Exhibit 10.1


 


PROMISSORY NOTE


(Variable Rate, Revolving
Loan)


(Second Renewal Note)


 




	
  Not to Exceed
  $9,000,000.00

  	
   

  	
  Sioux Falls, South Dakota

  
	
   

  	
   

  	
  July 28, 2009

  






 


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, a national bunking 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 Nine Million & 00/100 Dollars
($9,000,000.00) or so much thereof as may he advanced hereunder.


 


LOAN RENEWAL. This
Promissory Note renews the loan evidenced in part by that Promissory Note dated
September 21, 2007, in the original principal amount not to exceed
$9,000,000.00. The Promissory Note was renewed by a Renewal Note dated July 30,
2008, which extended the maturity date of the Promissory Note to July 28,
2009 (the “Prior Note”). The terms of the Prior Note apply until July 28,
2009, the date this Renewal Note becomes effective.


 


CALCULATION
OF INTEREST. Interest on each advance hereunder shall accrue at
an annual rate equal to 4.00% plus the one-month LIBOR rate quoted by Lender
(LIBOR + 4.00%), 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 initial 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 initial advance, which rate shall be in effect on the remaining days of the
month of the initial advance.


 


PAYMENT OF INTEREST. Payments of all interest accrued hereunder shall
be made on the last day of any month in which any amount is outstanding
hereunder.


 


REVOLVING FEATURE, Borrower may
from time-to-time prior to the Maturity Date draw, on a revolving basis, the
difference of the outstanding principal amount hereunder and the lesser of (i) the
Borrowing Base and (ii) Nine Million Dollars ($9,000,000.00) (the  greater of the two being the “Loan
Maximum”). Lender’s obligation to make any advance under this Promissory Note
is conditioned upon (i) all representations 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 of tins Promissory
Note and the Loan Agreement including any preconditions to any advance
hereunder contained in the Loan Agreement, (iii) no Event of Default
having occurred tinder this Promissory Note, or any other Promissory Note
between the parties hereto, or under any other Loan Document, and (iv) Borrower
shall demonstrate to Lender’s satisfaction that the funds requested to be
advanced shall be used in the operation of Borrower’s ethanol production
facility. Subject to these conditions, Lender shall advance to Borrower
hereunder, such amounts as Borrower may from time-to-time request, not to
exceed the total principal amount at any one time outstanding hereunder of Nine
Million Dollars ($9,000,000.00). Such requests for advances hereunder shall be
funded the next Business Day if received by Lender not later than 11:00 am, of
any Business Day, subject to Lender requiring additional time to confirm
Borrower has satisfied the conditions of this Note (including the Borrowing
Base requirements provided for below) 


 

















 


at the time each such
advance is requested and made.


 


PAYMENT  IN FULL AT MATURITY. The maturity date of
this Note is July 26, 2010 (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. THIS NOTE REQUIRES A BALLOON PAYMENT.


 


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.


 


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.


 


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


 


BORROWING
BASE. Definitions, As used in this
Promissory Note: “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 fair market value; “Inventory” means all Borrower’s corn, and
ethanol, and DDGS Inventory, as determined to Lender’s satisfaction; “Eligible
Accounts Receivable” means Accounts (as defined in the Uniform Commercial Code)
owned by Borrower that were generated by Borrower’s sate of Inventory, minus
Ineligible Accounts; “Ineligible Accounts” means Accounts which either have
been outstanding more than 90 days, or Accounts which otherwise would be
Eligible Accounts Receivable that Lender determines in Its discretion should
not so qualify. Eligible Accounts Receivable shall exclude Borrower’s “contra”
accounts and any other obligations or offsets which any of Borrower’s account
obligors may claim against Borrower.


 


Borrower
Reports. Each request for an advance hereunder shall be
accompanied by Borrower’s report to Lender evidencing the Borrowing Base as of
the close of the previous Business Day, in a form and containing such content
as Lender shall from time-to-time specify to Borrower, including but not
limited to: reports of the Borrower’s Accounts itemized by age; reports o the
inventory itemized by type, including its quantity, geographical location, and
information identifying any third party in possession or control thereof.
Borrower’s report shall also report Eligible Accounts Receivable on a gross
basis, and be itemized as to all offsets that may be claimed by any account
obligor as further set forth in the definition of Eligible Accounts Receivable
above. If at the end of any calendar month any amount is outstanding hereunder,
not later than the 15th day of the following month, Borrower shall provide
Lender a report containing the above information as of the end of such prior
month. Borrower shall also provide Lender such reports at other times specified
by Lender. The request for advances shall be on the form attached hereto as Exhibit A,
unless Lender specifies otherwise.


