pursuant to the provisions of Section 2.06 hereof, by the Person in whose name it is registered, in person or by its attorney duly authorized in writing, upon surrender of such Bond for cancellation, accompanied by a written instrument of transfer in a form approved by the Registrar, duly executed. The Registrar shall require the payment by the Owner of the Bond requesting such transfer of any tax or other governmental charge required to be paid and there shall be no other charge to any Owners for any such transfer. Whenever any Bond shall be surrendered for registration of transfer, the Issuer shall execute and the Registrar shall authenticate and deliver a new Bond or Bonds of the same tenor and of Authorized Denominations. No reg istration of transfer of Bonds shall be required to be made for a period of 15 days next preceding the date on which the Trustee sends by Mail any notice of redemption, nor shall any registration of transfer of Bonds called for redemption be required, except the unredeemed portion of any Bond being redeemed in part.

In the event any Owner fails to provide a correct taxpayer identification number to the Trustee, the Trustee may make a charge against the Owner sufficient to pay any government charge required to be paid as a result of such failure. In compliance with Section 3406 of the Code, this amount may be deducted by the Trustee from amounts payable to the Owner under this Indenture or the Bonds.

Bonds may be exchanged at the Principal Office of the Registrar for a like aggregate principal amount of Bonds of the same tenor and of Authorized Denominations. The Registrar shall require the payment by the Owner of the Bond requesting such exchange of any tax or other governmental charge required to be paid with respect to such exchange, and there shall be no other charge to any Owners for any such exchange. No exchange of Bonds shall be required to be made for a period of 15 days next preceding the date on which the Trustee Mails notice of redemption, nor shall any exchange of Bonds called for redemption be required, except the unredeemed portion of any Bond being redeemed in part.

The Issuer, the Registrar, the Trustee and any agent of the Issuer, the Registrar or the Trustee may treat the person in whose name the Bond is registered as the owner thereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not the Bond be overdue, and neither the Issuer, the Registrar, the Trustee, nor any such agent shall be affected by notice to the contrary.

Section 2.06.

Bond Register. The Registrar will keep or cause to be kept at its Principal Office sufficient books for the registration and the registration of transfer of the Bonds, which shall at all times, during regular business hours, be open to inspection by the Issuer, the Trustee and the Company; and, upon presentation for such purpose, the Registrar shall under such reasonable regulations as it may prescribe, register the transfer or cause to be registered the transfer, on said books, Bonds as hereinbefore provided.

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Section 2.07.

Bonds Mutilated, Lost, Destroyed or Stolen. If any Bond shall become mutilated, the Issuer, upon the request and at the expense of the Owner of said Bond, shall execute, and the Registrar shall thereupon authenticate and deliver, a new Bond of like tenor and number in exchange and substitution for the Bond so mutilated, but only upon surrender to the Registrar of the Bond so mutilated. Every mutilated Bond so surrendered to the Registrar shall be canceled by it and delivered to the Company. If any Bond issued hereunder shall be lost, destroyed or stolen, evidence of such loss, destruction or theft may be submitted to the Issuer, the Company and the Registrar, and if such evidence shall be satisfactory to them and indemnity satisfactory to them shall be given, the Issuer, at the expense of the Owner, shall execute, and the Registrar shall thereupon authenticate and deliver, a new Bond of like tenor in lieu of and in substitution for the Bond so los t, destroyed or stolen (or if any such Bond shall have matured or shall be about to mature, instead of issuing a substitute Bond the Registrar may pay the same without surrender thereof). The Issuer may require payment of a reasonable fee for each new Bond issued under this Section and payment of the expenses which may be incurred by the Issuer and the Registrar. Any Bond issued under the provisions of this Section in lieu of any Bond alleged to be lost, destroyed or stolen shall constitute an original additional contractual obligation on the part of the Issuer whether or not the Bond so alleged to be lost, destroyed or stolen be at any time enforceable by anyone, and shall be equally and proportionately entitled to the benefits of this Indenture with all other Bonds secured by this Indenture.

To the extent permitted by law, the provisions of this Section are exclusive and shall preclude all other rights and remedies with respect to the replacement or payment of mutilated, lost, destroyed or stolen Bonds.

Section 2.08.

Bonds; Limited Obligations. The Bonds, together with premium, if any, and interest thereon, shall be limited and not general obligations of the Issuer not constituting or giving rise to a pecuniary liability of the Issuer nor any charge against its general credit or taxing powers nor an indebtedness of or a loan of credit thereof within the meaning of any provision or limitation of the State Constitution or laws, shall be payable solely from the Revenues and other moneys pledged therefor under this Indenture, and shall be a valid claim of the respective Owners thereof only against the Bond Fund, the Revenues and other moneys held by the Trustee as part of the Trust Estate, subordinate to the rights of the Senior Lender under the Senior Loan. The Issuer shall not be obligated to pay the purchase price of Bonds from any source.

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THE BONDS AND THE OBLIGATION TO PAY INTEREST THEREON AND PREMIUM WITH RESPECT THERETO ARE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY OUT OF THE REVENUES AND INCOME DERIVED FROM THE AGREEMENT AND AS OTHERWISE PROVIDED IN THIS INDENTURE, AND SHALL NOT BE DEEMED TO CONSTITUTE AN INDEBTEDNESS OR AN OBLIGATION OF THE ISSUER, THE STATE OF INDIANA, OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE PURVIEW OF ANY CONSTITUTIONAL LIMITATION OR STATUTORY PROVISION. THE BONDS DO NOT NOW OR SHALL NEVER CONSTITUTE A CHARGE AGAINST THE GENERAL CREDIT OF THE ISSUER. THE BONDS ARE NOT IN ANY RESPECT A GENERAL OBLIGATION OF THE ISSUER, NOR ARE THEY PAYABLE IN ANY MANNER FROM REVENUES RAISED BY TAXATION.

No recourse shall be had for the payment of the principal of, or premium, if any, or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement contained in this Indenture, the Bonds, the Agreement or any other related documents, against any past, present or future officer, elected official agent or employee of the Issuer, or any incorporator, officer, director or member of any successor corporation, as such, either directly or through the Issuer or any successor corporation, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such incorporator, officer, director or member as such is hereby expressly waived and released as a condition of and in consideration for the execution of this Indenture and the issuance of any of the Bonds.

Section 2.09.

Disposal of Bonds. Upon payment of the principal of, premium, if any, and interest represented thereby or transfer or exchange pursuant to Section 2.05 hereof or replacement pursuant to Section 2.07 hereof, any Bond shall be canceled and such Bond shall be disposed of by the Registrar in accordance with its customary procedures and the Registrar shall provide evidence satisfactory to the Company of such cancellation and disposition.

Section 2.10.

Book-Entry System. (a) Unless otherwise determined by the Issuer, the Bonds shall be issued in the form of a single certificated fully-registered Bond, registered in the name of Cede & Co., as nominee of DTC, or any successor nominee (the “Nominee”). The actual owners of the Bonds (the “Beneficial Owners”) will not receive physical delivery of Bond certificates except as provided herein. Except as provided in paragraph (d) below, all of the outstanding Bonds shall be so registered in the registration books kept by the Registrar, and the provisions of this Section shall apply thereto.

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(b)

With respect to Bonds registered on the registration books kept by the Registrar in the name of the Nominee, the Issuer, the Company, the Registrar and the Trustee shall have no responsibility or obligation to any DTC Participant or the Beneficial Owners. Without limiting the immediately preceding sentence, the Issuer, the Company, the Registrar and the Trustee shall have no responsibility or obligation to DTC, any DTC Participant or any Beneficial Owner with respect to (l) the accuracy of the records of DTC, the Nominee or any DTC Participant with respect to any ownership interest in the Bonds, (2) the delivery by DTC or any DTC Participant of any notice with respect to the Bonds, including any notice of redemption, or (3) the payment to any DTC Participant or Beneficial Owner of any amount with respect to principal or purchase price of, or premium, if any, or interest on, the Bonds. The Issuer, the Company, the Registrar and the Trustee may treat and co nsider the person in whose name each Bond is registered in the registration books kept by the Registrar as the absolute owner of such Bond for the purpose of payment of principal, purchase price, premium and interest with respect to such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever. The Trustee shall pay all principal of and premium if any, and interest on, the Bonds only to or upon the order of the respective Owners, as shown in the registration books kept by the Registrar, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the Issuer’s obligations with respect to payment of principal of, and premium, if any, and interest on, the Bonds to the extent of the sum or sums so paid. No person other than an Owner, as shown in the registration books kept by the Regi strar, shall receive a certificated Bond evidencing the obligation of the Issuer to make payments of principal, premium, if any, and interest pursuant to this Indenture.

(c)

The Issuer has executed and delivered to DTC a letter of representations in customary form with respect to the Bonds in book-entry form (the “DTC Representation Letter”).

(d)

DTC may determine to discontinue providing its services with respect to the Bonds at any time by giving reasonable notice to the Issuer or the Trustee and discharging its responsibilities with respect thereto under applicable law. The Issuer, with the consent of the Company, may terminate the services of DTC with respect to the Bonds. Upon the discontinuance or termination of the services of DTC with respect to the Bonds, unless a substitute securities depository is appointed to undertake the functions of DTC hereunder, the Issuer, at the expense of the Company, is obligated to deliver Bond certificates to the Beneficial Owners of such Bonds, as described in this Indenture, and such Bonds shall no longer be restricted to being registered in the registration books kept by the Registrar in the name of the Nominee, but may be registered in whatever name or names Owners transferring or exchanging Bonds shall designate, in accordance with the provisions of thi s Indenture. The Trustee, the Registrar and the Issuer may conclusively rely on information provided by DTC and DTC Participants as to the identity of the Owners and the amount owed.

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(e)

Notwithstanding any other provision of this Indenture to the contrary, so long as any Bond is registered in the name of the Nominee, all payments with respect to principal of, or premium, if any, and interest on, such Bond and all notices with respect to such Bond shall be made and given, respectively, in the manner provided in the DTC Representation Letter. Owners shall have no lien or security interest in any rebate or refund paid by DTC to the Trustee which arises from the payment by the Trustee of principal of, or premium, if any, or interest on, the Bonds in immediately available funds to DTC.

Section 2.11.

CUSIP Numbers. The Issuer in issuing the Bonds may use “CUSIP” numbers (if then generally in use), and, if so, the Trustee shall use CUSIP numbers in notices of redemption as a convenience to Owners; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Bonds or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Bonds, and any such redemption shall not be affected by any defect in or omission of such numbers. The Issuer or the Company will promptly notify the Trustee and the Registrar of any change in any CUSIP number(s).

None of the Issuer, the Registrar nor the Trustee shall have any responsibility for any defect in the CUSIP number that appears on any Bond, check, advice of payment or redemption notice, and any such document may contain a statement to the effect that CUSIP numbers have been assigned by an independent service for convenience of reference and that none of the Issuer, the Registrar nor the Trustee shall be liable for any inaccuracy in such matters.

ARTICLE III

REDEMPTION OF BONDS

Section 3.01.

Redemption of Bonds Generally. (a) The Bonds are subject to redemption if and to the extent the Company is entitled or required to make and makes a prepayment pursuant to Article IX of the Agreement. Except as specifically provided in Section 3.03 hereof, the Trustee shall not give notice of any redemption under Section 3.05 hereof unless the Company has so directed in accordance with Section 9.01 of the Agreement; provided that the Trustee may require prepayment of Loan Payments under Section 5.01 of the Agreement in the case of mandatory redemption.

(b)

If the Bonds are to be redeemed in part, they shall only be redeemed in Authorized Denominations and in such manner that the unredeemed portion shall also be in Authorized Denominations.

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Section 3.02.

Redemption upon Optional Prepayment. (a) Extraordinary Optional Redemption. The Bonds shall be redeemed in whole or in part, and if in part by such method as the Trustee may deem fair and appropriate, at any time at a redemption price equal to 100% of the principal amount thereof plus accrued interest to the redemption date, upon receipt by the Trustee of a written notice from the Company stating that any of the following events has occurred and that the Company therefore intends to exercise its option to prepay the payments due under the Agreement in whole or in part pursuant to Section 9.01 of the Agreement and thereby effect the redemption of Bonds in whole or in part out of moneys available pursuant to this Indenture and, if necessary, other Company funds:

(i)

the Company shall have determined or concurred in a determination that the continued operation of the Plant is impracticable, uneconomical or undesirable for any reason;

(ii)

all or substantially all of the Plant shall have been condemned or taken by eminent domain;

(iii)

the operation of the Plant shall have been enjoined or shall have otherwise been prohibited by, or shall conflict with, any order, decree, rule or regulation of any court or of any federal, state or local regulatory body, administrative agency or other governmental body; or

(iv)

unreasonable burdens or excessive liabilities shall have been imposed upon the Company in respect of all or a part of the Project or the Plant including, without limitation, federal, state or other ad valorem, property, income or other taxes not being imposed on the date of the Agreement, as well as any statute or regulation enacted or promulgated after the date of the Agreement that prevents the Company from deducting interest in respect of the Agreement for federal income tax purposes.

(b)

Optional Redemption. The Bonds shall be subject to redemption in whole, or in part by lot, prior to their maturity, following receipt by the Issuer and the Trustee of a written notice from the Company pursuant to Section 9.01 of the Agreement and upon prepayment of the Loan Payments at the option of the Company, on any date during the redemption periods specified below, in each case in whole or in part, at the redemption prices (expressed as percentages of principal amount) hereinafter indicated plus accrued interest, if any, to the redemption date:

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REDEMPTION DATES (DATES INCLUSIVE)	REDEMPTION PRICE
March 1, 2012 through February 28, 2013	105%
March 1, 2013 through February 28, 2014	104%
March 1, 2014 through February 28, 2015	103%
March 1, 2015 through February 29, 2016	102%
March 1, 2016 through February 28, 2017	101%
March 1, 2017 and thereafter	100%

Section 3.03.

Redemption upon Mandatory Prepayment. (a) Mandatory Sinking Fund Redemption. The Bonds shall be subject to mandatory redemption by the Issuer prior to maturity, in part by lot (or such other random means selected by the Trustee), at a redemption price equal to the principal amount thereof, together with accrued interest to the date of redemption on each March 1 and September 1 as set forth below:

SINKING FUND INSTALLMENT PAYMENT DATE	SINKING FUND INSTALLMENT
March 1, 2010	$ 680,000
September 1, 2010	705,000
March 1, 2011	735,000
September 1, 2011	760,000
March 1, 2012	790,000
September 1, 2012	820,000
March 1, 2013	850,000
September 1, 2013	880,000
March 1, 2014	915,000
September 1, 2014	950,000
March 1, 2015	985,000
September 1, 2015	1,020,000
March 1, 2016	1,060,000
September 1, 2016	1,100,000
March 1, 2017	1,140,000
September 1, 2017	1,180,000
March 1, 2018	1,225,000
September 1, 2018	1,275,000
March 1, 2019	1,320,000
September 1, 2019 (Final Maturity)	3,610,000

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(b)

Mandatory Redemption upon Determination of Taxability. The Bonds shall be subject to mandatory redemption in whole on any date from amounts which are to be prepaid by the Company under Section 9.02 of the Agreement, at a redemption price equal to 100% of the principal amount thereof plus interest accrued, if any, to the redemption date within 180 days following a Determination of Taxability; provided that if, in the opinion of Bond Counsel delivered to the Trustee, the redemption of a specified portion of the Bonds outstanding would have the result that interest payable on the Bonds remaining outstanding after such redemption would remain Tax-Exempt, then the Bonds shall be redeemed in part by such method as the Trustee may deem fair and appropriate (in Authorized Denominations), in such amount as Bond Counsel in such opinion shall have determined is necessary to accomplish that result.

(c)

Special Mandatory Redemption. Following an occurrence in which the Plant is taken by eminent domain, or is damaged or destroyed, the Bonds shall be subject to mandatory redemption, in whole or in part by lot (or such other random means selected by the Trustee), on the earliest practicable date thereafter (which date shall be not less than 45 days from the date the Trustee transfers any moneys in the Condemnation and Awards Fund to the Redemption Account pursuant to Section 5.02(d) hereof), at a redemption price equal to the principal amount thereof, together with accrued interest to the date of redemption, from Net Proceeds of title insurance claims, casualty insurance and eminent domain awards in the Condemnation and Awards Fund; provided that, the Net Proceeds exceed $100,000; provided, further, that, the Net Proceeds are, in fact, available for said redemption of the Bonds in accordance with Section 5.02(d) hereof (i) after (A) com pleting the repair, replacement, rebuilding or restoration of the Plant and paying the costs thereof, a portion of the original Net Proceeds remain in the Condemnation and Awards Fund, or (B) it is determined by an Independent Engineer that the Net Proceeds, along with Company funds, would be insufficient to repair, replace, rebuild or restore the Plant and, consequently, such repair, replacement, rebuilding or restoration is not undertaken, and (ii) after making any transfer of said moneys to the Rebate Fund pursuant to Section 4.2 of the Tax Agreement and Section 6.04 hereof.

Section 3.04.

Selection of Bonds for Redemption. Except as described in Section 3.03 for partial redemptions upon a Determination of Taxability, if less than all of the Bonds are called for redemption the Trustee shall select the Bonds or any given portion thereof to be redeemed, from the outstanding Bonds or such given portion thereof not previously called for redemption, by such method as the Trustee may deem fair and appropriate. For the purpose of any such selection the Trustee shall (to the extent practicable) assign a separate number for each minimum Authorized Denomination of each Bond of a denomination of more than such minimum; provided that, following any such selection, both the portion of such Bond to be redeemed and the portion remaining shall be in Authorized Denominations. The Trustee shall promptly notify the Issuer and the Company in writing of the numbers of the Bonds or portions thereof so selected for redemption.

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Section 3.05.

Notice of Redemption. (a) The Trustee, for and on behalf of the Issuer, shall give notice of the redemption of any Bond by Mail, postage prepaid, not less than 30 days nor more than 60 days prior to the redemption date, to the Owner of such Bond at the address shown on the registration books of the Registrar on the date such notice is mailed and to the Securities Depositories and one or more of the Information Services. Notice of redemption shall also be given to DTC in accordance with the DTC Representation Letter. Notice of redemption to the Securities Depositories shall be given by registered mail and notices to the Information Services shall be given by facsimile transmission. Each notice of redemption shall state the date of such notice, the date of issue of the Bonds to be redeemed, the redemption date, the redemption price, the place of redemption (including the name and appropriate address or addresses of the Trustee), the principal amount , the CUSIP number (if any) of the maturity and, if less than all, the distinctive certificate numbers of the Bonds to be redeemed and, in the case of Bonds to be redeemed in part only, the respective portions of the principal amount thereof to be redeemed. Each such notice shall also state that the interest on the Bonds designated for redemption shall cease to accrue from and after such redemption date and that on said date there will become due and payable on each of said Bonds the principal amount thereof to be redeemed, interest accrued thereon, if any, to the redemption date and the premium, if any, thereon (such premium to be specified) and shall require that such Bonds be then surrendered at the address or addresses of the Trustee specified in the redemption notice. Notwithstanding the foregoing, failure by the Trustee to give notice pursuant to this Section 3.05 to anyone or more of the Information Services or Securities Depositories or the insufficiency of any such notices shall not affect the suffi ciency of the proceedings for redemption. Failure to give any required notice of redemption as to any particular Bond shall not affect the validity of the call for redemption of any Bonds in respect of which no such failure has occurred.

(b)

With respect to any notice of optional redemption of Bonds in accordance with Section 3.02(b) hereof, unless, upon the giving of such notice, such Bonds shall be deemed to have been paid within the meaning of Article VII hereof, such notice may state that such redemption is conditioned upon the receipt by the Trustee, on or prior to the date fixed for such redemption, of moneys sufficient to pay the principal of, and premium, if any, and interest on, such Bonds to be redeemed. In the event such moneys are not so received, the redemption shall not be made and the Trustee shall within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such redemption will not take place.

Section 3.06.

Partial Redemption of Bonds. Upon surrender of any Bond redeemed in part only, the Registrar shall exchange the Bond redeemed for a new Bond of like tenor and in an Authorized Denomination without charge to the Owner in the principal amount of the portion of the Bond not redeemed. In the event of any partial redemption of a Bond which is registered in the name of Cede & Co., DTC may elect to make a notation on the Bond certificate which reflects the date and amount of the reduction in the principal amount of said Bond in lieu of surrendering the Bond certificate to the Registrar for exchange. The Issuer, the Company and the Trustee shall be fully released and discharged from all liability to the extent of payment of the redemption price for such partial redemption.

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Section 3.07.

No Partial Redemption after Default. Anything in this Indenture to the contrary notwithstanding, if there shall have occurred and be continuing an Event of Default (other than an Event of Default described in Section 8.01(c) hereof) of which an authorized officer of the corporate trust department of the Trustee has actual knowledge, there shall be no redemption of less than all of the Bonds at the time Outstanding.

Section 3.08.

Payment of Redemption Price. For the redemption of any of the Bonds, the Trustee shall deposit in the Principal Account or the Redemption Account of the Bond Fund, as the case may be, solely out of the Revenues and any other moneys constituting the Trust Estate, an amount sufficient to pay the principal of, and premium, if any, and interest to become due on, the Bonds called for redemption on the date fixed for such redemption. Such deposit shall be reduced by the amount of moneys in the Principal Account or the Redemption Account of the Bond Fund, as the case may be, or any fund in Article VII hereof available for and used on such redemption date for payment of the principal of, and premium, if any, and accrued interest on, the Bonds to be redeemed.

Section 3.09.

Effect of Redemption. Notice of redemption having been duly given as aforesaid, and moneys for payment of the redemption price being held by the Trustee if such redemption was conditioned thereon, the Bonds so called for redemption shall, on the redemption date designated in such notice, become due and payable at the redemption price specified in such notice, interest on the Bonds so called for redemption shall cease to accrue, said Bonds shall cease to be entitled to any lien, benefit or security under this Indenture, and the Owners of said Bonds shall have no rights in respect thereof except to receive payment of the redemption price thereof, without interest accrued on any funds held to pay such redemption price accruing after the date of redemption.

All Bonds fully redeemed pursuant to the provisions of this Article III shall be canceled upon surrender thereof to the Trustee, which shall upon the written request of the Company, deliver to the Company a certificate evidencing such cancellation.

ARTICLE IV

GENERAL COVENANTS

Section 4.01.

Payment of Bonds. (a) The Issuer covenants that it will promptly pay or cause to be paid the principal of, and premium, if any, and interest on, every Bond issued under this Indenture at the place, on the dates and in the manner provided herein and in the Bonds, provided that the principal, premium if any, and interest are payable by the Issuer solely from the Revenues, and nothing in the Bonds or this Indenture shall be considered as assigning or pledging any other funds or assets of the Issuer other than the Trust Estate.

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(b)

Each and every covenant made herein by the Issuer is predicated upon the condition that the Issuer shall not in any event be liable for the payment of the principal of, or premium, if any, or interest on the Bonds, or the performance of any pledge, mortgage, obligation or agreement created by or arising under this Indenture or the Bonds from any property other than the Trust Estate; and, further, that neither the Bonds nor any such obligation or agreement of the Issuer shall be construed to constitute an indebtedness or a lending of credit of the Issuer within the meaning of any constitutional or statutory provision whatsoever, or constitute or give rise to a pecuniary liability of the Issuer or a charge against its general credit.

(c)

For the payment of interest on the Bonds, the Trustee shall deposit in the Interest Account on or prior to each Interest Payment Date, solely out of Revenues and other moneys pledged therefor, an amount sufficient to pay the interest to become due on such Interest Payment Date. Such deposit shall be reduced by the amount of moneys in the Interest Account available on the Interest Payment Date for the payment of the interest on the Bonds.

(d)

For payment of the principal of the Bonds upon redemption, maturity or acceleration of maturity, the Trustee shall deposit in the Principal Account, on or prior to the redemption date, the Principal Payment Date or the maturity date (whether accelerated or not) of the Bonds, solely out of Revenues and other moneys pledged therefor, an amount sufficient to pay the principal of the Bonds. Such deposit shall be reduced by the amount of moneys in the Principal Account available on the redemption date, the Principal Payment Date or the maturity date (whether accelerated or not) for the payment of the principal of the Bonds.

Section 4.02.

Performance of Covenants by Issuer; Authority; Due Execution. The Issuer covenants that it will faithfully perform at all times any and all covenants, undertakings, stipulations and provisions contained in this Indenture, in any and every Bond executed, authenticated and delivered hereunder and in all of its proceedings pertaining thereto. The Issuer represents that it is duly authorized under the Constitution and laws of the State to issue the Bonds and to execute this Indenture, to execute and deliver the Agreement, to assign the Agreement and amounts payable thereunder, and to pledge the amounts hereby pledged in the manner and to the extent herein set forth. The Issuer further represents that all action on its part for the issuance of the Bonds and the execution and delivery of this Indenture has been duly and effectively taken, and that the Bonds in the hands of the Owners thereof are and will be valid and binding limited obligations of the I ssuer.

The Issuer shall fully cooperate with the Trustee and with the Owners of the Bonds to the end of fully protecting the rights and security of the Owners of any Bonds.

Except to the extent otherwise provided in this Indenture, the Issuer shall not enter into any contract or take any action by which the rights of the Trustee or the Owners of the Bonds may be impaired and shall, from time to time, execute and deliver such further instruments and take such further action as may be reasonably required to carry out the purposes of this Indenture.

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Anything contained in this Indenture to the contrary notwithstanding, it is hereby understood and agreed that all of the representations and warranties or covenants of the Issuer contained in this Indenture are subject to the limitations set forth in Section 2.08 hereof and are not intended to and do not create a general obligation of the Issuer. The Bonds are issued pursuant to the Act and do not and shall never become general obligations of the Issuer, but are limited obligations payable solely and only from the Trust Estate, and as authorized by the Act and provided herein. No covenant or agreement contained in the Bonds, in this Indenture or in any other agreement referred in this Indenture shall be deemed to be the covenant or agreement of any trustee, officer, member, agent or employee of the Issuer in his or her individual capacity, and neither such persons nor any official executing the Bonds shall be liable personally on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof.

Section 4.03.

Defense of Issuer’s Rights. The Issuer agrees that the Trustee may defend the Issuer’s rights to the payments and other amounts due under the Agreement, for the benefit of the Owners of the Bonds, against the claims and demands of all persons whomsoever. The Issuer covenants that it will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, such indentures supplemental hereto and such further acts, instruments and transfers as the Trustee may reasonably require for the better assuring, transferring, pledging, assigning and confirming to the Trustee all and singular the rights assigned hereby and the amounts pledged hereby to the payment of the principal of, and premium, if any, and interest on, the Bonds. The Issuer covenants and agrees that, except as herein and in the Agreement provided, it will not sell, convey, assign, pledge, encumber or otherwise dispose of any part of the Trust Estate.

Section 4.04.

Recording and Filing; Further Instruments. (a) The Issuer and the Trustee shall cooperate with the Company in causing to be filed and recorded all documents, notices and financing statements related to this Indenture and to the Agreement which are necessary, as required by law, in order to perfect the lien of this Indenture in the Trust Estate.

(b)

The Issuer shall upon the reasonable request of the Trustee, from time to time execute and deliver such further instruments and take such further action as may be reasonable (and consistent with the Bond Documents) and as may be required to effectuate the purposes of this Indenture or any provisions hereof, provided, however, that no such instruments or actions shall pledge the general credit or the full faith of the Issuer.

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Section 4.05.

Rights under Agreement. The Agreement, a duly executed counterpart of which has been filed with the Trustee, sets forth the covenants and obligations of the Issuer and the Company, including provisions that, subsequent to the issuance of the Bonds and prior to the payment in full or provision for payment thereof in accordance with the provisions hereof, the Agreement (except as expressly provided therein) may not be effectively amended, changed, modified, altered or terminated without the concurring written consent of the Trustee, as provided in Article XI hereof, and reference is hereby made to the Agreement for a detailed statement of such covenants and obligations of the Company, and the Issuer agrees that the Trustee in its name or (to the extent required by law) in the name of the Issuer may enforce all rights of the Issuer and all obligations of the Company under and pursuant to the Agreement, whether or not the Issuer is in default hereunde r. The Issuer shall cooperate with the Trustee in enforcing the obligations of the Company to pay or cause to be paid all amounts payable by the Company under the Agreement.

Section 4.06.

Arbitrage and Tax Covenants. Subject to the Company’s direction of the investment of moneys on deposit in certain funds pursuant to Section 6.01 hereof, the Issuer covenants that it will not take or fail to take any action and within the reasonable control of the Issuer that would impair the exclusion of interest on the Bonds from gross income for federal income tax purposes. Subject to the appropriate direction by the Company of the investment of moneys on deposit in certain funds pursuant to Section 6.01 hereof, the Issuer further will not knowingly act or fail to act so as to cause the proceeds of the Bonds, any moneys derived, directly or indirectly, from the use or investment thereof and any other moneys on deposit in any fund or account maintained in respect of the Bonds (whether such moneys were derived from the proceeds of the sale of the Bonds or from other sources) to be used in a manner which would cause the Bonds to be treated as “arbitrage bonds” within the meaning of Section 148 of the Code, or which would otherwise adversely affect the Tax-Exempt status of the Bonds. The Issuer shall be deemed to have complied with the requirements of this Section 4.06, so long as, the Issuer acts on the written direction of the Company, and the Issuer shall be required to take action only based upon the written direction of the Company.

Section 4.07.

No Disposition of Trust Estate. Except as permitted by this Indenture, the Issuer shall not sell lease, pledge, assign or otherwise encumber or dispose of its interest in the Trust Estate and will promptly pay (but only from the Revenues) or cause to be discharged, or make adequate provision to discharge, any lien or charge on any part thereof not permitted hereby.

Section 4.08.

Access to Books. All books and documents in the possession of the Issuer relating to the Revenues and the Trust Estate shall at all reasonable times be open to inspection by such accountants or other agencies as the Trustee may from time to time designate.

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Section 4.09.

Source of Payment of Bonds. The Bonds are not general obligations of the Issuer, nor are they payable in any manner from revenues raised by taxation, but are limited obligations payable solely from the Revenues. The Revenues have been pledged and assigned as security for the equal and ratable payment of the Bonds and shall be used for no other purpose than to pay the principal of, and premium, if any, and interest on, the Bonds, except as may be otherwise expressly authorized in this Indenture, the Agreement, the Subordinate Mortgage, the Subordinate Security Agreement or the Subordination Agreement.

ARTICLE V

FUND AND ACCOUNTS; DEPOSIT AND APPLICATION

OF BOND PROCEEDS; REVENUES

Section 5.01.

Creation of Bond Fund and Accounts; Debt Service Reserve Fund; Rebate Fund; Condemnation and Awards Fund. (a) There is hereby created by the Issuer and ordered established a separate Bond Fund, to be held by the Trustee and to be designated “City of Bluffton, Indiana Subordinate Solid Waste Disposal Facility Revenue Bonds, Series 2007A (Indiana Bio-Energy, LLC Ethanol Plant Project) Bond Fund” and therein created (i) a Principal Account, (ii) an Interest Account, (iii) a Redemption Account and (iv) a Capitalized Interest Account.

(b)

For purposes of satisfying (i) any deficiency in the Interest Account or the Principal Account, and (ii) a deficiency in the Redemption Account solely in connection with the mandatory redemption in whole of the Bonds upon a Determination of Taxability, there is hereby created by the Issuer and ordered established a separate Debt Service Reserve Fund, to be held by the Trustee and to be designated “City of Bluffton, Indiana Subordinate Solid Waste Disposal Facility Revenue Bonds, Series 2007A (Indiana Bio-Energy, LLC Ethanol Plant Project) Debt Service Reserve Fund.”

The Bonds shall be secured by the Debt Service Reserve Fund. The Debt Service Reserve Fund Requirement may be satisfied by the use of a Reserve Fund Credit Instrument.

(c)

For purposes of complying with the requirements of Section 148 of the Code, the Rebate Fund is hereby established with the Trustee to make arbitrage payments as contemplated by the Tax Agreement. The Trustee shall deposit such amounts into the Rebate Fund and pay such amounts from the Rebate Fund as it shall be directed by an Authorized Company Representative, in accordance with the Tax Agreement and Section 6.04 hereof. To the extent the amount in the Rebate Fund exceeds the Rebate Amount (as defined in the Tax Agreement), the Trustee shall withdraw such excess in accordance with Section 6.04(c) herein and apply such excess as provided therein. The Trustee shall have no responsibility for calculating the amount of arbitrage rebate with respect to the Bonds.

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(d)

There is hereby established with the Trustee a “City of Bluffton, Indiana Subordinate Solid Waste Disposal Facility Revenue Bonds, Series 2007A (Indiana Bio-Energy, LLC Ethanol Plant Project) Condemnation and Awards Fund.”

Section 5.02.

Application of Bond Proceeds and Equity Contribution. (a) The Issuer will cause the proceeds of the initial sale of the Bonds to be deposited with the Trustee as described below. The Company will cause an equity contribution in the amount of $515,300 (the “Equity Contribution”) to be deposited with the Trustee on the Closing Date and applied as described below. The Trustee will hold those proceeds and the Equity Contribution in trust for the benefit of the Company and the Bondholders and will apply the proceeds and the Equity Contribution in accordance with this Section.

The Trustee shall deposit into the Interest Account of the Bond Fund all accrued interest, if any, received from the proceeds of the sale of the Bonds, to be held by the Trustee and applied solely to the payment of interest when due on the Bonds.

The Trustee shall deposit into the Capitalized Interest Account, capitalized interest in the amount of $2,476,352.66. On the Business Day preceding each Interest Payment Date during the Capitalized Interest Period, the Trustee shall transfer from the Capitalized Interest Account to the Interest Account an amount sufficient to pay the interest on the Bonds coming due on the next succeeding Interest Payment Date. Upon receipt of the Notice of Completion, the Trustee shall transfer any balance remaining in the Capitalized Interest Account to the Construction Fund, unless the Trustee has received a Favorable Opinion of Bond Counsel with respect to the continued use of moneys in the Capitalized Interest Account to pay interest on the Bonds.

If, on the Business Day preceding any Interest Payment Date, the amount on deposit in the Capitalized Interest Account is not sufficient to pay the interest coming due on the Bonds on such Interest Payment Date, the Trustee shall first transfer from the Debt Service Reserve Fund, and second, if needed for any Interest Payment Date occurring prior to the Completion Date, transfer from the Construction Fund to the Interest Account, without further authorization, an amount which, after giving effect to any transfer from the Capitalized Interest Account, is sufficient to pay interest on the Bonds due on such Interest Payment Date.

The Trustee shall deposit into the Debt Service Reserve Fund the amount of $2,200,000 to satisfy the initial Debt Service Reserve Requirement for the Bonds.

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The Trustee will deposit $515,300 of the Company’s Equity Contribution into the “Costs of Issuance Fund” which is hereby created with the Trustee, to pay a portion of the costs of issuing the Bonds, including, without limitation, all printing and recording expenses in connection with this Indenture, the Agreement, the Subordinate Mortgage, the Subordinate Security Agreement, the Subordination Agreement, the Bonds, the preliminary official statement and official statement for the Bonds; legal fees; compensation to the underwriter (payable solely from the Company’s Equity Contribution); and the initial fees of the Issuer and the Trustee. The costs described above are payable upon submission of a written request from an Authorized Company Representative stating that the amount indicated thereon is justly due and owing, has not been the subject of another written request which has been paid and is a proper cost of issuing the Bonds. The Tr ustee may conclusively rely on such requisitions. Any moneys remaining in the Costs of Issuance Fund on the earlier of the payment of all costs of issuance of the Bonds or June 1, 2007 shall be transferred to the Construction Fund and applied as described below.

The Trustee will deposit all remaining proceeds from the initial sale of the Bonds and any excess proceeds from the Costs of Issuance Fund into the “Construction Fund,” which is hereby created with the Trustee. Moneys in the Construction Fund will be disbursed to pay the Project Costs (as defined below), or to reimburse the Company for Project Costs paid by it. Other than for disbursements from the Construction Fund to be used for the payment of capitalized interest on the Bonds during the Capitalized Interest Period as to which no further authorization for the Trustee is required, the Trustee shall disburse moneys in the Construction Fund upon receipt of a requisition, substantially in the form as attached hereto as Exhibit B, signed by an Authorized Company Representative and approved by an Authorized Senior Lender Representative stating with respect to each disbursement to be made, the following:

(i)

the requisition number;

(ii)

the name and address of the person, firm or corporation to whom payment is due or has been made (which may include the Company) is set forth on Schedule I attached thereto;

(iii)

the amount to be or which has been paid is set forth on Schedule I attached thereto;

(iv)

that the costs of an aggregate amount set forth in such requisition have been made or incurred or financed and were necessary for the Project and were made or incurred in accordance with the construction contracts, plans and specifications and building permits therefor then in effect;

(v)

that the amount paid or to be paid, as set forth in such requisition, represents a part of the amount due and payable for Project Costs and that such payment was not paid in advance of the time, if any, fixed for payment and was made in accordance with the terms of any contracts applicable thereto and in accordance with usual and customary practice under existing conditions;

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(vi)

that no part of the Project Costs was included within the costs referred to in any requisition previously filed with the Trustee under the provisions of this Indenture;

(vii)

that (A) the withdrawal of moneys from the Construction Fund and the use of the property financed or reimbursed therefrom has not and will not result in a violation of any representation, term or covenant in the Tax Agreement or Project Certificate and (B) the Favorable Opinion of Bond Counsel required to be delivered as a result of changes to the Project pursuant to Section 3.02 of the Agreement has been delivered to the Trustee and the Issuer;

(viii)

that the amount remaining in the Construction Fund, together with (A) moneys then on hand at the Company or committed to the Company which are or will be available, and are anticipated by the Company to be applied, to pay the Project Costs and (B) expected investment earnings to be deposited into the Construction Fund pursuant to this Indenture, will, after payment of the amount requested in said requisition, be sufficient to pay the costs of completing the Project substantially in accordance with the construction contracts, plans and specifications and building permits therefor, if any, then in effect; and

(ix)

that the amounts paid or to be paid as set forth in the requisition are properly payable under the terms of this Indenture and that all conditions precedent to payment as prescribed in this Indenture have been satisfied.

The Company shall attach to each requisition a list of invoices or bills of sale covering all items for which payment is being requested in such requisition issued by the manufacturers, suppliers or other sellers of such items. The invoices or bills shall be available for review by the Trustee in the offices of the Company; provided that the Trustee shall have no duty or obligation to review such invoices and may conclusively rely on such requisitions.

To the extent that the Company leases from third parties or otherwise provides items for the Project from sources other than funds on deposit in the Construction Fund, the costs thereof shall not be included in the Project Costs referred to above.

The Trustee will maintain adequate records pertaining to the proceeds of the Bonds held by it and all disbursement from them made by the Trustee.

“Project Costs” means all costs properly chargeable to the acquisition, construction, installation or equipping of the Project or to its financing, including, without limitation, the following:

(i)

The cost of construction and acquisition of all lands, structures, real or personal property, rights, rights-of-way, franchises, easements and interests acquired or used for the Project.

(ii)

The cost of demolishing or removing any buildings or structures on land so acquired, including the cost of acquiring any lands to which such buildings or structures may be moved.

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(iii)

The cost of all machinery and equipment.

(iv)

Interest during construction of the Project that is not paid from the Capitalized Interest Account and the Debt Service Reserve Fund.

(v)

Reserves for extensions, enlargements, additions, replacements, renovations and improvements.

(vi)

The cost of architectural, engineering, financial and legal services, plans, specifications, studies, surveys, estimates, administrative expenses and other expenses necessary or incident to determining the feasibility of constructing the Project or incident to its construction, acquisition or financing.

(b)

Completion Date. The Company is required to deliver to the Issuer and the Trustee within 90 days after the completion of the Project a certificate as described below (the “Completion Certificate”) signed by an Authorized Company Representative stating the following:

(i)

All portions of the Project have been fully completed in accordance with the plans and specifications therefor, as then amended, and the Date of Completion.

(ii)

Such person has made such investigation of such sources of information as are deemed by such person to be necessary, including pertinent records of the Company, and is of the opinion that the Project has been fully paid for and no claim or claims exist against the Company or against the properties of the Company or, to the best of such person’s knowledge, against the Issuer or against the properties of the Issuer, out of which a lien based on furnishing labor or material for the Project exists or might ripen; provided, however, there may be excepted from the foregoing statement any claim or claims out of which a lien exists or might ripen in the event that the Company intends to contest such claim or claims, in which event such claim or claims shall be described; provided, further, however, that in such event such certificate shall state that funds are on deposit in the Construction Fund which, together with (i) mone ys then on hand at the Company or committed to the Company which are or will be available, and are anticipated by the Company to be applied, to pay the Project Costs, and (ii) expected investment earnings to be deposited into the Construction Fund pursuant to this Indenture, are sufficient to make payment of the full amount which might in any event be payable in order to satisfy such claim or claims. In the event such certificate shall state that there is a claim or claims in controversy which create or might ripen into a lien, there shall be filed with the Issuer and the Trustee a certificate of the Authorized Company Representative stating that such claim or claims have been paid when the same has in fact occurred.

(iii)

The withdrawal of moneys from the Construction Fund and the use of the property financed or reimbursed therefrom has not and will not result in a violation of any representation, term or covenant in the Tax Agreement.

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(iv)

All Favorable Opinions of Bond Counsel required to be delivered as a result of changes made pursuant to Section 3.02 of the Agreement have been delivered to the Trustee and the Issuer.

(c)

Disposition of Fund Moneys after Project is in Service or upon Determination Not to Complete All Components of the Project. Any moneys (“Excess Funds”) (including investment proceeds) remaining in the Construction Fund on the earlier of the following dates (the “Remedial Action Date”) (i) the date on which the Company determines that all components of the Project will not be completed; or (ii) the date on which the Project is placed in service (i.e., the date the Project is operating at substantially the level for which it is designed) (the “Placed in Service Date”), shall be used in accordance with Treasury Regulation 1.144-2 for one or more of the following purposes:

(i)

at the written direction of the Authorized Company Representative, for the payment, in accordance with the provisions of this Indenture, of any Project Costs not theretofore paid;

(ii)

at the written direction of the Authorized Company Representative, for transfer, first to the Rebate Fund, any amounts required by the Tax Agreement and Section 6.04 hereof; second, to remedy any deficiency in the Debt Service Reserve Fund; and third, to the payment of costs of other facilities qualifying under the Act;

(iii)

at the written direction of the Authorized Company Representative, for transfer to the Interest Account to pay interest on the Bonds;

(iv)

at the written direction of the Authorized Company Representative, (A) to pay, on or before 90 days following the Remedial Action Date, all or part of the price of purchasing a portion of the Bonds in the open market or at private sale, at a purchase price not in excess of 100% of the principal amount of such Bonds plus accrued interest to the date of such purchase for the purpose of cancellation;

(B)

if the Bonds are callable within 90 days following the Remedial Action Date, to pay, on or before 90 days following the Remedial Action Date, for transfer to the Redemption Account, to pay all or part of the redemption price of a portion of the Bonds; or

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(C)

if the Bonds are not callable within 90 days following the Remedial Action Date, for transfer into an escrow account established with the Trustee, upon filing by the Company required notice to the Internal Revenue Service, such transfer and notice to be on or before 90 days following the Remedial Action Date, to be used to pay, on the first date on which Bonds may be redeemed, but in any event within ten and one-half years from the date of issuance of the Bonds, all or part of the redemption price of a portion of the Bonds;

provided, that, except for the purpose described in subparagraph (i) above, no money, including earnings on the investment on such moneys, may be so used unless and until the Trustee has been furnished with Favorable Opinion of Bond Counsel; provided, further, that the earnings on the investment of the moneys on deposit in such escrow account described in subparagraph (iv)(C) above shall be transferred on each Interest Payment Date on the Bonds to the Interest Account and shall be used to pay interest on the Bonds coming due on such Interest Payment Date; and provided, further, that, until used for the foregoing purpose described in subparagraph (iv)(C) above, moneys on deposit in such escrow account may be invested in investments authorized by Section 6.01 hereof, but may not be invested to produce a yield on such moneys (computed from the Placed in Service Date and taking into account any investment of such moneys during the period from the Placed in Service Date until such moneys were deposited in such escrow account) greater than the yield on the Bonds from which such proceeds were derived, all as such terms are used in and determined in accordance with the Code and regulations promulgated thereunder. A verification report with respect to the calculation of such yield on the escrow account and the yield on the Bonds by a firm of nationally recognized certified public accountants will be provided to the Trustee.

(d)

Condemnation and Awards Fund. (i) Subject to the Senior Loan Agreement, to the extent the Trustee has the right to the Net Proceeds of title insurance claims, casualty insurance claims and eminent domain awards in accordance with and to the extent provided herein or the Subordinate Mortgage, the Trustee shall deposit into the Condemnation and Awards Fund, when and as received such Net Proceeds; provided, however, that if the Net Proceeds shall be less than $100,000, such Net Proceeds shall be paid over to the Company. If the Net Proceeds are $100,000 or more, such proceeds shall be deposited in the Condemnation and Awards Fund and applied in accordance with the Subordinate Mortgage and this Indenture. The amounts in the Condemnation and Awards Fund shall be subject to a security interest in favor of the Trustee until disbursed as provided herein and in the Subordinate Mortgage.

(ii)

Moneys on deposit in the Condemnation and Awards Fund shall be applied from time to time in accordance with the Subordinate Mortgage and this Indenture.

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(A)

If the Trustee shall have received an Independent Engineer’s Certificate stating that the Net Proceeds are sufficient to repair, replace, rebuild or restore the Plant substantially to its prior condition, such Net Proceeds in the Condemnation and Awards Fund will be used at the written direction of the Company to repair, replace, rebuild or restore the Plant substantially to its prior condition. If the Net Proceeds exceed the cost of such repair, replacement, rebuilding or restoration, the Trustee shall transfer the balance of such moneys on deposit in the Condemnation and Awards Fund to the Redemption Account for the redemption of the Bonds, in whole or in part, in accordance with Section 3 .03( c) hereof, after making any transfer to the Rebate Fund pursuant to Section 4.2 of the Tax Agreement and Section 6.04 hereof, and after the completion of such repair, replacement, rebuilding or restoration.

(B)

If the Trustee shall have received an Independent Engineer’s Certificate stating that the Net Proceeds are not sufficient to repair, replace, rebuild or restore the Plant substantially to its prior condition, the Company shall determine the additional funds needed to complete such repair, replacement, rebuilding or restoration and upon receipt by the Trustee of (1) an Independent Engineer’s Certificate confirming that such determination is correct and (2) a deposit by the Company of such additional funds in the Condemnation and Awards Fund, the aggregate amount therein shall be used at the direction of the Company to repair, replace, rebuild or restore the Plant to its condition immediately prior to such loss or damage. If such aggregate amount shall exceed the cost of such repair, replacement, rebuilding or restoration, the Trustee shall transfer the balance of such moneys on deposit in the Condemnation and Awards Fund to the Redemption Account for the redemption of the Bonds, in whole or in part, in accordance with Section 3.03(c) hereof, after making any transfer to the Rebate Fund pursuant to Section 4.2 of the Tax Agreement and Section 6.04 hereof, and after the completion of such repair, replacement, rebuilding or restoration.

(C)

If the Trustee shall have received an Independent Engineer’s Certificate stating that the Net Proceeds along with additional funds of the Company are not sufficient to repair, replace, rebuild or restore the Plant substantially to its prior condition and upon receipt of written directions from the Company, the Trustee shall transfer the Net Proceeds deposited in the Condemnation and Awards Fund to the Redemption Account for the redemption of the Bonds, in whole or in part, in accordance with Section 3 .03( c) hereof, after making any transfer to the Rebate Fund pursuant to Section 4.2 of the Tax Agreement and Section 6.04 hereof.

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(iii)

If an Event of Default shall exist at the time of the receipt by the Trustee of the Net Proceeds in the Condemnation and Awards Fund, unless the Event of Default would be cured upon the application of such Net Proceeds, the Trustee shall promptly request the written direction of the Owners of a majority in aggregate principal amount of the Bonds outstanding, and if such Event of Default shall not have been cured or waived, shall thereupon apply such Net Proceeds, after making any transfer to the Rebate Fund as directed pursuant to the Tax Agreement and Section 6.04 hereof, to the rebuilding, replacement, repair and restoration of the Plant, or for deposit in the Redemption Account as directed by such percentage of Bondholders (or if no such direction shall be received within 90 days after request therefor by the Trustee shall have been made, for deposit in the Redemption Account) provided, that no such directions shall allow for a distribution othe r than ratably among the Bondowners.

(iv)

The Trustee is hereby authorized to apply the amounts in the Condemnation and Awards Fund to the payment (or reimbursement to the extent the same have been paid by or on behalf of the Company or the Issuer) of the costs required for the rebuilding, replacement, repair and restoration of the Plant in accordance with the provisions of the Subordinate Mortgage and this Indenture and in substantially the same manner as provided for disbursements from the Construction Fund. The Trustee shall keep and maintain adequate records pertaining to the Condemnation and Awards Fund and all disbursements therefrom and shall furnish copies of same to the Issuer and the Company upon reasonable written request therefor.

(v)

The date of completion of the restoration of the Plant shall be evidenced to the Issuer and the Trustee by a Company’s Certificate stating (1) the date of such completion, (2) that all labor, services, machinery, equipment, materials and supplies used therefore and all costs and expenses in connection therewith have been paid for, (3) that the Plant has been restored to substantially its condition immediately prior to the loss event, or to a condition of at least equivalent value, operating efficiency and function, (4) that the Issuer has good and valid title to all property constituting part of the restored Plant, all property of the Plant is subject to the lien and security interest of the Subordinate Mortgage, (5) the Rebate Amount applicable with respect to the Net Proceeds and the earnings thereon (with a statement as to the determination of the Rebate Amount and a direction to the Trustee of any required transfer to the Rebate Fund), and (6) th at the restored Plant is ready for occupancy, use and operation for its intended purposes. Notwithstanding the foregoing, such certificate shall state (x) that it is given without prejudice to any rights of the Company against third parties which exist at the date of such certificate or which may subsequently come into being, (y) that it is given only for the purposes of this Section, and (z) that no Person other than the Issuer or the Trustee may benefit therefrom. If the Net Proceeds received from the loss event shall be equal to or greater than $500,000, such certificate shall be accompanied by those same documents as are required to evidence the Completion Date of the Plant.

(vi)

All earnings on amounts on deposit in the Condemnation and Awards Fund shall be transferred by the Trustee and deposited in accordance with Section 5.03 hereof.

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(vii)

Any surplus remaining in the Condemnation and Awards Fund after the completion of the rebuilding, replacement, repair and restoration of the Plant shall, after making any transfer to the Rebate Fund as directed pursuant to the Tax Agreement and Section 6.04 hereof, and after depositing in the Debt Service Reserve Fund an amount equal to any deficiency therein, be transferred by the Trustee to the Redemption Account.

(e)

Investment of Construction Fund Moneys. Moneys on deposit in the Construction Fund may be invested only in accordance with the provisions of Sections 6.03 and 6.05 of the Agreement and Article VI hereof, and income resulting therefrom shall be credited first to the Rebate Fund if required in the Tax Agreement and Section 6.04 hereof, and next to the Construction Fund.

(f) Redemption; Event of Default. If the Company is required to, or shall elect to redeem the Bonds in whole, any balance in the Construction Fund shall be deposited in the Redemption Account. If an Event of Default occurs and the maturity of the Bonds is accelerated, the Trustee will to the extent necessary transfer moneys in the Construction Fund to the Bond Fund, regardless of the other provisions of this Section.

Section 5.03.

Deposits into the Funds; Use of Moneys in the Funds. (a) The Trustee shall promptly deposit the following amounts as shown:

(i)

Upon the first Business Day of each month, moneys received from or on behalf of the Company pursuant to the Agreement shall be deposited in the following order of priority:

(1)

First, the Trustee shall transfer moneys to the Rebate Fund if required by the Tax Agreement and Section 6.04 hereof;

(2)

Second, the Trustee shall pay any Administration Expenses within 30 days after receipt of a bill therefor;

(3)

Third, commencing on the earlier of the Completion Date or September 1, 2008, the Trustee shall deposit into the Interest Account of the Bond Fund amounts sufficient to pay one-sixth of the interest due on the Bonds on the next succeeding Interest Payment Date; provided, however, that prior to making any deposit into the Bond Account, the Trustee shall take into account and, accordingly, not include in any required Loan Payment payable as of such date, the following amounts: (A) any amounts representing capitalized interest through the Capitalized Interest Period transferred from the Capitalized Interest Account, the Debt Service Reserve Fund or the Construction Fund, (B) any amounts representing investment earnings from other funds and accounts transferred pursuant to Section 5.03(a)(v)(3) hereof, and (C) any amounts representing investment earnings from the Debt Service Reserve Fund transferred pursuant to Section 5.03(a)(vii) hereof;

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(4)

Fourth, commencing on September 1, 2009, the Trustee shall deposit into the Principal Account of the Bond Fund amounts sufficient to pay one-sixth of the principal amount of the Bonds coming due on the next succeeding Principal Payment Date; and

(5)

Fifth, the Trustee shall deposit into the Debt Service Reserve Fund amounts necessary to cause the amount on deposit therein to equal the Debt Service Reserve Requirement and any deficiency in said Fund shall be replenished in accordance with Section 5.03(c)(ii) herein.

(ii)

Amounts transferred from the Capitalized Interest Account, the Construction Fund or the Debt Service Reserve Fund to pay interest on the Bonds shall be credited to the Interest Account.

(iii)

Excess or remaining amounts in the Construction Fund shall be credited as described in Section 5.02(c) hereof.

(iv)

Amounts in the Condemnation and Awards Fund shall be transferred as described in Section 5.02(d) hereof.

(v)

Investment income on all accounts and funds held by the Trustee, other than the Capitalized Interest Account and the Debt Service Reserve Fund, shall be credited as follows:

(1)

First, to the Rebate Fund as and if required by Section 4.2 of the Tax Agreement and Section 6.04 hereof;

(2)

Second, to the Construction Fund until the Completion Date; and

(3)

Last to the Interest Account.

(vi)

Investment income on the Capitalized Interest Account shall be credited to the Capitalized Interest Account.

(vii)

Investment income on the Debt Service Reserve Fund shall be credited as follows:

(1)

First, to the Debt Service Reserve Fund but only to the extent required to maintain the Debt Service Reserve Fund Requirement in accordance with Section 5.03(c)(ii) herein; and

(2)

Second, to the Interest Account.

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(viii)

Amounts transferred from the Debt Service Reserve Fund pursuant to Section 5.03(c) hereof shall be deposited and credited to the Interest Account, the Principal Account or the Redemption Account, as the case may be.

(b)

(i) The Trustee shall on each Interest Payment Date pay or cause to be paid out of the Interest Account, the interest due on the Bonds, and further payout of the Interest Account any amounts required for the payment of accrued interest upon any purchase or redemption (including any mandatory Sinking Fund Installment redemption) of the Bonds.

(ii)

The Trustee shall on each Principal Payment Date payout of the Principal Account, the principal amount, if any, due on the Bonds, upon the presentation and surrender of the requisite Bonds. On each Sinking Fund Installment payment date, the Trustee shall pay in immediately available funds the amounts required for the Sinking Fund Installment due and payable with respect to Bonds which are to be redeemed from Sinking Fund Installments on such date (accrued interest on such Bonds being payable from the Interest Account). The Trustee shall call for redemption Bonds in a principal amount equal to the Sinking Fund Installment then due. Such call for redemption shall be made even though at the time of mailing of the notice of such redemption sufficient moneys therefor shall not have been deposited in the Bond Fund relating to such Bonds.

(iii)

Amounts in the Redemption Account shall be applied, at the written direction of the Company, as promptly as practicable, to the purchase of such Bonds at prices not exceeding the redemption price thereof applicable on the earliest date upon which such Bonds are next subject to redemption, plus accrued interest to the date of redemption. Any amount in the Redemption Account not so applied to the purchase of such Bonds by 45 days prior to the next date on which the Bonds are so redeemable shall be applied to the redemption of Bonds on such redemption date. Any amounts deposited in the Redemption Account and not applied within 12 months of their date of deposit to the purchase or redemption of Bonds shall be transferred to the Interest Account. Upon the purchase of any Bonds out of prepayments under the Agreement, or upon the redemption of any Bonds, an amount equal to the principal of such Bonds so purchased or redeemed shall be credited against the Sinking Fund Installments for such Bonds in such order as an Authorized Company Representative shall direct the Trustee in writing (or, in the absence of any such written direction, in inverse order of the due dates of such Sinking Fund Installments) until the full principal amount of such Bonds so purchased or redeemed shall have been so credited. The portion of any such Sinking Fund Installment remaining after the deduction of such amounts so credited shall continue to be deemed to be the amount of such Sinking Fund Installment for the purposes of any calculation thereof under this Indenture.

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(iv)

In connection with purchases of Bonds out of the Bond Fund as provided in this Section, the Company shall arrange and the Trustee shall execute such purchases (through brokers or otherwise, and with or without receiving tenders) at the written direction of the Company; provided, however, that the Trustee may not effect such purchases through a broker unless the Company shall have previously approved in writing the use of such broker and the amount of such broker’s fees. The payment of the purchase price shall be made out of the moneys deposited in the Redemption Account and the payment of accrued interest shall be made out of moneys deposited in the Interest Account.

(v)

The Issuer shall receive a credit in respect of Sinking Fund Installments for any Bonds which are subject to mandatory Sinking Fund Installment redemption and which are delivered by the Issuer or the Company to the Trustee on or before the 45th day next preceding any Sinking Fund Installment payment date and for any Bonds which prior to said date have been purchased or redeemed (otherwise than through mandatory sinking fund redemption) and cancelled by the Trustee and not theretofore applied as a credit against any Sinking Fund Installment. Each Bond so delivered, cancelled or previously purchased or redeemed shall be credited by the Trustee at 100% of the principal amount thereof against the obligation of the Issuer to pay such Sinking Fund Installments in such order of the due dates of such Sinking Fund Installments and maturity as an Authorized Company Representative shall direct the Trustee in writing (or, in the absence of such written direction, in the inverse order of the due dates of such Sinking Fund Installments), and the principal amount of Bonds to be redeemed by application of Sinking Fund Installment payments shall be accordingly reduced.

(vi)

The Company shall on or before the 45th day next preceding each Sinking Fund Installment payment date furnish the Trustee with the Company’s certificate indicating whether or not and to what extent the provisions of this Section are to be availed of with respect to such Sinking Fund Installment payment, stating, in the case of the credit provided for, that such credit has not theretofore been applied against any Sinking Fund Installment and confirming that immediately available cash funds for the balance of the next succeeding prescribed Sinking Fund Installment payment will be paid on or prior to the next succeeding Sinking Fund Installment payment date.

(vii)

Moneys in the Redemption Account which are not set aside or deposited for the redemption or purchase of Bonds shall be transferred by the Trustee to the Interest Account or to the Principal Account.

(viii)

In the event that a deficiency shall exist in any account of the Bond Fund on any Interest Payment Date after giving effect to any transfers made pursuant to Sections 5.02, 5.03(a) and 5.03(c) hereof, the Trustee shall make demand on the Company for such deficiency.

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(c)

(i) If on any Interest Payment Date or redemption date for the Bonds the amount in the Interest Account (after taking into account amounts available to be transferred to the Interest Account from the Capitalized Interest Account) shall be less than the amount of interest then due and payable on the Bonds, or if on any Principal Payment Date, the amount in the Principal Account shall be less than the amount of principal of the Bonds then due and payable, in each case, after giving effect to all payments received by the Trustee in immediately available funds by 10:00 a.m. (Indianapolis, Indiana time) on such date, the Trustee forthwith shall transfer moneys from the Debt Service Reserve Fund (including any amount derived from investment earnings), first to such Interest Account, and second to such Principal Account, all to the extent necessary to make good any such deficiency. If on any redemption date, solely in connection with the mandatory redemption in whole of the Bonds upon a Determination of Taxability, the amount in the Redemption Account shall be less than the amount of the aggregate principal amount of the Bonds to be redeemed plus accrued interest to said redemption date, after giving effect to all payments received by the Trustee in immediately available funds by 10:00 a.m. (Indianapolis, Indiana time) on such date, the Trustee forthwith shall transfer moneys from the Debt Service Reserve Fund (including any amount derived from investment earnings) to such Redemption Account all to the extent necessary to make good any such deficiency.

(ii)

On February 15 and August 15 of each year and upon any withdrawal from the Debt Service Reserve Fund, the Trustee shall determine the amount on deposit in the Debt Service Reserve Fund.

In the case of the Debt Service Reserve Fund, a “surplus” means the amount by which the amount on deposit therein is in excess of the Debt Service Reserve Fund Requirement with respect to the Bonds (including any amount derived from investment earnings). If a surplus exists as of any such valuation date, the Trustee shall transfer an amount equal to such surplus to the Interest Account.

In the case of the Debt Service Reserve Fund, a “deficiency” means the amount by which the amount on deposit therein is less than the Debt Service Reserve Fund Requirement with respect to the Bonds (including any amount derived from investment earnings). If on any such valuation date a deficiency exists, the Trustee shall notify the Issuer and the Company of such deficiency and that such deficiency shall be replenished by the Company over a twelve-month period following the date on which the Trustee has notified the Issuer and the Company of said deficiency. To the extent required to maintain the Debt Service Reserve Fund Requirement, investment earnings received on the investments in the Debt Service Reserve Fund shall be retained in such Fund.

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Section 5.04.

Bonds Not Presented for Payment of Principal. In the event any Bonds shall not be presented for payment when the principal thereof becomes due, either at maturity or at the date fixed for redemption thereof or the acceleration of maturity, or in the event that any interest thereon is unclaimed, if moneys sufficient to pay such Bonds or interest are held by the Trustee, the Trustee shall segregate and hold such moneys in trust (but shall not invest such moneys), without liability for interest thereon, for the benefit of Owners of such Bonds who shall, except as provided in the following paragraph, thereafter be restricted exclusively to such fund or funds for the satisfaction of any claim of whatever nature on their part under this Indenture or relating to said Bonds or interest. Such Bonds which shall not have been so presented for payment shall be deemed paid for any purposes of this Indenture.

Any moneys which the Trustee shall segregate and hold in trust for the payment of the principal of or interest on any Bond and remaining unclaimed for two years after such principal or interest has become due and payable shall be paid by the Trustee to the Company upon written request of an Authorized Company Representative. After the payment of such unclaimed moneys to the Company, the Owner of such Bond shall look only to the Company for payment, and then only to the extent of the amount so repaid to the Company, and the Company shall not be liable for any interest thereon and shall not be regarded as a trustee of such money, and all liability of the Issuer and the Trustee with respect to such moneys shall thereupon cease.

Neither the Company nor the Issuer shall have any right, title or interest in or to any moneys held by the Trustee pursuant to this Section. The Trustee shall not be liable to the Issuer or any Owner for interest on funds held by it for the payment and discharge of the principal, interest, or premium on any of the Bonds to any Owner.

Section 5.05.

Payment to the Company. After the right, title and interest of the Trustee in and to the Trust Estate and all covenants, agreements and other obligations of the Issuer to the Owners shall have ceased, terminated and become void and shall have been satisfied and discharged in accordance with Section 5.04 and Article VII hereof, and all fees, expenses and other amounts payable to the Registrar, the Trustee and the Issuer pursuant to any provision of this Indenture shall have been paid, any moneys remaining in the Bond Fund, Debt Service Reserve Fund and the Rebate Fund shall be paid to the Company upon request of an Authorized Company Representative, other than any unclaimed moneys held pursuant to Section 5.04. The Trustee may conclusively rely on certificates of the Registrar as to the amount of any fees, expenses and other amounts owing to it.

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ARTICLE VI

INVESTMENTS

Section 6.01.

Investment of Moneys in Funds. Subject to Section 4.06 hereof and the provisions of the Tax Agreement, moneys in the Construction Fund, the Bond Fund, the Condemnation and Awards Fund, the Debt Service Reserve Fund, the Costs of Issuance Fund and the Rebate Fund may be invested and reinvested in Investment Securities. Such investments shall be made by the Trustee, as specifically directed and designated by the Company in a certificate of an Authorized Company Representative. Each such certificate shall contain a statement that each investment so designated by the Company constitutes an Investment Security and can be made without violation of any provision hereof or of the Agreement, the Tax Agreement or applicable law. The Trustee shall be entitled to rely on each such certificate or advice and shall incur no liability for making any such investment so designated or for any loss, fee, tax or other charge incurred in selling such investment or for any action taken pursuant to this Section that causes the Bonds to be treated as “arbitrage bonds” within the meaning of Section 148 of the Code. No investment instructions shall be given by the Company if the investments to be made pursuant thereto would violate any covenant set forth in Section 4.06 hereof or the provisions of the Agreement or the Tax Agreement. The Trustee is hereby authorized, in making or disposing of any investment permitted by this Section 6.01, to deal with itself (in its individual capacity) or with anyone or more of its affiliates, whether it or such affiliate is acting as an agent of the Trustee or for any third person or dealing as principal for its own account. The Trustee shall not be responsible for any loss on any investment made in accordance herewith.

Section 6.02.

Conversion of Investment to Cash. As and when any amounts so invested may be needed for disbursements from the Construction Fund, the Bond Fund, the Debt Service Reserve Fund or the Rebate Fund, the Trustee shall cause a sufficient amount of such investments to be sold or otherwise converted into cash to the credit of such fund. As long as no Event of Default shall have occurred and be continuing, the Company shall have the right to designate the investments to be sold and to otherwise direct the Trustee in the sale or conversion to cash of such investments; provided that the Trustee shall be entitled to conclusively assume the absence of any Event of Default unless it has notice thereof within the meaning of Section 9.05 hereof.

Section 6.03.

Credit for Gains and Charge for Losses. Gains from investments shall be credited to and held in, and losses shall be charged to, the fund or account from which the investment is made.

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Section 6.04.

Payments into Rebate Fund; Application of Rebate Fund. (a) The Rebate Fund and the amounts deposited therein shall not be subject to a security interest, pledge, assignment, lien or charge in favor of the Trustee or any Bondholder or any other Person.

(b)

The Trustee, on the first Business Day following each Computation Period (as defined in the Tax Agreement) and the receipt of a Company’s Certificate pursuant to Section 4.2 of the Tax Agreement, shall deposit in the Rebate Fund that amount, as shall be so specified in such certificate of written direction, from any of the following: (i) moneys furnished by the Company; (ii) any investment income on funds and accounts held by the Trustee in accordance with Article V hereof, and (iii) any excess or remaining amounts in the Construction Fund and the Condemnation and Awards Fund pursuant to Sections 5.02(c) and 5.02(d), respectively, hereof. If there has been delivered to the Trustee a certification of the Rebate Amount (as defined in the Tax Agreement) in conjunction with the completion of the Plant or the restoration of the Plant pursuant to Section 5.02(d) hereof, the Trustee shall at the written direction of an Authorized Company Representative depo sit in the Rebate Fund such amount so specified in such certification as required in order that the amount held in the Rebate Fund after such deposit is equal to the Rebate Amount calculated at the completion of the Plant or the restoration of the Plant.

(c)

In the event that the amount on deposit in the Rebate Fund exceeds the Rebate Amount as determined in accordance with the Tax Agreement, the Trustee, upon the receipt of written instructions from an Authorized Company Representative, shall withdraw such excess amount and deposit it in the Construction Fund until the completion of the Plant, or, after the Completion Date, deposit it in the Interest Account.

(d)

The Trustee, upon the receipt of written instructions from an Authorized Company Representative, shall pay to the United States of America, out of amounts in the Rebate Fund, (i) not later than 30 days after the end of each five year period after the date of original issuance of the Bonds, an amount such that, together with prior amounts paid to the United States of America, the total paid to the United States of America is equal to 90% of the Rebate Amount with respect to the Bonds calculated as of the end of the most recent Computation Period, and (ii) not later than 30 days after the date on which all of the Bonds have been redeemed or paid in full, 100% of the Rebate Amount as of the end of the final Computation Period.

(e)

The Company has agreed in the Tax Agreement to retain an arbitrage rebate consultant to calculate the Rebate Amount at least each Computation Period, and annually at its discretion or as may be required for the preparation of its annual financial statements. In the event that the amounts available in the Rebate Fund are insufficient to pay the required rebate payment, the Company shall pay all amounts required to the Trustee for payment to the United States of America.

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ARTICLE VII

DEFEASANCE

Section 7.01.

Defeasance. If the Issuer shall pay or cause to be paid to the Owner of any Bond secured hereby the principal of, and premium, if any, and interest due and payable, and thereafter to become due and payable, upon such Bond or any portion of such Bond in an Authorized Denomination thereof, such Bond or portion thereof shall cease to be entitled to any lien, benefit or security under this Indenture.

If the Issuer shall pay or cause to be paid the principal of, and premium if any, and interest due and payable on, all Outstanding Bonds, and thereafter to become due and payable thereon, and shall pay or cause to be paid all other sums payable hereunder by the Issuer, including any necessary and proper fees, compensation and expenses of the Trustee and the Registrar, then, and in that case, the right, title and interest of the Trustee in and to the Trust Estate shall thereupon cease, terminate and become void. In such event, the Trustee shall assign, transfer and turn over the Trust Estate to the Company and any surplus in the Bond Fund and any balance remaining in any other fund created under this Indenture shall be paid to the Company upon the request of an Authorized Company Representative, other than any unclaimed moneys held pursuant to Section 5.04. The Trustee may conclusively rely on certificates of the Registrar as to the amount of any fees, exp enses and other amounts owing to it.

All or any portion of Bonds (in Authorized Denominations) shall, prior to the maturity or redemption date thereof, be deemed to have been paid within the meaning of this Article VII and for all purposes of this Indenture when:

(a)

in the event said Bonds or portions thereof have been selected for redemption in accordance with Section 3.04 hereof, the Trustee shall have given, or the Company shall have given to the Trustee in form satisfactory to it irrevocable instructions to give, on a date in accordance with the provisions of Section 3.05 hereof, notice of redemption of such Bonds or portions thereof;

(b)

there shall have been deposited with the Trustee moneys in an amount sufficient (without relying on any investment income), in the opinion of a firm of nationally recognized certified public accountants, to pay when due the principal of, and premium, if any, and interest due and to become due (which amount of interest to become due shall be calculated at the actual rate borne by such Bonds) on said Bonds or portions thereof on and prior to the redemption date or maturity date thereof, as the case may be;

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(c)

in the event said Bonds or portions thereof do not mature and are not to be redeemed within the next succeeding 60 days, the Company on behalf of the Issuer shall have given the Trustee in form satisfactory to it irrevocable instructions to give, as soon as practicable in the same manner as a notice of redemption is given pursuant to Section 3.05 hereof, and a notice to the Owners of said Bonds or portions thereof that the deposit required by clause (b) above has been made with, and the opinion required by clause (b) above has been delivered to, the Trustee and that said Bonds or portions thereof are deemed to have been paid in accordance with this Article VII and stating the maturity date or redemption date upon which moneys are to be available for the payment of the principal of, and premium, if any, and interest on, said Bonds or portions thereof; and

(d)

the Trustee shall have received a Favorable Opinion of Bond Counsel with respect to such deposit.

Moneys deposited with the Trustee pursuant to this Article VII shall not be withdrawn or used for any purpose other than, and shall be held in trust for, the payment of the principal of, premium, if any, and interest on said Bonds or portions thereof; provided that such moneys, if not then needed for such purpose, shall to the extent practicable, be invested and reinvested in Government Obligations maturing on or prior to the Interest Payment Date next succeeding the date of investment or reinvestment, and interest earned from such investments shall be paid over to the Company, as received by the Trustee, free and clear of any trust, lien or pledge. If payment of less than all the Bonds is to be provided for in the manner and with the effect provided in this Article VII, the Trustee shall select such Bonds or portion of such Bonds in the manner specified by Section 3.04 hereof for selection for redemption of less than all Bonds in the principal amo unt permitted by Section 3.01(b) hereof.

Notwithstanding that all or any portion of the Bonds are deemed to be paid within the meaning of this Article VII, the provisions of this Indenture relating to (i) the registration and exchange of Bonds, (ii) replacement of mutilated, lost, destroyed or stolen Bonds, (iii) payment of the Bonds from the moneys deposited as described in this Article and (iv) payment, compensation, reimbursement and indemnification of the Trustee and the Registrar shall remain in full force and effect with respect to all Bonds until the maturity date thereof or the last date fixed for redemption of all Bonds prior to maturity and, in the case of clause (iv), until payment, compensation, reimbursement or indemnification, as the case may be, of the Trustee and the Registrar.

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ARTICLE VIII

DEFAULTS AND REMEDIES

Section 8.01.

Events of Default. Each of the following events shall constitute and is referred to in this Indenture as an “Event of Default”:

(a)

a failure to pay the principal of or premium, if any, on any of the Bonds when the same shall become due and payable at maturity, upon redemption or otherwise;

(b)

a failure to pay an installment of interest on any of the Bonds for a period of 5 days after the date upon which such interest has become due and payable;

(c)

a failure by the Issuer to observe and perform any covenant, condition, agreement or provision (other than as specified in this Section 8.01 (a) and Section 8.01 (b) contained in the Bonds or in this Indenture on the part of the Issuer to be observed or performed, which failure shall continue for a period of 90 days after written notice, specifying such failure and requesting that it be remedied, shall have been given to the Issuer and the Company by the Trustee by registered or certified mail which may give such notice in its discretion and shall give such notice at the written request of the Owners of not less than a majority in principal amount of the Bonds then Outstanding, unless the Trustee, or the Trustee and the Owners of a principal amount of Bonds not less than the principal amount of Bonds the Owners of which requested such notice, as the case may be, shall agree in writing to an extension of such period prior to its expirati on; provided, however, that the Trustee, or the Trustee and the Owners of such principal amount of Bonds, as the case may be, shall be deemed to have agreed to an extension of such period if corrective action is initiated by the Issuer or the Company on behalf of the Issuer within such period and is being diligently pursued; or

(d)

an “Event of Default” under the Agreement has occurred and is continuing.

If on the date on which payment of principal of, interest on or other amount in any respect of the Bonds is due, sufficient moneys are not available to make such payment after taking into account any funds available for said purpose in the Debt Service Reserve Fund, the Trustee shall promptly give telephonic notice of such insufficiency to the Company by notice to the President and Treasurer at the telephone number provided for in Section 12.08 hereof.

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Section 8.02.

Acceleration; Other Remedies. (a) If an Event of Default described in Section 8.0l(a) or Section 8.01(b) or an Event of Default described in Section 8.0l(d) hereof resulting from an “Event of Default” under Section 8.01(a), Section 8.01(c) or Section 8.01(e) of the Agreement (of which the Trustee shall have received notice or be deemed to have notice pursuant to the provisions of Section 9.05 hereof) has occurred and has not been cured or waived, then the Trustee may, or upon the written request of the Owners of not less than a majority in principal amount of the Bonds then Outstanding, the Trustee shall, by written notice by registered or certified mail to the Issuer and the Company, declare the Bonds to be immediately due and payable, whereupon the Bonds shall without further action, become and be immediately due and payable, anything in this Indenture or in the Bonds to the contrary notwithstanding, and the Trustee shall give notice t hereof by Mail to all Owners of Outstanding Bonds. Upon any declaration of acceleration, the Trustee shall immediately exercise such rights as it may have under the Agreement.

(b)

The provisions of Section 8.02(a) are subject further to the condition that if, after the principal of the Bonds shall have been so declared to be due and payable and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, the Issuer shall cause the Company to deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all Bonds, any unpaid purchase price and the principal of any and all Bonds which shall have become due otherwise than by reason of such declaration (with interest upon such principal and, to the extent permissible by law, on overdue installments of interest, at the rate per annum then borne by the Bonds) and such amount as shall be sufficient to cover reasonable compensation and reimbursement of expenses payable to the Trustee and all Events of Default (other than nonpayment of the principal of Bonds which shall have become due by said decla ration) shall have been remedied, then, in every such case, such Event of Default shall be deemed waived and such declaration and its consequences rescinded and annulled; provided, however, that no such waiver, rescission and annulment shall extend to or affect any other Event of Default or subsequent Event of Default or impair any right, power or remedy consequent thereon. The Trustee shall send notice of any rescission to the Company.

(c)

Upon the occurrence and continuance of any Event of Default, then and in every such case the Trustee in its discretion, may, and upon the written request of the Owners of not less than a majority in principal amount of the Bonds then Outstanding and receipt of indemnity to its satisfaction (except against its own negligence or willful misconduct) shall in its own name and as the Trustee of an express trust:

(i)

by mandamus, or other suit, action or proceeding at law or in equity, enforce all rights of the Owners under, and require the Issuer or the Company to carry out any agreements with or for the benefit of the Owners of Bonds and to perform its or their duties under, the Act, the Agreement, this Indenture, the Subordinate Mortgage, the Subordinate Security Agreement and the Subordination Agreement, provided that any such remedy may be taken only to the extent permitted under the applicable provisions of the Agreement or this Indenture, as the case may be;

(ii)

bring suit upon the Bonds;

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(iii)

by action or suit in equity require the Issuer to account as if it were the trustee of an express trust for the Owners of Bonds; or

(iv)

by action or suit in equity enjoin any acts or things which may be unlawful or in violation of the rights of the Owners of Bonds.

In exercising such rights and the rights given the Trustee under this Article VIII, the Trustee will take such action as, in the judgment of the Trustee applying the standards described in Section 9.17, would best serve the interests of the Bondholders, taking into account the provisions of the Subordinate Mortgage and the Subordinate Security Agreement.

(d)

The Trustee shall waive any Event of Default hereunder and its consequences and rescind any declaration of acceleration of principal upon the written request of the Owners of (i) a majority in principal amount of all Outstanding Bonds in respect of which default in the payment of principal or purchase price of or interest on the Bonds exists or (ii) a majority in principal amount of all Outstanding Bonds in the case of any other Event of Default; provided, however, that (x) there shall not be waived any Event of Default specified in Section 8.01(a) or Section 8.01(b) hereof unless prior to such waiver or rescission the Issuer shall have caused to be deposited with the Trustee a sum sufficient to pay all matured installments of interest upon all Bonds and the principal and purchase price of any and all Bonds which shall have become due otherwise than by reason of such declaration of acceleration (with interest upon such principal and, to the extent permissible by law, on overdue installments of interest, at the rate per annum then borne by the Bonds) and (y) no Event of Default shall be waived unless (in addition to the applicable conditions as aforesaid) there shall have been deposited with the Trustee such amount as shall be sufficient to cover reasonable compensation and reimbursement of expenses payable to the Trustee. In case of any waiver or rescission described above, or in case any proceeding taken by the Trustee on account of any such Event of Default shall have been discontinued or concluded or determined adversely, then and in every such case the Issuer, the Trustee and the Owners of Bonds shall be restored to their former positions and rights hereunder, respectively; provided, further that no such waiver or rescission shall extend to any subsequent or other Event of Default, or impair any right consequent thereon.

Section 8.03.

Restoration to Former Position. In the event that any proceeding taken by the Trustee to enforce any right under this Indenture shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee, then the Issuer, the Trustee and the Owners of Bonds shall be restored to their former positions and rights hereunder, respectively, and all rights, remedies and powers of the Trustee shall continue as though no such proceeding had been taken.

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Section 8.04.

Owners’ Right to Direct Proceedings. Anything in this Indenture or the Agreement to the contrary notwithstanding, upon the occurrence and continuance of an Event of Default, the Owners of a majority in principal amount of the Bonds then Outstanding, shall have the right, by an instrument in writing executed and delivered to the Trustee and upon furnishing to the Trustee indemnity satisfactory to it (except against its own negligence or willful misconduct), to direct the time, method and place of conducting all remedial proceedings available to the Trustee under this Indenture or the Agreement or exercising any trust or power conferred on the Trustee by this Indenture or the Agreement, provided that such direction shall not be other than in accordance with the provisions of law, the Agreement and this Indenture and shall not result in any personal liability of the Trustee.

Section 8.05.

Limitation on Owners’ Right to Institute Proceedings. No Owner shall have any right to institute any suit, action or proceeding in equity or at law for the execution of any trust or power hereunder, or any other remedy hereunder or in the Bonds, unless such Owner previously shall have given to the Trustee written notice of an Event of Default as herein above provided and unless the Owners of not less than a majority in principal amount of the Bonds then Outstanding shall have made written request of the Trustee so to do after the right to institute said suit, action or proceeding under Section 8.02 hereof shall have accrued, and shall have afforded the Trustee a reasonable opportunity to proceed to institute the same in either its or their name, and unless there also shall have been offered to the Trustee security and indemnity satisfactory to it against the costs, expenses and liabilities to be incurred therein or thereby (except against its own negligence or willful misconduct), and the Trustee shall not have complied with such request within a reasonable time; and such notification, request and offer of indemnity are hereby declared in every such case, at the option of the Trustee, to be conditions precedent to the institution of said suit, action or proceeding, it being understood and intended that no one or more of the Owners shall have any right in any manner whatever by his or their action to affect, disturb or prejudice the security of this Indenture, or to enforce any right hereunder or under the Bonds, except in the manner herein provided, and that all suits, actions and proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided and for the equal benefit of all Owners.

Section 8.06.

No Impairment of Right to Enforce Payment. Notwithstanding any other provision in this Indenture, the right of any Owner to receive payment of the principal or purchase price of, and premium, if any, and interest on, its Bond, on or after the respective due dates expressed therein, or to institute suit for the enforcement of any such payment on or after the respective due dates expressed therein, or to institute suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Owner.

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Section 8.07.

Proceedings by Trustee Without Possession of Bonds. All rights of action under this Indenture or under any of the Bonds secured hereby which are enforceable by the Trustee may be enforced by it without the possession of any of the Bonds, or the production thereof at the trial or other proceedings relative thereto, and any such suit, action or proceeding instituted by the Trustee shall be brought in its name for the equal and ratable benefit of the Owners, subject to the provisions of this Indenture.

Section 8.08.

No Remedy Exclusive. Except as provided in Section 2.07, no remedy herein conferred upon or reserved to the Trustee or to the Owners is intended to be exclusive of any other remedy or remedies, and each and every such remedy shall be cumulative, and shall be in addition to every other remedy given hereunder or under the Agreement, or now or hereafter existing at law or in equity or by statute; provided, however, that any conditions set forth herein to the taking of any remedy to enforce the provisions of this Indenture, the Bonds or the Agreement shall also be conditions to seeking any remedies at law or in equity or by statute pursuant to this Section 8.08.

Section 8.09.

No Waiver of Remedies. No delay or omission of the Trustee or of any Owner to exercise any right or power accruing upon any Event of Default shall impair any such right or power or shall be construed to be a waiver of any such Event of Default, or an acquiescence therein; and every power and remedy given by this Article VIII to the Trustee and to the Owners, respectively, may be exercised from time to time and as often as may be deemed expedient.

Section 8.10.

Application of Moneys. Any moneys received by the Trustee, by any receiver or by any Owner pursuant to any right given or action taken under the provisions of this Article VIII, after payment of the fees, costs and expenses, liabilities and advances incurred or made by the Trustee or its agents or counsel (provided that moneys held for Bonds not presented for payment or deemed paid pursuant to Section 5.04 or Article VII hereof shall not be used for purposes other than payment of such Bonds), shall be deposited in the Bond Fund and all moneys so deposited in the Bond Fund during the continuance of an Event of Default (other than moneys for the payment of Bonds which had matured or otherwise become payable prior to such Event of Default or for the payment of interest due prior to such Event of Default) shall be applied as follows:

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(a)

Unless the principal of all the Bonds shall have been declared due and payable, all such moneys shall be applied (i) first, to the payment to the persons entitled thereto of all installments of interest then due on each Bond, with interest on overdue installments of interest, if lawful at the rate per annum then borne by such Bond, in the order of maturity of the installments of such interest and, if the amount available shall not be sufficient to pay in full any particular installment of interest, then to the payment ratably, according to the amounts due on such installment, and (ii) second, to the payment to the persons entitled thereto of the unpaid principal of any of the Bonds which shall have become due (other than Bonds called for redemption for the payment of which money is held pursuant to the provisions of this Indenture) with interest on each Bond at its rate from the respective dates upon which it became due and, if the amou nt available shall not be sufficient to pay in full Bonds due on any particular date, together with such interest, then to the payment ratably, according to the amount of principal and interest due on such date, in each case to the persons entitled thereto, without any discrimination or privilege.

(b)

If the principal of all the Bonds shall have been declared due and payable, all such moneys shall be applied to the payment of the principal and interest then due and unpaid upon the Bonds, with interest on overdue interest and principal as aforesaid, without preference or priority of principal over interest or interest over principal or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, ratably, according to the amounts due respectively for principal and interest, to the persons entitled thereto without any discrimination or privilege.

(c)

If the principal of all the Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded and annulled under the provisions of this Article then, subject to the provisions of subparagraph (b) of this Section 8.10 which shall be applicable in the event that the principal of all the Bonds shall later become due and payable, the moneys shall be applied in accordance with the provisions of subparagraph (a) of this Section 8.10.

Whenever moneys are to be applied pursuant to the provisions of this Section 8.10, such moneys shall be applied at such times, and from time to time, as the Trustee shall determine, having due regard to the amount of such moneys available for application and the likelihood of additional moneys becoming available for such application in the future. Whenever the Trustee shall apply such funds, it shall fix the Bond Payment Date upon which such application is to commence and upon such Bond Payment Date interest on the amounts of principal and interest to be paid on such Bond Payment Date shall cease to accrue. The Trustee shall give notice of the deposit with it of any such moneys and of the fixing of any such Bond Payment Date by Mail to the Provider and all Owners of Outstanding Bonds and shall not be required to make payment to any Owner until such Bond shall be presented to the Registrar for appropriate endorsement or cancellation if fully paid.

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Section 8.11.

Severability of Remedies. It is the purpose and intention of this Article VIII to provide rights and remedies to the Trustee and the Owners which may be lawfully granted under the provisions of the Act, but should any right or remedy herein granted be held to be unlawful the Trustee and the Owners shall be entitled, as above set forth, to every other right and remedy provided in this Indenture and by law.

Section 8.12.

Limitation of Actions; Subordination Agreement. Notwithstanding any provisions of this Article VIII, all defaults and remedies shall be subject to the terms and conditions of the Subordination Agreement.

ARTICLE IX

TRUSTEE; REGISTRAR

Section 9.01.

Acceptance of Trusts. The Issuer has appointed U.S. Bank National Association, as Trustee (and paying agent for the Bonds). The Trustee hereby accepts and agrees to execute the trusts hereby created, but only upon the additional terms set forth in this Article IX, to all of which the Issuer agrees and the respective Owners agree by their acceptance of delivery of any of the Bonds. The Trustee, prior to the occurrence of an Event of Default and after the curing of all Events of Default, undertakes to perform such duties and only such duties as are specifically set forth herein, and no implied covenant shall be read into this Indenture against the Trustee.

Section 9.02.

No Responsibilities for Recitals. The recitals, statements and representations contained in this Indenture or in the Bonds shall not be taken and construed as made by or on the part of the Trustee, and the Trustee does not assume, and shall not have, any responsibility or obligation for the correctness of any thereof or for the validity, sufficiency or priority of this Indenture or the Agreement, or the perfection or the maintenance of the perfection of any security interest granted hereby.

Section 9.03.

Limitations on Liability. The Trustee may execute any of the trusts or powers hereof and perform the duties required of it hereunder by or through attorneys, agents, receivers or employees, and shall be entitled to and may conclusively rely upon advice of counsel concerning all matters of trust and its duties hereunder and shall not be answerable for the conduct of any such attorney, agent, receiver or employee if appointed by the Trustee with reasonable care, and the advice of any such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted hereunder in good faith and reliance thereon, and may in all cases pay such reasonable compensation to such attorneys, agents, receivers or employees as may be reasonably employed in connection with the trusts hereof. The Trustee shall not be answerable for the exercise of any discretion or power under this Indenture or for anything whatsoever in conn ection with the trusts created hereby, except only for its own negligence or willful misconduct.

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The Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Owners of a majority in aggregate principal amount of the Bonds Outstanding relating to the time, method and place of conducting any proceeding or any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee under this Indenture.

No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers. The Trustee shall not be required to give any bond or surety in respect to the execution of its trusts and powers hereunder.

The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty unless so specified herein.

The Trustee shall not be liable for any error of judgment made in good faith by an officer, director or employee unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts.

The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Owners pursuant to the provisions of this Indenture unless there shall have been provided to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby.

The Trustee shall not be responsible or liable for any loss suffered in connection with the investment of moneys made by it in accordance with Article VI.

In situations where a Favorable Opinion of Bond Counselor an opinion of Bond Counsel is required or requested to be delivered under this Indenture, the Agreement or the Tax Agreement after the date of delivery of the Bonds, the Trustee shall accept (unless otherwise directed by the Company) an opinion in such form and with such disclosures as may be required so that such opinion will not be treated as a “covered opinion” for purposes of the United States Treasury Department regulations governing practice before the Internal Revenue Service (Circular 230), 31 CFR Part 10.

Whether or not expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of the Trustee shall be subject to the provisions of this Article IX and shall extend to the Registrar and employees and agents of the Trustee and the Registrar.

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Section 9.04.

Compensation, Expenses and Advances. The Trustee and the Registrar shall be entitled to such compensation as shall be agreed in writing with the Company for their services rendered hereunder (not limited by any provision of law in regard to the compensation of the trustee of an express trust) and to reimbursement for their out-of-pocket expenses (including reasonable counsel fees and expenses) reasonably incurred in connection therewith except as a result of their negligence or willful misconduct. If the Issuer shall fail to perform any of the covenants or agreements contained in this Indenture, the Trustee may, in its uncontrolled discretion and without notice to the Owners, at any time and from time to time, make advances to effect performance of the same on behalf of the Issuer, but the Trustee shall be under no obligation so to do; and any and all such advances shall bear interest at a rate per annum equal to the rate of interest then in effec t and as announced by U.S. Bank National Association as its prime lending rate for domestic commercial loans in New York, New York; but no such advance shall operate to relieve the Issuer from any Event of Default. In no event shall the Trustee be liable for any claims resulting from any decision on its part not to advance funds as permitted in the immediately preceding sentence. In the Agreement, the Company has agreed that it will pay to the Trustee and the Registrar compensation and reimbursement of expenses and advances and certain indemnities, but the Company may, without creating an Event of Default, contest in good faith the reasonableness of any such expenses and advances. If the Company shall have failed to make any payment to the Trustee or the Registrar under the Agreement, then each of the Trustee and the Registrar shall have, in addition to any other rights hereunder, a claim, prior to the claim of the Owners, for the payment of their compensation and indemnities and the reimbursement of their e xpenses and any advances made by them, as provided in this Section 9.04, upon the moneys and obligations in the Bond Fund, except for moneys or obligations deposited with or paid to the Trustee for the redemption or payment of Bonds which are deemed to have been paid in accordance with Article VII hereof, or funds held pursuant to Section 5.04 hereof.

Notwithstanding any other provision of this Indenture, in each instance in which this Indenture shall provide for compensation, reimbursement or indemnification of the Trustee, such provision shall be deemed to provide for, whether or not expressly so stated, the payment of all related fees, costs, charges, advances and reasonable expenses of the Trustee (including, without limitation, reasonable attorneys’ fees and expenses), unless the context clearly indicates otherwise.

Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in Section 8.01(c) of the Agreement, the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law.

The provisions of this Section 9.04 shall survive the termination of this Indenture.

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Section 9.05.

Notice of Events of Default and Determination of Taxability. Notwithstanding anything otherwise provided herein, the Trustee shall not be required to take notice, or be deemed to have notice of any default or Event of Default, other than an Event of Default under Section 9.01(a) or Section 9.01(b) hereof, unless the Trustee shall have actual knowledge thereof or shall have been specifically notified in writing at the Principal Office of the Trustee, Attention: Corporate Trust, of such Event of Default by the Owners of at least 25% in principal amount of the Bonds then Outstanding, the Issuer or the Company. The Trustee may, however, at any time, in its discretion, require of the Issuer full information and cooperation as to the performance of any of the covenants, conditions and agreements contained herein. Such inquiry shall not for the purposes of this Section 9.05 constitute notice of any Event of Default. The Issuer shall not be required to ta ke notice, or be deemed to have notice, of any Event of Default, other than an Event of Default of which it shall have actual knowledge. If an Event of Default occurs after the Trustee has notice of the same as provided in this Section 9.05, or if a Determination of Taxability occurs of which the Trustee has received notice as provided in Section 9.02 of the Agreement, then the Trustee shall give notice thereof by Mail to the Company and the Owners of Outstanding Bonds.

Section 9.06.

Action by Trustee. Except as provided in Section 8.02 and Section 8.04 hereof and except for the payment of principal of, and premium, if any, and interest on, the Bonds when due from moneys held by the Trustee as part of the Trust Estate, the Trustee shall be under no obligation to take any action in respect of any Event of Default or toward the execution or enforcement of any of the trusts hereby created, or to institute, appear in or defend any suit or other proceeding in connection therewith, unless requested in writing so to do by the Owners of at least a majority in principal amount of the Bonds then Outstanding and, if in its opinion such action may tend to involve it in expense or liability, unless furnished, from time to time as often as it may require, with security and indemnity satisfactory to it (except against its own negligence or willful misconduct); but the foregoing provisions are intended only for the protection of the Trustee, and shall not affect any discretion or power given by any provisions of this Indenture to the Trustee to take action in respect of any Event of Default without such notice or request from the Owners, or without such security or indemnity.

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Section 9.07.

Good-Faith Reliance. The Trustee and the Registrar shall be protected and shall incur no liability in acting or proceeding in good faith upon any resolution, notice, telegram, telex or facsimile transmission, request, consent, waiver, certificate, statement, affidavit, voucher, bond, requisition or other paper or document which it shall in good faith believe to be genuine and to have been passed or signed by the proper board, body or person or to have been prepared and furnished pursuant to any of the provisions of this Indenture or the Agreement, or upon the written opinion of any attorney, engineer, accountant or other expert believed, without independent investigation, by the Trustee or the Registrar, as the case may be, to be qualified in relation to the subject matter. The Trustee and the Registrar shall be under no duty to make any investigation or inquiry as to any statements contained or matters referred to in any such instrument, but may accept and rely upon the same as conclusive evidence of the truth and accuracy of such statements; provided, however, that the Trustee may, in its discretion, make, but shall in no case be required to make, such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation it shall be entitled to examine the books, records and premises of the Company personally or by agent or attorney. Neither the Trustee nor the Registrar shall be bound to recognize any person as an Owner or to take any action at such person’s request unless satisfactory evidence of the ownership of such Bond shall be furnished to such entity.

Whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of negligence or bad faith on its part, request and conclusively rely upon a certificate of an Authorized Company Representative or an Executive Officer, and, prior to the occurrence of a default of which the Trustee has been notified as provided in Section 9.05 or of which by said section it is deemed to have notice, the Trustee shall also be at liberty to accept a similar certificate to the effect that any particular dealing, transaction or action is necessary or advisable, but shall in no case be bound to secure the same.

The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.

Notwithstanding anything elsewhere in this Indenture contained, the Trustee or the Registrar, as the case may be, shall have the right, but shall not be required, to demand, in respect of the authentication of any Bonds or the taking of any other action whatsoever within the purview of this Indenture or the Agreement, any showings, certificates, opinions or other information, or corporate action or evidence thereof, in addition to those by the terms hereof or thereof required as a condition of such action which are reasonably deemed desirable by the Trustee or the Registrar, as the case may be, for the purpose of establishing the right of the Issuer or the Company to request the taking of such action by the Trustee or the Registrar.

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Section 9.08.

Dealings in Bonds; Allowance of Interest. The Trustee and the Registrar, in its individual capacity, may in good faith buy, sell, own, hold and deal in any of the Bonds issued hereunder and may join in any action which any Owner may be entitled to take with like effect as if it did not act in any capacity hereunder. The Trustee or the Registrar, in its individual capacity, either as principal or agent, may also engage in or be interested in any financial or other transaction with the Issuer or the Company, and may act as depositary, trustee or agent for any committee or body of Owners secured hereby or other obligations of the Issuer or the Company as freely as if it did not act in any capacity hereunder.

All moneys received by the Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any moneys received hereunder except for accounting for income from Investment Securities.

Section 9.09.

Several Capacities. Anything in this Indenture to the contrary notwithstanding, with the consent of the Company, the same entity may serve hereunder as the Trustee and the Registrar and in any other combination of such capacities, to the extent permitted by law.

Section 9.10.

Resignation of Trustee. The Trustee may resign and be discharged of the trusts created by this Indenture by executing any instrument in writing resigning such trust and specifying the date when such resignation shall take effect, and filing the same with the Issuer, the Company and the Registrar not less than 45 days before the date specified in such instrument when such resignation shall take effect, and by giving notice of such resignation by Mail not less than three weeks prior to such resignation date, to all Owners of Bonds. Such resignation shall take effect on the day specified in such instrument and notice, unless previously a successor Trustee shall have been appointed as hereinafter provided, in which event such resignation shall take effect immediately upon the appointment of such successor Trustee, but in no event shall a resignation take effect earlier than the date on which a successor Trustee, acceptable to the Issuer and the Compan y, has been appointed and has accepted its appointment.

Section 9.11.

Removal of Trustee. (a) The Trustee may be removed at any time by filing with the Trustee so removed and with the Issuer, the Company and the Registrar, an instrument or instruments in writing executed by (x) the Company, if no default or Event of Default or condition which with the giving of notice or the passage of time, or both, would constitute a default or an Event of Default, shall have occurred and be continuing, or (y) during the occurrence and continuation of a default or an Event of Default or condition which with the giving of notice or the passage of time, or both, would constitute a default or an Event of Default, the Owners of not less than a majority in principal amount of the Bonds then Outstanding.

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(b)

The Issuer may, and, so long as no default or Event of Default is then existing under Section 8.01 of the Agreement or Section 8.01(a) or (b) of this Indenture, at the request of the Company will, remove the Trustee (i) if the Trustee fails to comply with Section 9.13(a), (b), (c) or (e) hereof, (ii) the Trustee is adjudged a bankrupt or an insolvent, (iii) if a receiver or other public officer takes charge of the Trustee or its property or (iv) if the Trustee otherwise becomes incapable of acting.

(c)

In no event shall a removal take effect earlier than the date on which a successor Trustee has been appointed and has accepted its appointment.

Section 9.12.

Appointment of Successor Trustee. In case at any time the Trustee shall be removed, or be dissolved, or if its property or affairs shall be taken under the control of any state or federal court or administrative body because of insolvency or bankruptcy, or for any other reason, then a vacancy shall forthwith and ipso facto exist in the office of Trustee and a successor may be appointed, and in case at any time the Trustee shall resign, then a successor may be appointed by filing with the Issuer, the Company and the Registrar an instrument in writing executed by the Company if no default or Event of Default or condition which with the giving of notice or the passage of time, or both, would constitute a default or an Event of Default, is then existing under Section 8.01 of the Agreement or Section 8.01(a) or (b) of this Indenture or, if a default is then existing, by the Owners of not less than a majority in principal amount of the Bonds then Outstanding. Copies of such instrument shall be promptly delivered by the Issuer to the predecessor Trustee and to the Trustee so appointed. Any successor Trustee appointed upon the removal of the original Trustee hereunder shall assume the obligations of the original Trustee through an instrument of acceptance.

Until a successor Trustee shall be appointed by the Company or the Owners as herein authorized, the Issuer, by an instrument authorized by the governing body of the Issuer, shall appoint a successor Trustee acceptable to the Company. After any appointment by the Issuer, it shall cause notice of such appointment to be given to the Registrar and to be given by Mail to all Owners of Bonds. Any new Trustee so appointed by the Issuer shall immediately and without further act be superseded by a Trustee appointed by the Company or the Owners in the manner above provided.

Section 9.13.

Qualifications of Successor Trustee. Every successor Trustee (a) shall be a national or state bank or trust company that is authorized by law to perform all the duties imposed upon it by this Indenture and to exercise corporate trust powers in the State, (b) shall have (or, in the case of a corporation included in a bank holding company system, the related bank holding company shall have) a combined capital and surplus of at least $50,000,000 as set forth in its (or its related bank holding company’s) most recent published annual report of condition, and (c) shall be permitted under the Act to perform the duties of Trustee, if there can be located, with reasonable effort, such an institution willing and able to accept the trust on reasonable and customary terms.

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Section 9.14.

Judicial Appointment of Successor Trustee. In case at any time the Trustee shall resign and no appointment of a successor Trustee shall be made pursuant to the foregoing provisions of this Article IX prior to the date specified in the notice of resignation as the date when such resignation is to take effect, the resigning Trustee may forthwith apply to a court of competent jurisdiction for the appointment of a successor Trustee. If no appointment of a successor Trustee shall be made pursuant to the foregoing provisions of this Article IX within six months after a vacancy shall have occurred in the office of Trustee, any Owner may apply to any court of competent jurisdiction to appoint a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper, appoint a successor Trustee.

Section 9.15.

Acceptance of Trusts by Successor Trustee. Any successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuer an instrument accepting such appointment hereunder, and thereupon such successor Trustee, without any further act, deed or conveyance, shall become duly vested with all the estates, property rights, powers, trusts, duties and obligations of its predecessor in the trust hereunder, with like effect as if originally named Trustee herein, and the duties and obligations of the predecessor Trustee hereunder shall thereupon cease and terminate. Upon request of such Trustee, such predecessor Trustee and the Issuer shall execute and deliver an instrument transferring to such successor Trustee all the estates, property, rights, powers and trusts hereunder of such predecessor Trustee and, subject to the provisions of Section 9.04 hereof, such predecessor Trustee shall pay over to the successor Trustee all moneys and other assets at the time held by it hereunder.

Section 9.16.

Successor by Merger or Consolidation. Any corporation into which any Trustee hereunder may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which any Trustee hereunder shall be a party, or to which all or substantially all of its corporate trust business shall be transferred, shall be the successor Trustee under this Indenture, without the execution or filing of any paper or any further act on the part of the parties hereto, anything in this Indenture to the contrary notwithstanding, provided, however, if such successor corporation is not a trust company or state or national bank that has trust powers, the Trustee shall resign from the trusts hereby created prior to such merger, transfer or consolidation or the successor corporation shall resign from such trusts as soon as practicable after such merger, transfer or consolidation.

Section 9.17.

Standard of Care. Notwithstanding any other provisions of this Article IX, the Trustee shall, during the existence and prior to the curing of an Event of Default of which the Trustee has notice as provided in Section 9.05 hereof, exercise such of the rights and powers vested in it by this Indenture and use the same degree of skill and care in their exercise as a prudent person would use and exercise under the circumstances in the conduct of its own affairs.

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Section 9.18.

Intervention in Litigation of the Issuer. In any judicial proceeding to which the Issuer is a party and which in the opinion of the Trustee and its counsel has a substantial bearing on the interests of the Owners of the Bonds, the Trustee may and shall upon receipt of indemnity satisfactory to it (except against its own negligence or willful misconduct) at the written request of the Owners of at least 25% in principal amount of the Bonds then Outstanding and if permitted by the court having jurisdiction in the premises, intervene in such judicial proceeding.

Section 9.19.

Registrar. U.S. Bank National Association is the Registrar for the Bonds. Any Registrar shall designate to the Issuer, the Company and the Trustee its office where the registration books shall be kept and signify its acceptance of the duties imposed upon it hereunder by a written instrument of acceptance delivered to the Issuer and the Trustee under which such Registrar will agree, particularly, to keep such books and records as shall be consistent with prudent industry practice and to make such books and records available for inspection by the Issuer, the Trustee and the Company at all reasonable times.

The Issuer shall cooperate with the Trustee and the Company to cause the necessary arrangements to be made and to be thereafter continued whereby Bonds, executed by the Issuer and authenticated by the Registrar, shall be made available for exchange, registration and registration of transfer at the Principal Office of the Registrar. The Issuer shall cooperate with the Trustee, the Registrar and the Company to cause the necessary arrangements to be made and thereafter continued whereby the Trustee shall be furnished such records and other information, at such times, as shall be required to enable the Trustee to perform the duties and obligations imposed upon them hereunder.

Section 9.20.

Qualifications of Registrar; Resignation; Removal. The Registrar shall be a corporation duly organized under the laws of the United States of America or any state or territory thereof, having a combined capital surplus and retained earnings of at least $10,000,000 and authorized by law to perform all the duties imposed upon it by this Indenture. The Registrar may at any time resign and be discharged of the duties and obligations created by this Indenture by giving at least 45 days’ notice to the Issuer, the Trustee and the Company. The Registrar may be removed at any time by an instrument signed by the Authorized Company Representative and filed with the Issuer, the Registrar and the Trustee. Upon the resignation or removal of the Registrar, the Company shall appoint a new Registrar.

In the event of the resignation or removal of the Registrar, the Registrar shall deliver any Bonds held by it in such capacity to its successor or, if there be no successor, to the Trustee.

In the event that the Company shall fail to appoint a Registrar hereunder, or in the event that the Registrar shall resign or be removed, or be dissolved, or if the property or affairs of the Registrar shall be taken under the control of any state or federal court or administrative body because of bankruptcy or insolvency, or for any other reason, and the Company shall not have appointed its successor as Registrar, the Trustee shall ipso facto be deemed to be the Registrar for all purposes of this Indenture until the appointment by the Company of the Registrar or successor Registrar, as the case may be.

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Section 9.21.

Additional Duties of Trustee. (a) The Trustee shall keep such books and records with respect to the Bonds as shall be consistent with prudent industry practice and to make such books and records available for inspection by the Issuer, the Trustee and the Company at all reasonable times; provided, however, that nothing in this Section 9.21(a) shall limit the provisions of Section 9.21(b) herein.

(b)

The Trustee shall, with respect to amounts held under the Indenture, keep and retain or cause to be kept and retained until six years after the Bonds are paid in full adequate records with respect to the investment of all Gross Proceeds (as defined in the Tax Agreement) and amounts in the Rebate Fund. Such records shall include: (i) purchase price; (ii) purchase date; (iii) type of investment; (iv) accrued interest paid; (v) interest rate; (vi) principal amount; (vii) maturity date; (viii) interest payment date; (ix) date of liquidation; and (x) receipt upon liquidation. If any investment becomes Gross Proceeds on a date other than the date such investment is purchased, the records required to be kept shall include the fair market value of such investment on the date it becomes Gross Proceeds. If any investment is retained after the date the last Bond is retired, the records required to be kept shall include the fair market value of such investment on the date the last Bond is retired. Amounts or investments will be segregated whenever necessary to maintain these records; and

(c)

The Trustee shall, as long as a book-entry system is in effect for the Bonds, comply with the DTC Representation Letter and perform all duties required of it thereunder.

ARTICLE X

EXECUTION OF INSTRUMENTS BY OWNERS AND

PROOF OF OWNERSHIP OF BONDS

Any request, direction, consent or other instrument in writing required or permitted by this Indenture to be signed or executed by the Owners or on their behalf by an attorney-in-fact may be in any number of concurrent instruments of similar tenor and may be signed or executed by the Owners in person or by an agent or attorney-in-fact appointed by an instrument in writing or as provided in the Bonds. Proof of the execution of any such instrument and of the ownership of Bonds shall be sufficient for any purpose of this Indenture and shall be conclusive in favor of the Trustee with regard to any action taken by it under such instrument if made in the following manner:

(a)

The fact and date of the execution by any person of any such instrument may be proved by the certificate of any officer in any jurisdiction who, by the laws thereof, has power to take acknowledgments within such jurisdiction, to the effect that the person signing such instrument acknowledged before him the execution thereof, or by an affidavit of a witness to such execution.

(b)

The ownership of Bonds shall be proved by the registration books kept under the provisions of Section 2.06 hereof.

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Nothing contained in this Article X shall be construed as limiting the Trustee to such proof, it being intended that the Trustee may accept any other evidence of matters herein stated which it may deem sufficient. Any request by or consent of any Owner shall bind every future Owner of the same Bond or any Bond or Bonds issued in lieu thereof or upon registration of transfer thereof in respect of anything done by the Trustee or the Issuer in pursuance of such request or consent.

ARTICLE XI

MODIFICATION OF THIS INDENTURE, THE

AGREEMENT AND THE SUBORDINATE MORTGAGE

Section 11.01.

Supplemental Indentures Without Owner Consent. Subject to the Subordination Agreement, the Issuer and the Trustee may, from time to time and at any time, without the consent of the Owners, enter into a Supplemental Indenture as follows:

(a)

to cure any formal defect, omission, inconsistency or ambiguity in this Indenture;

(b)

to add to the covenants and agreements of the Issuer contained in this Indenture or of the Company contained in any document, other covenants or agreements thereafter to be observed, or to assign or pledge additional security for any of the Bonds, or to surrender any right or power reserved or conferred upon the Issuer or the Company, which in the judgment of the Trustee is not materially adverse to the Owners of the Bonds (in making such determination, the Trustee may, but is not required to, rely conclusively upon an opinion of counsel);

(c)

to confirm, as further assurance, any pledge of or lien on the Revenues or any other moneys, securities or funds subject or to be subjected to the lien of this Indenture;

(d)

to comply with the requirements of the Trust Indenture Act of 1939, as from time to time amended, if applicable to this Indenture;

(e)

to modify, alter, amend or supplement this Indenture or any Supplemental Indenture in any other respect which in the judgment of the Trustee is not materially adverse to the Owners of the Bonds (in making such determination, the Trustee may, but is not required to, rely conclusively upon an opinion of counsel);

(f)

to modify, alter, amend or supplement or restate this Indenture or any Supplemental Indenture in any and all respects necessary, desirable or appropriate in connection with the delivery to the Trustee of bond insurance or other security arrangements obtained or provided by the Company;

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(g)

to provide for a depository to accept Bonds in lieu of DTC;

(h)

to modify or eliminate the book-entry registration system for any of the Bonds;

(i)

to provide for uncertificated Bonds or for the issuance of coupons and bearer Bonds or Bonds registered only as to principal but only to the extent that such would not adversely affect the Tax-Exempt status of the Bonds;

(j)

to secure or maintain ratings on the Bonds from Moody’s and/or S&P;

(k)

to provide demand purchase obligations to cause the Bonds to be authorized purchases for investment companies;

(l)

to provide for the appointment of a successor Trustee and Registrar;

(m)

to provide the procedures required to permit any Owner to separate the right to receive interest on the Bonds from the right to receive principal thereof and to sell or dispose of such right as contemplated by Section 1286 of the Code (or similar successor provision);

(n)

to make any change necessary (i) to establish or maintain the Tax-Exempt status of the Bonds as a result of any modifications or amendments to Section 148 of the Code (or any successor provision of law) or interpretations thereof by the Internal Revenue Service, or (ii) to comply with the provisions of Section 148(f) of the Code (or any successor provision of law), including provisions for the payment of all or a portion of the investment earnings of any of the Funds established hereunder to the United States of America; and

(o)

to provide for the issuance of Additional Senior Indebtedness in accordance with Section 4.02 of the Agreement.

Before the Issuer and the Trustee shall enter into any Supplemental Indenture pursuant to this Section 11.01, in all cases, there shall have been delivered to the Trustee and the Company, a Favorable Opinion of Bond Counsel with respect to such Supplemental Indenture and further stating that such Supplemental Indenture is authorized or permitted by this Indenture and will, upon the execution and delivery thereof, be valid and binding upon the Issuer in accordance with its terms. Neither the Issuer nor the Trustee will be obligated to enter into any such Supplemental Indenture that would materially alter their respective rights, duties or immunities under this Indenture, the Agreement or otherwise.

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The Trustee shall provide written notice of any Supplemental Indenture described in this Section 11.01 to Moody’s and S&P (but only if such corporations are then providing a rating for the Bonds) and to the Owners of all Bonds then Outstanding at least 15 days prior to the effective date of such Supplemental Indenture. Such notice shall state the effective date of such Supplemental Indenture and shall briefly describe the nature of such Supplemental Indenture and shall state that a copy thereof is on file at the Principal Office of the Trustee for inspection by the parties mentioned in the preceding sentence.

Section 11.02.

Supplemental Indentures Requiring Owner Consent. (a) Except for any Supplemental Indenture entered into pursuant to Section 11.01 hereof, subject to the terms and provisions contained in this Section 11.02 and not otherwise, and subject to the Subordination Agreement, the Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding shall have the right from time to time to consent to and approve the execution and delivery by the Issuer and the Trustee of any Supplemental Indenture deemed necessary or desirable by the Issuer for the purposes of modifying, altering, amending, supplementing or rescinding, any of the terms or provisions contained in this Indenture; provided, however, that, unless approved in writing by the Owners of all the Bonds then Outstanding, nothing herein contained shall permit, or be construed as permitting (i) an extension of the maturity of the principal of, or the time for payment of any redemption premium or interest on, any Bond or a reduction in the principal amount of any Bond, or the rate of interest or redemption premium thereon, or a reduction in the amount of, or extension of the time of any payment required by, any Bond; (ii) a privilege or priority of any Bond over any other Bond (except as herein provided); (iii) a reduction in the aggregate principal amount of the Bonds required for consent to such a Supplemental Indenture; (iv) the deprivation of the owner of any Bond then Outstanding of the lien created by this Indenture; or (v) the amendment of this Section 11.02.

(b)

If at any time the Issuer shall request the Trustee to enter into any Supplemental Indenture for any of the purposes of this Section 11.02, the Trustee, upon being satisfactorily indemnified for its expenses, shall cause notice of the proposed Supplemental Indenture to be given by Mail to Moody’s and S&P (but only if such corporations are then providing a rating for the Bonds) and to all Owners of Outstanding Bonds. Such notice shall briefly set forth the nature of the proposed Supplemental Indenture and shall state that a copy thereof is on file at the Principal Office of the Trustee for inspection by the Owners, Moody’s and S&P.

(c)

Within two years after the date of the mailing of such notice, the Issuer and the Trustee may enter into such Supplemental Indenture in substantially the form described in such notice, but only if there shall have first been delivered to the Trustee (i) the required consents, in writing, of the Owners and (ii) a Favorable Opinion of Bond Counsel with respect to such Supplemental Indenture and further stating that such Supplemental Indenture is authorized or permitted by this Indenture and will, upon the execution and delivery thereof, be valid and binding upon the Issuer in accordance with its terms. Neither the Issuer nor the Trustee will be obligated to enter into any such Supplemental Indenture that would materially alter their respective rights, duties or immunities under this Indenture, under the Agreement or otherwise.

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(d)

If Owners of not less than the percentage of Bonds required by this Section 11.02 shall have consented to and approved the execution and delivery of a Supplemental Indenture as herein provided, no Owner shall have any right to object to the execution and delivery of such Supplemental Indenture, or to object to any of the terms and provisions contained therein or the operation thereof, or in any manner to question the propriety of the execution and delivery thereof, or to enjoin or restrain the Issuer or the Trustee from executing and delivering the same or from taking any action pursuant to the provisions thereof.

Section 11.03.

Effect of Supplemental Indenture. Upon the execution and delivery of any Supplemental Indenture pursuant to the provisions of this Article XI, this Indenture shall be, and be deemed to be, modified and amended in accordance therewith, and the respective rights, duties and obligations under this Indenture shall thereafter be determined, exercised and enforced under this Indenture subject in all respects to such modifications and amendments.

Section 11.04.

Consent of the Company and Other Parties. No Supplemental Indenture under this Article XI and no amendment of the Agreement shall become effective unless the Company shall have consented thereto in writing.

Any provision of this Indenture expressly recognizing or granting rights in or to the Registrar may not be amended in any manner which affects the rights of such party hereunder without the prior written consent of such party.

Section 11.05.

Amendment of Agreement Without Owner Consent.  Subject to the Subordination Agreement, without the consent of or notice to the Owners, the Issuer and the Company may modify, alter, amend or supplement the Agreement, and the Trustee may consent thereto, as may be required:

(a)

by the provisions of the Agreement and this Indenture;

(b)

for the purpose of curing any formal defect, omission, inconsistency or ambiguity therein;

(c)

in connection with any other change therein which in the judgment of the Trustee is not materially adverse to the Owners (in making such determination, the Trustee may, but is not required to, rely conclusively upon an opinion of counsel);

(d)

to secure or maintain ratings on the Bonds from Moody’s and/or S&P;

(e)

to add to the covenants and agreements of the Issuer contained in the Agreement or of the Company contained in any document, other covenants or agreements thereafter to be observed, or to assign or pledge additional security for any of the Bonds, or to surrender any right or power reserved or conferred upon the Issuer or the Company, which shall not materially adversely affect the interest of the Owners of the Bonds (in making such determination, the Trustee may, but is not required to, rely conclusively upon an opinion of counsel);

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(f)

to provide demand purchase obligations to cause the Bonds to be authorized purchases for investment companies;

(g)

to provide the procedures required to permit any Owner to separate the right to receive interest on the Bonds from the right to receive principal thereof and to sell or dispose of such right as contemplated by Section 1286 of the Code (or similar successor provision);

(h)

to make any change necessary (i) to establish or maintain the Tax-Exempt status of the Bonds as a result of any modifications or amendments to Section 148 of the Code (or any successor provision of law) or interpretations thereof by the Internal Revenue Service, or (ii) to comply with the provisions of Section 148(f) of the Code (or any successor provision of law), including provisions for the payment of all or a portion of the investment earnings of any of the Funds established hereunder to the United States of America;

(i)

to modify, alter, amend or supplement or restate the Agreement in any and all respects necessary, desirable or appropriate in connection with the delivery to the Trustee of bond insurance or other security arrangements obtained or provided by the Company; and

(j)

to provide for the issuance of Additional Senior Indebtedness In accordance with Section 4.02 of the Agreement.

A revision of Exhibit A to the Agreement in accordance with Section 3.02 of the Agreement shall not be deemed a modification, alteration, amendment or supplement to the Agreement, or to this Indenture, for any purpose of this Indenture.

Before the Issuer shall enter into, and the Trustee shall consent to, any modification, alteration, amendment or supplement to the Agreement pursuant to this Section 11.05, there shall have been delivered to the Issuer and the Trustee a Favorable Opinion of Bond Counsel with respect to such modification, alteration, amendment or supplement and further stating that such modification, alteration, amendment or supplement is authorized or permitted by the Agreement or this Indenture and will, upon the execution and delivery thereof, be valid and binding upon the Issuer in accordance with its terms and an opinion of counsel to the Company to the effect that such modification, alteration, amendment or supplement will, upon execution and delivery thereof, be valid and binding upon the Company in accordance with its terms. Neither the Issuer nor the Trustee will be obligated to enter into or consent to any such modifications, alterations, amendments or supplement s to the Agreement that would materially alter their respective rights, duties or immunities under this Indenture, under the Agreement or otherwise.

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Section 11.06.

Amendment of Agreement Requiring Owner Consent. Except in the case of modifications, alterations, amendments or supplements referred to in Section 11.05 hereof, the Issuer shall not enter into, and the Trustee shall not consent to, any amendment, alteration, supplement or modification of the Agreement without the written approval or consent of the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding given and procured as provided in Section 11.02 hereof, subject in all respects to the Subordination Agreement; provided, however, that, unless approved in writing by the Owners of all Bonds affected thereby, nothing herein contained shall permit, or be construed as permitting, a change in the obligations of the Company under Section 5.01 or Section 5.02 of the Agreement. If at any time the Issuer or the Company shall request the consent of the Trustee to any such proposed modification, alteration, amendment or supplement permitted under this Section 11.06, the Trustee shall cause notice thereof to be given in the same manner as provided by Section 11.02 hereof with respect to Supplemental Indentures. Such notice shall briefly set forth the nature of such proposed modification, alteration, amendment or supplement and shall state that copies of the instrument embodying the same are on file at the Principal Office of the Trustee for inspection by all Owners. The Issuer may enter into, and the Trustee may consent to, any such proposed modification, alteration, amendment or supplement subject to the same conditions and with the same effect as provided in Section 11.02 hereof with respect to Supplemental Indentures.

Before the Issuer shall enter into, and the Trustee shall consent to, any modification, alteration, amendment or supplement to the Agreement pursuant to this Section 11.06, there shall have been delivered to the Issuer and the Trustee a Favorable Opinion of Bond Counsel with respect to such modification, alteration, amendment or supplement and further stating that such modification, alteration, amendment or supplement is authorized or permitted by the Agreement or this Indenture and will, upon the execution and delivery thereof, be valid and binding upon the Issuer in accordance with its terms and an opinion of counsel to the Company to the effect that such modification, alteration, amendment or supplement will, upon execution and delivery thereof, be valid and binding upon the Company in accordance with its terms. Neither the Issuer nor the Trustee will be obligated to enter into any such modification, alteration, amendment or supplement to the Agreement that would materially alter their respective rights, duties or immunities under this Indenture, under the Agreement or otherwise.

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Section 11.07.

Amendment of Subordinate Mortgage Without Owner Consent. Subject to the Subordination Agreement, without the consent of or notice to the Owners, the Company may modify, alter, amend or supplement the Subordinate Mortgage or the Subordinate Security Agreement, and the Trustee may consent thereto, as may be required: (a) by the provisions of the Subordinate Mortgage, the Subordinate Security Agreement and the Indenture; (b) for the purpose of curing any formal defect, omission, inconsistency or ambiguity therein; (c) in connection with any other change therein which in the judgment of the Trustee is not materially adverse to the Owners; (d) to secure or maintain ratings for the Bonds from Moody’s and/or S&P; (e) to add to the covenants and agreements of the Company contained in the Subordinate Mortgage or the Subordinate Security Agreement or of the Company contained in any document, other covenants or agreements thereafter to be observed, or to assign or pledge additional security for any of the Bonds, or to surrender any right or power reserved or conferred upon the Company, which will not materially adversely affect the interest of the Owners of the Bonds; (f) to modify, alter, amend or supplement or restate the Subordinate Mortgage or the Subordinate Security Agreement in any and all respects necessary, desirable or appropriate in connection with the delivery to the Trustee of bond insurance or other security arrangements obtained or provided by the Company; and (g) to provide for the issuance of Additional Senior Indebtedness in accordance with the Agreement.

Section 11.08. Amendment of Subordinate Mortgage or the Subordinate Security Agreement Requiring Owner Consent. Except in the case of modifications, alterations, amendments or supplements described in the preceding paragraph, the Company will not enter into, and the Trustee will not consent to, any other amendment, alteration, supplement or modification of the Subordinate Mortgage without the written approval or consent of the Owners of at least a majority in aggregate principal amount of the Bonds then Outstanding, subject in all respects to the Subordination Agreement.

ARTICLE XII

MISCELLANEOUS

Section 12.01.

Successors of the Issuer. In the event of the dissolution of the Issuer, all the covenants, stipulations, promises and agreements in this Indenture contained, by or on behalf of, or for the benefit of the Issuer, shall bind or inure to the benefit of the successors of the Issuer from time to time and any entity, officer, board, commission, agency or instrumentality to whom or to which any power or duty of the Issuer shall be transferred.

Section 12.02.

Parties in Interest. Except as herein otherwise specifically provided, nothing in this Indenture expressed or implied is intended or shall be construed to confer upon any person, firm, corporation or entity other than the Issuer, the Registrar, the Company, the Trustee and the Owners of Bonds any right, remedy or claim under or by reason of this Indenture, this Indenture being intended to be for the sale and exclusive benefit of the Issuer, the Registrar, the Company, the Trustee and the Owners of Bonds. The Trustee shall have no fiduciary duty to any entity other than the Owner of any Bond as such and only in accordance with, into the extent of, the terms and provisions hereunder.

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Section 12.03.

Severability. In case anyone or more of the provisions of this Indenture or of the Agreement or of the Bonds shall for any reason be held to be illegal or invalid, such illegality or invalidity shall not affect any other provisions of this Indenture, the Agreement or the Bonds, and this Indenture, the Agreement and the Bonds shall be construed and enforced as if such illegal or invalid provisions had not been contained herein or therein.

Section 12.04.

No Personal Liability of Issuer Officials. No representation, warranty, covenant or agreement contained in the Bonds or in this Indenture or in any of the documents or certificates related thereto shall be deemed to be the representation, warranty, covenant or agreement of any official, officer, agent, counselor employee of the Issuer in his or her individual capacity, and neither the members of the Issuer nor any official executing the Bonds shall be liable personally on the Bonds or be subject to any personal liability or accountability by reason of the issuance thereof.

Section 12.05.

Bonds Owned by the Issuer or the Company. In determining whether the Owners of the requisite aggregate principal amount of the Bonds have concurred in any direction, consent or waiver under this Indenture, Bonds which are owned by the Issuer or the Company or by any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company (unless the Issuer, the Company or such person owns all Bonds which are then Outstanding, determined without regard to this Section 12.05) shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Bonds with respect to which the Trustee has received written notice of such ownership shall be so disregarded. Bonds so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Bonds and that the pledgee is not the Issuer or the Company or any person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company. In case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee.

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Section 12.06.

Documents to be Delivered to the Trustee in Relation to the Closing. In connection with the issuance and delivery of the Bonds, the Trustee shall receive executed copies (either in original or photostatic form) of the following documents: (i) the Agreement; (ii) that certain Bond Purchase Agreement among the Issuer, Oppenheimer & Co. and the Company; (iii) that certain Continuing Disclosure Agreement by and among the Company, the Trustee and Oppenheimer & Co.; (iv) the Senior Loan Agreement; (v) the Subordinate Mortgage; (vi) the Subordinate Security Agreement; (vii) the Subordination Agreement; (viii) that certain Environmental Indemnity Agreement dated as of March 1, 2007 between the Company and the Trustee; (ix) that certain Assignment of Design-Build Contract (Fagen, Inc.) dated as of March 1, 2007 by and between the Company and the Trustee; (x) that certain Assignment of Design-Build Contract (Jackson-Briner Joint Venture, LLC) dated as of March 1, 2007 by and between the Company and the Trustee; (xi) that certain the Assignment of License Agreement (ICM, Inc.) dated as of March 1, 2007 by and between the Company and the Trustee; (xii) that certain Collateral Assignment of Corn Supply Agreement (Cargill, Incorporated) dated as of March 1, 2007 by and between the Company and the Trustee; (xiii) that certain Assignment of Ethanol Marketing Agreement (Aventine Renewable Energy, Inc.) dated as of March 1, 2007 by and between the Company and the Trustee; (xiv) that certain Assignment of Distiller’s Grain Marketing Agreement (Commodity Specialist Company) dated as of March 1, 2007 by and between the Company and the Trustee; (xv) the Tax Agreement; (xvi) that certain Certificate and Request of Issuer dated March 22, 2007; (xvii) that certain Certificate and Approval of Indiana Bio-Energy, LLC dated March 22, 2007; (xviii) that certain Loan Policy issued by Chicago Title Insurance Company showing the Trustee as the insured thereunder; (xix) the UCC Financing Statement with the Issuer as the debtor and the Trustee as the secured party filed with the office of the Indiana Secretary of State; and (xx) Cross Receipts dated March 22, 2007 from Oppenheimer & Co. and the Trustee.

Section 12.07.

Counterparts. This Indenture may be executed in any number of counterparts, each of which, when so executed and delivered, shall be an original; but such counterparts shall together constitute but one and the same Indenture.

Section 12.08.

Governing Law. This Indenture shall be governed by and construed in accordance with the laws of the State.

Section 12.09.

Notices. Except as otherwise provided in this Indenture, all notices, certificates, requests, requisitions, directions or other communications by the Issuer, the Company, the Trustee or the Registrar, pursuant to this Indenture shall be in writing and shall be sufficiently given and shall be deemed given when mailed by Mail or by first class mail, postage prepaid, or by overnight delivery service, addressed as follows (and, if by overnight delivery service and required by the chosen delivery service, with then-current telephone numbers of the addressees ):

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if to the Issuer, to:

City of Bluffton, Indiana

City Hall

128 East Market Street

Bluffton, Indiana 46714

Attention:

Clerk-Treasurer

Telephone:

(260) 824-1320

Facsimile:

(260) 824-680

if to the Trustee or the Registrar, to:

U.S. Bank National Association

10 West Market Street, Suite 1150

Indianapolis, Indiana 46204

Attention:

Corporate Trust

Telephone:

(317) 264-2500

Facsimile:

(317) 636-1951

for purposes of

U.S. Bank National Association

presentation of Bonds

60 Livingston Avenue

for payment or transfer

P.O. Box 64111

only:

St. Paul, Minnesota 55164-0111

Attention:

Corporate Trust Services

if to the Company, to:

Indiana Bio-Energy, LLC

969 North Main Street, P.O. Box 297

Bluffton, Indiana 46714

Attention:

President

Telephone:

(260) 846-0011

Facsimile:

(260) 353-1100

Any of the foregoing may, by notice given hereunder to each of the others, designate any further or different addresses to which subsequent notices, certificates, requests or other communications shall be sent hereunder. Any communications required to be given hereunder by the Company shall be given by an Authorized Company Representative. A copy of any notice given to Bondholders shall be send to the Company.

Section 12.10.

Holidays. If the date for making any payment or the last date for performance of any act or the exercising of any right, as provided in this Indenture, shall not be a Business Day, such payment may, unless otherwise provided in this Indenture or the Agreement, be made or act performed or right exercised on the next succeeding Business Day with the same force and effect as if done on the nominal date provided in this Indenture, and no interest shall accrue for the period after such nominal date.

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IN WITNESS WHEREOF, the CITY OF BLUFFTON, INDIANA, has caused this Indenture to be signed in its name and behalf by its Mayor, and its official seal to be hereunto affixed and attested by its Clerk-Treasurer and to evidence its acceptance of the trusts hereby created U.S. BANK NATIONAL ASSOCIATION has caused this Indenture to be signed in its name and behalf by one of its authorized officers all as of the day and year first above written.

CITY OF BLUFFTON, INDIANA

BY: /s/ Ted L Ellis                              

Name: Ted L Ellis

Title: Mayor

[SEAL]

ATTEST:

By: /s Nancy Hewitt                       

Name: Nancy Hewitt

Title: Clerk-Treasurer

U.S. BANK NATIONAL ASSOCIATION, as Trustee

By:  /s/ Ann M Forey                                         

Name: Ann M Forey

Title: Vice President

Signature Page to Indenture of Trust

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EXHIBIT A

[FORM OF BOND]

REGISTERED	REGISTERED
No. R-1	$22,000,000

UNITED STATES OF AMERICA

STATE OF INDIANA

CITY OF BLUFFTON, INDIANA

SUBORDINATE SOLID WASTE DISPOSAL FACILITY REVENUE BOND, SERIES 2007 A (INDIANA BIO-ENERGY, LLC ETHANOL PLANT PROJECT)

INTEREST RATE	MATURITY DATE	DATED DATE	CUSIP No.
7.50%	September 1, 2019	March 22, 2007	096338 AA6

Registered Owner: CEDE & Co.

Principal Amount: TWENTY-TWO MILLION DOLLARS

A-1

CITY OF BLUFFTON, INDIANA, a municipal corporation duly organized and existing under the laws of the State of Indiana (the “Issuer”), for value received, hereby promises to pay (but only out of the source hereinafter provided) to the registered owner identified above, or registered assigns, on the Maturity Date set forth above (or if this Bond is called for earlier redemption as described herein on the redemption date), the Principal Amount set forth above (the “Principal Amount”) and to pay (but only out of the sources hereinafter provided) interest on the balance of said Principal Amount from time to time remaining unpaid from the Interest Payment Date next preceding the date of registration and authentication hereof unless this Bond is registered and authenticated on or prior to the first Interest Payment Date, in which event this Bond shall bear interest from the Dated Date set forth above; provided, however, t hat if, as shown by the records of the Trustee, interest on the Bonds shall be in default, Bonds issued in exchange for Bonds surrendered for registration of transfer or exchange shall bear interest from the last date to which interest has been paid in full or duly provided for on the Bonds, or, if no interest has been paid or duly provided for on the Bonds, from the Dated Date, until payment of said Principal Amount has been made or duly provided for, at the interest rate specified above, computed on the basis of a 360-day year consisting of twelve 30-day months, payable on September 1, 2007 and semi-annually thereafter on each March 1 and September 1, and to pay (but only out of the sources hereinafter provided) interest on overdue principal and, to the extent permitted by law, on overdue interest at the rate then borne by this Bond, except as the provisions hereinafter set forth with respect to redemption or acceleration prior to maturity may become applicable hereto. The principal of and premium, if any, on this Bond are payable upon surrender thereof in lawful money of the United States of America at the payment office in Indianapolis, Indiana, of U.S. Bank National Association, or its successors and assigns, as Trustee. Interest payments on this Bond shall be made by the Trustee to the registered owner hereof as of the close of business on the Record Date (as hereinafter defined) with respect to each Interest Payment Date (except that, if and to the extent that there shall be a default in the payment of the interest due on an Interest Payment Date, such defaulted interest shall be paid to the Owners in whose name any such Bonds are registered as of a special record date to be fixed by the Trustee, notice of which shall be given to such Owners not less than ten days prior thereto) and shall be paid:

(a)

in respect of any Bond that is registered in the book-entry system pursuant to the Indenture, in immediately available funds by no later than 2:30 p.m., New York City time, and

(b)

in respect of any Bond that is not registered in the book-entry system, (i) by bank check mailed by first-class mail on the Interest Payment Date to the registered owner hereof at its address as it appears on the registration books of U.S. Bank National Association, Indianapolis, Indiana, as Registrar or at such other address as is furnished in writing by such registered owner to the Registrar, or (ii) by wire transfer on the Interest Payment Date to any owner of at least $1,000,000 in aggregate principal amount of Bonds (or such lesser amount if such Bonds constitute all of the Bonds then outstanding).

A-2

This Bond is one of the duly authorized Subordinate Solid Waste Disposal Facility Revenue Bonds, Series 2007A (Indiana Bio-Energy, LLC Ethanol Plant Project) of the Issuer, originally issued in the aggregate principal amount of $22,000,000 (the “Bonds”), pursuant to proper action duly adopted by the Issuer on November 14, 2006, and executed under an Indenture of Trust, dated as of March 1, 2007 (the “Indenture “), between the Issuer and U.S. Bank National Association, as trustee (the “Trustee,” which term shall include any successor trustee), for the purpose of loaning the proceeds thereof to Indiana Bio-Energy, LLC (the “Company”) in order to provide funds (i) to finance a portion of the costs of the Project, (ii) to pay a portion of the interest accruing on the Bonds during construction of the Project, (iii) to fund a debt service reserve fund on the Bonds and (iv) to pay certain costs of issu ance relating to the Bonds. Pursuant to the Loan Agreement, dated as of March 1, 2007 (the “Agreement”), between the Issuer and the Company, the proceeds of the Bonds have been loaned to the Company.

Any term used herein as a defined term but not defined herein shall be defined as in the Indenture.

This Bond and all other Bonds of the issue of which it forms a part are issued pursuant to and in full compliance with the Constitution and laws of the State of Indiana, particularly the Act, and pursuant to an ordinance adopted by the Issuer on November 14, 2006, which ordinance authorizes the execution and delivery of the Indenture. THIS BOND AND THE OBLIGATION TO PAY INTEREST HEREON AND PREMIUM WITH RESPECT HERETO ARE SPECIAL, LIMITED OBLIGATIONS OF THE ISSUER PAYABLE SOLELY OUT OF THE REVENUES AND INCOME DERIVED FROM THE AGREEMENT AND AS OTHERWISE PROVIDED IN THE INDENTURE, AND SHALL NOT BE DEEMED TO CONSTITUTE AN INDEBTEDNESS OR AN OBLIGATION OF THE ISSUER, THE STATE OF INDIANA, OR ANY POLITICAL SUBDIVISION THEREOF WITHIN THE PURVIEW OF ANY CONSTITUTIONAL LIMITATION OR STATUTORY PROVISION. THE BONDS DO NOT NOW OR SHALL NEVER CONSTITUTE A CHARGE AGAINST THE GENERAL CREDIT OF THE ISSUER. THE BONDS ARE NOT IN ANY RESPECT A GENERAL OBLIGATION OF THE ISSU ER, NOR ARE THEY PAYABLE IN ANY MANNER FROM REVENUES RAISED BY TAXATION.

The Bonds shall be deliverable in the form of registered Bonds without coupons in the following denomination of $5,000 or any integral multiple hereof (the “Authorized Denomination”).

“Record Date” means the fifteenth day of the month immediately preceding each Interest Payment Date.

A-3

The Bonds shall be redeemed in whole or in part, and if in part by such method as the Trustee may deem fair and appropriate, at any time at a redemption price equal to 100% of the principal amount thereof, plus accrued interest to the redemption date upon receipt by the Trustee of a written notice from the Company stating that any of the following events has occurred and that the Company therefore intends to exercise its option to prepay the payments due under the Agreement in whole or in part and thereby effect the redemption of Bonds in whole or in part out of moneys available pursuant to the Indenture and, if necessary, Company funds: (a) the Company shall have determined or concurred in a determination that the continued operation of the Plant is impracticable, uneconomical or undesirable for any reason; (b) all or substantially all of the Plant shall have been condemned or taken by eminent domain; (c) the operation of the Plant shall have been enjoin ed or shall have otherwise been prohibited by, or shall conflict with, any order, decree, rule or regulation of any court or of any federal, state or local regulatory body, administrative agency or other governmental body; or (d) unreasonable burdens or excessive liabilities shall have been imposed upon the Company in respect of all or a part of the Project or the Plant including, without limitation, federal, state or other ad valorem, property, income or other taxes not being imposed on the date of the Agreement, as well as any statute or regulation enacted or promulgated after the date of the Agreement that prevents the Company from deducting interest in respect of the Agreement for federal income tax purposes.

The Bonds shall be subject to optional redemption upon prepayment of the Loan Payments at the option of the Company, in whole, or in part by lot, prior to their maturity, on any date during the redemption periods specified below, in each case in whole or in part, at the redemption prices (expressed as percentages of principal amount) hereinafter indicated plus accrued interest, if any, to the redemption date:

REDEMPTION DATES (DATES INCLUSIVE)	REDEMPTION PRICE
March 1, 2012 through February 28, 2013	105%
March 1, 2013 through February 28, 2014	104%
March 1, 2014 through February 28, 2015	103%
March 1, 2015 through February 29, 2016	102%
March 1, 2016 through February 28, 2017	101%
March 1, 2017 and thereafter	100%

A-4

The Bonds shall be subject to mandatory redemption by the Issuer prior to maturity, in part by lot (or such other random means selected by the Trustee), at a redemption price equal to the principal amount thereof, together with accrued interest to the date of redemption on each March 1 and September 1 as set forth below:

SINKING FUND INSTALLMENT PAYMENT DATE	SINKING FUND INSTALLMENT
March 1, 201 0	$ 680,000
September 1, 2010	705,000
March 1, 2011	735,000
September 1, 2011	760,000
March 1, 2012	790,000
September 1, 2012	820,000
March 1, 2013	850,000
September 1, 2013	880,000
March 1, 2014	915,000
September 1, 2014	950,000
March 1, 2015	985,000
September 1, 2015	1,020,000
March 1, 2016	1,060,000
September 1, 2016	1,100,000
March 1, 2017	1,140,000
September 1, 2017	1,180,000
March 1, 2018	1,225,000
September 1, 2018	1,275,000
March 1, 2019	1,320,000
September 1, 2019 (Final Maturity)	3,610,000

The Bonds shall be redeemed in whole on any date from amounts which are to be prepaid by the Company under the Agreement, at a redemption price equal to 100% of the principal amount thereof plus interest accrued, if any, to the redemption date within 180 days after the occurrence of a Determination of Taxability; provided that if, in the opinion of Bond Counsel delivered to the Trustee, the redemption of a specified portion of the Bonds outstanding would have the result that interest payable on the Bonds remaining outstanding after such redemption would remain Tax-Exempt, then the Bonds shall be redeemed in part by such method as the Trustee may deem fair and appropriate (in Authorized Denominations), in such amount as Bond Counsel in such opinion shall have determined is necessary to accomplish that result.

A-5

A “Determination of Taxability” shall be deemed to have occurred if as a result of the Company’s failure to observe any covenant, agreement or representation in the Agreement, a final decree or judgment of any federal court or a final action of the Internal Revenue Service determines that interest paid or payable on any Bond is or was includible in the gross income of an Owner of the Bonds for federal income tax purposes under the Code (other than an Owner who is a “substantial user” or “related person” within the meaning of Section 147(a) of the Code). However, no such decree or action will be considered final for this purpose unless the Company has been given written notice of the same, either directly or in the name of any Owner of a Bond, and, if it is so desired and is legally allowed, has been afforded the opportunity to contest the same, either directly or in the name of any Owner of a Bond, and until concl usion of any appellate review, if sought.

Following an occurrence in which the Plant is taken by eminent domain or threat thereof, or is damaged or destroyed, the Bonds shall be subject to mandatory redemption, in whole or in part by lot (or such other random means selected by the Trustee), on the earliest practicable date thereafter (which date shall be not less than 45 days from the date the Trustee transfers any moneys in the Condemnation and Awards Fund to the Redemption Account in accordance with the terms of the Indenture), at a redemption price equal to the principal amount thereof, together with accrued interest to the date of redemption.

Notice of any optional or mandatory redemption shall be given by first-class mail not less than 30 days (except as provided in the Indenture) nor more than 60 days prior to the date fixed for redemption to the Owners of Bonds at the address shown on the registration books of the Registrar on the date such notice is mailed. Except as described above for partial redemptions upon a Determination of Taxability, if less than all of the Bonds are called for redemption, the Trustee shall select the Bonds or any given portion thereof from the outstanding Bonds or such given portion thereof not previously called for redemption, by such method as the Trustee may deem fair and appropriate. For the purpose of any such selection the Trustee shall assign a separate number for each minimum Authorized Denomination of each Bond of a denomination of more than such minimum; provided that, following any such selection, both the portion of such Bond to be redeemed and the portion remaining shall be in Authorized Denominations.

