Green Plains Inc.
GREEN PLAINS RENEWABLE ENERGY, INC. (Form: 10-Q, Received: 05/15/2009 16:16:58)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________


FORM 10-Q


Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934


For the Quarterly Period Ended March 31, 2009


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 Avenue, Suite 100

Omaha, NE 68114

(Address of principal executive offices, including zip code)


(402) 884-8700

(Registrant’s telephone number, including area code)


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.      X . Yes          . No


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 the definitions 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 Exchange Act).         . Yes     X . No


The number of shares of common stock, par value $0.001 per share, outstanding as of April 30, 2009 was 24,933,514 shares.






TABLE OF CONTENTS


 

Page

PART I – FINANCIAL INFORMATION

 

 

 

Item 1.

Financial Statements

 

 

 

 

 

Consolidated Balance Sheets

2

 

 

 

 

Consolidated Statements of Operations

3

 

 

 

 

Consolidated Statements of Cash Flows

4

 

 

 

 

Notes to Consolidated Financial Statements

6

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

 

 

 

Item 4.

Controls and Procedures

31

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

32

 

 

 

Item 1A.

Risk Factors

32

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

32

 

 

 

Item 3.

Defaults Upon Senior Securities

32

 

 

 

Item 4.

Submission of Matters to a Vote of Security Holders

32

 

 

 

Item 5.

Other Information

32

 

 

 

Item 6.

Exhibits

33

 

 

 

Signatures

34



1



GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES

 

 CONSOLIDATED BALANCE SHEETS


(in thousands, except share amounts)


 

 

March 31,

2009

 

December 31,

2008

 

 

(unaudited)

 

 

ASSETS

Current assets

 

 

 

 

Cash and cash equivalents

$

53,541

$

64,839

Accounts receivable, net of allowances of $147 and $174, and

including amounts from related parties of $0 and $2,177, respectively

 

37,411

 

54,306

Inventories

 

52,393

 

47,033

Prepaid expenses

 

6,461

 

13,341

Deposits

 

11,950

 

10,385

Derivative financial instruments and other

 

4,661

 

3,065

Total current assets

 

166,417

 

192,969

 

 

 

 

 

Property and equipment, net

 

498,479

 

495,772

Investment in unconsolidated subsidiaries

 

1,277

 

1,377

Financing costs and other

 

12,798

 

2,948

Total assets

$

678,971

$

693,066

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

 

 

 

 

Accounts payable, including amounts to related parties

of $166 and $9,824, respectively

$

46,400

$

61,711

Accrued liabilities

 

6,800

 

14,595

Derivative financial instruments

 

4,495

 

4,538

Current maturities of long-term debt

 

32,779

 

27,405

Notes payable

 

3,030

 

-

Total current liabilities

 

93,504

 

108,249

 

 

 

 

 

Long-term debt

 

301,397

 

299,011

Other liabilities

 

5,534

 

5,821

Total liabilities

 

400,435

 

413,081

 

 

 

 

 

Stockholders’ equity

 

 

 

 

Common stock, $0.001 par value; 50,000,000 shares authorized; 24,904,708 and 24,659,250  shares issued and outstanding, respectively

 

25

 

25

Additional paid-in capital

 

290,614

 

290,421

Accumulated deficit

 

(19,800)

 

(10,459)

Accumulated other comprehensive loss

 

(289)

 

(298)

Total Green Plains stockholders’ equity

 

270,550

 

279,689

Noncontrolling interest

 

7,986

 

296

Total stockholders’ equity

 

278,536

 

279,985

Total liabilities and stockholders’ equity

$

678,971

$

693,066


See accompanying notes to the consolidated financial statements.



2



GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF OPERATIONS


(unaudited and in thousands, except per share amounts)


 

 

Three Months Ended

March 31,

 

 

2009

 

2008

 

 

 

 

 

Revenues

 

 

 

 

Ethanol

$

161,854

$

-

Grain

 

17,318

 

-

Agronomy products

 

4,462

 

-

Distillers grains

 

34,880

 

-

Other

 

2,568

 

-

Total revenues

 

221,082

 

-

Cost of goods sold

 

219,203

 

-

Gross profit

 

1,879

 

-

Operating expenses

 

9,059

 

1,953

 

 

 

 

 

Operating loss

 

(7,180)

 

(1,953)

 

 

 

 

 

Other income (expense)

 

 

 

 

Interest income

 

74

 

-

Interest expense, net of amounts capitalized

 

(2,514)

 

(58)

Other, net

 

334

 

(6)

Total other income (expense)

 

(2,106)

 

(64)

 

 

 

 

 

Loss before income taxes

 

(9,286)

 

(2,017)

Income tax provision (benefit)

 

-

 

-

Net loss

 

(9,286)

 

(2,017)

Net (income) loss attributable to noncontrolling interest

 

(55)

 

230

Net loss attributable to Green Plains

$

(9,341)

$

(1,787)

 

 

 

 

 

Earnings (loss) per share – basic and diluted:

 

 

 

 

Income attributable to Green Plains stockholders

$

(0.38)

$

(0.24)

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

Basic and diluted

 

24,865

 

7,498


See accompanying notes to the consolidated financial statements.



3



GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF CASH FLOWS


(unaudited and in thousands)


 

 

Three Months Ended

March 31,

 

 

2009

 

2008

Cash flows from operating activities:

 

 

 

 

Net loss attributable to Green Plains

$

(9,341)

$

(1,787)

Adjustments to reconcile net income to net cash provided (used) by operating activities:

 

 

 

 

Depreciation and amortization

 

6,169

 

8

Unrealized (gains) losses on derivative financial instruments  

 

1,303

 

-

Stock-based compensation expense

 

153

 

136

Changes in operating assets and liabilities:

 

 

 

 

Accounts receivable

 

18,166

 

-

Inventories

 

(5,360)

 

-

Derivative financial instruments

 

(2,932)

 

-

Prepaid expenses and other assets

 

7,016

 

345

Deposits

 

(1,565)

 

-

Accounts payable and accrued liabilities

 

(24,102)

 

12,266

Other

 

(613)

 

-

Net cash provided (used) by operating activities

 

(11,106)

 

10,968

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Purchases of property and equipment

 

(1,304)

 

(47,669)

Investment in business

 

(7,500)

 

-

(Investment in) withdrawal of restricted cash

 

-

 

2,204

Cash acquired in acquisition of business

 

4,280

 

-

Sale (purchase) of investments

 

-

 

(894)

Other

 

(101)

 

(230)

Net cash used by investing activities

 

(4,625)

 

(46,589)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Proceeds from the issuance of debt

 

8,516

 

-

Payment of principal on long-term debt

 

(2,932)

 

-

Proceeds from notes payable

 

-

 

34,323

Proceeds from exercises of stock options

 

40

 

-

Capital contributions

 

-

 

475

Payment of loan fees and equity in creditors

 

(1,191)

 

(413)

Net cash provided by financing activities

 

4,433

 

34,385

 

 

 

 

 

Net change in cash and equivalents

 

(11,298)

 

(1,236)

Cash and cash equivalents, beginning of period

 

64,839

 

1,774

Cash and cash equivalents, end of period

$

53,541

$

538

 

 

 

 

 

Continued on the following page

 

 

 

 



4



GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


(unaudited and in thousands)


Continued from the previous page

 

 

 

 

Three Months Ended

March 31,

 

 

2009

 

2008

Supplemental disclosures of cash flow:

 

 

 

 

Cash paid for income taxes

$

-

$

-

Cash paid for interest

$

2,064

$

58

 

 

 

 

 

Noncash additions to property and equipment:

 

 

 

 

Property and equipment acquired in acquisition

$

7,437

$

-

Capital lease obligation incurred for equipment

 

322

 

-

Total noncash additions to property and equipment

$

7,759

$

-

 

 

 

 

 

Supplemental noncash investing and financing activities:

 

 

 

 

Assets acquired in acquisition

$

21,593

$

-

Less liabilities assumed

 

(6,202)

 

-

Total noncash additions to property and equipment

$

15,391

$

-



See accompanying notes to the consolidated financial statements.



5



GREEN PLAINS RENEWABLE ENERGY, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(unaudited)


1.

BASIS OF PRESENTATION, DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


References to the Company


References to “we,” “us,” “our,” “Green Plains” or the “Company” in the consolidated financial statements and 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 for the three-month period ended March 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., Green 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.


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.


Change in Fiscal Year End


Effective April 1, 2008, the Company changed its fiscal year end from March 31 to December 31 to more closely align our year end with that of the majority of our peer group.


Consolidated Financial Statements


In the consolidated financial statements and the notes thereto, all references to the three-month period ended March 31, 2008 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 VBV’s results as a development stage company (from 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.



6



The accompanying consolidated balance sheet as of December 31, 2008, which has been derived from our audited consolidated financial statements as filed in our annual report for the transition period then ended and the unaudited interim consolidated financial statements, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), and include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted pursuant to those rules and regulations. The consolidated financial statements at March 31, 2009, and for the three-months ended March 31, 2009 and 2008, are unaudited and reflect all adjustments of a normal recurring nature, except as otherwise disclosed herein, which are, in the opinion of management, necessary for a fair presentation, in all material respects, of the consolidated financial position, results of operations and cash flows for the interim periods. The results of the interim periods are not necessarily indicative of the results for the full year. The consolidated financial statements should be read in conjunction with the consolidated financial statements included in our Form 10-K as filed with the SEC and notes thereto and risk factors contained therein for the nine-month transition period ended December 31, 2008.


Use of Estimates in the Preparation of Consolidated Financial Statements


The preparation of consolidated financial statements in conformity with GAAP requires management to make certain 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.


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 a full-service grain and agronomy business (via the April 2008 acquisition of Great Lakes Cooperative), ethanol marketing services, (see Note 3 related to the October 2008 merger between Green Plains and VBV, which provided additional ethanol production and marketing services) and terminal and distribution assets (see Note 4 related to the January 2009 acquisition of majority interest in Blendstar LLC, a biofuel terminal operator). 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.



7



In January 2009, the Company acquired majority interest in Blendstar LLC, a Houston-based biofuel terminal operator with six facilities in five states. Green Plains owns 51% of Blendstar (see Note 4 – Acquisition for further discussion related to this acquisition).


The Company believes that as a result of the 2008 mergers and the January 2009 Blendstar acquisition, 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.


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.


Previously, the Company sold ethanol and distillers grains in-house and via third-party marketers, who were our customers for purposes of revenue recognition. Specifically, Green Plains Superior LLC, Green Plains Bluffton and Green Plains Obion each had contracted with independent marketers to purchase all of their ethanol production. These third-party marketers were responsible for subsequent sales, marketing, and shipping of the ethanol and distillers grains. Accordingly, once the ethanol or distillers grains were loaded into rail cars and bills of lading were generated, the criteria for revenue recognition were considered to be satisfied and sales were recorded. The agreements with these third-party marketers terminated in January 2009 and February 2009. Green Plains Trade is now responsible for the sales, marketing and distribution of all ethanol produced at the Company’s four production facilities. 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. 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. Revenues from Blendstar, which offers ethanol transload and splash blending services, are recognized as these services are rendered.


The Company routinely enters into fixed-price, physical-delivery ethanol sales agreements. In certain instances, the Company intends to settle the transaction by open market purchases of ethanol rather than by delivery from its own production. These transactions are reported net as a component of revenues.


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


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, plant depreciation, sales commissions and outbound freight charges. Shipping costs incurred directly by us, including railcar lease costs, are also reflected in cost of goods sold. Throughput and unloading fees incurred by Blendstar are recognized as these services are rendered.


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.



8



Recent Accounting Pronouncements


In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141R, “Business Combinations,” which replaces SFAS No. 141. SFAS No. 141R requires the acquirer to recognize the identifiable assets acquired, liabilities assumed, contingent purchase consideration and any noncontrolling interest in the acquiree at fair value on the date of acquisition. In April 2009, the FASB issued Final Staff Position (“FSP”) 141R-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies,” which amends SFAS No. 141R by establishing a model to account for certain pre-acquisition contingencies. Under FSP 141R-1, the acquirer is required to recognize, at fair value, an asset acquired or a liability assumed in a business combination that arises from a contingency if the acquisition-date fair value of that asset or liability can be determined during the measurement period. If the acquisition-date fair value cannot be determined, then the acquirer should follow the recognition criteria in SFAS No. 5, “Accounting for Contingencies,” and FASB Interpretation No. 14, “Reasonable Estimation of the Amount of a Loss – an interpretation of FASB Statement No. 5.” SFAS No. 141R and FSP 141R-1 are effective for annual reporting periods beginning January 1, 2009, and will apply prospectively to business combinations completed on or after that date. The impact of the adoption of SFAS No. 141R and FSP 141R-1 will depend on the nature of acquisitions completed after that date.


In January, 2009 the FASB issued FSP 107-1 and Accounting Principles Board (“APB”) Opinion No. 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” These expand the fair value disclosures required for all financial instruments within the scope of SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” to interim periods. FAS 107-1 and APB Opinion No. 28-1 are effective for interim periods ending after June 15, 2009, and may result in increased disclosures in our interim periods.


2.  FAIR VALUE DISCLOSURES


Effective April 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 establishes a hierarchy for inputs used in measuring fair value. The following methods and assumptions were used in estimating the fair value of the Company’s 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 represents their fair value due to the high liquidity and relatively short maturity of these instruments. Marketable securities considered 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 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.


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.


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 due to the short duration of these items.



9



3.  BUSINESS COMBINATION


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 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 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.


4.  ACQUISITION


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 a total of $8.9 million. The purchase price is comprised of a $7.5 million cash payment and three future annual payments of $0.5 million, beginning in July 2009. These future annual payments are recorded in debt at a present value of $1.4 million. The allocation of the purchase price to specific assets and liabilities was based, in part, on outside appraisals of the fair value of certain assets acquired. Approximately $21.3 million is attributed to assets acquired, of which $5.3 million was allocated to goodwill and $3.1 million to intangible assets that are subject to amortization. Liabilities assumed total approximately $4.8 million. In addition, $7.6 million was recorded as noncontrolling interest in the purchase price allocation.


The acquisition of Blendstar is a strategic investment within the ethanol value chain. 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. Blendstar’s operations are included in the Marketing and Distribution segment.


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.



10



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


 

 

 

 

Three Months Ended

March 31,

 

 

 

 

2009

 

2008

Revenues:

 

 

 

 

 

Ethanol Production

$

137,503

$

-

 

Agribusiness

 

46,210

 

-

 

Marketing and Distribution

 

178,353

 

-

 

Intersegment eliminations

 

(140,984)

 

-

 

 

 

$

221,082

$

-

 

 

 

 

 

 

 

Gross profit (loss):

 

 

 

 

 

Ethanol Production

$

(2,761)

$

-

 

Agribusiness

 

2,746

 

-

 

Marketing and Distribution

 

1,843

 

-

 

Intersegment eliminations

 

51

 

-

 

 

 

$

1,879

$

-

 

 

 

 

 

 

 

Operating income (loss):

 

 

 

 

 

Ethanol Production

$

(7,432)

$

(1,953)

 

Agribusiness

 

(574)

 

-

 

Marketing and Distribution

 

775

 

-

 

Intersegment eliminations

 

51

 

-

 

 

 

$

(7,180)

$

(1,953)


Previously, Green Plains Superior, Green Plains Bluffton and Green Plains Obion had contracted with third-party marketers 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. Following completion of the Merger and prior to the termination of the agreements, nearly all of our ethanol that was sold to one of the 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 intersegment eliminations above).


6.  INVENTORIES


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


 

 

March 31,

2009

 

December 31,

2008

Petroleum & agronomy items held for sale

$

16,895

$

15,925

Grain held for sale

 

11,185

 

10,574

Raw materials

 

14,283

 

9,503

Work-in-process

 

7,418

 

7,371

Finished goods

 

1,085

 

2,171

Supplies and parts

 

1,527

 

1,489

 

$

52,393

$

47,033


7.  FINANCIAL DERIVATIVE INSTRUMENTS


In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities.” SFAS No. 161 requires expanded disclosures regarding the location and amounts of derivative instruments in an entity’s financial statements, how derivative instruments and related hedged items are accounted for under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and how derivative instruments and related hedged items affect an entity’s financial position, operating results and cash flows. The adoption of SFAS No. 161 did not have an impact on our consolidated financial position and results of operations.



11



To minimize the risk and the effects of the volatility of commodity price changes primarily related to corn, natural gas and ethanol, the Company uses various derivative financial instruments, including exchange-traded futures, and exchange-traded and over-the-counter options contracts. 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 positions in these commodities as one way to mitigate risk. While the Company attempts to link its hedging activities to purchase and sales activities, there are situations where these hedging activities can themselves result in losses.  


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 sales 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.


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. The Company does not classify any 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.  


The financial statement locations of derivatives designated as hedging instruments under SFAS No. 133 are as follows (in thousands):


 

 

 

 

Asset Derivatives

 

Liability Derivatives

 

 

 

 

Fair Value at

 

Fair Value at

Derivatives

 

March 31, 2009

 

December

31, 2008

 

March 31, 2009

 

December

31, 2008

 

 

 

 

 

 

 

 

 

Balance Sheet Location

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Inventories

$

(1,095)

$

2,752

$

-

$

-

Derivative financial instruments and other

 

4,676

 

1,915

 

-

 

-

Current liabilities:

 

 

 

 

 

 

 

 

Derivative financial instruments

 

-

 

-

 

4,519

 

4,538

    Total

$

3,581

$

4,667

$

4,519

$

4,538


8.  PROPERTY AND EQUIPMENT


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


 

 

March 31,

2009

 

December 31,

2008

Construction-in-progress

$

3,257

$

1,180

Plant, buildings and improvements

 

264,474

 

264,474

Plant equipment

 

185,391

 

180,276

Land and improvements

 

35,247

 

35,006

Railroad track and equipment

 

22,127

 

22,225

Computer and software

 

1,990

 

1,702

Office furniture and equipment

 

638

 

575

Leasehold improvements and other

 

1,418

 

6

Total property and equipment

 

514,542

 

505,444

Less: accumulated depreciation

 

(16,063)

 

(9,672)

Property and equipment, net

$

498,479

$

495,772




12



9.  LONG-TERM DEBT AND LINES OF CREDIT


The components of long-term debt are as follows (in thousands):


 

 

March 31,

2009

 

December 31,

2008

Green Plains Bluffton:

 

 

 

 

 

Term loan

$

68,250

$

70,000

 

Revolving term loan

 

19,376

 

18,715

 

Revenue bond

 

22,000

 

22,000

 

Economic development grant

 

500

 

500

Green Plains Obion:

 

 

 

 

 

Term loan

 

60,000

 

60,000

 

Revolving term loan

 

35,200

 

30,839

 

Note payable

 

710

 

714

 

Capital lease

 

748

 

748

 

Economic development loan

 

1,000

 

1,000

 

Economic development grant

 

1,700

 

1,700

Green Plains Shenandoah:

 

 

 

 

 

Term loan

 

23,200

 

23,200

 

Revolving term loan

 

17,000

 

17,000

 

Seasonal borrowing

 

3,300

 

3,300

 

Economic development loan

 

150

 

165

Green Plains Superior:

 

 

 

 

 

Term loan

 

35,875

 

35,875

 

Revolving term loan

 

10,000

 

10,000

 

Capital lease

 

323

 

-

Green Plains Grain:

 

 

 

 

 

Term loan

 

8,100

 

8,325

 

Revolving term loan

 

23,172

 

20,000

 

Equipment financing loan

 

1,415

 

1,517

Other

 

2,157

 

818

Total debt

 

334,176

 

326,416

 

Less:  current portion

 

(32,779)

 

(27,405)

Long-term debt

$

$301,397

$

299,011


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


Year Ending December 31,

 

Amount

2009

$

25,693

2010

 

54,094

2011

 

30,827

2012

 

30,286

2013

 

87,991

Thereafter

 

105,285

   Total

$

334,176


Loan Terminology


Related to loan covenant discussions below, the following definitions will apply (all calculated in accordance with 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.



13



·

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 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 collectively, 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


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



14



§

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 1.0% or short-term fixed rates at LIBOR plus 2.5% to 3.9% (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.


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




15



·

Maintenance of net worth as follows:


o

Green Plains Bluffton  

  $80.0 million


o

Green Plains Obion  

  $77.0 million


o

Green Plains Shenandoah

  $37.5 million


o

Green Plains Superior  

  $26.6 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 March 31, 2009, working capital balances at 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 tangible net worth balances at Green Plains Bluffton, Green Plains Obion and Green Plains Superior were also less than those required by the respective financial covenants. In April 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.


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


The Company capitalized $0 and $1.2 million of interest and debt issuance costs during the first three months of 2009 and 2008, respectively.



16



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.


Key Loan Information


·

The term loan expires on April 3, 2013 and the revolving loan expires on September 30, 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 LIBOR plus 3.5%, subject to an interest rate “floor” of 4.5%.


·

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.


·

Unused commitment fees are 0.375% on the unused portion.


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


·

Maintenance of working capital of at least $7.0 million through 2009, increasing to $9.0 million thereafter.


·

Maintenance of tangible net worth of at least $15.0 million.


·

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 are restricted to $2.0 million per year. However, any unused portion from any fiscal year may be added to the limit for the next succeeding year.


As of March 31, 2009, working capital balances at Green Plains Grain were less than those required by the financial covenants in the loan agreements. The Company was granted a waiver of the working capital covenant for the period.


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 payments of $43,341, which commenced in April 2008.


On March 31, 2009, Green Plains Superior entered into a capital lease for equipment, financed through AXIS Capital. The present value of the lease payments total $0.3 million, and no payments had been made as of March 31, 2009. Green Plains Superior is required to make 60 monthly payments of $6,150, which begin in April 2009. Gordon F. Glade, President and Chief Executive Officer of AXIS Capital, is a member of our Board of Directors.


10.  STOCK-BASED COMPENSATION


The Company accounts for all share-based compensation transactions pursuant to SFAS No. 123R, “Share-Based Payment,” which 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.


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. Additionally, outstanding stock options were assumed as part of the Merger. The maximum number of shares of common stock that can be granted to any employee during any year under the Equity Incentive Plan is 50,000.



17



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.


There were no stock options granted during the first quarter of 2009. 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 March 31, 2009 and changes during the three-month period then ended are as follows:


 

 

 

Shares

 

Weighted-Average Exercise Price

 

Weighted-Average Remaining Contractual Term (in years)

 

Aggregate Intrinsic Value (in thousands)

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2008

 

1,311,528

$

12.59

 

 

 

 

 

 

Granted

 

-

 

-

 

 

 

 

 

 

Exercised

 

(240,096)

 

0.14

 

 

 

 

 

 

Cancellations

 

-

 

-

 

 

 

 

 

Outstanding at March 31, 2009

 

1,071,432

$

15.38

 

6.0

$

 

-

 

 

 

 

 

 

 

 

 

 

 

Exercisable at March 31, 2009

 

702,265

$

19.74

 

5.2

$

 

-


All fully-vested stock options as of March 31, 2009 are exercisable and are included in the above table. Since weighted-average option prices exceeded the closing stock price at March 31, 2009, the aggregate intrinsic value was zero. The Company’s 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. The Company uses original issuances of common stock to satisfy our share-based payment obligations.


Compensation costs expensed for share-based payment plans described above were approximately $0.2 million and $0.1 million during the three-month periods ended March 31, 2009 and 2008, respectively. The potential tax benefit realizable for the anticipated tax deductions of the exercise of share-based payment arrangements generally would approximate 40% of these expense amounts. However, due to uncertainty that the tax benefits will be realized, these potential benefits were not recognized currently.


On May 7, 2009, the shareholders of the Company approved the 2009 Equity Incentive Plan which provides for future grants of up to 1,000,000 shares for 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.



18



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.


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.


The provision for income taxes for the three months ended March 31, 2009 and 2008 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.



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 $1.3 million and approximately $2,000 during the three-month periods ended March 31, 2009 and 2008, respectively. Aggregate minimum lease payments under these agreements for the remainder of 2009 and in future fiscal years are as follows (in thousands):


Year Ending December 31,

 

Amount

2009

$

3,756

2010

 

4,296

2011

 

2,455

2012

 

2,281

2013

 

2,093

Thereafter

 

4,974

Total

$

19,855


Commodities - Corn and Natural Gas


As of March 31, 2009, we had contracted for future corn deliveries valued at $49.7 million, natural gas deliveries valued at approximately $11.5 million, ethanol product deliveries valued at approximately $13.4 million and dried distillers grains product deliveries valued at approximately $11.4 million.



19



14.  RELATED PARTY TRANSACTIONS


Grain Origination Contracts


Obion Grain, 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 bear a subordinate lien on Green Plains Obion’s real property if Green Plains Obion defaults under its corn purchase agreement with Obion Grain. Green Plains Obion paid $9.6 million under this arrangement for the three months ended March 31, 2009, of which $0.1 million was for origination fees, and the remainder was payments for corn. No costs were incurred related to this arrangement for the three-month period ended March 31, 2008 as the plant was still under construction. Included in current liabilities were amounts due to Obion Grain totaling $0.1 million at March 31, 2009 and $0.4 million at December 31, 2008.


Sales and Financing Contracts


Green Plains Grain executed two separate financing agreements 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 $1.4 million and $1.5 million is included in debt at March 31, 2009 and December 31, 2008, respectively under these financing arrangements. On March 31, 2009, Green Plains Superior entered into a capital lease for equipment, financed through AXIS Capital. The present value of the lease payments total $0.3 million, and no payments had been made as of March 31, 2009.  


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 three-month period ended March 31, 2009, cash receipts and payments totaled $27.1 million and $0.2 million, respectively, on these contracts. The Company had $0.1 million and $0 at March 31, 2009 and December 31, 2008 included in current liabilities under these purchase and sale agreements.


Blendstar Acquisition


As discussed in Note 4 – Acquisition , on January 20, 2009, the Company acquired 51% of Blendstar LLC from Bioverda U.S. Holdings LLC, an affiliate of NTR, for a total of $8.9 million. The purchase price is comprised of a $7.5 million cash payment and three future annual payments of $0.5 million, beginning in July 2009, booked at present value amounts.




