

NOTE 4:	CORPORATE BORROWINGS AND CAPITAL LEASE OBLIGATIONS

Indebtedness Outstanding. Debt consists of the following:



	December 31,
	2013			2012
Revolving Credit Agreement, 2.52% (variable interest rate)	$	18,000		$	25,893
Secured Promissory Note, 6.63% (variable interest rate), due monthly to July, 2016.	746			1,070
Water Cooling System Capital Lease Obligation, 2.61%, due monthly to May, 2017	4,422			5,603
Other Capital Lease Obligations, 0.61%, due monthly to October, 2013.	—			178
Total	23,168			32,744
Less current maturities of long term debt	(1,557		)	(1,683		)
Long-term debt	$	21,611		$	31,061

Credit Agreement and Former Credit Agreement. On November 2, 2012, the Company entered into an Amended and Restated Credit Agreement, and ancillary documents with Wells Fargo (the “Credit Agreement”). The Credit Agreement amends the Company’s Former Credit Agreement with the lender in all material respects. Key terms of the amended agreement are as follows:

The Credit Agreement matures on November 2, 2017 and provides for the provision of letters of credit and revolving loans with a Maximum Revolver Commitment of $55,000, subject to borrowing base limitations. As of December 31, 2013, our outstanding borrowings under this facility were $18,000, leaving $23,920 available for additional borrowings after giving effect to a $2,000 outstanding letter of credit that we have with one of our vendors. These limitations are generally based on the value of eligible inventory, as defined in the Credit Agreement, and accounts receivable owned by the Borrowers. The Credit Agreement includes a possible future $5,000 fixed asset sub-line facility that increases the applicable borrowing base by up to $5,000 in the event that certain unencumbered equipment and real estate is mortgaged and certain Excess Availability (as defined in the Credit Agreement) thresholds are satisfied.

Borrowings under the Credit Agreement may bear interest either on a Base Rate model or a LIBOR Rate model. For LIBOR Rate Loans, the interest rate is equal to the per annum LIBOR Rate (based on 1, 2, 3 or 6 months) plus 2.00% – 2.50% (depending upon the average Excess Availability, as described below). For Base Rate Loans, the interest rate shall be the greatest of (a) 1.00%, (b) the Federal Funds Rate plus 0.50%, (c) one-month LIBOR Rate plus 1.00%, and (d) Wells Fargo’s “prime rate” as announced from time to time. The weighted average rate in effect at December 31, 2013 and 2012, was 2.52% and 2.84%, respectively. The Credit Agreement provides for an unused line fee equal to 0.375% per annum multiplied by the difference of the total revolving loan commitment less the average outstanding revolving loans for the given period, as well as customary field examination and appraisal fees, letter of credit fees and other administrative fees.

The Company’s Credit Agreement contains a number of financial and other covenants, including provisions that require the Company under certain circumstances to meet certain financial tests. These covenants may limit or restrict the Company’s ability to:


•	incur additional indebtedness;


•	pay cash dividends or make distributions;


•	dispose of assets;


•	create liens on Company assets;


•	pledge the fixed and real property assets of LDI’s Distillery Business; or


•	merge or consolidate.

Under the Credit Agreement, the Company must comply with the following covenants:

Financial Covenants. For all periods in which the Excess Availability (which is the total availability for loans, less the Company’s and its subsidiaries’ trade payables aged in excess of historical levels and book overdrafts) is less than $9,625, the Borrowers are required to have a Fixed Charge Coverage Ratio (“FCCR”)

[FCCR means, with respect to any fiscal period and with respect to the Company determined on a consolidated basis in accordance with GAAP, the ratio of (i) EBITDA⁽¹⁾ for such period minus unfinanced Capital Expenditures made (to the extent not already incurred in a prior period) or incurred during such period, to (ii) Fixed Charges for such period.]

⁽¹⁾On February 12, 2014, we entered into Amendment No. 1 to Credit Agreement ("First Amendment"). The First Amendment amended and restated the definition of the term EBITDA to add back (to the Company's consolidated net earnings (or loss)) governance expenses relating to shareholder litigation incurred prior to December 31, 2013, in an aggregate amount not in excess of $5,500. For the year ended December 31, 2013, we incurred $5,465 of such expenses. Had the Company not entered into the First Amendment, the Company still would have been in compliance with its FCCR covenant at December 31, 2013.

measured on a month end trailing basis, of at least 1.10:1.00 (a) for each month-end until October 31, 2013, for the trailing months from November 1, 2012 through such date, and (b) as of each month-end commencing November 30, 2013 using a trailing twelve-month measure. Moreover, Borrowers are required to maintain Excess Availability on a consolidated basis of at least $4,000 at all times prior to the later of (a) November 2, 2013 and (b) the last day of the first twelve month period for which Borrowers have maintained a Fixed Charge Coverage Ratio of at least 1.10:1.00. The Company was in compliance with its Credit Agreement’s financial covenants at December 31, 2013 and 2012.

Other Restrictions. The Company is generally prohibited from incurring any liabilities, or acquiring any assets, except for certain ordinary holding company activities as further described in the Credit Agreement. Wells Fargo has significant lending discretion under the Credit Agreement, and may modify borrowing base and advance rates, the effect of which may limit the amount of loans that the Borrowers may have outstanding at any given time. Wells Fargo may also terminate or accelerate our obligations under the Credit Agreement upon the occurrence of various events in addition to payment defaults and other breaches, including such matters as a change of control of the Company, defaults under other material contracts with third parties, and ERISA violations.

