**Exhibit 10.29**

 

**PROMISSORY NOTE**

(VariableRate, Revolving Loan)

 
| Not to Exceed  $3,000,000.00 |   | Sioux Falls, South Dakota |
|------------------------------|--------|---------------------------|
|                         |   | March 30, 2005       |

 

**FOR VALUE RECEIVED**,NORTHERN LIGHTS ETHANOL, LLC, a South Dakota Limited Liability Company (“Borrower”),hereby promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION, anational banking association (“Lender”, which term shall include any futureholder hereof), at 141 N. Main Avenue, Sioux Falls, South Dakota, or at suchother place as Lender may from time-to-time designate in writing, in lawfulmoney of the United States of America, the principal sum of Three Million &00/100 Dollars ($3,000,000.00) or so much thereof as may be advanced hereunder.

 

**CALCULATION AND**PAYMENT OF INTEREST.** The unpaidprincipal balance will bear interest at an annual rate equal to prime rateannounced by Lender from time-to-time (the ‘Prime Rate”). The interest rateshall be adjusted each time that the Prime Rate changes. Lender will strive toinform Borrower of each change in the Prime Rate, but each adjustment in thePrime Rate is effective whether or not Lender informs Borrower of such change.Payments of all interest accrued hereunder shall be made March 31, June 30,September 30 and December** **31 ofeach year unless such day is not a Business day as defined in the LoanAgreement (in which case the Business Day which immediately follows such dayshall apply) in which any amount is outstanding under the Note (the “QuarterlyPayment Date”). The first Quarterly Payment Date shall be June 30, 2005,and an interest only payment shall be due that day and****each Quarterly Payment Date thereafteruntil March 31, 2008 (the “Maturity Date”), if there is any amountoutstanding hereunder on each such date. The Prime Rate applicable on the dateof this Note shall be five and seventy-five hundredths percent (5.7%). Interestshall be calculated on a 365/360 simple basis; that is, by applying the ratioof the annual interest rate over a year of 360 days, multiplied by theoutstanding principal balance, multiplied by the actual number of days theprincipal balance is outstanding.

 

**REVOLVING FEATURE**.Borrower may from time to time prior to the Maturity Date draw, on a revolvingbasis, the difference of the outstanding principal amount hereunder and thelesser of (i) the Borrowing Base and (ii) Three Million Dollars ($3,000,000.00)(the greater of the two being the “Loan Maximum”). Lender’s obligation to makeany advance under this Promissory Note is conditioned upon (i) allrepresentations and warranties made by ** **Borrower in the Loan Agreement****remaining true, accurate and complete,(ii) Borrower’s continued compliance with all other terms and conditions ofthis Promissory Note and the Loan Agreement, (iii) no Event of Default havingoccurred under this Promissory Note, or any other Promissory Note between theparties hereto, or under any other Loan Document, and (iv) Borrower shalldemonstrate to Lender’s satisfaction that the funds requested to be advancedshall be used in the operation of Borrower’s ethanol production facility, andnot for other purposes, including funding distributions to members. Subject tothese conditions, Lender shall advance to Borrower hereunder, such amounts asBorrower may from time-to-time request, not to exceed the total principal amountat any one time outstanding hereunder of Three Million Dollars ($3,000,000.00).Such requests for advances hereunder shall be funded the next Business Day if

 

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received by Lender not later than 11:00 a.m.of any Business Day, subject to Lender requiring additional time to confirmBorrower has satisfied the foregoing conditions at the time each such advanceis requested and made.

 

**PAYMENT IN FULL AT MATURITY**.** **Thetotal unpaid principal amount and all interest thereon and any other amount duehereunder shall be payable on the Maturity Date. THIS NOTE REQUIRES A BALLOONPAYMENT.

 

**MANDATORY PAYMENTS PRIOR TO MATURITY.**Inthe event the amount outstanding hereunder at any time, including interest andany other amounts, exceeds the amount which could be borrowed on such dateaccording to the then applicable Borrowing Base (the “Eligible Balance”),Borrower shall immediately pay to Lender an amount not less than the differencebetween such balance and the Eligible Balance.