20



Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations


General


References to “we,” “us,” “our” or the “Company” in this report refer to Green Plains Renewable Energy, Inc., an Iowa corporation, and its subsidiaries. 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 and accompanying notes included herewith, and our annual report filed on Form 10-K for the nine-month transition period ended December 31, 2008, including the consolidated financial statements, accompanying notes and the risk factors contained therein.


Forward-Looking Statements


This report contains forward-looking statements based on current expectations that involve a number of risks and uncertainties. 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 words such as “anticipates,”  “believes,” “continue,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “may,” “should,” “will,” and words and phrases of similar 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. The forward-looking statements are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although we believe that our expectations regarding future events are based on reasonable assumptions, 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 in our forward-looking statements. We may experience significant fluctuations in future operating results due to a number of economic conditions, including, but not limited to, competition in the ethanol industry, commodity market risks, financial market risks, counter-party risks, risks associated with changes to federal policy and/or regulation and other risk factors detailed in our reports filed with the Securities and Exchange Commission. 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 Part II, Item 1A – Risk Factors of this report and in Part I, Item 1A  – Risk Factors of our annual report on Form 10-K for the nine-month transition period ended December 31, 2008.


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.



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Previously, Green Plains Superior, Green Plains Bluffton and Green Plains Obion had contracted with independent marketers to purchase all of their ethanol production. Under the agreements, we sold our ethanol production exclusively to the independent marketers at a price per gallon based on a market price at the time of sale, less certain costs for each gallon sold. These agreements terminated in January 2009 and February 2009 and as a result, a one-time charge of approximately $4.6 million is 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, reduce our costs for leased railcars, provide us a better opportunity to employ our risk management processes, mitigate our risks of counterparty concentration and accelerate our collection of receivables. We expect savings in marketing fees and lower leased railcar costs totaling approximately $4.8 million per year for each of the next three years, with a reduced yearly benefit after that.


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, in an environment of higher prices, compress the overall margin structure at the plants. As a result, at times, we may operate our plants at negative operating margins.


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 2008 was $5.27 per bushel, with highs reaching nearly $8.00 per bushel and retreating to $4.07 per bushel as of December 31, 2008. Corn prices continued to drop during the first three months of 2009; the average CBOT near-month corn price for the three-month period ended March 31, 2009 was $3.78. We believe that market volatility is attributable to a number of factors, including but not limited to export demand, speculation, currency valuation, global economic conditions, 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 also vary from location to location 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. For the first quarter of 2009, the average Opis Spot Ethanol Assessment was $1.56 per gallon and the average NYMEX RBOB was $1.24 per gallon, or approximately $0.32 per gallon below ethanol prices. We believe the higher ethanol prices relative to gasoline were due to constraints in the ethanol blending and distribution infrastructure. Beginning in the fourth quarter of 2008, gasoline prices fell at a faster rate than ethanol prices and gasoline prices continue to be below ethanol prices in the first quarter of 2009. As a result, discretionary blending slowed because ethanol traded above the blender’s credit value. Additional ethanol supply from newly completed plants and existing plants that were temporarily taken off-line may begin production in the near future, which may reduce wholesale ethanol prices compared to gasoline.



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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. Growth Energy, an ethanol industry trade organization, has requested a waiver from the EPA to increase the amount of ethanol blended into gasoline from the 10 percent blend up to a 15 percent blend (E15). We believe there is a reasonable 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 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 versus 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.


On April 23, 2009, the California Air Resources Board adopted the Low Carbon Fuel Standard (“LCFS”) requiring a 10% reduction in greenhouse gas (“GHG”) emissions from transportation fuels by 2020. On May 5, 2009, the Environmental Protection Agency (“EPA”) released proposed rulemaking for the second stage of the RFS requiring a 20% reduction in GHG emissions produced at newer ethanol production, transportation and distribution facilities. Both the EPA and the California Air Resources Board propose an Indirect Land Use Changes (“ILUC”) component in the lifecycle GHG emissions calculation. Eleven additional states are currently considering similar ILUC standards. The methodology for determining the ILUC standard has yet to be determined. However, the ILUC standard may possibly penalize corn-based ethanol as a cause of deforestation and displacement of non-intensive agricultural acreage. The market for corn-based ethanol could be negatively impacted if it is determined that corn-based ethanol fails to achieve lifecycle GHG emission reductions. The long-term impact of the ILUC standard is a fragmented ethanol market where low carbon ethanol from sugarcane or other alternative feedstocks carries a premium value.


Companies involved in the production of ethanol had historically been 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.


The ethanol industry has seen significant distress over the last year. There have been several well-publicized bankruptcies announced, including VeraSun Energy Corporation and Aventine Renewable Energy, which had been two 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 ineffective commodity price risk management 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. We believe a disciplined risk management program helps mitigate these types of occurrences. Green Plains utilizes a disciplined risk management program with a comprehensive policy to monitor and measure the risk of commodity price movements. We attempt to match within a close tolerance our ethanol sales and corn purchases, and monitor the “value at risk” of our open, unhedged position 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.



23



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. Pursuant to the terms of the Merger, 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.


Acquisition of Majority Interest in Blendstar LLC


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 a total of $8.9 million. The purchase price is comprised of a $7.5 million cash payment and three future annual payments of $0.5 million, beginning in July 2009. These future annual payments are recorded in debt at a present value of $1.4 million. The allocation of the purchase price to specific assets and liabilities was based, in part, on outside appraisals of the fair value of certain assets acquired. Approximately $21.6 million is attributed to assets acquired, of which $5.3 million is allocated to goodwill. Liabilities assumed total approximately $6.2 million.


The acquisition of Blendstar is a strategic investment within the ethanol value chain. 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


The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States requires the Company to 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. Key accounting policies, including but not limited to those relating to revenue recognition, cost of goods sold, property and equipment, impairment of long-lived assets, share-based compensation, derivative financial instruments and income taxes, are impacted significantly by judgments, assumptions and estimates used in the preparation of the consolidated financial statements. See further discussion of our critical accounting policies and estimates, as well as significant accounting policies, in our Form 10-K for the nine-month transition period ended December 31, 2008.



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Recent Accounting Pronouncements


In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141R, “Business Combinations,” which replaces SFAS No. 141. SFAS No. 141R requires the acquirer to recognize the identifiable assets acquired, liabilities assumed, contingent purchase consideration and any noncontrolling interest in the acquiree at fair value on the date of acquisition. In April 2009, the FASB issued Final Staff Position (“FSP”) 141R-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies,” which amends SFAS No. 141R by establishing a model to account for certain pre-acquisition contingencies. Under FSP 141R-1, the acquirer is required to recognize, at fair value, an asset acquired or a liability assumed in a business combination that arises from a contingency if the acquisition-date fair value of that asset or liability can be determined during the measurement period. If the acquisition-date fair value cannot be determined, then the acquirer should follow the recognition criteria in SFAS No. 5, “Accounting for Contingencies,” and FASB Interpretation No. 14, “Reasonable Estimation of the Amount of a Loss – an interpretation of FASB Statement No. 5.” SFAS No. 141R and FSP 141R-1 are effective for annual reporting periods beginning January 1, 2009, and will apply prospectively to business combinations completed on or after that date. The impact of the adoption of SFAS No. 141R and FSP 141R-1 will depend on the nature of acquisitions completed after that date.


In January, 2009 the FASB issued FSP 107-1 and Accounting Principles Board (“APB”) Opinion No. 28-1, “Interim Disclosures about Fair Value of Financial Instruments.” These expand the fair value disclosures required for all financial instruments within the scope of SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” to interim periods. FAS 107-1 and APB Opinion No. 28-1 are effective for interim periods ending after June 15, 2009, and may result in increased disclosures in our interim periods.


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. SFAS No. 161 does not have a material impact on our consolidated financial statements.  See Note 7 – Financial Derivative Instruments for disclosures.


 

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


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. Pursuant to reverse acquisition accounting rules, results of operations include the financial results of VBV from its period of inception, along with the financial results of Green Plains since October 15, 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”).



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


 

 

 

 

Three Months Ended

March 31,

 

 

 

 

2009

 

2008

Revenues:

 

 

 

 

 

Ethanol Production

$

137,503

$

-

 

Agribusiness

 

46,210

 

-

 

Marketing and Distribution

 

178,353

 

-

 

Intersegment eliminations

 

(140,984)

 

-

 

 

 

$

221,082

$

-

 

 

 

 

 

 

 

Gross profit (loss):

 

 

 

 

 

Ethanol Production

$

(2,761)

$

-

 

Agribusiness

 

2,746

 

-

 

Marketing and Distribution

 

1,843

 

-

 

Intersegment eliminations

 

51

 

-

 

 

 

$

1,879

$

-

 

 

 

 

 

 

 

Operating income (loss):

 

 

 

 

 

Ethanol Production

$

(7,432)

$

(1,953)

 

Agribusiness

 

(574)

 

-

 

Marketing and Distribution

 

775

 

-

 

Intersegment eliminations

 

51

 

-

 

 

 

$

(7,180)

$

(1,953)


Revenues during the three months ended March 31, 2009 were $221.1 million. We had no revenues during the three months ended March 31, 2008 as VBV was a development stage company until the Bluffton ethanol plant commenced production in September 2008.


Lower than expected revenues were experienced during the first quarter of 2009 due to an accelerated and extended plant shutdown at the Green Plains Bluffton facility and operational issues at the Green Plains Superior facility. These two operational issues affected net income by approximately $4.0 million. The Green Plains Bluffton facility required long-term improvements to the distillation process and the improvements were completed in March 2009. The plant closure resulting from these improvements impacted net income by approximately $2.5 million. The Green Plains Superior facility faced operational challenges in the first quarter, as technology and design issues limited the plant’s performance and reliability, specifically related to production of dried distillers grains. The Company estimates the impact to first quarter net income of $1.5 million. The Company is working to improve the plant’s operating effectiveness and efficiencies, and anticipates further production improvements at the plant by the end of the second quarter.


Previously, Green Plains Superior, Green Plains Bluffton and Green Plains Obion had contracted with third-party marketers 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 during the first quarter of 2009. Following completion of the Merger and prior to the termination of the agreements, nearly all of our ethanol that was sold to one of the 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 intersegment eliminations above).


Cost of goods sold during the three months ended March 31, 2009 was $219.2 million, resulting in a $1.9 million gross profit. We had no cost of goods sold during the three months ended March 31, 2008 as VBV was still a development stage company at that time. Included in the first quarter 2009 cost of goods sold is a one-time charge related to the cancellation of the third-party ethanol marketing agreements, discussed above, of $4.6 million.




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Operating expenses were $9.1 million, and $2.0 million during the three months ended March 31, 2009 and 2008, respectively. Operating expenses for the three months ending March 31, 2009 include the operations of the Bluffton and Obion ethanol production plants and Green Plains Trade, along with the acquired operations of Green Plains Grain and the Shenandoah and Superior ethanol production plants. For the three months ended March 31, 2008, operating expenses include development-stage expenses only as the Bluffton and Obion plants were under construction, and do not include the operating expenses of the Shenandoah and Superior plants (as this period is pre-Merger). The $7.1 million increase in operating expenses during the three-month period ended March 31, 2009, as compared to the same period during 2008, is mainly 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. Our operating expenses are primarily general and administrative expenses for employee salaries, incentives and benefits; stock-based compensation expenses; office expenses; 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.


Interest expense was $2.5 million and $0.1 million during the three months ended March 31, 2009 and 2008, respectively. Interest expense during the period of plant construction was capitalized to construction in progress. With our plants now operational, interest on debt is charged to interest expense. However, interest expense during the first quarter of 2009 was reduced by $1.1 million in patronage refunds received from two of our lenders.


Liquidity and Capital Resources


On March 31, 2009, we had $53.5 million in cash and equivalents and $18.2 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 March 31, 2009, working capital balances at Green Plains Bluffton, Green Plains Obion, Green Plains Superior and Green Plains Grain were less than those required by the respective financial covenants in the loan agreements of those subsidiaries. In April 2009, the Company contributed additional capital to Green Plains Bluffton, Green Plains Obion and Green Plains Superior and also entered into negotiations with their respective lenders to provide waivers and modifications to the loan agreements. 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 Shenandoah indicate continued compliance with each of the material financial covenants. Current forecasts for Green Plains Bluffton, Green Plains Obion and Green Plains Superior indicate that we may fail to meet required working capital, net worth and/or debt service coverage ratios at those subsidiaries unless the loan agreements are amended. In that event, we may seek additional waivers from the lenders or may inject additional capital into those subsidiaries, as necessary, to become compliant, though we have no obligation to make such an injection. We are currently negotiating amendments to the loan agreements with our lenders. Because of the volatility of our income and cash flow, we are unable to accurately predict whether any of our 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 the Company has sufficient working capital for its 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 secure 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.



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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. At March 31, 2009, $68.3 million related to the term loan was outstanding, along with $19.4 million on the revolving term loan. The term loan requires quarterly principal payments of $1.75 million. The loans mature on November 1, 2013.


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. At March 31, 2009, the entire $60.0 million related to the term loan was outstanding, along with $35.2 million on the revolving term loan. The term loan requires quarterly principal payments of $2.4 million. The term loan matures on May 20, 2015 and the revolving loan matures on November 1, 2018.


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. At March 31, 2009, $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 term loan requires quarterly principal payments of $1.2 million. The term loan matures on May 20, 2014 and the revolving facility matures on November 1, 2017.


The Green Plains Superior loan is comprised of a $40.0 million amortizing term loan and a $10.0 million revolving term facility. At March 31, 2009, $35.9 million related to the term loan was outstanding, along with the entire $10.0 million on the revolving term loan. The term loan requires quarterly principal payments of $1.375 million. The term loan matures on July 20, 2015 and the revolving facility matures on July 1, 2017.


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.


With certain exceptions, the revolving term facilities are generally available for advances throughout the life of the commitment. Interest-only payments are due each month on all revolving term facilities until the final maturity date, with the exception of Green Plains Obion’s agreement, which requires additional semi-annual payments of $4.675 million beginning November 1, 2015.


The term loans and revolving facilities 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). 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.


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. Loan proceeds are used primarily for working capital purposes. The principal amount of the revolving term facility was reduced to $30.0 million on March 31, 2009. At March 31, 2009, $8.1 million on the term loan and $23.2 million on the revolving term facility was outstanding. The term loan expires on April 3, 2013 and the revolving facility 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. In addition, Green Plain Grain had outstanding equipment financing term loans totaling $1.4 million at March 31, 2009.



28



Contractual Obligations


Our contractual obligations as of March 31, 2009 were as follows (in thousands):


 

 

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)

$

334,176

$

30,581

$

84,848

$

81,831

$

136,916

Operating lease obligations (2)

 

19,855

 

4,919

 

6,111

 

4,311

 

4,514

Purchase obligations (3)

 

162,798

 

145,689

 

8,001

 

3,929

 

5,179

Totals

$

516,829

$

181,189

$

98,960

$

90,071

$

146,609

_______________________

(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 3.  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 $334 million outstanding in long-term debt as of March 31, 2009, $304 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 $3.0 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 utilization; 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.


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.



29



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 Board 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 March 31, 2009. 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

$

54,752

  Corn

 

119,826

 

Bushels

$

51,293

  Distillers grains

 

1,036

 

Tons *

$

12,653

  Natural Gas

 

9,338

 

MMBTU

$

4,385

_______________________

* Distillers grains quantities are stated on an equivalent dried ton basis.


At March 31, 2009, approximately 12% 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 $6.4 million.


At March 31, 2009, approximately 13% 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 10 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 $6.6 million.


At March 31, 2009, approximately 20% 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 $2.6 million.


At March 31, 2009, approximately 23% 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 $1.0 million.



30



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, foreign and domestic 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 inventory 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

$

475

Market Risk

$

  48


Item 4.  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 Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission (“SEC”) 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). Due to the numerous pervasive changes that occurred in the Company’s control environment as a result of the October 2008 Merger, and enhancements that were made but not yet tested during the quarter ended March 31, 2009, the Company’s Chief Executive Officer and the Chief Financial Officer were unable to conclude at the time of this evaluation 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 reported, completely and accurately, within the time periods specified in SEC rules and forms.


Changes in Internal Control over Financial Reporting


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 discussed in further detail in our Form 10-K for the nine-month transition period ended December 31, 2008, numerous pervasive changes occurred to the Company’s internal control environment as a result of the October 2008 Merger. Enhancements have been made to the Company’s internal controls over financial reporting during the first quarter ended March 31, 2009 to address the Company’s post-merger internal control environment. Those enhancements include improved documentation of control procedures. In addition, the Company appointed a controller over all ethanol operations to drive consistency in policies and procedures. Another enhancement resulted from the termination of two third-party marketing agreements and moving all marketing in-house. Finally, the Company centralized its cash management process and made enhancements to the invoicing process. There were no other changes in our internal control over financial reporting that occurred during the period covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



31



PART II – OTHER INFORMATION


Item 1.  Legal Proceedings


None.


Item 1A.  Risk Factors


Our investors should consider the risks that could affect us and our business as set forth in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the nine-month transition period ended December 31, 2008. Although we have attempted to discuss key factors, our investors need to be aware that other risks may prove to be important in the future. New risks may emerge at any time and we cannot predict such risks or estimate the extent to which they may affect our financial performance. As a result of our merger with VBV, IBE and EGP (the “Mergers”), we are subject to a number of risks, which have been previously disclosed, associated with the transactions contemplated by the Mergers. Investors should carefully consider the discussion of risks and the other information included or incorporated by reference in this Quarterly Report on Form 10-Q, including Forward-Looking Information, which is included in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” In addition, because we have changed the way we sell and market ethanol and distillers grains, we have revised the risk factor related to credit exposure as follows:


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. 


In the past, we had a concentration of credit risk related to our accounts receivable since we generally sold nearly all of our ethanol and distillers grains to a few third-party brokers. We have moved responsibility for sales, marketing and distribution of all ethanol produced at our four production facilities and the majority of our distillers grains in-house, which results in credit risks from multiple new customers. Furthermore, we have entered into contracts with other companies to market their ethanol, and there exists risk in the event they are unable to fulfill their contractual obligations to us. 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 ten 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, perform on contracts with us or to provide inventory to us on advances made may cause us to experience losses and may adversely impact our liquidity and our ability to make our payments when due.


Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds


None.


Item 3.  Defaults Upon Senior Securities


None.


Item 4.  Submission of Matters to a Vote of Security Holders


None.


Item 5.  Other Information


None.



32



Item 6.  Exhibits


EXHIBIT INDEX


Exhibit No.

Description

10.1

Employment Agreement by and between Green Plains Renewable Energy, Inc. and Michael C. Orgas dated November 1, 2008

10.2

Employment Offer Letter to Edgar Seward dated October 15, 2008

10.3

Employment Offer Letter to Steven Bleyl dated October 15, 2008

10.4

Employment Offer Letter to Ron Gillis dated October 15, 2008

10.5

Amendment to Master Loan Agreement between Farm Credit Services of Mid-America, FCLA, Farm Credit Services of Mid-America, PCA and Green Plains Obion LLC (f/k/a Ethanol Grain Processors, LLC) dated March 24, 2009

10.6

Statused Revolving Credit Supplement between Farm Credit Services of Mid-America, PCA and Green Plains Obion LLC (f/k/a Ethanol Grain Processors, LLC) dated March 24, 2009

10.7

Second Amendment to Master Loan Agreement between Green Plains Bluffton LLC (f/k/a Indian Bio-Energy, LLC) and AgStar Financial Services, PCA dated April 16, 2009

10.8

First Amended and Restated Credit Agreement between Green Plains Grain Company LLC and First National Bank of Omaha dated as of March 31, 2009

10.9

2009 Equity Incentive Plan (Incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K dated May 11, 2009)

31.1

Certification of Chief Executive Officer pursuant to S.E.C. Rule 13a-14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Chief Financial Officer pursuant to S.E.C. Rule 13a-14, as adopted pursuant to 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




33



SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.







Date:  May 15, 2009

GREEN PLAINS RENEWABLE ENERGY, INC.

(Registrant)



By:     /s/ Todd A. Becker                             

Todd A. Becker
President and Chief Executive Officer

(Principal Executive Officer)




Date:  May 15, 2009




By:     /s/ Jerry L. Peters                              

Jerry L. Peters
Chief Financial Officer

(Principal Financial Officer)




34


Exhibit 10.1


EMPLOYMENT AGREEMENT


This Employment Agreement (this “ Agreement ”) is effective as of the Effective Date defined herein, by and between GREEN PLAINS RENEWABLE ENERGY, INC., an Iowa corporation (the “ Company ”), and MICHAEL C. ORGAS, an individual (“ Executive ”).


In consideration of the promises and mutual covenants contained herein, the parties hereto agree as follows:


1.

Employment; Location . The Company hereby employs Executive and Executive hereby accepts such employment in the Omaha, Nebraska metro area.  Executive will be relocated in accordance with the relocation provisions herein.


2.

Term . Executive’s employment shall be “at-will” and may be terminated at any time, by either party, for any reason whatsoever (the “ Term ”).  Executive’s employment with the Company shall commence on November 1, 2008 (the “Effective Date”).    


3.

Duties and Authorities . During the Term:


3.1

Executive shall be appointed and serve as the Executive Vice President of Commercial Operations of the Company and will report to the Chief Operating Officer (“COO”) of the Company. Executive shall have responsibilities, duties and authority reasonably accorded to and expected of such positions in similar businesses in the United States, including and such responsibilities and duties assigned by Chief Operating Officer and Chief Executive Officer from time to time (the “ Duties ”).


3.2

Executive shall diligently execute such Duties and shall devote his full time, skills and efforts to such Duties, subject to the general supervision and control of the COO.  Executive will not engage in any other employment, occupation or consulting activity during the Term of this Agreement.


4.

Compensation and Benefits . The Company shall pay Executive, and Executive accepts as full compensation for all services to be rendered to the Company, the following compensation and benefits:


4.1

Base Salary . The Company shall pay Executive a base salary of Two Hundred Thousand Dollars ($200,000) per year.  Base salary shall be payable in equal installments twice monthly or at more frequent intervals in accordance with the Company’s customary pay schedule.  The Company shall annually consider increases of Executive’s base salary and may periodically increase such base salary in its discretion.


4.2

Additional Compensation .  In addition to base salary, the Company shall pay the following to Executive:


(a)

Special One-Time Advance .  The Company shall pay to Executive a one-time advance, against the minimum annual bonus set forth in Section 4.2(b) below, in connection the commencement of employment with the Company in the amount equal to Twenty Five Thousand Dollars ($25,000), payable within 10 business days following the Effective Date of this Agreement.  In the event Executive leaves employment with the Company for any reason within the first year of this Agreement, Executive shall be obligated to repay the entire amount of this special one-time advance and agrees that the Company may offset such amount from any amounts Company may owe Executive hereunder.  Any amounts remaining due thereafter shall be payable by Executive within 10 business days following Executive’s last day of employment.


(b)

Annual Bonus .  Executive will be entitled to a bonus of up to fifty percent (50%) of annual base salary, payable annually, based on objectives set by the Company. Executive shall receive a minimum of twenty-five percent (25%) of annual base salary as a first year bonus.  The Company will obtain feedback from Executive before setting bonus objectives.




(c)

Long-Term Incentive Compensation .  The Compensation Committee will engage an outside compensation consultant to assist in the development of a long-term incentive program (“LTIP”) for the Company. Executive shall be eligible to participate in such LTIP at the sole discretion of the Company.


4.3

Equity Incentive Compensation .


(a)

Stock Compensation.  On the Effective Date, the Company shall provide Executive a grant of 25,000 shares of the Company’s common stock which shall be subject to terms and conditions set out in the Company’s 2007 Equity Compensation Plan and related stock grant.  As will be set forth in the related stock grant, the shares shall vest as follows:  one-fourth shall vest at the Effective Time, with one-fourth vesting each year thereafter until fully vested.  All shares not vested at the time of Executive’s termination from employment shall be forfeited.


(b)

Option Compensation .  On the Effective Date, Executive will be granted an option exercisable for 50,000 shares of the Company’s common stock at a strike price equal to the closing price of the Company’s common stock on the Effective Date.  The option shall vest as follows:  one-fourth shall vest at the Effective Time with one-fourth vesting each year thereafter until fully vested.  The options shall terminate on the earlier of the ten (10) year anniversary of the Effective Date or the 90 th day after Executive’s termination of employment for any reason, other than for death or disability, in which case the grant shall terminate on the 366 th day after death or disability, and shall be subject to terms and conditions set out in the Company’s 2007 Equity Compensation Plan and related stock option grant.    

4.4

Additional Benefits .  Executive shall be permitted, during the Term, if and to the extent eligible, to participate in any group life, hospitalization or disability insurance plan, health or dental program, pension plan, similar benefit plan or other so-called “fringe benefits” of the Company made available to officers of the Company.  


4.5

Vacation .  Executive shall be entitled to an aggregate of up to four weeks leave for vacation for each calendar year during the Term at full pay.  Executive agrees to give reasonable notice of his vacation scheduling requests, which shall be allowed subject to the Company’s reasonable business needs. No more than five (5) days vacation may be carried over from one year to the next year.   For the remainder of 2008, Executive shall be entitled to up to one week leave for vacation.  


4.6

Deductions .  The Company shall have the right to deduct from the compensation due to Executive hereunder any and all sums required for social security and withholding taxes and for any other federal, state or local tax or charge which may be hereafter enacted or required by law as a charge on the compensation of Executive.


5.

Business Expenses . Executive may incur reasonable, ordinary and necessary business expenses in the course of his performance of his obligations under this Agreement. The Company shall reimburse Executive in accordance with the Company’s business expense reimbursement policy.


6.