Any notice of optional redemption of Bonds may state that such redemption is conditioned upon the receipt by the Trustee, on or prior to the date fixed for such redemption, of moneys sufficient to pay the principal of, and premium, if any, and interest on, such Bonds to be redeemed. In the event such moneys are not so received, the redemption shall not be made and the Trustee shall within a reasonable time thereafter give notice, in the manner in which the notice of redemption was given, that such redemption will not take place.

Subject to the limitations and upon payment of the charges, if any, provided in the Indenture, Bonds may be exchanged at the Principal Office of the Registrar for a like aggregate principal amount of Bonds of the same tenor and of Authorized Denominations.

A-6

This Bond is transferable by the person in whose name it is registered, in person, or by its attorney duly authorized in writing, at the Principal Office of the Registrar, but only in the manner, subject to the limitations and upon payment of the charges, if any, provided in the Indenture, and upon surrender and cancellation of this Bond accompanied by a written instrument of transfer in a form approved by the Registrar, duly executed. Upon such transfer a new fully registered Bond or Bonds in Authorized Denominations, for the same aggregate principal amount, will be issued to the transferee in exchange therefor.

The Issuer, the Registrar, the Trustee and any agent of the Issuer, the Registrar or the Trustee may treat the person in whose name this Bond is registered as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Bond be overdue, and neither the Issuer, the Registrar, the Trustee nor any such agent shall be affected by notice to the contrary.

The Bonds are equally and ratably secured, to the extent provided in the Indenture, by the pledge thereunder of the Trust Estate, subordinate to the rights of the Senior Lender under the Senior Loan. The Issuer has also pledged and assigned to the Trustee as security for the Bonds all other rights and interests of the Issuer under the Agreement (other than its rights to indemnification, exemption from personal liability and certain administration expenses and certain other rights).

The Owner of this Bond shall have no right to enforce the provisions of the Indenture, or to institute action to enforce the covenants therein, or to take any action with respect to any Event of Default under the Indenture, or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Indenture.

With certain exceptions as provided therein, the Indenture and the Agreement may be modified or amended by the Owners of not less than a majority in aggregate principal amount of all Bonds then Outstanding under the Indenture.

Reference is hereby made to the Indenture, the Agreement, the Subordinate Security Agreement, the Subordinate Mortgage, the Subordination Agreement and the Tax Agreement, copies of which are on file with the Trustee, for the provisions, among others, with respect to the nature and extent of the rights, duties and obligations of the Issuer, the Company, the Trustee, the Registrar and the Owners of the Bonds. The Owner of this Bond, by the acceptance hereof, is deemed to have agreed and consented to and to be bound by the terms and provisions of the Indenture, the Agreement, the Subordinate Security Agreement, the Subordinate Mortgage, the Subordination Agreement and the Tax Agreement.

A-7

The Indenture prescribes the manner in which it may be discharged, including (a) a provision that the Bonds shall be deemed to be paid if moneys sufficient to pay the principal of, premium, if any, and interest on the Bonds and all necessary and proper fees, compensation and expenses of the Trustee and the Registrar, shall have been deposited with the Trustee, after which the Bonds shall no longer be secured by or entitled to the benefits of the Indenture, except for the purposes of registration and exchange of Bonds and of delivery of the Bonds to the Trustee for purchase, and (b) a provision that, if the Bonds mature or are called for redemption pursuant to the Indenture, the Bonds shall be deemed to be paid if Government Obligations, as defined in the Indenture, maturing as to principal and interest in such amounts and at such times as to insure the availability of sufficient moneys to pay the principal of, premium, if any, and interest on the Bonds on and prior to the redemption date or maturity date thereof, and all necessary and proper fees, compensation and expenses of the Issuer, the Trustee and the Registrar, shall have been deposited with the Trustee, after which the Bonds shall no longer be secured by or entitled to the benefits of the Indenture, except for the purposes of registration and exchange of Bonds and of such payment.

No recourse shall be had for the payment of the principal of, premium, if any, or interest on any of the Bonds or for any claim based thereon or upon any obligation, covenant or agreement in the Indenture, the Bonds, the Agreement or any other related document contained, against any past, present or future officer, elected official agent or employee of the Issuer, or any incorporator, officer, director or member of any successor corporation, as such, either directly or through the Issuer or any successor corporation, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such incorporator, officer, director or member is hereby expressly waived and released as a condition of and in consideration for the execution of the Indenture and the issuance of any of the Bonds.

IT I S HEREBY CERTIFIED, RECITED AND DECLARED that all acts, conditions and things required to exist, happen and be performed precedent to and in the execution and delivery of the Indenture and the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law, and that the issuance of this Bond and the issue of which it forms a part, together with all other obligations of the Issuer, does not exceed or violate any constitutional or statutory limitation of indebtedness.

This Bond shall not be entitled to any security or benefit under the Indenture, or be valid or become obligatory for any purpose, until this Bond shall have been authenticated by the execution by the Registrar of the certificate of authentication inscribed hereon.

A-8

IN WITNESS WHEREOF, CITY OF BLUFFTON, INDIANA, has caused this Bond to be executed in its name with the signature of its Mayor and attested by the signature of its Clerk-Treasurer, all as of the Issue Date specified above.

CITY OF BLUFFTON, INDIANA

By: ____________________________

Mayor

[SEAL]

ATTEST:

____________________________________

Clerk-Treasurer

A-9

[FORM OF REGISTRAR’S CERTIFICATE]

CERTIFICATE OF AUTHENTICATION

This is to certify that this Bond is one of the Bonds of the series described in the within mentioned Indenture.

U.S. BANK NATIONAL ASSOCIATION, as Registrar

By: _________________________________

Authorized Signatory

Date of registration and authentication: _____________________

A-10

[FORM OF ASSIGNMENT]

The following abbreviations, when used in the inscription on the face of the within Bond shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM	as tenants in common	UNIF GIFT MIN ACT
TEN ENT	as tenants by the entirety	Custodian
JT TEN	as joint tenants with right	(Cust)	(Minor)
	of survivorship and not as	under Uniform Gifts to Minors Act of
	tenants in common
		(State)

Additional abbreviations may also be used though not in the list above.

For value received ____________________________________________hereby sells,

assigns and transfers unto

INSERT SOCIAL SECURITY OR

OTHER IDENTIFYING NUMBER OF ASSIGNEE

_____________________________________________________________________________

(Please Print or Typewrite Name and Address of Assignee)

the within Bond of CITY OF BLUFFTON, INDIANA, and hereby irrevocably constitutes and appoints ____________________ attorney to register the transfer of said Bond on the books kept for registration thereof with full power of substitution in the premises.

Dated:___________________

Signature:_____________________________

SIGNATURE GUARANTEED:

____________________________________

NOTICE: Signature(s) must be guaranteed by an “eligible guarantor institution” that is a member of or a participant in a “signature guarantee program” (e.g., the Securities Transfer Agents Medallion Program, the Stock Exchange Medallion Program or the New York Stock Exchange, Inc. Medallion Signature Program).

NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Bond in every particular, without alteration or enlargement or any change whatever.

A-11

EXHIBIT B

[Form of Requisition]

[Date]

U.S. Bank National Association

10 West Market Street, Suite 1150

Indianapolis, Indiana 46204

Attention:

Corporate Trust

This Requisition is submitted pursuant to the provisions of Section 5.02 of the Indenture of Trust dated as of March 1, 2007 (the “Indenture”) between the City of Bluffton, Indiana (the “Issuer”) and U.S. Bank National Association, as trustee (the “Trustee”), relating to City of Bluffton, Indiana Subordinate Solid Waste Disposal Facility Revenue Bonds, Series 2007A (Indiana Bio-Energy, LLC Ethanol Plant Project). Capitalized terms used herein have the same meanings herein as when used in the Indenture (except where the context otherwise requires).

The undersigned is an Authorized Company Representative and hereby certifies as follows:

(1)

that this is Requisition Number _____________

(2)

that the name and address of the person, firm or corporation to whom payment is due or has been made (which may include the Company) is set forth on Schedule I attached hereto;

(3)

that the amount to be or which has been paid is set forth on Schedule I attached hereto;

(4)

that the costs of an aggregate amount set forth in this Requisition have been made or incurred or financed and were necessary for the Project and were made or incurred in accordance with the construction contracts, plans and specifications and building permits therefor then in effect;

(5)

that the amount paid or to be paid, as set forth on Schedule I attached hereto, represents either a part of the amount due and payable for Project Costs and that such payment was not paid in advance of the time, if any, fixed for payment and was made in accordance with the terms of any contracts applicable thereto and in accordance with usual and customary practice under existing conditions;

(6)

that no part of the Project Costs was included within the costs referred to in any requisition previously filed with the Trustee under the provisions of the Indenture;

B-1

(7)

that (i) the withdrawal of moneys from the Construction Fund and the use of the property financed or reimbursed therefrom has not and will not result in a violation of any representation, term or covenant in the Tax Agreement or the Project Certificate and (ii) the Favorable Opinion of Bond Counsel required to be delivered as a result of changes to the Project pursuant to Section 3.02 of the Agreement has been delivered to the Trustee and the Issuer;

(8)

that the amount remaining in the Construction Fund, together with (i) moneys then on hand at the Company or committed to the Company which are or will be available, and are anticipated by the Company to be applied, to pay the Project Costs and (ii) expected investment earnings to be deposited into the Construction Fund pursuant to the Indenture, will, after payment of the amount requested on Schedule I attached hereto, be sufficient to pay the costs of completing the Project substantially in accordance with the construction contracts, plans and specifications and building permits therefor, if any, then in effect; and

(9)

that the amounts paid or to be paid as set forth in this Requisition are properly payable under the terms of the Indenture and that all conditions precedent to payment as prescribed in the Indenture have been satisfied.

You are authorized and directed to make the disbursements pursuant to this Requisition from the Construction Fund as provided in Section 5.02 of the Indenture. In making such disbursements, you are entitled to rely on this Requisition as provided in Section 5.02 of the Indenture.

B-2

IN WITNESS WHEREOF, the undersigned Authorized Company Representative has caused this Requisition to be executed as of the day first above written.

INDIANA BIO-ENERGY, LLC

By __________________________________

___________________________________

Authorized Company Representative

Approved:

AGSTAR FINANCIAL SERVICES, PCA

By _________________________

Name:

Title:

B-3

EX-10

Exhibit 10.48

Space above this line for Recorder’s use only

CONSTRUCTION/PERMANENT MORTGAGE,

SECURITY AGREEMENT, ASSIGNMENT OF

LEASES AND RENTS, FINANCING STATEMENT

AND FIXTURE FILING

This CONSTRUCTION/PERMANENT MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS, FINANCING STATEMENT AND FIXTURE FILING, is effective as of February 27, 2007 (as amended, amended and restated, supplemented or otherwise modified from time to time, this “Mortgage”) and is made by INDIANA BID-ENERGY, LLC, an Indiana limited liability company (“Mortgagor”), whose address is 969 North Main Street, P.O. Box 297, Bluffton, Indiana 46714, in favor of AGSTAR FINANCIAL SERVICES, PCA, a United States instrumentality, (“Mortgagee”), whose address is 3555 9^th Street NW, Suite 400, Rochester, Minnesota 55903.

RECITALS

A.

Unless otherwise defined herein, all capitalized terms herein shall have the meanings ascribed to them in that certain Master Loan Agreement by and between Mortgagor and Mortgagee dated of even date herewith (as the same may be modified or amended from time to time, the “Loan Agreement”).

B.

Mortgagor is the owner and holder of fee simple title in and to that certain real estate located in Bluffton, Wells County, Indiana, as more fully described on Exhibit A (the “Land”).

C.

Mortgagor desires to construct and operate a single 100 million gallon ethanol and co-product production facility and other amenities to be located on the Land (the “Facility”).

D.

Mortgagor and Mortgagee have entered into the Loan Agreement pursuant to which Mortgagee has extended to Mortgagor (i) a Construction Loan in the maximum principal amount of $90,000,000.00 evidenced by a Construction Note of even date herewith which will be converted on the Conversion Date to a Term Loan and Term Revolving Loan as described in (ii) and (iii) below, (ii) a Term Revolving Loan in the maximum principal amount of $20,000,000.00 evidenced by a Term Revolving Note of even date herewith, and (iii) a Term Loan in the maximum principal amount of the remaining outstanding balance of the Construction Loan upon the Conversion Date (as defined in the Loan Agreement) less $20,000,000.00 as evidenced by the Construction Note of even date herewith, all as more fully described in the Loan Agreement (the Construction Note and the Term Revolving Note, are sometimes herein collectively referred to as the “Notes”). The foregoing financ ial accommodations and credit facilities shall be collectively referred to in this Mortgage as the “Loans”. The total principal amount secured by this Mortgage is $90,000,000.00, or so much thereof as may have been advanced and/or re-advanced now or in the future at variable and/or fixed rates of interest to or for the benefit of Mortgagee and remains unpaid from time to time, plus the amount of protective advances made by Mortgagee as provided for in this Mortgage or any of the other Loan Documents (as defined in the Loan Agreement).

E.

The Loans are payable and to be performed in accordance with the terms of the Notes and the Loan Agreement, with the entire unpaid balance of the Loans to mature and be due and payable in full not later than the Maturity Date (as defined in the Loan Agreement) but in no event later than December 31, 2013 (the “Maturity Date”).

F.

Mortgagor has agreed to mortgage the Mortgaged Property (as that term is defined below) to Mortgagee to secure the Loan Obligations (as those terms are defined below).

G.

The obligations secured by this Mortgage (the “Loan Obligations”) are as follows:

(i)

the Loans, including without limitation, future advances made by Mortgagee to Mortgagor, Mortgagor’s obligations in respect of the due and punctual payment of principal and interest on the Loans when and as due, whether by acceleration or otherwise and all fees, expenses, indemnities, reimbursements, guaranties and other obligations of Mortgagor under the Loans, Loan Agreement and the other Loan Documents, in all cases whether now existing or hereafter arising or incurred;

(ii)

all other amounts payable by Mortgagor under the Loans, Loan Agreement or other Loan Documents as the same now exist or may hereafter be amended; and

(iii)

all obligations of Mortgagor under this Mortgage, including, but not limited to, any protective advances advanced by Mortgagee under this Mortgage.

Pursuant to Indiana Code section 32-29-1-10, the Loan Obligations include, and this Mortgage secures, future obligations and advances under the Loans and protective advances made under this Mortgage or the Loan Documents and future modifications, extensions, conversions, and renewals of the Loans and Loan Obligations secured by this Mortgage.

NOW, THEREFORE, Mortgagor, in consideration of the Mortgagee advancing the Loans and making such funds available to Mortgagor, intending to be legally bound and to secure the payment and performance of the Loan Obligations hereby irrevocably and unconditionally MORTGAGES and WARRANTS and collaterally assigns, collaterally transfers and pledges unto Mortgagee, its successors and assigns, with right of entry and possession, and grants to Mortgagee, its successors and assigns, a mortgage lien upon and security interest in the Land and any buildings, plants, facilities or improvements of any kind (collectively, the “Improvements”), now existing or hereafter constructed or placed thereon, described in Exhibit A attached hereto and all mineral rights, hereditaments, easements and appurtenances thereto, along with the following (to the extent permitted by applicable law or the agreement, instrument or other documents creating Mortgagor
46;s rights therein), all of which together with the Land is called the “Mortgaged Property”:

(a)

All and singular the tenements, hereditaments, easements, appurtenances, passages, rights of ingress and egress, licenses, permits, rights of use or occupancy, waters, water courses, repair in rights, mineral rights, sewer rights, rights in trade names, licenses, permits and contracts, and all other rights, liberties and privileges of any kind or character in any way now or hereafter appertaining to the Land or any Improvements thereon, including but not limited to, homestead and any other claim at law or in equity as well as any after-acquired title, franchise or license and the reversion and reversions and remainder and remainders thereof;

(b)

The land lying within any street, alley, avenue, roadway, or right of way open or proposed or hereafter vacated in front of or adjoining the Land; and all right, title, and interest, if any, of Mortgagor in and to any strips and gores adjoining or used in connection with the Land;

(c)

All agreements, ground leases, grants of easements or rights of way, permits, declarations of easement, conditions or restrictions, disposition and development of agreements, planned unit development agreements, plats, subdivision plans, permits and approvals, and other documents affecting the Land and/or the Improvements;

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(d)

All rights, title and interest of Mortgagor in any and all buildings and Improvements of every kind and description now or hereafter erected or placed on the Land and all materials intended for construction, reconstruction, alteration and repairs of such buildings and Improvements now or hereafter erected thereon, all of which materials shall be deemed included within the Mortgaged Property immediately upon the delivery thereof to the Mortgaged Property or upon any earlier acquisition thereof by Mortgagor, and all fixtures now or hereafter owned by Mortgagor and attached to or contained in and used or acquired for use in connection with the Mortgaged Property including, but not limited to, all heating, lighting, refrigerating, ventilating, air conditioning, air cooling, fire extinguishing, plumbing, cleaning, telephone, communications and power equipment, systems and apparatus; and all elevators, switchboards, motors, pumps, screens, aw nings, floor coverings, cabinets, partitions, conduits, ducts and compressors; and all cranes and craneways, oil storage, sprinklers/fire protection and water service equipment; and also including any of such property stored on the Land or Improvements or in warehouses and intended to be used in connection with or incorporated into the Land or Improvements or for the pursuit of any other activity in which Mortgagor may be engaged on the Land or Improvements, and including without limitation all tools, cabinets, awnings, window shades, venetian blinds, drapes and drapery rods, brackets, screens, carpeting and other window and floor coverings, decorative fixtures, plants, cleaning apparatus, and cleaning equipment, refrigeration equipment, generators, cables, telecommunication cables, antennas and systems, computers, software, books, supplies, kitchen equipment, appliances, tractors, lawn mowers, groundsweepers and tools, together with all substitutions, accessions, repairs, additions and replacements to any o f the foregoing and all other items of furniture, furnishings, equipment and personal property owned by Mortgagor used or useful in the operation of the Mortgaged Property; and all renewals or replacements of all of the aforesaid property owned by Mortgagor or articles in substitution therefore, whether or not the same are or shall be attached to said buildings or Improvements in any manner; it being mutually agreed, intended and declared that all of the aforesaid property owned by Mortgagor and placed by it on the Land or Improvements or used or acquired for use in connection with the operation or maintenance of the Mortgaged Property shall, so far as permitted by law, be deemed to form a part and parcel of the Land for the purposes of this Mortgaged Land and covered by this Mortgage, and as to any of the property aforesaid which does not form a part and parcel of the Land or does not constitute a “fixture” (as such term is defined in the Uniform Commercial Code as in effect in the State of Indian a (the “UCC”), this Mortgage is hereby deemed to be, as well, a security agreement under the UCC for the purposes of creating hereby a security interest in such property which Mortgagor hereby grants to Mortgagee as secured party, and all inventory, office supplies, machinery, apparatus, systems and equipment used or useful in the production of ethanol at the Mortgaged Property, all as now owned or hereafter acquired by Mortgagor;

(e)

All leases of the Land or Improvements or any part thereof, whether now existing or hereafter entered into (the “Leases”), and all rights, title and interest of Mortgagor thereunder, including cash and security deposits under any such Leases;

(f)

Any and all awards, payments or insurance proceeds, including interest and unearned premiums thereon, and the right to receive the same, which may be paid or payable with respect to the Land or Improvements for other properties described above as a result of: (i) the exercise of the right eminent domain or action in lieu thereof; or (ii) the alteration of the grade of any streets; or (iii) any fire, casualty, accident, damage or other injury to or decrease in the value of Land or Improvements or other properties described above, to the extent of all amounts which may be secured by this Mortgage at the date of receipt of any such award or payment by Mortgagor or Mortgagee, and of the reasonable counsel fees, costs and disbursements incurred by Mortgagor or Mortgagee in connection with the collection of such award or payment. Mortgagor agrees to execute and deliver, from time to time, such further instruments as may be requested by Mortga gee to confirm such assignment to Mortgagee of any such award or payment;

3

(g)

All licenses, permits (including, but not limited to, building permits), authorizations, certificates, variances, consents, approvals and other approvals now or hereafter acquired pertaining to the Land or any Improvements thereon or which related to the construction of the Improvements and/or the use, occupancy, development, leasing, operation or servicing of the Land, including, but not limited to, air and water discharge permits, environmental permits and rights as is required for the production of ethanol, above-ground storage tank licenses and permits, and all estate, right, title and interest of Mortgagor in, to, under or delivered from all present or future development, construction, operation or use of the Land or any Improvements thereon;

(h)

All intangible personal property relating to the Land and/or Improvements, business records, claims for refunds or rebates of taxes, tax abatements, money, deposit accounts, accounts in general and payment intangibles;

(i)

Any and all water and water rights, minerals, oil, gas, or any rights thereto;

(j)

All plans, drawings, and specifications relating to the Mortgaged Property and the construction of the Improvements, all permits, consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from any governmental entity with respect to the Mortgaged Property; and all other interests of any kind and character that Mortgagor now has or at any time hereafter acquires in and to the Mortgaged Property;

(k)

All studies, tests, investigations, and reports of any kind relating to the soils or conditions of the soils of the Land and the suitability of the soils for the construction of the Improvements, all mechanical or structural studies, grading plans, drainage studies, and plans and other similar studies, plans from drawings, or reports of any nature related to the construction of the Improvements;

(l)

All management contracts, service contracts, operating agreements, variances and permits relating to the Land and/or Improvements;

(m)

All after-acquired title to or remainder or reversion of any of the foregoing, all and any proceeds of any of the foregoing, all and any additions, accessions and extensions to, improvements of and substitutions and replacements of any of the foregoing and all additional lands, estates, interest, rights, or any other property acquired by Mortgagor after the date of this Mortgage, all without need for any additional Mortgage, assignment, pledge or conveyance to Mortgagee but Mortgagor will executed and deliver to Mortgagee upon Mortgagee’s request any documents or instruments to further effect or evidence the foregoing; and

(n)

The right in the case of foreclosure hereunder of the encumbered property for Mortgagee to take and use the same by which the buildings and all other Improvements situated on the Land or commonly known and the right to manage and operate said buildings under any such name and variance thereof;

Subject only to the Permitted Encumbrances (as herein defined) and to secure payment of the Loan Obligations.

The Parties intend the definition of Mortgaged Property to be broadly construed and in the case of doubt if any particular item is to be included in the definition of Mortgaged Property, the doubt should be resolved in favor of inclusion.

TO HAVE AND TO HOLD said Mortgaged Property, whether now owned or held or hereafter acquired, unto Mortgagee, its successors and assigns, pursuant to the provisions of this Mortgage.

4

IT IS HEREBY COVENANTED, DECLARED AND AGREED that the lien, security interest or estate created by this Mortgage to secure the payment of the Loan Obligations, both present and future, shall be first, prior and superior to any lien, security interest, reservation of title or other interest heretofore, contemporaneously or subsequently suffered or granted by Mortgagor, its legal representatives, successors or assigns, except only those, if any, expressly hereinafter referred to and that the Mortgaged Property is to be held, dealt with and disposed of by Mortgagee, upon and subject to the terms, covenants, conditions, uses and agreements set forth in this Mortgage.

PROVIDED ALWAYS, that upon the indefeasible payment in full in cash of the Loan Obligations and all other obligations to Mortgagee under the Loan Documents and the observance and performance by Mortgagor of its covenants and agreements set forth herein and therein, then this Mortgage and the estate hereby and therein granted shall cease and be void and shall be terminated and released as provided herein below.

This Mortgage also constitutes a security agreement within the meaning of the UCC, with respect to all property described herein as to which a security interest may be granted and/or perfected pursuant to the UCC, and is intended to afford Mortgagee to the fullest extent allowed by law, the rights and remedies of a secured party under the UCC.

MORTGAGOR FURTHER agrees as follows:

ARTICLE 1.

AGREEMENTS

Section 1.1

Performance of Loan Obligations; Incorporation by Reference. Subject to any applicable cure or grace periods as set forth in the Loan Documents, Mortgagor shall pay and perform the Loan Obligations. Time is of the essence hereof. All of the covenants, obligations, agreements, warranties and representations of Mortgagor contained in this Agreement, the Loan Agreement and the other Loan Documents and all of the terms and provisions thereof, are hereby incorporated herein and made a part hereof by reference as if fully set forth herein.

Section 1.2

Further Assurances. If Mortgagee requests, Mortgagor shall sign and deliver and cause to be recorded as Mortgagee shall direct any further mortgages, amendments or supplements to this Mortgage, instruments of further assurance, certificates and other documents as Mortgagee reasonably may consider necessary or desirable in order to attach, perfect, continue and preserve the Loan Obligations and Mortgagee’s rights, title, estate, liens and interests under the Loan Documents. Mortgagor further agrees to pay to Mortgagee, upon demand, all reasonable and necessary costs and expenses incurred by Mortgagee in connection with the preparation, execution, recording, filing and refilling of any such documents, including reasonable attorneys’ fees.

Section 1.3

Sale, Transfer, Encumbrance. If Mortgagor sells, conveys, transfers or otherwise disposes of, or encumbers, any part of its interest in the Mortgaged Property, whether voluntarily, involuntarily or by operation of law (except for Permitted Encumbrances), without the prior written consent of Mortgagee, Mortgagee shall have the option to declare the Loan Obligations immediately due and payable immediately upon notice. Included within the foregoing actions requiring prior written consent of Mortgagee are: (a) sale by deed or contract for deed; (b) mortgaging or granting a lien on the Mortgaged Property; (other than the Permitted Encumbrances); and (c) a change of control in 50% or more of the equity interest or voting power or control of Mortgagor. Mortgager shall give notice of any proposed action effecting any of the foregoing to Mortgagee for Mortgagee’s consent at least thirty (30) days prior to taking such action. Mortgagor shall pay all re asonable costs and expenses incurred by Mortgagee in evaluation any such action. Mortgagee may condition its consent upon reasonable modification of the Loan Documents or payment of reasonable fees. No such action shall relieve Mortgagor from liability for the Loan Obligations as set forth herein. The consent by Mortgagee to any action shall not constitute a waiver of the necessity of such consent to any subsequent action.

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Section 1.4

Insurance. Mortgagor shall obtain, maintain and keep in full force and effect and shall furnish to Mortgagee copies of policies of insurance as described in, and meeting the requirements set forth in, the Loan Agreement. At least ten (l0) days prior to the termination of any such coverage, Mortgagor shall provide Mortgagee with evidence satisfactory to Mortgagee that such coverage will be renewed or replaced upon termination with insurance that complies with the provisions of this Section and the Loan Agreement. Mortgagor, at its sole cost and expense, from time to time when Mortgagee shall so request, will provide Mortgagee with evidence in a form acceptable to Mortgagee, of the full insurable replacement cost of Mortgaged Property. All property and liability insurance policies maintained by Mortgagor pursuant to this Section and the Loan Agreement shall (a) include effective waivers by the insurer of all claims for insurance premiums against Mor tgagee, and (b) provide that any losses shall be payable notwithstanding (i) any act of negligence by Mortgagor or Mortgagee, (ii) any foreclosure or other proceedings or notice of foreclosure sale relating to the Mortgaged Property, or (iii) any release from liability or waiver of subrogation rights granted by insured. In addition, all policies of casualty insurance shall contain standard noncontributory mortgagee loss payable clauses to Mortgagee, and the comprehensive general liability and other liability polices required in the Loan Agreement, including environmental pollution polices, shall name Mortgagee as an additional insured.

Section 1.5

Taxes, Liens and Claims, Utilities. Mortgagor shall pay and discharge when due, or cause to be paid and discharged when due, all taxes, assessments and governmental charges and levies (collectively “Impositions”) imposed upon or against the Mortgaged Property or the Rents, or upon or against the Loan Obligations, or upon or against the interest of Mortgagee in the Mortgaged Property or the Loan Obligations, except Impositions measured by the income of Mortgagee. Mortgagor shall provide evidence of such payment at Mortgagee’s request. Mortgagor shall keep the Mortgaged Property free and clear of all liens (including, but not limited to, mechanics’ liens), encumbrances, easements, covenants, conditions, restrictions and reservations (collectively “Encumbrances”) except those set forth in Exhibit B attached hereto and made a part hereof (the “Permitted Encumbrances”). Mortgagor shall pay or cause to be p aid when due all charges or fees for utilities and services supplied to the Mortgaged Property. Notwithstanding anything to the contrary contained in this Section, Mortgagor shall not be required to pay or discharge any Imposition or Encumbrance so long as Mortgagor shall in good faith, and after giving notice to Mortgagee, contest the same by appropriate legal proceedings and otherwise in accordance with the requirements set forth in the Loan Agreement. If Mortgagor contests any Imposition or Encumbrance against the Mortgaged Property, Mortgagor shall provide such security to Mortgagee as Mortgagee shall reasonably require against loss or impairment of Mortgagor’s ownership of or Mortgagee’s lien on the Mortgaged Property and shall in any event pay such Imposition or Encumbrance before loss or impairment occurs.

Section 1.6

Escrow Payments. If requested by Mortgagee after the occurrence and during the continuation of an Event of Default, Mortgagor shall deposit with Mortgagee monthly on the first day of each month the amount reasonably estimated by Mortgagee to be necessary to enable Mortgagee to pay, at least five (5) days before they become due, all Impositions against the Mortgaged Property and the premiums upon all insurance required hereby to be maintained with respect to the Mortgaged Property. All funds so deposited shall secure the Loan Obligations. Any such deposits shall be held by Mortgagee, or its nominee, in a non-interest bearing account and may be commingled with other funds. Such deposits shall be used to pay such Impositions and insurance premiums when due. Any excess sums so deposited shall be retained by Mortgagee and shall be applied to pay said items in the future, unless the Loan Obligations have been paid and performed in full, in which case all exces s sums so paid shall be promptly refunded to Mortgagor. Upon the occurrence of an Event of Default, Mortgagee may apply any funds in said account against the Loan Obligations in such order as Mortgagee may determine.

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Section 1.7

Maintenance and Repair; Compliance with Laws. Mortgagor shall cause the Mortgaged Property to be operated, maintained and repaired in safe and good repair, working order and condition, reasonable wear and tear insured casualty loss excepted; shall not commit or permit waste thereof; except as provided in any Loan Document, shall not remove, demolish or substantially alter the design or structural character of any Improvements without the prior written consent of Mortgagee; shall complete or cause to be completed forthwith any Improvements which are now or may hereafter be under construction upon the Land; shall materially comply or cause material compliance with all laws, statutes, ordinances and codes, and governmental rules, regulations and requirements, applicable to the Mortgaged Property or the manner of using or operating the same, and with any covenants, conditions, restrictions and reservations affecting the title to the Mortgaged Property , and with the terms of all insurance policies relating to the Mortgaged Property; and shall obtain and maintain in full force and effect all consents, permits and licenses necessary for the use and operation of the Mortgaged Property in Mortgagor’s business, Mortgagor shall obtain and maintain in full force and effect all certificates, licenses, permits and approvals that are required by law or necessary for the construction of the Improvements or the use, occupancy or operation of the Project. Subject to the provisions of this Mortgage with respect to insurance proceeds and condemnation awards, Mortgagor shall promptly repair, restore and rebuild any Improvements now or hereafter on the Mortgaged Property which may become damaged or destroyed, such Improvements to be of at least equal value and quality and of substantially the same character as prior to such damage or destruction.

Section 1.8

Leases.

(a)

Notwithstanding anything to the contrary herein, Mortgagor shall not enter into any Lease without Mortgagee’s prior written consent, and shall furnish to Mortgagee, upon execution, a complete and fully executed copy of each Lease. Mortgagor shall provide Mortgagee with a copy of each proposed Lease requiring the consent of Mortgagee and with any information requested by Mortgagee regarding the proposed Tenant thereunder, Mortgagee may declare each Lease to be prior or subordinate to this Mortgage, at Mortgagee’s option.

(b)

Mortgagor shall, at its cost and expense, perform each obligation to be performed by the Landlord under each Lease; not borrow against, pledge or further assign any rents or other payments due thereunder; not permit the prepayment of any rents or other payments due for more than thirty (30) days in advance; and not permit any Tenant to assign its Lease or sublet the premises covered by its Lease, unless required to do so by the terms thereof and then only if such assignment does not work to relieve the Tenant of any liability for performance of its obligations thereunder.

(c)

If any Tenant shall default under its Lease, Mortgagor shall, in the ordinary course of business, exercise sound business judgment with respect to such default, but may not discount, compromise, forgive or waive claims or discharge the Tenant from its obligations under the Lease or terminate or accept a surrender of the Lease.

(d)

If Mortgagor fails to perform any obligations of Mortgagor under any Lease or if Mortgagee becomes aware of or is notified by any Tenant of a failure on the part of Mortgagor to so perform, Mortgagee may, but shall not be obligated to, without waiving or releasing Mortgagor from any Obligation, remedy such failure, and Mortgagor agrees to repay upon demand all sums incurred by Mortgagee in remedying any such failure, together with interest thereon from the date incurred at the Default Rate (as defined in the Loan Agreement).

(e)

For purposes of this Mortgage, the following terms shall have the following meanings:

(i)

“Lease”: Any lease, occupancy agreement or other document or agreement, written or oral, permitting any Person to use or occupy any part of the Mortgaged Property.

(ii)

“Person”: Any natural person, corporation, partnership, limited partnership, limited liability company, joint venture, firm, association, trust, unincorporated organization, government or governmental agency or political subdivision or any other entity, whether acting in individual, fiduciary or other capacity.

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(iii)

“Tenant”: Any Person or party using or occupying any part of the Mortgaged Property pursuant to a Lease.

Section 1.9

Indemnity. Mortgagor shall indemnify Mortgagee together with its participants, successors and assigns and Mortgagee’s directors and officers (collectively the “Indemnified Parties”) against, and hold the Indemnified Parties harmless from, all losses, damages, suits, claims, judgments, penalties, fines, liabilities, costs and expenses by reason of, or on account of, or in connection with the construction, reconstruction or alteration of the Mortgaged Property during Mortgagor’s ownership thereof, or any accident, injury, death or damage to any person or property occurring in, on or about the Mortgaged Property during Mortgagor’s ownership thereof, or any street, drive, sidewalk, curb or passageway adjacent thereto, except to the extent that the same results from the willful misconduct or gross negligence of the Person or party seeking indemnification. The indemnity contained in this Section shall include costs of defense of any such claim asserted against an Indemnified Party, including reasonable attorneys’ fees. The indemnity contained in this Section shall survive payment and performance of the Loan Obligations and satisfaction and release of this Mortgage and any foreclosure thereof or acquisition of title by deed in lieu of foreclosure.

Section 1.10

 Assignment of Leases and Rents.

(a)

As additional security for the Loan Obligations secured by this Mortgage, Mortgagor does hereby bargain, sell, assign, transfer and set over unto Mortgagee all Leases and all the rents, fees, issues, profits, revenues, royalties and other income of any kind (“Rents”) which, whether before or after foreclosure, or during the full statutory period of redemption, if any, shall accrue and be owing for the use or occupation of the Mortgaged Property or any part thereof. So long as no Event of Default exists under this Mortgage, Mortgagor shall have a revocable license to collect, but not more than one (l) month in advance under any Lease, all Rents earned prior to default. This Mortgage constitutes an absolute, irrevocable, currently effective assignment of Rents and profits. Mortgagor hereby appoints Mortgagee Mortgagor’s true and lawful attorney-in-fact with full power of substitution to, upon the occurrence and during the c ontinuation of an Event of Default, demand, collect and receive any and all Rents which may be or become due and payable by Tenants after the occurrence of any Event of Default, which appointment is coupled with an interest and is irrevocable. Upon the occurrence and during the continuation of an Event of Default, Mortgagee may, at its discretion, file any claim or take any action to collect and enforce the payment of Rents, either in Mortgagee’s name or Mortgagor’s name or otherwise. Tenants are hereby expressly authorized and directed by Mortgagor to pay to Mortgagee all Rents upon Mortgagee’s demand, and such Tenants are hereby expressly relieved of any and all duty, obligation or liability in respect of any Rents so paid to Mortgagee.

(b)

If, at any time after an Event of Default hereunder and during the continuation thereof, in the sole discretion of Mortgagee, a receivership may be necessary to protect the Mortgaged Property or its Rents, whether before or after maturity of any Loan and whether before or at the time of or after the institution of suit to collect such Loan Obligations, or to enforce this Mortgage, Mortgagee, as a matter of strict right and regardless of the value of the Mortgaged Property or the amounts due hereunder or secured hereby, or of the solvency of any party bound for the payment of such Loan Obligations, shall have the right to the appointment of a receiver to take charge of, manage, preserve, protect, rent and operate the Mortgaged Property, to collect the Rents thereof, to make all necessary and needful repairs, and to pay all Impositions against the Mortgaged Property and all premiums for insurance thereon, and to do such other acts as may by such court be authorized and directed, and after payment of the expenses of the receivership and the management of the Mortgaged Property, to apply the net proceeds of such receivership in reduction of the Loan Obligations secured hereby or in such other manner as the said court shall direct notwithstanding the fact that the amount owing thereon may not then be due and payable or the said Loan Obligations is otherwise adequately secured. Such receivership shall, at the option of Mortgagee, continue until full payment of all sums hereby secured or until title to the Mortgaged Property shall have passed by sale under this Mortgage.

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(c)

The reasonable costs and expenses (including any receiver’s fees and reasonable attorneys’ fees) incurred by Mortgagee pursuant to the powers herein contained shall be reimbursed by Mortgagor to Mortgagee on demand as promptly as practicable, shall be secured hereby and shall bear interest from the date incurred at the Default Rate. Mortgagee shall not be liable to account to Mortgagor for any action taken pursuant hereto, other than to account for any Rents, fees, issues, revenues, profits or proceeds actually received by Mortgagee.

ARTICLE II.

REPRESENTATIONS AND WARRANTIES

Mortgagor represents and warrants to Mortgagor and covenants with Mortgagor as follows:

Section 2.1

Ownership. Liens. Compliance with Laws. Mortgagor owns the Mortgaged Property free from all liens and Encumbrances except the Permitted Encumbrances. To the best of Mortgagor’s knowledge, except as otherwise specifically provided in the Loan Agreement, all material applicable zoning, environmental, land use, subdivision, building, fire, safety and health laws, statutes, ordinances, codes, rules, regulations and requirements affecting the Mortgaged Property permit the current use and occupancy thereof, and Mortgagor has obtained or is in the process of obtaining all consents, permits and licenses required for such use, but in no event shall Mortgagor use the Mortgaged Property where such use requires consents, permits and/or licenses until obtaining the required consents, permits and licenses. Mortgagor has examined and is familiar with all applicable covenants, conditions, restrictions and reservations, and with all applicable laws, statutes, ordinances, codes and governmental rules, regulations and requirements affecting the Mortgaged Property, and to the best of Mortgagor’s knowledge, the Mortgaged Property complies in all material respects with all of the foregoing.

Section 2.2

Use. The Mortgaged Property is not homestead property, a single or two family dwelling, nor is it agricultural property or in agricultural use. Except to the extent specifically permitted in the Loan Agreement, the construction, use and occupancy of the Project complies and will comply with all requirements of law and any Permitted Encumbrance. No portion of any Improvements will be/are constructed over areas subject to easements, in violation of the terms of such easements. Neither the zoning nor any of the right to construct or to use any Improvements will be/is to any extent dependent upon or related to any real estate other than the Land; and all approvals, licenses, permits, certifications, filings and other actions required by law with respect to the construction, use, occupancy and operation of the Mortgaged Property, have been or will be received.

Section 2.3

Utilities; Services. The Mortgaged Property is, or will be, serviced by all necessary public utilities, and all such utilities are, or will be, operational and have sufficient capacity. The Mortgaged Property has access to all public streets and railroad spurs and tracks, and is benefited by all necessary easements, to allow the operation of the Mortgaged Property by Mortgagor in the ordinary course of business and in a prudent manner.

Section 2.4

Construction of the Improvements. Except as otherwise specifically provided in the Loan Agreement, Mortgagor has, or prior to commencement of construction of any Improvements will have, received all requisite building permits and approvals, all approvals and consents to the Plans and without limiting the generality of the foregoing, complied with all requirements of law applicable to the construction of the Project. Mortgagor shall promptly complete all Improvements in a good and workmanlike manner in accordance with the Plans approved by Mortgagee and free from any liens or Encumbrances of any nature except for this Mortgage and the Permitted

Exceptions.

ARTICLE III.

CASUALTY; CONDEMNATION

Section 3.1

Casualty, Repair, Proof of Loss. If any portion of the Mortgaged Property shall be damaged or destroyed by any cause (a “Casualty”), Mortgagor shall, subject to Section 3.2 below:

(a)

give notice to the Mortgagee as promptly as practicable; and

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(b)

unless the Mortgagee has withheld Casualty proceeds during the twelve (12) months prior to the Maturity Date and insurance proceeds and other funds are not available to Mortgagor, promptly commence and diligently pursue to completion (in accordance with plans and specifications approved by Mortgagee) the restoration, repair and rebuilding of the Mortgaged Property as nearly as possible to its value, condition and character immediately prior to the Casualty; and

(c)

if the Casualty is covered by insurance, immediately make proof of loss and to the extent permitted by this Mortgage, collect all insurance proceeds, all such proceeds to be payable to Mortgagee or as Mortgagee shall direct. If an Event of Default shall be in existence, or if Mortgagor shall fail to provide notice to Mortgagee of filing proof of loss, or if Mortgagor shall not be diligently proceeding, in Mortgagee’s reasonable opinion, to collect such insurance proceeds, then Mortgagee may, but is not obligated to, make proof of loss, and is authorized, but is not obligated, to settle any claim with respect thereto, and to collect the proceeds thereof.

Section 3.2

Use of Insurance Proceeds. Mortgagee shall make the net insurance proceeds received by it (after reimbursement of Mortgagee’s reasonable out-of pocket costs of collecting and disbursing the same) available to Mortgagor to pay the cost of restoration, repair and rebuilding of the Mortgaged Property, subject to all of the following conditions precedent:

(a)

There shall be no Event of Default in existence at the time of any disbursement of the insurance proceeds; and

(b)

Mortgagee shall have determined, in its reasonable discretion, that the cost of restoration, repair and rebuilding is and will be equal to or less than the amount of insurance proceeds and other funds deposited by Mortgagor with Mortgagee or Mortgagor has otherwise demonstrated to Mortgagee’s satisfaction the availability of funds to complete the restoration, repair or rebuilding; and

(c)

Mortgagee shall have determined, in its reasonable discretion, that the restoration, repair and rebuilding can be completed in accordance with plans and specifications approved by Mortgagee (such approval not to be unreasonably withheld), in accordance with codes and ordinances; and

(d)

All funds shall be disbursed, at Mortgagee’s option, in accordance with Mortgagee’s customary disbursement procedures for construction loans (but in any event in a manner consistent with the requirements and provisions contained in the Loan Agreement).

If any of these conditions shall not be satisfied, then Mortgagee shall have the right to use the insurance proceeds to prepay the Loan Obligations. If any insurance proceeds shall remain after completion of the restoration, repair and rebuilding of the Mortgaged Property, they shall be disbursed to Mortgagor, or at the Mortgagee’s discretion, used to prepay the Loan Obligations.

In the event such insurance proceeds are made available for restoration and repair by the Mortgagee, Mortgagor shall pay all costs incurred by Mortgagee in connection with the application of such insurance proceeds (including but not limited to reasonable costs incurred by Mortgagee, and a title company or agent approved by Mortgagee in overseeing the disbursement of such insurance proceeds), and the Improvements shall be restored or rebuilt so as to be of at least equal value and substantially the same character as prior to such damage or destruction.

Section 3.3

Condemnation. If any portion of the Mortgaged Property shall be taken, condemned or acquired pursuant to exercise of the power of eminent domain or threat thereof (a “Condemnation”), Mortgagor shall:

(a)

give notice thereof to Mortgagee as promptly as practicable, and send a copy of each document received by Mortgagor in connection with the Condemnation to Mortgagee promptly after receipt; and

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(b)

diligently pursue any negotiation and prosecute any proceeding in connection with the Condemnation at Mortgagor’s expense. If an Event of Default shall be in existence, or if Mortgagor, in Mortgagee’s reasonable opinion, shall not be diligently negotiating or prosecuting the claim, Mortgagee is authorized, but not required, to negotiate and prosecute the claim and appear at any hearing for itself and on behalf of Mortgagor and to compromise or settle all compensation for the Condemnation. Mortgagee shall not be liable to Mortgagor for any failure by Mortgagee to collect or to exercise diligence in collecting any such compensation. Mortgagor shall not compromise or settle any claim resulting from the Condemnation if such settlement shall result in payment of more than $500,000 less than Mortgagee’s reasonable estimate of the damages therefrom. All awards shall be paid to Mortgagee.

Section 3.4

Use of Condemnation Proceeds. Mortgagee shall make the net proceeds of any Condemnation received by it (after reimbursement of Mortgagee’s out-of-pocket costs of collecting and disbursing the same) available to Mortgagor for restoration, repair and rebuilding of the Mortgaged Property, subject to all of the following conditions precedent:

(a)

There shall be no Event of Default in existence at the time of any disbursement of the condemnation proceeds;

(b)

Mortgagee shall have determined, in its reasonable discretion, that the cost of restoration, repair and rebuilding is and will be equal to or less than the amount of condemnation proceeds and other funds deposited by Mortgagor with Mortgagee or Mortgagor has otherwise demonstrated to Mortgagee’s satisfaction the availability of funds to complete the restoration, repair or rebuilding;

(c)

Mortgagee shall have determined, in its reasonable discretion, that the restoration, repair and rebuilding can be completed in accordance with plans and specifications approved by Mortgagee (such approval not to be unreasonably withheld), in accordance with codes and ordinances and in accordance with the terms, and within the time requirements in order to prevent termination, of any Lease;

(d)

All funds shall be disbursed, at Mortgagee’s option, in accordance with Mortgagee’s customary disbursement procedures for construction loans; and

(e)

The condemnation or taking causes damage of $500,000.00 or less or requires restoration which costs less than $500,000.00. If any of these conditions shall not be satisfied, then Mortgagee shall have the right to use the condemnation proceeds to prepay the Loan Obligations. If any condemnation proceeds shall remain after completion of the restoration, repair and rebuilding of the Mortgaged Property, they shall be disbursed to Mortgagor, or at Mortgagee’s discretion, used to prepay the Loan Obligations.

ARTICLE IV.

DEFAULTS AND REMEDIES

Section 4.1

Events of Default. The term “Event of Default,” wherever used in this Mortgage, shall mean the occurrence of an Event of Default under the Loan Agreement.

Section 4.2

Remedies. Subject to any applicable notice and cure and/or grace periods in the Loan Agreement after an Event of Default, Mortgagee shall be entitled to invoke, subject to any limitations or restrictions imposed by applicable law, any and all of the rights and remedies described below, in addition to all other rights and remedies available to Mortgagee under any Loan Document or at law or in equity. All of such rights and remedies shall be cumulative, and the exercise of anyone or more of them shall not constitute an election of remedies.

