**Exhibit 10.8**

 

**Third Amendment to Construction LoanAgreement**

 

This Third Amendment to Construction Loan Agreement is dated as of the 23rd day of June, 2003, and is by andbetween LSCP, L.P., an Iowa limited partnership (“BORROWER”) and FIRST NATIONALBANK OF OMAHA (“BANK”), a national banking association established at Omaha, Nebraska.

 

WHEREAS, the BANK and BORROWER executed a written Construction LoanAgreement dated as of July 25, 2002, which, together will all amendments thereto,is collectively called the “AGREEMENT”.

 

Now, Therefore, in consideration of the AGREEMENT, and their mutualpromises made herein, BANK and BORROWER agree as follows:

 

1.                                       Termswhich are typed herein as allcapitalized words and are not defined herein shall have same meanings as whendescribed in the AGREEMENT.

 

2.                                       Section 1,Paragraph 1.3 of the AGREEMENT is hereby amended, effective immediately, toread:

 

1.3                                 “BANKINGDAY” means a day on which the BANK is open for substantially all of its business. “EURODOLLAR BUSINESS DAY”means a BANKING DAY on which commercial banks are open for internationalbusiness (including dealings in dollar deposits) in London, England.

 

3.                                       Section 1,Paragraph 1.16 of the AGREEMENT is hereby amended to read as follows, effectiveimmediately:

 

1.16                           “INDEBTEDNESS”means all indebtedness for borrowed money including long-term debt, short-termdebt, SWAP CONTRACTS, and capital leases.

 

4.                                       Section 1,Paragraph 1.19 (i) of the AGREEMENTis hereby amended to read as follows, effective immediately:

 

(i) as to the REVOLVING NOTE, July 24, 2003, as to TERM NOTE 2,TERM NOTE 3 and TERM NOTE 4, June 1, 2008.

 

5.                                       Section 1,Paragraph 1.31 of the AGREEMENT is hereby amended to read as follows, effectiveimmediately:

 

1.31                           “TERMNOTE” means that promissory note of BORROWER to BANK which evidences permanentfinancing to pay the CONSTRUCTION NOTE as described in Sections 2.5 of thisAGREEMENT, its renewals, modifications and extensions.  TERM NOTE 2, TERM NOTE 3, and TERM NOTE 4 referto three promissory notes whichhereafter will replace the TERM NOTE.

 

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6.                                       Section 1,Paragraph 1.32 of the AGREEMENT is hereby amended to read as follows, effectiveimmediately:

 

1.32                           “WORKINGCAPITAL” means current assets (less investments in or other amounts due fromany member, employee or any person or entity related to or affiliated with theBORROWER and prepayments) plus the amount available to BORROWER for drawingunder TERM NOTE 4, less current liabilities (less any portion of such currentliabilities that constitute debt that is expressly subordinated to the BANK ina writing acceptable to the BANK).

 

7.                                       TheAGREEMENT is hereby amended, effective immediately, by the addition of thefollowing new sections 1.33, 1.34, 1.35, 1.36, 1.37, and 1.38:

 

1.33                           “INTERESTPERIOD” means initially, the period commencing on the date of the LOAN and, forTERM NOTE 2 and TERM NOTE 3 ending three months later, and for TERM NOTE 4 andREVOLVING NOTE ending one month later; and thereafter, each period commencingon the first day immediately following the last day of the immediatelypreceding INTEREST PERIOD and, for TERM NOTE 2 and TERM NOTE 3 ending threemonths thereafter, and for TERM NOTE 4 and REVOLVING NOTE ending one monththereafter; provided that.

 

A                                      subject to clauses B and C below, any INTERESTPERIOD which would otherwise end on a day which is not a EURODOLLARBUSINESS DAY shall be extended to the next succeeding EURODOLLAR BUSINESS DAYunless such EURODOLLAR BUSINESS DAY falls in another calendar month, in whichcase such INTEREST PERIOD shall end on the immediately preceding EURODOLLARBUSINESS DAY;

 

B.                                     subject to clauseC below, any INTEREST PERIOD which begins on the last EURODOLLAR BUSINESS DAYof a calendar month (or a day for which there is no numerically correspondingday in the calendar month at the end of such INTEREST PERIOD) shall end on thelast EURODOLLAR BUSINESS DAY of a calendar month; and

 

C.                                     no INTEREST PERIOD shall extend beyond the LOANTERMINATION DATE.

 

1.34                           “LIBORBASE RATE” shall mean, with respect to the applicable INTEREST PERIOD, (a) theLIBOR INDEX RATE for such INTEREST PERIOD, if such rate is available or (b) ifthe LIBOR INDEX RATE cannot be determined, the average (rounded upward, ifnecessary, to the next higher 1/100 of 1%) of the respective rates per annum ofinterest at which deposits in dollars are offered to BANK in the Londoninterbank market by two (2) Eurodollar dealers of recognized standing, selectedby BANK in its sole discretion, at such time on the date two (2) EurodollarBusiness Days before the first day of such

 

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INTEREST PERIOD as BANK in its sole discretion elects, for delivery on the first day of the applicableINTEREST PERIOD for a number of days comparable to the number of days in suchINTEREST PERIOD and in an amount approximately equal to the principal amount ofthe OBLIGATIONS.

 

1.35                           “LIBORINDEX RATE” shall mean, with respect to the applicable INTEREST PERIOD, therate per annum (rounded upwards, if necessary, to the next higher 1/100 of 1%)for deposits in U.S. Dollars for a period equalto such INTEREST PERIOD, which appears on the BANK’s information vendoras of 9:00 a.m. (Omaha time) on the day two (2) Eurodollar Business Days beforethe first day of such INTEREST PERIOD. The term “BANK’s information vendor” means the Bloomberg service or suchother vendor chosen by BANK for the purposeof displaying British Bankers’ Association Interest Settlement Rates for U.S.Dollar Deposits.

 

1.36                           “LIBORRATE” shall mean (a) the quotient of the (i) LIBOR BASE RATE divided by (ii)one minus the applicable LIBOR RESERVE PERCENTAGE plus (b) 280 basispoints in the case of the TERM NOTE 2, or 380 basis points in the case of TERMNOTE 3, TERM NOTE 4, and REVOLVING NOTE. The LIBOR RATE shall be adjusted automatically on and as of theeffective date of any change in the LIBOR RESERVE; PERCENTAGE.

 

1.37                           “LIBORRESERVE PERCENTAGE” shall mean for any day that percentage (expressed as adecimal) which is in effect on suchday, as prescribed by the Board of Governors of the Federal ReserveSystem (or any successor), for determining the maximum reserve requirement fora member bank of the Federal Reserve System with respect to “Eurocurrencyliabilities” (or in respect ofany other category of liabilities whichincludes deposits by reference to which the interest rate on LIBOR loansis determined or any category of extensions of credit or other assets whichinclude loans by a non-United States office of any bank to United Statesresidents). The LIBOR RATE shall be adjusted automatically on and as of theeffective date of any change in the LIBOR RESERVE PERCENTAGE.

 

1.38                           “SWAPCONTRACT” or “SWAP CONTRACTS” means (a)any and all rate swap transactions, basis swaps, credit derivativetransactions, forward rate transactions, commodity swaps, commodity options,forward commodity contracts, equity or equity index swaps or options, bond orbond price or bond index swaps or options or forward bond or forward bond priceor forward bond index transactions, interest rate options, forward foreignexchange transactions, cap transactions, floor transactions, collartransactions, currency swap transactions, cross-currency rate swaptransactions, currency options, spotcontracts, or any other similar transactions or any combination of any of the foregoing (including any options to enterinto any of the foregoing), whether or notany such transaction is governed by or subject to any master agreement, and (b)any and all transactions of any kind, and the related confirmations, which are

 

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subject to the terms and conditions of, or governed by, any form ofmaster agreement published by the International Swaps and Derivatives Association, Inc.Provided, however, the term SWAP CONTRACT shallnot, for the purposes of this AGREEMENT, include commodity hedging orcommodity risk management contracts. Commodity includes grain, natural gas and other traded commodities.

 

8.                                       Section 2,Paragraph 2.11 of the AGREEMENT is hereby amended, effective immediately toread:

 

2.11                           Fees.  At COMPLETION DATE, and on each annualanniversary of COMPLETION DATE for five years subsequent to COMPLETION DATE,the BORROWER shall pay to the BANK an AnnualServicing Fee of $50,000.00, which fee BORROWER agrees and acknowledges has been earned by BANK; provided, however, anAnnual Servicing Fee shall not be due and payable on the LOAN TERMINATIONDATE.  BORROWER agrees to pay BANK anunused commitment fee equal to 12.5 basis points of the average unused portionof the REVOLVING LOAN, calculated and payable on a quarterly basis in arrears;provided, however, the unused commitment fee shall not apply and be payable bythe BORROWER until such time as the BORROWER has requested, and the BANK hasdeposited, the initial advance of the REVOLVING LOAN into the BORROWER’sdeposit account with BANK.  BORROWERshall pay BANK an unused commitment fee of thirty-seven and one-half (37.5bps)basis points, assessed quarterly in arrears, as to the unused portion of TERMNOTE 4, which BANK will share with its participants.

 

9.                                       Section 2,Paragraph 2.13 of the AGREEMENT is hereby amended, effective immediately, toread:

 

2.13                           IncentivePricing.  The interest rateapplicable to certain of the NOTES may be subject to reduced interest rates,based on the business results of BORROWER. In such cases the NOTES will reflectsuch potential for reduction of rates.

 

10.                                 Section 2,Paragraph 2.6 of the AGREEMENT is hereby amended, effective immediately, toread:

 

2.6                                 Intereston TERM NOTES.  Interest on TERMNOTE 2, TERM NOTE 3, and TERM NOTE 4 shall accrue at the LIBOR RATE prior toacceleration or maturity, and six hundred basis points in excess of the LIBORRATE in effect from time to time after maturity, whether by acceleration orotherwise.  The NOTE may also providefor reductions in such interest rates based upon BORROWER’s performance.

 

11.                                 Section 2, Paragraph 2.9 of the AGREEMENT is hereby amended, effectiveimmediately, to read:

 

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2.9                                 INTERESTON THE REVOLVING NOTE.  Interest onthe REVOLVING NOTE shall accrue at the LIBOR RATE prior to acceleration ormaturity, and six hundred basis points in excess of the LIBOR RATE in effectfrom time to time after maturity, whether by acceleration or otherwise.  Interest on the REVOLVING LOAN shall bepayable every three months.  The NOTEmay also provide for reductions in such interest rates based upon ‘BORROWER’sperformance.

 

12.                                 Section 6,Paragraph 6.2.3 of the AGREEMENT is hereby amended, effective immediately, toread:

 

6.2.3                        BORROWERshall determine, at each fiscal year end, the amount of its EXCESS CASH FLOWfor said fiscal year, and within one hundred twenty days following such fiscalyear end, pay twenty percent (20%) of such sum to BANK, to be applied to theoutstanding principal amount of TERM NOTE 3, and after TERM NOTE 3 is repaid,to TERM NOTE 4 and thereafter, TERM NOTE 2. Such annual payment shall notrelease BORROWER from making any payment of principal or interest otherwiserequired by this AGREEMENT.  No paymentof EXCESS CASH FLOW shall be the cause of a payment to BANK for interest ratebreakage fees or otherwise result in any prepayment fee.

 

13.                                 Section 6of the AGREEMENT is hereby amended, effective immediately, by adding anadditional paragraph, denominated 6.4.17, as follows:

 

6.4.17                  BORROWERshall not cancel, repudiate, terminate, or breach any SWAP CONTRACT withoutprior written consent of BANK.

 

14.                                 Theexisting balance on the TERM NOTE is 31,465,000.00. On execution hereof, theTERM NOTE will be replaced and said balance will be paid by three newpromissory notes, hereafter called “TERM NOTE 2”, “TERM NOTE 3”, and “TERM NOTE4” in the forms attached hereto as Exhibits 3-1, 3-2, and 3-3, respectively,and are by this reference made a part hereof.

 

Payments on such NOTES shall be as follows:

 

On the first day of each quarter, commencing September 1, 2003,BORROWER shall pay to BANK the scheduled principal payment shown inSchedule I, attached hereto and by this reference made a part hereof, plusaccrued interest on TERM NOTE 2.

In addition, on the first day of each quarter, commencingSeptember 1, 2003, BORROWER shall pay $506,588.01 to BANK, which shall beallocated as follows:

a.               first to accrued interest on TERM NOTE4;

b.              next to accrued interest on TERM NOTE 3;

c.               next to principal on TERM NOTE 3;

After TERM NOTE 3 has been fully paid, such quarterly payments shall beallocated first to accrued interest on TERM NOTE 4, and thence toprincipal.  All unpaid principal andaccrued interest shall be due and payable on LOAN TERMINATION DATE, if notsooner paid.