Relocation . The Company shall provide relocation assistance to Executive for the purpose of facilitating Executive’s move to Omaha, Nebraska pursuant to Section 1 above. No reimbursement by the Company to the Executive shall be made absent a receipt from Executive detailing the relocation expense incurred by the Executive.  The following costs shall be reimbursed by the Company, as described above:


·

All reasonable realtor fees related to the selling of Executive’s residence in Lakeville, Minnesota;


·

All reasonable costs associated with the movement of household goods from Lakeville, Minnesota to Omaha, Nebraska;


·

Up to $50,000 of negative equity in Executive’s Lakeville, Minnesota residence; and


·

All temporary living expenses for Executive in Omaha, Nebraska until June 15, 2009, including reasonable airfare to commute to Omaha until such time.



2



7.

Termination .


7.1

Termination for Cause .  Executive’s employment hereunder shall be terminable for Cause (as defined below) upon written notice from the Company to Executive. As used in this Agreement, “ Cause ” shall mean one of the following: (a) a material breach by Executive of the terms of this Agreement, not cured within thirty (30) days from receipt of notice from the Board of such breach, (b) conviction of or plea of guilty or no contest to, a felony; (c) willful misconduct or gross negligence in connection with the performance of Executive’s duties; or (d) willfully engaging in conduct that constitutes fraud, gross negligence or gross misconduct that results in material harm to the Company.  For purposes of this definition, no act, or failure to act, on Executive’s part shall be considered "willful" unless done, or omitted to be done, by Executive in knowing bad faith and without reasonable belief that his action or omission was in, or not opposed to, the best interests of the Company.  If the Company terminates Executive’s employment for Cause, Executive shall be paid his salary and benefits through the date of termination and, except as otherwise required by applicable law or under any applicable and properly approved compensation plan or arrangement, no other amounts shall be payable.  


7.2

Termination without Cause or for Good Reason . The Company may terminate Executive’s employment at any time for any reason (or no reason) other than Cause, as determined by the Board and the Executive may terminate Executive’s employment with the Company for Good Reason and resign any and all positions as officer of the Company and any related companies. If the Company terminates Executive’s employment without Cause or the Executive terminates his employment for Good Reason:


(a)

The Company shall pay within 10 business days after such termination:  (1) an amount equal to six (6) months of Executive’s full annual base salary on the date of his termination; and


(b)

All options and other equity awards, whether made pursuant to this agreement or otherwise, shall become fully vested and released from any restrictions on transfer upon such termination.  


As used in this Agreement, “ Good Reason ” shall mean any of the following if the same occurs without Executive’s express written consent:  (a) a material diminution in Executive’s base salary as described in Section 4.1, which for such purposes shall be deemed to exist with a reduction of greater than fifteen percent (15%) ; (b) a material diminution in Executive’s authority, Duties, or responsibilities; (c) a material diminution in the authority, duties, or responsibilities of the person to whom Executive is required to report; (d) a material change in the geographic location at which Executive must perform the services pursuant to Section 1 (for this purpose, any relocation of more that 50 miles shall be deemed a material change following a Change in Control as defined in the 2007 Equity Compensation Plan; provided however the merger pursuant to the Agreement and Plan of Merger among Green Plains Renewable Energy, Inc., Green Plains Merger Sub, Inc. and VBV LLC  dated May 7, 2008 and related mergers (the “Merger”), shall not be a Change in Control for such purpose); (e) any material reduction or other adverse change in Executive’s benefits under any applicable and properly approved compensation plan or arrangement without the substitution of comparable benefits; or (f) any other action or inaction that constitutes a material breach by the Company under this Agreement. To terminate for Good Reason, an Executive must incur a termination of employment on or before the second (2 nd ) anniversary of the initial existence of the condition.


Executive shall be required to provide notice to the Company of the existence of any of the foregoing conditions within 60 days of the initial existence of the condition, upon the notice of which the Company shall have a period of 30 days during which it may remedy the condition.


7.3

Termination by Executive Without Good Reason .  If Executive terminates without Good Reason, then Executive will be required to give the Company at least ninety (90) days notice.  If Executive terminates without Good Reason then Executive will be paid his salary and benefits through the date of termination and, except as otherwise required by applicable law, no other amounts shall be payable except as provided under any applicable and properly approved compensation plan or arrangement.



3



7.4

Effect of Termination .  In the event Executive’s employment is terminated, all obligations of the Company and all obligations of Executive shall cease except that (a) the terms of this Section 7 and of Sections 8 through 22 below shall survive such termination and (b) the Company shall continue to be obligated to fulfill its obligations pursuant to Section 4, 5 and 6 to the extent they have not been satisfied as of the date of such termination. Executive acknowledges that, upon termination of his employment, he is entitled to no other compensation, severance or other benefits other than those specifically set forth in this Agreement, except to the extent provided in any applicable compensation plan or arrangement.


8.

Covenant Not to Compete; Nonsolicitation .


8.1

Covenant .  Executive hereby agrees that, while he is employed or engaged by the Company as either an employee or as a consultant pursuant to this Agreement, and, in any event, for the one (1)-year period following Executive’s termination of employment for any reason, he will not directly or indirectly compete (as defined in Section 8.2 below) with the Company in any geographic area in which the Company does or has done business.


8.2

Direct and Indirect Competition .  As used herein, the phrase “ directly or indirectly compete ” shall mean owning, managing, operating or controlling, or participating in the ownership, management, operation or control of, or being connected with or having any interest in, as a stockholder, director, officer, employee, agent, consultant, assistant, advisor, sole proprietor, partner or otherwise, any business (other than the Company’s) engaged in the production, marketing, sale or distribution of ethanol, provided, however, that this prohibition shall not apply to ownership of less than one percent (1%) of the voting stock in companies whose stock is traded on a national securities exchange or in the over-the-counter market.


8.3

Nonsolicitation .  Executive hereby agrees that while he is employed or engaged by the Company as either an employee or as a consultant pursuant to this Agreement, and, in any event, during the two (2)-year period following Executive’s termination of employment for any reason, he will not directly or indirectly solicit or attempt to solicit any customer, vendor or distributor of the Company, other than for the Company, with respect to any product or service being furnished, made or sold by the Company at any time during Executive’s employment with the Company.  Executive further agrees that during such time period, Executive shall not, directly or indirectly, solicit, encourage or attempt to solicit any of the executives, managers or employees who are employed by the Company on his termination date to become executives, manages or employees of any other person or entity with which Executive is affiliated.


9.

Confidential Information .  Executive acknowledges that during his employment or consultancy with the Company he will develop, discover, have access to and/or become acquainted with technical, financial, marketing, personnel and other information relating to the present or contemplated products or the conduct of business of the Company which is of a confidential and proprietary nature (“ Confidential Information ”). Executive agrees that all files, records, documents and the like relating to such Confidential Information, whether prepared by him or otherwise coming into his possession, shall remain the exclusive property of the Company, and Executive hereby agrees to promptly disclose such Confidential Information to the Company upon request and hereby assigns to the Company any rights which he may acquire in any Confidential Information. Executive further agrees not to disclose or use any Confidential Information and to use his best efforts to prevent the disclosure or use of any Confidential Information either during the term of his employment or consultancy or at any time thereafter, except as may be necessary in the ordinary course of performing his duties under this Agreement. Upon termination of Executive’s employment or consultancy with the Company for any reason, (a) Executive shall promptly deliver to the Company all materials, documents, data, equipment and other physical property of any nature containing or pertaining to any Confidential Information, and (b) Executive shall not take from the Company’s premises any such material or equipment or any reproduction thereof.


10.

Inventions .


10.1

Disclosure of Inventions .  Executive hereby agrees that if he conceives, learns, makes or first reduces to practice, either alone or jointly with others, any “ Employment Inventions ” (as defined in Section 10.3 below) while he is employed by the Company, either as an employee or as a consultant, he will promptly disclose such Employment Inventions to the Board or to any other Company officer designated by the Board.



4



10.2

Ownership, Assignment Assistance and Power of Attorney .  All Employment Inventions shall be the sole and exclusive property of the Company, and the Company shall have the right to use and to apply for patents, copyrights or other statutory or common law protection for such Employment Inventions in any country. Executive hereby assigns to the Company any rights which he may acquire in such Employment Inventions. Furthermore, Executive agrees to assist the Company in every proper way at the Company’s expense to obtain patents, copyrights and other statutory or common law protections for such Employment Inventions in any country and to enforce such rights from time to time. Specifically, Executive agrees to execute all documents as the Company may desire for use in applying for and in obtaining or enforcing such patents, copyrights and other statutory or common law protections together with any assignments thereof to the Company or to any person designated by the Company. Executive’s obligations under this Section 10 shall continue beyond the termination of his employment under this Agreement, but the Company shall compensate Executive at a reasonable rate after any such termination for the time which Executive actually spends at the Company’s request in rendering such assistance. In the event the Company is unable for any reason whatsoever to secure Executive’s signature (after reasonable attempts to do so) to any lawful document required to apply for or to enforce any patent, copyright or other statutory or common law protections for such Employment Inventions, Executive hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as his agents and attorneys-in-fact to act in his stead to execute such documents and to do such other lawful and necessary acts to further the issuance and prosecution of such patents, copyrights or other statutory or common law protection, such documents or such acts to have the same legal force and effect as if such documents were executed by or such acts were done by Executive.


10.3

Employment Inventions .  The definition of “ Employment Invention ” as used herein is as follows: “ Employment Invention ” means any invention or part thereof conceived, developed, reduced to practice, or created by Executive which is: (a) conceived, developed, reduced to practice, or created by Executive: (i) within the scope of his employment; (ii) on the Company’s time; or (iii) with the aid, assistance, or use of any of the Company’s property, equipment, facilities, supplies, resources, or intellectual property; (b) the result of any work, services, or duties performed by Executive for the Company; (c) related to the industry or trade of the Company; or (d) related to the current or demonstrably anticipated business, research, or development of the Company.


10.4

Exclusion of Prior Inventions .  Executive has identified on Exhibit A attached hereto a complete list of all inventions which Executive has conceived, learned, made or first reduced to practice, either alone or jointly with others, prior to employment with the Company and which Executive desires to exclude from the operation of this Agreement. If no inventions are listed on Exhibit A , Executive represents that he has made no such inventions at the time of signing this Agreement.


10.5

Inventions of Third Parties .  Executive shall not disclose to the Company, use in the course of his employment, or incorporate into the Company’s products or processes any confidential or proprietary information or inventions that belong to a third party, unless the Company has received authorization from such third party and Executive has been directed by the Board to do so.


11.

Compliance with Section 409A of the Code .  Notwithstanding any provision in this Agreement to the contrary, this Agreement shall be interpreted, construed and conformed in accordance with Section 409A of the Code and regulations and other guidance issued thereunder. If, on the date of Executive’s separation from service (as defined in Treasury Regulation §1.409A-1(h)), Executive is a specified employee (as defined in Code Section 409A and Treasury Regulation §1.409A-1(i)), no payment shall be made under this Agreement at any time during the 6-month period following the Employee's separation from service of any amount that results in the "deferral of compensation" within the meaning of Treasury Regulation §1.409A-1(b), after application of the exemptions provided in Treasury Regulation §§1.409A-1(b)(4) and 1.409A-1(b)(9)(iii) and (v), and any amounts otherwise payable during such 6-month period shall be paid in a lump sum on the first payroll payment date following expiration of such 6-month period.


12.

No Conflicts .  Executive hereby represents that, to the best of his knowledge, his performance of all the terms of this Agreement and his work as an employee or consultant of the Company does not breach any oral or written agreement which he has made prior to his employment with the Company.



5



13.

Equitable Remedies .  Executive acknowledges and agrees that the breach or threatened breach by him of certain provisions of this Agreement, including without limitation Sections 8, 9 or 10 above, would cause irreparable harm to the Company for which damages at law would be an inadequate remedy. Accordingly, Executive hereby agrees that in any such instance the Company shall be entitled to seek injunctive or other equitable relief in addition to any other remedy to which it may be entitled.


14.

Assignment .  This Agreement is for the unique personal services of Executive and is not assignable or delegable in whole or in part by Executive without the consent of the Board. This Agreement may be assigned or delegated in whole or in part by the Company and, in such case, the terms of this Agreement shall inure to the benefit of, be assumed by, and be binding upon the entity to which this Agreement is assigned.


15.

Waiver or Modification .  Any waiver, modification or amendment of any provision of this Agreement shall be effective only if in writing in a document that specifically refers to this Agreement and such document is signed by the parties hereto.


16.

Entire Agreement .  This Agreement constitutes the full and complete understanding and agreement of the parties hereto with respect to the specific subject matter covered herein and therein and supersede all prior oral or written understandings and agreements with respect to such specific subject matter.


17.

Severability .  If any provision of this Agreement is found to be unenforceable by a court of competent jurisdiction, the remaining provisions shall nevertheless remain enforceable in full force and effect, and the court making such determination shall modify, among other things, the scope, duration, or geographic area of such affected provision to preserve the enforceability thereof to the maximum extent then permitted by law.


18.

Notices .  All notices thereunder shall be in writing addressed to the respective party as set forth below and may be personally served, sent by facsimile transmission, sent by overnight courier service, or sent by United States mail, return receipt requested. Such notices shall be deemed to have been given: (a) if delivered in person, on the date of delivery; (b) if delivered by facsimile transmission, on the date of transmission if transmitted by 5:00 p.m. (local time, Omaha, Nebraska) on a business day or, if not, on the next succeeding business day; provided that a copy of such notice is also sent the same day as the facsimile transmission by any other means permitted herein; (c) if delivered by overnight courier, on the date that delivery is first attempted; or (d) if by United States mail, on the earlier of two (2) business days after depositing in the United States mail, postage prepaid and properly addressed, or the date delivery is first attempted. Notices shall be addressed as set forth as set forth on the signature page hereof, or to such other address as the party to whom such notice is intended shall have previously designated by written notice to the serving party. Notices shall be deemed effective upon receipt.


19.

Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of Nebraska, without reference to the choice of law provisions thereof.


20.

Attorneys’ Fees .  In the event an action or proceeding is brought by any party under this Agreement to enforce or construe any of its terms, the party that prevails by enforcing this Agreement shall be entitled to recover, in addition to all other amounts and relief, its reasonable costs and attorneys’ fees incurred in connection with such action or proceeding.


21.

Construction . Whenever the context requires, the singular shall include the plural and the plural shall include the singular, the whole shall include any part thereof, and any gender shall include all other genders. The headings in this Agreement are for convenience only and shall not limit, enlarge, or otherwise affect any of the terms of this Agreement. Unless otherwise indicated, all references in this Agreement to sections refer to the corresponding sections of this Agreement. This Agreement shall be construed as though all parties had drafted it.


22.

Counterparts . This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. Counterparts and signatures transmitted by facsimile shall be valid, effective and enforceable as originals.



6



IN WITNESS WHEREOF, Executive has signed this Agreement personally and the Company has caused this Agreement to be executed by its duly authorized representative.



GREEN PLAINS RENEWABLE ENERGY, INC.



By: /s/ Todd Becker

Name:  Todd Becker

Title: Chief Operating Officer

 

Address:

Green Plains Renewable Energy, Inc.

9420 Underwood Ave.  Suite 100

Omaha NE 68114

 

Executive

 

/s/ Michael C. Orgas

Michael C. Orgas, individually

 

Address:

16385 Interlachen Blvd.

Lakeville, MN 55044



7



EXHIBIT A

EXCLUDED INVENTIONS



8



[GPRE10Q033109EX102001.JPG]


Exhibit 10.2



October 15, 2008



Mr. Edgar Seward

310 Stillwater Dr.

Bluffton, IN  46714


Dear Edgar,


On behalf of Green Plains Renewable Energy, Inc. (GPRE), I am pleased to confirm our offer to you for the position of Executive Vice President of Plant Operations.  


The terms of your new position with the Company are as set forth below:


1.

Position: Executive Vice President, Plant Operations. As such, you will be a member of the Executive Management team of VBV, LLC (“VBV”), and upon the closing of the merger, of GPRE. You will report directly to the President/COO of the company.  In this role you will be in charge of plant operations including technology, efficiency improvements, and production.   While employed by the Company, except with the written approval, you will not actively engage in any other employment, occupation or consulting activity.


2.

Start Date.  You will commence this new position with the Company upon the successful completion of the merger between GPRE and VBV.


3.

Employment; Location.  The Company herby employs Executive and Executive hereby accepts such employment in the Omaha, Nebraska metro area.  Executive will be relocated in accordance with the relocations provision herein. This move is to take place no later than two years after the effective date of this offer.


4.

Compensation.


i)

Base Salary.  You will be paid $200,000 annually.  Your salary will be payable pursuant to the Company’s regular payroll policy (or in the same manner as other officers of the Company). The Company shall annually review Executive’s Base Salary.


ii)

Short Term Incentive Program.  Your targeted annual bonus will be up to 40% of your base salary, based on milestones set forth by the CEO and President/COO of the company.  The bonus will be paid on an annual basis based on the company’s performance, on your performance, and your ability to achieve the milestones that have been put in place.


iii)

Long Term Incentive Program.  The Board and the CEO are working to create a stock option program (or similar program) for yourself and other members of the management team of the Company that will allow you and the team to participate in upside success of the Company’s performance.  Upon the creation of this program, you will be eligible to participate at the sole discretion of the company’s board of directors and CEO.


iv)

Stock Grant.  The Company shall grant you 16,250 restricted shares of the Company’s common stock (16,250 = 25,000 x 65%), which will incrementally vest over a period of three (3) years with 25% vesting immediately, and 25% vesting each year after the Effective Date.  The Company shall pay withholding taxes in accordance with a Restricted Stock Agreement to issue to you.


9420 UNDERWOOD AVENUE, SUITE 100 OMAHA, NE 68144

PHONE:  (402) 884-8700 FAX:  (402) 884-8776

WWW.GPREINC.COM




– 2 –


v)

Stock Options.  The Company shall grant you an option to purchase 50,000 shares of the Company’s common stock at a price equal to the closing price of the Company’s stock on the date of grant, which will incrementally vest over a period of three (3) years with 25% vesting immediately, and 25% vesting each year after the Effective Date.


vi)

You will receive a bonus payment of $100,000 upon the successful completion and start-up of the Indiana BioEnergy plant.  


5.

Benefits.


i)

Insurance Benefits.  The Company will provide you with the standard medical and dental insurance benefits available to other employees of the Company.  


6.

Vacation:  Executive shall be entitled to an aggregate of up to four weeks leave for vacation for each calendar year during the Term at full pay.  Executive agrees to give reasonable notice of his vacation scheduling requests, which shall be allowed subject to the Company’s reasonable business needs.  No more than five (5) days vacation may be carried over from one year to the next year.


7.

Relocation:  The Company shall provide relocation assistance to Executive for the purpose of facilitating Executive’s move to Omaha, Nebraska pursuant to Section 3 above.  No reimbursement by the Company to the Executive shall be made absent a receipt from Executive detailing the relocation expense incurred by the Executive.  The following costs shall be reimbursed by the Company, as described above:


·

All reasonable realtor fees related to the selling of Executive’s residence in Bluffton Indiana;


·

All reasonable costs associated with the movement of household goods from Bluffton Indiana.


In addition to the reimbursement of relocation expenses described above, the Company shall pay, the cost to purchase or shall cause its relocation firm to purchase Executive’s residence in Bluffton, IN at the relocation appraisal price determined by the relocation firm and shall reimburse Executive for any negative difference in the relocation appraisal price and the cost to Executive of such residence, including any out of pocket improvements made by Executive.


8.

At-Will Employment.  The employment relationship between you and the Company is “at-will” and based upon mutual consent.  This relationship may be terminated at any time by either you or the Company for any or no reason, with or without cause.  In the event that you resign your position, you must provide the Company with thirty (30) days written notice of your intent to resign.


No employee of the company is employed for any specific time unless they have a written employment contract signed by the Chairman of the Board.  Any employment agreement entered into by any other person purporting to act on behalf of the Company is not valid and shall not be enforceable against the company.  


Nothing in this agreement or in any documents provided by the company, or benefit plan of the company or any statement by any officer or employee of the Company limits or changes the employment at-will relationship.


9.

Confidential Information and Invention Assignment Agreement.  As an employee of the Company, you will have access to certain Company confidential information and you may during the course of your employment develop certain information or inventions, which will be the property of the Company .  To protect the interest of the Company you will need to sign the Company’s standard “Employee Confidentiality Agreement” as a condition of your employment.






– 3 –


10.

No Inconsistent Obligations.  By accepting this offer of employment, you represent and warrant to the Company that you are under no obligations or commitments, whether contractual or otherwise, that are inconsistent with your obligations set forth in this letter.  You also represent and warrant that you will not use or disclose, in connection with your employment by the Company, any trade secrets or other proprietary information or intellectual property in which you or any other person has any right, title or interest, and that your employment by the Company will not infringe upon or violate the rights of any other person or entity.  You represent and warrant to the Company that you have returned all property and confidential information relating to any prior employers.


11.

Arbitration .  Any dispute or claim arising out of or in connection with this letter agreement will be finally settled by binding arbitration in the State of Nebraska in accordance with the rules of the American Arbitration Association by one arbitrator appointed in accordance with said rules.  The arbitrator shall apply Nebraska law, without reference to rules of conflicts of law or rules of statutory arbitration, to the resolution of any dispute.  Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.  Notwithstanding the foregoing, the parties may apply to any court of competent jurisdiction for preliminary or interim equitable relief, or to compel arbitration in accordance with this paragraph, without breach of this arbitration provision.  


12.

Entire Agreement.  This Agreement embodies the entire understanding of the parties hereto and any prior representation or arrangements between you and the Company, or between you and Indiana BioEnergy, LLC are hereby superseded.


We are all delighted to be able to extend this offer of promotion and look forward to working with you in your new role.  To indicate your acceptance of the Company’s offer, please sign and date this letter in the space provided below, and return to the Company.  A duplicate original is enclosed for your records.  This letter agreement , together with the Employee Confidentiality Agreement, sets forth our entire agreement and understanding regarding the terms of your employment with Company and supersedes any prior representations or agreements, whether written or oral (including that certain offer letter also dated as of the date hereof).  This letter agreement may not be modified or amended except by a written agreement, signed by the CEO of the Company and by you.  


Sincerely,



/s/ Wayne Hoovestol                                 

Wayne Hoovestol

Chief Executive Officer

Green Plains Renewable Energy, Inc.




Agreed and Accepted October 15, 2008




/s/ Edgar Seward                                   

Edgar Seward





[GPRE10Q033109EX103001.JPG]



Exhibit 10.3


October 15, 2008



Mr. Steven Bleyl

7964 Pinehurst Rd.

Woodbury, MN  55125



Dear Steve,


On behalf of the Company, I am pleased to confirm our offer to you for the position of Executive Vice President of Ethanol Marketing. In this position you will report directly to the President/COO of the company.  The terms of your new position with the Company are as set forth below:



Position: Executive Vice President, Ethanol Marketing. As Executive Vice President Ethanol Marketing, you will be a member of the Executive Management team of Green Plains Renewable Energy, Inc. You will report directly to Todd Becker, the President/COO of the company.  You will continue to report to Todd following his assumption of the role of CEO of GPRE.  While employed by the Company, except with written approval, you will not actively engage in any other employment, occupation or consulting activity.


Start Date.  You will commence this new position with the Company upon the successful completion of the merger between GPRE and VBV, LLC (“VBV”).


1)

Compensation.


i)

Base Salary.  You will be paid $250,000 annually.  Your salary will be payable pursuant to the Company’s regular payroll policy (or in the same manner as other officers of the Company). The Company shall annually review Executive’s Base Salary.


ii)

Base Bonus Program.  You bonus program will be directly tied to the profits generated by the revenues you bring to the Company, less all business expenses.  Your bonus payout will be determined as follows:  You will receive ten (10) percent of profit before taxes (PBT) up to a payout level of $500,000.  Beyond the $500,000 level you will receive five (5) percent of PBT.  The first $250,000 of your payout will be made in a lump-sum payment.  Any remaining bonus to be paid will be paid over a five (5) year period on a deferred basis.  That is, you will receive 20% of the deferred payments each year for five years.  Should you choose to leave the company before the deferred payments are made, you will forfeit any remaining deferred payments owed to you.  You will be guaranteed a minimum bonus payout of $125,000 in you first year of employment with the Company.  The bonus will be paid on an annual basis based on your performance and your ability to achieve the milestones that have been put in place.


iii)

Long Term Incentive Program.  The Board and the CEO are working to create a stock option program (or similar program) for yourself and other members of the management team of the Company that will allow you and the team to participate in upside success of the Company’s performance.  Upon the creation of this program, you will be eligible to participate at the sole discretion of the company’s board of directors and CEO.


iv)

Stock Grant.  The Company shall grant you 32,500 restricted shares of the Company’s common stock (32,500 = 50,000 x 65%), in satisfaction of VBV’s grant of restricted limited liability company interests, which will incrementally vest over a period of three (3) years with 25% vesting immediately, and 25% vesting each year after the Effective Date.  The Company shall pay withholding taxes in accordance with a Restricted Stock Assumption Agreement to issue to you effective with the merger between GPRE and VBV.




9420 Underwood Avenue, Suite 100 Omaha, Ne 68144

phone:  (402) 884-8700 fax:  (402) 884-8776

www.gpreinc.com



v)

Stock Options.  The Company shall grant you an option to purchase 50,000 shares of the Company’s common stock at a price equal to the closing price of the Company’s stock on the date of grant, which will incrementally vest over a period of three (3) years with 25% vesting immediately, and 25% vesting each year after the Effective Date.


2)

Benefits.


vi)

Insurance Benefits.  The Company will provide you with the standard medical and dental insurance benefits available to other employees of the Company.  


vii)

Vacation.  You will earn vacation consistent with the Company’s vacation policy offered to other employees of the Company.


3)

Location.  This position is based in Omaha and it is expected that you will maintain an office in our Omaha headquarters. When you are not traveling in furtherance of your duties, you are expected to work out of the Omaha office a minimum of four days per five-day week


4)

At-Will Employment.  Your employment with the Company shall be for no specified period or term and may be terminated by you or by the Company at any time for any or no reason, with or without Cause, as long as written notice is provided the Company that you provide thirty (30) days written notice to the company of your intention to resign.  The “at-will” nature of your employment shall remain unchanged during your tenure as an employee of the Company, and may only be changed by an express written agreement that is signed by you and by the Chairman of the Board.


