CONSTRUCTION AND TERM LOAN SUPPLEMENT

Exhibit 10.40

Loan No. RI0487T01A

CONSTRUCTION AND TERM LOAN SUPPLEMENT

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

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

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

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

SECTION 4. Disbursements of Proceeds.

(A)

Disbursement Procedures.

(1)

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

(2)

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

(B)

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

Construction and Term Loan Supplement RI0487T01A

SECTION 5. Interest and Fees.

(A)

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

(1)

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

(2)

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

(3)

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

(4)

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

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.

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Construction and Term Loan Supplement RI0487T01A

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

(B)

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

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

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

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

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

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Construction and Term Loan Supplement RI0487T01A

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

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

SECTION 9. Additional Conditions Precedent.

(A)

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

(1)

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

(2)

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

(3)

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

(B)

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

(1)

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

(2)

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

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Construction and Term Loan Supplement RI0487T01A

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

(A)

Project Approvals; Consents; Compliance. The Company has obtained all Project Approvals relating to the construction and operation of the Improvements, except those the Company has disclosed to Agent in writing. All such Project Approvals heretofore obtained remain in full force and effect and the Company has no reason to believe that any such Project Approval not heretofore obtained will not be obtained by the Company in the ordinary course during or following completion of the construction of the Improvements. No such Project Approval will terminate, or become void or voidable or terminable, upon any sale, transfer or other disposition of the Property or the Improvements, including any transfer pursuant to foreclosure sale under the Mortgage. No consent, permission, authorization, order, or license of any governmental authority is necessary in connection with the execution, delivery, performance, or enforcement of the loan documents to which the Company is