 

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15.                                 Asthe result of the parties’ agreement to change the rate of interest accrual onthe REVOLVING NOTE, BORROWER shall execute and deliver to BANK a replacementNOTE in the form of Exhibit 3-4, attached hereto and by this reference made apart hereof.

 

16.                                 Inthe event that the BORROWER pre-pays part or all of its debt where the rate isfixed in excess of one month, including that associated with SWAP CONTRACTS,and except as to such payments as required by this AGREEMENT, the BORROWERshall pay BANK a breakage fee sufficient to make BANK whole for any expensesrelated to breaking fixed interest rates, which BANK shall apportion among itsparticipants.  Provided, however, nopayment of EXCESS CASH FLOW shall be the cause of a payment to BANK forinterest rate breakage fees or otherwise result in any prepayment fee.

 

17.                                 BORROWERcertifies by its execution hereof that the representations and warranties setforth in Section 5 of the AGREEMENT are true as of this date, and that noEVENT OF DEFAULT under the AGREEMENT, and no event which, with the giving ofnotice or passage of time or both, would become such an EVENT OF DEFAULT, hasoccurred as of this date.

 

18.                                 Exceptas amended hereby the parties ratify and confirm as binding upon them all ofthe terms of the AGREEMENT.

 

In witness whereof the parties set their hands as of the date firstwritten above.

 

 
| First National Bank of Omaha |                    | LSCP, L.P., an Iowa Limited Partnership      |
|------------------------------|-------------------------|----------------------------------------------|
|                         |                    | By Little Sioux Corn Processors, L.L.C., Its |
|                         |                    | General Partner                              |
|                         |                    |                                         |
|                         |                    |                                         |
| By:                          | /s/ Omer Sagheer        |                                         |   | By: | /s/ Daryl J. Haack |   |
|                         | Omer Sagheer,           |                                         |   | Daryl J. Haack, President of Little |
|                         | Commercial Loan Officer |                                         |   | Sioux Corn Processors, L.L.C. |
|                              |                         |                                              |  |  |  |  |

 

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**Exhibit 3-1**

**TERM NOTE 2**

 
| Note Date:     | June 23, 2003            |   | $15,732,500.00 |
|----------------|-------------------------------|--------|----------------|
| Maturity Date: |   June 1, 2008 |   |           |

 

**FORVALUE RECEIVED****,****LSCP, L.P.,**an Iowa limited partnership (“BORROWER”)promises to pay to the order of First National Bank of Omaha (“BANK”), at itsprincipal office or such other address as BANK or holder may designate fromtime to time, the principal sum of Fifteen Million Seven Hundred Thirty-TwoThousand Five Hundred and No/100 Dollars ($15,732,500.00), or the amount shownon the BANK’s records to be outstanding, plus interest (calculated on the basisof actual days elapsed in a 360-day year) accruing each day on the unpaidprincipal balance at the annual interestrates defined below.  Absent manifesterror, the BANK’s records shall be conclusive evidence of the principal andaccrued interest owing hereunder.

 

Thispromissory note is executed pursuant to a Construction Loan Agreement(“CONSTRUCTION LOAN AGREEMENT”) between BORROWER and BANK dated as ofJuly 25, 2002, which, together will all amendments thereto, iscollectively called the “AGREEMENT”. All capitalized terms not otherwise defined in this note shall have themeanings provided in the CONSTRUCTION LOAN AGREEMENT.

 

**INTEREST ACCRUAL. **Interest on the principal amountoutstanding shall accrue based on a three month LIBOR +280 bps.  Interest shall be calculated on the basis ofa 360-day year, counting the actual number of days elapsed.

 

**REPAYMENTTERMS.**  Intereston the outstanding principal balance shall be due and payable quarterly, inarrears, with the first payment commencing on September 1, 2003. Principalshall be due and payable in theamounts and on the dates set forth in attached Schedule I, which isincorporated herein by reference.  Inall events, the entire outstanding principal balance, together with all accruedand unpaid interest, shall be immediately due and payable in full onJune 1, 2008.

 

**PREPAYMENT. **The BORROWER mayprepay this promissory note in full or in part at any time.  Provided, however, a condition of anyprepayment is that a fee shall be paid to BANK sufficient to make BANK wholefor any expenses related to breaking fixed interest rates.  Each prepayment may be applied in inverse orderof maturity or as the BANK in its sole discretion may deem appropriate.  Such prepayment shall not excuse theBORROWER from making subsequent payments each quarter until the indebtedness ispaid in full.  No payment of EXCESS CASHFLOW shall be the cause of **a**paymentto BANK for interest rate breakage fees or otherwise result in any prepaymentfee.

 

**ADDITIONALTERMS AND CONDITIONS. **TheLOAN AGREEMENT, and any amendments or substitutions, contains additional termsand conditions, including default and acceleration provisions, which areincorporated into this promissory note by reference.  The BORROWER agrees to pay all costs of collection, includingreasonable attorneys fees and legal

 

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expenses incurred by the BANK if this promissory note is not paid asprovided above.  This**promissory note shall be governedby the substantive laws of the State of Nebraska.

 

**WAIVER OF PRESENTMENT AND NOTICE OFDISHONOR. **BORROWERand any other person who signs, guarantees or endorses this promissory note, tothe extent allowed by law, hereby waives presentment, demand for payment,notice of dishonor, protest, and any notice relating to the acceleration of thematurity of this promissory note.

 

 
|   |   | LSCP, L.P., an Iowa Limited Partnership      |
|--------|--------|----------------------------------------------|
|   |   | By Little Sioux Corn Processors, L.L.C., Its |
|   |   | General Partner                              |
|   |   |                                         |
|   |   |                                         |
|   |   | By:                                          | /s/ Daryl J. Haack |   |
|   |   |                                         | Daryl J. Haack, President of Little |
|   |   |                                         | Sioux Corn Processors, L.L.C. |

 

 
| STATE  OF IOWA            | )      |
|---------------------------|--------|
|                      | )  ss. |
| COUNTY  OF  CHEROKEE | )      |

 

On this 20 day of June, 2003, before me, the undersigned, a NotaryPublic, personally appeared Daryl J. Haack, President of Little Sioux CornProcessors, L.L.C., General Partner of LSCP, L.P., on behalf of said entity,who executed the foregoing instrument, and acknowledged that he executed thesame as his voluntary act and deed.

 

 
|   | /s/ Becky J. Nothem |   |
|--------|---------------------|--------|
|   | Notary Public       |

 

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**Exhibit 3-2**

**TERM NOTE 3(variable rate)**

 
| Note Date:     | June 23, 2003            |   | $10,732,500.00 |
|----------------|-------------------------------|--------|----------------|
| Maturity Date: |   June 1, 2008 |   |           |

 

**FOR VALUE RECEIVED, LSCP, L.P.,**anIowa limited partnership (“BORROWER”) promises to pay to the order of FirstNational Bank of Omaha (“BANK”), at its principal office or such other addressas BANK or holder may designate from time to time, the principal sum of TenMillion Seven Hundred Thirty-Two Thousand Five Hundred and No/100 Dollars($10,732,500.00), or the amount shown on the BANK’s records to be outstanding,plus interest (calculated on the basis of actual days elapsed in a 360-dayyear) accruing each day on the unpaid principal balance at the annual interestrates defined below.  Absent manifesterror, the BANK’s records shall be conclusive evidence of the principal andaccrued interest owing hereunder.

 

This promissory note is executed pursuant to a Construction LoanAgreement (“CONSTRUCTION LOAN AGREEMENT”) between BORROWER and BANK dated as ofJuly 25, 2002, which, together will all amendments thereto, iscollectively called the “AGREEMENT”. All capitalized terms not otherwise defined in this note shall have themeanings provided in the CONSTRUCTION LOAN AGREEMENT.

 

**INTEREST ACCRUAL. **Interest on the principal amountoutstanding shall accrue based on a three month LIBOR +380 bps.  Interest shall be calculated on the basis of a 360-day year, counting the actualnumber of days elapsed.

 

**INCENTIVE PRICING. **The interest rate applicable to thispromissory note is subject to reduction after a date six months subsequent toCONSTRUCTION COMPLETION DATE, based on thebusiness results of BORROWER.  In theevent that BORROWER maintains the following ratios, measured monthly, the interestrates will adjust accordingly:

 
| **If INDEBTEDNESS to NET WORTH  is:**                           |   | **Interest rate will be:**              |
|-----------------------------------------------------------------|--------|-----------------------------------------|
|                                                            |   |                                    |
| Greater than 1.30 : 1.00                                        |   | three month LIBOR plus 380 basis points |
| Greater than 1.10 : 1.00, but less than or equal to 1.30 : 1.00 |   | three month LIBOR plus 355 basis points |
| Greater than .90 : 1.00, but less than or equal to 1.10 : 1.00  |   | three month LIBOR plus 330 basis points |
| Greater than .70 : 1.00, but less than or equal to .90 : 1.00   |   | three month LIBOR plus 305 basis points |
| Less than or equal to .70 : 1:00                                |   | three month LIBOR plus 280 basis points |