5)

Termination of Employment. If you resign your employment with the Company or if the Company terminates your employment for Cause, at any time, you will receive your base salary, as well as any accrued but unused vacation (if applicable), earned through the effective resignation or termination date, and no additional compensation. If the Company terminates your employment for any reason other than Cause, it will give you written notice of termination, any base salary and accrued but unused vacation that is earned through the effective termination date, and, conditioned on your (a) signing and not revoking a release of any and all claims, in a form prescribed by the Company, (b) returning to the Company all of its property and confidential information that is in your possession, you will receive the following: (i) continuation of your base salary for six (6) months beyond the effective termination date, payable in accordance with the regular payroll practices of the Company, provided that these payments will be terminated the earlier of six (6) months or as of the date you commence full time employment elsewhere; and (ii) if you elect to continue your health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) following the termination of your employment, then the Company shall pay your monthly premium under COBRA until the earlier of (x) 3 months following the effective termination date, or (y) the date upon which you commence employment with an entity other than the Company and (iii) if you are terminated within your first year of employment, your option granted under Paragraph 3 will vest on a monthly basis commensurate with the number of months that you were employed by the Company.  You will notify the Company in writing within 5 days of your receipt of an offer of employment with any entity other than the Company, and will accordingly identify the date upon which you will commence employment in such writing.  This salary continuance is meant to be provided to you as you actively seek future employment and as noted will cease once you have secured such employment.


For all purposes under this Agreement, a termination for “Cause” shall mean a determination by the company that your employment be terminated for any of the following reasons: (i) failure or refusal to comply in any material respect with lawful policies, standards or regulations of Company; (ii) a violation of a federal or state law or regulation applicable to the business of the Company; (iii) conviction or plea of no contest to a felony under the laws of the United States or any State; (iv) fraud or misappropriation of property belonging to the Company or its affiliates; (v) a breach in any material respect of the terms of any confidentiality, invention assignment or proprietary information agreement with the Company or with a former employer, (vi)  your failure to satisfactorily perform your duties after having received written notice of such failure and at least thirty (30) days to cure such failure, or (vii) your misconduct or gross negligence in connection with the performance of your duties.


6)

Change of Control.   If, during your employment with the Company, there is a Change of Control event, and the Company terminates your employment without Cause within six (6) months after that event, then you will be eligible to receive the benefits provided in Section 5 above.


a)

“Change of Control” shall be defined as (i) merger, reorganization, consolidation or other acquisition (or series of related transactions of such nature) pursuant to which more than fifty percent (50%) of the voting power of all equity of the Company would be transferred by the holders of the Company’s outstanding shares (excluding a reincorporation to effect a change in domicile); (ii) a sale of all or substantially all of the assets of the Company; or (iii) any other transaction or series of transactions, in which the Company’s stockholders immediately prior to such transaction or transactions own immediately after such transaction less than 50% of the voting equity securities of the surviving corporation or its parent .



2



b)

The term “Change of Control” does not include the pending merger between VBV and GPRE.  Following the completion of the merger, the term “Company” in section a) above will apply solely to the remaining entity, GPRE.


7)

Confidential Information and Invention Assignment Agreement.  As an employee of the Company, you will have access to certain Company confidential information and you may during the course of your employment develop certain information or inventions, which will be the property of the Company.  To protect the interest of the Company you will need to sign the Company’s standard “Employee Confidentiality Agreement” as a condition of your employment.


8)

No Inconsistent Obligations.  By accepting this offer of employment, you represent and warrant to the Company that you are under no obligations or commitments, whether contractual or otherwise, that are inconsistent with your obligations set forth in this letter.  You also represent and warrant that you will not use or disclose, in connection with your employment by the Company, any trade secrets or other proprietary information or intellectual property in which you or any other person has any right, title or interest, and that your employment by the Company will not infringe upon or violate the rights of any other person or entity.  You represent and warrant to the Company that you have returned all property and confidential information relating to any prior employers.


9)

Arbitration.  Any dispute or claim arising out of or in connection with this letter agreement will be finally settled by binding arbitration in the State of Nebraska in accordance with the rules of the American Arbitration Association by one arbitrator appointed in accordance with said rules.  The arbitrator shall apply Nebraska law, without reference to rules of conflicts of law or rules of statutory arbitration, to the resolution of any dispute.  Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.  Notwithstanding the foregoing, the parties may apply to any court of competent jurisdiction for preliminary or interim equitable relief, or to compel arbitration in accordance with this paragraph, without breach of this arbitration provision.  


We are all delighted to be able to extend this offer and look forward to continuing to work with you.  To indicate your acceptance of the Company’s offer, please sign and date this letter in the space provided below, and return to the Company.  A duplicate original is enclosed for your records.  This letter agreement, together with the Employee Confidentiality Agreement, sets forth our entire agreement and understanding regarding the terms of your employment with Company and supersedes any prior representations or agreements, whether written or oral (including that certain offer letter also dated as of the date hereof).  This letter agreement may not be modified or amended except by a written agreement, signed by the CEO of the Company and by you.



Sincerely,



/s/ Wayne Hoovestol

 

 

Wayne Hoovestol

 

 

Chief Executive Officer

 

 

 

 

 

Agreed and Accepted

 

 

 

 

 

 

 

 

 

 

 

/s/ Carl Steve Bleyl

Date October 15, 2008

 

Carl Steve Bleyl

 

 




3


[GPRE10Q033109EX104001.JPG]


Exhibit 10.4


October 15, 2008


Mr. Ron Gillis

17474 Archer Circle

Omaha, NE  68135


Dear Ron,


On behalf of Green Plains Renewable Energy, Inc. (GPRE), I am pleased to confirm our offer to you for the position of Executive Vice President Finance and Treasurer.  


The terms of your new position with the Company are as set forth below:


1.

Position:  Executive Vice President Finance and Treasurer As such, you will report to the CFO of the company, Jerry Peters.   While employed by the Company, except with the written approval, you will not actively engage in any other employment, occupation or consulting activity.


2.

Start Date.  You will commence this new position with the Company upon the successful completion of the merger between GPRE and VBV, LLC (“VBV”).


3.

Compensation.


i)

Base Salary.  You will be paid $200,000 annually.  Your salary will be payable pursuant to the Company’s regular payroll policy (or in the same manner as other officers of the Company). The Company shall annually review Executive’s Base Salary.


ii)

Short Term Incentive Program.  Your targeted annual bonus will be up to 35% of your base salary, based on milestones set forth by the CEO and President/COO of the company.  The bonus will be paid on an annual basis based on the company’s performance, on your performance, and your ability to achieve the milestones that have been put in place.


iii)

Long Term Incentive Program.  The Board and the CEO are working to create a stock option program (or similar program) for yourself and other members of the management team of the Company that will allow you and the team to participate in upside success of the Company’s performance.  Upon the creation of this program, you will be eligible to participate at the sole discretion of the company’s board of directors and CEO.


iv)

Stock Grant.  The Company shall grant you 16,250 restricted shares of the Company’s common stock (16,250 = 25,000 x 65%), in satisfaction of VBV’s grant of restricted limited liability company interests, which will incrementally vest over a period of three (3) years with 25% vesting immediately, and 25% vesting each year after the Effective Date.  The Company shall pay withholding taxes in accordance with a Restricted Stock Assumption Agreement to issue to you effective with the merger between GPRE and VBV.


v)

Stock Options.  The Company shall grant you an option to purchase 50,000 shares of the Company’s common stock at a price equal to the closing price of the Company’s stock on the date of grant, which will incrementally vest over a period of three (3) years with 25% vesting immediately, and 25% vesting each year after the Effective Date.



9420 Underwood Avenue, Suite 100 Omaha, Ne 68144

phone:  (402) 884-8700 fax:  (402) 884-8776

www.gpreinc.com



4.

Benefits.


i)

Insurance Benefits.  The Company will provide you with the standard medical and dental insurance benefits available to other employees of the Company.  


ii)

Vacation.  You will earn vacation consistent with the Company’s vacation policy offered to other employees of the Company.


5.

Location.  This position is based in Omaha, NE and it is expected that you will maintain an office in our Omaha, NE headquarters.   


6.

At-Will Employment.  Your employment with the Company shall be for no specified period or term and may be terminated by you or by the Company at any time for any or no reason, with or without Cause, as long as written notice is provided the Company that you provide thirty (30) days written notice to the company of your intention to resign.  The “at-will” nature of your employment shall remain unchanged during your tenure as an employee of the Company, and may only be changed by an express written agreement that is signed by you and by the Chairman of the Board.


7.

Termination of Employment.  If you resign your employment with the Company or if the Company terminates your employment for Cause, at any time, you will receive your base salary, as well as any accrued but unused vacation (if applicable), earned through the effective resignation or termination date, and no additional compensation.  If the Company terminates your employment for any reason other than Cause, it will give you written notice of termination, any base salary and accrued but unused vacation that is earned through the effective termination date, and, conditioned on your (a) signing and not revoking a release of any and all claims, in a form prescribed by the Company, (b) returning to the Company all of its property and confidential information that is in your possession, you will receive the following: (i) continuation of your base salary for 6 months beyond the effective termination date, payable in accordance with the regular payroll practices of the Company, provided that these payments will be terminated the earlier of 6 months or as of the date you commence full time employment elsewhere; and (ii) if you elect to continue your health insurance coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) following the termination of your employment, then the Company shall pay your monthly premium under COBRA until the earlier of (x) 6 months following the effective termination date, or (y) the date upon which you commence employment with an entity other than the Company and ( iii) if you are terminated within your first year of employment, your option granted under Paragraph 3 will vest on a monthly basis commensurate with the number of months that you were employed by the Company.  You will notify the Company in writing within 5 days of your receipt of an offer of employment with any entity other than the Company, and will accordingly identify the date upon which you will commence employment in such writing.  This salary continuance is meant to be provided to you as you actively seek future employment and as noted will cease once you have secured such employment.


For all purposes under this Agreement, a termination for “Cause” shall mean a determination by the company that your employment be terminated for any of the following reasons: (i) failure or refusal to comply in any material respect with lawful policies, standards or regulations of Company; (ii) a violation of a federal or state law or regulation applicable to the business of the Company; (iii) conviction or plea of no contest to a felony under the laws of the United States or any State; (iv) fraud or misappropriation of property belonging to the Company or its affiliates; (v) a breach in any material respect of the terms of any confidentiality, invention assignment or proprietary information agreement with the Company or with a former employer, (vi)   your failure to satisfactorily perform your duties after having received written notice of such failure and at least thirty (30) days to cure such failure , or (vii) your misconduct or gross negligence in connection with the performance of your duties .


8.

Change of Control. If, during your employment with the Company, there is a Change of Control event, and the Company terminates your employment without Cause within six (6) months after that event, you will be eligible to receive the benefits provided in Section 7 .


a.

“Change of Control” shall be defined as (i) merger, reorganization, consolidation or other acquisition (or series of related transactions of such nature) pursuant to which more than fifty percent (50%) of the voting power of all equity of the Company would be transferred by the holders of the Company ’s outstanding shares (excluding a reincorporation to effect a change in domicile); (ii) a sale of all or substantially all of the assets of the Company ; or (iii) any other transaction or series of transactions, in which the Company ’s stockholders immediately prior to such transaction or transactions own immediately after such transaction less than 50% of the voting equity securities of the surviving corporation or its parent.


b.

The term “Change of Control” does not include the pending merger between VBV and GPRE.  Following the completion of the merger, the term “Company” in section a) above will apply solely to the remaining entity, GPRE.



2



9.

Confidential Information and Invention Assignment Agreement.  As an employee of the Company, you will have access to certain Company confidential information and you may during the course of your employment develop certain information or inventions, which will be the property of the Company .  To protect the interest of the Company you will need to sign the Company’s standard “Employee Confidentiality Agreement” as a condition of your employment.


10.

No Inconsistent Obligations.  By accepting this offer of employment, you represent and warrant to the Company that you are under no obligations or commitments, whether contractual or otherwise, that are inconsistent with your obligations set forth in this letter.  You also represent and warrant that you will not use or disclose, in connection with your employment by the Company, any trade secrets or other proprietary information or intellectual property in which you or any other person has any right, title or interest, and that your employment by the Company will not infringe upon or violate the rights of any other person or entity.  You represent and warrant to the Company that you have returned all property and confidential information relating to any prior employers.


11.

Arbitration .  Any dispute or claim arising out of or in connection with this letter agreement will be finally settled by binding arbitration in the State of Nebraska in accordance with the rules of the American Arbitration Association by one arbitrator appointed in accordance with said rules.  The arbitrator shall apply Nebraska law, without reference to rules of conflicts of law or rules of statutory arbitration, to the resolution of any dispute.  Judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.  Notwithstanding the foregoing, the parties may apply to any court of competent jurisdiction for preliminary or interim equitable relief, or to compel arbitration in accordance with this paragraph, without breach of this arbitration provision.  


We are all delighted to be able to extend this offer and look forward to working with you.  To indicate your acceptance of the Company’s offer, please sign and date this letter in the space provided below, and return to the Company.  A duplicate original is enclosed for your records.  


This letter agreement , together with the Employee Confidentiality Agreement, sets forth our entire agreement and understanding regarding the terms of your employment with Company and supersedes any prior representations or agreements, whether written or oral (including that certain offer letter also dated as of the date hereof).  This letter agreement may not be modified or amended except by a written agreement, signed by the CEO of the Company and by you.  

Sincerely,



/s/ Wayne Hoovestol

Wayne Hoovestol

Chief Executive Officer

Green Plains Renewable Energy, Inc.

 

 

Agreed and Accepted October 15 , 2008

 

 

 

/s/ Ron Gillis

Ron Gillis





3


Exhibit 10.5



Amendment No. RI0487C


AMENDMENT

TO THE

MASTER LOAN AGREEMENT


THIS AMENDMENT is entered into as of March 24, 2009 , between FARM CREDIT SERVICES OF MID-AMERICA, FLCA ("FLCA") FARM CREDIT SERVICES OF MID-AMERICA, PCA (“PCA”) and GREEN PLAINS OBION LLC , Rives, Tennessee (formerly known as ETHANOL GRAIN PROCESSORS, LLC , Rives, Tennessee) (the ''Company'').


BACKGROUND


FLCA, PCA and the Company are parties to a Master Loan Agreement dated August 31, 2007 (such agreement, as previously amended, is hereinafter referred to as the (“MLA”). FLCA, PCA and the Company now desire to amend the MLA. For that reason, and for valuable consideration (the receipt and sufficiency of which are hereby acknowledged), FLCA, PCA and the Company agree as follows:


1.

Section 11 (B) of the MLA is hereby amended and restated to read ea follows:


SECTION 11. Financial Covenants. Unless otherwise agreed to in writing, while this agreement is in effect:


(B) Net Worth. 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 total assets over total liabilities (both as determined in accordance with GAAP consistently applied) of not less than $77,000,000.00.


2.

Except as set forth in this amendment, the MLA, including all amendments thereto, shall continue in full force and effect as written.



FARM CREDIT SERVICES OF MID-

 

GREEN PLAINS OBION LLC

AMERICA, FLCA

 

 

 

 

 

 

 

By:

/s/ Ralph M. Bowman

 

By:

/s/ Jerry L. Peters

 

 

 

 

 

Title:

Vice President

 

Title:

CFO & Secretary

 

 

 

 

 

 

 

 

FARM CREDIT SERVICES OF MID-

 

 

 

AMERICA, PCA

 

 

 

 

 

 

 

By:

/s/ Ralph M. Bowman

 

 

 

 

 

 

 

 

Title:

Vice President

 

 

 




Exhibit 10.6


Loan No. Rl0487S01B

STATUSED REVOLVING CREDIT SUPPLEMENT


THIS SUPPLEMENT to the Master Loan Agreement dated August 31, 2001 (the “MLA”), is entered into as of March 24, 2009, between FARM CREDIT SERVICES OF MID-AMERICA, PCA (‘‘Farm Credit”) and GREEN PLAINS OBION LLC , Rives, Tennessee (formerly known as ETHANOL GRAIN PROCESSORS, LLC , Rives, Tennessee) (the “Company”), and Amends and restates the Supplement dated August 31, 2007, and numbered Rl0487S01A.


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 date hereof, up to and including October 1, 2009, or such later date as Agent may, in its sale discretion authorize in writing.


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 sole 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 any one 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 any one 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.




Statused Revolving Credit Supplement RI0487S01B

Green Plains Obion LLC

Omaha, Nebraska



(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 RI0487T0lB hereof):


Pricing Type

Initial Spread

Spread After Completion of

$18,000,000.00 of Free Cash Flow

Payments

Agent Base Rate

+100 Basis Points

+75 Basis Points

LIBOR

+390 Basis Points

+365 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.


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.



2



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 dally unused portion of the Commitment at the rate of 0.40% 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.


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 MID-

 

GREEN PLAINS OBION LLC

AMERICA, FLCA

 

 

 

 

 

 

 

By:

/s/ Ralph M. Bowman

 

By:

/s/ Jerry L. Peters

 

 

 

 

 

Title:

Vice President

 

Title:

CFO & Secretary




3


Exhibit 10.7


SECOND AMENDMENT

TO

MASTER LOAN AGREEMENT


THIS SECOND AMENDMENT TO THE MASTER LOAN AGREEMENT (this “ Amendment ”), is entered into as of April 16, 2009, between INDIANA BIO-ENERGY, LLC, an Indiana limited liability company (the “ Borrower ”) and AGSTAR FINANCIAL SERVICES, PCA , a United States instrumentality (the “ Lender” ).  


RECITALS


A.

Borrower and Lender entered into a Master Loan Agreement dated as of February 27, 2007, which was amended by that certain First Amendment to Master Loan Agreement dated October 15, 2008 (together, the “ MLA ”); a First Supplement to Master Loan Agreement dated as of February 27, 2007 (the “ First Supplement ”); and a Second Supplement to Master Loan Agreement dated as of February 27, 2007 (the “ Second Supplement ,” and together with the MLA and the First Supplement, the “ Loan Agreement ”) by which the Lender agreed to extend certain financial accommodations to the Borrower.


B.

At the request of Borrower, Borrower and Lender have agreed to make certain modifications to the Loan Agreement, all in accordance with the terms and conditions of this Amendment.


NOW THEREFORE, in consideration of the facts set forth in the above Recitals, which the parties agree are true and correct, and in consideration for entering into this Amendment, the undersigned hereby agree as follows:


AMENDMENTS


1.

Certain Defined Terms .  All terms used and not otherwise defined herein shall have the meanings assigned to them in the Loan Agreement.  


2.

Amendments to the Loan Agreement .   Section 5.01(c)(i) in the Loan Agreement shall be amended and restated as follows:


(i)

As soon as available, but in any event within 120 days after the end of each fiscal year of the Borrower, occurring during the term hereof, audited annual financial statements of GPRE as of the end of such fiscal year (including the income statement, balance sheet, shareholders’ equity, and statement of cash flows along with accompanying footnotes) each prepared on a consolidated and consolidating basis, audited by independent certified public accountants of nationally recognized standing reasonably acceptable to the Lender, 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).  Reporting of eliminating entries shall be provided in aggregate as well as those attributable to the Borrower, which may be provided in separate documentation delivered with the financial statements required under this subsection.


3.

Effect on Loan Agreement .   Except as expressly amended hereby, all of the terms of the Loan Agreement shall be unaffected by this Amendment and shall remain in full force and effect.  Nothing contained in this Amendment shall be deemed to constitute a waiver of any rights of the Lender, or to affect, modify, or impair any of the Lender’s rights under the Loan Documents.




4.

Representations and Warranties of Borrower .   The Borrower hereby agrees with, reaffirms, and acknowledges as follows:


(a)

The representations and warranties contained in the Loan Agreement and the other Loan Documents are, and continue to be, true and correct and in full force and effect as of the date of this Amendment.


(b)

Borrower has the power and authority to execute, deliver, and perform this Amendment, and any document required under this Amendment, and that all documents contemplated herein when executed and delivered to Lender will constitute the valid, binding and legally enforceable obligations of Borrower in accordance with their respective terms, except as enforceability may be limited by any applicable bankruptcy or insolvency laws.


5.

Counterparts .   It is understood and agreed that this Amendment may be executed in several counterparts each of which shall, for all purposes, be deemed an original and all of which, taken together, shall constitute one and the same agreement even though all of the parties hereto may not have executed the same counterpart.  


{SIGNATURE PAGE IMMEDIATELY FOLLOWS}



2



SIGNATURE PAGE TO

SECOND AMENDMENT TO MASTER LOAN AGREEMENT

BY AND BETWEEN

INDIANA BIO-ENERGY, LLC

AND

AGSTAR FINANCIAL SERVICES, PCA

DATED:  April 16, 2009


IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to Master Loan Agreement to be executed by their respective duly-authorized officers as of the date first above written.


BORROWER:


INDIANA BIO-ENERGY, LLC

an Indiana limited liability company



/s/ Jerry L. Peters

 

By:  Jerry L. Peters

 

Its:  CFO

 

 

 

LENDER:

 

 

 

AGSTAR FINANCIAL SERVICES, PCA

 

 

 

 

/s/ Mark Schmidt

 

By:  Mark Schmidt

 

Its:  Vice President

 








3


EXHIBIT 10.8



FIRST AMENDED AND RESTATED CREDIT AGREEMENT

Green Plains Grain Company LLC

as Borrower

with

First National Bank of Omaha

as Lender

dated as of March 31, 2009










TABLE OF CONTENTS


SECTION 1.

DEFINITIONS AND INTERPRETATION

1

1.1.

Terms Defined

1

1.2.

Matters of Construction

12

1.3.

Accounting Principles

12

SECTION 2.

THE LOANS

12

2.1.

Description

12

2.2.

Funding Procedures

13

2.3.

Interest

13

2.4.

Payments

14

2.5.

Use of Proceeds

15

2.6.

Fees

15

2.7.

[This section intentionally omitted.]

15

2.8.

Increased Costs

15

2.9.

Break Funding Payments

16

2.10.

Taxes

16

SECTION 3.

CLOSING AND CONDITIONS PRECEDENT TO ADVANCES

17

3.1.

Conditions Precedent to Closing

17

3.2.

Conditions Precedent to Closing of Existing Credit Agreement

17

3.3.

Conditions Precedent to Advances

20

3.4.

Compliance with this Agreement

20

3.5.

[This section intentionally omitted.]

20

3.6.

Closing

20

3.7.

Non-Waiver of Rights

20

SECTION 4.

REPRESENTATIONS AND WARRANTIES

20

4.1.

Organization, Powers, Authorization and Enforceability

20

4.2.

No Conflicts

21

4.3.

Financial Condition / Full Disclosure

21

4.4.

Governmental Approval

21

4.5.

Pending Litigation

21

4.6.

Taxes

21

4.7.

Insurance

21

4.8.

Contracts, etc.

21

4.9.

Compliance with Laws

22

4.10.

Equity Interests

22

4.11.

Associations

22

4.12.

Labor Matters

22

4.13.

ERISA

22

4.14.

Debt

22

4.15.

Title to Property

22

4.16.

Collateral Locations

22

4.17.

Location of Bank and Brokerage Accounts

23

SECTION 5.

BORROWER’S AFFIRMATIVE COVENANTS

23

5.1.

Financial and Business Information

23

5.2.

Tax Returns and Reports

24

5.3.

Material Adverse Effect

24

5.4.

Litigation / Loss

24

5.5.

Places of Business; Jurisdiction of Organization; Name

24

5.6.

Maintenance of Insurance, Financial Records and Legal Existence.

24

5.7.

Business Conducted

25

5.8.

Payment of Obligations, Taxes and Claims

25

5.9.

Financial Covenants

25

5.10.

[This section intentionally omitted.]

25

5.11.

Maintenance of Property / Inspection

25

SECTION 6.

BORROWER’S NEGATIVE COVENANTS

26

6.1.

Debt

26

6.2.

Liens, Claims and Encumbrances

26

6.3.

Loans, Advances and Investments

26

6.4.

Distributions

26








6.5.

Sale of Assets, Merger, Consolidation, Dissolution or Liquidation of Borrower

26

6.6.

Change of Control of Parent

26

6.7.

Transactions With Affiliates

27

6.8.

Bank and Brokerage Accounts; Deposits

27

6.9.

Hedging

27

SECTION 7.

DEFAULT

27

7.1.

Events of Default

27

7.2.

Cure

29

7.3.

Rights and Remedies on Default

29

7.4.

Nature of Remedies

30

7.5.

Set-Off

30

SECTION 8.

MISCELLANEOUS

30

8.1.

Governing Law

30

8.2.

Integrated Agreement

30

8.3.

Waiver and Indemnity.

31

8.4.

Time

31

8.5.

Expenses of Lender

31

8.6.

Confidentiality

31

8.7.

Notices

32

8.8.

Headings

32

8.9.

Survival

32

8.10.

Successors and Assigns

32

8.11.

Duplicate Originals

32

8.12.

Modification

32

8.13.

Signatories

32

8.14.

Third Parties

32

8.15.

Waivers

33

8.16.

Consent to Jurisdiction

33

8.17.

Waiver of Jury Trial

33

8.18.

Discharge of Taxes, Borrower’s Obligations, Etc.

34

8.19.

Injunctive Relief

34

8.20.

Transfers, Participations and Securitizations

34

SECTION 9.

NOTICE - WRITTEN AGREEMENTS.