 

**BORROWING****BAS****E. ***Definitions.*As used in this PromissoryNote: ‘Borrowing Base” means, as of the day for which it is calculated, .75(75%) of the total of (i) the fair market value of the outstanding Inventory,(ii) the Eligible Accounts Receivable, and (iii) hedging accounts at fairmarket value; “Inventory” means all Borrower’s corn, and ethanol, and DDGSInventory, as determined to****Lender’ssatisfaction; ‘Eligible Accounts Receivable” means Accounts owned by Borrowerthat were generated by Borrower’s sale of Inventory, minus Ineligible Accounts;“Ineligible Accounts” means Accounts which either have been outstanding morethan 30 days, or Accounts which otherwise would be Eligible Accounts Receivablethat Lender determines in its discretion should not so qualify. EligibleAccounts Receivable shall exclude Borrower’s **“**contra”accounts****and any other obligationsor offsets which any of Borrower’s account****obligorsmay claim against Borrower.

 

*Borrower Reports.*Eachrequest for an advance hereunder shall be accompanied by Borrowers report toLender evidencing the Borrowing Base as of the close of the previous BusinessDay, in a form and containing such content as Lender shall from time-to-timespecify to Borrower, including but not limited to: reports of the Borrower’saccounts itemized by age; reports of the Inventory itemized by type, includingits quantity, geographical location, and information identifying any thirdparty in possession or control thereof. Borrower Report shall also reportEligible Accounts Receivable on a gross basis, and be itemized as to alloffsets that may be claimed by any account obligor as further set forth in thedefinition of Eligible Accounts Receivable above, If at the end of any calendarmonth any amount is outstanding hereunder, not later than the 15th day of thefollowing month, Borrower shall provide Lender a report containing the aboveinformation as of the end of such prior month. Borrower shall also provideLender such reports at other times specified by Lender. The request foradvances shall be on the form attached hereto as Exhibit A, unless Lenderspecifies otherwise.

 

*Reasonable Processes and Controls.*Borrowershall maintain reasonable processes and controls, provide accurate calculationof the Borrowing Base and otherwise assure compliance with the Lender’scollateral audit program, including instituting policies requiring its employeemarketers to accurately enter each contract for purchase or sale of Inventory(including other relevant

 

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information as to the status of the contract, including any dispute bythe other party thereto) into Borrower’s accounting system immediately uponentry into the contract. Among other information which shall be available toLender on a****daily basis are theamount, identity, location, telephone number and other relevant informationconcerning each account obligor, and the location and quantity of allInventory.

 

**UNUSED COMMITMENT FEE**.Borrower****shall pay Lender inarrears each Quarterly Payment Date an unused commitment fee equal tothree-eights percent (3/8%) multiplied by the difference, if any, of the LoanMaximum minus the average daily outstanding principal balance due hereunder forsuch prior quarter.

 

**PAYMENTS.**Allpayments under this Note shall be made in immediately available funds. In theevent there is no outstanding Event of Default, all payments made hereundershall be credited first to****accruedinterest, next to unpaid principal, and next, in such order as Lender maydetermined in its sole and absolute discretion, to other fees, charges, orcosts and expenses payable by Borrower under this Note or in connection withany other Loan Document.

 

**PREPAYMENTS.**Borrowermay prepay****this Note in whole orin part at any time, and if in part from time-to-time, during the entire termof 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” inthe Loan Agreement, and is subject to the additional terms and conditions setforth in the Loan Agreement and the Loan Documents referred to therein. ThisNote is secured by a Security Agreement dated March 30, 3005, and aMortgage, Security Agreement, Assignment of Leases and Rents and Fixture FinancingStatement dated as of July 11, 2001, on the Project, as**well as other collateral described****in the Loan Agreement and the other LoanDocuments. Capitalized terms not defined herein shall have the meaning givensuch terms in the Loan Agreement.

 

**LATE PAYMENT; GRACE PERIOD; DEFAULT.**Ifa payment due hereunder is not made within ten (10) days****after the date when due, Borrower shallpay to Lender a late payment charge of Five****HundredDollars ($500.00) to compensate Lender for a portion of the cost related tohandling the overdue payment****Anydefault under this Promissory Note, the Security Agreement dated March 30,2005, or****any Event of Default asdefined in the Loan Agreement, shall constitute an “Event of Default” for****purposes of this Note. After any Event ofDefault, the entire principal sum evidenced by this Note, together with allaccrued and unpaid interest,****shall,at the option of the holder hereof; bear interest at the rate per annum (the “DefaultRate”) equal to 3% in excess of the rate of interest per annum which would****otherwise be payable hereunder, and becomeimmediately due and payable without****furthernotice (except as provided****in theLoan Agreement), demand or presentment for payment, and without any reliefwhatever from****any valuation orappraisement laws.

