Document:

Exhibit
10.1

AMENDED
AND RESTATED LOAN AGREEMENT

This
Amended and Restated Loan Agreement (this “Amended Loan Agreement”, “Loan
Agreement” or “Agreement”) dated as of August 28, 2006, is by and between
Northern Lights Ethanol, LLC, a South Dakota limited liability company (the “Borrower”),
and U.S. Bank National Association, a national banking association (the “Lender”).

RECITALS

A.            Borrower and Lender are party to a
Loan Agreement effective July 11, 2001, amended by an Amendment to Loan
Agreement effective June 22, 2004, and further amended by a Second Amendment to
Loan Agreement effective March 30, 2005 (collectively the “First Loan Agreement”);

B.            The First Loan Agreement structured
a loan not to exceed $31,100,000.00 for construction of a 40 million gallon per
year nameplate dry-mill ethanol production, storage and distribution facility
near Big Stone City, South Dakota (the “Original Loan”).  That construction was successfully completed
and the plant has been successfully operating since opening 2002.  This construction financing converted to long
term financing;

C.            Borrower desires to borrow
additional funds from Lender to expand its ethanol production nameplate
capacity to 75 million gallons per year, and to reconfigure portions of its
ethanol production processes to take advantage of advances in technology;

D.            The total cost of this expansion and
reconfiguration is estimated to be at least $38,000,000.00 and Lender has
conditionally committed to lend Borrower $33,000,000.00 of this estimated cost
under the terms and conditions of this Amended Loan Agreement;

E.             The loan made under the First Loan
Agreement was restructured so that as of the effective date of this Amended
Loan Agreement, the loan is evidenced by the following Promissory Notes:

	
  Date

  	
   

  	
  Note No.

  	
   

  	
  Original Face

  Amount

  	
   

  	
  Principal Balance

  as of July 26, 2006

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  03-30-2005

  	
   

  	
  158

  	
   

  	
  $

  	
  15,800,000.00

  	
   

  	
  $

  	
  14,346,134.39

  	
   

  
	
  03-30-2005

  	
   

  	
  174

  	
   

  	
  $

  	
  3,900,000.00

  	
   

  	
  $

  	
  3,412,500.00

  	
   

  
	
  03-30-2005

  	
   

  	
  91

  	
   

  	
  $

  	
  5,000,000.00

  	
   

  	
  $

  	
  0.00

  	
   

  

 

F.             The $5,000,000.00 Promissory Note
represents a revolving loan in an amount not to exceed such face amount.  Lender also extended a $3,000,000.00
revolving loan to Borrower

 

which is outside
the First Loan Agreement.  No balance is
outstanding under this $3,000,000.00 Promissory Note;

G.            The Loan as it is outstanding on the
effective date will be restructured under this Amended Loan Agreement so that
the $3,000,000.00 and $5,000,000.00 revolving Promissory Notes will be combined
into one revolving Promissory Note in an amount not to exceed $8,000,000.00,
all of which will be subject to this Amended Loan Agreement;

H.            The terms of the $15,800,000.00 and
$3,900,000.00 Promissory Notes are not affected by this Amended Loan
Agreement.  The new $33,000,000.00 loan
facility the Lender is conditionally extending under this Amended Loan
Agreement shall be evidenced by a new Promissory Note not to exceed such
amount; and

I.              Lender has extended Borrower loans
other than those referenced above, and those other loans are not subject to the
First Loan Agreement and this Amended Loan Agreement.

ARTICLE I

DEFINITIONS
AND ACCOUNTING TERMS

Section
1.1  Defined Terms.  As used in this Agreement the following terms
shall have the following respective meanings:

“Access and Rail Agreement”: The
Borrower’s right to ingress and egress over and across the roads and railroad
spur lines identified in the Access and Rail Agreement dated April 18, 2001,
described in Exhibit A attached hereto and incorporated herein by reference.

“Affiliate”: Any Person, directly or
indirectly, controlling, controlled by, or under common control with, such
person.  For purposes of this definition,
“control” (including “controlled by” and “under common control with”) shall
mean the power, directly or indirectly, to direct or cause the direction of the
management and policies of such Person whether through the ownership of voting
securities, by contract or otherwise.