35


EXHIBITS

SCHEDULES

A –

Real Property

4.15 –

Agreements Regarding Rights,

B –

Revolving Credit Note

Options and Leases

C –

Term Loan Note

4.16 –

Collateral Locations

D – Mortgage, Security Agreement, Fixture Financing Statement and Assignment of Leases and Rents

4.17 –

Location of Bank and Brokerage Accounts

E –

Security Agreement

 

F –

Control Agreement

 

G –

Environmental Indemnity Agreement

 

H –

Borrowing Base Report

 

I –

Compliance Certificate

 









FIRST AMENDED AND RESTATED CREDIT AGREEMENT


This First Amended and Restated Credit Agreement (as the same may from time to time be amended, restated, modified or otherwise supplemented, this “Agreement”) is dated this 31 st day of March, 2009 by and among Green Plains Grain Company LLC, a Delaware limited liability company (together with its successors and permitted assigns, the “Borrower”), and First National Bank of Omaha, a national banking association (together with its successors and assigns, the “Lender”).


RECITALS


WHEREAS, pursuant to that certain Credit Agreement dated April 3, 2008 and First Amendment to Credit Agreement dated July 2, 2008 (collectively, the “Existing Credit Agreement”), Lender has made loans to Borrower of up to forty-four million dollars ($44,000,000) via (a) a thirty-five million dollar ($35,000,000) revolving credit facility, the proceeds of which are used to finance Borrower’s working capital needs and (b) a nine million dollar ($9,000,000) term loan facility, the proceeds of which were used to refinance Borrower’s existing debt and for general business purposes;


WHEREAS, the loans are generally secured by (a) the personal property of Borrower (other than rolling stock and equipment owned by Borrower as of April 3, 2008), now existing or hereafter acquired, and (b) the real property of Borrower described on Exhibit A attached hereto and all improvements now or hereafter existing thereon; and


WHEREAS, Borrower and Lender desire to amend and restate the Existing Credit Agreement as set forth herein.


NOW, THEREFORE, for and in consideration of Lender making the loans to Borrower, the premises set forth above, which are incorporated herein by this reference and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is agreed as follows:


SECTION 1.

DEFINITIONS AND INTERPRETATION


1.1.

Terms Defined.  As used in this Agreement, the following terms have the following respective meanings:


“Account” means a right to payment of a monetary obligation including, without limitation, all accounts, contract rights, instruments, documents, chattel paper and general intangibles in which Borrower now has or hereafter acquires any right.


“Account Debtor” means the Person who is obligated on an Account.


“Advance” means any monies advanced or credit extended as Revolving Credit Loans or the Term Loan to or for the benefit of Borrower by Lender.


“Affiliate” means, with respect to any specified Person, (a) any Person which directly or indirectly controls, or is controlled by, or is under common control with, the specified Person, and (b) any director or officer (or, in the case of a Person which is not a corporation, any individual having analogous powers) of the specified Person or of a Person who is an Affiliate of the specified Person within the meaning of the preceding clause (a). For purposes of the preceding sentence, “control” of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, or direct or indirect ownership (beneficially or of record) of, or direct or indirect power to vote, 5% or more of the equity interests of such Person.


“Authorized Officer” means any officer of Borrower or its sole member authorized by specific resolutions of Borrower and its sole member to request Revolving Credit Loans or the Term Loan as set forth in the incumbency certificate referred to in Section 3.2(h) hereof.



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“Base LIBOR Rate” means the London interbank offered rate for an interest period of three (3) months appearing on the Bloomberg Finance, L.P. rate sheets (or any successor to or substitute for such service, providing rate quotations comparable to those currently provided by such service, as determined by Lender from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two (2) Business Days prior to the date such rate shall be adjusted hereunder.  In the event that such rate is not available for any reason, then the Base LIBOR Rate shall be the rate at which dollar deposits for a maturity comparable to three (3) months are offered by the principal London office of any major bank in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two (2) Business Days prior to the date such rate shall be adjusted hereunder.  The Base LIBOR Rate shall be adjusted hereunder on the (a) first (1 st ) Business Day of each month with respect to the Revolving Credit Rate and (b) first (1 st ) Business Day of each calendar quarter with respect to the Term Rate.


“Board” means the Board of Governors of the Federal Reserve Systems of the United States.


“Borrower” has the meaning set forth in the introductory paragraph of this Agreement and, when used in a historical context (i.e., prior to the Closing Date), includes Great Lakes Cooperative, an Iowa cooperative association, and Green Plains Grain Cooperative, an Iowa cooperative association, the predecessors-in-interest to Borrower.


“Borrowing Base” means an amount equal to the lesser of (a) the Revolving Credit Commitment and (b) the sum of:


(i)

85% of the Value of Eligible Accounts Receivable; plus


(ii)

70% of the Value of Eligible Non-Grain Inventory; plus


(iii)

90% of the Value of Eligible Grain Inventory Evidenced By Warehouse Receipts; plus


(iv)

80% of the Value of Eligible Grain Inventory Not Evidenced By Warehouse Receipts; plus


(v)

75% of the Value of Supplier Prepayments; plus


(vi)

85% of the Value of Eligible Grain Inventory In Transit; plus


(vii)

85% of the Value of Grain Cash Forward Purchase & Sale Contracts (100% if Value is negative); plus


(viii)

100% of the Value of Hedging Accounts; plus


(ix)

100% of the Value of Lender Accounts; minus


(x)

100% of amounts payable by Borrower with respect to Grain Inventory included in clauses (iii), (iv) and (vi) above; minus


(xi)

100% of outstanding checks and other outstanding forms of payment by Borrower to satisfy amounts payable under clause (x) above (to the extent the corresponding payable has been reduced); minus


(xii)

100% of customer prepayments to Borrower with respect to Non-Grain Inventory and Grain Inventory included in clauses (ii), (iii), (iv) and (vi) above; minus


(xiii)

100% of accrued and unpaid interest on the Debt; minus


(xiv)

100% of outstanding letters of credit issued on behalf of Borrower.  



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As of any date, the Borrowing Base shall be determined on the basis of the information contained in the most recent Borrowing Base Report.


“Borrowing Base Report” has the meaning set forth in Section 3.2(t) hereof.


“Borrowing Notice” means a written, telex, telecopy or telephonic notice by Borrower to Lender specifying (a) the Effective Date of making any Advance under the Revolving Credit Facility or Term Loan Facility and (b) the amount of any Advance requested under the Revolving Credit Facility or Term Loan Facility.


“Business Day” means any day other than a Saturday, Sunday or any day on which banking institutions in Omaha, Nebraska are permitted or required by law, executive order or governmental decree to remain closed or a day on which Lender is closed for business; provided, however, that when used in connection with the determination of the Revolving Credit Rate or Term Rate, Business Day shall exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.


“Capital Expenditures” means, with respect to any period, the expenditures of Borrower for such period in connection with the purchase of any fixed or capital assets required to be capitalized for financial reporting purposes in accordance with GAAP.


“Capitalized Lease” means a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.


“Change in Law” means (a) the adoption of any law, rule or regulation by any governmental authority after the Closing Date, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any governmental authority after the Closing Date or (c) compliance by Lender with any binding request, guideline or directive (whether or not having the force of law) of any governmental authority made or issued after the Closing Date.


“Change of Control” has the meaning set forth in Section 6.6 hereof.


“Closing” has the meaning set forth in Section 3.6 hereof.


“Closing Date” has the meaning set forth in Section 3.6 hereof.


“Code” means the Internal Revenue Code of 1986, as amended from time to time, and the regulations and rulings issued thereunder.


“Collateral” means the Personal Property, Real Property and all other Property that now or hereafter secures the payment and performance of any of the Obligations pursuant to any of the Loan Documents or otherwise.


“Compliance Certificate” has the meaning set forth in Section 3.2(u) hereof.


“Control Agreements” has the meaning set forth in Section 3.2(d) hereof.


“Debt” means, with respect to any date, whether or not included as indebtedness or liabilities in accordance with GAAP, the sum of Borrower’s: (a) obligations for borrowed money; plus (b) obligations evidenced by bonds, debentures, notes or other similar instruments; plus (c) obligations under conditional sale or other title retention agreements relating to property purchased to the extent of the value of such property; plus (d) obligations to pay the deferred purchase price of property or services (other than trade accounts payable arising in the ordinary course of business and due within six months of the incurrence thereof); plus (e) obligations under Capitalized Leases; plus (f) obligations under operating leases for rolling stock and equipment; plus (g) obligations to purchase securities or other property which arise out of or in connection with the sale of the same or substantially similar securities or property; plus (h) obligations to reimburse any other Person in respect of amounts paid under a letter of credit, bankers’ acceptance or similar instrument; plus (i) guaranties of the obligations of any other Person.



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“Default Rate” means the rate of interest otherwise applicable on Revolving Credit Loans and the Term Loan plus five percent (5%).


“Disclosures” has the meaning set forth in Section 8.20(b) hereof.


“Distribution” means (a) dividends or other distributions on the equity interests of Borrower, (b) the redemption, repurchase or acquisition of such equity interests or of warrants, rights or other options to purchase such equity interests and (c) loans made to any member of Borrower.


“EBITDAR” means, with respect to any date, for the most recently ended four fiscal quarters of Borrower, the sum of Borrower’s: (a) Net Income for such period; plus (b) any amount which, in the determination of Net Income for such period, has been deducted for (i) Interest Expense, (ii) provisions for federal, state, local and foreign income taxes, (iii) depreciation, amortization (including, without limitation, amortization of goodwill and other intangible assets), impairment of goodwill and other non-recurring non-cash charges (excluding any such non-cash charge to the extent that it represents amortization of a prepaid cash expense that was paid in a prior period or an accrual of, or a reserve for, cash charges or expenses in any future period), (iv) rent and lease expense and (v) unrealized losses on mark-to-market accounting for hedging activities; minus (c) any amount which, in the determination of Net Income for such period, has been added for (i) interest income, (ii) any non-cash income or non-cash gains, (iii) any extraordinary, unusual or non-recurring income and (iv) unrealized gains on mark-to-market accounting for hedging activities; all as determined in accordance with GAAP.


“Effective Date” means any Business Day designated by Borrower in a Borrowing Notice or Prepayment Notice as the date any Advance or prepayment, as the case may be, shall become effective.


“Eligible Accounts Receivable” means any Account in which Lender has a first priority perfected security interest and which complies with each of the following requirements:


(a)

it arises out of a bona fide sale of goods or services sold and delivered by or on behalf of Borrower, or is in the process of being delivered by or on behalf of Borrower, to the Account Debtor on said Account;


(b)

it has been identified to Lender by Borrower in a manner reasonably satisfactory to Lender;


(c)

it is evidenced by an invoice to the Account Debtor thereunder;


(d)

it has not remained unpaid in whole or in part for a period of more than ninety (90) days from the due date set forth in the original invoice (such due date not to exceed twenty (20) days from the original invoice date);


(e)

it is not owed by an Account Debtor who is an employee of or which is an Affiliate of Borrower (other than Accounts that arise with respect to the sale of grain by Borrower to Parent, GPRE Shenandoah LLC or Superior Ethanol, LLC for use at their Shenandoah, Iowa ethanol plant or Superior, Iowa ethanol plant in accordance with Section 6.7 hereof);


(f)

it is not owing by any Account Debtor located outside of the United States;


(g)

the amount of such Account represented as owing is not disputed and it is net of any credit or allowance given by Borrower to such Account Debtor; and


(h)

the Account is not subject to any counterclaim or defense asserted by the Account Debtor thereunder, nor is it subject to any offset or contra account payable to the Account Debtor or to any repurchase obligations or return rights.


“Eligible Grain Inventory Evidenced By Warehouse Receipts” means any Grain Inventory in which Lender has a first priority perfected security interest and which complies with each of the following requirements:



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(a)

it is owned by Borrower and such ownership is evidenced by warehouse receipt;


(b)

it is readily usable or marketable by Borrower in the ordinary course of its business;


(c)

it substantially conforms to the represented specifications and other quality standards of Borrower;


(d)

it has been identified to Lender by Borrower in a manner reasonably satisfactory to Lender;


(e)

it is located at a location in the United States of America disclosed to and approved by Lender and, if requested by Lender, any Person (other than Borrower) owning or controlling such location shall have waived all right, title and interest in and to such Grain Inventory in a manner satisfactory to Lender;


(f)

it is priced in accordance with GAAP and consistent with Borrower’s method of pricing of Grain Inventory elected in its year-end financial statements referred to in Section 5.1(a) hereof; and


(g)

it has not given rise to an Account.


“Eligible Grain Inventory In Transit” means any Grain Inventory in which Lender has a first priority perfected security interest and which complies with each of the following requirements:


(a)

it is owned by Borrower and under contract to be shipped and sold within four (4) weeks of its original invoice date;


(b)

it is readily usable or marketable by Borrower in the ordinary course of its business;


(c)

it substantially conforms to the represented specifications and other quality standards of Borrower;


(d)

it has been identified to Lender by Borrower in a manner reasonably satisfactory to Lender;


(e)

it is located at a location in the United States of America disclosed to and approved by Lender and, if requested by Lender, any Person (other than Borrower) owning or controlling such location shall have waived all right, title and interest in and to such Grain Inventory in a manner satisfactory to Lender;


(f)

it is priced in accordance with GAAP and consistent with Borrower’s method of pricing of Grain Inventory elected in its year-end financial statements referred to in Section 5.1(a) hereof; and


(g)

it has not given rise to an Account.


“Eligible Grain Inventory Not Evidenced By Warehouse Receipts” means any Grain Inventory in which Lender has a first priority perfected security interest and which complies with each of the following requirements:


(a)

it is owned by Borrower and such ownership is not evidenced by warehouse receipt;


(b)

it is readily usable or marketable by Borrower in the ordinary course of its business;


(c)

it substantially conforms to the represented specifications and other quality standards of Borrower;


(d)

it has been identified to Lender by Borrower in a manner reasonably satisfactory to Lender;


(e)

it is located at a location in the United States of America disclosed to and approved by Lender and, if requested by Lender, any Person (other than Borrower) owning or controlling such location shall have waived all right, title and interest in and to such Grain Inventory in a manner satisfactory to Lender;



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(f)

it is priced in accordance with GAAP and consistent with Borrower’s method of pricing of Grain Inventory elected in its year-end financial statements referred to in Section 5.1(a) hereof; and


(g)

it has not given rise to an Account.


“Eligible Non-Grain Inventory” means any Non-Grain Inventory in which Lender has a first priority perfected security interest and which complies with each of the following requirements:


(a)

it is owned by Borrower;


(b)

it is readily usable or marketable by Borrower in the ordinary course of its business;


(c)

it substantially conforms to the represented specifications and other quality standards of Borrower;


(d)

it has been identified to Lender by Borrower in a manner reasonably satisfactory to Lender;


(e)

it is located at a location in the United States of America disclosed to and approved by Lender and, if requested by Lender, any Person (other than Borrower) owning or controlling such location shall have waived all right, title and interest in and to such Non-Grain Inventory in a manner satisfactory to Lender;


(f)

it is priced in accordance with GAAP and consistent with Borrower’s method of pricing of Non-Grain Inventory elected in its year-end financial statements referred to in Section 5.1(a) hereof; and


(g)

it has not given rise to an Account.


“Environmental Indemnity Agreement” has the meaning set forth in Section 3.2(e) hereof.


“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations and rulings issued thereunder.


“ERISA Affiliate” means any Person that, together with Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, Section 414(m) of the Code.


“ERISA Event” means: (a) the occurrence of a “reportable event,” as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan unless the 30 day notice period requirement with respect to such event has been waived or the requirements of subsection (1) of Section 4043(b) of ERISA (without regard to subsection (2) of such Section) are met with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) for plan years beginning prior to 2008, the existence with respect to any Plan of an “accumulated funding deficiency” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by Borrower or its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by Borrower or its ERISA Affiliates from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (f) the incurrence by Borrower or its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by Borrower or its ERISA Affiliates of any notice, or the receipt by any Multiemployer Plan from Borrower or its ERISA Affiliates of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.


“Event of Default” has the meaning set forth in Section 7.1 hereof.


“Exchange Act” has the meaning set forth in Section 6.6(a) hereof.



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“Existing Credit Agreement” has the meaning set forth in the Recitals of this Agreement.


“Expenses” has the meaning set forth in Section 8.5 hereof.


“Fixed Charge EBITDAR Deductions” means, with respect to any date, for the most recently ended four fiscal quarters of Borrower, the sum of Borrower’s:  (a) provisions for federal, state, local and foreign income taxes (i.e., amounts added to Net Income in the calculation of EBITDAR); plus (b) Capital Expenditures; plus (c) Distributions.


“Fixed Charge Ratio” means, with respect to any date, the ratio of: (a) EBITDAR as of such date minus Fixed Charge EBITDAR Deductions as of such date; to (b) Fixed Charges as of such date.


“Fixed Charges” means, with respect to any date, for the most recently ended four fiscal quarters of Borrower, the sum of Borrower’s: (a) Interest Expense; plus (b) current maturities of Debt (excluding the principal amount of any Revolving Credit Loans outstanding); plus (c) rent and lease expense.


“GAAP” means generally accepted accounting principles, consistently applied.


“Grain Cash Forward Purchase & Sale Contracts” means contracts entered into by Borrower, outstanding as of any date, under which Borrower commits to purchase or sell grain to be delivered within fifteen (15) months of such date, and with respect to which (a) Borrower is hedged with a futures contract maintained in a Hedging Account and (b) Lender has a first priority perfected security interest.


“Grain Inventory” means corn, soybeans, oats and other grains held for sale by Borrower.


“Great Lakes Grain Storage” means Great Lakes Grain Storage, L.L.C., an Iowa limited liability company.


“Hedging Accounts” means commodity trading accounts maintained by Borrower for hedging purposes with any reputable broker reasonably acceptable to Lender, and in which Lender has a first priority perfected security interest.


“Hedging Policy” means a policy setting forth standards, practices and procedures with respect to Borrower’s hedging activities approved by the Board of Directors of Parent and reasonably acceptable to Lender.


“Incumbent  Directors” has the meaning set forth in Section 6.6(b) hereof.


“Indemnified Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any governmental authority (other than income and franchise taxes imposed on the net income of Lender).


“Interest Expense” means, with respect to any period, the interest expense of Borrower for such period payable in connection with Debt (including all computed interest on Capitalized Leases and operating leases for rolling stock and equipment).


“Lender Accounts” means deposit accounts maintained by Borrower with Lender, and in which Lender has a first priority perfected security interest.


“Loan Documents” means this Agreement, the Revolving Credit Note, the Term Loan Note, the Mortgages, the Security Agreement, the UCC-1 Financing Statement, the Control Agreements, the Environmental Indemnity Agreement and any other agreements, instruments, documents and certificates executed and/or delivered in connection with this Agreement, as each may be amended, restated, modified or otherwise supplemented from time to time.



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“Loan Pool” means: (a) in the context of a Securitization, any pool or group of loans that are a part of such Securitization; (b) in the context of a Transfer, all loans which are sold, transferred or assigned to the same transferee; and (c) in the context of a Participation, all loans as to which participating interests are granted to the same participant.


“Material Adverse Effect” means a material adverse effect on (a) the business, assets, operations or condition, financial or otherwise, of Borrower, (b) the ability of Borrower to perform any of its obligations under any Loan Document or (c) the rights of or benefits available to Lender under any Loan Document.


“Minimum Notice Period” means a period commencing no later than 10:00 a.m., Omaha time, (a) on the Effective Date of any Advance under the Revolving Credit Facility or Term Loan Facility and (b) three Business Days prior to the Effective Date of any payment under the Term Loan Facility (other than the quarterly payments required by Section 2.4(c) hereof).


“Mortgages” has the meaning set forth in Section 3.2(b) hereof.


“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.


“Net Income” means, with respect to any period, the net income (loss) of Borrower for such period, determined in accordance with GAAP.


“Non-Grain Inventory” means all raw materials, work in process, finished goods, supplies and goods other than Grain Inventory held for sale or lease or furnished or to be furnished under contracts of service in which Borrower now has or hereafter acquires any right.


“Non-Use Fee Rate” means an annual rate of interest equal to thirty-seven and one-half basis points (0.375%).


“Obligations” means all now existing or hereafter arising loans, advances, liabilities, debts, obligations, covenants and duties of payment or performance of every kind, matured or unmatured, direct or contingent, owing, arising, due or to become due, or payable to Lender, by or from Borrower, in each case to the extent arising out of this Agreement or any other Loan Document or otherwise including, without limitation, all obligations to repay principal of and interest on Revolving Credit Loans and the Term Loan, all obligations to pay interest, fees, costs, charges, expenses and any other sums chargeable to Borrower under the Loan Documents or any other agreement with Lender, whether or not evidenced by any note or other instrument.  The Obligations shall also include any Swap Obligations owing to Lender or Swap Lender.


“Other Taxes” means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.


“Parent” means Green Plains Renewable Energy, Inc., an Iowa corporation.


“Participation” means one or more grants by Lender to a third party of a participating interest in notes evidencing obligations to repay secured or unsecured loans owned by Lender or any or all servicing rights with respect thereto.


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


“Permitted Exceptions” means: (a) the liens for current taxes and assessments with respect to the Real Property, not yet due and payable; (b) liens and security interests in favor of Lender; (c) those easements, restrictions, liens and encumbrances with respect to the Real Property set forth as exceptions in the title insurance policies issued to Lender and approved by Lender in its reasonable discretion; and (d) any other matters which have been approved in writing by Lender.



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“Person” means any individual, corporation, partnership, limited liability partnership, limited liability company, association, trust, unincorporated organization, joint venture, court or government or political subdivision or agency thereof, or other entity.


“Personal Property” means the personal property of Borrower (other than rolling stock and equipment owned by Borrower on the date hereof) described in the Security Agreement, now existing or hereafter acquired.


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


“Prepayment Notice” means a written, telex, telecopy or telephonic notice by the Company to the Lender pursuant to Section 2.4(d) hereof specifying the amount of principal to be prepaid and the Effective Date of such prepayment.


“Property” means an interest of Borrower in any kind of property or asset, whether real or personal, tangible or intangible, and includes the Collateral and any equity interest in Borrower.


“Real Property” means the real property of Borrower described on Exhibit A attached hereto and in the Mortgages and all improvements now or hereafter existing thereon.


“Revolving Credit Commitment” means an amount equal to thirty-five million dollars ($35,000,000).


“Revolving Credit Facility” has the meaning set forth in Section 2.1(a) hereof.


“Revolving Credit Loans” has the meaning set forth in Section 2.1(b) hereof.


“Revolving Credit Maturity Date” has the meaning set forth in Section 2.1(d) hereof.


“Revolving Credit Note” has the meaning set forth in Section 2.1(c) hereof.


“Revolving Credit Rate” means an annual rate of interest (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the higher of: (a) the sum of (i) the Base LIBOR Rate multiplied by the Statutory Reserve Rate plus (ii) three hundred basis points (3.00%); and (b) four and one-half percent (4.50%).


“Securitization” means one or more sales, dispositions, transfers or assignments by Lender to a special purpose corporation, trust or other entity identified by Lender of notes evidencing obligations to repay secured or unsecured loans owned by Lender (and, to the extent applicable, the subsequent sale, transfer or assignment of such notes to another special purpose corporation, trust or other entity identified by Lender), and the issuance of  bonds, certificates, notes or other instruments evidencing interests in pools of such loans, whether in connection with a permanent asset securitization or a sale of loans in anticipation of a permanent asset securitization.  Each Securitization shall be undertaken in accordance with all requirements which may be imposed by the investors or the rating agencies involved in each such sale, disposition, transfer or assignment or which may be imposed by applicable securities, tax or other laws or regulations.


“Security Agreement” has the meaning set forth in Section 3.2(c) hereof.


“Senior Leverage Ratio” means, with respect to any date, the ratio of (a) Debt (excluding the principal amount of any Revolving Credit Loans outstanding) as of such date to (b) EBITDAR as of such date.



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“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which Lender is subject for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board).  Such reserve percentages shall include those imposed pursuant to such Regulation D.  Revolving Credit Loans and the Term Loan shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to Lender under such Regulation D or any comparable regulation.  The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.


“Subsidiary” shall mean any corporation, limited liability company, partnership, joint venture, trust or other legal entity of which Borrower owns directly or indirectly 50% or more of the outstanding voting stock or equity interests, or of which Borrower has effective control, by contract or otherwise.


“Supplier Prepayments” means payments made by Borrower to suppliers for the purchase of Non-Grain Inventory, and with respect to which (a) Borrower has not acquired title to Non-Grain Inventory and (b) Lender has a first priority perfected security interest.


“Swap Lender” means any Person who is a party to an arrangement with Borrower evidencing Swap Obligations and holds a participating interest in the Revolving Credit Loans and the Term Loan.


“Swap Obligations” means the obligations of Borrower pursuant to any arrangement with Lender or Swap Lender, whereby, directly or indirectly, Borrower is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made to Lender or Swap Lender calculated by applying a fixed or a floating rate of interest on the same notional amount and shall include, without limitation, interest rate swaps, caps, floors, collars and similar agreements.


“Tangible Net Worth” means, with respect to any date, the sum of Borrower’s: (a) total assets (excluding any assets which are treated as intangibles in conformity with GAAP); minus (b) total liabilities, all as determined in accordance with GAAP.  The computation of Tangible Net Worth shall exclude non-cash adjustments of Borrower’s assets and liabilities to fair value in connection with the October 15, 2008 merger pursuant to which VBV, LLC and its subsidiaries became wholly-owned subsidiaries of Parent.


“Term Loan Commitment” means an amount equal to nine million dollars ($9,000,000).


“Term Loan Facility” has the meaning set forth in Section 2.1(a) hereof.


“Term Loan Maturity Date” has the meaning set forth in Section 2.1(d) hereof.


“Term Loan Note” has the meaning set forth in Section 2.1(c) hereof.


“Term Loan” has the meaning set forth in Section 2.1(b) hereof.


“Term Rate” means an annual rate of interest (rounded upwards, if necessary, to the next 1/16 of 1%) equal to the higher of: (a) the sum of (i) the Base LIBOR Rate multiplied by the Statutory Reserve Rate plus (ii) three hundred fifty basis points (3.50%); and (b) four and one-half percent (4.50%).