 

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**PAYMENT OF OTHER ITEMS. **If Borrower defaults under any of the termsof this Note, Borrower shall pay all reasonable costs and expenses,including without limitation attorneys’ fees (including any service taxthereon) and costs, incurred by Lender in enforcing****this Note immediately upon Lenders demand, whether or not anyaction or proceeding is commenced by Lender. Without limiting the generality ofthe preceding sentence, such costs and expenses shall include all attorneys’fees and costs incurred by Lender in connection with any federal or statebankruptcy, insolvency, reorganization, or other similar proceeding by oragainst Borrower or any surety, guarantor or endorser of this Note which in anyway affects Lenders exercise of its rights and remedies under this Note orunder the Loan Agreement or any other Loan Document. Maker hereby stipulatesthat Lender is a “regulated lender” within the meaning of SDCL 54-3-13 andother applicable South Dakota statutes.

 

**NO OFFSET**. Noindebtedness evidenced by this Note shall be offset by all or part of anyclaim, cause of action, or cross-claim of any kind, whether liquidated orunliquidated, which Borrower now has or may hereafter acquire or allege to haveacquired against Lender. To the fullest extent permitted by law, Borrowerwaives the benefits of any applicable law, regulation, or procedure whichprovides, in substance, that where cross demands for money exist betweenparties at any point in time when neither demand is barred by the applicablestatute of limitations, and an action is thereafter commenced by one suchparty, the other party may assert the defense of payment in that the twodemands are compensated so far as they equal each other, notwithstanding thatan independent action asserting the claim would at the time of filing theresponse be barred by the applicable statute of limitations.

 

**CERTAIN BORROWER WAIVERS**.Borrower waives presentment, protest and demand, notice of protest, demand andof dishonor and nonpayment of this Note and any lack of diligence or delays incollection or enforcement of this Note. Borrower agrees that this Note, or anypayment hereunder, may be extended from time-to-time, and Borrower consents tothe release of any party liable for the obligation evidenced by this Note, therelease of any of the security for this Note, the acceptance of any othersecurity therefor, or any other indulgence or forbearance whatsoever, allwithout notice to any party and without affecting the liability of Borrower.

 

**APPLICABLE LAW.**Thisnote shall be construed under and governed by the laws of the State of SouthDakota, without giving effect to conflict of laws or principles thereof; butgiving effect to federal laws of the United States applicable to nationalbanks. Whenever possible, each provision of this note and any other statement,instrument or transaction contemplated hereby or relating hereto, shall beinterpreted in such manner as**to be effective and valid undersuch applicable law, but, if any provision of this note or any other statement,instrument or transaction contemplated hereby or relating hereto shall be heldto be prohibited or invalid under such applicable law, such provision shall beineffective only to the extent of such prohibition or invalidity, withoutinvalidating the remainder of such provision or the remaining provisions ofthis note or any other statement, instrument or transaction contemplated herebyor relating hereto.

 

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**NO WAIVER; CERTAIN MISCELLANEOUS PROVISIONS.**Failure to exercise any option provided herein shall not constitute a waiver ofthe right to exercise the same in the event of any subsequent default. Nomodification or waiver by Lender of any of the terms of this Note shall bevalid or binding on Lender unless such modification or waiver is in writing andsigned by Lender. Without limiting the generality of the preceding sentence, nodelay, omission or forbearance by Lender in exercising or enforcing any of itsrights and remedies under this Note shall constitute a****waiver of such rights or remedies. Lender’srights and remedies under this Note are cumulative with and in addition to****all other legal and equitable rights andremedies Lender may have in connection with the Loan. The headings ofparagraphs of this Note are for convenience of the parties only and shall notbe used in interpreting this Note. If this Note is lost, stolen, or destroyed,upon Borrower’s receipt of a reasonably satisfactory indemnification agreementexecuted by Lender, or if this Note is mutilated, upon Lender’s surrender ofthe mutilated Note to Borrower, Borrower shall execute and deliver to Lender anew promissory note which is identical in form and content to this Note toreplace the lost, stolen, destroyed or mutilated Note. Time is of the essencein the performance of each provision of this Note by Borrower. All exhibitshereto are incorporated herein.

 

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

 

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

 

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

 
|   | NORTHERN LIGHTS ETHANOL, LLC |            |
|--------|------------------------------|-----------------|
|   |                         |            |   |
|   |                         |            |   |
|   | By:                          |            | /s/ Delton Strasser |   |
|   |                         | Delton Strasser |   |
|   |                         | Its:            | President |   |
|   |                         |            |   |

 

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