 

**REPAYMENT TERMS.**  Interest and Principal shall be due andpayable in the amounts described in the AGREEMENT, which will be applied tothis Note and an additional Note, in the manner described in the AGREEMENT.  Any remaining principal balance, plus anyaccrued but unpaid interest, shall be fully due and payable on June 1,2008, if not sooner paid

 

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**PREPAYMENT. **The BORROWER may prepay this promissory note infull or in part at any time.  Provided,however, a condition of any prepayment is that a fee shall be paid to BANK sufficient to make BANK whole for anyexpenses related to breaking fixed interest rates.  Each prepayment may beapplied in inverse order ofmaturity or as the BANK in its sole discretion may deem appropriate.  Such prepayment shall not excuse theBORROWER from making subsequent payments each quarter until the indebtedness ispaid in full.  No payment of EXCESS CASHFLOW shall be the cause of a payment to BANK for interest rate breakage fees orotherwise result in any prepayment fee.

 

**ADDITIONAL TERMS AND CONDITIONS. **The LOAN AGREEMENT,and any amendments or substitutions, contains additional terms and conditions, including default andacceleration provisions, which are incorporated into this promissory note byreference.  The BORROWER agrees to pay all costs of collection, includingreasonable attorneys fees and legal expenses incurred by the BANK if thispromissory note is not paid as provided above. This promissory note shall be governed by the substantive laws of theState of Nebraska.

 

**WAIVER OF PRESENTMENT AND NOTICE OFDISHONOR. **BORROWERand any other person who signs, guarantees or endorses this promissory note, tothe extent allowed by law, hereby waives presentment, demand for payment,notice of dishonor, protest, and any notice relating to the acceleration of thematurity of this promissory note.

 

 
|   |   | LSCP, L.P., an Iowa Limited Partnership      |
|--------|--------|----------------------------------------------|
|   |   | by Little Sioux Corn Processors, L.L.C., Its |
|   |   | General Partner                              |
|   |   |                                         |
|   |   |                                         |
|   |   | By:                                          | /s/ Daryl J. Haack |   |
|   |   |                                         | Daryl J. Haack, President of Little |
|   |   |                                         | Sioux Corn Processors, L.L.C. |

 

 
| STATE  OF IOWA  | )      |
|-----------------|--------|
|            | )  ss. |
| COUNTY  OF IOWA | )      |

 

On this 20 day of June, 2003, before me, the undersigned, a Notary Public, personally appearedDaryl J. Haack, President of Little Sioux Corn Processors, L.L.C., GeneralPartner of LSCP, L.P., on behalf of said entity, who executed the foregoinginstrument, and acknowledged that he executed the same as his voluntary act anddeed.

 

 
|   | /s/ Becky J. Nothem |   |
|--------|---------------------|--------|
|   | Notary Public       |

 

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**Exhibit 3-3**

**TERM NOTE 4 (with reducing revolver feature)**

 
| Note Date:     | June 23, 2003            |   | $5,000,000.00 |
|----------------|-------------------------------|--------|---------------|
| Maturity Date: |   June 1, 2008 |   |          |

** **

**FOR VALUE RECEIVED, LSCP, L.P.,**anIowa limited partnership (“BORROWER”) promises to pay to the order of FirstNational Bank of Omaha (“BANK”), at its principal office or such other addressas BANK or holder may designate from time to time, the principal sum of FiveMillion and No/100 Dollars ($5,000,000.00), or the amount shown on the BANK’srecords to be outstanding, plus interest(calculated on the basis of actual days elapsed in a 360-day year) accruingeach day on the unpaid principal balance at the annual interest rates definedbelow.  Absent manifest error, theBANK’s records shall be conclusive evidence of the principal and accruedinterest owing hereunder.

 

This promissory note is executed pursuant to a Construction LoanAgreement (“CONSTRUCTION LOAN AGREEMENT”) between BORROWER and BANK dated as ofJuly 25, 2002, which, together will all amendments thereto, is collectivelycalled the “AGREEMENT”. All capitalized terms not otherwise defined in thisnote shall have the meanings provided in the CONSTRUCTION LOAN AGREEMENT.