“Transfer” means one or more sales, transfers or assignments by Lender to a third party of notes evidencing obligations to repay secured or unsecured loans owned by Lender or any or all servicing rights with respect thereto.


“Unmatured Event of Default” means an event which with the passage of time, giving of notice or both, would become an Event of Default.



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“Value” means, as of any given date, an amount equal to:


(a)

for Eligible Accounts Receivable, the amount owing;


(b)

for Eligible Non-Grain Inventory, the lesser of (i) cost determined on a FIFO inventory basis of accounting (all in accordance with GAAP) and (ii) market price for inventory of similar kind, quality, quantity and condition;


(c)

for Eligible Grain Inventory Evidenced By Warehouse Receipts and Eligible Grain Inventory Not Evidenced By Warehouse Receipts, the closing daily cash price at which Borrower purchased inventory of similar kind, quality, quantity and condition;


(d)

for Supplier Prepayments, the amount paid;


(e)

for Eligible Grain Inventory In Transit, the invoice price at which Borrower agreed to sell inventory of similar kind, quality, quantity and condition;


(f)

for Grain Cash Forward Purchase & Sale Contracts, the aggregate (net) excess or deficit sum of:


(i)

the product of (A) the futures price (per bushel) quoted on the Chicago Board of Trade for each futures only cash purchase contract minus the applicable contract price (per bushel) multiplied by (B) the remaining number of bushels to be delivered under the applicable contract;


(ii)

the product of (A) the closing daily cash price (per bushel) for each cash purchase contract minus the applicable contract price (per bushel) multiplied by (B) the remaining number of bushels to be delivered under the applicable contract;


(iii)

the product of (A) the applicable contract price (per bushel) for each futures only cash sale contract minus the futures price (per bushel) quoted on the Chicago Board of Trade multiplied by (B) the remaining number of bushels to be delivered under the applicable contract; and


(iv)

the product of (A) the applicable contract price (per bushel) for each cash sale contract minus the closing daily cash price (per bushel) multiplied by (B) the remaining number of bushels to be delivered under the applicable contract.


Under the above calculation, any excess amount (net unrealized gain) shall result in a positive Value and any deficit amount (net unrealized loss) shall result in a negative Value.  Borrower represents and warrants that the statements delivered to Lender pursuant to Section 5.1(a)(vii) hereof will reflect the Value (as defined by the foregoing formula);


(g)

for Hedging Accounts, the aggregate (net) excess or deficit sum of (i) the account balances that would exist if all contracts held in such accounts were liquidated so that all gains and losses on such contracts were realized plus (ii) all amounts held as margin (whether initial, maintenance or otherwise) in such accounts.  Under the above calculation, any excess amount (net unrealized gain) shall result in a positive Value and any deficit amount (net unrealized loss) shall result in a negative Value).  Borrower represents and warrants that the statements delivered to Lender pursuant to Section 5.1(a)(vii) hereof will reflect the Value (as defined by the foregoing formula); and


(h)

for Lender Accounts, the cash held in such accounts.



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Commencing with the April 2009 Borrowing Base Report delivered to Lender pursuant to Section 5.1(a)(v) hereof, the Value of Eligible Accounts Receivable and the Value of Grain Cash Forward Purchase & Sale Contracts which, in either case, is derived from Affiliates shall not exceed four million five hundred thousand dollars ($4,500,000) in the aggregate.


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


“Working Capital” means, with respect to any date, the sum of Borrower’s: (a) current assets; minus (b) current liabilities (including the principal amount of any Revolving Credit Loans outstanding and current maturities under the Term Loan Facility), all as determined in accordance with GAAP.


1.2.

Matters of Construction.  The terms “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision. Any pronoun used shall be deemed to cover all genders. Wherever appropriate in the context, terms used herein in the singular also include the plural and vice versa. All references to statutes and related regulations shall include any amendments of same and any successor statutes and regulations. Unless otherwise provided, all references to any instruments or agreements to which Lender is a party including, without limitation, references to any of the Loan Documents, shall include any and all modifications or amendments thereto and any and all extensions or renewals thereof.


1.3.

Accounting Principles.  Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, this shall be done in accordance with GAAP, to the extent applicable, except as otherwise expressly provided in this Agreement.


SECTION 2.

THE LOANS


2.1.

Description.


(a)

Subject to the other terms and conditions of this Agreement, Lender hereby maintains loans for the benefit of Borrower of up to forty-four million dollars ($44,000,000) consisting of (i) a revolving credit facility (the “Revolving Credit Facility”), the proceeds of which are used to finance Borrower’s working capital needs, and (ii) a term loan facility (the “Term Loan Facility”), the proceeds of which were used to refinance Borrower’s existing debt and for general business purposes.


(b)

The Revolving Credit Facility permits Advances to be extended by Lender to or for the benefit of Borrower from time to time hereunder in the form of revolving credit loans (the “Revolving Credit Loans”). The aggregate outstanding amount of all Advances under the Revolving Credit Facility, at any time, shall not exceed the lesser of the Revolving Credit Commitment and the Borrowing Base. Subject to such limitation, the outstanding balance of all Advances under the Revolving Credit Facility may fluctuate from time to time, through repayments and reborrowings.  In no event shall the principal amount of any Advance under the Revolving Credit Facility be less than one hundred thousand dollars ($100,000).  The Term Loan Facility permits a single Advance to be extended by Lender to or for the benefit of Borrower any time hereunder in the form of a term loan (the “Term Loan”).  The aggregate outstanding amount of any Advance under the Term Loan Facility shall not exceed the Term Loan Commitment.  Any Advance under the Term Loan Facility which is repaid is not available for reborrowing.  The Obligations of Borrower under the Revolving Credit Facility, the Term Loan Facility, this Agreement and the other Loan Documents shall at all times be absolute and unconditional.



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(c)

Borrower has duly executed and delivered to Lender (i) a promissory note made payable to the order of Lender in the principal amount of the Revolving Credit Commitment (as the same may be amended, modified or replaced from time to time, the “Revolving Credit Note”) and (ii) a promissory note made payable to the order of Lender in the principal amount of the Term Loan Commitment (as the same may be amended, modified or replaced from time to time, the “Term Loan Note”). The Revolving Credit Note and the Term Loan Note shall evidence Borrower’s absolute and unconditional obligation to repay Lender for all Revolving Credit Loans made by Lender under the Revolving Credit Facility and the Term Loan made by Lender under the Term Loan Facility, with interest as herein and therein provided. Each and every Advance under the Revolving Credit Facility shall be evidenced by the Revolving Credit Note and any Advance under the Term Loan Facility shall be evidenced by the Term Loan Note.  The Revolving Credit Note and the Term Loan Note are incorporated herein by reference and made a part hereof. The Revolving Credit Note and the Term Loan Note shall be substantially in the form of Exhibit B and Exhibit C, respectively, attached hereto.


(d)

The term of the Revolving Credit Facility shall expire on September 30, 2010. All Revolving Credit Loans under the Revolving Credit Facility shall be repaid on or before the earlier of (i) September 30, 2010, (ii) termination of the Revolving Credit Facility and (iii) termination of this Agreement (the earliest of such dates, the “Revolving Credit Maturity Date”). After the Revolving Credit Maturity Date, no further Advances under the Revolving Credit Facility shall be available from Lender.  The term of the Term Loan Facility shall expire on April 3, 2013.  Any Term Loan under the Term Loan Facility shall be repaid on or before the earlier of (i) April 3, 2013, (ii) termination of the Term Loan Facility and (iii) termination of this Agreement (the earliest of such dates, the “Term Loan Maturity Date”).


2.2.

Funding Procedures.


(a)

Subject to the terms and conditions of this Agreement and so long as no Event of Default or Unmatured Event of Default has occurred hereunder, Lender will make Advances to Borrower under the Revolving Credit Facility and a single Advance to Borrower under the Term Loan Facility, in each case, on the Effective Dates specified in Borrowing Notices received by Lender.


(b)

Not less than the Minimum Notice Period prior to any Effective Date, Borrower shall deliver to Lender a Borrowing Notice for an Advance under the Revolving Credit Facility or Term Loan Facility .


(c)

Subject to the terms and conditions of this Agreement, if the Borrowing Notice is delivered to Lender not less than the Minimum Notice Period prior to any Effective Date, and any other conditions set forth in this Agreement are satisfied, Lender will make the requested Advance to Borrower on the Effective Date (or the next applicable Business Day if the Borrowing Notice is delivered to Lender less than the Minimum Notice Period prior to the Effective Date).  


2.3.

Interest.


(a)

Each Revolving Credit Loan and the Term Loan shall bear interest on the outstanding principal amount thereof from the date made until such Revolving Credit Loan or Term Loan is paid in full.  Borrower agrees to pay interest on the unpaid principal amount of each Revolving Credit Loan from time to time outstanding hereunder at the following rate of interest per annum: the Revolving Credit Rate.  Borrower agrees to pay interest on the unpaid principal amount of the Term Loan from time to time outstanding hereunder at the following rate of interest per annum: the Term Rate.


(b)

[This section intentionally omitted.]



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(c)

If any Event of Default shall occur, the rate of interest applicable to Revolving Credit Loans and the Term Loan then outstanding shall be the Default Rate. The Default Rate shall apply from the date of the Event of Default until the date such Event of Default is waived or cured, as determined by Lender in its reasonable discretion, and interest accruing at the Default Rate shall be payable upon demand.


(d)

Interest shall be computed for the actual number of days elapsed on the basis of a year consisting of three hundred sixty (360) days, including the date a Revolving Credit Loan or the Term Loan, as applicable, is made and excluding the date such Revolving Credit Loan or Term Loan, as applicable, or any portion thereof is paid or prepaid.


(e)

All contractual rates of interest chargeable on any outstanding Revolving Credit Loan or the Term Loan, as applicable, shall continue to accrue and be paid even after default, maturity, acceleration, judgment, bankruptcy, insolvency proceedings of any kind or the happening of any event or occurrence similar or dissimilar.


(f)

In no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder and charged or collected pursuant to the terms of this Agreement exceed the highest rate of interest permissible under applicable law. In the event that any court of competent jurisdiction determines Lender has charged or received interest hereunder in excess of the highest applicable rate of interest, Lender may, in its reasonable discretion, apply and set off such excess interest received by Lender against other Obligations due or to become due and such rate of interest shall automatically be reduced to the maximum rate of interest permitted by such law.


2.4.

Payments.


(a)

All accrued interest on the Revolving Credit Loans shall be due and payable (i) on the last Business Day of each month until the Revolving Credit Maturity Date, (ii) on the Revolving Credit Maturity Date and (iii) upon payment in full.  All accrued interest on the Term Loan shall be due and payable (i) on the last Business Day of each calendar quarter until the Term Loan Maturity Date, (ii) on the Term Loan Maturity Date and (iii) upon payment in full.  After the Revolving Credit Maturity Date or Term Loan Maturity Date, as applicable, interest shall be payable on demand.


(b)

If, at any time, the aggregate principal amount of all Revolving Credit Loans outstanding exceeds the lesser of the Revolving Credit Commitment and the Borrowing Base then in effect, Borrower shall immediately make such principal prepayments of the Revolving Credit Loans as is necessary to eliminate such excess.  If, at any time, the aggregate principal amount of the Term Loan outstanding exceeds the Term Loan Commitment, Borrower shall immediately make such principal prepayments of the Term Loan as is necessary to eliminate such excess.


(c)

The entire outstanding principal balance of the Revolving Credit Loans, together with all unpaid accrued interest thereon, shall be due and payable on the Revolving Credit Maturity Date.  Borrower shall repay the Term Loan to Lender on the last Business Day of each calendar quarter, commencing on June 30, 2008, through and including the Term Loan Maturity Date, in consecutive quarterly payments of principal equal to two hundred twenty-five thousand dollars ($225,000).  The entire outstanding principal balance of the Term Loan, together with all unpaid accrued interest thereon, shall be due and payable on the Term Loan Maturity Date.


(d)

Upon receipt by the Lender of a Prepayment Notice not less than the Minimum Notice Period prior to the Effective Date thereof, Borrower may prepay without penalty the principal of Revolving Credit Loans and the Term Loan at any time.  Notwithstanding the preceding sentence, Borrower acknowledges that prepayment make-whole payments, premiums or penalties may be required in connection with the prepayment of the Term Loan on any day other than the last Business Day of any calendar quarter.  



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(e)

All payments and prepayments shall be applied first to any unpaid interest and fees and thereafter to the principal of the Revolving Credit Loans and Term Loan and to other amounts due Lender.  Except as otherwise provided herein, all payments of principal, interest, fees or other amounts payable by Borrower hereunder shall be remitted to Lender in immediately available funds not later than 2:30 p.m., Omaha time, on the day due. Whenever any payment is stated as due on a day which is not a Business Day, the maturity of such payment shall be extended to the next succeeding Business Day and interest shall continue to accrue during such extension; provided, however, that if said next succeeding Business Day falls in a new month the maturity of such payment shall be on the immediately preceding Business Day.


2.5.

Use of Proceeds.  The proceeds of the Revolving Credit Loans shall be used to finance Borrower’s working capital needs.  The proceeds of the Term Loan have been used to refinance Borrower’s existing debt and for general business purposes.


2.6.

Fees.


(a)

Borrower shall pay to Lender a non-use fee, which shall accrue at the Non-Use Fee Rate on the average daily unused amount of the Revolving Credit Commitment during the period from the Closing Date until the Revolving Credit Maturity Date.  All accrued non-use fees shall be due and payable (i) on the last Business Day of each calendar quarter, commencing on June 30, 2008, until the Revolving Credit Maturity Date and (ii) on the Revolving Credit Maturity Date.  All non-use fees shall be computed for the actual number of days elapsed on the basis of a year consisting of three hundred sixty (360) days, including the Closing Date and excluding the Revolving Credit Maturity Date.


(b)

As of the Closing, Lender shall have fully earned, and Borrower shall have paid to Lender, a non-refundable fee of two hundred sixteen thousand six hundred twenty-five dollars ($216,625).


2.7.

[This section intentionally omitted.]


2.8.

Increased Costs.


(a)

If any Change in Law shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by,  Lender (except any such reserve requirement reflected in the Base LIBOR Rate); or (ii) impose on Lender or the London interbank market any other condition affecting this Agreement; and the result of any of the foregoing shall be to increase the cost to Lender of making or maintaining any Revolving Credit Loan or the Term Loan (or of maintaining its obligation to make any such loan) or to reduce the amount of any sum received or receivable by Lender (whether of principal, interest or otherwise), then Borrower shall pay to Lender such additional amount or amounts as will compensate Lender for such additional costs incurred or reduction suffered.


(b)

If Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on Lender’s capital or on the capital of Lender’s holding company, if any, as a consequence of this Agreement to a level below that which Lender or Lender’s holding company, if any, could have achieved but for such Change in Law (taking into consideration Lender’s or policies and the policies of Lender’s holding company, if any, with respect to capital adequacy), then from time to time Borrower shall pay to Lender such additional amount or amounts as will compensate Lender or Lender’s holding company, if any, for any such reduction suffered.


(c)

A certificate of Lender setting forth the amount or amounts necessary to compensate Lender or its holding company, if any, as specified in paragraphs (a) or (b) above shall be delivered to Borrower, demonstrating in reasonable detail the calculation of the amounts, and shall be conclusive absent manifest error.  Borrower shall pay Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.



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(d)

Failure or delay on the part of Lender to demand compensation pursuant to this Section 2.8 shall not constitute a waiver of Lender’s right to demand such compensation; provided that Borrower shall not be required to compensate Lender pursuant to this Section 2.8 for any increased costs or reductions incurred more than one hundred eighty (180) days prior to the date that Lender notifies Borrower of the Change in Law giving rise to such increased costs or reductions and of Lender’s intention to claim compensation therefore; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive and if Lender notifies Borrower of such Change of Law within one hundred eighty (180) days after the adoption, enactment or similar act with respect to such Change of Law, then the one hundred eighty (180) day period referred to above shall be extended to include the period from the effective date of such Change of Law to the date of such notice.


2.9.

Break Funding Payments.   In the event of (a) the payment of any principal of the Term Loan (other than the quarterly payments required by Section 2.4(c) hereof) other than on the last Business Day of any calendar quarter or (b) the failure to borrow or pay any Revolving Credit Loan or the Term Loan on the applicable Effective Date, then, in any such event, Borrower shall compensate Lender for the loss, cost and expense attributable to such event.  Such loss, cost or expense to Lender shall be deemed to include an amount determined by Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such loan had such event not occurred, at the annual rate of interest that would have been applicable to such loan, for the period from the date of such event to the last day of the then current interest period (or, in the case of a failure to borrow, for the period that would have been the interest period for such loan) over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the London interbank market.  A certificate of Lender setting forth any amount or amounts that Lender is entitled to receive pursuant to this Section 2.8, demonstrating in reasonable detail the calculation of the amounts, shall be delivered to Borrower and shall be conclusive absent manifest error.  Borrower shall pay Lender the amount shown as due on any such certificate within ten (10) days after receipt thereof.


2.10.

Taxes.


(a)

Any and all payments by or on account of any obligation of Borrower under this Agreement or any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions or withholdings (including deductions applicable to additional sums payable under this Section 2.10) Lender receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions or withholdings and (iii) Borrower shall pay the full amount deducted or withheld to the relevant governmental authority in accordance with applicable law.


(b)

In addition, Borrower shall pay any Other Taxes to the relevant governmental authority in accordance with applicable law.


(c)

Borrower shall indemnify Lender, within thirty (30) days after written demand therefore, for the full amount of any Indemnified Taxes or Other Taxes paid by Lender on or with respect to any payment by or on account of any obligation of Borrower under this Agreement or any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 2.10) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant governmental authority.  A certificate as to the amount of such payment or liability delivered to Borrower by Lender demonstrating in reasonable detail the calculation of the amounts, shall be conclusive absent manifest error.  However, Lender shall not be entitled to receive any payment with respect to Indemnified Taxes or Other Taxes that are incurred or accrued more than one hundred eighty (180) days prior to the date Lender gives notice and demand thereof to Borrower.



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(d)

As soon as reasonably practicable after any payment of Indemnified Taxes or Other Taxes by Borrower to a governmental authority, Borrower shall deliver to Lender the original or a certified copy of a receipt issued by such governmental authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to Lender.


(e)

Lender, if requested by Borrower, shall deliver such properly completed and executed documentation prescribed by applicable law or reasonably requested by Borrower as will enable Borrower to determine whether or not Lender is subject to backup withholding or information reporting requirements.


(f)

If Lender determines, in its reasonable discretion, that it has received a refund of any taxes or Other Taxes as to which it has been indemnified by Borrower or with respect to which Borrower has paid additional amounts pursuant to this Section 2.10, it shall pay over such refund to Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by Borrower under this Section 2.10 with respect to the taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of Lender and without interest (other than any interest paid by the relevant governmental authority with respect to such refund); provided, that Borrower, upon the request of Lender, agrees to repay the amount paid over to Borrower (plus any penalties, interest or other charges imposed by the relevant governmental authority) to Lender in the event Lender is required to repay such refund to such governmental authority.  This Section 2.10 shall not be construed to require Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to Borrower or any other Person.


SECTION 3.

CLOSING AND CONDITIONS PRECEDENT TO ADVANCES


Closing under this Agreement and the making of each Advance are subject to the following conditions precedent (all documents to be in form and substance satisfactory to Lender):


3.1.

Conditions Precedent to Closing.  Prior to the Closing, Borrower shall have delivered to Lender the following:


(a)

A duly and fully executed Agreement, Revolving Credit Note (amended and restated) and Term Loan Note (amended and restated).


(b)

Each instrument, document and agreement required to be executed under any provisions of this Agreement or any other Loan Document.


(c)

Certified copies of (i) resolutions of Borrower and its sole member, authorizing the execution, delivery and performance of this Agreement and the other Loan Documents and the transactions contemplated thereby and (b) Borrower’s and its sole member’s organizational and governing documents and agreements (to the extent any such organizational and governing documents and agreements have been amended or modified since April 3, 2008).


(d)

Incumbency certificates identifying all Authorized Officers, with specimen signatures.


(e)

Payment of the fee referenced in Section 2.6(b) hereof and all Expenses associated with the Revolving Credit Facility and Term Loan Facility incurred to the Closing Date.


(f)

All other instruments, certificates, documents, information and reports reasonably required or requested to be executed and/or delivered by Borrower.


3.2.

Conditions Precedent to Closing of Existing Credit Agreement.  Prior to the closing of the Existing Credit Agreement, Borrower was requested to deliver to Lender the following:


(a)

A duly and fully executed Agreement, Revolving Credit Note and Term Loan Note.



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(b)

Duly and fully executed mortgages, security agreements, fixture financing statements and assignments of leases and rents with respect to the Real Property substantially in the form of Exhibit D attached hereto (as the same may from time to time be amended, restated, modified or otherwise supplemented, the “Mortgages”).  The Mortgages shall secure the Obligations and create first priority liens on the Real Property, subject only to the Permitted Exceptions.


(c)

A duly and fully executed security agreement substantially in the form of Exhibit E attached hereto (as the same may from time to time be amended, restated, modified or otherwise supplemented, the “Security Agreement”) and UCC-1 Financing Statement.  Said Security Agreement and UCC-1 Financing Statement shall secure the Obligations and create a first priority perfected security interest on the Personal Property, subject only to the Permitted Exceptions.


(d)

Duly and fully executed control agreements with respect to the bank and brokerage accounts set forth on Schedule 4.17 hereto substantially in the form of Exhibit F attached hereto (as the same may from time to time be amended, restated, modified or otherwise supplemented, the “Control Agreements”).  The Control Agreements shall secure the Obligations and create a first priority perfected security interest on the bank and brokerage accounts set forth on Schedule 4.17 hereto, subject only to the Permitted Exceptions.


(e)

A duly and fully executed environmental indemnity agreement substantially in the form of Exhibit G attached hereto (as the same may from time to time be amended, restated, modified or otherwise supplemented, the “Environmental Indemnity Agreement”).


(f)

Each instrument, document and agreement required to be executed under any provision of this Agreement or any other Loan Document.


(g)

Certified copies of (i) resolutions of Borrower and its sole member, authorizing the execution, delivery and performance of this Agreement and the other Loan Documents and the transactions contemplated thereby and (ii) Borrower’s and its sole member’s organizational and governing documents and agreements.


(h)

Incumbency certificates identifying all Authorized Officers, with specimen signatures.


(i)

A certificate of good standing for Borrower and its sole member issued by appropriate governmental authorities.


(j)

A written opinion of Borrower’s independent counsel.


(k)

Independent written appraisals of the value of the Real Property, prepared by qualified and licensed real estate appraisers satisfactory to Lender, together with a letter from each real estate appraiser stating that Lender can rely upon such appraisal in connection with this Agreement.


(l)

ALTA lender’s policies of title insurance for the Real Property, with Lender as the insured, insuring the Mortgages as first priority liens on the Real Property, subject only to the Permitted Exceptions.  All standard exceptions to such policies shall be deleted, and the policies shall contain such endorsements as Lender may reasonably require.  On the Closing Date, Lender shall receive a “mark-up” of the title insurance commitment for such insurance showing that (i) all requirements for issuance of the policies have been satisfied, (ii) the Mortgages are first priority liens on the Real Property, subject only to the Permitted Exceptions, (iii) the standard exceptions to coverage will be deleted from the final policies and (iv) the final policies will contain the requested endorsements.



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(m)

ALTA-ACSM surveys of the Real Property, prepared by a registered land surveyor satisfactory to Lender, together with a letter from each land surveyor stating that Lender and the title company issuing the title insurance for the Real Property can rely upon such survey in connection with this Agreement and that no material changes have occurred to the Real Property in question since the survey was prepared.


(n)

Complete copies of phase 1 environmental assessments for the Real Property, prepared by environmental assessment firms satisfactory to Lender, together with a letter from each environmental assessment firm stating that Lender can rely upon such assessment in connection with this Agreement.


(o)

Satisfactory evidence of hazard insurance coverage on the Collateral and general liability, auto liability, workers compensation and other insurance, as may be required by any of the Loan Documents.


(p)

Flood certificates indicating that the Real Property is not within the 100-year flood plain or identified as a special flood hazard area as defined by the Federal Emergency Management Agency.


(q)

Complete copies of the fully executed merger agreements with respect to the merger of Green Plains Grain Merger Sub, Inc. with and into Great Lakes Cooperative and the merger of Great Lakes Cooperative (n/k/a Green Plains Grain Cooperative) with and into Borrower.  The mergers shall have been, or substantially simultaneously with the Closing shall be, consummated in accordance with the merger agreements and applicable law, without any amendment to or waiver of any terms or conditions of the merger agreements not approved by Lender (such approval not to be unreasonably withheld or delayed). Lender shall have received copies of the material documents evidencing the closing of the mergers and all material due diligence materials relating to the mergers.


(r)

Satisfactory evidence of payoff of all existing debt and obligations owing to CoBank, ACB and discharge of related liens and security interests.


(s)

Payment of the origination fee referenced in Section 2.6(b) of the Existing Credit Agreement and all Expenses associated with the Revolving Credit Facility and Term Loan Facility incurred to the closing date of the Existing Credit Agreement.


(t)

A borrowing base report substantially in the form of Exhibit H attached hereto, together with supporting documentation (as the same may from time to time be amended, restated, modified or otherwise supplemented, the “Borrowing Base Report”), dated within thirty (30) days of the closing date of the Existing Credit Agreement.


(u)

A compliance certificate substantially in the form of Exhibit I attached hereto, together with supporting documentation (as the same may from time to time be amended, restated, modified or otherwise supplemented, the “Compliance Certificate”), dated within thirty (30) days of the closing date of the Existing Credit Agreement.


(v)

Commitments from financial institutions satisfactory to Lender to fund fourteen million dollars ($14,000,000) of the Revolving Credit Commitment and Term Loan Commitment.


(w)

All other instruments, certificates, documents, information and reports reasonably required or requested to be executed and/or delivered by Borrower.



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3.3.

