5. Long-Term Debt

The following table summarizes long-term debt as of September 30, 2013 and December 31, 2012 (in thousands):

	September 30, 2013		December 31, 2012
Term loans	$	170,480	$	170,480
Capital lease		2,466		2,475
Notes payable		349		474
		173,295		173,429
Less current portion		(170,642)		(170,634)
Long-term portion	$	2,653	$	2,795

Senior Debt Facility

In September 2006, the Operating Subsidiaries entered into the Senior Debt Facility to finance the construction of and provide working capital to operate our ethanol plants. Neither the Company nor the LLC is a borrower or a guarantor under the Senior Debt Facility, although the equity interests and assets of our subsidiaries are pledged as collateral to secure the debt under the facility. Principal payments under the Senior Debt Facility are payable quarterly at a minimum amount of $3,150,000, with additional pre-payments to be made out of available cash flow. These term loans mature in September 2014.

The Operating Subsidiaries did not make the regularly-scheduled payments of principal and interest that were due under the outstanding Senior Debt Facility on September 28, 2012, in an aggregate amount of $3.6 million. As a result, the Operating Subsidiaries received a Notice of Default from First National Bank of Omaha, as Administrative Agent for the lenders under the Senior Debt Facility. Since the initial default the Operating Subsidiaries have not made any of the regularly-scheduled principal and interest payments, which through September 30, 2013 totaled $22.4 million.

On April 11, 2013, the Operating Subsidiaries entered into a Lender Agreement with First National Bank of Omaha, as Escrow Agent under the Lender Agreement, and as Administrative Agent and Collateral Agent for the lenders under the Senior Debt Facility. Under the terms of the Lender Agreement, the Administrative Agent and the lenders agreed to provide the Operating Subsidiaries with a grace period until July 30, 2013 to allow the Company to pursue one or more strategic alternatives, including but not limited to a potential sale of one or both of the Company’s ethanol plants. This grace period was subject to the achievement of certain milestones, and could be extended at the sole discretion of the Administrative Agent. The Company engaged Piper Jaffray & Co. to act as its financial advisor and to assist us in exploring these strategic alternatives. In the event of a sale of one or both of our ethanol plants, the proceeds of such sale would first be applied to repay all or a portion of the outstanding indebtedness under the Senior Debt Facility, except for a small portion of such proceeds that, pursuant to the terms of the Lender Agreement, would be allocable to us. Residual proceeds after satisfying the senior indebtedness, if any, would accrue to the Company. Any such sale would also require the consent of the lenders under the Senior Debt Facility.

Simultaneously with the execution of the Lender Agreement, the Operating Subsidiaries, the Administrative Agent and the lenders under the Senior Debt Facility also entered into a Deed in Lieu Agreement, pursuant to which, among other things, the Operating Subsidiaries would transfer ownership of their respective ethanol plants, including the underlying real property, personal property and all material contracts used to operate the plants, to Newco, in full satisfaction of all outstanding obligations under the Senior Debt Facility and in lieu of the Administrative Agent and the lenders exercising their rights and remedies under the Senior Debt Facility. The Company also made a contingent payment into escrow of $938,000 for the anticipated payment of certain obligations and liabilities of the Operating Subsidiaries that are to be paid or assumed by Newco in conjunction with any such transfer. In conjunction with any such transfer, the Company would receive a full and final release of all known or potential claims of the lenders, as well as a 1% equity interest in Newco, which may be increased, under certain circumstances, to a 2% equity interest in Newco along with, in such circumstances, the right to acquire up to an additional 17.5% of the equity of Newco.

Under the terms of the Lender Agreement, the Deed in Lieu Agreement is currently being held in escrow by the Escrow Agent. At any time, the Administrative Agent may deliver written notice to the Escrow Agent directing the Escrow Agent to take steps necessary to consummate the transfers set forth in the Deed in Lieu Agreement. The Administrative Agent has not, as of the date of this Report, delivered such written notice.

As of September 30, 2013, the Operating Subsidiaries had $170.5 million of principal indebtedness outstanding under the Senior Debt Facility. The entire amount outstanding under the Senior Debt Facility has been classified as a current liability in the September 30, 2013 consolidated balance sheet.