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(a)

Acceleration. Mortgagee may declare any or all of the Loan Obligations to be due and payable immediately. In addition, Mortgagee shall have no further obligation to make any Advances under any Loan. If, while any insurance proceeds or condemnation awards are being held by Mortgagee to reimburse Mortgagor for the cost of rebuilding or restoration of buildings or improvements on the Mortgaged Property, Mortgagee shall accelerate the Loan Obligations, then and in such event, Mortgagee shall be entitled to apply all such insurance proceeds and condemnation awards then held by it in reduction of the Loan Obligations and any excess held by it over the amount of Loan Obligations then due hereunder shall be returned to Mortgagor or the Persons legally entitled thereto without interest.

(b)

Receiver. Mortgagee shall have the right to obtain a receiver in accordance with applicable law at any time after an Event of Default which is continuing, whether or not an action for foreclosure has been commenced. Any court having jurisdiction shall at the request of Mortgagee following an Event of Default which is continuing, appoint a receiver to take immediate possession of the Mortgaged Property and to rent or operate the same as he may deem best for the interest of all parties concerned, and such receiver shall be liable to account to the Mortgagor only for the net profits, after application of rents, issues and profits upon the costs and expenses of the receivership and upon the Loan Obligations. Mortgagee shall have the right, at any time to advance money to the receiver to pay any part or all of the items which the receiver should otherwise pay if cash were available from the Mortgaged Property and sums so advanced, wit h interest at the Default Rate.

(c)

Entry. Mortgagee, in person, by agent or by court-appointed receiver, may enter, take possession of, manage and operate all or any part of the Mortgaged Property, and may also do any and all other things in connection with those actions that Mortgagee may in its sole discretion consider necessary and appropriate to protect the security of this Mortgage. Such other things may include: taking and possessing all of Mortgagor’s or the then owner’s books and records; entering into, enforcing, modifying or canceling leases on such terms and conditions as Mortgagee may consider proper; obtaining and evicting tenants; fixing or modifying Rents; collection and receiving any payment of money owing to Mortgagee; terminating management agreements, contracts or agents/managers responsible for the operation and/or property management of the Mortgaged Property; completing any unfinished construction; and/or contracting for and making repairs and alterations. If Mortgagee so requests, Mortgagor shall assemble all of the Mortgaged Property that has been removed from the Land and make all of it available to Mortgagee at the site of the Land. Mortgagor hereby irrevocably constitutes and appoints Mortgagee as Mortgagor’s attorney-in-fact to, following the occurrence and during the continuation of an Event of Default, perform such acts and execute such documents as Mortgagee in its sole discretion may consider to be appropriate in connection with taking these measures, including endorsement of Mortgagor’s name on any instruments, such appointment being coupled with an interest and irrevocable.

(d)

Cure; Protection of Security. Mortgagee may cure any breach or default of Mortgagor, and if it chooses to do so in connection with any such cure, Mortgagee may also enter the Mortgaged Property and/or do any and all other things which it may in its sole reasonable discretion consider necessary and appropriate to protect the security of this Mortgage. Any reasonable amounts expended by Mortgagee under this Section 4.2(d) shall be secured by this Mortgage and shall be payable upon demand and shall accrue interest at the Default Rate until paid in full.

(e)

Uniform Commercial Code Remedies. Mortgagee may exercise any or all of the remedies granted to a secured party under the UCC.

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(f)

Foreclosure; Lawsuits. Mortgagee or its nominee may institute such mortgage foreclosure actions provided for by Indiana law in accordance with applicable law and may bid and become the purchaser of all or any part of the Mortgaged Property at any foreclosure or other sale hereunder, and the amount of Mortgagee’s successful bid shall be credited on the Loan Obligations. Without limiting the foregoing, Mortgagee may proceed by a suit or suits in law or equity, whether for specific performance of any covenant or agreement herein contained or contained in any of the other Loan Documents, or in aid of the execution of any power herein or therein granted, or for any foreclosure under the judgment or decree of any court of competent jurisdiction, or for damages, or to collect the Loan Obligations secured hereby, or for the enforcement of any other appropriate legal, equitable, statutory or contractual remedy.

(g)

Other Remedies. Mortgagee may exercise all rights and remedies contained in any other instrument, document, agreement or other writing heretofore or otherwise available at law or in equity, concurrently or in the future executed by Mortgagor or any other Person or entity in favor of Mortgagee in connection with the Loan Obligations or any part thereof, without prejudice to the right of Mortgagee thereafter to enforce any appropriate remedy against Mortgagor. Mortgagee shall have the right to pursue all remedies afforded to a Mortgagee under applicable law, and shall have the benefit of all of the provisions of such applicable law, including all amendments thereto which may become effective from time to time after the date hereof. In the event any provision of such statutes which is specifically referred to herein may be repealed, Mortgagee shall have the benefit of such provision as most recently existing prior to such repeal, as though the same were incorporated herein by express reference.

(h)

Power of Sale for Personal Mortgaged Property. Under this power of sale, Mortgagee shall have the discretionary right to cause some or all of the Mortgaged Property, which constitutes personal property, to be sold or otherwise disposed of in any combination and in any manner permitted by applicable law.

(i)

Determination of Personal Property. For purposes of the power of sale provided above, Mortgagee may elect to treat as personal property any Mortgaged Property which is intangible or which can be severed from the Land or Improvements without causing structural damage. If it chooses to do so, Mortgagee may dispose of any personal property, in any manner permitted by Article 9 of the UCC, including any public or private sale, or in any manner permitted by any other applicable law.

(j)

Single or Multiple Foreclosure Sales. If the Mortgaged Property consists of more than one lot, parcel or item of Mortgaged Property, Mortgagee may, in accordance with applicable law:

(i)

designate the order in which the lots, parcels and/or items shall be sold or disposed of or offered for sale or disposition; and

(ii)

elect to dispose of the lots, parcels and/or items through a single consolidated sale or disposition to be held or made under or in connection with judicial proceedings, or by virtue of a judgment and decree of foreclosure and sale, or pursuant to the power of sale contained herein; or through two or more such sales or dispositions; or in any other manner Mortgagee may deem to be in its best interests (any foreclosure sale or disposition as permitted by the terms hereof is sometimes referred to herein as a “Foreclosure Sale;” and any two or more such sales, “Foreclosure Sales”).

If it chooses to have more than one Foreclosure Sale, Mortgagee at its option may cause the Foreclosure Sales to be held simultaneously or successively, on the same day, or on such different days and at such different times and in such order as it may deem to be in its best interests. No Foreclosure Sale shall terminate or affect the liens of this Mortgage on any part of the Mortgaged Property which has not been sold, until the Loan Obligations have been paid in full.

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Section 4.3

Expenses of Exercising Rights Powers and Remedies. The reasonable expenses (including any receiver’s fees, reasonable attorneys’ fees, appraisers’ fees, environmental engineers’ and/or consultants’ fees, auctioneer’s fees and costs, costs incurred for documentary and expert evidence, stenographers’ charges, publication costs, costs (which may be estimated as to items to be expended after entry of the decree of foreclosure) of procuring all abstracts of title, continuations of abstracts of title, title searches and examinations, UCC and chattel lien searches, and similar data and assurances with respect to title as Mortgagee may deem reasonably necessary either to prosecute any foreclosure action or to evidence to bidders at any sale which may be had pursuant to any foreclosure decree the true condition of the title to or the value of the Mortgaged Property) incurred by Mortgagee after the occurrence of any Event of Default and/or in pursuing the rights, powers and remedies contained in this Mortgage shall be immediately due and payable by Mortgagor, with interest thereon from the date incurred at the Default Rate and shall be added to the Loan Obligations secured by this

Mortgage.

Section 4.4

Restoration of Position. In case Mortgagee shall have proceeded to enforce any right under this Mortgage by foreclosure, sale, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely, then, and in every such case, Mortgagor and Mortgagee shall be restored to their former positions and rights hereunder with respect to the Mortgaged Property subject to the lien hereof, except as might otherwise be determined by a final order of a court of competent jurisdiction.

Section 4.5

Marshalling. Mortgagor, for itself and on behalf of all Persons which may claim under Mortgagor, hereby waives all requirements of law relating to the marshalling of assets, if any, which would be applicable in connection with the enforcement by Mortgagee of its remedies for an Event of Default hereunder, absent this waiver. Mortgagee shall not be required to sell or realize upon any portion of the Mortgaged Property before selling or realizing upon any other portion thereof.

Section 4.6

Waivers. No waiver of any provision hereof shall be implied from the conduct of the parties. Any such waiver must be in writing and must be signed by the party against which such waiver is sought to be enforced. The waiver or release of any breach of the provisions set forth herein to be kept and performed shall not be a waiver or release of any preceding or subsequent breach of the same or any other provision. No receipt of partial payment after acceleration of the Loan Obligations shall waive the acceleration. No payment by Mortgagor or receipt by Mortgagee of a lesser amount than the full amount secured hereby shall be deemed to be other than on account of the sums due and payable hereunder, nor shall any endorsement or statement on any check or any letter accompanying any check or payment be deemed an accord and satisfaction, and Mortgagee may accept any check or payment without prejudice to Mortgagee’s right to recover the balance of suc h sums or to pursue any other remedy provided in this Mortgage. The consent by Mortgagee to any matter or event requiring such consent shall not constitute a waiver of the necessity for such consent to any subsequent matter or event.

Section 4.7

Mortgagee’s Right to Cure Defaults. If Mortgagor shall fail to comply with any of the terms of this Mortgage with respect to the procuring of insurance, the payment of taxes, assessments and other charges, the keeping of the Mortgaged Property in repair, or any other term contained herein and such failure shall continue for a period of three (3) days after notice of such failure from Mortgagee, Mortgagee may make advances to perform the same without releasing any of the Loan Obligations. Mortgagor agrees to repay upon demand all sums so advanced and all sums expended by Mortgagee in connection with such performance, including without limitation reasonable attorneys’ fees, with interest at the Default Rate from the dates such advances are made until paid in full, and all sums so advanced and/or expenses incurred, with interest, shall be secured hereby, but no such advance and/or incurring of expense by Mortgagee, shall be deemed to reliev e Mortgagor from any default hereunder, or to release any of the Loan Obligations.

Section 4.8

Suits and Proceedings. Mortgagee shall have the power and authority, upon prior notice to Mortgagor, to institute and maintain any suits and proceedings as Mortgagee may deem advisable to (a) prevent any impairment of the Mortgaged Property by any act which may be unlawful or by any violation of this Mortgage, (b) preserve or protect its interest in the Mortgaged Property, or (c) restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if, in the sole opinion of Mortgagee, the enforcement of or compliance with such enactment, rule or order might impair the security hereunder or be prejudicial to Mortgagee’s interest.

14

ARTICLE V.

MISCELLANEOUS

Section 5.1

Binding Effect; Survival; Number; Gender. This Mortgage shall be binding on and inure to the benefit of the parties hereto, and their respective heirs, legal representatives, successors and assigns. All agreements, representations and warranties contained herein or otherwise heretofore made by Mortgagor to Mortgagee shall survive the execution and delivery hereof. The singular of all terms used herein shall include the plural, the plural shall include the singular, and the use of any gender herein shall include all other genders, where the context so requires or permits.

Section 5.2

Severability. The unenforceability or invalidity of any provision of this Mortgage as to any Person or circumstance shall not render that provision unenforceable or invalid as to any other Person or circumstance. If any provision of this Mortgage is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Mortgage, the legality, validity and enforceability of the remaining provisions of this Mortgage shall not be affected thereby.

Section 5.3

Notices. Any notice or other communication to any party in connection with this Mortgage shall be in writing and shall be sent by manual delivery, facsimile transmission, overnight courier or United States mail (postage prepaid) addressed to such party at the address specified below, or at such other address as such party shall have specified to the other party hereto in writing. All periods of notice shall be measured from the date of delivery thereof if manually delivered, from the date of sending thereof if sent by facsimile transmission, from the first business day after the date of sending if sent by overnight courier, or from four (4) days after the date of mailing if mailed. Notices shall be given to or made upon the respective parties hereto at their respective addresses set forth below:

If to Mortgagee:

AgStar Financial Services, PCA

3555 9^th Street NW, Suite 400

Rochester, MN 55903

Facsimile: (507) 344-5088

Attention: Mark Schmidt

With copies to:

Gray Plant Mooty

1010 West St, Germain, Suite 600

St, Cloud, MN 5630]

Facsimile: (320) 252-4482

Attention: Phillip L. Kunkel

If to Mortgagor:

Indiana Bio-Energy, LLC

969 North Main Street, P.O. Box 297

Bluffton, IN 46714

Facsimile: (260) 353-1100

Attention: President

With copies to:

Krieg DeVault LLP

2800 One Indiana Square

Indianapolis, IN 46204

Facsimile: (317) 636-1507

Attn. John R. Kirkwood, Esq.

Either party may change its address for notices by a notice given pursuant to this Section.

Section 5.4

Applicable Law. This Mortgage shall be construed and enforceable in accordance with, and be governed by, the laws of the State of Indiana, without giving effect to conflict of laws or principles thereof. The Loan Agreement and Notes shall be construed and enforceable in accordance with, and be governed by, the laws of the State of Minnesota, without giving effect to conflict of laws or principles thereof.

15

Section 5.5

WAIVER OF JURY TRIAL. MORTGAGOR AND MORTGAGEE, BY ITS ACCEPTANCE OF THIS MORTGAGE, EACH IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS MORTGAGE OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 5.6

Effect. This Mortgage is in addition and not in substitution for any other guarantees, covenants, obligations or other rights now or hereafter held by Mortgagee from any other Person or entity in connection with the Loan Obligations.

Section 5.7

Assignability Mortgagee shall have the right to assign this Mortgage, in whole or in part, or sell participation interests herein, to any Person obtaining an interest in the Loan Obligations.

Section 5.8

Headings. Headings of the Sections of this Mortgage are inserted for convenience only and shall not be deemed to constitute a part hereof.

Section 5.9

Fixture Filing. This instrument shall be deemed to be a Fixture Filing within the meaning of the UCC, and for such purpose, the following information is given:

(a)

Name and address of Debtor:

Indiana Bio-Energy, LLC

969 North Main Street, P.O. Box 297

Bluffton, IN 46714

(b)

Type of Organization:

Limited Liability Company

(c)

Jurisdiction of Organization:

Indiana

(d)

Organizational J.D. No.:

IN2004120800099

(e)

Name and address of Secured Party:

AgStar Financial Services, PCA

3555 9^th Street NW, Suite 400

Rochester, MN 55903

Facsimile: (507) 344-5088

Attention: Mark Schmidt

(f)

Description of the collateral:

See granting clause above

(g)

Description of real estate to which

See Exhibit A hereto.

the collateral is attached or upon

which it is or will be located:

Some of the above-described collateral is or is to become fixtures upon the above described real estate, and this Fixture Filing is to be filed for record in the public real estate records.

Section 5.10 Estoppel Certificate. At any time and from time to time, within ten (10) Business Days after receipt from Mortgagee of a written request therefore, Mortgagor shall prepare, execute and deliver to Mortgagee, and/or any other party which Mortgagee may designate, an estoppel certificate stating: (a) the amount of the unpaid principal balance and accrued interest secured by this Mortgage on the date thereof; (b) the date upon which the last payment secured by this Mortgage was made and the date the next payment secured by this Mortgage is due; and (c) that the provisions of the Loan Agreement, this Mortgage and the other Loan Documents described in said request have not been materially amended or changed in any manner, that there are no material defaults or events of default then existing under the terms of the Loan Agreement, this Mortgage or the other Loan Documents described in said request, and that Mortgagor has no defenses, claims or offsets against f ull enforcement hereof and thereof ac(according to the terms hereof and thereof, or listing and describing any such amendments, changes, defaults, events of default, defenses, claims or offsets which do exist.

IN WITNESS WHEREOF, Mortgagor, has executed and delivered as of the date first written above.

16

IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAY BE LEGALLY ENFORCED. YOU MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.

MORTGAGOR:

Indiana Bio-Energy, LLC

an Indiana limited liability company

By: /s/ Stephen J. Hogan                           

       Stephen J. Hogan, President

17

CERTIFICATE OF ACKNOWLEDGMENT

STATE OF INDIANA

)

) ss.

COUNTY OF  Marion

)

Before me, a Notary Public in and for said County and State, personally appeared Stephen 1. Hogan, known to me to be the President of Indiana Bio-Energy, LLC, an Indiana limited liability company, and acknowledged the execution of the foregoing for and on behalf of said limited liability company.

Witness my hand and Notarial Seal, this 27^th  of February, 2007.

/s/ Bradley S. Fuson            

Notary Public – Signature

Notary Public - Printed

My Commission Expires:

[Seal]

My County of Residence                            County, Indiana

This Instrument Prepared by and Return to:

Donald K. Densborn

Sommer Barnard PC

8888 Keystone Crossing, Suite 1400

Indianapolis, IN 46240-4609

I affirm, under penalties of perjury, that I have taken reasonable care to redact each social security number in this document, unless required by law.

Donald K. Densborn

18

EXHIBIT A

LEGAL DESCRIPTION

The following described real estate located in Wells County, Indiana:

Parcel No. 90-08-08-100-001.000-002

Part of the Northeast Quarter of Section 8, Township 26 North, Range 12 East, Harrison Township, Wells County, Indiana, described as follows: Beginning at the Northwest corner of said Northeast Quarter found per record witness; thence easterly, 2229.08 feet along the north line of said Northeast Quarter to a 5/8” rebar stake set on the westerly right-of-way line of the Norfolk and Western Railway Company; thence southwesterly, deflecting right 111 degrees 41 minutes 00 seconds, 2861.11 feet along said westerly right-of-way line to a 5/8” rebar stake set on the south line of said Northeast Quarter; thence westerly, deflecting right 67 degrees 21 minutes 40 seconds, 1121.70 feet along said south line to a 5/8” rebar stake set at the Southwest Corner of said Northeast Quarter; thence northerly, deflecting right 89 degrees 52 minutes 40 seconds, 2677.84 feet along the west line of said Northeast Quarter to the place of beginning. Containing 102.50 acres.

Parcel No. 90-08-08-200-001.000-010; 90-08-08-200-002.000-010

Part of the Northwest Quarter of Section 8, Township 26 North, Range 12 East, Harrison Township, Wells County, Indiana, described as follows:

Beginning at the Southwest corner of said Northwest Quarter found per record witness; thence Northerly, 1208.78 feet along the West line of said Northwest Quarter to a P.K. nail at the Southwest corner of the 17.04 acre tract described in Deed Record 130, Page 872; thence Northeasterly, deflecting right 65 degrees 20 minutes 38 seconds, 2931.66 feet along the South line of said 17.04 acre tract to a 5/8” rebar stake on the East line of said Northwest Quarter; thence Southerly, deflecting right 114 degrees 57 minutes 47 seconds, 1112.76 feet along said East line to a 5/8” rebar stake at the Southeast corner of the Northeast Quarter of said Northwest Quarter; thence Westerly, deflecting right 90 degrees 04 minutes 33 seconds, 1329.23 feet to a 5/8” rebar stake at the Southwest corner of the Northeast Quarter of said Northwest Quarter; thence Southerly, deflecting left 90 degrees 13 minutes 45 seconds, 1337.85 feet to a 5/8” rebar stake at the Southeast co rner of the Southwest Quarter of said Northwest Quarter; thence Westerly, deflecting right 90 degrees 16 minutes 33 seconds, 1325.66 feet along the South line of said Northwest Quarter to the place of beginning. Containing 70.79 acres more or less.

Parcel No. 90-08-08-300-002.000-002

Tract I: The Southeast Quarter of the Northwest Quarter of Section 8, Township 26 North, Range 12 East, Wells County, Indiana, containing 40 acres, more or less.

Tract II: The east half of the Southwest Quarter of Section 8, Township 26 North, Range 12 East, Wells County, Indiana, containing 80 acres, more or less.

EXCEPTING THEREFROM, Part of the Southwest Quarter of Section 8, Township 26 North, Range 12 East, Harrison Township, Wells County, Indiana, described as follows: Starting at the southeast corner of said Southwest Quarter found per record witness; thence westerly, 451.42 feet along the south line of said Southwest Quarter to a P.K. nail which shall be the place of beginning; thence continuing westerly, 253.58 feet along said south line, to a PK nail; thence northerly, deflecting right 90 degrees 00 minutes 00 seconds, 280.00 feet to a 5/8” rebar stake; thence easterly, deflecting right 90 degrees 00 minutes 00 seconds, 253.58 feet parallel with the south line of said Southwest Quarter to a 5/8” rebar stake; thence southerly, deflecting right 90 degrees 00 minutes 00 seconds, 280.00 feet to the place of beginning. Containing 1.63 acres, more or less.

Containing in all 118.37 acres, after exception.

19

Parcel No. 90-08-08-400-027.000-010

Part of the Northwest Quarter of Section 8, Township 26 North, Range 12 East, Harrison Township, Wells County, Indiana, described as follows:

Starting at the northwest corner of said Northwest Quarter; thence southerly, 1185.11 feet, along the west line of said Northwest Quarter to its intersection with the southerly right-of-way line of the Norfolk and Western Railway Company, which shall be the place of beginning; thence northeasterly, deflecting left 114 degrees 39 minutes 22 seconds, 2804.95 feet, along said right-of-way line to the north line of said Northwest Quarter; thence easterly, deflecting right 24 degrees 59 minutes 26 seconds, 116.37 feet, along said north line to the northeast corner of said Northwest Quarter; thence southerly, deflecting right 89 degrees 58 minutes 17 seconds, 226.16 feet, along the east line of said Northwest Quarter; thence southwesterly, deflecting right 65 degrees 02 minutes 17 seconds, 2931.66 feet, parallel with the southerly right-of-way line of the Norfolk and Western Railway Company to the west line of said Northwest Quarter; thence northerly, deflecting right 114 degree s 39 minutes 22 seconds, 279.69 feet, along said west line to the place of beginning. Containing 17.04 acres.

Parcel No. 90-08-08-200-001.000-01 0; 90-08-08-200-002.000-01 0

Part of the Northwest Quarter of Section 8, Township 26 North, Range 12 East, Harrison Township, Wells County, Indiana, described as follows:

Beginning at the Southwest corner of said Northwest Quarter found per record witness; thence Northerly, 1208.78 feet along the West line of said Northwest Quarter to a P.K. nail at the Southwest corner of the 17.04 acre tract described in Deed Record 130, Page 872; thence Northeasterly, deflecting right 65 degrees 20 minutes 38 seconds, 2931.66 feet along the South line of said 17.04 acre tract to a 5/8” rebar stake on the East line of said Northwest Quarter; thence Southerly, deflecting right 114 degrees 57 minutes 47 seconds, 1112.76 feet along said East line to a 5/8” rebar stake at the Southeast corner of the Northeast Quarter of said Northwest Quarter; thence Westerly, deflecting right 90 degrees 04 minutes 33 seconds, 1329.23 feet to a 5/8” rebar stake at the Southwest corner of the Northeast Quarter of said Northwest Quarter; thence Southerly, deflecting left 90 degrees 13 minutes 45 seconds, 1337.85 feet to a 5/8” rebar stak e at the Southeast corner of the Southwest Quarter of said Northwest Quarter; thence Westerly, deflecting right 90 degrees 16 minutes 33 seconds, 1325.66 feet along the South line of said Northwest Quarter to the place of beginning. Containing 70.79 acres more or less.

Parcel No. 90-08-08-300-001.000-002

Part of the Southwest Quarter of Section 8, Township 26 North, Range 12 East, Harrison Township, Wells County, Indiana, described as follows: Starting at the southeast corner of said Southwest Quarter found per record witness; thence westerly, 451.42 feet along the south line of said Southwest Quarter to a P.K. nail which shall be the place of beginning; thence continuing westerly, 253.58 feet along said south line, to a P.K. nail; thence northerly, deflecting right 90 degrees 00 minutes 00 seconds, 280.00 feet to a 5/8” rebar stake; thence easterly, deflecting right 90 degrees 00 minutes 00 seconds, 253.58 feet parallel with the south line of said Southwest Quarter to a 5/8” rebar stake; thence southerly, deflecting right 90 degrees 00 minutes 00 seconds, 280.00 feet to the place of beginning. Containing 1.63 acres, more or less.

Parcel No. 90-08-08-300-006.000-010

THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, CONTAINING 40.46 ACRES.

Parcel No. 90-08-08-300-004.000-010

ALSO: THE SOUTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, CONTAINING 40.40 ACRES.

20

EXCEPTING THEREFROM: PART OF THE SOUTHWEST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, DESCRIBED AS FOLLOWS:

BEGINNING AT THE SOUTHWEST CORNER OF SAID SOUTHWEST QUARTER FOUND PER RECORD WITNESS; THENCE NORTHERLY, 527.00 FEET ALONG THE WEST LINE OF SAID SOUTHWEST QUARTER TO A PK. NAIL; THENCE EASTERLY, DEFLECTING RIGHT 90 DEGREES 00 MINUTES 16 SECONDS, 655.00 FEET PARALLEL WITH THE SOUTH LINE OF SAID SOUTHWEST QUARTER TO A 5/8” REBAR STAKE; THENCE SOUTHERLY, DEFLECTING RIGHT 89 DEGREES 59 MINUTES 44 SECONDS, 527.00 FEET PARALLEL WITH THE WEST LINE OF SAID SOUTHWEST QUARTER TO A P.K. NAIL ON THE SOUTH LINE OF SAID SOUTHWEST QUARTER; THENCE WESTERLY, DEFLECTING RIGHT 90 DEGREES 00 MINUTES 16 SECONDS, 655.00 FEET ALONG SAID SOUTH LINE TO THE PLACE OF BEGINNING. CONTAINING 7.92 ACRES

CONTAINING AFTER SAID EXCEPTION 32.48 ACRES.

Parcel No. 90·08-08-400-004.000-002

Commencing at the southwest corner of the southeast quarter of section eight (8), in township 26 north, range 12 east, and running thence north 1324.70 feet to the northwest corner of the south half of said quarter, thence east 558.20 feet to the west line of the right of way of the Ft Wayne, Cincinnati and Louisville railroad company, thence in a southwesterly direction along the west line of said Railroad right of way a distance of 1437.50 feet to the south line of said Section 8, thence west 12 feet to the place of beginning, containing 8.67 acres.

Parcel No. 90-08-08-400-020.000-002

PART OF THE NORTH HALF Of THE SOUTHEAST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, DESCRIBED AS FOLLOWS:

STARTING AT THE NORTHEAST CORNER Of SAID SOUTHEAST QUARTER FOUND PER RECORD WITNESS; THENCE WESTERLY, 152871 FEET ALONG THE NORTH LINE OF SAID SOUTHEAST QUARTER TO THE WESTERLY RIGHT-Of-WAY LINE OF THE NORFOLK & WESTERN RAILROAD, WHICH SHALL BE THE PLACE OF BEGINNING; THENCE SOUTHWESTERLY, DEFLECTING LEFT 67 DEGREES 21 MINUTES 32 SECONDS, 617.57 FEET ALONG SAID WESTERLY RIGHT-Of-WAY LINE: THENCE SOUTHWESTERLY, DEFLECTING RIGHT 00 DEGREES 02 MINUTES 05 SECONDS, 816.82 FEET ALONG SAID WESTERLY RIGHT OF-WAY LINE TO THE SOUTH LINE OF THE NORTH HALF Of SAID SOUTHEAST QUARTER: THENCE WESTERLY, DEFLECTING RIGHT 67 DEGREES 09 MINUTES 58 SECONDS, 565.65 FEET ALONG THE SOUTH LINE OF THE NORTH HALF OF SAID SOUTHEAST QUARTER TO THE WEST LINE OF SAID SOUTHEAST QUARTER; THENCE NORTHERLY, DEFLECTING RIGHT 90 DEGREES 03 MINUTES 19 SECONDS, 1325.61 FEET ALONG THE WEST LINE OF SAID SOUTHEAST QUARTER TO THE NORTHWEST CORNER OF SAID SOUTHEAST QUARTER; THENCE EASTERLY, DEFLECTING RIGHT 90 DEGREES 07 MINUTES 21 SECONDS, 1120.66 FEET ALONG THE NORTH LINE Of SAID SOUTHEAST QUARTER TO THE PLACE OF BEGINNING. CONTAINING 25.64 ACRES MORE OR LESS.

NOW KNOWN AS:

PARCEL 1:

PART Of SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, DESCRIBED AS FOLLOWS;

21

BEGINNING AT THE SOUTHWEST CORNER OF THE NORTHWEST QUARTER OF SAID SECTION 8; THENCE NORTH 00 DEGREES 09 MINUTES 53 SECONDS WEST, (ASSUMED AND THE BASIS FOR THESE BEARINGS), 1488.47 FEET ALONG THE WEST LINE Of SAID NORTHWEST QUARTER TO THE SOUTHERLY RIGHT-Of-WAY LINE Of THE NORFOLK AND SOUTHERN RAILROAD; THENCE NORTH 65 DEGREES 10 MINUTES 45 SECONDS EAST, 2804.95 FEET ALONG SAID SOUTHERLY RIGHT-OF-WAY LINE TO THE NORTH LINE OF SAID NORTHWEST QUARTER, THENCE SOUTH 89 DEGREES 49 MINUTES 48 SECONDS EAST 116.37 FEET ALONG SAID NORTH LINE TO THE NORTHWEST CORNER OF THE NORTHEAST QUARTER OF SAID SECTION 8; THENCE SOUTH 88 DEGREES 46 MINUTES 46 SECONDS EAST, 2227,06 FEET ALONG THE NORTH LINE OF SAID NORTHEAST QUARTER TO THE WESTERLY RIGHT-OF-WAY LINE OF THE NORFOLK AND SOUTHERN RAILROAD; THENCE SOUTH 22 DEGREES 53 MINUTES 10 SECONDS WEST, 3478.34 FEET ALONG SAID WESTERLY RIGHT-OF-WAY LINE; THENCE SOUTH 22 DEGREES 55 MINUTES 15 SECONDS WEST, 2255.13 FEET ALONG SAID WESTERLY RIGHT-Of-WAY LINE TO THE SOUTH LINE OF THE SOUTHEAST QUARTER OF SAID SECTION 8; THENCE SOUTH 89 DEGREES 54 MINUTES 33 SECONDS WEST, 8.77 FEET ALONG THE SOUTH LINE OF SAID SOUTHEAST QUARTER TO THE SOUTHEAST CORNER OF THE SOUTHWEST QUARTER OF SAID SECTION 8; THENCE NORTH 90 DEGREES 00 MINUTES 00 SECONDS WEST, 1322.25 FEET ALONG THE SOUTH LINE OF SAID SOUTHWEST QUARTER TO THE SOUTHWEST CORNER OF THE EAST HALF OF SAID SOUTHWEST QUARTER; THENCE NORTH 00 DEGREES 04 MINUTES 08 SECONDS, EAST, 2657.35 FEET ALONG THE WEST LINE OF THE EAST HALF OF SAID SOUTHWEST QUARTER TO THE NORTH LINE OF SAID SOUTHWEST QUARTER; THENCE NORTH 89 DEGREES 44 MINUTES 08 SECONDS WEST, 1325.66 FEET ALONG SAID NORTH LINE TO THE PLACE OF BEGINNING. CONTAINING 346.08 ACRES MORE OR LESS

PARCEL 2:

Tract 1:

THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, CONTAINING 40.46 ACRES.

Tract 2:

ALSO: THE SOUTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, CONTAINING 40.40 ACRES.

EXCEPTING THEREFROM: PART OF THE SOUTHWEST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, DESCRIBED AS FOLLOWS:

BEGINNING AT THE SOUTHWEST CORNER OF SAID SOUTHWEST QUARTER FOUND PER RECORD WITNESS; THENCE NORTHERLY, 527.00 FEET ALONG THE WEST LINE OF SAID SOUTHWEST QUARTER TO A PK NAIL; THENCE EASTERLY, DEFLECTING RIGHT 90 DEGREES 00 MINUTES 16 SECONDS, 655.00 FEET PARALLEL WITH THE SOUTH LINE OF SAID SOUTHWEST QUARTER TO A 5/8” REBAR STAKE; THENCE SOUTHERLY, DEFLECTING RIGHT 89 DEGREES 59 MINUTES 44 SECONDS, 527.00 FEET PARALLEL WITH THE WEST LINE OF SAID SOUTHWEST QUARTER TO A P.K. NAIL ON THE SOUTH LINE OF SAID SOUTHWEST QUARTER; THENCE WESTERLY, DEFLECTING RIGHT 90 DEGREES 00 MINUTES 16 SECONDS, 655.00 FEET ALONG SAID SOUTH LINE TO THE PLACE OF BEGINNING. CONTAINING 7.92 ACRES.

CONTAINING AFTER SAID EXCEPTION 32.48 ACRES.

22

EXHIBIT B

PERMITTED ENCUMBRANCES

1.

Terms and provisions of a Grant of Easement granted to the City of Bluffton, dated June 25, 1998 and recorded June 26, 1998 in Deed Book 134 Page 399 of the Wells County, Indiana records.

2.

Terms and provisions of a Grant of Easement granted to the City of Bluffton, dated July 2, 1998, and recorded July 2, 1998 in Deed Book 134 Page 423 of the Wells County, Indiana records.

3.

Covenants, conditions and restrictions contained in the Restrictive Covenants Southwest Bluffton Industrial Park, dated June 15, 2004, and recorded June 17, 2004, in Miscellaneous Record 65 Page 59 of the Wells County, Indiana records (provisions, if any, based on race, color, religion, sex, handicap, familiar status or national origin, are omitted). Pertains to the 17.04 Acres tract conveyed in Deed Record 130 page 871 of the Wells County, Indiana records as shown on a survey by Joel A. Hoehn, dated February 17, 2007, and revised February 19, 2007. (NOTE: Mortgagor is undertaking to remove the Restricted Covenants from the encumbered tract pursuant to the Loan Agreement)

4.

Terms and provisions of a Right of Way Grant, dated January 27, 1984, and recorded February 22, 1984, in Miscellaneous Book 52 Page 669 of the Wells County, Indiana records.

5.

Right of Way for drainage, flow and maintenance of Addington Legal Tile Drain as set forth in IC 36-9-27-33.

6.

Liens, encumbrances and security interests granted by Mortgagor to US Bank National Association, as Trustee (“Subordinate Lender”), regarding the credit facilities identified in and subject to the further terms and conditions as set forth in that certain Intercreditor and Subordination Agreement between Mortgagee and Subordinate Lender.

23

EX-10

Exhibit 10.49

This instrument was prepared by and when recorded return to: Susan E. Rollins, Esq. Chapman and Cutler LLP 111 West Monroe Street Chicago, Illinois 60603-4080
	Instrument Number:			155560
	Date and Time:			4/3/2007  3:41:00 PM
	MORTGAGE
	Book:	128	Page:		357	Jacket:
	Sandra K. Fair
	Wells County Recorder

SPACE ABOVE THIS LINE RESERVED FOR RECORDER’S USE ONLY

SUBORDINATE CONSTRUCTION/PERMANENT MORTGAGE,

SECURITY AGREEMENT, ASSIGNMENT OF

LEASES AND RENTS, FINANCING STATEMENT

AND FIXTURE FILING

INDIANA BIO-ENERGY, LLC

Mortgagor

AND

U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE

Mortgagee

This instrument was

prepared by and when

recorded return to:

Susan E. Rollins, Esq.

Chapman and Cutler LLP

111 West Monroe Street

Chicago, Illinois 60603-4080

 SPACE ABOVE THIS LINE RESERVED FOR RECORDER’S USE ONLY

SUBORDINATE CONSTRUCTION/PERMANENT MORTGAGE,

SECURITY AGREEMENT, ASSIGNMENT OF

LEASES AND RENTS, FINANCING STATEMENT

AND FIXTURE FILING

INDIANA BIO-ENERGY, LLC

Mortgagor

AND

U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE

Mortgagee

TABLE OF CONTENTS

SECTION	HEADING	PAGE
ARTICLE I	AGREEMENTS	5
Section 1.1.	Performance of Loan Obligations; Incorporation by Reference	5
Section 1.2.	Further Assurances	5
Section 1.3.	Sale, Transfer, Encumbrance	5
Section 1.4.	Insurance	6
Section 1.5.	Taxes, Liens and Claims, Utilities	6
Section 1.6.	Escrow Payments	6
Section 1.7.	Maintenance and Repair; Compliance with Laws	7
Section 1.8.	Leases	7
Section 1.9.	Indemnity	8
Section 1.10.	Assignment of Leases and Rents	8
ARTICLE II	REPRESENTATIONS AND WARRANTIES	9
Section 2.1.	Ownership, Liens, Compliance with Laws	9
Section 2.2.	Use	9
Section 2.3.	Utilities; Services	9
Section 2.4.	Construction of the Improvements	9
ARTICLE III	CASUALTY; CONDEMNATION	9
Section 3.1.	Casualty, Repair, Proof of Loss	9
Section 3.2.	Use of Insurance Proceeds	10
Section 3.3.	Condemnation	11
Section 3.4.	Use of Condemnation Proceeds	11
ARTICLE IV	DEFAULTS AND REMEDIES	12
Section 4.1.	Events of Default	12
Section 4.2.	Remedies	12
Section 4.3.	Expenses of Exercising Rights, Powers and Remedies	14
Section 4.4.	Restoration of Position	14
Section 4.5.	Marshalling	14
Section 4.6.	Waivers	14
Section 4.7.	Mortgagee’s Right to Cure Defaults	14
Section 4.8.	Suits and Proceedings	15
ARTICLE V	MISCELLANEOUS	15
Section 5.1.	Binding Effect; Survival; Number; Gender	15
Section 5.2.	Severability	15
Section 5.3.	Notices	15
Section 5.4.	Applicable Law	16
Section 5.5.	Waiver of Jury Trial	16
Section 5.6.	Effect	16
Section 5.7.	Assignability	16
Section 5.8.	Headings	16
Section 5.9.	Fixture Filing	16
Section 5.10.	Estoppel Certificate	17
Section 5.11.	Senior Loan	17
Signature		18
Exhibit A	LEGAL DESCRIPTION
Exhibit B	PERMITTED ENCUMBRANCES

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SUBORDINATE CONSTRUCTION/PERMANENT MORTGAGE,

SECURITY AGREEMENT, ASSIGNMENT OF

LEASES AND RENTS, FINANCING STATEMENT

AND FIXTURE FILING

This SUBORDINATE CONSTRUCTION/PERMANENT MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF LEASES AND RENTS, FINANCING STATEMENT AND FIXTURE FILING is dated as of March 1, 2007 (as amended, amended and restated, supplemented or otherwise modified from time to time, this “Mortgage”), and is made by INDIANA BIO-ENERGY, LLC, an Indiana limited liability company (“Mortgagor”), whose address is 969 North Main Street, P.O. Box 297, Bluffton, Indiana 46714, in favor of U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE, a national banking association (“Mortgagee”), whose address is 10 West Market Street, Suite 1150, Indianapolis, Indiana 46204, Attention: Corporate Trust.

RECITALS

A.

Unless otherwise defined herein, all capitalized terms herein shall have the meanings ascribed to them in that certain Indenture of Trust by and between City of Bluffton, Indiana (“Issuer”) and Mortgagee dated of even date herewith (as the same may be modified or amended from time to time, the “Indenture“).

B.

Mortgagor is the owner and holder of fee simple title in and to that certain real estate located in Bluffton, Wells County, Indiana, as more fully described on Exhibit A (the “Land”).

C.

Mortgagor desires to construct and operate a single 100 million gallons per year ethanol production facility and other amenities to be located on the Land (the “Facility”).

D.

Mortgagor and Issuer have entered into the Loan Agreement dated as of even date herewith (the “Loan Agreement”) providing for the issuance by Issuer of the $22,000,000 aggregate principal amount of City of Bluffton, Indiana Subordinate Solid Waste Disposal Facility Revenue Bonds, Series 2007A (Indiana Bio-Energy, LLC Ethanol Plant Project) (the “Bonds”) for the purpose of loaning the proceeds thereof to Mortgagor in order to provide funds (i) to finance a portion of the costs of the Facility, (ii) to pay a portion of the interest accruing on the Bonds during construction thereof, (iii) to fund a debt service reserve fund for the Bonds and (iv) to pay certain costs of issuance relating to the Bonds. The payment obligations of Mortgagor under the Loan Agreement shall be collectively referred to in this Mortgage as the “Loan Payments.” The total principal amount secured by this Mortgage is $22,000,000.00, pl us the amount of protective advances made by Mortgagee as provided for in this Mortgage or the Loan Agreement. The maximum principal amount secured by this Mortgage is $44,000,000.

E.

The Loan Payments are payable and to be performed in accordance with the terms of the Loan Agreement, with the entire unpaid balance of the Loan Payment to mature and be due and payable in full not later than September 1, 2019 (the “Maturity Date”).

F.

Mortgagor has agreed to mortgage the Mortgaged Property (as that term is defined below) to Mortgagee to secure the Loan Obligations (as that term is defined below).

G.

The obligations secured by this Mortgage (the “Loan Obligations”) are as follows:

(i)

the Loan Payments, including, without limitation, future advances made by Mortgagee to Mortgagor, Mortgagor’s obligations in respect of the due and punctual payment of principal and interest when and as due, whether by acceleration or otherwise and all fees, expenses, indemnities, reimbursements, guaranties and other obligations of Mortgagor under the Loan Payments, Loan Agreement and this Mortgage, in all cases whether now existing or hereafter arising or incurred;

(ii)

all other amounts payable by Mortgagor under the Loan Agreement or this Mortgage as the same now exist or may hereafter be amended; and

(iii)

all obligations of Mortgagor under this Mortgage, including, but not limited to, any protective advances advanced by Mortgagee under this Mortgage.

Pursuant to I.C. 32-29-1-10, the Loan Obligations include, and this Mortgage secures, future obligations and advances under the Loan Agreement and protective advances made under this Mortgage or the Loan Agreement and future modifications, extensions, conversions, and renewals of the Loan Obligations secured by this Mortgage.

NOW, THEREFORE, Mortgagor, in consideration of the issuance of the Bonds and the Issuer making such funds available to Mortgagor, intending to be legally bound and to secure the payment and performance of the Loan Obligations hereby irrevocably and unconditionally MORTGAGES and WARRANTS and collaterally assigns, collaterally transfers and pledges unto Mortgagee, its successors and assigns, forever, with right of entry and possession, and grants to Mortgagee, its successors and assigns, a Mortgage and security interest in the Land and any buildings, plants, facilities or improvements of any kind (collectively, the “Improvements”), now existing or hereafter constructed or placed thereon, described in Exhibit A attached hereto and all mineral rights, hereditaments, easements and appurtenances thereto, along with the following (to the extent permitted by applicable law or the agreement, instrument or other documents creating the Mortga gor’s rights therein), all of which together with the Land is called the “Mortgaged Property”:

(a)

All and singular the tenements, hereditaments, easements, appurtenances, passages, rights of ingress and egress, licenses, permits, rights of use or occupancy, waters, water courses, repair in rights, mineral rights, sewer rights, rights in trade names, licenses, permits and contracts, and all other rights, liberties and privileges of any kind or character in any way now or hereafter appertaining to the Land or any Improvements thereon, including, but not limited to, homestead and any other claim at law or in equity as well as any after-acquired title, franchise or license and the reversion and reversions and remainder and remainders thereof;

(b)

The land lying within any street, alley, avenue, roadway, or right of way open or proposed or hereafter vacated in front of or adjoining the Land; and all right, title, and interest, if any, of Mortgagor in and to any strips and gores adjoining or used in connection with the Land;

(c)

All agreements, ground leases, grants of easements or rights of way, permits, declarations of easement, conditions or restrictions, disposition and development of agreements, planned unit development agreements, plats, subdivision plans, permits and approvals, and other documents affecting the Land and/or the Improvements;

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(d)

All rights, title and interest of Mortgagor in any and all buildings and Improvements of every kind and description now or hereafter erected or placed on the Land and all materials intended for construction, reconstruction, alteration and repairs of such buildings and Improvements now or hereafter erected thereon, all of which materials shall be deemed included within the Mortgaged Property immediately upon the delivery thereof to the Mortgaged Property or upon any earlier acquisition thereof by Mortgagor, and all fixtures now or hereafter owned by Mortgagor and attached to or contained in and used or acquired for use in connection with the Mortgaged Property including, but not limited to, all heating, lighting, refrigerating, ventilating, air conditioning, air cooling, fire extinguishing, plumbing, cleaning, telephone, communications and power equipment, systems and apparatus; and all elevators, switchboards, motors, pumps, screens, aw nings, floor coverings, cabinets, partitions, conduits, ducts and compressors; and all cranes and craneways, oil storage, sprinklers/fire protection and water service equipment; and also including any of such property stored on the Land or Improvements or in warehouses and intended to be used in connection with or incorporated into the Land or Improvements or for the pursuit of any other activity in which Mortgagor may be engaged on the Land or Improvements, and including without limitation all tools, cabinets, awnings, window shades, Venetian blinds, drapes and drapery rods, brackets, screens, carpeting and other window and floor coverings, decorative fixtures, plants, cleaning apparatus, and cleaning equipment, refrigeration equipment, generators, cables, telecommunication cables, antennas and systems, computers, software, books, supplies, kitchen equipment, appliances, tractors, lawn mowers, groundsweepers and tools, together with all substitutions, accessions, repairs, additions and replacements to any o f the foregoing and all other items of furniture, furnishings, equipment and personal property owned by Mortgagor used or useful in the operation of the Mortgaged Property; and all renewals or replacements of all of the aforesaid property owned by Mortgagor or articles in substitution therefore, whether or not the same are or shall be attached to said buildings or Improvements in any manner; it being mutually agreed, intended and declared that all of the aforesaid property owned by Mortgagor and placed by it on the Land or Improvements or used or acquired for use in connection with the operation or maintenance of the Mortgaged Property shall, so far as permitted by law, be deemed to form a part and parcel of the Land for the purposes of this Mortgaged Land and covered by this Mortgage, and as to any of the property aforesaid which does not form a part and parcel of the Land or does not constitute a “fixture” (as such term is defined in the Uniform Commercial Code as in effect in the State of Indian a (the “UCC“)), this Mortgage is hereby deemed to be, as well, a security agreement under the UCC for the purposes of creating hereby a security interest in such property which Mortgagor hereby grants to Mortgagee as secured party, and all inventory, office supplies, machinery, apparatus, systems and equipment used or useful in the production of ethanol at the Mortgaged Property, all as now owned or hereafter acquired by Mortgagor;

(e)

All Leases (as hereinafter defined) of the Land or Improvements or any part thereof, whether now existing or hereafter entered into (the “Leases”), and all rights, title and interest of Mortgagor thereunder, including cash and security deposits under any such Leases;

(f)

Any and all awards, payments or insurance proceeds, including interest and unearned premiums thereon, and the right to receive the same, which may be paid or payable with respect to the Land or Improvements for other properties described above as a result of: (i) the exercise of the right of eminent domain or action in lieu thereof; or (ii) the alteration of the grade of any streets; or (iii) any fire, casualty, accident, damage or other injury to or decrease in the value of Land or Improvements or other properties described above, to the extent of all amounts which may be secured by this Mortgage at the date of receipt of any such award or payment by Mortgagor or Mortgagee, and of the reasonable counsel fees, costs and disbursements incurred by Mortgagor or Mortgagee in connection with the collection of such award or payment. Mortgagor agrees to execute and deliver, from time to time, such further instruments as may be requested by Mor tgagee to confirm such assignment to Mortgagee of any such award or payment;

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(g)

All licenses, permits (including, but not limited to, building permits), authorizations, certificates, variances, consents, approvals and other approvals now or hereafter acquired pertaining to the Land or any Improvements thereon or which related to the construction of the Improvements and/or the use, occupancy, development, leasing, operation or servicing of the Land, including, but not limited to, air and water discharge permits, environmental permits and rights as is required for the production of ethanol, above-ground storage tank licenses and permits, and all estate, right, title and interest of Mortgagor in, to, under or delivered from all present or future development, construction, operation or use of the Land or any Improvements thereon;

(h)

All intangible personal property relating to the Land and/or Improvements, business records, claims for refunds or rebates of taxes, tax abatements, money, deposit accounts, accounts in general and payment intangibles;

(i)

Any and all water and water rights, minerals, oil, gas, or any rights thereto;

(j)

All plans, drawings, and specifications relating to the Mortgaged Property and the construction of the Improvements, all permits, consents, approvals, licenses, authorizations and other rights granted by, given by or obtained from any governmental entity with respect to the Mortgaged Property; and all other interests of any kind and character that Mortgagor now has or at any time hereafter acquires in and to the Mortgaged Property;

(k)

All studies, tests, investigations, and reports of any kind relating to the soils or conditions of the soils of the Land and the suitability of the soils for the construction of the Improvements, all mechanical or structural studies, grading plans, drainage studies, and plans and other similar studies, plans from drawings, or reports of any nature related to the construction of the Improvements;

(l)

All management contracts, service contracts, operating agreements, variances and permits relating to the Land and/or Improvements;

(m)

All after-acquired title to or remainder or reversion of any of the foregoing, all and any proceeds of any of the foregoing, all and any additions, accessions and extensions to, improvements of and substitutions and replacements of any of the foregoing and all additional lands, estates, interest, rights, or any other property acquired by Mortgagor after the date of this Mortgage, all without need for any additional Mortgage, assignment, pledge or conveyance to Mortgagee but Mortgagor will execute and deliver to Mortgagee upon Mortgagee’s request any documents or instruments to further effect or evidence the foregoing; and

(n)

The right in the case of foreclosure hereunder of the encumbered property for Mortgagee to take and use the same by which the buildings and all other Improvements situated on the Land or commonly known and the right to manage and operate said buildings under any such name and variance thereof;

Subject only to the Permitted Encumbrances (as herein defined) and to secure payment of the Loan Obligations.