 


Reasonable
Processes and Controls. Borrower shall maintain reasonable processes
and controls, provide accurate calculation of the Borrowing Base and otherwise
assure compliance with the Lender’s collateral audit program, including
instituting policies requiring its employee marketers to accurately enter each
contract for purchase or sale of Inventory (including other relevant
information as to the status of the contract, including any dispute by the
other party thereto) into Borrower’s accounting system immediately upon entry
into the contract. Among other information which shall be available to 


 


2

















 


Lender on a daily basis are
the amount, identity, location, telephone number and other relevant information
concerning each account obligor, and the locution and quantity of all
Inventory.


 


RENEWAL COMMITMENT FEE. In consideration of Lender’s
agreement to renew the loan evidenced by this Note, Borrower shall pay Lender
not later than the date of this Notice first shown above a renewal commitment
fee of one-fourth percent (0.25%) of Loan Maximum or Twenty-Two Thousand Five
Hundred Dollars ($22,500.00).


 


UNUSED COMMITMENT FEE. Borrower
shall pay Lender quarterly, in arrears, an unused commitment fee. The unused
commitment fee shall be paid October 31, January 31, April 30,
and July 31. The unused commitment fee is equal to one-half percent
(0.50%) per annum, multiplied by the difference, if any, of the Loan Maximum
minus the average daily outstanding principal balance due hereunder for such
prior quarter.


 


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 determined 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,
(together with all amendments or other modifications thereto, 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 in part by (and is a Secured Obligation as defined in) a Security
Agreement dated as of August 28, 2006, and a Mortgage - Collateral Real
Estate Mortgage; Security Agreement, Fixture Filing and Assignment of Rents
dated as of September 21, 2007 (as may be amended from time-to-time), 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; CROSS-DEFAULT. If a payment
due hereunder is not made within ten (10) 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. Any default under this Promissory Note, the Security
Agreement dated August 28, 2006, or any Event of Default as defined in the
Loan Agreement, shall constitute an “Event of Default” for purposes of this
Note. After any Event of Default, 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 without any relief
whatever from any valuation or appraisement laws.


 


PAYMENT OF 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 cost; 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 


 


3

















 


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.


 


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 therefor, 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, hut, 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 MISCELLMEOUS
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 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 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. All
exhibits hereto are incorporated herein


 


4

















 


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 PROM 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 [N 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

  






 


5

















 


NORTHERN LIGHTS ETHANOL


BORROWING BASE CERTIFICATE


 




	
  U.S.
  Bank National Association

  	
   

  	
   

  
	
  141 N. Main Avenue

  	
   

  	
   

  
	
  Sioux Falls, SD 57104

  	
   

  	
  Date:

  






 


Accounts Receivable




	
  POET
  Ethanol Products

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  POET Nutrition

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Accounts Receivable

  	
   

  	
  $0

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Deduct
  Ineligible Accounts

  (>90
  days from invoice date)

  Deduct
  Other ineligible Accounts

  (as determined by Bank)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Eligible
  Accounts Receivable

  	
   

  	
  $0

  	
   

  	
   

  	
   

  	
   

  
	
  Multiply
  by Advance Rate

  	
   

  	
  75.00%

  	
   

  	
   

  	
   

  	
   

  
	
  Accounts
  Receivable Available

  	
   

  	
   

  	
   

  	
  $0

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Inventory:

  Corn

  DDGS

  Ethanol

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Inventory

  	
   

  	
  $0

  	
   

  	
   

  	
   

  	
   

  
	
  Multiply by Advance Rate

  	
   

  	
  75.00%

  	
   

  	
   

  	
   

  	
   

  
	
  Inventory Available

  	
   

  	
   

  	
   

  	
  $0

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Hedging
  Accounts:

  name

  name

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Hedging Accounts

  	
   

  	
  $0

  	
   

  	
   

  	
   

  	
   

  
	
  Multiply by Advance Rate

  	
   

  	
  75.00%

  	
   

  	
   

  	
   

  	
   

  
	
  Hedging Accounts Available

  	
   

  	
   

  	
   

  	
  $0

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Borrowing Base

  	
   

  	
   

  	
   

  	
  $0

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Outstanding Revolver Balance

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (not to exceed $9r000,000)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Surplus / (Paydown Required)

  	
   

  	
   

  	
   

  	
  $0

  	
   

  	
   

  






 


Northern
Lights Ethanol, LLC (“Borrower”) and U.S. Bank National Association (“Bank”)  are
party to a  Note and Security Agreement
dated September 21. 2007 as well as the Amended and Restated Loan
Agreement, as amended, dated August 28, 2006 (the “Loan Documents”). To
qualify for an advance under the $9,009,000 revolver, the undersigned hereby
reaffirms the Bank’s security interest in: all inventory, whether now owned or
hereafter acquired, and the proceeds thereof, and, each and every account
whether such right to payment now exists or hereafter arises, and the proceeds
thereof.  The undersigned also certifies
that the Borrowing Base as represented above is true and correct and that there
is no default under the aforementioned Loan Documents, or on any of the
Borrower’s obligations to the Bank.


 




	
   

  	
  Northern Lights Ethanol, LLC

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its: