Exhibit 10.3


 


PROMISSORY NOTE


(Variable Rate, Non-Revolving Single Advance Loan)


 


	
  Not
  to Exceed $4,300,000.00

  	
  Sioux Falls, South Dakota

  
	
   

  	
  September 21, 2007

  



 


FOR VALUE RECEIVED, N0RTHERN LIGHTS ETHANOL, LLC, a South
Dakota Limited Liability Company (“Borrower”), hereby promises to pay to the
order of U.S. BANK NATIONAL ASSOCIATION, a national banking association (“Lender”,
which term shall include any future holder hereof), at 141 N, Main Avenue,
Sioux Falls, South Dakota, or at such other place as Lender may from
time-to-time designate in writing, in lawful money of the United States of
America, the principal sum of Four Million Three Hundred Thousand & 00/100
Dollars ($4,300,000.00) or so much thereof as may be advanced hereunder.


 


CALCULATION 0F INTEREST. Interest hereunder shall accrue at an annual
rate equal to 3.00% plus the one-month LIBOR rate quoted by Lender (LIBOR +
3.00%), which shall be the one-month LIBOR rate in effect two New York Banking
Days prior to the stated monthly reprice date, adjusted for any reserve
requirement and any subsequent costs arising from a change in government
regulation, such rate to be reset monthly on the last day of the month. The
term “New York Banking Day” means any date (other than a Saturday or Sunday) on
which commercial banks are open for business in New York, New York. Lender’s
internal records of applicable interest rates shall be determinative in the
absence of manifest error. If the advance under this Note occurs other than on
the first day of the month, the initial one-month LIBOR rate shall be that
one-month LIBOR rate in effect two New York Banking Days prior to the date of
the advance, which rate shall be in effect on the remaining days of the month
of the advance.


 


PAYMENT SCHEDULE.


 


INTEREST PAYMENTS. Payments of all interest accrued hereunder
shall be made October 31, 2007, and the last day of each month thereafter.


 


PRINCIPAL PAYMENTS. In this Note each “Quarterly Payment Date”
shall be October 31, January 31, April 30, and July 31 of each year. Borrower
shall make an installment payment of principal in the amount of One Hundred
Fifty Four Thousand Dollars ($154,000.00) each Quarterly Payment Date
commencing October 31, 2007, and each Quarterly Payment Date thereafter.


 


COMMITMENT FEE. In consideration of Lender’s agreement to
extend the loan evidenced by the Note, Borrower shall pay Lender on the date of
this Note first shown above a commitment fee of Twenty One Thousand Five
Hundred Dollars ($21,500.00).


 


PAYMENT IN FULL AT MATURITY. The Maturity Date of this Note is July 31,
2014 (the “Maturity Date”). The total unpaid principal amount and all interest
thereon and any other amount due hereunder shall be payable on the Maturity
Date.


 


PAYMENT DUE ON NON-BUSINESS DAY. In the event any payment due under this Note
is due on a date other than a Business Day (as defined in the Loan 


 

















 


Agreement),
such payment shall be due on the Business Day immediately following the day the
payment was otherwise due.


 


CREDITING PAYMENTS. All payments under this Note shall be made
in immediately available funds. In the event there is no outstanding Event of
Default, all payments made hereunder shall be credited first to accrued
interest, next to unpaid principal, and next, in such order as Lender may
determine in its sole and absolute discretion, to other fees, charges, or costs
and expenses payable by Borrower under this Note or in connection with any
other Loan Document.


 


PREPAYMENTS. Borrower may prepay this Note in whole or in part at any time, and if
in part from time-to-time, during the entire term of this Note, without penalty
or premium. No prepayment shall reduce the amount of any scheduled payment.


 


COLLATERAL; COORDINATION WITH LOAN AGREEMENT. This Note is within the definition of the “Note”
in the Amended and Restated Loan Agreement dated as of August 28, 2006, as
amended by that Amendment to Amended and Restated Loan Agreement dated
September 21, 2007 (the “Loan Agreement”), and is subject to the additional
terms and conditions set forth in the Loan Agreement and the Loan Documents
referred to therein. This Note is secured by a Security Agreement dated as of
August 28, 2006, and a Mortgage, Security Agreement, Assignment of Leases and
Rents and Fixture Financing Statement dated as of the date of this Note, as
well as other collateral described in the Loan Agreement and the other Loan
Documents, Capitalized terms not defined herein shall have the meaning-given
such terms in the Loan Agreement.


 


LATE PAYMENT; GRACE PERIOD; DEFAULT INTEREST; CROSS-
DEFAULT. If a payment
due hereunder is not made within five (5) days after the date when due,
Borrower shall pay to Lender a late payment charge of Five Hundred Dollars
($500.00) to compensate Lender for a portion of the cost related to handling
the overdue payment. After any Event of Default, as defined in the Loan
Agreement, then the entire principal sum evidenced by this Note, together with
all accrued and unpaid interest, shall, at the option of the holder hereof,
bear interest at the rate per annum (the “Default Rate”) equal to 3% in excess
of the rate of interest per annum which would otherwise be payable hereunder,
and become immediately due and payable without further notice (except as
provided in the Loan Agreement), demand or presentment for payment, and with
out any relief whatever from any valuation or appraisement laws.


 


PAYMENT 0F OTHER ITEMS. If Borrower defaults under any of the terms
of this Note; Borrower shall pay all reasonable costs and expenses, including
without limitation attorneys’ fees (including any service tax thereon) and
costs, incurred by Lender in enforcing this Note immediately upon Lender’s
demand, whether or not any action or proceeding is commenced by Lender. Without
limiting the generality of the preceding sentence, such costs and expenses
shall include all attorneys’ fees and costs incurred by Lender in connection
with any federal or state bankruptcy, insolvency, reorganization, or other
similar proceeding by or against Borrower or any surety, guarantor or endorser
of this Note which in any way affects Lender’s exercise of its rights and
remedies under this Note or under the Loan Agreement or any other Loan
Document. Maker hereby stipulates that Lender is a “regulated lender” within
the meaning of SDCL 54-3-13 and other applicable South Dakota statutes.


 


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NO OFFSET. No indebtedness evidenced by this Note shall be offset by all or part
of any claim, cause of action, or cross-claim of any kind, whether liquidated
or unliquidated, which Borrower now has or may hereafter acquire or allege to
have acquired against Lender. To the fullest extent permitted by law, Borrower
waives the benefits of any applicable law, regulation, or procedure which
provides, in substance, that where cross demands for money exist between
parties at any point in time when neither demand is barred by the applicable
statute of limitations, and an action is thereafter commenced by one such
party, the other party may assert the defense of payment in that the two
demands are compensated so far as they equal each other, notwithstanding that
an independent action asserting the claim would at the time of filing the
response be barred by the applicable statute of limitations.


 


CERTAIN BORROWER WAIVERS. Borrower waives presentment, protest and
demand, notice of protest, demand and of dishonor and nonpayment of this Note
and any lack of diligence or delays in collection or enforcement of this Note.
Borrower agrees that this Note, or any payment hereunder, may be extended from
time-to-time, and Borrower consents to the release of any party liable for the
obligation evidenced by this Note, the release of any of the security for this
Note, the acceptance of any other security therefore, or any other indulgence
or forbearance whatsoever, all without notice to any party and without
affecting the liability of Borrower.


 


APPLICABLE LAW. This note shall be construed under and
governed by the laws of the State of South Dakota, without giving effect to
conflict of laws or principles thereof, but giving effect to federal laws of
the United States applicable to national banks. Whenever possible, each
provision of this note and any other statement instrument or transaction
contemplated hereby or relating hereto, shall be interpreted in such manner as
to be effective and valid under such applicable law, but, if any provision of
this note or any other statement, instrument or transaction contemplated hereby
or relating hereto shall be held to be prohibited or invalid under such
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this note or any other statement, instrument or
transaction contemplated hereby or relating hereto.


 


NO WAIVER; CERTAIN MISCELLANEOUS PROVISIONS. Failure to exercise any option provided
herein shall not constitute a waiver of the right to exercise the same in the
event of any subsequent default. No modification or waiver by Lender of any of
the terms of this Note shall be valid or binding on Lender unless such
modification or waiver is in writing and signed by Lender. Without limiting the
generality of the preceding sentence, no delay, omission or forbearance by
Lender in exercising or enforcing any of its rights and remedies under this
Note shall constitute a waiver of such rights or remedies. Lender’s rights and
remedies under this Note are cumulative with and in addition to all other legal
and equitable rights and remedies which Lender may have in connection with the
Loan. The headings of paragraphs of this Note are for convenience of the
parties only and shall not be used in interpreting this Note. If this Note is
lost, stolen, or destroyed, upon Borrower’s receipt of a reasonably
satisfactory indemnification agreement executed by Lender, or if this Note is
mutilated, upon Lender’s surrender of the mutilated Note to Borrower, Borrower
shall execute and deliver to Lender a new promissory note which is identical in
form and 


 


3

















 


content
to this Note to replace the lost, stolen, destroyed or mutilated Note. Time is
of the essence in the performance of each provision of this Note by Borrower.


 


AT
THE OPTION OF LENDER, THIS NOTE MAY BE ENFORCED IN ANY FEDERAL COURT OR SOUTH
DAKOTA STATE COURT SITTING IN SIOUX FALLS, SOUTH DAKOTA; AND BORROWER CONSENTS
TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT
VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT BORROWER COMMENCES ANY
ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS NOTE,
LENDER AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF
THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.


 


BORROWER
AND LENDER EACH IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE OR ANY OF THE LOAN
DOCUMENTS (AS DEFINED IN THE LOAN AGREEMENT) OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.


 


IN
WITNESS WHEREOF, Borrower has executed this Note as of the date first above
written.


 


	
   

  	
  NORTHERN
  LIGHTS ETHANOL, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Delton Strasser

  	
   

  
	
   

  	
   

  	
  Delton
  Strasser

  
	
   

  	
     Its:
  

  	
  President

  
					



 


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