The parties hereto intend the definition of Mortgaged Property to be broadly construed and in the case of doubt if any particular item is to be included in the definition of Mortgaged Property, the doubt should be resolved in favor of inclusion.

TO HAVE AND TO HOLD said Mortgaged Property, whether now owned or held or hereafter acquired, unto Mortgagee, its successors and assigns, forever pursuant to the provisions of this Mortgage.

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IT IS HEREBY COVENANTED, DECLARED AND AGREED that the lien, security interest or estate created by this Mortgage to secure the payment of the Loan Obligations, both present and future, shall, except as set forth in Section 5.11 hereof, be first, prior and superior to any lien, security interest, reservation of title or other interest heretofore, contemporaneously or subsequently suffered or granted by Mortgagor, its legal representatives, successors or assigns, except only those, if any, expressly hereinafter referred to and that the Mortgaged Property is to be held, dealt with and disposed of by Mortgagee, upon and subject to the terms, covenants, conditions, uses and agreements set forth in this Mortgage.

PROVIDED ALWAYS, that upon the indefeasible payment in full in cash of the Loan Obligations and all other obligations to Mortgagee under the Loan Agreement and the observance and performance by Mortgagor of its covenants and agreements set forth herein and therein, then this Mortgage and the estate hereby and therein granted shall cease and be void and shall be terminated and released as provided herein below.

This Mortgage also constitutes a security agreement within the meaning of the UCC, with respect to all property described herein as to which a security interest may be granted and/or perfected pursuant to the UCC, and is intended to afford Mortgagee to the fullest extent allowed by law, the rights and remedies of a secured party under the Dec.

MORTGAGOR FURTHER agrees as follows:

ARTICLE I

AGREEMENTS

Section 1.1.

Performance of Loan Obligations; Incorporation by Reference. Subject to any applicable cure or grace periods as set forth in the Loan Documents, Mortgagor shall pay and perform the Loan Obligations. Time is of the essence hereof. All of the covenants, obligations, agreements, warranties and representations of Mortgagor contained in this Mortgage and the Loan Agreement and all of the terms and provisions thereof are hereby incorporated herein and made a part hereof by reference as if fully set forth herein.

Section 1.2.

Further Assurances. If Mortgagee requests, Mortgagor shall sign and deliver and cause to be recorded as Mortgagee shall direct any further mortgages, amendments or supplements to this Mortgage, instruments of further assurance, certificates and other documents as Mortgagee reasonably may consider necessary or desirable in order to attach, perfect, continue and preserve the Loan Obligations and Mortgagee’s rights, title, estate, liens and interests under the Loan Agreement and this Mortgage. Mortgagor further agrees to pay to Mortgagee, upon demand, all reasonable and necessary costs and expenses incurred by Mortgagee in connection with the preparation, execution, recording, filing and refiling of any such documents, including reasonable attorneys’ fees.

Section 1.3.

Sale, Transfer, Encumbrance. If Mortgagor sells, conveys, transfers or otherwise disposes of, or encumbers, any part of its interest in the Mortgaged Property, whether voluntarily, involuntarily or by operation of law (except for Permitted Encumbrances), without the prior written consent of Mortgagee, Mortgagee shall have the option to declare the Loan Obligations immediately due and payable immediately upon notice. Included within the foregoing actions requiring prior written consent of Mortgagee are: (a) sale by deed or contract for deed; (b) mortgaging or granting a lien on the Mortgaged Property (other than the Permitted Encumbrances); and (c) a change of control in 50% or more of the equity interest or voting power or control of Mortgagor. Mortgagor shall give notice of any proposed action effecting any of the foregoing to Mortgagee for Mortgagee’s consent at least thirty (30) days prior to taking such action. Mortgagor shall pay all rea sonable costs and expenses incurred by Mortgagee in evaluating any such action. Mortgagee may condition its consent upon reasonable modification of the Loan Documents or payment of reasonable fees. No such action shall relieve Mortgagor from liability for the Loan Obligations as set forth herein. The consent by Mortgagee to any action shall not constitute a waiver of the necessity of such consent to any subsequent action.

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Section 1.4.

Insurance. Mortgagor shall obtain, maintain and keep in full force and effect and shall furnish to Mortgagee copies of policies of insurance as described in, and meeting the requirements set forth in, the Loan Agreement. At least ten (10) days prior to the termination of any such coverage, Mortgagor shall provide Mortgagee with evidence satisfactory to Mortgagee that such coverage will be renewed or replaced upon termination with insurance that complies with the provisions of this Section and the Loan Agreement. Mortgagor, at its sole cost and expense, from time to time when Mortgagee shall so request, will provide Mortgagee with evidence in a form acceptable to Mortgagee, of the full insurable replacement cost of Mortgaged Property. All property and liability insurance policies maintained by Mortgagor pursuant to this Section and the Loan Agreement shall (a) include effective waivers by the insurer of all claims for insurance premiums against Mor tgagee, and (b) provide that any losses shall be payable notwithstanding (i) any act of negligence by Mortgagor or Mortgagee, (ii) any foreclosure or other proceedings or notice of foreclosure sale relating to the Mortgaged Property, or (iii) any release from liability or waiver of subrogation rights granted by insured. In addition, all policies of casualty insurance shall contain standard noncontributory mortgagee loss payable clauses to Mortgagee, and the comprehensive general liability and other liability policies required in the Loan Agreement, including environmental pollution policies, shall name Mortgagee as an additional insured.

Section 1.5.

Taxes, Liens and Claims, Utilities. Mortgagor shall pay and discharge when due, or cause to be paid and discharged when due, all taxes, assessments and governmental charges and levies (collectively, “Impositions”) imposed upon or against the Mortgaged Property or the Rents (as hereinafter defined), or upon or against the Loan Obligations, or upon or against the interest of Mortgagee in the Mortgaged Property or the Loan Obligations, except Impositions measured by the income of Mortgagee. Mortgagor shall provide evidence of such payment at Mortgagee’s request. Mortgagor shall keep the Mortgaged Property free and clear of all liens (including, but not limited to, mechanics’ liens), encumbrances, easements, covenants, conditions, restrictions and reservations (collectively, “Encumbrances”) except those set forth in Exhibit B attached hereto and made a part hereof (the “Permitted Encumbrances “). Mortgagor shall pay or cause to be paid when due all charges or fees for utilities and services supplied to the Mortgaged Property. Notwithstanding anything to the contrary contained in this Section, Mortgagor shall not be required to pay or discharge any Imposition or Encumbrance so long as Mortgagor shall in good faith, and after giving notice to Mortgagee, contest the same by appropriate legal proceedings and otherwise in accordance with the requirements set forth in the Loan Agreement. If Mortgagor contests any Imposition or Encumbrance against the Mortgaged Property, Mortgagor shall provide such security to Mortgagee as Mortgagee shall reasonably require against loss or impairment of Mortgagor’s ownership of or Mortgagee’s lien on the Mortgaged Property and shall in any event pay such Imposition or Encumbrance before loss or impairment occurs.

Section 1.6.

Escrow Payments. If requested by Mortgagee after the occurrence and during the continuation of an Event of Default, Mortgagor shall deposit with Mortgagee monthly on the first day of each month the amount reasonably estimated by Mortgagee to be necessary to enable Mortgagee to pay, at least five (5) days before they become due, all Impositions against the Mortgaged Property and the premiums upon all insurance required hereby to be maintained with respect to the Mortgaged Property. All funds so deposited shall secure the Loan Obligations. Any such deposits shall be held by Mortgagee, or its nominee, in a non-interest bearing account and may be commingled with other funds. Such deposits shall be used to pay such Impositions and insurance premiums when due. Any excess sums so deposited shall be retained by Mortgagee and shall be applied to pay said items in the future, unless the Loan Obligations have been paid and performed in full, in which case al l excess sums so paid shall be promptly refunded to Mortgagor. Upon the occurrence of an Event of Default, Mortgagee may apply any funds in said account against the Loan Obligations in such order as Mortgagee may determine.

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Section 1.7.

Maintenance and Repair; Compliance with Laws. Mortgagor shall cause the Mortgaged Property to be operated, maintained and repaired in safe and good repair, working order and condition, reasonable wear and tear, insured casualty loss excepted; shall not commit or permit waste thereof; except as provided in the Loan Agreement, shall not remove, demolish or substantially alter the design or structural character of any Improvements without the prior written consent of Mortgagee; shall complete or cause to be completed forthwith any Improvements which are now or may hereafter be under construction upon the Land; shall materially comply or cause material compliance with all laws, statutes, ordinances and codes, and governmental rules, regulations and requirements, applicable to the Mortgaged Property or the manner of using or operating the same, and with any covenants, conditions, restrictions and reservations affecting the title to the Mortgaged Proper ty, and with the terms of all insurance policies relating to the Mortgaged Property; and shall obtain and maintain in full force and effect all consents, permits and licenses necessary for the use and operation of the Mortgaged Property in Mortgagor’s business. Mortgagor shall obtain and maintain in full force and effect all certificates, licenses, permits and approvals that are required by law or necessary for the construction of the Improvements or the use, occupancy or operation of the Project. Subject to the provisions of this Mortgage with respect to insurance proceeds and condemnation awards, Mortgagor shall promptly repair, restore and rebuild any Improvements now or hereafter on the Mortgaged Property which may become damaged or destroyed, such Improvements to be of at least equal value and quality and of substantially the same character as prior to such damage or destruction.

Section 1.8.

Leases. (a) Notwithstanding anything to the contrary herein, Mortgagor shall not enter into any Lease without Mortgagee’s prior written consent, and shall furnish to Mortgagee, upon execution, a complete and fully executed copy of each Lease. Mortgagor shall provide Mortgagee with a copy of each proposed Lease requiring the consent of Mortgagee and with any information requested by Mortgagee regarding the proposed Tenant thereunder. Mortgagee may declare each Lease to be prior or subordinate to this Mortgage, at Mortgagee’s option.

(b) Mortgagor shall, at its cost and expense, perform each obligation to be performed by the Landlord under each Lease; not borrow against, pledge or further assign any rents or other payments due thereunder; not permit the prepayment of any rents or other payments due for more than thirty (30) days in advance; and not permit any Tenant to assign its Lease or sublet the premises covered by its Lease, unless required to do so by the terms thereof and then only if such assignment does not work to relieve the Tenant of any liability for performance of its obligations thereunder.

(c) If any Tenant shall default under its Lease, Mortgagor shall, in the ordinary course of business, exercise sound business judgment with respect to such default, but may not discount, compromise, forgive or waive claims or discharge the Tenant from its obligations under the Lease or terminate or accept a surrender of the Lease.

(d) If Mortgagor fails to perform any obligations of Mortgagor under any Lease or if Mortgagee becomes aware of or is notified by any Tenant of a failure on the part of Mortgagor to so perform, Mortgagee may, but shall not be obligated to, without waiving or releasing Mortgagor from any obligation, remedy such failure, and Mortgagor agrees to repay upon demand all sums incurred by Mortgagee in remedying any such failure, together with interest thereon from the date incurred.

(e) For purposes of this Mortgage, the following terms shall have the following meanings:

(i)

“Landlord”: Any person or party leasing to Tenant any part of the Mortgaged Property pursuant to a Lease.

(ii)

“Lease”: Any lease, occupancy agreement or other document or agreement, written or oral, permitting any Person to use or occupy any part of the Mortgaged Property.

(iii)

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

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(iv)

“Tenant”: Any Person or party using or occupying any part of the Mortgaged Property pursuant to a Lease.

Section 1.9.

Indemnity. Mortgagor shall indemnify Mortgagee together with its successors and assigns and Mortgagee’s directors and officers (collectively the “Indemnified Parties”) against, and hold the Indemnified Parties harmless from, all losses, damages, suits, claims, judgments, penalties, fines, liabilities, costs and expenses by reason of, or on account of, or in connection with the construction, reconstruction or alteration of the Mortgaged Property during Mortgagor’s ownership thereof, or any accident, injury, death or damage to any person or property occurring in, on or about the Mortgaged Property during Mortgagor’s ownership thereof, or any street, drive, sidewalk, curb or passageway adjacent thereto, except to the extent that the same results from the willful misconduct or gross negligence of the Person or party seeking indemnification. The indemnity contained in this Section shall include costs of defense of any such clai m asserted against an Indemnified Party, including reasonable attorneys’ fees. The indemnity contained in this Section shall survive payment and performance of the Loan Obligations and satisfaction and release of this Mortgage and any foreclosure thereof or acquisition of title by deed in lieu of foreclosure.

Section 1.10.

Assignment of Leases and Rents. (a) As additional security for the Loan Obligations secured by this Mortgage, Mortgagor does hereby bargain, sell, assign, transfer and set over unto Mortgagee all Leases and all the rents, fees, issues, profits, revenues, royalties and other income of any kind (“Rents”) which, whether before or after foreclosure, or during the full statutory period of redemption, if any, shall accrue and be owing for the use or occupation of the Mortgaged Property or any part thereof. So long as no Event of Default exists under this Mortgage, Mortgagor shall have a revocable license to collect, but not more than one (1) month in advance under any Lease, all Rents earned prior to default. This Mortgage constitutes an absolute, irrevocable, currently effective assignment of Rents and profits. Mortgagor hereby appoints Mortgagee Mortgagor’s true and lawful attorney-in-fact with full power of substitution to, upon the oc currence and during the continuation of an Event of Default, demand, collect and receive any and all Rents which may be or become due and payable by Tenants after the occurrence of any Event of Default, which appointment is coupled with an interest and is irrevocable. Upon the occurrence and during the continuation of an Event of Default, Mortgagee may, at its discretion, file any claim or take any action to collect and enforce the payment of Rents, either in Mortgagee’s name or Mortgagor’s name or otherwise. Tenants are hereby expressly authorized and directed by Mortgagor to pay to Mortgagee all Rents upon Mortgagee’s demand, and such Tenants are hereby expressly relieved of any and all duty, obligation or liability in respect of any Rents so paid to Mortgagee.

(b) If, at any time after an Event of Default hereunder and during the continuation thereof, in the sole discretion of Mortgagee, a receivership may be necessary to protect the Mortgaged Property or its Rents, whether before or after maturity of any Loan Payments and whether before or at the time of or after the institution of suit to collect such Loan Obligations, or to enforce this Mortgage, Mortgagee, as a matter of strict right and regardless of the value of the Mortgaged Property or the amounts due hereunder or secured hereby, or of the solvency of any party bound for the payment of such Loan Obligations, shall have the right to the appointment of a receiver to take charge of, manage, preserve, protect, rent and operate the Mortgaged Property, to collect the Rents thereof, to make all necessary and needful repairs, and to pay all Impositions against the Mortgaged Property and all premiums for insurance thereon, and to do such other acts as may by suc h court be authorized and directed, and after payment of the expenses of the receivership and the management of the Mortgaged Property, to apply the net proceeds of such receivership in reduction of the Loan Obligations secured hereby or in such other manner as the said court shall direct notwithstanding the fact that the amount owing thereon may not then be due and payable or the said Loan Obligations are otherwise adequately secured. Such receivership shall, at the option of Mortgagee, continue until full payment of all sums hereby secured or until title to the Mortgaged Property shall have passed by sale under this Mortgage.

(c) The reasonable costs and expenses (including any receiver’s fees and reasonable attorneys’ fees) incurred by Mortgagee pursuant to the powers herein contained shall be reimbursed by Mortgagor to Mortgagee on demand as promptly as practicable, shall be secured hereby and shall bear interest from the date incurred at the interest rate applicable to advances made by the Trustee pursuant to the Indenture. Mortgagee shall not be liable to account to Mortgagor for any action taken pursuant hereto, other than to account for any Rents, fees, issues, revenues, profits or proceeds actually received by Mortgagee.

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ARTICLE II

REPRESENTATIONS AND WARRANTIES

Mortgagor represents and warrants to Mortgagee and covenants with Mortgagee as follows:

Section 2.1.

Ownership, Liens, Compliance with Laws. Mortgagor owns the Mortgaged Property free from all liens and Encumbrances except the Permitted Encumbrances. To the best of Mortgagor’s knowledge, except as otherwise specifically provided in the Loan Agreement, all material applicable zoning, environmental, land use, subdivision, building, fire, safety and health laws, statutes, ordinances, codes, rules, regulations and requirements affecting the Mortgaged Property permit the current use and occupancy thereof, and Mortgagor has obtained or is in the process of obtaining all consents, permits and licenses required for such use but in no event shall Mortgagor use the Mortgaged Property where such use requires consents, permits and/or licenses until obtaining the required consents, permits and licenses. Mortgagor has examined and is familiar with all applicable covenants, conditions, restrictions and reservations, and with all applicable laws, statutes, ordinances, codes and governmental rules, regulations and requirements affecting the Mortgaged Property, and to the best of Mortgagor’s knowledge, the Mortgaged Property complies in all material respects with all of the foregoing.

Section 2.2.

Use. The Mortgaged Property is not homestead property, a single or two family dwelling, nor is it agricultural property or in agricultural use. Except to the extent specifically permitted in the Loan Agreement, the construction, use and occupancy of the Project complies and will comply with all requirements of law and any Permitted Encumbrance. No portion of any Improvements will be/are constructed over areas subject to easements, in violation of the terms of such easements. Neither the zoning nor any of the right to construct or to use any Improvements will be/is to any extent dependent upon or related to any real estate other than the Land; and all approvals, licenses, permits, certifications, filings and other actions required by law with respect to the construction, use, occupancy and operation of the Mortgaged Property have been or will be received.

Section 2.3.

Utilities; Services. The Mortgaged Property is, or will be, serviced by all necessary public utilities, and all such utilities are operational and have sufficient capacity. The Mortgaged Property has access to all public streets and railroad spurs and tracks, and is benefited by all necessary easements, to allow the operation of the Mortgaged Property by Mortgagor in the ordinary course of business and in a prudent manner.

Section 2.4.

Construction of the Improvements. Except as otherwise specifically provided in the Loan Agreement, Mortgagor has, or prior to commencement of construction of any Improvements will have, received all requisite building permits and approvals, all approvals and consents to the plans and, without limiting the generality of the foregoing, complied with all requirements of law applicable to the construction of the Project. Mortgagor shall promptly complete all Improvements in a good and workmanlike manner in accordance with the plans approved by Mortgagee and free from any liens or Encumbrances of any nature except for this Mortgage and the Permitted Encumbrances.

ARTICLE III

CASUALTY; CONDEMNATION

Section 3.1.

Casualty, Repair, Proof of Loss. If any portion of the Mortgaged Property shall be damaged or destroyed by any cause (a “Casualty”), Mortgagor shall, subject to Section 3.2 below:

(a)

give notice to the Mortgagee as promptly as practicable; and

(b)

unless the Mortgagee has withheld Casualty proceeds during the twelve (12) months prior to the Maturity Date and insurance proceeds and other funds are not available to Mortgagor, promptly commence and diligently pursue to completion (in accordance with plans and specifications approved by Mortgagee) the restoration, repair and rebuilding of the Mortgaged Property as nearly as possible to its value, condition and character immediately prior to the Casualty; and

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(c)

if the Casualty is covered by insurance, immediately make proof of loss and to the extent permitted by this Mortgage, collect all insurance proceeds, all such proceeds to be payable to Mortgagee for deposit in the Condemnation and Awards Fund established pursuant to the Indenture or as Mortgagee shall direct. If an Event of Default shall be in existence, or if Mortgagor shall fail to provide notice to Mortgagee of filing proof of loss, or if Mortgagor shall not be diligently proceeding, in Mortgagee’s reasonable opinion, to collect such insurance proceeds, then Mortgagee may, but is not obligated to, make proof of loss, and is authorized, but is not obligated, to settle any claim with respect thereto, and to collect the proceeds thereof.

Section 3.2.

Use of insurance Proceeds. Mortgagee shall make the net insurance proceeds received by it, which amount shall be net of any amount payable pursuant to the Senior Mortgage (as that term is hereinafter defined) (after reimbursement of Mortgagee’s reasonable out-of-pocket costs of collecting and disbursing the same) available to Mortgagor to pay the cost of restoration, repair and rebuilding of the Mortgaged Property, subject to all of the following conditions precedent; provided that subparagraphs (b) through (f) shall apply only if the net insurance proceeds are $100,000 or more:

(a)

If the net insurance proceeds are less than $100,000, the Mortgagee shall pay the net proceeds to the Mortgagor. The Mortgagor shall proceed promptly to replace, repair, rebuild and restore the Mortgaged Property to substantially the same condition as existed before the taking or event causing the damage or destruction, with such changes, alterations and modifications (including substitution or addition of other property) as may be desired by the Mortgagor and will be suitable for continued operation of the Mortgagor for the business purposes of the Mortgagor, and the Mortgagor will pay all costs thereof. If the net proceeds are not sufficient to pay such costs in full, the Mortgagor shall pay that portion of the cost in excess of the amount of net proceeds and shall complete such repair, replacement, rebuilding or restoration as provided in the Indenture;

(b)

There shall be no Event of Default in existence at the time of any disbursement of the insurance proceeds, unless such Event of Default would be cured upon the application of such net proceeds; provided, however, this condition precedent shall be waived if Mortgagee is otherwise directed by the owners of a majority in aggregate principal amount of the Bonds outstanding;

(c)

Mortgagee shall have determined, based upon a certificate of an Independent Engineer (as defined in the Indenture), that the cost of restoration, repair and rebuilding is and will be equal to or less than the amount of insurance proceeds and other funds deposited by Mortgagor with Mortgagee;

(d)

Mortgagee shall have determined, based upon a certificate of an Independent Engineer, that the restoration, repair and rebuilding can be completed in accordance with plans and specifications approved by Independent Engineer (such approval not to be unreasonably withheld), in accordance with codes and ordinances;

(e)

All funds shall be disbursed as provided in the Indenture; and

(f)

If any of these conditions shall not be satisfied, except as otherwise provided above, then Mortgagee shall apply the insurance proceeds first to the Rebate Fund (as defined in the Indenture) in accordance with the Indenture then to prepay the Loan Obligations by transferring the moneys on deposit in the Condemnation and Awards Fund to the Redemption Account established pursuant to the Indenture. If any insurance proceeds shall remain after completion of the restoration, repair and rebuilding of the Mortgaged Property, they shall be applied in accordance with the Indenture.

In the event such insurance proceeds are made available for restoration and repair by the Mortgagee, Mortgagor shall pay all costs incurred by Mortgagee in connection with the application of such insurance proceeds (including but not limited to reasonable costs incurred by Mortgagee, and a title company or agent approved by Mortgagee in overseeing the disbursement of such insurance proceeds), and the Improvements shall be restored or rebuilt so as to be of at least equal value and substantially the same character as prior to such damage or destruction.

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Section 3.3.

Condemnation. If any portion of the Mortgaged Property shall be taken, condemned or acquired pursuant to exercise of the power of eminent domain or threat thereof (a “Condemnation”), Mortgagor shall:

(a)

give notice thereof to Mortgagee as promptly as practicable, and send a copy of each document received by Mortgagor in connection with the Condemnation to Mortgagee promptly after receipt; and

(b)

diligently pursue any negotiation and prosecute any proceeding in connection with the Condemnation at Mortgagor’s expense. If an Event of Default shall be in existence, or if Mortgagor, in Mortgagee’s reasonable opinion, shall not be diligently negotiating or prosecuting the claim, Mortgagee is authorized, but not required, to negotiate and prosecute the claim and appear at any hearing for itself and on behalf of Mortgagor and to compromise or settle all compensation for the Condemnation. Mortgagee shall not be liable to Mortgagor for any failure by Mortgagee to collect or to exercise diligence in collecting any such compensation. Mortgagor shall not compromise or settle any claim resulting from the Condemnation if such settlement shall result in payment of more than $500,000 less than Mortgagee’s reasonable estimate of the damages therefrom. All awards shall be paid to Mortgagee for deposit in the Condemnation and A ward s Fund.

Section 3.4.

Use of Condemnation Proceeds. Mortgagee shall make the net proceeds of any Condemnation received by it, which amount shall be net of any amount payable pursuant to the Senior Mortgage (after reimbursement of Mortgagee’s out-of-pocket costs of collecting and disbursing the same) available to Mortgagor for restoration, repair and rebuilding of the Mortgaged Property, subject to all of the following conditions precedent; provided that subparagraphs (b) through (f) shall apply only if the net proceeds of any Condemnation are $100,000 or more:

(a)

If the net condemnation proceeds are less than $100,000, the Mortgagee shall pay the net proceeds to the Mortgagor. The Mortgagor shall proceed promptly to replace, repair, rebuild and restore the Mortgaged Property to substantially the same condition as existed before the taking or event causing the damage or destruction, with such changes, alterations and modifications (including substitution or addition of other property) as may be desired by the Mortgagor and will be suitable for continued operation of the Mortgagor for the business purposes of the Mortgagor, and the Mortgagor will pay all costs thereof. If the net proceeds are not sufficient to pay such costs in full, the Mortgagor shall pay that portion of the cost in excess of the amount of net proceeds and shall complete such repair, replacement, rebuilding or restoration as provided in the Indenture;

(b)

There shall be no Event of Default in existence at the time of any disbursement of the condemnation proceeds, unless such Event of Default would be cured upon applicable of such net proceeds; provided, however, this condition precedent shall be waived if Mortgagee is otherwise directed by the owners of a majority in aggregate principal amount of the Bonds outstanding;

(c)

Mortgagee shall have determined, based upon a certificate of an Independent Engineer, that the cost of restoration, repair and rebuilding is and will be equal to or less than the amount of condemnation proceeds and other funds deposited by Mortgagor with Mortgagee;

(d)

Mortgagee shall have determined, based upon a certificate of an Independent Engineer, that the restoration, repair and rebuilding can be completed in accordance with plans and specifications approved by such Independent Engineer (such approval not to be unreasonably withheld), in accordance with codes and ordinances and in accordance with the terms, and within the time requirements in order to prevent termination, of any Lease;

(e)

All funds shall be disbursed in accordance with the Indenture; and

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(f)

If any of these conditions shall not be satisfied, except as otherwise provided above, then Mortgagee shall apply the condemnation proceeds first to the Rebate Fund in accordance with the Indenture to prepay the Loan Obligations by transferring the moneys on deposit in the Condemnation and Awards Fund to the Redemption Account. If any condemnation proceeds shall remain after completion of the restoration, repair and rebuilding of the Mortgaged Property, they shall be applied in accordance with the Indenture.

ARTICLE IV

DEFAULTS AND REMEDIES

Section 4.1.

Events of Default. The term “Event of Default,” wherever used in this Mortgage, shall mean the occurrence of an Event of Default under the Loan Agreement.

Section 4.2.

Remedies. Subject to any applicable notice and cure and/or grace periods in the Loan Agreement after an Event of Default, Mortgagee shall be entitled to invoke, subject to any limitations or restrictions imposed by applicable law, any and all of the rights and remedies described below, in addition to all other rights and remedies available to Mortgagee under any Loan Document or at law or in equity. All of such rights and remedies shall be cumulative, and the exercise of anyone or more of them shall not constitute an election of remedies.

(a)

Acceleration. Mortgagee may declare any or all of the Loan Obligations to be due and payable immediately. If, while any insurance proceeds or condemnation awards are being held by Mortgagee to reimburse Mortgagor for the cost of rebuilding or restoration of buildings or improvements on the Mortgaged Property, Mortgagee shall accelerate the Loan Obligations, then and in such event, Mortgagee shall be entitled to apply all such insurance proceeds and condemnation awards then held by it in reduction of the Loan Obligations and any excess held by it over the amount of Loan Obligations then due hereunder shall be returned to Mortgagor or the Persons legally entitled thereto without interest.

(b)

Receiver. Mortgagee shall have the right to obtain a receiver in accordance with applicable law at any time after an Event of Default which is continuing, whether or not an action for foreclosure has been commenced. Any court having jurisdiction shall, at the request of Mortgagee following an Event of Default which is continuing, appoint a receiver to take immediate possession of the Mortgaged Property and to rent or operate the same as the receiver may deem best for the interest of all parties concerned, and such receiver shall be liable to account to the Mortgagor only for the net profits, after application of rents, issues and profits upon the costs and expenses of the receivership and upon the Loan Obligations. Mortgagee shall have the right, at any time, to advance money to the receiver to pay any part or all of the items which the receiver should otherwise pay if cash were available from the Mortgaged Property, and sums so advance d shall be payable upon demand and shall accrue interest until paid in full at the interest rate applicable to advances made by the Trustee pursuant to the Indenture.

(c)

Entry. Mortgagee, in person, by agent or by court-appointed receiver, may enter, take possession of, manage and operate all or any part of the Mortgaged Property, and may also do any and all other things in connection with those actions that Mortgagee may in its sole discretion consider necessary and appropriate to protect the security of this Mortgage. Such other things may include: taking and possessing all of Mortgagor’s or the then owner’s books and records; entering into, enforcing, modifying or canceling leases on such terms and conditions as Mortgagee may consider proper; obtaining and evicting tenants; fixing or modifying Rents; collecting and receiving any payment of money owing to Mortgagee; terminating management agreements, contracts or agents/managers responsible for the operation and/or property management of the Mortgaged Property; completing any unfinished construction; and/or contracting for and making repairs and alterations. If Mortgagee so requests, Mortgagor shall assemble all of the Mortgaged Property that has been removed from the Land and make all of it available to Mortgagee at the site of the Land. Mortgagor hereby irrevocably constitutes and appoints Mortgagee as Mortgagor’s attorney-in-fact to, following the occurrence and during the continuation of an Event of Default, perform such acts and execute such documents as Mortgagee in its sole discretion may consider to be appropriate in connection with taking these measures, including endorsement of Mortgagor’s name on any instruments, such appointment being coupled with an interest and irrevocable.

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(d)

Cure; Protection of Security. Mortgagee may cure any breach or default of Mortgagor, and if it chooses to do so in connection with any such cure, Mortgagee may also enter the Mortgaged Property and/or do any and all other things which it may in its sole reasonable discretion consider necessary and appropriate to protect the security of this Mortgage. Any reasonable amounts expended by Mortgagee under this Section 4.2(d) shall be secured by this Mortgage and shall be payable upon demand and shall accrue interest at the interest rate applicable to advances made by the Trustee pursuant to the Indenture until paid in full.

(e)

Uniform Commercial Code Remedies. Mortgagee may exercise any or all of the remedies granted to a secured party under the UCC.

(f)

Foreclosure; Lawsuits. Mortgagee or its nominee may institute such mortgage foreclosure actions provided for by Indiana law in accordance with applicable law and may bid and become the purchaser of all or any part of the Mortgaged Property at any foreclosure or other sale hereunder, and the amount of Mortgagee’s successful bid shall be credited on the Loan Obligations. Without limiting the foregoing, Mortgagee may proceed by a suit or suits at law or in equity, whether for specific performance of any covenant or agreement herein contained or contained in any of the other Loan Documents, or in aid of the execution of any power herein or therein granted, or for any foreclosure under the judgment or decree of any court of competent jurisdiction, or for damages, or to collect the Loan Obligations secured hereby, or for the enforcement of any other appropriate legal, equitable, statutory or contractual remedy.

(g)

Other Remedies. Mortgagee may exercise all rights and remedies contained in any other instrument, document, agreement or other writing heretofore or otherwise available at law or in equity, concurrently or in the future executed by Mortgagor or any other Person or entity in favor of Mortgagee in connection with the Loan Obligations or any part thereof, without prejudice to the right of Mortgagee thereafter to enforce any appropriate remedy against Mortgagor. Mortgagee shall have the right to pursue all remedies afforded to a Mortgagee under applicable law, and shall have the benefit of all of the provisions of such applicable law, including all amendments thereto which may become effective from time to time after the date hereof. In the event any provision of such statutes which is specifically referred to herein may be repealed, Mortgagee shall have the benefit of such provision as most recently existing prior to such repeal, as though the same were incorporated herein by express reference.

(h)

Power of Sale for Personal Mortgaged Property. Under this power of sale, Mortgagee shall have the discretionary right to cause some or all of the Mortgaged Property, which constitutes personal property, to be sold or otherwise disposed of in any combination and in any manner permitted by applicable law.

(i)

Determination of Personal Property. For purposes of the power of sale provided above, Mortgagee may elect to treat as personal property any Mortgaged Property which is intangible or which can be severed from the Land or Improvements without causing structural damage. If it chooses to do so, Mortgagee may dispose of any personal property, in any manner permitted by Article 9 of the UCC, including any public or private sale, or in any manner permitted by any other applicable law.

(j)

Single or Multiple Foreclosure Sales. If the Mortgaged Property consists of more than one lot, parcel or item of Mortgaged Property, Mortgagee may, in accordance with applicable law:

(i)

designate the order in which the lots, parcels and/or items shall be sold or disposed of or offered for sale or disposition; and

(ii)

elect to dispose of the lots, parcels and/or items through a single consolidated sale or disposition to be held or made under or in connection with judicial proceedings, or by virtue of a judgment and decree of foreclosure and sale, or pursuant to the power of sale contained herein; or through two or more such sales or dispositions; or in any other manner Mortgagee may deem to be in its best interests (any foreclosure sale or disposition as permitted by the terms hereof is sometimes referred to herein as a “Foreclosure Sale,” and any two or more such sales, “Foreclosure Sales”).

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If it chooses to have more than one Foreclosure Sale, Mortgagee at its option may cause the Foreclosure Sales to be held simultaneously or successively, on the same day, or on such different days and at such different times and in such order as it may deem to be in its best interests. No Foreclosure Sale shall terminate or affect the liens of this Mortgage on any part of the Mortgaged Property which has not been sold, until the Loan Obligations have been paid in full.

Section 4.3.

Expenses of Exercising Rights, Powers and Remedies. The reasonable expenses (including any receiver’s fees, reasonable attorneys’ fees, appraisers’ fees, environmental engineers’ and/or consultants’ fees, auctioneer’s fees and costs, costs incurred for documentary and expert evidence, stenographers’ charges, publication costs, costs (which may be estimated as to items to be expended after entry of the decree of foreclosure) of procuring all abstracts of title, continuations of abstracts of title, title searches and examinations, UCC and chattel lien searches, and similar data and assurances with respect to title as Mortgagee may deem reasonably necessary either to prosecute any foreclosure action or to evidence to bidders at any sale which may be had pursuant to any foreclosure decree the true condition of the title to or the value of the Mortgaged Property) incurred by Mortgagee after the occurrence of any Event of Default and/or in pursuing the rights, powers and remedies contained in this Mortgage shall be immediately due and payable by Mortgagor, with interest thereon from the date incurred at the interest rate applicable to advances made by the Trustee pursuant to the Indenture and shall be added to the Loan Obligations secured by this Mortgage.

Section 4.4.

Restoration of Position. In case Mortgagee shall have proceeded to enforce any right under this Mortgage by foreclosure, sale, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely, then, and in every such case, Mortgagor and Mortgagee shall be restored to their former positions and rights hereunder with respect to the Mortgaged Property subject to the lien hereof, except as might otherwise be determined by a final order of a court of competent jurisdiction.

Section 4.5. Marshalling. Mortgagor, for itself and on behalf of all Persons which may claim under Mortgagor, hereby waives all requirements of law relating to the marshalling of assets, if any, which would be applicable in connection with the enforcement by Mortgagee of its remedies for an Event of Default hereunder, absent this waiver. Mortgagee shall not be required to sell or realize upon any portion of the Mortgaged Property before selling or realizing upon any other portion thereof.

Section 4.6.

Waivers. No waiver of any provision hereof shall be implied from the conduct of the parties. Any such waiver must be in writing and must be signed by the party against which such waiver is sought to be enforced. The waiver or release of any breach of the provisions set forth herein to be kept and performed shall not be a waiver or release of any preceding or subsequent breach of the same or any other provision. No receipt of partial payment after acceleration of the Loan Obligations shall waive the acceleration. No payment by Mortgagor or receipt by Mortgagee of a lesser amount than the full amount secured hereby shall be deemed to be other than on account of the sums due and payable hereunder, nor shall any endorsement or statement on any check or any letter accompanying any check or payment be deemed an accord and satisfaction, and Mortgagee may accept any check or payment without prejudice to Mortgagee’s right to recover the balance of suc h sums or to pursue any other remedy provided in this Mortgage. The consent by Mortgagee to any matter or event requiring such consent shall not constitute a waiver of the necessity for such consent to any subsequent matter or event.

Section 4.7.

Mortgagee’s Right to Cure Defaults. If Mortgagor shall fail to comply with any of the terms of this Mortgage with respect to the procuring of insurance, the payment of taxes, assessments and other charges, the keeping of the Mortgaged Property in repair, or any other term contained herein and such failure shall continue for a period of three (3) days after notice of such failure from Mortgagee, Mortgagee may make advances to perform the same without releasing any of the Loan Obligations. Mortgagor agrees to repay upon demand all sums so advanced and all sums expended by Mortgagee in connection with such performance, including without limitation reasonable attorneys’ fees, with interest at the interest rate applicable to advances made by the Trustee pursuant to the Indenture from the dates such advances are made until paid in full, and all sums so advanced and/or expenses incurred, with interest, shall be secured hereby, but no such advan ce and/or incurring of expense by Mortgagee shall be deemed to relieve Mortgagor from any default hereunder, or to release any of the Loan Obligations.

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Section 4.8.

 Suits and Proceedings. Mortgagee shall have the power and authority, upon prior notice to Mortgagor, to institute and maintain any suits and proceedings as Mortgagee may deem advisable to (a) prevent any impairment of the Mortgaged Property by any act which may be unlawful or by any violation of this Mortgage, (b) preserve or protect its interest in the Mortgaged Property, or (c) restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if, in the sole opinion of Mortgagee, the enforcement of or compliance with such enactment, rule or order might impair the security hereunder or be prejudicial to Mortgagee’s interest.

ARTICLE V

MISCELLANEOUS

Section 5.1.

Binding Effect; Survival; Number; Gender. This Mortgage shall be binding on and inure to the benefit of the parties hereto, and their respective heirs, legal representatives, successors and assigns. All agreements, representations and warranties contained herein or otherwise heretofore made by Mortgagor to Mortgagee shall survive the execution and delivery hereof. The singular of all terms used herein shall include the plural, the plural shall include the singular, and the use of any gender herein shall include all other genders, where the context so requires or permits.

Section 5.2.

Severability. The unenforceability or invalidity of any provision of this Mortgage as to any Person or circumstance shall not render that provision unenforceable or invalid as to any other Person or circumstance. If any provision of this Mortgage is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Mortgage, the legality, validity and enforceability of the remaining provisions of this Mortgage shall not be affected thereby.

Section 5.3.

Notices. Any notice or other communication to any party in connection with this Mortgage shall be in writing and shall be sent by manual delivery, facsimile transmission, overnight courier or United States mail (postage prepaid) addressed to such party at the address specified below, or at such other address as such party shall have specified to the other party hereto in writing. All periods of notice shall be measured from the date of delivery thereof if manually delivered, from the date of sending thereof if sent by facsimile transmission, from the first Business Day after the date of sending if sent by overnight courier, or from four (4) days after the date of mailing if mailed. Notices shall be given to or made upon the respective parties hereto at their respective addresses set forth below:

If to Mortgagee:

U.S. Bank National Association, as Trustee

10 West Market Street

Suite 1150

Indianapolis, IN 46204

Attention: Corporate Trust

Facsimile: (317) 636-1951

With copies to:

Wooden & McLaughlin LLP

One Indiana Square, Suite 1800

Indianapolis, IN 46204

Attention: Thomas W. Dinwiddie

Facsimile: (317) 639-6444

If to Mortgagor:

Indiana Bio-Energy, LLC

969 North Main Street, P.O. Box 297

Bluffton, IN 46714

Attention: President

Facsimile: (260) 353-1100

15

With copies to:

Krieg DeVault LLP

2800 One Indiana Square

Indianapolis, IN 46204

Attention: John R. Kirkwood, Esq.

Facsimile: (317) 636-1507

Either party may change its address for notices by a notice given pursuant to this Section.

Section 5.4.

Applicable Law. This Mortgage shall be construed and enforceable in accordance with, and be governed by, the laws of the State of Indiana, without giving effect to conflict of laws or principles thereof. The Loan Agreement shall be construed and enforceable in accordance with, and be governed by, the laws of the State of Indiana, without giving effect to conflict of laws or principles thereof.

Section 5.5.

Waiver of Jury Trial. MORTGAGOR AND MORTGAGEE, BY ITS ACCEPTANCE OF THIS MORTGAGE, EACH IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS MORTGAGE OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 5.6.

Effect. This Mortgage is in addition to and not in substitution for any other guarantees, covenants, obligations or other rights now or hereafter held by Mortgagee from any other Person or entity in connection with the Loan Obligations.

Section 5.7.

Assignability. Mortgagee shall have the right to assign this Mortgage, in whole or in part, or sell participation interests herein, to any Person obtaining an interest in the Loan Obligations.

Section 5.8.

Headings. Headings of the Sections of this Mortgage are inserted for convenience only and shall not be deemed to constitute a part hereof.

Section 5.9.

Fixture Filing. This instrument shall be deemed to be a Fixture Filing within the meaning of the UCC, and for such purpose, the following information is given:

(a)	Name and address of Debtor:	Indiana Bio-Energy, LLC 969 North Main Street, P.O. Box 297 Bluffton, IN 46714 Facsimile: (260) 353-1100
(b)	Type of Organization:	Limited Liability Company
(c)	Jurisdiction of Organization:	Indiana
(d)	Organizational J.D. No.:	2004120800099
(e)	Name and address of Secured Party:	U.S. Bank National Association, as Trustee l0 West Market Street Suite 1150 Indianapolis, IN 46204 Attention: Corporate Trust Facsimile: (317) 636-1951
(f)	Description of the collateral:	See granting clauses above
(g)	Description of real estate to which the collateral is attached or upon which it is or will be located:	See Exhibit A hereto

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Some of the above-described collateral is or is to become fixtures upon the above described real estate, and this Fixture Filing is to be filed for record in the public real estate records.

Section 5.10.

Estoppel Certificate. At any time and from time to time, within three (3) Business Days after receipt from Mortgagee of a written request therefore, Mortgagor shall prepare, execute and deliver to Mortgagee, and/or any other party which Mortgagee may designate, an estoppel certificate stating: (a) the amount of the unpaid principal balance and accrued interest secured by this Mortgage on the date thereof; (b) the date upon which the last payment secured by this Mortgage was made and the date the next payment secured by this Mortgage is due; and (c) that the provisions of the Loan Agreement, this Mortgage and the other Loan Documents described in said request have not been materially amended or changed in any manner, that there are no material defaults or events of default then existing under the terms of the Loan Agreement, this Mortgage or the other Loan Documents described in said request, and that Mortgagor has no defenses, claims or offsets ag ainst full enforcement hereof and thereof according to the terms hereof and thereof, or listing and describing any such amendments, changes, defaults, events of default, defenses, claims or offsets which do exist.

Section 5.11.

Senior Loan. Concurrently herewith, Mortgagor executed and delivered to AgStar Financial Services, PCA (the “Senior Lender”), a Construction/Permanent Mortgage, Security Agreement, Assignment of Leases and Rents, Financing Statement and Fixture Filing dated February 27, 2007 (the “Senior Mortgage”), which instrument secures a loan from the Senior Lender to the Mortgagor in the initial principal amount of $90,000,000, and which instrument will be or has been recorded with the Recorder of Wells County, Indiana, prior to the recording of this Mortgage.

In connection therewith, the Senior Lender and the Mortgagee entered into an Intercreditor Agreement dated as of February 27, 2007, which instrument sets forth the relative rights and priorities of the Senior Lender and the Mortgagee under the Financing Documents and the Bond Documents (both as defined therein).

This Mortgage is subordinate in all respects to the Senior Mortgage and the Intercreditor Agreement as respectively amended and supplemented.

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IN WITNESS WHEREOF, Mortgagor has executed and delivered as of the date first written above.

IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THIS AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY THOSE TERMS IN WRITING ARE ENFORCEABLE. No OTHER TERMS OR ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT MAYBE LEGALLY ENFORCED. You MAY CHANGE THE TERMS OF THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.

MORTGAGOR:

INDIANA BIO-ENERGY, LLC

an Indiana limited liability company

By: /s/ Stephen J. Hogan             

Printed Name: Stephan J. Hogan

Title: President

Prepared by and when recorded please return

to Susan E. Rollins, Esq.,

Chapman and Cutler LLP,

III West Monroe Street,

Chicago, Illinois 60603-4080

I affirm, under penalties for perjury, that I have taken reasonable care to redact each Social Security number in this document, unless required by law. Susan E. Rollins

CERTIFICATE OF ACKNOWLEDGMENT

ST ATE OF INDIANA

)

) ss

COUNTY OF MARION

)

Before me, a Notary Public in and for said County and State, personally appeared Stephen J. Hogan, known to me to be the President of Indiana Bio-Energy, LLC, an Indiana limited liability company, and acknowledged the execution of the foregoing for and on behalf of said limited liability company.