“Business Day”: 
Any day (other than a Saturday, Sunday or legal holiday in the State of
South Dakota) on which national banks are permitted to be open for business in
Sioux Falls, South Dakota.

“Closing Date”: 
The date on which the conditions set forth in Section 3.1 have been
satisfied and the Expansion Loan is closed.

“Completion Deadline”:  August 31, 2007, or such earlier date upon
which the construction of expansion of the Project under the Expansion Loan is
completed and the expanded
Project is to become operational, according to the certificate of the
Inspecting Architect.

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“Conversion Date”:  That date which will coincide with or follow
the Completion Deadline, upon which the Expansion Loan converts from a short
term construction loan to a long term loan, assuming the Expansion Loan
qualifies for such conversion. 
Specifically, the Conversion Date is the earlier of the following to
occur: (i) August 31, 2007, or (ii) the 120th day following that stage in the
progress of the construction of the Expansion Improvements such that the
construction is sufficiently complete so that Borrower can utilize the Project,
including Project Expansion, for its intended use.

“Default”: 
Any event which, with the giving of notice (whether such notice is
required under Section 6.1, or under some other provision of this Agreement, or
otherwise) or lapse of time, or both, would constitute an Event of Default.

“Default Rate”: 
As defined in each Note evidencing the Loan.

“ERISA”: 
The Employee Retirement Income Security Act of 1974, as amended.

“Escrow Company”: Homestead Escrow and Exchange
Company which will act as the disbursing agent for Expansion Loan proceeds.

“Event of Default”:  Any event described in Section 6.1.

“Expansion Loan”:  As defined in Section 2.1.  

“Expansion Construction Note”:  The Note dated of even date herewith, in the
amount of the Expansion Loan, executed by the Borrower and payable to the order
of the Lender.

“Financing Statement”:  The Financing Statement(s) executed by the
Borrower, as Debtor, in favor of the Lender, as Secured Party.

“First Advance Date”: The date on which the
conditions set forth in Section 3.2 have been satisfied so as to permit the
first advance of Expansion Loan proceeds for the payment of the expenses of
construction of the Project Expansion to 75 million gallons per year nameplate
capacity and related reconfiguring of the Project.

“GAAP”: Generally accepted accounting
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession, which are applicable to the circumstances
as of any date of determination.

“Governmental Requirements”:  All laws, statutes, codes, ordinances, and
governmental rules, regulations and requirements applicable to the Borrower,
the Lender and the Project.

 3
 

 

 

“Indemnification Agreement”:  The Environmental and ADA Indemnification
Agreement dated of even date herewith, executed by the Borrower in favor of
Lender, and any other similar agreement executed in connection with the
Original Loan.

“Inspecting Architect”:  The architectural, engineering or other
consultant firm which will be retained by the Lender, at Borrower’s cost, to
conduct on-site inspections of the work-in-progress on the expansion of the
Project, and to issue periodic reports to the Lender as to the progress of
construction and adherence to the Plans. 
The Inspecting Architect at the time of this Agreement is BKBM Engineers
of Minneapolis, Minnesota.

“Land”: 
The land legally described on Exhibit A attached hereto and hereby made
a part hereof.

“Lease”: The Big Stone Plant Property Lease
dated April 18, 2001, under the terms of which Borrower leases the Land from
Big Stone-Grant Industrial Development and Transportation, L.L.C.

“Lien”: 
With respect to any Person, any security interest, mortgage, pledge,
lien, charge, encumbrance, title retention agreement or analogous instrument or
device (including the interest of each lessor under any capitalized lease), in,
of or on any assets or properties of such Person, now owned or hereafter
acquired, whether arising by agreement or operation of law.

“Loan”: 
Collectively, the Expansion Loan and the remaining obligations under the
Original Loan as evidenced in part by the $15,800,000.00, $3,900,000.00, and
$5,000,000.00 Promissory Notes referenced in the Recitals.

“Loan Documents”:  This Agreement, the Note, the Mortgage, the
Security Agreement, the Indemnification Agreement, the Financing Statement and
any other document evidencing, collateral to or as security for the Loan.

“Loan Fees”: 
As defined in Section 2.3.