Interest rates on the Senior Debt Facility are, at management’s option, set at: i) a base rate, which is the higher of the federal funds rate plus 0.5% or the administrative agent’s prime rate, in each case plus a margin of 2.0%; or ii) at LIBOR plus 3.0%. Interest on base rate loans is payable quarterly and, depending on the LIBOR rate elected, as frequently as monthly on LIBOR loans, but no less frequently than quarterly. In addition, since the Operating Subsidiaries defaulted on their payments of principal and interest in September 2012, those unpaid balances have accrued interest at a penalty rate of 8.3%. The interest rate in effect on the borrowings at both September 30, 2013 and December 31, 2012 was 3.2%.

The Senior Debt Facility is secured by a first priority lien on all right, title and interest in and to the Wood River and Fairmont plants and any accounts receivable or property associated with those plants and a pledge of all of our equity interests in the Operating Subsidiaries. The Operating Subsidiaries have established collateral deposit accounts maintained by an agent of the banks, into which their revenues are deposited, subject to security interests to secure any outstanding obligations under the Senior Debt Facility. These funds are then allocated into various sweep accounts held by the collateral agent, including accounts that provide funds for the operating expenses of the Operating Subsidiaries. The collateral accounts have various provisions, including historical and prospective debt service coverage ratios and debt service reserve requirements, which determine whether there is, and the amount of, cash available to the LLC from the collateral accounts each month. The terms of the Senior Debt Facility also include covenants that impose certain limitations on, among other things, the ability of the Operating Subsidiaries to incur additional debt, grant liens or encumbrances, declare or pay dividends or distributions, conduct asset sales or other dispositions, merge or consolidate, and conduct transactions with affiliates. The terms of the Senior Debt Facility also include customary events of default including failure to meet payment obligations, failure to pay financial obligations when due, failure of the Operating Subsidiaries to remain solvent and failure to obtain or maintain required governmental approvals. Under the terms of separate management services agreements between our Operating Subsidiaries and the LLC, the Operating Subsidiaries were paying a monthly management fee of $884,000 to the LLC to cover salaries, rent, and other operating expenses of the LLC. Due to the Senior Debt Facility payment default, the lenders required the Operating Subsidiaries to reduce their monthly management fee to $260,000 per month effective October 2012.

Debt issuance fees and expenses of $7.9 million ($0.9 million, net of accumulated amortization as of September 30, 2013) have been incurred in connection with the Senior Debt Facility. These costs have been deferred and are being amortized and expensed as interest over the term of the Senior Debt Facility.

On November 5, 2013, the Company was notified by the lenders under the Senior Debt Facility and Green Plains that a definitive agreement has been entered into for the lenders to sell the Company’s ethanol plants plus working capital to Green Plains. The Company has not been provided with a copy of the lenders’ definitive agreement with Green Plains and therefore no further details can be provided at this time. In the case of a transfer of the assets of the Operating Subsidiaries to Newco and Newco’s subsequent sale of the plants to Green Plains, we cannot assure you as to what value, if any, may be derived for shareholders of the Company from such transfer or sale. The assets of the Operating Subsidiaries comprise substantially all of the assets of the Company, other than its cash and cash equivalents of the LLC, which totaled $9.3 million at September 30, 2013. The Company has not yet determined how it will proceed or what strategic alternative it may pursue subsequent to such transfer or sale.

Capital Lease

The operating subsidiary that constructed the Fairmont plant has entered into an agreement with the local utility pursuant to which the utility has built and owns and operates a substation and distribution facility in order to supply electricity to the plant. The operating subsidiary is paying a fixed facilities charge based on the cost of the substation and distribution facility of $34,000 per month, over the 30-year term of the agreement. This fixed facilities charge is being accounted for as a capital lease in the accompanying financial statements. The agreement also includes a $25,000 monthly minimum energy charge that also began in the first quarter of 2008.

Notes Payable

Notes payable relate to certain financing agreements in place at our Wood River facility. The operating subsidiary entered into a note payable for $419,000 with the City of Wood River for special assessments related to street, water, and sanitary improvements at our Wood River facility. This note requires annual payments of $52,000, including interest at 4.0% per annum, and matures in 2018. In addition, the operating subsidiary for the Wood River facility entered into a financing agreement in the fourth quarter of 2012 for the purchase of certain rolling stock equipment to be used at the facility for $208,000. This note requires 24 monthly payments of $9,000, including interest at 6.0% per annum, and matures in 2014.

The following table summarizes the aggregate maturities of our long-term debt as of September 30, 2013 (in thousands):

Remainder of 2013	$	170,509
2014		146
2015		56
2016		59
2017		63
Thereafter		2,462
Total	$	173,295