Conditions Precedent to Advances.  Lender’s obligation to make Advances shall be subject to the satisfaction of each of the following conditions:


(a)

All representations and warranties of Borrower shall be deemed reaffirmed as of the making of such Advance and shall be true, correct and complete both before and after giving effect to such Advance.


(b)

No Event of Default or Unmatured Event of Default shall have occurred and be continuing, Borrower shall be in compliance with this Agreement and the other Loan Documents and Borrower shall be deemed to have certified such matters to Lender.


(c)

Borrower shall have taken such other actions, including the delivery of documents and opinions, as Lender may reasonably request.


3.4.

Compliance with this Agreement.  Borrower shall have performed and complied with all agreements, covenants and conditions contained herein including, without limitation, the provisions of Sections 5 and 6 hereof, which are required to be performed or complied with by Borrower before or at the Closing Date and as of the date of each Advance.


3.5.

[This section intentionally omitted.]


3.6.

Closing.  Subject to the conditions of this Section 3, this Agreement shall be effective on the date (the “Closing Date”) this Agreement is duly executed and all of the conditions contained in Section 3.1 hereof are completed (the “Closing”).


3.7.

Non-Waiver of Rights.  By completing the Closing hereunder, or by making Advances hereunder, Lender does not thereby waive a breach of any warranty, representation or covenant made by Borrower hereunder or under any agreement, document or instrument delivered to Lender or otherwise referred to herein, and any claims and rights of Lender resulting from any breach or misrepresentation by Borrower are specifically reserved by Lender.


SECTION 4.

REPRESENTATIONS AND WARRANTIES


To induce Lender to complete the Closing and continue to make Advances under the Revolving Credit Facility, Borrower represents and warrants to Lender that:


4.1.

Organization, Powers, Authorization and Enforceability.


(a)

Borrower is duly organized, validly existing and in good standing under the laws of the state of its formation, has lawful power and authority to engage in the business it conducts and is qualified to do business and in good standing in each state and other jurisdiction where the nature and extent of its business requires qualification, except where the failure to so qualify could not have a Material Adverse Effect.


(b)

Borrower has all requisite power and authority to enter into and perform this Agreement and the other Loan Documents and to incur the Obligations herein provided for, and has taken all proper and necessary action to authorize the execution, delivery and performance of this Agreement and the other Loan Documents.


(c)

This Agreement and the other Loan Documents, when executed and delivered, will be legal, valid and binding upon Borrower and enforceable against Borrower in accordance with their respective terms.



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4.2.

No Conflicts.   The execution, delivery and performance of this Agreement, the other Loan Documents and all related agreements and each document required by any provision hereof will not violate any law, government rule or regulation, violate the organizational or governing documents and agreements of Borrower or violate or result in a default of (immediately or with the passage of time) any contract, agreement or instrument to which Borrower is a party, or by which Borrower or its Property  is bound, which violation or default could have a Material Adverse Effect.  Borrower is not in violation of nor has it knowingly caused any Person to violate any term of any agreement or instrument to which it or such Person is a party or by which it  or its Property may be bound, which violation could have a Material Adverse Effect.  Borrower is not in violation of its organizational or governing documents and agreements.


4.3.

Financial Condition / Full Disclosure.  Borrower has delivered to Lender its balance sheet and statements of operations, cash flows and member equity as of and for the fiscal year ended December 31, 2008.  Such financial statements present fairly the financial position and results of operations and cash flows of Borrower as of such date and for such period in accordance with GAAP.  The other financial statements and information relating to Borrower and delivered to Lender in connection with the negotiation of this Agreement present fairly the financial position of Borrower as of the date thereof and the results of its operations as of the period thereof.  Since December 31, 2008, there has been no Material Adverse Effect.  Neither the written statements furnished by Borrower to Lender in connection with the negotiation of this Agreement nor those contained in any financial statements or documents relating to Borrower contain any untrue statement of a material fact or omit a material fact necessary to make the statements contained therein or herein not misleading.


4.4.

Governmental Approval.  Neither the nature of Borrower or of Borrower’s business or Property, nor any relationship between Borrower and any other Person, nor any circumstance affecting Borrower in connection with the issuance or delivery of any Loan Document, is such as to require a consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of Borrower in connection with the execution and delivery of this Agreement or the other Loan Documents, except: (a) for the filing of the UCC-1 Financing Statement; and (b) for instances in which the lack of such consent, approval or authorization of, or filing, registration or qualification with, any governmental authority on the part of Borrower could not have a Material Adverse Effect.


4.5.

Pending Litigation.  There are no judgments, judicial or administrative orders,  suits, actions, proceedings or investigations (civil or criminal) pending, or to the knowledge of Borrower, threatened, against Borrower or affecting its Property in any court or before any governmental authority, regulatory agency or arbitration board or tribunal, none of which, if adversely determined, could have a Material Adverse Effect.  Borrower is not in default with respect to any order of any court, governmental authority, regulatory agency or arbitration board or tribunal. No officer of Borrower or its sole member has been indicted or convicted in connection with or is engaging in any criminal conduct, or is currently subject to any lawsuit or proceeding or under investigation in connection with any anti-racketeering or other related conduct or activity.


4.6.

Taxes.  All tax returns required to be filed by Borrower in any jurisdiction have in fact been filed, and all taxes, assessments, fees and other governmental charges upon Borrower, or any of its Property, income or franchises, which are shown to be due and payable on such returns have been paid, except for those taxes being contested in good faith with due diligence by appropriate proceedings.  Borrower is not aware of any proposed additional tax assessment or tax to be assessed against or applicable to Borrower that could reasonably be expected to have a Material Adverse Effect.


4.7.

Insurance.   All premiums due in respect of all insurance maintained by Borrower or with respect to its Property have been paid.


4.8.

Contracts, etc.


(a)

Borrower is not a party to any contract or agreement, or subject to any other restriction, which unduly materially and adversely affects its business, financial condition, Property or prospects.



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(b)

Except as otherwise specifically provided in this Agreement, Borrower has not agreed or consented to cause or permit any Property to be subject in the future (upon the happening of a contingency or otherwise) to any lien, claim or encumbrance of any nature whatsoever not permitted by this Agreement.


4.9.

Compliance with Laws.   Borrower is not in violation of, has not received written notice that it is in violation of, nor has it knowingly caused any Person to violate, any applicable statute, regulation or ordinance of the United States, or of any state, city, town, municipality, county or of any other jurisdiction, or of any agency, or department thereof (including without limitation, environmental laws and regulations), which violation could have a Material Adverse Effect.


4.10.

Equity Interests.  The authorized and outstanding equity interests of Borrower are owned by Parent.  All of the equity interests of Borrower have been duly and validly authorized and issued and are fully paid and non-assessable and have been sold and delivered to the holder thereof in compliance with, or under valid exemption from, all federal and state laws and the rules and regulations of all regulatory bodies thereof governing the sale and delivery of securities.  There are no subscriptions, warrants, options, calls, commitments, rights or agreements by which Borrower or Parent is bound relating to the issuance, transfer, voting or redemption of Borrower’s equity interests or any pre-emptive rights held by any Person with respect to the equity interests of Borrower. Borrower has not issued any securities convertible into or exchangeable for its equity interests or any options, warrants or other rights to acquire such equity interests or securities convertible into or exchangeable for such equity interests.  


4.11.

Associations.   Borrower is not engaged in, nor does it have any interest in, any joint venture or partnership with any other Person.  Borrower does not have any Subsidiaries, except Great Lakes Grain Storage.


4.12.

Labor Matters.  There are no strikes, lockouts or slowdowns against Borrower pending or, to the knowledge of Borrower, threatened.  The hours worked by and payments made to employees of Borrower have not been in violation of the Fair Labor Standards Act or any other applicable federal, state, local or foreign law dealing with such matters.  All payments due from Borrower, or for which any claim may be made against Borrower, on account of wages and employee health and welfare insurance and other benefits, have been paid or accrued as a liability on the books of Borrower, in each of such cases so as to not cause a Material Adverse Effect.


4.13.

ERISA.  No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to have a Material Adverse Effect.  The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of all such underfunded Plans, in each of such cases so as to cause a Material Adverse Effect.


4.14.

Debt.  Borrower does not have existing Debt, except Debt permitted by Section 6.1 hereof.


4.15.

Title to Property.  Borrower has good and marketable title to its Property, free from all liens, claims and encumbrances of any nature whatsoever, except liens, claims and encumbrances permitted by Section 6.2 hereof.  None of the Borrower’s Property is subject to any right of first refusal, right of first offer, option to purchase or lease, except pursuant to the agreements set forth on Schedule 4.15 hereto.


4.16.

Collateral Locations.  Attached hereto as Schedule 4.16 is a complete and accurate list showing all places at which the Collateral is located on the date hereof.  Such list indicates whether the premises are owned or leased by Borrower or whether the premises are the premises of a warehouseman or other third party, and if owned by a third party, the name and address of such third party.  



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4.17.

Location of Bank and Brokerage Accounts.  Attached hereto as Schedule 4.17 is a complete and accurate list of all deposit, checking, savings, securities, investment, hedging, commodity trading and other accounts maintained with any bank, broker or dealer and all other similar accounts maintained by Borrower on the date hereof, together with a description thereof.  Each of the accounts set forth on Schedule 4.17 hereto is maintained with the corresponding financial institution indicated thereon.  


SECTION 5.

BORROWER’S AFFIRMATIVE COVENANTS


Borrower covenants that until all of the Obligations are paid and satisfied in full and the Revolving Credit Facility and Term Loan Facility have been terminated:


5.1.

Financial and Business Information.  Borrower shall deliver to Lender the following (all to be in form and substance satisfactory to Lender):


(a)

Financial Statements and Reports:


(i)

as soon as available, but in any event within ninety (90) days after the end of each fiscal year of Parent, financial statements of Parent for such year which present fairly Parent’s financial condition, including the balance sheet as of the end of such fiscal year and a statement of operations, a statement of cash flows and a statement of stockholder equity for such fiscal year, all on a consolidated basis and accompanied by consolidating schedules, prepared in accordance with GAAP, and audited by an independent certified public accounting firm of recognized standing selected by Parent and reasonably satisfactory to Lender, together with an unqualified opinion on the financial statements from such accounting firm;


(ii)

as soon as available, but in any event within forty-five (45) days after the end of each fiscal quarter of Parent, internally prepared financial statements of Parent for such quarter, along with year to date information and comparative information from the same periods of the preceding fiscal year, which present fairly Parent’s financial condition, including balance sheet, statement of operations, statement of cash flows and statement of stockholder equity, all on a consolidated basis and accompanied by consolidating schedules, prepared in accordance with GAAP;


(iii)

as soon as available, but in any event within thirty (30) days after the end of each month, internally prepared financial statements of Borrower for such month, along with year to date information and comparative information from the same periods of the preceding fiscal year, which present fairly Borrower’s financial condition, including balance sheet, statement of operations and statement of member equity, prepared in accordance with GAAP (subject to absence of footnotes);


(iv)

as soon as available, but in any event within forty-five (45) days after the end of each fiscal quarter, a Compliance Certificate;


(v)

as soon as available, but in any event within thirty (30) days after the end of each month, a Borrowing Base Report;


(vi)

as soon as available, but in any event within ninety (90) days after the end of each fiscal year of Borrower, financial projections of Borrower for the then current fiscal year, together with an explanation of the assumptions used to forecast such financial projections;


(vii)

daily, electronic copies of all broker statements of Borrower indicating all activities with respect to Hedging Accounts; and



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(viii)

such other data, reports, statements and information (financial or otherwise) as Lender may reasonably request.


(b)

Notice of Event of Default - promptly upon becoming aware of the existence of any condition or event which constitutes an Event of Default or Unmatured Event of Default under this Agreement, a written notice specifying the nature and period of existence thereof and what action Borrower is taking (and proposes to take) with respect thereto.


5.2.

Tax Returns and Reports.  At Lender’s request from time to time, Borrower shall promptly furnish Lender with copies of the annual federal and state income tax returns of Borrower.


5.3.

Material Adverse Effect.  Borrower agrees that immediately upon it, its sole member or any of its or its sole member’s officers becoming aware of any development or other information which could reasonably be expected to result in a Material Adverse Effect, it shall give to Lender telephonic or facsimile notice specifying the nature of such development or information and such anticipated Material Adverse Effect. In addition, such verbal communication shall be confirmed by written notice thereof to Lender on the next Business Day after such verbal notice is given.


5.4.

Litigation / Loss.  Borrower shall give prompt notice to Lender of any (a) litigation claiming in excess of two hundred fifty thousand dollars ($250,000) from Borrower, or which could otherwise have a Material Adverse Effect or (b) any damage, loss, theft or destruction in excess of two hundred fifty thousand dollars ($250,000) with respect to any portion of Borrower’s Property, or which could otherwise have a Material Adverse Effect.


5.5.

Places of Business; Jurisdiction of Organization; Name.  Borrower shall give thirty (30) days prior written notice to Lender of any changes in the location of any of its chief executive office or any other places of business, any changes in its jurisdiction of organization, change of name or the establishment of any new, or the discontinuance of any existing place of business.


5.6.

Maintenance of Insurance, Financial Records and Legal Existence.


(a)

Property Insurance - Borrower shall maintain or cause to be maintained insurance on its Property against fire, casualty and such other hazards in such amounts, with such deductibles and with such insurers as are customarily used by companies operating in the same industry as Borrower. The policies of all such casualty insurance shall contain standard lender loss payable and additional insured clauses issued in favor of Lender pursuant to which all losses thereunder shall be paid to Lender as Lender’s interests may appear. Such policies shall expressly provide that the requisite insurance cannot be altered or canceled without thirty (30) days prior written notice to Lender and shall insure Lender notwithstanding the act or neglect of the insured. At or prior to Closing, Borrower shall furnish Lender with insurance certificates certified as true and correct and being in full force and effect as of the Closing Date or such other evidence of insurance as Lender may require, provided that Borrower shall furnish to Lender such insurance certificates naming Lender as loss payee and as additional insured no later than sixty (60) days subsequent to the Closing Date. In the event Borrower fails to procure or cause to be procured any such insurance or to timely pay or cause to be paid the premium(s) on any such insurance, Lender may do so for Borrower, but Borrower shall continue to be liable for the same. Borrower hereby appoints Lender as its attorney-in-fact, exercisable at Lender’s option, to endorse any check which may be payable to Borrower in order to collect the proceeds of such insurance.


(b)

Public Liability and Business Interruption Insurance - Borrower shall maintain, and shall deliver to Lender upon Lender’s request evidence of public liability and business interruption insurance in such amounts as is customary for companies in the same or similar businesses located in the same or similar area.



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(c)

Financial Records - Borrower shall keep current and accurate books of records and accounts in which full and correct entries will be made of all of its business transactions, and will reflect in its financial statements adequate accruals and appropriations to reserves, all in accordance with GAAP. Borrower shall provide written notice to Lender promptly upon any change to its fiscal year end date.


(d)

Existence and Rights - Borrower shall do (or cause to be done) all things necessary to preserve and keep in full force and effect its legal existence, good standing, rights and franchises.


(e)

Compliance with Laws - Borrower shall be in compliance with any and all laws, ordinances, governmental rules and regulations, and court or administrative orders or decrees to which it or its Property is subject, whether federal, state or local (including, without limitation, environmental or environmental-related laws, statutes, ordinances, rules, regulations and notices) and shall obtain and maintain any and all licenses, permits, franchises, certificates or other governmental authorizations necessary to the ownership of its Property or to the conduct of its businesses, which violation or failure to obtain could materially adversely affect the business, financial condition, Property or prospects of Borrower.


5.7.

Business Conducted.  Borrower shall continue in the primary business presently engaged in by it, it being agreed that Borrower may engage in businesses reasonably related to its primary business.


5.8.

Payment of Obligations, Taxes and Claims.  Borrower shall pay, before they become delinquent, all debts, obligations, taxes, assessments, governmental charges, levies and claims imposed upon it or upon its Property, except for those being contested in good faith with due diligence by appropriate proceedings and for which appropriate reserves have been maintained under GAAP.


5.9.

Financial Covenants.  Borrower shall perform and comply with each of the following financial covenants as reflected and computed from its financial statements:


(a)

Borrower shall maintain at all times, Working Capital equal to or more than: (i) seven million dollars ($7,000,000) during fiscal 2009; and (ii) nine million dollars ($9,000,000) during fiscal 2010 and each fiscal year thereafter.


(b)

Borrower shall maintain at all times, Tangible Net Worth equal to or more than fifteen million dollars ($15,000,000) during fiscal 2009 and each fiscal year thereafter.


(c)

Borrower shall maintain at all times, a Fixed Charge Ratio of 1.10x or more.


(d)

Borrower shall maintain at all times, Capital Expenditures equal to or less than two million dollars ($2,000,000) during fiscal 2009 and each fiscal year thereafter; provided, however, that any unused portion of Capital Expenditures from any fiscal year may be added to the two million dollar ($2,000,000) limit in the next succeeding year.


(e)

Borrower shall maintain at all times, a Senior Leverage Ratio that does not exceed 2.25x.


5.10.

[This section intentionally omitted.]


5.11.

Maintenance of Property / Inspection.  Borrower shall keep and maintain its Property in good working order and condition, ordinary wear and tear excepted.  Borrower shall permit any of Lender’s officers or other representatives to visit and inspect Borrower’s Property during regular business hours to examine and audit all of Borrower’s books of account, records, reports and other papers, to make copies and extracts therefrom and to discuss its affairs, finances and accounts with its officers, employees and independent certified public accountants and attorneys.



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SECTION 6.

BORROWER’S NEGATIVE COVENANTS


Borrower covenants that until all of the Obligations are paid and satisfied in full and the Revolving Credit Facility and Term Loan Facility have been terminated:


6.1.

Debt.  Borrower shall not create, incur, assume or suffer to exist, voluntarily or involuntarily, any Debt, except (a) the Obligations, (b) purchase money obligations, obligations under Capitalized Leases and obligations under operating leases for rolling stock and equipment in an aggregate amount not to exceed three million dollars ($3,000,000) outstanding at any one time and (c) unsecured and subordinated obligations owing to Parent not in excess of two million dollars ($2,000,000) in the aggregate at any one time outstanding.  No payment of principal or interest shall be made by Borrower with respect to obligations owing to Parent if an Unmatured Event of Default or Event of Default would occur as a result of such payment.


6.2.

Liens, Claims and Encumbrances.  Borrower shall not (a) execute a negative pledge agreement with any Person covering any Property, except as set forth in this Agreement, or (b) cause or permit or consent to cause or permit (upon the happening of a contingency or otherwise) its Property to be subject to any lien, claim or encumbrance of any nature whatsoever, except (i) the Permitted Exceptions and (ii) liens and security interests with respect to the Property subject to the purchase money obligations, obligations under Capitalized Leases and obligations under operating leases for rolling stock and equipment permitted by Section 6.1 hereof.


6.3.

Loans, Advances and Investments.  Borrower shall not make, or be permitted to have outstanding, any loans or advances to, or investments in, any Person, except (a) advances to employees in the ordinary course of business not in excess of one hundred thousand dollars ($100,000) in the aggregate at any one time outstanding, (b) extensions of trade credit or similar advances in the ordinary course of business and (c) Great Lakes Grain Storage.


6.4.

Distributions.  Borrower shall not declare, pay or make any form of Distribution, except (a) periodic Distributions to Parent in an amount equal to Borrower’s reasonable overhead and operating expenses paid by Parent and (b) an annual Distribution to Parent in an amount equal to Parent’s federal, state, local and foreign income tax liability for such year in respect of taxable income derived from Borrower (net of tax refunds).


6.5.

Sale of Assets, Merger, Consolidation, Dissolution or Liquidation of Borrower.


(a)

Borrower shall not sell, lease, license, transfer or otherwise dispose of its Property, agree to the same or convey any rights regarding the same, except (i) Property sold in the ordinary course or ordinary operation of Borrower’s business, (ii) sales of assets (other than as otherwise set forth in this Section 6.1(a)) for fair market value in an aggregate amount not to exceed two hundred fifty thousand dollars ($250,000) per fiscal year and (iii) pursuant to the agreements set forth on Schedule 4.15 hereto.  Borrower shall not materially amend, restate, modify, supplement, extend, renew or take any similar material actions with respect to the agreements set forth on Schedule 4.15 hereto.


(b)

Borrower shall not merge or consolidate with, acquire any equity interests in (except the currently outstanding equity interests in Great Lakes Grain Storage), acquire all or substantially all of the assets of or otherwise engage in any form of business combination with, any other Person, or commence a dissolution or liquidation.


(c)

Borrower shall remain wholly-owned by Parent.


6.6.

Change of Control of Parent.  No Change of Control shall occur with respect to Parent.  For the purposes of this Section 6.6, “Change of Control” means:


(a)

the acquisition, directly or indirectly, by any person, entity or “group” (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than fifty percent (50%) of the combined voting power of Parent’s then outstanding voting securities entitled to vote generally in the election of directors;



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(b)

individuals who, as of the Closing Date, constitute the Board of Directors of Parent (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board of Directors of Parent, provided that any person becoming a director subsequent to the Closing Date whose election, or nomination for election by the shareholders of Parent, was approved by a vote of at least a majority of the Incumbent Directors who are directors at the time of such vote shall be, for purposes of this Agreement, an Incumbent Director; or


(c)

consummation of (i) a reorganization, merger or consolidation, in each case, with respect to which persons who were the shareholders of Parent immediately prior to such reorganization, merger or consolidation (other than the acquirer) do not, immediately thereafter, beneficially own more than fifty percent (50%) of the combined voting power of the reorganized, merged or consolidated company’s then outstanding voting securities entitled to vote generally in the election of directors or (ii) a liquidation or dissolution of Parent or the sale of all or substantially all of the assets of Parent (whether such assets are held directly or indirectly) to a third party.


6.7.

Transactions With Affiliates.   Borrower shall not enter into any transaction with any Affiliate including, without limitation, the purchase, sale, lease or exchange of Property, or the loaning, capitalization or giving of funds to any such Affiliate, unless (a) such Affiliate is engaged in a business substantially related to the business permitted to be conducted by Borrower hereunder, (b) the transaction is in the ordinary course of and pursuant to the reasonable requirements of Borrower’s business and upon terms substantially the same and no less favorable to Borrower as it would obtain in a comparable arm’s-length transactions with any Person not an Affiliate and (c) such transaction is not prohibited hereunder.


6.8.

Bank and Brokerage Accounts; Deposits.  Borrower shall not establish any new deposit, checking, savings, securities, investment, hedging, commodity trading or other similar accounts, maintain any account other than those accounts specified on Schedule 4.17 hereto, deposit proceeds from the sale of Collateral in any account other than a deposit account specified on Schedule 4.17 hereto or permit the cash balance of the accounts set forth on Schedule 4.17 hereto to exceed the corresponding balance limit indicated on Schedule 4.17 hereto.  The accounts set forth on Schedule 4.17 hereto that are maintained with financial institutions other than Lender and in which Lender does not have a first priority perfected security interest shall not have an aggregate balance limit in excess of one hundred thousand dollars ($100,000).


6.9.

Hedging.  Borrower shall not (a) violate the Hedging Policy, (b) permit more than fifty thousand (50,000) bushels of any commodity constituting Grain Inventory to be unhedged against future price risk as of the close of the Chicago Board of Trade on each Business Day or (c) enter into any short position in any futures contract traded on the Chicago Board of Trade with a term that expires in excess of twelve (12) months from the contract date.


SECTION 7.

DEFAULT


7.1.

Events of Default.  Each of the following events shall constitute an event of default (“Event of Default”) and Lender shall thereupon have the option to declare the Obligations immediately due and payable, all without demand, notice, presentment or protest or further action of any kind (it also being understood that the occurrence of any of the events or conditions set forth in subparagraphs (j), (k) or (l) shall automatically cause an acceleration of the Obligations):


(a)

Payments - if Borrower fails to make any payment of principal or interest on the date when such payment is due and payable; or



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(b)

Other Charges - if Borrower fails to pay any other charges, fees, Expenses or other monetary obligations owing to Lender, arising out of or incurred in connection with this Agreement on the date when such payment is due and payable, whether upon maturity, acceleration, demand or otherwise and such failure continues for a period of ten (10) days after the earlier of Borrower becoming aware of such failure or Borrower receiving written notice from Lender of such failure; provided however, that the ten (10) day grace period shall not be applicable if such payments are due and payable due to maturity, acceleration or demand, whether following an Event of Default, or otherwise; or


(c)

Particular Covenant Defaults - if Borrower fails to perform, comply with or observe any covenant or undertaking contained in this Agreement not otherwise described in this Section 7.1, and such failure continues for a period of thirty (30) days after the earlier of Borrower becoming aware of such failure or Borrower receiving written notice from Lender of such failure; or


(d)

Financial Information - if any statement, report, financial statement or certificate made or delivered by Borrower, its sole member or any of their officers, employees or agents, to Lender is not true and correct, in all material respects, when made; or


(e)

Uninsured Loss - if there shall occur any uninsured damage, loss, theft or destruction in excess of two hundred fifty thousand dollars ($250,000) with respect to any portion of Borrower’s Property; or


(f)

Warranties or Representations - if any warranty, representation or other statement by or on behalf of Borrower contained in or pursuant to this Agreement, any of the other Loan Documents, or in any document, agreement or instrument furnished in compliance with, relating to or in reference to this Agreement, is false, erroneous or misleading in any material respect when made; or


(g)

Agreements with Others - if Borrower shall default beyond any grace period under any agreement with any creditor for borrowed money having an outstanding principal amount of two hundred fifty thousand dollars ($250,000) or more and (i) such default consists of the failure to pay any principal or interest with respect to such indebtedness or (ii) such default consists of the failure to perform any covenant or agreement with respect to such indebtedness, if the effect of such default is to cause or permit Borrower’s, or any of its obligations which are the subject thereof, to become due prior to its maturity date or prior to its regularly scheduled date of payment; or


(h)

Related Agreements – if, after the passage of all applicable notice and cure or grace periods, Borrower breaches or violates the terms of, or if a default or an event of default occurs under, (i) any other existing or future agreement between or among Borrower and Lender that is in any way related to this Agreement including, without limitation, the Loan Documents or (ii) any Swap Obligations; or


(i)

Judgments - if any final, nonappealable judgment for the payment of money in excess of two hundred fifty thousand dollars ($250,000) which is not covered by insurance or an appeal bond, or for which Borrower has not established a cash or cash equivalent reserve in the amount of such judgment, shall be rendered and shall remain unsatisfied and unstayed for a period of at least thirty (30) days; or


(j)

Assignment for Benefit of Creditors, etc. - if Borrower makes or proposes an assignment for the benefit of creditors generally, offers a composition or extension to creditors, or makes or sends notice of an intended bulk sale of any business or assets now or hereafter owned or conducted by Borrower which might materially and adversely affect Borrower; or



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(k)

Bankruptcy, Dissolution, etc. - upon the commencement of any action for the dissolution or liquidation of Borrower, or the commencement of any proceeding to avoid any transaction entered into by Borrower, or the commencement of any case or proceeding for reorganization or liquidation of Borrower, or any of its debts under the Bankruptcy Code or any other state or federal law, now or hereafter enacted for the relief of debtors, whether instituted by or against any Borrower; provided, however, that Borrower shall have sixty (60) days to obtain the dismissal or discharge of involuntary proceedings filed against Borrower, it being understood that during such sixty (60) day period, Lender shall not be obligated to make Advances hereunder and Lender may seek adequate protection in any bankruptcy proceeding; or


(l)

Receiver - upon the appointment of a receiver, liquidator, custodian, trustee or similar official or fiduciary for Borrower or for any of Borrower’s Property; or


(m)

Execution Process, Seizure, etc. - the issuance of any execution or distraint process affecting any material portion of the Property of Borrower, or any material portion of the Property of Borrower is seized by any governmental entity, federal, state or local; or


(n)

Pension Benefits, etc. - if Borrower fails to comply with ERISA, so that grounds exist to permit the appointment of a trustee under ERISA to administer Borrower’s employee plans or to allow the Pension Benefit Guaranty Corporation to institute proceedings to appoint a trustee to administer such plan(s), or to permit the entry of a lien to secure any deficiency or claim; or


(o)

Material Adverse Effect - a Material Adverse Effect occurs which impairs Borrower’s ability to repay the Obligations in full as and when due; or


(p)

Change of Control – if Borrower fails to perform, comply with or observe Section 6.1 hereof or Section 6.6 hereof.