Witness my hand and Notarial Seal, this 21^st day of March, 2007.

 /s/ Joy R. Burwell                                      

Notary Public - Signature

 Joy R. Burwell                                          

Notary Public – Printed

Date: March 21, 2007                                 

My Commission Expires:

        11/15/2008                  

My County of Residence: Hamilton County, Indiana

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EXHIBIT A

LEGAL DESCRIPTION

The following described real estate located in Wells County, Indiana:

Parcel No. 90-08-08-100-001.000-002

Part of the Northeast Quarter of Section 8, Township 26 North, Range 12 East, Harrison Township, Wells County, Indiana, described as follows: Beginning at the Northwest corner of said Northeast Quarter found per record witness; thence easterly, 2229.08 feet along the north line of said Northeast Quarter to a 5/8” rebar stake set on the westerly right-of-way line of the Norfolk and Western Railway Company; thence southwesterly, deflecting right 111 degrees 41 minutes 00 seconds, 2861.11 feet along said westerly right-of-way line to a 5/8” rebar stake set on the south line of said Northeast Quarter; thence westerly, deflecting right 67 degrees 21 minutes 40 seconds, 1121.70 feet along said south line to a 5/8” rebar stake set at the Southwest Corner of said Northeast Quarter; thence northerly, deflecting right 89 degrees 52 minutes 40 seconds, 2677.84 feet along the west line of said Northeast Quarter to the place of beginning. Containing 102.50 acres.

Parcel No. 90-08-08-200-001.000-010; 90-08-08-200-002.000-010

Part of the Northwest Quarter of Section 8, Township 26 North, Range 12 East, Harrison Township, Wells County, Indiana, described as follows:

Beginning at the Southwest corner of said Northwest Quarter found per record witness; thence Northerly, 1208.78 feet along the West line of said Northwest Quarter to a P. K. nail at the Southwest corner of the 17.04 acre tract described in Deed Record 130, Page 872; thence Northeasterly, deflecting right 65 degrees 20 minutes 38 seconds, 2931.66 feet along the South line of said 17.04 acre tract to a 5/8” rebar stake on the East line of said Northwest Quarter; thence Southerly, deflecting right 114 degrees 57 minutes 47 seconds, 1112.76 feet along said East line to a 5/8” rebar stake at the Southeast corner of the Northeast Quarter of said Northwest Quarter; thence Westerly, deflecting right 90 degrees 04 minutes 33 seconds, 1329.23 feet to a 5/8” rebar stake at the Southwest corner of the Northeast Quarter of said Northwest Quarter; thence Southerly, deflecting left 90 degrees 13 minutes 45 seconds, 1337.85 feet to a 518” rebar stake at the Southeast c orner of the Southwest Quarter of said Northwest Quarter; thence Westerly, deflecting right 90 degrees 16 minutes 33 seconds, 1325.66 feet along the South line of said Northwest Quarter to the place of beginning. Containing 70.79 acres more or less.

Parcel No. 90-08-08-300-002.000-002

Tract I: The Southeast Quarter of the Northwest Quarter of Section 8, Township 26 North, Range 12 East, Wells County, Indiana, containing 40 acres, more or less.

Tract II: The east half of the Southwest Quarter of Section 8, Township 26 North, Range 12 East, Wells County, Indiana, containing 80 acres, more or less.

EXCEPTING THEREFROM, Part of the Southwest Quarter of Section 8, Township 26 North, Range 12 East, Harrison Township, Wells County, Indiana, described as follows: Starting at the southeast corner of said Southwest Quarter found per record witness; thence westerly, 451.42 feet along the south line of said Southwest Quarter to a PK nail which shall be the place of beginning; thence continuing westerly, 253.58 feet along said south line, to a P.K. nail; thence northerly, deflecting right 90 degrees 00 minutes 00 seconds, 280.00 feet to a 5/8” rebar stake; thence easterly, deflecting right 90 degrees 00 minutes 00 seconds, 253.58 feet parallel with the south line of said Southwest Quarter to a 5/8” rebar stake; thence southerly, deflecting right 90 degrees 00 minutes 00 seconds, 280.00 feet to the place of beginning. Containing 1.63 acres, more or less.

Containing in all 118.37 acres, after exception.

Parcel No. 90-08-08-400-027.000-010

Part of the Northwest Quarter of Section 8, Township 26 North, Range 12 East, Harrison Township, Wells County, Indiana, described as follows:

Starting at the northwest corner of said Northwest Quarter; thence southerly, 1185.11 feet, along the west line of said Northwest Quarter to its intersection with the southerly right-of-way line of the Norfolk and Western Railway Company, which shall be the place of beginning; thence northeasterly, deflecting left 114 degrees 39 minutes 22 seconds, 2804.95 feet, along said right-of-way line to the north line of said Northwest Quarter; thence easterly, deflecting right 24 degrees 59 minutes 26 seconds, 116.37 feet, along said north line to the northeast corner of said Northwest Quarter; thence southerly, deflecting right 89 degrees 58 minutes 17 seconds, 226.16 feet, along the east line of said Northwest Quarter; thence southwesterly, deflecting right 65 degrees 02 minutes 17 seconds, 2931.66 feet, parallel with the southerly right-of-way line of the Norfolk and Western Railway Company to the west line of said Northwest Quarter; thence northerly, deflecting right 114 degree s 39 minutes 22 seconds, 279.69 feet, along said west line to the place of beginning. Containing 17.04 acres.

Parcel No. 90-08-08-200-001.000-010; 90-08-08-200-002.000-010

Part of the Northwest Quarter of Section 8, Township 26 North, Range 12 East, Harrison Township, Wells County, Indiana, described as follows:

Beginning at the Southwest corner of said Northwest Quarter found per record witness; thence Northerly, 1208.78 feet along the West line of said Northwest Quarter to a P.K. nail at the Southwest corner of the 17.04 acre tract described in Deed Record 130, Page 872; thence Northeasterly, deflecting right 65 degrees 20 minutes 38 seconds, 2931.66 feet along the South line of said 17.04 acre tract to a 5/8” rebar stake on the East line of said Northwest Quarter; thence Southerly, deflecting right 114 degrees 57 minutes 47 seconds, 1112.76 feet along said East line to a 5/8” rebar stake at the Southeast corner of the Northeast Quarter of said Northwest Quarter; thence Westerly, deflecting right 90 degrees 04 minutes 33 seconds, 1329.23 feet to a 5/8” rebar stake at the Southwest corner of the Northeast Quarter of said Northwest Quarter; thence Southerly, deflecting left 90 degrees 13 minutes 45 seconds, 1337. 85 feet to a 5/8” rebar stake at the Southeast c orner of the Southwest Quarter of said Northwest Quarter; thence Westerly, deflecting right 90 degrees 16 minutes 33 seconds, 1325.66 feet along the South line of said Northwest Quarter to the place of beginning. Containing 70.79 acres more or less.

Parcel No. 90-08-08-300-001.000-002

Part of the Southwest Quarter of Section 8, Township 26 North, Range 12 East, Harrison Township, Wells County, Indiana, described as follows: Starting at the southeast corner of said Southwest Quarter found per record witness; thence westerly, 451.42 feet along the south line of said Southwest Quarter to a P.K. nail which shall be the place of beginning; thence continuing westerly, 253.58 feet along said south line, to a PK nail; thence northerly, deflecting right 90 degrees 00 minutes 00 seconds, 280.00 feet to a 5/8” rebar stake; thence easterly, deflecting right 90 degrees 00 minutes 00 seconds, 253.58 feet parallel with the south line of said Southwest Quarter to a 5/8” rebar stake; thence southerly, deflecting right 90 degrees 00 minutes 00 seconds, 280.00 feet to the place of beginning. Containing 1.63 acres, more or less.

Parcel No. 90-08-08-300-006.000-010

THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, CONTAINING 40.46 ACRES.

Parcel No. 90-08-08-300-004.000-010

ALSO: THE SOUTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, CONTAINING 40.40 ACRES.

EXCEPTING THEREFROM: PART OF THE SOUTHWEST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, DESCRIBED AS FOLLOWS:

BEGINNING AT THE SOUTHWEST CORNER OF SAID SOUTHWEST QUARTER FOUND PER RECORD WITNESS; THENCE NORTHERLY, 527.00 FEET ALONG THE WEST LINE OF SAID SOUTHWEST QUARTER TO A P.K. NAIL; THENCE EASTERLY, DEFLECTING RIGHT 90 DEGREES 00 MINUTES 16 SECONDS, 655.00 FEET PARALLEL WITH THE SOUTH LINE OF SAID SOUTHWEST QUARTER TO A 5/8” REBAR STAKE; THENCE SOUTHERLY, DEFLECTING RIGHT 89 DEGREES 59 MINUTES 44 SECONDS, 527.00 FEET PARALLEL WITH THE WEST LINE OF SAID SOUTHWEST QUARTER TO A P.K. NAIL ON THE SOUTH LINE OF SAID SOUTHWEST QUARTER: THENCE WESTERLY, DEFLECTING RIGHT 90 DEGREES 00 MINUTES 16 SECONDS, 655.00 FEET ALONG SAID SOUTH LINE TO THE PLACE OF BEGINNING. CONTAINING 7.92 ACRES.

CONTAINING AFTER SAID EXCEPTION 32.48 ACRES.

Parcel No. 90-08-08-400-004.000-002

Commencing at the southwest corner of the southeast quarter of section eight (8), in township 26 north, range 12 east, and running thence north 1324.70 feet to the northwest corner of the south half of said quarter, thence east 558.20 feet to the west line of the right of way of the Ft. Wayne, Cincinnati and Louisville railroad company, thence in a southwesterly direction along the west line of said Railroad right of way a distance of 1437.50 feet to the south line of said Section 8, thence west 12 feet to the place of beginning, containing 8.67 acres.

Parcel No. 90-08-08-400-020.000-002

PART OF THE NORTH HALF OF THE SOUTHEAST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, DESCRIBED AS FOLLOWS:

STARTING AT THE NORTHEAST CORNER OF SAID SOUTHEAST QUARTER FOUND PER RECORD WITNESS; THENCE WESTERLY, 1528.71 FEET ALONG THE NORTH LINE OF SAID SOUTHEAST QUARTER TO THE WESTERLY RIGHT-OF-WAY LINE OF THE NORFOLK & WESTERN RAILROAD, WHICH Shall BE THE PLACE OF BEGINNING; THENCE SOUTHWESTERLY, DEFLECTING LEFT 67 DEGREES 21 MINUTES 32 SECONDS, 617.57 FEET ALONG SAID WESTERLY RIGHT-OF-WAY LINE; THENCE SOUTHWESTERLY, DEFLECTING RIGHT 00 DEGREES 02 MINUTES 05 SECONDS, 816.82 FEET ALONG SAID WESTERLY RIGHT-OF-WAY LINE TO THE SOUTH LINE OF THE NORTH HALF OF SAID SOUTHEAST QUARTER; THENCE WESTERLY, DEFLECTING RIGHT 67 DEGREES 09 MINUTES 58 SECONDS, 565.65 FEET ALONG THE SOUTH LINE OF THE NORTH HALF OF SAID SOUTHEAST QUARTER TO THE WEST LINE OF SAID SOUTHEAST QUARTER; THENCE NORTHERLY, DEFLECTING RIGHT 90 DEGREES 03 MINUTES 19 SECONDS, 1325.61 FEET ALONG THE WEST LINE OF SAID SOUTHEAST QUARTER TO THE NORTHWEST CORNER OF SAID SOUTHEAST QUARTER; THENCE EASTERLY, DEFLECTING RIGHT 90 DEGREES 07 MINUTES 21 SECONDS, 1120.66 FEET ALONG THE NORTH LINE OF SAID SOUTHEAST QUARTER TO THE PLACE OF BEGINNING. CONTAINING 25.64 ACRES MORE OR LESS.

NOW KNOWN AS:

PARCEL 1:

PART OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, DESCRIBED AS FOLLOWS;

BEGINNING AT THE SOUTHWEST CORNER OF THE NORTHWEST QUARTER OF SAID SECTION 8; THENCE NORTH 00 DEGREES 09 MINUTES 53 SECONDS WEST, (ASSUMED AND THE BASIS FOR THESE BEARINGS), 1488.47 FEET ALONG THE WEST LINE OF SAID NORTHWEST QUARTER TO THE SOUTHERLY RIGHT-OF-WAY LINE OF THE NORFOLK AND SOUTHERN RAILROAD; THENCE NORTH 65 DEGREES 10 MINUTES 45 SECONDS EAST, 2804.95 FEET ALONG SAID SOUTHERLY RIGHT-OF-WAY LINE TO THE NORTH LINE OF SAID NORTHWEST QUARTER; THENCE SOUTH 89 DEGREES 49 MINUTES 48 SECONDS EAST 116.37 FEET ALONG SAID NORTH LINE TO THE NORTHWEST CORNER OF THE NORTHEAST QUARTER OF SAID SECTION 8; THENCE SOUTH 88 DEGREES 46 MINUTES 46 SECONDS EAST, 2227.06 FEET ALONG THE NORTH LINE OF SAID NORTHEAST QUARTER TO THE WESTERLY RIGHT-OF-WAY LINE OF THE NORFOLK AND SOUTHERN RAILROAD; THENCE SOUTH 22 DEGREES 53 MINUTES 10 SECONDS WEST, 3478.34 FEET ALONG SAID WESTERLY RIGHT-OF-WAY LINE; THENCE SOUTH 22 DEGREES 55 MINUTES 15 SECONDS WEST, 2255.13 FEET ALONG SAID WESTERLY RIGHT-OF-WAY LINE TO THE SOUTH LINE OF THE SOUTHEAST QUARTER OF SAID SECTION 8; THENCE SOUTH 89 DEGREES 54 MINUTES 33 SECONDS WEST, 8.77 FEET ALONG THE SOUTH LINE OF SAID SOUTHEAST QUARTER TO THE SOUTHEAST CORNER OF THE SOUTHWEST QUARTER OF SAID SECTION 8; THENCE NORTH 90 DEGREES 00 MINUTES 00 SECONDS WEST, 1322.25 FEET ALONG THE SOUTH LINE OF SAID SOUTHWEST QUARTER TO THE SOUTHWEST CORNER OF THE EAST HALF OF SAID SOUTHWEST QUARTER; THENCE NORTH 00 DEGREES 04 MINUTES 08 SECONDS, EAST, 2657.35 FEET ALONG THE WEST LINE OF THE EAST HALF OF SAID SOUTHWEST QUARTER TO THE NORTH LINE OF SAID SOUTHWEST QUARTER; THENCE NORTH 89 DEGREES 44 MINUTES 08 SECONDS WEST, 1325.66 FEET ALONG SAID NORTH LINE TO THE PLACE OF BEGINNING. CONTAINING 346.08 ACRES MORE OR LESS.

PARCEL 2:

Tract 1:

THE NORTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, CONTAINING 40.46 ACRES.

Tract 2:

ALSO: THE SOUTHWEST QUARTER OF THE SOUTHWEST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, CONTAINING 40.40 ACRES.

EXCEPTING THEREFROM: PART OF THE SOUTHWEST QUARTER OF SECTION 8, TOWNSHIP 26 NORTH, RANGE 12 EAST, HARRISON TOWNSHIP, WELLS COUNTY, INDIANA, DESCRIBED AS FOLLOWS:

BEGINNING AT THE SOUTHWEST CORNER OF SAID SOUTHWEST QUARTER FOUND PER RECORD WITNESS; THENCE NORTHERLY, 527.00 FEET ALONG THE WEST LINE OF SAID SOUTHWEST QUARTER TO A P.K. NAIL; THENCE EASTERLY, DEFLECTING RIGHT 90 DEGREES 00 MINUTES 16 SECONDS, 655.00 FEET PARALLEL WITH THE SOUTH LINE OF SAID SOUTHWEST QUARTER TO A 5/8” REBAR STAKE; THENCE SOUTHERLY, DEFLECTING RIGHT 89 DEGREES 59 MINUTES 44 SECONDS, 527.00 FEET PARALLEL WITH THE WEST LINE OF SAID SOUTHWEST QUARTER TO A P.K. NAIL ON THE SOUTH LINE OF SAID SOUTHWEST QUARTER; THENCE WESTERLY, DEFLECTING RIGHT 90 DEGREES 00 MINUTES 16 SECONDS, 655.00 FEET ALONG SAID SOUTH LINE TO THE PLACE OF BEGINNING. CONTAINING 7.92 ACRES.

CONTAINING AFTER SAID EXCEPTION 32.48 ACRES.

PERMITTED ENCUMBRANCES

1.

Terms and provisions of a Grant of Easement granted to the City of Bluffton, dated June 25, 1998 and recorded June 26, 1998 in Deed Book 134 Page 399 of the Wells County, Indiana records.

2.

Terms and provisions of a Grant of Easement granted to the City of Bluffton, dated July 2, 1998, and recorded July 2, 1998 in Deed Book 134 Page 423 of the Wells County, Indiana records.

3.

Covenants, conditions and restrictions contained in the Restrictive Covenants Southwest Bluffton Industrial Park, dated June 15, 2004, and recorded June 17, 2004, in Miscellaneous Record 65 Page 59 of the Wells County, Indiana records (provisions, if any, based on race, color, religion, sex, handicap, familiar status or national origin, are omitted). Pertains to the 17.04 Acres tract conveyed in Deed Record 130 page 871 of the Wells County, Indiana records as shown on a survey by Joel A. Hoehn, dated February 17, 2007, and revised February 19, 2007. (NOTE: Mortgagor is undertaking to remove the Restricted Covenants from the encumbered tract pursuant to the Senior Loan Agreement between the Senior Lender and the Mortgagor dated as of February 27, 2007)

4.

Terms and provisions of a Right of Way Grant, dated January 27, 1984, and recorded February 22, 1984, in Miscellaneous Book 52 Page 669 of the Wells County, Indiana records.

5.

Right of Way for drainage, flow and maintenance of Addington Legal Tile Drain as set forth in IC 36-9-27-33.

6.

Construction/Permanent Mortgage, Security Agreement, Assignment of Leases and Rents, Financing Statement and Fixture Filing from Mortgagor to Agstar Financial Services, PCA, dated February 27, 2007, and recorded February 28, 2007 in Mortgage Book 128 Page 241 of the Wells County, Indiana records.

EXHIBIT B

EX-10

Exhibit 10.50

GREEN PLAINS RENEWABLE ENERGY, INC.

NON-STATUTORY STOCK OPTION AGREEMENT

THIS AGREEMENT is made as of October 15th, 2008, between Green Plains Renewable Energy, Inc., an Iowa corporation (the “Company”), and Steve Bleyl (the “Optionee”).

THE PARTIES AGREE AS FOLLOWS:

1.

Option Grant. The Company hereby grants to the Optionee an option (the “Option”) to purchase the number of shares of the Company’s common stock (the “Shares”), for an exercise price per share (the “Option Price”) as of the Grant Date, all as set forth below:

Shares under option: 50,000

Option Price per Share: $5.99

Grant Date: October 15, 2008

The Option granted hereunder will not be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.

2.

Installment Exercises. Subject to such further limitations as are provided herein, the Option shall become exercisable in four installments, the Optionee having the right hereunder to purchase from the Company the following number of Shares upon exercise of the Option, in cumulative fashion:

Number of Shares	When Exercisable
12,500	Grant Date
12,500	First anniversary of Grant Date
12,500	Second anniversary of Grant Date
12,500	Third anniversary of Grant Date

To the extent not exercisable upon Optionee’s termination of employment with the Company, the Option shall be forfeited, unless otherwise specified in this Agreement.  The Option shall fully vest in the event of a Change in Control.  A “Change in Control” shall be deemed to have occurred if, in a single transaction or series of related transactions:

(a)

any person (as such term is used in Section 13(d) and 14(d) of the 1934 Act, or persons acting as a group, other than a trustee or fiduciary holding securities under an employment benefit program, is or becomes a “beneficial owner” (as defined in Rule 13-3 under the 1934 Act), directly or indirectly of securities of the Company representing 51% or more of the combined voting power of the Company, or

(b)

there is a merger, consolidation, or other business combination transaction of the Company with or into an other corporation, entity or person, other than a transaction in which the holders of at least a majority of the shares of voting capital stock of the Company outstanding immediately prior to such transaction continue to hold (either by such shares remaining outstanding or by their being converted into shares of voting capital stock of the surviving entity) a majority of the total voting power represented by the shares of voting capital stock of the Company (or surviving entity) outstanding immediately after such transaction, or

(c)

all or substantially all of the Company’s assets are sold.

In addition, in the event of a termination of Optionee’s employment by the Company without Cause, the Option will be deemed to have vested through the next annual anniversary of the Grant Date.  “Cause” shall mean one of the following: (a) a material breach by Optionee of the terms of this Agreement (including without limitation habitual neglect of or deliberate or intentional refusal to perform any of his material duties and obligations under this Agreement) other than due to Optionee’s death or Disability, not cured within two (2) weeks from receipt of notice from the Board of such breach, (b) material wrongful misappropriation of any money, assets or other property of the Company or any subsidiary or affiliate of the Company, (c) the conviction of Optionee for any felony or a crime involving moral turpitude, or (d) Optionee’s chronic alcoholism or chronic drug addiction.  “Disability 8; shall mean Optionee is unable to perform (except due to chronic alcoholism or chronic drug addiction) the essential functions of his job and render services of the character previously performed in the ordinary course and that such inability continues for a period of at least three consecutive months (or for shorter periods totaling more than three months during any period of twelve (12) consecutive months).  

3.

Shareholder Rights. No rights or privileges of a shareholder in the Company are conferred by reason of the granting of the Option. Optionee will not become a shareholder in the Company with respect to the Shares unless and until the Option has been properly exercised and the Option Price fully paid as to the portion of the Option exercised.

4.

Termination. Subject to earlier termination as provided in the Option Plan, this Option will expire, unless previously exercised in full, on the eighth anniversary of the Grant Date.  Notwithstanding the foregoing, to the extent not previously exercised, the Option will terminate, if earlier:  (i) immediately if the Optionee is terminated for Cause; or (ii) twelve (12) months after the date that the Optionee ceases to be an Employee by reason other than termination for Cause.

5.

Terms of the Option Plan.

(a)

The following provisions shall govern the exercise of any options held by the Optionee at the time of cessation of Service or death:

(i)

Any option outstanding at the time of the Optionee’s cessation of Service for any reason shall remain exercisable for ninety (90) days thereafter, but the Option shall not be exercisable after the expiration of the Option term.

(ii)

To the extent exercisable in accordance with Paragraph 2 at the time of death, the Option may be subsequently exercised by the personal representative of the Optionee’s estate or by the person or persons to whom the option is transferred pursuant to the Optionee’s will or the laws of inheritance or by the Optionee’s designated beneficiary or beneficiaries of that option.

(iii)

During the applicable post-Service exercise period, the Option may not be exercised in the aggregate for more than the number of vested shares for which the Option is at the time exercisable. No additional shares shall vest under the Option following the Optionee’s cessation of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the Option term, the Option shall terminate and cease to be outstanding for any shares for which the Option has not been exercised.

(b)

“Service” means the performance of services for the Company (or any parent or subsidiary) by Optionee. Optionee shall be deemed to cease Service immediately upon the occurrence of the either of the following events: (i) the Optionee no longer performs services in any capacity for the Company or any parent or subsidiary, or (ii) the entity for which Optionee is performing such services ceases to remain a parent or subsidiary of the Company, even though the Optionee may subsequently continue to perform services for that entity.

2

(c)

During the lifetime of the Optionee, the Option shall be exercisable only by the Optionee and shall not be assignable or transferable other than by will or the laws of inheritance following the Optionee’s death, except that the Plan Administrator may permit the Option to be assigned in whole or in part during the Optionee’s lifetime to one or more Family Members of the Optionee or to a trust established exclusively for the Optionee and/or one or more such Family Members, to the extent such assignment is in connection with the Optionee’s estate plan or pursuant to a domestic relations order. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the Option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the ass ignee as the Company may deem appropriate.  “Family Member” means, with respect to the Optionee, any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships.

(d)

Notwithstanding the foregoing, the Optionee may designate one or more persons as the beneficiary or beneficiaries of his or her outstanding Option, which shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee’s death while holding those options. Such beneficiary or beneficiaries shall take the transferred Option subject to all the terms and conditions of this Agreement, including (without limitation) the limited time period during which the option may be exercised following the Optionee’s death.

6.

Miscellaneous. The grant of the Option (a) shall not confer upon the Optionee any right to continue as a director or employee of, or consultant or advisor to, the Company, and (b) shall not affect in any way the right of the Company to terminate the employment or other service of the Optionee at any time. This Agreement sets forth the complete agreement of the parties concerning the subject matter hereof, superseding all prior agreements, negotiations and understandings. This Agreement will be governed by the substantive law of the State of Iowa, and may be executed in counterparts. The parties hereby have entered into this Agreement as of the date set forth above.

GREEN PLAINS RENEWABLE ENERGY, INC.
By:	/s/ Wayne B. Hoovestol
Title:	Chief Executive Officer
“OPTIONEE”
	/s/ Steve Bleyl
	Steve Bleyl

3

EX-10

Exhibit 10.51

GREEN PLAINS RENEWABLE ENERGY, INC.

NON-STATUTORY STOCK OPTION AGREEMENT

THIS AGREEMENT is made as of October 15, 2008, between Green Plains Renewable Energy, Inc., an Iowa corporation (the “Company”), and Edgar Seward (the “Optionee”).

THE PARTIES AGREE AS FOLLOWS:

1.

Option Grant. The Company hereby grants to the Optionee an option (the “Option”) to purchase the number of shares of the Company’s common stock (the “Shares”), for an exercise price per share (the “Option Price”) as of the Grant Date, all as set forth below:

Shares under option: 50,000

Option Price per Share: $5.99

Grant Date: October 15, 2008

The Option granted hereunder will not be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.

2.

Installment Exercises. Subject to such further limitations as are provided herein, the Option shall become exercisable in four installments, the Optionee having the right hereunder to purchase from the Company the following number of Shares upon exercise of the Option, in cumulative fashion:

Number of Shares	When Exercisable
12,500	Grant Date
12,500	First anniversary of Grant Date
12,500	Second anniversary of Grant Date
12,500	Third anniversary of Grant Date

To the extent not exercisable upon Optionee’s termination of employment with the Company, the Option shall be forfeited, unless otherwise specified in this Agreement.  The Option shall fully vest in the event of a Change in Control. A “Change in Control” shall be deemed to have occurred if, in a single transaction or series of related transactions:

(a)

any person (as such term is used in Section 13(d) and 14(d) of the 1934 Act, or persons acting as a group, other than a trustee or fiduciary holding securities under an employment benefit program, is or becomes a “beneficial owner” (as defined in Rule 13-3 under the 1934 Act), directly or indirectly of securities of the Company representing 51% or more of the combined voting power of the Company, or

(b)

there is a merger, consolidation, or other business combination transaction of the Company with or into an other corporation, entity or person, other than a transaction in which the holders of at least a majority of the shares of voting capital stock of the Company outstanding immediately prior to such transaction continue to hold (either by such shares remaining outstanding or by their being converted into shares of voting capital stock of the surviving entity) a majority of the total voting power represented by the shares of voting capital stock of the Company (or surviving entity) outstanding immediately after such transaction, or

(c)

all or substantially all of the Company’s assets are sold.

In addition, in the event of a termination of Optionee’s employment by the Company without Cause, the Option will be deemed to have vested through the next annual anniversary of the Grant Date.  “Cause” shall mean one of the following:  (a) a material breach by Optionee of the terms of this Agreement (including without limitation habitual neglect of or deliberate or intentional refusal to perform any of his material duties and obligations under this Agreement) other than due to Optionee’s death or Disability, not cured within two (2) weeks from receipt of notice from the Board of such breach, (b) material wrongful misappropriation of any money, assets or other property of the Company or any subsidiary or affiliate of the Company, (c) the conviction of Optionee for any felony or a crime involving moral turpitude, or (d) Optionee’s chronic alcoholism or chronic drug addiction.  “Disabili ty” shall mean Optionee is unable to perform (except due to chronic alcoholism or chronic drug addiction) the essential functions of his job and render services of the character previously performed in the ordinary course and that such inability continues for a period of at least three consecutive months (or for shorter periods totaling more than three months during any period of twelve (12) consecutive months).  

3.

Shareholder Rights. No rights or privileges of a shareholder in the Company are conferred by reason of the granting of the Option. Optionee will not become a shareholder in the Company with respect to the Shares unless and until the Option has been properly exercised and the Option Price fully paid as to the portion of the Option exercised.

4.

Termination. Subject to earlier termination as provided in the Option Plan, this Option will expire, unless previously exercised in full, on the eighth anniversary of the Grant Date.  Notwithstanding the foregoing, to the extent not previously exercised, the Option will terminate, if earlier:  (i) immediately if the Optionee is terminated for Cause; or (ii) twelve (12) months after the date that the Optionee ceases to be an Employee by reason other than termination for Cause.

5.

Terms of the Option Plan.

(a)

The following provisions shall govern the exercise of any options held by the Optionee at the time of cessation of Service or death:

(iii)

Any option outstanding at the time of the Optionee’s cessation of Service for any reason shall remain exercisable for ninety (90) days thereafter, but the Option shall not be exercisable after the expiration of the Option term.

(iii)

To the extent exercisable in accordance with Paragraph 2 at the time of death, the Option may be subsequently exercised by the personal representative of the Optionee’s estate or by the person or persons to whom the option is transferred pursuant to the Optionee’s will or the laws of inheritance or by the Optionee’s designated beneficiary or beneficiaries of that option.

(iii)

During the applicable post-Service exercise period, the Option may not be exercised in the aggregate for more than the number of vested shares for which the Option is at the time exercisable. No additional shares shall vest under the Option following the Optionee’s cessation of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the Option term, the Option shall terminate and cease to be outstanding for any shares for which the Option has not been exercised.

(b)

“Service” means the performance of services for the Company (or any parent or subsidiary) by Optionee. Optionee shall be deemed to cease Service immediately upon the occurrence of the either of the following events: (i) the Optionee no longer performs services in any capacity for the Company or any parent or subsidiary, or (ii) the entity for which Optionee is performing such services ceases to remain a parent or subsidiary of the Company, even though the Optionee may subsequently continue to perform services for that entity.

2

(c)

During the lifetime of the Optionee, the Option shall be exercisable only by the Optionee and shall not be assignable or transferable other than by will or the laws of inheritance following the Optionee’s death, except that the Plan Administrator may permit the Option to be assigned in whole or in part during the Optionee’s lifetime to one or more Family Members of the Optionee or to a trust established exclusively for the Optionee and/or one or more such Family Members, to the extent such assignment is in connection with the Optionee’s estate plan or pursuant to a domestic relations order. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the Option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the ass ignee as the Company may deem appropriate.  “Family Member” means, with respect to the Optionee, any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships.

(d)

Notwithstanding the foregoing, the Optionee may designate one or more persons as the beneficiary or beneficiaries of his or her outstanding Option, which shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee’s death while holding those options. Such beneficiary or beneficiaries shall take the transferred Option subject to all the terms and conditions of this Agreement, including (without limitation) the limited time period during which the option may be exercised following the Optionee’s death.

6.

Miscellaneous. The grant of the Option (a) shall not confer upon the Optionee any right to continue as a director or employee of, or consultant or advisor to, the Company, and (b) shall not affect in any way the right of the Company to terminate the employment or other service of the Optionee at any time. This Agreement sets forth the complete agreement of the parties concerning the subject matter hereof, superseding all prior agreements, negotiations and understandings. This Agreement will be governed by the substantive law of the State of Iowa, and may be executed in counterparts. The parties hereby have entered into this Agreement as of the date set forth above.

GREEN PLAINS RENEWABLE ENERGY, INC.
By:	/s/ Wayne B. Hoovestol
Title:	Chief Executive Officer
“OPTIONEE”
	/s/ Edgar Seward
	Edgar Seward

3

EX-10

Exhibit 10.52

GREEN PLAINS RENEWABLE ENERGY, INC.

NON-STATUTORY STOCK OPTION AGREEMENT

THIS AGREEMENT is made as of November 1, 2008, between Green Plains Renewable Energy, Inc., an Iowa corporation (the “Company”), and Michael C. Orgas (the “Optionee”).

THE PARTIES AGREE AS FOLLOWS:

1.

Option Grant. The Company hereby grants to the Optionee an option (the “Option”) to purchase the number of shares of the Company’s common stock (the “Shares”), for an exercise price per share (the “Option Price”) as of the Grant Date, all as set forth below:

Shares under option: 50,000

Option Price per Share: $3.23

Grant Date: November 1, 2008

The Option granted hereunder will not be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.

2.

Installment Exercises. Subject to such further limitations as are provided herein, the Option shall become exercisable in four installments, the Optionee having the right hereunder to purchase from the Company the following number of Shares upon exercise of the Option, in cumulative fashion:

Number of Shares	When Exercisable
12,500	Grant Date
12,500	First anniversary of Grant Date
12,500	Second anniversary of Grant Date
12,500	Third anniversary of Grant Date

To the extent not exercisable upon Optionee’s termination of employment with the Company, the Option shall be forfeited, unless otherwise specified in this Agreement.  The Option shall fully vest in the event of a Change in Control.  A “Change in Control” shall be deemed to have occurred if, in a single transaction or series of related transactions:

(a)

any person (as such term is used in Section 13(d) and 14(d) of the 1934 Act, or persons acting as a group, other than a trustee or fiduciary holding securities under an employment benefit program, is or becomes a “beneficial owner” (as defined in Rule 13-3 under the 1934 Act), directly or indirectly of securities of the Company representing 51% or more of the combined voting power of the Company, or

(b)

there is a merger, consolidation, or other business combination transaction of the Company with or into an other corporation, entity or person, other than a transaction in which the holders of at least a majority of the shares of voting capital stock of the Company outstanding immediately prior to such transaction continue to hold (either by such shares remaining outstanding or by their being converted into shares of voting capital stock of the surviving entity) a majority of the total voting power represented by the shares of voting capital stock of the Company (or surviving entity) outstanding immediately after such transaction, or

(c)

all or substantially all of the Company’s assets are sold.

In addition, in the event of a termination of Optionee’s employment by the Company without Cause, the Option will be deemed to have vested through the next annual anniversary of the Grant Date.  “Cause” shall mean one of the following:  (a) a material breach by Optionee of the terms of this Agreement (including without limitation habitual neglect of or deliberate or intentional refusal to perform any of his material duties and obligations under this Agreement) other than due to Optionee’s death or Disability, not cured within two (2) weeks from receipt of notice from the Board of such breach, (b) material wrongful misappropriation of any money, assets or other property of the Company or any subsidiary or affiliate of the Company, (c) the conviction of Optionee for any felony or a crime involving moral turpitude, or (d) Optionee’s chronic alcoholism or chronic drug addiction.  “Disabili ty” shall mean Optionee is unable to perform (except due to chronic alcoholism or chronic drug addiction) the essential functions of his job and render services of the character previously performed in the ordinary course and that such inability continues for a period of at least three consecutive months (or for shorter periods totaling more than three months during any period of twelve (12) consecutive months).  

3.

Shareholder Rights. No rights or privileges of a shareholder in the Company are conferred by reason of the granting of the Option. Optionee will not become a shareholder in the Company with respect to the Shares unless and until the Option has been properly exercised and the Option Price fully paid as to the portion of the Option exercised.

4.

Termination. Subject to earlier termination as provided in the Option Plan, this Option will expire, unless previously exercised in full, on the eighth anniversary of the Grant Date.  Notwithstanding the foregoing, to the extent not previously exercised, the Option will terminate, if earlier:  (i) immediately if the Optionee is terminated for Cause; or (ii) twelve (12) months after the date that the Optionee ceases to be an Employee by reason other than termination for Cause.

5.

Terms of the Option Plan.

(a)

The following provisions shall govern the exercise of any options held by the Optionee at the time of cessation of Service or death:

(i)

Any option outstanding at the time of the Optionee’s cessation of Service for any reason shall remain exercisable for ninety (90) days thereafter, but the Option shall not be exercisable after the expiration of the Option term.

(ii)

To the extent exercisable in accordance with Paragraph 2 at the time of death, the Option may be subsequently exercised by the personal representative of the Optionee’s estate or by the person or persons to whom the option is transferred pursuant to the Optionee’s will or the laws of inheritance or by the Optionee’s designated beneficiary or beneficiaries of that option.

(iii)

During the applicable post-Service exercise period, the Option may not be exercised in the aggregate for more than the number of vested shares for which the Option is at the time exercisable. No additional shares shall vest under the Option following the Optionee’s cessation of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the Option term, the Option shall terminate and cease to be outstanding for any shares for which the Option has not been exercised.

(b)

“Service” means the performance of services for the Company (or any parent or subsidiary) by Optionee. Optionee shall be deemed to cease Service immediately upon the occurrence of the either of the following events: (i) the Optionee no longer performs services in any capacity for the Company or any parent or subsidiary, or (ii) the entity for which Optionee is performing such services ceases to remain a parent or subsidiary of the Company, even though the Optionee may subsequently continue to perform services for that entity.

2

(c)

During the lifetime of the Optionee, the Option shall be exercisable only by the Optionee and shall not be assignable or transferable other than by will or the laws of inheritance following the Optionee’s death, except that the Plan Administrator may permit the Option to be assigned in whole or in part during the Optionee’s lifetime to one or more Family Members of the Optionee or to a trust established exclusively for the Optionee and/or one or more such Family Members, to the extent such assignment is in connection with the Optionee’s estate plan or pursuant to a domestic relations order. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the Option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the ass ignee as the Company may deem appropriate.  “Family Member” means, with respect to the Optionee, any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships.

(d)

Notwithstanding the foregoing, the Optionee may designate one or more persons as the beneficiary or beneficiaries of his or her outstanding Option, which shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee’s death while holding those options. Such beneficiary or beneficiaries shall take the transferred Option subject to all the terms and conditions of this Agreement, including (without limitation) the limited time period during which the option may be exercised following the Optionee’s death.

6.

Miscellaneous. The grant of the Option (a) shall not confer upon the Optionee any right to continue as a director or employee of, or consultant or advisor to, the Company, and (b) shall not affect in any way the right of the Company to terminate the employment or other service of the Optionee at any time. This Agreement sets forth the complete agreement of the parties concerning the subject matter hereof, superseding all prior agreements, negotiations and understandings. This Agreement will be governed by the substantive law of the State of Iowa, and may be executed in counterparts. The parties hereby have entered into this Agreement as of the date set forth above.

GREEN PLAINS RENEWABLE ENERGY, INC.
By:	/s/ Wayne B. Hoovestol
Title:	Chief Executive Officer
“OPTIONEE”
	/s/ Michael C. Orgas
	Michael C. Orgas

3

EX-10

Exhibit 10.53

GREEN PLAINS RENEWABLE ENERGY, INC.

NON-STATUTORY STOCK OPTION AGREEMENT

THIS AGREEMENT is made as of October 15th, 2008, between Green Plains Renewable Energy, Inc., an Iowa corporation (the “Company”), and Ron Gillis (the “Optionee”).

THE PARTIES AGREE AS FOLLOWS:

1.

Option Grant. The Company hereby grants to the Optionee an option (the “Option”) to purchase the number of shares of the Company’s common stock (the “Shares”), for an exercise price per share (the “Option Price”) as of the Grant Date, all as set forth below:

Shares under option: 50,000

Option Price per Share: $5.99

Grant Date: October 15, 2008

The Option granted hereunder will not be an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.

2.

Installment Exercises. Subject to such further limitations as are provided herein, the Option shall become exercisable in four installments, the Optionee having the right hereunder to purchase from the Company the following number of Shares upon exercise of the Option, in cumulative fashion:

Number of Shares	When Exercisable
12,500	Grant Date
12,500	First anniversary of Grant Date
12,500	Second anniversary of Grant Date
12,500	Third anniversary of Grant Date

To the extent not exercisable upon Optionee’s termination of employment with the Company, the Option shall be forfeited, unless otherwise specified in this Agreement.  The Option shall fully vest in the event of a Change in Control.  A “Change in Control” shall be deemed to have occurred if, in a single transaction or series of related transactions:

(a)

any person (as such term is used in Section 13(d) and 14(d) of the 1934 Act, or persons acting as a group, other than a trustee or fiduciary holding securities under an employment benefit program, is or becomes a “beneficial owner” (as defined in Rule 13-3 under the 1934 Act), directly or indirectly of securities of the Company representing 51% or more of the combined voting power of the Company, or

(b)

there is a merger, consolidation, or other business combination transaction of the Company with or into an other corporation, entity or person, other than a transaction in which the holders of at least a majority of the shares of voting capital stock of the Company outstanding immediately prior to such transaction continue to hold (either by such shares remaining outstanding or by their being converted into shares of voting capital stock of the surviving entity) a majority of the total voting power represented by the shares of voting capital stock of the Company (or surviving entity) outstanding immediately after such transaction, or

(c)

all or substantially all of the Company’s assets are sold.

In addition, in the event of a termination of Optionee’s employment by the Company without Cause, the Option will be deemed to have vested through the next annual anniversary of the Grant Date.  “Cause” shall mean one of the following:  (a) a material breach by Optionee of the terms of this Agreement (including without limitation habitual neglect of or deliberate or intentional refusal to perform any of his material duties and obligations under this Agreement) other than due to Optionee’s death or Disability, not cured within two (2) weeks from receipt of notice from the Board of such breach, (b) material wrongful misappropriation of any money, assets or other property of the Company or any subsidiary or affiliate of the Company, (c) the conviction of Optionee for any felony or a crime involving moral turpitude, or (d) Optionee’s chronic alcoholism or chronic drug addiction.  “Disabili ty” shall mean Optionee is unable to perform (except due to chronic alcoholism or chronic drug addiction) the essential functions of his job and render services of the character previously performed in the ordinary course and that such inability continues for a period of at least three consecutive months (or for shorter periods totaling more than three months during any period of twelve (12) consecutive months).  

3.

Shareholder Rights. No rights or privileges of a shareholder in the Company are conferred by reason of the granting of the Option. Optionee will not become a shareholder in the Company with respect to the Shares unless and until the Option has been properly exercised and the Option Price fully paid as to the portion of the Option exercised.

4.

Termination. Subject to earlier termination as provided in the Option Plan, this Option will expire, unless previously exercised in full, on the eighth anniversary of the Grant Date.  Notwithstanding the foregoing, to the extent not previously exercised, the Option will terminate, if earlier:  (i) immediately if the Optionee is terminated for Cause; or (ii) twelve (12) months after the date that the Optionee ceases to be an Employee by reason other than termination for Cause.

5.

Terms of the Option Plan.

(a)

The following provisions shall govern the exercise of any options held by the Optionee at the time of cessation of Service or death:

(i)

Any option outstanding at the time of the Optionee’s cessation of Service for any reason shall remain exercisable for ninety (90) days thereafter, but the Option shall not be exercisable after the expiration of the Option term.

(ii)

To the extent exercisable in accordance with Paragraph 2 at the time of death, the Option may be subsequently exercised by the personal representative of the Optionee’s estate or by the person or persons to whom the option is transferred pursuant to the Optionee’s will or the laws of inheritance or by the Optionee’s designated beneficiary or beneficiaries of that option.

(iii)

During the applicable post-Service exercise period, the Option may not be exercised in the aggregate for more than the number of vested shares for which the Option is at the time exercisable. No additional shares shall vest under the Option following the Optionee’s cessation of Service. Upon the expiration of the applicable exercise period or (if earlier) upon the expiration of the Option term, the Option shall terminate and cease to be outstanding for any shares for which the Option has not been exercised.

(b)

“Service” means the performance of services for the Company (or any parent or subsidiary) by Optionee. Optionee shall be deemed to cease Service immediately upon the occurrence of the either of the following events: (i) the Optionee no longer performs services in any capacity for the Company or any parent or subsidiary, or (ii) the entity for which Optionee is performing such services ceases to remain a parent or subsidiary of the Company, even though the Optionee may subsequently continue to perform services for that entity.

2

(c)

During the lifetime of the Optionee, the Option shall be exercisable only by the Optionee and shall not be assignable or transferable other than by will or the laws of inheritance following the Optionee’s death, except that the Plan Administrator may permit the Option to be assigned in whole or in part during the Optionee’s lifetime to one or more Family Members of the Optionee or to a trust established exclusively for the Optionee and/or one or more such Family Members, to the extent such assignment is in connection with the Optionee’s estate plan or pursuant to a domestic relations order. The assigned portion may only be exercised by the person or persons who acquire a proprietary interest in the Option pursuant to the assignment. The terms applicable to the assigned portion shall be the same as those in effect for the option immediately prior to such assignment and shall be set forth in such documents issued to the ass ignee as the Company may deem appropriate.  “Family Member” means, with respect to the Optionee, any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships.

(d)

Notwithstanding the foregoing, the Optionee may designate one or more persons as the beneficiary or beneficiaries of his or her outstanding Option, which shall, in accordance with such designation, automatically be transferred to such beneficiary or beneficiaries upon the Optionee’s death while holding those options. Such beneficiary or beneficiaries shall take the transferred Option subject to all the terms and conditions of this Agreement, including (without limitation) the limited time period during which the option may be exercised following the Optionee’s death.

6.

Miscellaneous. The grant of the Option (a) shall not confer upon the Optionee any right to continue as a director or employee of, or consultant or advisor to, the Company, and (b) shall not affect in any way the right of the Company to terminate the employment or other service of the Optionee at any time. This Agreement sets forth the complete agreement of the parties concerning the subject matter hereof, superseding all prior agreements, negotiations and understandings. This Agreement will be governed by the substantive law of the State of Iowa, and may be executed in counterparts. The parties hereby have entered into this Agreement as of the date set forth above.

GREEN PLAINS RENEWABLE ENERGY, INC.
By:	/s/ Wayne B. Hoovestol
Title:	Chief Executive Officer
“OPTIONEE”
	/s/ Ron Gillis
	Ron Gillis

3

EX-10

Exhibit 10.54

GREEN PLAINS RENEWABLE ENERGY, INC.

RESTRICTED STOCK AGREEMENT

This Restricted Stock Agreement (the “Agreement”) is made this 1st day of November, 2008 to Michael C. Orgas (the “Grantee”) and evidences the grant by Green Plains Renewable Energy, Inc., an Iowa corporation (the “Company”) of a Restricted Stock Award (the “Award”) to the Grantee on the date hereof (the “Date of Grant”).  By accepting the Award, the Grantee agrees to be bound in accordance with the provisions of this Agreement.  

1.

Shares Awarded and Restrictions on Shares.  The Grantee is hereby awarded the following number of shares (the “Restricted Shares”) of the Company’s Common Stock (“Common Stock”), $.001 par value, subject to forfeiture and to the restriction on the rights of sale and transfer set forth in this document, the provisions of which are hereby incorporated in this document by reference:

Number of Restricted Shares: 25,000

This award is not effective unless signed by Employee and received by the Company’s Chief Financial Officer within thirty (30) days following the Date of Grant.  The term “Restricted Shares” shall include all shares of Green Plains Common Stock issued in respect to the Restricted Shares which result from stock splits, stock dividends, division of shares, or other capital structure changes.

2.