6.63% (variable interest rate) Secured Promissory Note, due monthly to July 2016. On July 20, 2009, Union State Bank – Bank of Atchison (“Bank of Atchison”), which previously had loaned the Company $1,500, agreed to loan Processing an additional $2,000. The note for this loan is secured by a mortgage and security interest on the Company’s Atchison plant and equipment. The note bears interest at 6.00% over the three year treasury index, adjustable quarterly, and is payable in 84 monthly installments of $32, with any balance due on the final installment. See Note 14: Related Party Transactions for further discussion on this related party transaction.

Leases

Capital Lease Obligations.

Water Cooling System Capital Lease Obligation. On June 28, 2011, Processing sold a major portion of the new process water cooling towers and related equipment being installed at its Atchison facility to U.S. Bancorp Equipment Finance, Inc. for $7,335 and leased them from U.S. Bancorp pursuant to a Master Lease Agreement and related Schedule. Monthly rentals under the lease are $110 (plus applicable sales/use taxes, if any) and continue for 72 months with a rate of 2.61%. Processing may purchase the leased property after 60 months for approximately $1,328, or at the end of the term for fair market value to be determined at that time. Given this continuing involvement, the Company treated this as a financing transaction. The lessor may, at its option, extend the lease for specified periods after the end of the term if Processing fails to exercise its purchase option. Under the terms of the Master Lease, Processing is responsible for property taxes and assumes responsibility for insuring and all risk of loss or damage to the property.

Obligations under the Master Lease may be accelerated if an event of default occurs and continues for 10 days. In addition to payment defaults and breaches of representations and covenants, events of default include defaults under any other agreement with lessor or payment default under any obligation. In such event, among other matters, lessor may cancel the Master Lease, take possession of the property and seek to recover the present value of future rentals, the residual value of the property and the value of lost tax benefits.

Lenders having liens on the Atchison facility, including its revolving credit lender, Wells Fargo Bank, National Association, entered into mortgagee's waivers with respect to the leased property. As described in Note 2: Other Balance Sheet Captions, this equipment is included in property, plant and equipment.

4.90% Industrial Revenue Bond Obligation. On December 28, 2006, Processing engaged in an industrial revenue bond transaction with the City of Atchison, Kansas (the "City") pursuant to which the City (i) under a trust indenture, (“the Indenture“), issued $7,000 principal amount of its industrial revenue bonds (“the Bonds”) to Processing and used the proceeds thereof to acquire from the Company its newly constructed office building and technical innovations center in Atchison, Kansas, (“the Facilities”) and (ii) leased the Facilities back to Processing under a capital lease (“the Lease”). The assets related to this transaction are included in property and equipment.

The Bonds mature on December 1, 2016 and bear interest, payable annually on December 1 of each year commencing December, 2007 at the rate of 4.90% per annum. Basic rent under the lease is payable annually on December 1 in an amount sufficient to pay principal and interest on the Bonds. The Indenture and Lease contain certain provisions, covenants and restrictions customary for this type of transaction. In connection with the transaction, Processing agreed to pay the city an administrative fee of $50 payable over 10 years.

The purpose of the transaction was to facilitate certain property tax abatement opportunities available related to the constructed facilities. The facilities acquired with bond proceeds will receive property tax abatements which terminate upon maturity of the Bonds on December 1, 2016. The issuance of the Bonds was integral to the tax abatement process. Financing for the Facilities was provided internally from Processing’s operating cash flow. Accordingly, upon consummation of the transaction and issuance of the Bonds, Processing acquired all Bonds issued for $7,000, excluding transaction fees. As a result, Processing owns all of the outstanding Bonds. Because Processing owns all outstanding Bonds, management considers the debt canceled and, accordingly, no amount for these Bonds is reflected as debt outstanding on the Consolidated Balance Sheets as of December 31, 2013 or 2012.

Below is a summary of the financial asset and liability that are offset as of December 31, 2013 and 2012, respectively.





	(i)			(ii)			(iii) = (i) - (ii)
	Gross Amounts of Recognized Assets (Liabilities)			Gross Amounts offset in the Balance Sheet			Net Amounts of Assets (Liabilities) presented in the Balance Sheet
December 31, 2013:
Investment in bonds	$	7,000		$	7,000		$	0
Capital lease obligation	$	(7,000	)	$	(7,000	)	$	0

December 31, 2012:
Investment in bonds	$	7,000		$	7,000		$	0
Capital lease obligation	$	(7,000	)	$	(7,000	)	$	0

Leases and Debt Maturities. Processing leases railcars and other assets under various operating leases. For railcar leases, the Company is generally required to pay all service costs associated with the railcars. Rental payments include minimum rentals plus contingent amounts based on mileage. Rental expenses under operating leases with terms longer than one month were $2,844 and $2,485 for the years ended December 31, 2013 and 2012, respectively. Minimum annual payments and present values thereof under existing debt maturities, capital leases and minimum annual rental commitments under non-cancelable operating leases are as follows:



					Capital Leases
Year Ending December 31,	Revolving Credit Agreement		Long-Term Debt		Minimum Lease Payments		Less Interest		Net Present Value		Total Debt		Operating Leases
2014	$	—	$	345	$	1,316	$	104	$	1,212	$	1,557	$	2,280
2015			369		1,316		72		1,244		1,613		2,167
2016			32		1,316		39		1,277		1,309		1,699
2017	18,000		—		695		6		689		18,689		1,106
2018			—		—		—		—		—		265
Thereafter	—		—		—		—		—		—		727
Total	$	18,000	$	746	$	4,643	$	221	$	4,422	$	23,168	$	8,244