7.2.

Cure.  Nothing contained in this Agreement or the Loan Documents shall be deemed to compel Lender to accept a cure of any Event of Default hereunder, except as outlined in Section 7.1 hereof.


7.3.

Rights and Remedies on Default.


(a)

In addition to all other rights, options and remedies granted or available to Lender under this Agreement or the Loan Documents, or otherwise available at law or in equity, upon or at any time after the occurrence and during the continuance of an Event of Default or Unmatured Event of Default, Lender may, in its reasonable discretion, withhold or cease making Advances.


(b)

In addition to all other rights, options and remedies granted or available to Lender under this Agreement or the Loan Documents (each of which is also then exercisable by Lender), Lender may, in its reasonable discretion, upon or at any time after the occurrence and during the continuance of an Event of Default, terminate the Revolving Credit Facility and Term Loan Facility.


(c)

In addition to all other rights, options and remedies granted or available to Lender under this Agreement or the Loan Documents (each of which is also then exercisable by Lender), Lender may, upon or at any time after the occurrence and during the continuance of an Event of Default, exercise all rights under the Uniform Commercial Code and any other applicable law or in equity, and under all Loan Documents permitted to be exercised after the occurrence of an Event of Default, including the following rights and remedies (which list is given by way of example and is not intended to be an exhaustive list of all such rights and remedies):



29





(i)

The right to “take possession” of the Collateral, and notify all Account Debtors of Lender’s security interest in the Accounts and require payment under the Accounts to be made directly to Lender and Lender may, in its own name or in the name of the Borrower, exercise all rights of a secured party with respect to the Collateral and collect, sue for and receive payment on all Accounts, and settle, compromise and adjust the same on any terms as may be satisfactory to Lender, in its reasonable discretion for any reason or without reason and Lender may do all of the foregoing with or without judicial process (including, without limitation, notifying the United States postal authorities to redirect mail addressed to Borrowers, to an address designated by Lender); or


(ii)

Require Borrower, at Borrower’s expense, to assemble all or any part of the Collateral and make it available to Lender; or


(iii)

The right to reduce or modify the Revolving Credit Commitment or Term Loan Commitment, or to modify the terms and conditions upon which Lender may be willing to consider making Advances.


(d)

Borrower hereby agrees that a notice received by it at least ten (10) days before the time of any intended public sale or of the time after which any private sale or other disposition of the Collateral is to be made, shall be deemed to be reasonable notice of such sale or other disposition. If permitted by applicable law, any Collateral which threatens to speedily decline in value or which is sold on a recognized market may be sold immediately by Lender without prior notice to Borrower. Borrower covenants and agrees not to interfere with or impose any obstacle to Lender’s exercise of its rights and remedies with respect to the Collateral.


7.4.

Nature of Remedies.  All rights and remedies granted Lender hereunder and under the Loan Documents, or otherwise available at law or in equity, shall be deemed concurrent and cumulative, and not alternative remedies, and Lender may proceed with any number of remedies at the same time until all Obligations are satisfied in full. The exercise of any one right or remedy shall not be deemed a waiver or release of any other right or remedy, and Lender, upon or at any time after the occurrence and during the continuance of an Event of Default, may proceed against Borrower at any time, under any agreement, with any available remedy and in any order.


7.5.

Set-Off. If any bank account or other Property held by or with Lender, or any Affiliate of Lender, or any participant is attached or otherwise liened or levied upon by any third party, Lender (and such participant) shall have and be deemed to have, without notice to Borrower, the immediate right of set-off and may apply the funds or other amounts or property thus set off against any of the Obligations hereunder.


SECTION 8.

MISCELLANEOUS


8.1.

GOVERNING LAW.  THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL RELATED AGREEMENTS AND DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF NEBRASKA. THE PROVISIONS OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO HEREIN ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL CONTINUE IN FULL FORCE AND EFFECT.


8.2.

Integrated Agreement.  The Revolving Credit Note, the Term Loan Note, the Mortgages, the Security Agreement, the Control Agreements, the Environmental Indemnity Agreement and the other Loan Documents, all related agreements and this Agreement shall be construed as integrated and complementary of each other and as augmenting and not restricting Lender’s rights and remedies. If, after applying the foregoing, an inconsistency still exists, the provisions of this Agreement shall constitute an amendment thereto and shall control.



30





8.3.

Waiver and Indemnity.


(a)

No omission or delay by Lender in exercising any right or power under this Agreement or any related agreements and documents will impair such right or power or be construed to be a waiver of any default, or Event of Default or an acquiescence therein, and any single or partial exercise of any such right or power will not preclude other or further exercise thereof or the exercise of any other right, and as to Borrower no waiver will be valid unless in writing and signed by Lender and then only to the extent specified.


(b)

Borrower releases and shall indemnify, defend and hold harmless Lender, and its respective officers, employees and agents, of and from any claims, demands, liabilities, obligations, judgments, injuries, losses, damages and costs and expenses (including, without limitation, reasonable legal fees) resulting from (i) acts or conduct of Borrower under, pursuant or related to this Agreement and the other Loan Documents, (ii) Borrower’s breach, or alleged breach, or violation of any representation, warranty, covenant or undertaking contained in this Agreement or the other Loan Documents and (iii) Borrower’s failure, or alleged failure, to comply with any or all laws, statutes, ordinances, governmental rules, regulations or standards, whether federal, state or local, or court or administrative orders or decrees (including without limitation environmental laws, etc.), and all costs, expenses, fines, penalties or other damages resulting therefrom, unless, in each case resulting from acts or conduct of Lender constituting willful misconduct or gross negligence.


(c)

Lender shall not be liable for, and Borrower hereby agrees that Lender’s liability in the event of a breach by Lender of this Agreement shall be limited to Borrower’s direct damages suffered and shall not extend to, any consequential or incidental damages. In the event Borrower brings suit against Lender in connection with the transactions contemplated hereunder, and Lender is found not to be liable, Borrower shall indemnify and hold Lender harmless from all costs and expenses, including attorneys’ fees, incurred by Lender in connection with such suit.


8.4.

Time.  Except as otherwise set forth in this Agreement, whenever Borrower shall be required to make any payment, or perform any act, on a day which is not a Business Day, such payment may be made, or such act may be performed, on the next succeeding Business Day. Time is of the essence in Borrower’s performance under all provisions of this Agreement and all related agreements and documents.


8.5.

Expenses of Lender.   Borrower will pay all out-of-pocket expenses incurred by Lender on demand (including, without limitation, search costs, audit fees, inspection fees, appraisal fees, and the fees and expenses of legal counsel for Lender) relating to this Agreement, and all related agreements and documents, including, without limitation, expenses incurred in the analysis, negotiation, preparation, closing, administration and enforcement of this Agreement and the other Loan Documents.  In the event of any Event of Default or Unmatured Event of Default which requires action by Lender in accordance with the terms of the Loan Documents, Borrower will pay all out-of-pocket expenses incurred by Lender on demand relating to the enforcement, protection and defense of the rights of Lender in and to the Collateral or otherwise hereunder.  Additionally, Borrower will pay any reasonable expenses relating to extensions, amendments, waivers or consents pursuant to the provisions hereof, or any related agreements and documents or relating to agreements with other creditors, or termination of this Agreement.  The fees, expenses and other costs set forth in this Section 8.5 are collectively referred to as the “Expenses.”  Any Expenses not paid upon demand by Lender shall bear interest at the Default Rate.


8.6.

Confidentiality.  Borrower and Lender agree to maintain the confidentiality of this Agreement, the other Loan Documents and any financial and business information delivered to Lender pursuant to Section 5.1 hereof and not to disclose such information or provide a copy thereof to any third party, except (i) as required by law or regulation (including the regulations of the Securities and Exchange Commission), (ii) to accountants, lawyers and financial advisers of the parties who are informed of and agree to be bound by this Section 8.6, (iii) to any assignee or participant (or potential assignee or participant) of Lender’s interests herein or any rating agencies, guarantors or insurers and (iv) to the extent such information is available to the public.



31





8.7.

Notices.


(a)

Any notices or consents required or permitted by this Agreement shall be in writing and shall be deemed given if delivered in person or if sent by facsimile or by nationally recognized overnight courier, or via first class, certified or registered mail, postage prepaid, to the address of such party set forth on the signature pages hereof, unless such address is changed by written notice hereunder.


(b)

Any notice sent by Lender or Borrower by any of the above methods shall be deemed to be given when so received.


(c)

Lender shall be fully entitled to rely upon any facsimile transmission or other writing purported to be sent by any Authorized Officer (whether requesting an Advance or otherwise) as being genuine and authorized.


8.8.

Headings.  The headings of any paragraph or section of this Agreement are for convenience only and shall not be used to interpret any provision of this Agreement.


8.9.

Survival.  All warranties, representations, and covenants made by Borrower herein, in any Loan Document, or in any agreement referred to herein or on any certificate, document or other instrument delivered by it or on its behalf under this Agreement, shall be considered to have been relied upon by Lender, and shall survive the delivery to Lender of any Loan Document, regardless of any investigation made by Lender or on its behalf. All statements in any such certificate or other instrument prepared and/or delivered for the benefit of Lender shall constitute warranties and representations by Borrower hereunder. Except as otherwise expressly provided herein, all covenants made by Borrower hereunder, in any Loan Document or under any other agreement or instrument shall be deemed continuing until all Obligations are satisfied in full.


8.10.

Successors and Assigns.


(a)

This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties. Borrower may not transfer, assign or delegate any of its duties or obligations hereunder.


(b)

Lender may at any time assign all of its Advances and commitments hereunder to any other Person.


8.11.

Duplicate Originals.  Two or more duplicate originals of this Agreement may be signed by the parties, each of which shall be an original but all of which together shall constitute one and the same instrument. This Agreement may be executed in counterparts, all of which counterparts taken together shall constitute one completed fully executed document.


8.12.

Modification.  No modification hereof or of any agreement referred to herein shall be binding or enforceable unless in writing and signed by Borrower and Lender.


8.13.

Signatories.  Each individual signatory hereto represents and warrants that such signatory is duly authorized to execute this Agreement on behalf of such signatory’s principal and that such signatory executes the Agreement in such capacity and not as a party.


8.14.

Third Parties.  No rights are intended to be created hereunder, or under any related agreements or documents for the benefit of any third party donee, creditor or incidental beneficiary of Borrower. Nothing contained in this Agreement shall be construed as a delegation to Lender of Borrower’s duty of performance, including, without limitation, Borrower’s duties under any account or contract with any other Person.



32





8.15.

Waivers.


(a)

Borrower hereby irrevocably, unconditionally and fully subordinates in favor of Lender, any and all rights it may have at any time (whether arising directly or indirectly, by operation of law or contract) to assert or receive payment on any claim against it, on account of payments made under this Agreement, including without limitation, any and all rights of subrogation, reimbursement, exoneration, contribution or indemnity. Borrower waives any event or circumstances which might constitute a legal or equitable defense of, or discharge of, Borrower. Furthermore, Borrower agrees that if any payment on the Obligations is recovered from or repaid by Lender in whole or in part in any bankruptcy, insolvency or similar proceeding instituted by or against Borrower, Borrower shall be obligated to the same extent as if the recovered or repaid payment had never been originally made on such Obligation.


(b)

Borrower hereby consents and agrees that Lender, at any time or from time to time in its reasonable discretion may: (i) settle, compromise or grant releases for liabilities of any Person or Persons liable for any Obligations, (ii) exchange, release, surrender, sell, subordinate or compromise any Collateral to the extent allowed under federal, state or local law, including without limitation administrative pronouncements, of any party now or hereafter securing any of the Obligations and (iii) following an Event of Default, apply any and all payments received at any time against the Obligations in any order as Lender may determine; all of the foregoing in such manner and upon such terms as Lender may see fit, without notice to or further consent from Borrower who hereby agrees and shall remain bound upon this Agreement notwithstanding any such action on Lender’s part.


(c)

The liability of Borrower hereunder is absolute and unconditional and shall not be reduced, impaired or affected in any way by reason of (i) any failure to obtain, retain or preserve, or the lack of prior enforcement of, any rights against any Person or Persons or in any Property, (ii) the invalidity or unenforceability of any Obligations or rights in any Collateral, (iii) any delay in making demand upon any other Person or Persons or any delay in enforcing, or any failure to enforce, any rights against any other Person or Persons or in any Collateral even if such rights are thereby lost, (iv) any failure, neglect or omission to obtain, perfect or retain any lien upon, protect, exercise rights against, or realize on, any Property of Borrower, or any other party securing the Obligations, (v) the existence or non-existence of any defenses which may be available to any other Person or Persons with respect to the Obligations or (vi) the commencement of any bankruptcy, reorganization, liquidation, dissolution or receivership proceeding or case filed by or against Borrower.


8.16.

CONSENT TO JURISDICTION.  BORROWER AND LENDER HEREBY IRREVOCABLY CONSENT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN DOUGLAS COUNTY, NEBRASKA IN ANY AND ALL ACTIONS AND PROCEEDINGS WHETHER ARISING HEREUNDER OR UNDER ANY OTHER AGREEMENT OR UNDERTAKING. BORROWER WAIVES ANY OBJECTION TO IMPROPER VENUE AND FORUM NON-CONVENIENS TO PROCEEDINGS IN ANY SUCH COURT AND ALL RIGHTS TO TRANSFER FOR ANY REASON. BORROWER IRREVOCABLY AGREES TO SERVICE OF PROCESS BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED TO THE ADDRESS OF THE APPROPRIATE PARTY SET FORTH HEREIN.


8.17.

WAIVER OF JURY TRIAL.  BORROWER AND LENDER HEREBY WAIVE ANY AND ALL RIGHTS THEY MAY HAVE TO A JURY TRIAL IN CONNECTION WITH ANY LITIGATION COMMENCED BY OR AGAINST LENDER WITH RESPECT TO RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO OR UNDER THE LOAN DOCUMENTS, WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE.



33





8.18.

Discharge of Taxes, Borrower’s Obligations, Etc.  Lender, in its reasonable discretion, shall have the right at any time, and from time to time, with prior notice to Borrower, if Borrower fails to do so five (5) Business Days after requested in writing to do so by Lender, to: (a) pay for the performance of any of Borrower’s obligations hereunder and (b) discharge taxes or liens, at any time levied or placed on any of Borrower’s Property in violation of this Agreement unless Borrower is in good faith with due diligence by appropriate proceedings contesting such taxes or liens. Expenses and advances shall be deemed Advances hereunder and shall bear interest at the Default Rate until reimbursed to Lender. Such payments and advances made by Lender shall not be construed as a waiver by Lender of an Event of Default under this Agreement.


8.19.

Injunctive Relief.  The parties acknowledge and agree that, in the event of a breach or threatened breach of any party’s obligations hereunder, they may have no adequate remedy in money damages and, accordingly, shall be entitled to an injunction (including without limitation, a temporary restraining order, preliminary injunction, writ of attachment, or order compelling an audit) against such breach or threatened breach.  However, no specification in this Agreement of a specific legal or equitable remedy shall be construed as a waiver or prohibition against any other legal or equitable remedies in the event of a breach or threatened breach of any provision of this Agreement.


8.20.

Transfers, Participations and Securitizations.


(a)

A material inducement to Lender’s willingness to complete the transactions contemplated by this Agreement and the other Loan Documents is Borrower’s agreement that Lender may, at any time, complete a Transfer, Participation or Securitization with respect to the Revolving Credit Note, Term Loan Note or any of the other Loan Documents, or any or all servicing rights with respect thereto.


(b)

Borrower agrees to cooperate in good faith with Lender in connection with any such Transfer, Participation or Securitization of the Revolving Credit Note, Term Loan Note or any of the other Loan Documents, or any or all servicing rights with respect thereto, including, without limitation: (i) providing such documents, financial and other data, and other information and materials which would typically be required with respect to Borrower by a purchaser, transferee, assignee, servicer, participant, investor or rating agency involved with respect to such Transfer, Participation or Securitization, as applicable; provided, however, Borrower  shall not be required to make disclosures of any confidential information or any information which has not previously been made public unless required by applicable federal or state securities laws (the “Disclosures”); and (ii) amending the non-financial terms of the transactions evidenced by the Loan Documents to the extent necessary so as to satisfy the requirements of purchasers, transferees, assignees, servicers, participants, investors or selected rating agencies involved in any such Transfer, Participation or Securitization, so long as such amendments would not have a Material Adverse Effect.  Lender shall be responsible for preparing at its expense any documents evidencing the amendments referred to in clause (ii) above and compliance with any applicable law.  


(c)

Borrower consents to Lender providing the Disclosures, as well as any other information which Lender may now have or hereafter acquire with respect to Borrower, to each purchaser, transferee, assignee, servicer, participant, investor or rating agency involved with respect to each Transfer, Participation or Securitization, as applicable.  Lender and Borrower shall each pay their own attorneys’ fees and other out-of-pocket expenses incurred in connection with the performance of their respective obligations under this Section 8.20.



34





(d)

Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents: (i) an Event of Default under any Loan Document which relates to a loan which has not been the subject of a Securitization, Participation or Transfer shall not constitute an Event of Default under any Loan Document which relates to a loan which has been the subject of a Securitization, Participation or Transfer; (ii) an Event of Default under any Loan Document which relates to a loan which is included in any Loan Pool shall not constitute an Event of Default under any Loan Document which relates to a loan which is included in any other Loan Pool; (iii) the Loan Documents corresponding to the loans in any Loan Pool shall not secure the obligations of Borrower contained in any Loan Document which does not correspond to a loan in such Loan Pool; and (iv) the Loan Documents which do not correspond to a loan in any Loan Pool shall not secure the obligations of Borrower contained in any Loan Document which does correspond to a loan in such Loan Pool.


SECTION 9.

NOTICE - WRITTEN AGREEMENTS.


This notice is provided pursuant to Nebraska Revised Statutes 45-1,112 et. seq. This Agreement is a credit agreement. A credit agreement must be in writing to be enforceable under Nebraska Law. To protect you and us from any misunderstandings or disappointments, any contract, promise, undertaking or offer to forebear repayment of money or to make any other financial accommodation in connection with this loan of money or grant or extension of credit, or any amendment of, cancellation of, waiver of or substitution for any or all of the terms or provisions of any instrument or document executed in connection with this loan of money or grant or extension of credit, must be in writing to be effective.

INITIALED:




Borrower


[Signature Page Follows]



35





IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first set forth above.


Address For Notices to Borrower:

Borrower:

 

 

Green Plains Grain Company LLC

Green Plains Grain Company LLC

9420 Underwood Avenue, Suite 100

 

Omaha, Nebraska 68114

 

Attn:  Jerry Peters

By: /s/ Ron Gillis                                  

Fax:  (402) 884-8776

Name: Ron Gillis

 

Title: EVP of Finance, Treasurer

With a copy to:

 

 

 

Husch Blackwell Sanders LLP

 

1620 Dodge Street, Suite 2100

 

Omaha, Nebraska  68102

 

Attn:  Michelle Mapes

 

Fax:  (402) 964-5050

 

 

 

Address for notices to Lender:

Lender:

 

 

First National Bank of Omaha

First National Bank of Omaha

625 Maryville Center Drive, Suite 100

 

St. Louis, Missouri  63141

 

Attn:  Kenneth Feaster

By: /s/ Kenneth Feaster                        

Fax:  (314) 317-1695

Name: Kenneth Feaster

 

Title: Vice President

And:

 

 

 

First National Bank of Omaha

 

1620 Dodge Street, Stop 1057

 

Omaha, Nebraska 68197

 

Attn:  Brian Frevert

 

Fax:  (402) 633-3518

 

 

 

With a copy to:

 

 

 

McGrath North Mullin & Kratz, PC LLO

 

First National Tower, Suite 3700

 

1601 Dodge Street

 

Omaha, Nebraska 68102

 

Attn:  Robert Bothe

 

Jason Benson

 

Fax:  (402) 341-0216

 



36





SCHEDULE 4.15


1.

Lease Agreement dated October 31, 2007 by and between Great Lakes Cooperative as landlord and Farmers Cooperative Company as tenant.


2.

Antenna Space Lease dated May 8, 1996 by and between Farmers Cooperative Elevator Company of Everly as landlord and Cellular One, Great Lakes of Iowa as tenant.


3.

Antenna Space Lease dated November 4, 1998 by and between Farmers Cooperative Elevator Company of Everly as landlord and Cellular One, Great Lakes of Iowa as tenant.


4.

Antenna Space Lease dated November 4, 1998 by and between Farmers Cooperative Elevator Company of Everly as landlord and Cellular One, Great Lakes of Iowa as tenant.


5.

Antenna Space Lease dated November 4, 1998 by and between Farmers Cooperative Elevator Company of Everly as landlord and Cellular One, Great Lakes of Iowa as tenant.


6.

GLGS Service Agreement dated March 22, 2006 by and between Great Lakes Cooperative as landlord and Great Lakes Grain Storage, L.L.C. as tenant.


7.

Rooftop Lease with Option dated August 1, 2007 by and Between Great lakes Cooperative as landlord and Clay County Communications, LLC as tenant.


8.

Agreement dated April 6, 2004 by and between Great lakes Cooperative as landlord and Community State Bank as tenant.


9.

Farm Lease dated March 25, 2008 by and between Great lakes Cooperative as landlord and Allen Sindt as tenant.



37





SCHEDULE 4.16

Item

Premises

Owned / Leased

Owner / Address

1.

701 N. Main Street

Everly, IA

Owned

- - -

2.

106 3 rd Ave.

Royal, IA

Owned

- - -

3.

701 4 th Ave. W.

Spencer, IA

Owned

- - -

4.

Hwy. 71

Spencer, IA

Owned

- - -

5.

Clay County, Section 30 W.

Spencer, IA

Owned

- - -

6.

1111 Railroad Ave.

Greenville, IA

Owned

- - -

7.

2980 254 th Ave.

Langdon, IA

Owned

- - -

8.

1110 P Ave.

Milford, IA

Owned

- - -

9.

603 RR Ave.

Superior, IA

Owned

- - -

10.

300 Agriculture Ave.

Gruver, IA

Owned

- - -

11.

101 West Main St.

Terril, IA

Leased

Luby’s

101 West Main St.

Terril, IA




38





SCHEDULE 4.17


Item

Account Number

Description

Financial Institution

Location

Balance Limit

1.

110263630

Deposit

First National Bank of Omaha

1620 Dodge St.

Omaha, NE

No Limit

 

 

 

 

 

 

2.

429869

Deposit

Northwest Federal Savings Bank

101 W. 5 th St.

Spencer, IA

$100,000

 

 

 

 

 

 

3.

533-20422

Commodity

R.J. O’Brien & Associates, LLC

222 S. Riverside Plaza

Chicago, IL 60606

No Limit





39




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 Quarterly Report on Form 10-Q 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 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: May 15, 2009

 

/s/ Todd A. Becker

 

 

Todd A. Becker

 

 

President and Chief Executive Officer

(Principal Executive Officer)








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 Quarterly Report on Form 10-Q 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 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: May 15, 2009

 

/s/ Jerry L. Peters

 

 

Jerry L. Peters

 

 

Chief Financial Officer

(Principal Financial Officer)




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 Quarterly Report of Green Plains Renewable Energy, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended March 31, 2009 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: May 15, 2009

 

/s/ Todd A. Becker

 

 

Todd A. Becker

 

 

President and Chief Executive Officer





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 Quarterly Report of Green Plains Renewable Energy, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended March 31, 2009 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: May 15, 2009

 

/s/ Jerry L. Peters

 

 

Jerry L. Peters

 

 

Chief Financial Officer