Sale or Transfer Restrictions.  All Restricted Shares shall be held by the Grantee without the rights of sale or transfer, and are subject to forfeiture as provided in paragraph 3, below, until the dates shown on the schedule below, when such restrictions shall lapse.  The award shall become fully vested and all restrictions shall lapse according to the schedule shown below:

Number of Shares	Vesting Date
6,250	November 1, 2008
6,250	November 1, 2009
6,250	November 1, 2010
6,250	November 1, 2011

3.

Employment Requirement.  In the event of Grantee’s Termination of Service prior to any date specified in Paragraph 2, above, the Restricted Shares for which restrictions shall not have lapsed will be forfeited by the Grantee and become the property of the Company.

4.

Sale or Transfer Restrictions.  The Restricted Shares shall be owned by the Grantee without the rights of sale or transfer and subject to forfeiture as provided in Paragraph 3 until the date shown above when such restrictions shall lapse.

5.

Shares of Record.  The Company will cause the number of awarded shares to be recorded in book entry format in the name of the Grantee on the shareholder records of the Company.  No certificate or certificates evidencing the Restricted Shares will be issued in the name of the Grantee until such time as the restrictions shall lapse.  By execution of this agreement and the acceptance of the Restricted Shares, Grantee authorizes the Company to cause the cancellation of the Restricted Shares in the event of forfeiture.  If requested by Company the Grantee will deliver to the Company a stock power, executed in blank, covering the Restricted Shares.  When the prohibited sale and transfer restrictions lapse under Paragraph 2 with respect to the Restricted Shares, provided the Restricted Shares have not been forfeited under Paragraph 3, the Company shall deliver to the Grantee a stock certificate for the number of Restricted Shares reduced by the number of shares of Common Stock having a value equal to the amount required pursuant to Paragraph 7 to be withheld for taxes upon the lapse of restrictions.  

6.

Voting and Other Rights of Restricted Shares.  Upon the book entry in the records of the Registrar representing the Restricted Shares, the Grantee shall have all of the rights of a stockholder of the Company, including the right to receive dividends (excluding stock dividends during the restriction period) and to vote the Restricted Shares until such shares may have been forfeited to the Company as provided in Paragraph 3.

7.

Taxes.  The Grantee will be solely responsible for any federal, state, local or payroll taxes imposed in connection with the granting of the Restricted Stock or the delivery of the shares pursuant thereto, and the Grantee authorizes the Company or any Subsidiary to pay any withholding for taxes which the Company or any Subsidiary deems necessary or proper in connection therewith.  

The Company shall satisfy the withholding requirements by withholding shares having a value equal to the amount required to be withheld with such value based on the last sale price of the Common Stock reported by NASDAQ on the date the amount of tax to be withheld is to be determined.  To determine the number of shares to be withheld, the Common Stock shall be valued at its per share closing price each date the restrictions lapse pursuant to Paragraph 2, and the withholding rates used shall be 35% federal income tax, 8.98% State of Iowa income tax; 6.20% Social Security tax (up to the taxable wage base for the year the restrictions lapse ($102,000 for 2008)); and 1.45% Medicare tax.  The Company shall pay the dollar value of the withheld shares as withholding to applicable tax authorities.

8.

Beneficiary.  The Grantee may designate a beneficiary or beneficiaries and may change such designation from time to time by filing a written designation thereof with the Secretary of the Company.  No such designation shall be effective unless received prior to the death of the Grantee.  In the absence of such designation or if the beneficiary so designated shall not survive the Grantee, the certificate or certificates shall be delivered to the estate of the Grantee.

9.

Changes in Circumstances.  It is expressly understood and agreed that the Grantee assumes all risks incident to any change hereafter in the applicable laws or regulations or incident to any change in the market value of the Restricted Shares after the date hereof.

10.

Committee Authority.  Any questions concerning the interpretation of this Award Agreement or the Plan, and any controversy which arises under this Award Agreement or the Plan shall be settled by the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) in its sole discretion.  All determinations and decisions of the Compensation Committee shall be final, conclusive, and binding on all persons, and shall be given the maximum deference permitted by law.

11.

Governing Law.  Where applicable, the provisions of this Award Agreement shall be governed by the contract law of the State of Iowa.

To confirm the foregoing, please sign and return one copy of this Award Agreement immediately.

By your signature and the Company’s signature below, you and the Company agree that this Award is granted under and governed by the terms and conditions of this Award Agreement.  

/s/ Wayne Hoovestol, CEO	November 1, 2008
Green Plains Renewable Energy, Inc.	Date
/s/ Michael C. Orgas	November 1, 2008
Michael C. Orgas	Date

The undersigned Grantee hereby designates ___________________________ as beneficiary which designation shall continue until a written change of designation of beneficiary shall have been filed with the Secretary of the Company.

Michael C. Orgas Date

RETURN THIS FORM TO Jerry Peters, Chief Financial Officer, Green Plains Renewable Energy, Inc., 9420 Underwood Ave., Suite 100, Omaha, NE 68114.

2

EX-10

Exhibit 10.55

GREEN PLAINS RENEWABLE ENERGY, INC.

RESTRICTED STOCK AGREEMENT

This Restricted Stock Agreement (the “Agreement”) is made this 15^th day of October, 2008 to Edgar Seward (the “Grantee”) and evidences the grant by Green Plains Renewable Energy, Inc., an Iowa corporation (the “Company”) of a Restricted Stock Award (the “Award”) to the Grantee on the date hereof (the “Date of Grant”).  By accepting the Award, the Grantee agrees to be bound in accordance with the provisions of this Agreement.  

1.

Shares Awarded and Restrictions on Shares.  The Grantee is hereby awarded the following number of shares (the “Restricted Shares”) of the Company’s Common Stock (“Common Stock”), $.001 par value, subject to forfeiture and to the restriction on the rights of sale and transfer set forth in this document, the provisions of which are hereby incorporated in this document by reference:

Number of Restricted Shares: 25,000

This award is not effective unless signed by Employee and received by the Company’s Chief Financial Officer within thirty (30) days following the Date of Grant.  The term “Restricted Shares” shall include all shares of Green Plains Common Stock issued in respect to the Restricted Shares which result from stock splits, stock dividends, division of shares, or other capital structure changes.

2.

Sale or Transfer Restrictions.  All Restricted Shares shall be held by the Grantee without the rights of sale or transfer, and are subject to forfeiture as provided in paragraph 3, below, until the dates shown on the schedule below, when such restrictions shall lapse.  The award shall become fully vested and all restrictions shall lapse according to the schedule shown below:

Number of Shares	Vesting Date
6,250	October 15, 2008
6,250	October 15, 2009
6,250	October 15, 2010
6,250	October 15, 2011

3.

Employment Requirement.  In the event of Grantee’s Termination of Service prior to any date specified in Paragraph 2, above, the Restricted Shares for which restrictions shall not have lapsed will be forfeited by the Grantee and become the property of the Company.

4.

Sale or Transfer Restrictions.  The Restricted Shares shall be owned by the Grantee without the rights of sale or transfer and subject to forfeiture as provided in Paragraph 3 until the date shown above when such restrictions shall lapse.

5.

Shares of Record.  The Company will cause the number of awarded shares to be recorded in book entry format in the name of the Grantee on the shareholder records of the Company.  No certificate or certificates evidencing the Restricted Shares will be issued in the name of the Grantee until such time as the restrictions shall lapse.  By execution of this agreement and the acceptance of the Restricted Shares, Grantee authorizes the Company to cause the cancellation of the Restricted Shares in the event of forfeiture.  If requested by Company the Grantee will deliver to the Company a stock power, executed in blank, covering the Restricted Shares.  When the prohibited sale and transfer restrictions lapse under Paragraph 2 with respect to the Restricted Shares, provided the Restricted Shares have not been forfeited under Paragraph 3, the Company shall deliver to the Grantee a stock certificate for the number of Restricted Shares reduced by the number of shares of Common Stock having a value equal to the amount required pursuant to Paragraph 7 to be withheld for taxes upon the lapse of restrictions.  

6.

Voting and Other Rights of Restricted Shares.  Upon the book entry in the records of the Registrar representing the Restricted Shares, the Grantee shall have all of the rights of a stockholder of the Company, including the right to receive dividends (excluding stock dividends during the restriction period) and to vote the Restricted Shares until such shares may have been forfeited to the Company as provided in Paragraph 3.

7.

Taxes.  The Grantee will be solely responsible for any federal, state, local or payroll taxes imposed in connection with the granting of the Restricted Stock or the delivery of the shares pursuant thereto, and the Grantee authorizes the Company or any Subsidiary to pay any withholding for taxes which the Company or any Subsidiary deems necessary or proper in connection therewith.  

The Company shall satisfy the withholding requirements by withholding shares having a value equal to the amount required to be withheld with such value based on the last sale price of the Common Stock reported by NASDAQ on the date the amount of tax to be withheld is to be determined.  To determine the number of shares to be withheld, the Common Stock shall be valued at its per share closing price each date the restrictions lapse pursuant to Paragraph 2, and the withholding rates used shall be 35% federal income tax, 8.98% State of Iowa income tax; 6.20% Social Security tax (up to the taxable wage base for the year the restrictions lapse ($102,000 for 2008)); and 1.45% Medicare tax.  The Company shall pay the dollar value of the withheld shares as withholding to applicable tax authorities.

8.

Beneficiary.  The Grantee may designate a beneficiary or beneficiaries and may change such designation from time to time by filing a written designation thereof with the Secretary of the Company.  No such designation shall be effective unless received prior to the death of the Grantee.  In the absence of such designation or if the beneficiary so designated shall not survive the Grantee, the certificate or certificates shall be delivered to the estate of the Grantee.

9.

Changes in Circumstances.  It is expressly understood and agreed that the Grantee assumes all risks incident to any change hereafter in the applicable laws or regulations or incident to any change in the market value of the Restricted Shares after the date hereof.

10.

Committee Authority.  Any questions concerning the interpretation of this Award Agreement or the Plan, and any controversy which arises under this Award Agreement or the Plan shall be settled by the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) in its sole discretion.  All determinations and decisions of the Compensation Committee shall be final, conclusive, and binding on all persons, and shall be given the maximum deference permitted by law.

11.

Governing Law.  Where applicable, the provisions of this Award Agreement shall be governed by the contract law of the State of Iowa.

To confirm the foregoing, please sign and return one copy of this Award Agreement immediately.

By your signature and the Company’s signature below, you and the Company agree that this Award is granted under and governed by the terms and conditions of this Award Agreement.  

/s/ Wayne Hoovestol, CEO	October 15, 2008
Green Plains Renewable Energy, Inc.	Date
/s/ Edgar Seward	October 15, 2008
Edgar Seward	Date

The undersigned Grantee hereby designates ___________________________ as beneficiary which designation shall continue until a written change of designation of beneficiary shall have been filed with the Secretary of the Company.

Edgar Seward Date

RETURN THIS FORM TO Jerry Peters, Chief Financial Officer, Green Plains Renewable Energy, Inc., 9420 Underwood Ave., Suite 100, Omaha, NE 68114.

2

EX-14

Exhibit 14.1

Green Plains Renewable Energy, Inc.

Code of Business Ethics and Conduct

11/02/06

Updated

10/__/08

GPRE wants to provide a safe and rewarding place to work. We are committed to being a good neighbor in the communities where our operations are located. The corporation is responsible for the acts of those who work with us to produce rewards for themselves as well as our investors.

These statements are a "common sense blueprint” to guide operational activities, both legally and ethically. This memorandum has been written in an attempt to create a context in the work place that will ensure a productive, safe and rewarding work environment for our employees, investors and corporation.

Green Plains Renewable Energy, Inc.

Code of Business Ethics and Conduct General Policy

GREEN PLAINS RENEWABLE ENERGY (the Company) conducts its business in compliance with all applicable laws, rules and regulations and on the highest levels of integrity. This blueprint is intended to preserve the integrity of the Company’s business and assure that perceptions of our coworkers, government regulators, suppliers, competitors and the community affirm our adherence to these principles.

GPRE builds on a foundation of high, consistent principles that includes, respect, teamwork, accountability, a sense of fairness and collegiality. Commitment and adherence to these principles help us maintain a respected leadership position.

As an employee of the Company you are expected to do your best to follow the underlying principles and procedures of our Code of Conduct. It should be kept handy and reviewed from time to time. We realize that none of us are perfect and that all of us have faults and shortcomings. However, we hope that these general principles and guidelines can help each of us achieve our goals, perform our duties and fulfill our obligations to ourselves and the Company.

This Code of Conduct provides a set of guidelines that employees at all levels, including directors and officers of the Company are expected to follow. It is not a complete statement of all policies affecting an employee’s employment.

Supervisors have a special responsibility to lead by example, to foster an environment that promotes integrity and to assist all employees with understanding and following this Code.

When you have any suggestions for improving the Company’s overall compliance performance, your thoughts are always welcome.

Importance of Code

A major purpose for these principles is to assure full compliance with the law, especially securities regulations, which are extensive. All Company business should be conducted fairly, honestly and ethically. We rely on every employee to make the right decisions.

When in doubt, you have the responsibility to seek clarification from your supervisor, corporate counsel or the Audit Committee Chairman (or his designee). Violations of ethical and legal standards are grounds for disciplinary action, up to and including discharge, and possible legal proceedings.

This Code is not intended to address all situations you may encounter. When situations arise that are not covered by this Code, you are encouraged to exercise restraint and to be respectful of others at all times. Whenever questions arise as to what you should do in any given situation, you are encouraged to seek counsel from your supervisors.

This Code is subject to change or modification at any time by the Board of Directors of the Company. All changes will be promptly disclosed as required by law or stock exchange regulations.

This Code does not create an employment contract; nor does it alter any employee's status as an employee at will.

Employee’s Responsibility

Review this Code of Conduct carefully and keep it in a convenient place so you can refer to it if you are uncertain about what to do in any given situation. Likewise, if there is any part of the Code you don’t understand or if you are not sure how to handle a situation, contact your supervisor.

Open Door Policy

It is the Company's intent to create a work place environment where people feel accepted and comfortable. An environment that people are happy to come to each day, where they feel it is safe to express their thoughts and ideas, knowing that they will be listened to, considered and respected. The Company believes you should have the opportunity to speak openly and be treated fairly. We encourage all employees to be candid and truthful. This is our Open Door Philosophy. The best way to use the Open Door for bringing up ideas, concerns and issues is to talk to your immediate supervisor or his / her supervisor.

If, for any reason you are afraid or reticent to contact anyone employed by the Company you may choose to send an anonymous message to the Audit Committee Chairman (or his designee) who will discuss with the Audit Committee as appropriate.

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YOU WILL NOT BE RETALIATED AGAINST FOR RAISING A QUESTION OR CONCERN WITH YOUR SUPERVISORS, THE COMPLIANCE OFFICER OR THE AUDIT COMMITTEE CHAIRMAN.

Guidance for Employees

No single document, including this Code of Conduct, can provide all the answers. If you are ever uncertain about something you intend to do, it is very important that you seek advice. Contact your supervisor before acting.

It is your obligation to let us know if you see or learn something that suggests either the Code, Company Policy, or the Law has been violated. Use a communication method with which you are most comfortable. The most important thing is, let us know.

Compliance Committee:

The Board has designated the Company’s Chief Executive Officer as the Company’s Compliance Officer.  

Employee Relations

Value Our Diversity

Our Company benefits from a diverse workforce that recognizes differences as well as similarities. This creates a culture of openness, teamwork and mutual respect. Individual diversity recognizes the unique set of abilities, perspectives that each employee brings to the Company. We are committed to creating and supporting a diverse workforce. We will respect one another for the unique values each brings to our workplace.

Discrimination

We are committed to providing equal opportunity for all qualified applicants and employees without regard to race, color, religion, sex, age, national origin, ancestry, sexual orientation, marital status, disability, military status, political beliefs or other legally protected statuses. This policy applies to all aspects of employment including recruitment, hiring, job assignments, promotions, working conditions, scheduling, benefits, wage and salary administration, disciplinary action, termination as well as company-sponsored social, educational and recreational programs. In accordance with law we provide reasonable accommodations for qualified individuals with disabilities.

All employees, including supervisors, have a responsibility to maintain a discrimination free environment. If you believe this policy has been violated, report the matter immediately to your supervisor.

Workplace Harassment

GPRE also recognizes that harassment on the basis of race, religion, sex, disability or other legally protected status is a form of discrimination. Prohibited conduct includes, but is not limited to, racial or ethnic slurs and epithets, ethnic jokes or any joke that would demean a person, making inappropriate gestures, words or conduct that creates a hostile environment. Profanity in the workplace is offensive and should be avoided.

You are responsible for your actions.

Violations of this policy are subject to disciplinary action up to, and including, termination of employment. If you believe that you or a fellow employee has been harassed or treated unfairly, immediately inform your supervisor.

Weapons and Workplace Violence

We do not tolerate violent behavior or threats of violence; nor will we tolerate an employee bringing a weapon on our premises. The responsibility for preserving a safe and respectful working environment lies with each of us. Employees must comply with both the letter and the spirit of this policy.

Employees are prohibited from engaging in violence or the threat of violence, in any form, while on company property or while engaged in our business, whether on or off its property. Violence and threats of violence are also prohibited when directed at an employee, a customer or anyone else with whom the employee has come in contact through GPRE whether the prohibited conduct occurs during working hours or at any other time.

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Conduct prohibited by this policy includes physical assault, but also threats, verbal abuse, harassment and intimidation, whether directed at supervisors, employees, vendors, visitors or members of the public.

If the Compliance Officer determines that inappropriate conduct has occurred, the Company will take all appropriate remedial action, including firm disciplinary action up to, and including, termination of employment.

Prohibited conduct includes, but is not limited to, the following:

Causing physical injury to another person,

Stalking, harassing or intimidating another individual, whether in person or by telephone, Email or other means,

Making a statement that connotes violence, contains a general threat of violence or contains a threat directed against one or more individuals,

Engaging in aggressive or hostile language or conduct that would be offensive or intimidating to a reasonable person,

Causing damage to property, whether property of GPRE, an employee, or a third party, through anger, malice or otherwise.

Workplace Violence

If you experience, observe or otherwise become aware of conduct that may be in violation of this policy, report the matter promptly to your supervisor or to the Compliance Officer. Those holding a supervisory or managerial position must immediately report to the Compliance Officer any known or suspected violation of this policy.

We investigate and address all reported violations of our policy. Any employee who exhibits violent behavior or who otherwise violates this policy will be met with immediate and appropriate action up to, and including, termination of employment. Law enforcement authorities may be notified.

Health and Safety

The safety of employees, customers and others is a top priority, and the Company is committed to providing and maintaining a clean, safe work environment. You can help keep the workplace safe by:

Immediately reporting any potential hazards (that you cannot correct yourself), no matter how minor, even though you corrected them, to your supervisor.

Immediately reporting any workplace accident and/or any injury to your immediate supervisor or a member of management.

Not attempting to move an injured person, instead request medical attention.

Being prepared to deal with a safety issue is very important! Take the time to learn safety guidelines and procedures specific to your location.

Substance Abuse

Employees are prohibited from possessing, using or being under the influence of alcohol on Company property. Employees may not, under any circumstances, use, possess, buy, sell or be under the influence of any illegal drug while on Company premises, or while performing any job-related activity, whether on or off Company premises. An illegal drug means any controlled substance that cannot be obtained legally or that, although available legally (that is, by prescription), has been obtained illegally.

Employees are not prohibited from use or possession of a drug in accordance with a valid medical prescription; however, employees are strongly encouraged to tell their supervisor about any prescribed drug that could impair their ability to perform their jobs safely and/or effectively.

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Employee Wage and Hour Rules

GPRE s practices are based on applicable laws and are designed to protect the interests of the Company and its employees. All positions have been classified as exempt or non-exempt with respect to eligibility for overtime pay. Non-exempt employees are eligible for overtime pay and may not work for the Company while off the clock. Such conduct is prohibited and will result in disciplinary action up to, and including, termination. A supervisor must authorize any overtime work by a non-exempt employee.

Integrity (Adherence to Moral and Ethical Principles)

Honesty

You are expected to be honest and to conduct yourself in a manner that upholds Company values. Examples of dishonesty include any false or misleading statement and any theft or deliberate act that results in loss of value of others' property, whether the property belongs to GPRE, another employee, a customer or anyone else, regardless of the value of that property.

Conflicts Of Interest

GPRE expects you to always perform your duties in the best interests of the Company. Scrupulously avoid situations or positions that present an actual or potential conflict of interest or that may give rise to the appearance of a conflict between your personal interest and your duties to the Company.

A conflict of interest occurs when the personal interests or activities of an employee, or a relative or household member of that employee, or someone with whom the employee has an intimate relationship, interfere with, or appear to interfere with the employee's performance of his/her duties for the Company or with the interests of the Company as a whole.

A conflict of interest also occurs when an employee is in a position to influence a decision that may result in a personal gain for that employee or for a relative as a result of the Company's business dealings.

Personal gain results not only in cases where an employee or his/her relative has a significant ownership in a company with which GPRE does business, but also when an employee or a relative receives any kickback, bribe, gift or special consideration as a result of any transaction or business dealings involving GPRE. (For the purposes of this policy, an employee's relatives include those related to the employee by blood or marriage and all members of the employee's household, as well as anyone with whom the employee has an intimate relationship.)

Carefully review your own situation for any conflicts of interest. If you have any ability to influence a transaction involving purchases, contracts or leases of the Company, disclose the existence of any actual or potential conflict of interest to your supervisor as soon as the conflict or potential conflict arises so that safeguards can be established to protect all parties. In consultation with the Compliance Officer your supervisor will determine whether a conflict actually exists and if any action should be taken. If at any time you have a question about a possible conflict of interests, you should promptly contact your supervisor or the legal department.

While it is not possible to list all circumstances that constitute a conflict of interest, the following list gives some examples of situations that must be avoided by you, your relatives or members of your household, or anyone with whom you have an intimate relationship.

Accepting from a person or entity that does business, or is seeking to do business, with GPRE any form of compensation (e.g., cash, securities, investments, options or rights) or any other gift of more than nominal value (See also Gifts and Entertainment ).

Accepting any type of concurrent employment without notification and, where necessary, approval of your supervisor including consulting or a directorship with a competitor or vendor.

Influencing the Company on behalf of a third party to purchase a particular product or service when such purchase will result in a benefit, financial or otherwise, to you or any of your relatives.

Engaging in real estate or other property transactions in which the Company has an interest.

Speculating or dealing in equipment, supplies, materials or property purchased or sold by the Company.

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Having an intimate relationship with an employee for whom you have oversight or supervisory responsibility.

As an employee, you should never take for yourself personally (or for a relative) any business or other opportunity that you discover through the use of Company property or information or because of your position at GPRE. You cannot use Company property or information or your position at GPRE for your personal gain and you are prohibited from competing with GPRE while you are an employee of the Company.

Officers, Directors and 5- 10% Shareholders.

Officers, directors and 5- 10% stockholders of public companies are subject to additional restrictions and requirements under federal securities laws. If you are unsure about the applicability of these restrictions and requirements to you, please consult the Company's legal department or legal counsel.

Gifts and Entertainment

GPRE recognizes that in some instances, gifts and entertainment can provide an entirely appropriate means for furthering a business relationship. However, no employee, officer or director should accept or provide gifts of more than $250 in connection with their business dealings. The receipt of any such gift over $250 should be returned immediately.

Normal business courtesies involving no more than ordinary amenities (such as lunch, dinner, a spectator event, or a golf game), as are token non-cash gifts of nominal value will be permitted.

However, do not participate in a vendor-paid activity if it might create a sense of obligation, compromise your professional judgment or create the appearance that it might do so. In deciding whether your participation is appropriate, consider whether public disclosure would embarrass you or the Company.

The guiding principle is that no gift, favor or entertainment should be accepted or provided if it will obligate, or appear to obligate, the recipient.

If you are uncertain about the propriety of a gift, you should contact your supervisor or the Compliance Officerfor guidance. Separate and more stringent gift, meals, and entertainment rules apply to dealings with government officials. Federal and state anti-kickback laws prohibit GPRE and its representatives from knowingly and willfully offering, paying, requesting, or receiving any money or other benefit, directly or indirectly, in return for obtaining or rewarding favorable treatment in connection with the award of a government contract. Any employee who becomes aware of any such conduct should immediately report it to the Compliance Officer.

Anti-kickback laws must be considered whenever something of value is given or received by GPRE or its representatives, or affiliates that is in any way connected to work performed for the government. There aremany transactions that may violate the anti-kickback rules. As a result, no one acting on behalf of GPRE may offer or accept gifts, loans, rebates, services, or payment of any kind to or from government agencies, government suppliers and vendors without first consulting the Compliance Officer. The Company prohibits offering, giving, soliciting or receiving any form of bribe or kickback. There are serious penalties, including criminal sanctions, for this conduct.

Confidential Information

As an employee, you may be or are entrusted with confidential information, such as business or marketing plans, supplier information, software or product design, existing and future merchandise information or human resources information. Confidential information includes all nonpublic information that might be of use to the Company s competitors, or that may be harmful to the Company or its customers, if disclosed. You are expected to maintain the confidentiality of such information entrusted to you by the Company or its customers. If you leave the Company, you must return all Company materials and property. Company information should be used only for Company purposes and should not be disclosed to anyone outside of GPRE unless approved by the Company’s Chief Executive Officer, Chief Financial Officer, President, or General Counsel or under a nondisclosure agreement approved by the legal department or the Company's Legal Counsel. Within the Compa ny, only those employees who need to know should have access to confidential information.

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When dealing with confidential materials and information:

Never leave confidential information in a place where others can see it. Clearly indicate that the information is confidential.

Be careful when sending confidential information to an unattended fax machine, printer or in an unsecured manner via the Internet.

Never discuss confidential matters in a place where others may hear.

The Company also respects the confidentiality of others. Here are some basic rules to follow:

Do not bring proprietary papers or computer records from previous employers to the Company.

Do not accept or use anyone else’s confidential information except under an agreement approved by an officer of the Company.

Be ethical in obtaining information about the marketplace.

If you have any questions regarding confidential information, please contact your supervisor.

Protection and Proper Use of Company Assets, Including Our Name, Brands and Trademarks

Protect the Company’s assets and ensure that they are used efficiently. Theft, carelessness and waste have a direct impact on the Company s profitability. All of the Company’s assets are to be used for legitimate business purposes. Our brands and trademarks are extremely important to our success and must be used properly and protected from others misuse. Similarly, be sure to follow the law as it relates to the protection of the trademarks, patents and copyrights of others. For example, use software only in accordance with the license for that software. Do not make or use unauthorized copies.

Likewise, do not copy the designs of others or knowingly buy products, which incorporate copies of others designs. Respect third parties trademark rights and do not knowingly buy products with third parties trademarks unless the third party consents. Written materials may also be subject to copyright protection and should only be copied when permitted.

The Company does not knowingly destroy or discard evidence. If you are informed, or have reason to believe, that Company records may be relevant to a pending or threatened legal action or preceding such records must be retained. If the Company receives a subpoena, a request for records or other legal papers or if we have reason to believe that such an event is likely, the Company will retain all relevant records. If you receive such a request, notify the Legal Department immediately and provide a copy of the request.

Accounting, Accounting Controls and Audit Matters

GPRE is committed to compliance with all applicable securities laws and regulations, accounting principles and standards, internal controls and audit practices adopted by GPRE. Employees of the Company with accounting, finance, treasury, tax, and investor relations responsibility have a special obligation to assure that accounting information and financial reports are complete and accurate. All employees have a responsibility to report suspected violations of financial accounting or reporting standards or audit matters. Good faith complaints by employees regarding accounting, internal controls and auditing matters may be submitted to your supervisor, the Chief Financial Officer, the Chief Executive Officer, or the Compliance Officer.

All employees are encouraged to raise concerns regarding questionable accounting and auditing matters. Employees may submit their complaints regarding questionable accounting and auditing matters on a confidential and anonymous basis by submitting an anonymous letter to the Audit Committee Chairman (or his designee) who will deal with it appropriately.

Complaints submitted via physical delivery should be marked CONFIDENTIAL. Confidentiality will be maintained to the fullest extent possible, consistent with the need to conduct an adequate investigation of the complaint. Employees are encouraged to report as much detailed information as possible about the basis for their concerns or complaints. Reports will be promptly investigated and corrective action will be taken, when warranted by the investigation.

GPRE and its officers, employees and agents will not retaliate against an employee for raising good faith complaints or concerns regarding accounting, internal controls and auditing matters of the Company. Any such retaliation is a violation of US law as well as company policy.

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INSIDER TRADING GUIDELINES

The Company has adopted (and provided you a copy of) a separate Insider Trading Policy (the Trading Policy) which provides specific rules and guidelines with respect to transactions in the Company's securities.

Applicability of Trading Policy

The Trading Policy applies to all transactions in the Company's securities, including common stock, options for common stock and any other securities the Company may issue from time to time, such as preferred stock, warrants and convertible debentures, as well as to derivative securities relating to the Company's stock, whether or not issued by the Company, such as exchange-traded options.  It applies to all executive officers of the Company, the Company's Board of Directors, all employees of the Company and its subsidiaries, certain family members thereof, and to any consultants, affiliates, associates and employees of affiliates of the Company (the Group or Groups) who receive or because of their association with the Company or its affiliates have access to material nonpublic information regarding the Company.

Information is material if its disclosure will be likely to have an impact on the price of a security, or if reasonable investors would want to know the information before deciding whether or not to purchase or sell a security. This Group is sometimes referred to in the Trading Policy as "Insiders." The Trading Policy also applies to any person who receives material nonpublic information from any Insider.

Any person who possesses material nonpublic information regarding the Company is an Insider for so long as the information is not publicly known (i.e., has not been fully disclosed). Any employee, consultant, affiliate or employee or consultant of an affiliate can be an Insider from time to time, and would at those times be subject to certain additional provisions of the Trading Policy applicable to Insiders.

Certain Exceptions

The only exceptions to the policy are as follows:

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Exercise of a stock option under the Company's stock option plan. Note that this exception does not include a subsequent sale of the shares acquired pursuant to the exercise of the option under the stock option plan.

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Non-employee directed purchases under the Company's 401(k) Plan if applicable.

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Any transaction specifically approved in writing in advance by the Chief Executive Officer or the Chief Financial Officer of the Company.

Potential Criminal and Civil Liability and/or Disciplinary Action

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Liability for Insider Trading. Insiders may be subject to civil and criminal penalties for engaging in transactions in the Company's securities at a time when they have knowledge of material nonpublic information regarding the Company.

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Liability for Tipping. Insiders may also be liable for improper transactions by any person (commonly referred to as "tipping") to whom they have disclosed material nonpublic information regarding the Company or to whom they have made recommendations or expressed opinions on the basis of such information as to trading in the Company's securities. The Securities and Exchange Commission (the "SEC") has imposed large penalties even when the disclosing person did not profit financially from the trading. The SEC, the stock exchanges and the National Association of Securities Dealers, Inc. use sophisticated electronic surveillance techniques to uncover insider trading.

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Possible Disciplinary. Employees of the Company who violate the Trading Policy shall also be subject to disciplinary action by the Company, which may include ineligibility for future participation in the Company's equity incentive plans or termination of employment.

Inquiries

Please direct your questions about any of the matters discussed in the Trading Policy to the Company's CEO or CFO.

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Auditors

Every public company must retain auditors to audit its financial statements. GPRE provides its auditors with complete access to its books and records. Any action by an employee that is intended to improperly influence, coerce, manipulate or mislead an auditor is illegal and will not be tolerated by GPRE.

Electronic Resources and Communications

The GPRE electronic resources (its computer network and all computer hardware and software, including its Email system and Internet connections, and its other communications equipment and systems, including its telephones and voice mail system) are important assets of the Company provided to employees in order to facilitate business communications. The use of these electronic resources requires common sense, good judgment and awareness that the improper use of these tools could expose the Company to unnecessary legal and financial risk.

Our basic goals as employees include the following: To protect GPRE’s electronic resources.

To protect the security of GPRE s computer networks and computer hardware and the information stored on them.

To comply with established guidelines for access to GPRE information.

To understand the risks and protect the security of electronic communications. To comply with vendor licensing agreements.

To ensure that all hardware, software and other programs function properly.

Computer Access

Use of GPRE’s computer hardware or its network is limited to employees unless authorized by a Manager. Use only approved remote access methods to dial in to the GPRE computer network or to connect to a non-GPRE network. Additionally, always follow any Company procedures designed to maintain the security of such remote access communications.

Software Installation, Copying and Use

The Company purchases licenses to use copies of software for the operation of our business. Copying of these software programs in violation of the license, whether by an employee or anyone else, may place the Company at risk of civil or even criminal liability under copyright infringement laws. Employees may not make, acquire or use illegal copies of computer software on Company computers or use unauthorized copies of Company licensed software on home computers. Never remove, disable or bypass software installed to protect against viruses

Desktop, Notebook Computers and PDAs

The computer hardware in Company offices, and that provided to employees for work outside the office, and all of the information on that hardware are the property of the Company. The Company may access and review any information stored on GPRE equipment in the interests of protecting Company assets. The Company cannot and does not ensure the privacy, confidentiality or security of any personal information stored on its computers (especially those connected to a network) or on any other computer equipment connected through a network with our equipment.

Voice Mail, E-mail, Intranet and the Internet

Voice mail, electronic mail (E-mail ), Intranet and Internet access are important assets of the Company shared by employees in order to enhance information and business communications. The use of these electronic resources requires common sense, good judgment and awareness that the improper use of these tools could expose the Company to unnecessary legal and financial risk. All such communications sent and received internally or externally via these resources is GPRE property. Therefore, do not expect any message transmitted using this equipment or these systems to be private. In order to protect our electronic resources and provide a secure computing environment, it is important for you to follow these guidelines.

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The Company s E-mail and voice mail systems are to be used principally to transmit routine business information to assist employees in performing their day-to-day functions. In composing and sending E-mail, take into consideration that E-mail messages are considered documents, just like any other writing. Electronic documents and messages, including those that have been deleted, have the potential to reflect poorly on the employee and the Company. Also, electronic documents and messages could be subject to discovery in any litigation involving the employee or the Company.

The following is a list of unacceptable uses of the Company s E-mail, voice mail, Intranet and Internet systems. This is not an exhaustive list.

Solicitation for political, religious or other personal causes;

Any mass or group mailing for any purpose other than Company business; Use of electronic communications to send chain letters;

Transmission of material that is false, derogatory, profane, vulgar or sexually explicit, or any other material that the Company considers offensive (e.g., a racial or ethnic slur);

Downloading from the Internet of sexually explicit or other offensive materials, software programs, or any copyrighted or trademarked materials;

Viewing or posting messages to Web sites that contain sexually explicit, racist or other material that the Company considers offensive;

Attempting to disguise your name or the origin of any transmission over any of the Company s communication systems;

Engaging in any criminal activity; and

Accessing the E-mail or voice mail of any other employee without the approval of that employee or the approval of a supervisor, unless there is a pressing business reason to do so.

Chat Rooms, Message Boards and Confidentiality

Never disclose in chat rooms, post to electronic message boards, or disclose in any public setting any confidential, proprietary, personal or business information related to the Company, including but not limited to information about its business, financial condition, people or employment practices. Never gossip about GPRE matters outside the Company, including online. If a chat room is not directly related to GPRE business activities employees shall not participate while on duty.

Complaints

If you believe you are receiving inappropriate E-mail or voice mail messages, immediately notify your supervisor, or the Compliance Officer.

Interacting with the Government

GPRE values its good relations with all governmental authorities. We are committed to being a good corporate citizen and are proud of the contributions we’ve made to help the communities where we do business. The Company’s policy is to deal honestly and fairly with government representatives and agents and to comply with valid and reasonable governmental requests and processes.

Responsibility for the task of dealing with governmental and regulatory representatives will be delegated and assigned by the Chief Executive Officer to a specific person trained for this task.

Although unlikely, a government representative may seek to interview you regarding GPRE’s business activities or your work at the Company. If you are contacted by a government agent or representative and asked to provide information, contact the COO or CEO immediately!

All exchanges with representatives of these agencies must be referred to the responsible person. It is not your task to converse with anyone other than GPRE employees.

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When asked by the representative assigned to this task to have a conversation with agency and government representatives, be truthful and straightforward in your dealings with governmental representatives and do not direct or encourage another employee (or someone else) to provide false or misleading information to any government agent or representative. Do not direct or encourage anyone to destroy records relevant to a fact-finding process or other legal process.

Occasionally, government representatives seek to inspect a Company facility. If this happens, ask the representative to wait while you contact an officer or the COO to assist them. Immediately notify your manager or supervisor.

Similarly, if someone arrives unexpectedly at an office or other company facility and attempts to serve legal papers, ask them to wait and then immediately notify an officer of the Company who will then deal with that person.

Business Practices

Fair Dealing

We always deal fairly with GPRE’s customers, vendors, competitors and employees. We never take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any unfair dealing practices.

Fair Competition

Competition in the marketplace benefits all of us as consumers. We are successful because we provide our customers with the best value for their money. The Company does not:

Engage in any unfair practices against competitors;

Pay bribes to help our business or to hurt a competitor; or Steal competitors trade secrets

We always compete fairly. Our reputation is one of our greatest assets, and you are responsible for protecting the Company’s good name. We are truthful with our internal and external customers, vendors, suppliers and all others who do business with the Company. We do not misrepresent our products and we do not make false statements about our competitors or the products they sell.

Political Activities

GPRE believes that our democratic form of government benefits from citizens who are politically active. For this reason, GPRE encourages each of its employees to participate in civic and political activities in his or her own way. GPRE s direct political activities are, however, limited by law.

Neither GPRE nor supervisory personnel within GPRE may require any employees to make any such contribution. Finally, GPRE cannot reimburse its employees for any money they contribute to political candidates or campaigns. Political contributions by corporations whether by direct or indirect use of corporate funds may violate federal law and the law of some states. In the limited circumstances where political contributions by corporations are permitted with respect to state and local elections or issues, and where federal prohibitions are not applicable, corporate funds for these purposes may be expended only upon written approval of the Chief Executive Officer.

Public Relations

It is important that all information disclosed to the media, investors or the general public be accurate, complete and consistent. Only authorized GPRE spokespeople are permitted to speak to the media, investors or the general public regarding Company matters. If you are asked for information regarding the Company, follow these guidelines:

Refer a person asking questions about GPRE or the Company’s business or financial activities to the COO, CFO, or CEO.

If a member of the media, or someone else, appears unexpectedly at a GPRE facility and asks to shoot a video or take photographs or makes other inquiries, immediately notify the General Manager of our business unit or the supervisor on duty if GM is absent.

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Politely and firmly tell the person to contact an authorized spokesperson for GPRE

Refer inquiries about a former employee, such as a reference request, to the General Manager of your business unit.

Commitment to the Environment

GPRE is committed to protecting the environment and complying with all applicable environmental laws and regulations. You can help the environment by recycling whenever possible.

Sexual Harassment

These statements are intended to be a basic, definitive clarification of our mission to provide a safe place to work. GPRE is committed to providing and maintaining a workplace that is free of sexual harassment. This policy applies to employees at all levels of the Company.

One person may define an exchange as social fun and banter, well within their personal rights. Another person, in the same situation may find it humiliating, threatening, demeaning, and offensive harassment. These policies will be the determining guidelines.

Sexual Harassment

Sexual harassment is unlawful. If you believe that you or a fellow employee has been harassed or treated unfairly, immediately notify your supervisor, a member of Management or contact the Compliance Officer.

Prohibited sexual harassment includes inappropriate or unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature that interferes with an employee’s work performance or creates an intimidating, hostile, humiliating or sexually offensive working environment.

In addition, no supervisor, male or female, may sexually harass any employee by making submission to or rejection of sexual advances, requests for sexual favors or other verbal or physical conduct of a sexual nature either explicitly or implicitly a term or condition of employment or a basis for employment decisions.

Likewise, it is unlawful to retaliate against an employee for making or filing a complaint of sexual harassment or for cooperating in an investigation of a complaint of sexual harassment.

Examples of Sexual Harassment

The Compliance Officer will determine, on an individual complaint basis, in light of all of the circumstances, if particular language or conduct is subject to disciplinary action under this policy. The following are examples of sexual harassment:

An employee engages in a pattern of unwelcome sexual language or conduct that is sufficiently severe or pervasive that it interferes with the job performance of co-workers.

An employee rejects the sexual advances of his/her supervisor and, in retaliation; the supervisor terminates the individual's employment.

Harassment may occur at several levels. Below are specific examples of conduct on the verbal, visual, written, and physical levels that all employees of GPRE are cautioned to avoid.

These examples arose from a series of costly and embarrassing legal actions that have damaged persons and corporations.

Verbal

Jokes or other remarks with sexual content that are graphic or may otherwise be offensive to others.

Comments to, or about, any employee or his/her appearance that are sexually graphic or would otherwise tend to be degrading.

A repetition of any words or conduct of a sexual nature after the person addressed has indicated that such words or conduct are unwelcome.

12

Asking about one’s sexual conduct.

Discussing one’s sexual activities.

Visual

Display of objects, posters or pictures of a sexual nature.

Leering, prolonged staring, whistling, brushing against the body, sexual gestures, suggestive, insulting comments or innuendo of a sexual nature.

Written

Unwelcome and/or inappropriate contacts via letters, phone calls, or E-mail.

Physical

Repeated touches, any physical contact of an intimate or sexual nature, flirtations, requests for dates, talking, following/confronting a person off the job.

Upholding Standards

GPRE requires that employees follow the law and conduct business with a high degree of integrity. The Company takes all reports of possible violations of the Code of Conduct, the law or any GPRE policy seriously, will investigate such reports and take appropriate action.

Each person is responsible for his or her actions. No one has the authority to approve an illegal or improper act, and such an act cannot be justified because a superior ordered it. It is against GPRE policy for you to direct or encourage another employee to violate the law, company policy or otherwise to act improperly.

If you are faced with this situation, take action. Talk to your supervisor or call the Compliance Officer.

Actions that violate the Code of Conduct may also violate governmental laws. Such violations can subject the individuals involved to prosecution, imprisonment and fines. When appropriate, law enforcement and other governmental authorities may be contacted.

Failure to comply with the law and Code of Conduct will have severe consequences for the employees involved, as well as the company. Any employee who violates the Code of Conduct or the law will be  subject to discipline up to, and including, termination of employment.

Discipline may be imposed for the following infractions.

This is not an exhaustive list.

Refusing to cooperate in a fact-finding process or other investigation

Retaliating against another employee for reporting a violation or for cooperating in a fact-finding process or other investigation;

Fabricating a report or providing false or misleading information or making material omissions in a fact-finding process or other investigation

Directing or encouraging another employee to violate the law or the Code of Conduct; or

Failing to report a violation of law or this Code of Conduct or engaging in any act or omission to conceal such a violation.

13

Waivers of the Code

Any waivers of the Code for the principal executive officer, principal financial officer, principle accounting or controller (or persons performing similar functions) other executive officers and directors will be made by the Company’s Audit Committee and promptly disclosed as required by law or stock exchange rules.

Any waiver of the Code for any other employee will be made by the Compliance Officer and be reported personally to the Audit Committee at their next scheduled meeting.

Procedures for Reporting Code Violations

The following is an outline of the procedure that GPRE may pursue, depending on the particular circumstances, once a complaint has been brought to the attention of the Company.

The Audit Committee will conduct a prompt and impartial investigation of the complaint.

That investigation may include (but will not necessarily be limited to) interviews with the employee who made the complaint (unless the complaint was made anonymously), with the person or persons against whom the complaint was made and with other employees who may have witnessed the reported incident or incidents.

Upon completion of the investigation, the individual who conducted that investigation will meet separately with the employee who made the complaint (unless the complaint was made anonymously) and the employee or employees against whom the complaint was made. A report of the results of an investigation will be sent to the Audit Committee. When appropriate the parties involved will be informed of the steps taken to correct the situation.

GPRE will share information arising out of a complaint or investigation of sexual harassment only on a need-to-know basis in order for an effective investigation to be conducted. Any manager or supervisor who receives a complaint of sexual harassment from an employee or who otherwise knows or has reason to believe that an employee has been subjected to sexual harassment must report the incident promptly to the General Manager of your business unit or the Compliance Officer.

14

Code of Conduct Certifications:

All employees must be given a Code of Conduct, which is to be read, and prior to employment must sign this formal statement:

I have read the Code of Conduct statement and will comply with its requirements as a condition of employment. I will not engage in activities or conduct that will embarrass the company or raise questions about its honesty, impartiality and reputation.

Employee:                                                                                             Date:                                             

Supervisor:                                                                                            Date:                                             

Must be signed by both employee and supervisor and copies sent to:

l.

Employee

2.

Supervisor

3.

Personnel Records

15

EX-21

Exhibit 21.1

Subsidiaries of the Company

Company	State of Organization
Green Plains Essex Inc. fka Essex Elevator, Inc.	Iowa
Green Plains Obion LLC fka Ethanol Grain Processors, LLC	Tennessee
Green Plains Shenandoah LLC fka GPRE Shenandoah, LLC	Delaware
Green Plains Grain Company LLC	Delaware
Green Plains Bluffton LLC fka Indiana Bio-Energy, LLC	Indiana
Green Plains Superior LLC fka Superior Ethanol, L.L.C.	Iowa
Green Plains VBV LLC fka VBV LLC	Delaware
Green Plains Trade Group LLC	Delaware

EX-23

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the use of our report presented herein dated March 26, 2009, relating to the consolidated financial statements as of December 31, 2008 and the nine month transition period ended December 31, 2008 of Green Plains Renewable Energy, Inc. (which report expresses an unqualified opinion and includes an explanatory paragraph regarding the business combination between VBV, LLC and Green Plains Renewable Energy, Inc.).

/s/ L.L. Bradford & Company, LLC

March 26, 2009

Las Vegas, Nevada

EX-23

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Green Plains Renewable Energy, Inc.:

We consent to the use of our report dated June 20, 2008, except as to note 2, which is as of August 1, 2008, with respect to the consolidated balance sheets as of March 31, 2008 and 2007, and the related consolidated statements of operations, members’ capital, and cash flows for the year ended March 31, 2008 and the period from September 28, 2006 (date of inception) to March 31, 2007, and from September 28, 2006 (date of inception) to March 31, 2008, included herein.

/s/ KPMG, LLP

Chicago, Illinois

March 27, 2009

EX-31

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14(a) AND SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

I, Todd A. Becker, certify that:

1.

I have reviewed this transition report on Form 10-K of Green Plains Renewable Energy, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 30, 2009	/s/ Todd A. Becker
	Todd A. Becker
	President and Chief Executive Officer (Principal Executive Officer)

EX-31

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a) AND SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

I, Jerry L. Peters, certify that:

1.

I have reviewed this transition report on Form 10-K of Green Plains Renewable Energy, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 30, 2009	/s/ Jerry L. Peters
	Jerry L. Peters
	Chief Financial Officer (Principal Financial Officer)

EX-32

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the transition report of Green Plains Renewable Energy, Inc. (the “Company”) on Form 10-K for the nine-month transition period ended December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Todd A. Becker, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1)

The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 30, 2009	/s/ Todd A. Becker
	Todd A. Becker
	President and Chief Executive Officer

EX-32

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the transition report of Green Plains Renewable Energy, Inc. (the “Company”) on Form 10-K for the nine-month transition period ended December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jerry L. Peters, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1)

The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 30, 2009	/s/ Jerry L. Peters
	Jerry L. Peters
	Chief Financial Officer