 

**INTEREST ACCRUAL. **Interest on the principal amountoutstanding shall accrue based on a one month LIBOR +380 bps.  Interest shall be calculated on the basis ofa 360-day year, counting the actual number of days elapsed.

 

**REVOLVING FEATURE. **The BORROWER may reborrow, on arevolving basis, that principal amount repaid on this promissory note whichremains at a variable interest rate. Pursuant to this revolving loan feature the BANK will lend the BORROWER,from time to time until maturity of this note such sums in integral multiplesof $10,000.00 as the BORROWER may request by reasonable same day notice to theBANK, received by the BANK not later than 11:00 A.M. on Friday, or the nextBUSINESS DAY thereafter, each week but which shall not exceed in the aggregateprincipal amount at any one time outstanding, $5,000,000.00.  The BORROWER may borrow, repay and reborrowhereunder, from the date of this AGREEMENT until the maturity of this note,said amount or any lesser sum which is $10,000.00 or an integral multiplethereof.

 

**INCENTIVE PRICING. **The interest rate applicable to thispromissory note is subject to reduction after a date six months subsequent toCONSTRUCTION COMPLETION DATE, based on the business results of BORROWER.  In the event that BORROWER maintains thefollowing ratios, measured monthly, the interest rates will adjust accordingly:

 

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| **If INDEBTEDNESS to NET WORTH is:**                            |   | **Interest rate will be:**            |
|-----------------------------------------------------------------|--------|---------------------------------------|
|                                                            |   |                                  |
| Greater than 1.30 : 1.00                                        |   | one month LIBOR plus 380 basis points |
| Greater than 1.10 : 1.00, but less than or equal to 1.30 : 1.00 |   | one month LIBOR plus 355 basis points |
| Greater than .90 : 1.00, but less than or equal to 1.10 : 1.00  |   | one month LIBOR plus 330 basis points |
| Greater than .70 : 1.00, but less than or equal to .90 : 1.00   |   | one month LIBOR plus 305 basis points |
| Less than or equal to .70 : 1:00                                |   | one month LIBOR plus 280 basis points |

 

Following repayment of TERM NOTE 3, when regular quarterly principalpayments are applied to this note, the amount available to be borrowed underthe revolving loan feature will be correspondingly reduced, so that the maximumamount outstanding under this promissory note will decrease accordingly.

 

**REPAYMENT TERMS. **Interest and Principal shall be due andpayable in the amounts described in the AGREEMENT, which will be applied tothis Note and an additional Note, in the manner described in theAGREEMENT.  Any remaining principalbalance, plus any accrued but unpaid interest, shall be fully due and payableon June 1, 2008, if not sooner paid.

 

**PREPAYMENT. **The BORROWER may prepay this promissory note infull or in part at any time.  Provided,however, a condition of any prepayment is that a fee shall be paid to BANKsufficient to make BANK whole for any expenses related to breaking fixedinterest rates.  Each prepayment may beapplied in inverse order of maturity or as the BANK in its sole discretion maydeem appropriate.  Such prepayment shallnot excuse the BORROWER from making subsequent payments each quarter until theindebtedness is paid in full.  Nopayment of EXCESS CASH FLOW shall be the cause of a payment to BANK forinterest rate breakage fees or otherwise result in any prepayment fee.

 

**ADDITIONAL TERMS AND CONDITIONS. **The LOAN AGREEMENT,and any amendments or substitutions, contains additional terms and conditions,including default and acceleration provisions, which are incorporated into thispromissory note by reference.  TheBORROWER agrees to pay all costs of collection, including reasonable attorneysfees and legal expenses incurred by the BANK if this promissory note is notpaid as provided above.  This promissorynote shall be governed by the substantive laws of the State of Nebraska.

 

**WAIVER OF PRESENTMENT AND NOTICE OFDISHONOR. **BORROWERand any other person who signs, guarantees or endorses this promissory note, tothe extent allowed by law, hereby waives presentment, demand for payment,notice of dishonor, protest, and any notice relating to the acceleration of thematurity of this promissory note.

 

(signatures on next page)

 

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|   |   | LSCP, L.P., an Iowa Limited Partnership      |
|--------|--------|----------------------------------------------|
|   |   | By Little Sioux Corn Processors, L.L.C., Its |
|   |   | General Partner                              |
|   |   |                                         |
|   |   |                                         |
|   |   | By:                                          | /s/ Daryl J. Haack |   |
|   |   |                                         | Daryl J. Haack, President of Little |
|   |   |                                         | Sioux Corn Processors, L.L.C. |

 

 
| STATE  OF IOWA      | )      |
|---------------------|--------|
|                | )  ss. |
| COUNTY  OF CHEROKEE | )      |

 

On this 20 day of June, 2003, before me, the undersigned, a NotaryPublic, personally appeared Daryl J. Haack, President of Little Sioux CornProcessors, L.L.C., General Partner of LSCP, L.P., on behalf of said entity,who executed the foregoing instrument, and acknowledged that he executed thesame as his voluntary act and deed.

 
|   | /s/ Becky J. Nothem |   |
|--------|---------------------|--------|
|   | Notary Public       |

 

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**Exhibit 3-4**

**REVOLVING PROMISSORY NOTE**

 
| Omaha, Nebraska               |   | $3,500,000.00                     |
|-------------------------------|--------|-----------------------------------|
| Note Date: June 23, 2003 |   | Maturity Date: July 24, 2003 |

 

On or before July 24, 2003, LSCP, L.P. (“BORROWER”) promises topay to the order of First National Bank of Omaha (“BANK”) at any of its officesin Omaha, Nebraska the principal sum hereof, which shall be Three Million FiveHundred Thousand and no/100 ($3,500,000.00) Dollars or so much thereof as mayhave been advanced by BANK and shown on the records of the BANK to beoutstanding, under this Note and the loan agreement executed by the BANK andBORROWER dated as of July 25, 2002, as it may, from time to time, beamended.

 

Interest on the principal amount outstanding shall accrue based on aone month LIBOR +380bps.  Interest shallbe calculated on the basis of a 360-day year, counting the actual number ofdays elapsed.  Interest on thispromissory note shall be payable monthly.

 

The interest rateapplicable to this promissory note is subject to reduction after a date sixmonths subsequent to CONSTRUCTION COMPLETION DATE, based on the businessresults of BORROWER.  During any threemonth INTEREST PERIOD that BORROWER maintains the following ratios, measuredfor the prior INTEREST PERIOD, the interest rates will adjust accordingly:

 
| **If INDEBTEDNESS to NET WORTH is:**                            |   | **Interest rate will be:**            |
|-----------------------------------------------------------------|--------|---------------------------------------|
|                                                            |   |                                  |
| Greater than 1.30 : 1.00                                        |   | one month LIBOR plus 380 basis points |
| Greater than 1.10 : 1.00, but less than or equal to 1.30 : 1.00 |   | one month LIBOR plus 355 basis points |
| Greater than .90 : 1.00, but less than or equal to 1.10 : 1.00  |   | one month LIBOR plus 330 basis points |
| Greater than .70 : 1.00, but less than or equal to .90 : 1.00   |   | one month LIBOR plus 305 basis points |
| Less than or equal to .70 : 1:00                                |   | one month LIBOR plus 280 basis points |

 

This note is executed pursuant to a Construction Loan Agreement datedas of July 25, 2002, between BANK and BORROWER (the “LOAN AGREEMENT”). TheLOAN AGREEMENT contains additional terms of this Note, including, but notlimited to enumerated events of default, and the granting of liens to secureBORROWER’s performance.  All capitalizedterms not otherwise defined herein shall have the same meanings as set forth inthe LOAN AGREEMENT.

 

As provided in the LOAN AGREEMENT, upon any such enumerated default,BANK may accelerate the due date of this Note and declare all obligations setforth herein immediately due and payable, and BANK shall also have such otherremedies as are described in the LOAN AGREEMENT and are provided by law.  All makers and endorsers hereby waivepresentment,

 

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demand, protest and notice of dishonor, consent to any number ofextensions and renewals for any period without notice; and consent to anysubstitution, exchange or release of collateral, and to the addition or releasesof any other party primarily or secondarily liable.

 

Executed as of the 23rd day of June, 2003.

 
|   |   | LSCP, L.P., an Iowa Limited Partnership  |
|--------|--------|------------------------------------------|
|   |   | by Little Sioux Corn Processors, L.L.C., |
|   |   | Its general partner                      |
|   |   |                                     |
|   |   |                                     |
|   |   | By:                                      |   |   |
|   |   |                                     |   Daryl J. Haack, President |

 

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