“Maturity Date”: The date all amounts due under
the Expansion Loan shall be paid to Lender, if not earlier paid or
accelerated.  The Maturity Date shall be
determined under the terms of the Expansion Construction Note, but shall not be
later than the seventh (7th) anniversary of the Conversion Date.

“Mortgage”: 
Collectively (i) The Mortgage, Security Agreement, Assignment of Leases
and Rents and Fixture Financing Statement dated as of July 11, 2001, evidencing
the original Construction Loan and securing the Loan; (ii) that
Mortgage-Collateral Real Estate Mortgage; Security Agreement, Fixture filing
and Assignment of Rents dated as of December 31, 2002, securing the Loan; and
(iii) that Mortgage, Security Agreement, Assignment of Leases and Rents and
Fixture Financing Statement of even date herewith securing the Loan, all of
which were executed by the Borrower in favor of the Lender.

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“Note”: 
Note means the Expansion Construction Note, all Notes referenced in the
Recitals, and any other Note that evidences any obligation under the Loan.  In this Agreement, the word “Note” is
synonymous with “Promissory Note.”

“Obligations”: 
The Borrower’s obligations in respect of the due and punctual payment of
principal and interest on the Loan when and as due, whether by acceleration or
otherwise and all fees, expenses, indemnities, reimbursements and other
obligations of the Borrower under this Agreement or any other Loan Document, in
all cases whether now existing or hereafter arising or incurred.

“Operating Contracts”: The access,
construction, management and marketing contracts described on Exhibit B
attached hereto and hereby made a part hereof.

“Permitted Encumbrances”:  The liens, charges and encumbrances on title
to the Project under which a party other than Lender is the secured party and
that are listed on Exhibit C attached hereto and hereby made a part hereof.

“Person”: 
Any natural person, corporation, cooperative, partnership, limited
partnership, limited liability partnership, limited liability company, joint
venture, firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether
acting in an individual, fiduciary or other capacity.

“Project”: 
The Land, all improvements thereon, and all fixtures, equipment and
personal property now or hereafter owned by the Borrower and located or to be located
in or on, and used in connection with the management, maintenance or operation
of, the Land and the improvements.  The
term “Project” includes the Project Expansion.

“Project Expansion”:  The expansion, retrofitting and reconfiguring
of the Project under the Expansion Loan and pursuant to the Plans.

“Regulatory Change”:  Any change after the date of this Agreement
in federal, state or foreign laws or regulations or the adoption or making
after such date of any interpretations, directives or requests applying to a
class of banks including the Lender under any federal, state or foreign laws or
regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.

“Security Agreement”:  (i) The Borrower’s Security Agreement dated
as of July 11, 2001, and (ii) that Security Agreement of even date herewith,
each executed by Borrower in favor of the Lender.

“Tenant”: 
Any Person using or occupying any part of the Project pursuant to a
lease.

 5
 

 

“Title Company”: Dakota Homestead Title
Insurance Company which will issue the Title Policy, or act as agent for such
issuer.

“Title Policy”: 
A current ALTA form loan title insurance policy, dated as of the date of
recording of the Mortgage, containing such endorsements and assurances as the
Lender may require, and containing only those exceptions approved by the
Lender.

Section
1.2  Accounting Terms and Calculations.  Except as may be expressly provided to the
contrary herein, all accounting terms used herein shall be interpreted and all
accounting determinations hereunder shall be made in accordance with GAAP.

Section
1.3  Other Definitional Terms, Terms
of Construction.  The words “hereof”,
“herein” and “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.  References
to Sections, Exhibits, Schedules and like references are to Sections, Exhibits,
Schedules and the like of this Agreement unless otherwise expressly
provided.  The words “include”, “includes”
and “including” shall be deemed to be followed by the phrase “without
limitation”.  Unless the context in which
used herein otherwise clearly requires, “or” has the inclusive meaning
represented by the phrase “and/or”.  All
incorporations by reference of covenants, terms, definitions or other
provisions from other agreements are incorporated into this Agreement as if
such provisions were fully set forth herein, and include all necessary
definitions and related provisions from such other agreements.  All covenants, terms, definitions and other
provisions from other agreements incorporated into this Agreement by reference
shall survive any termination of such other agreements until the obligations of
the Borrower under this Agreement and the Note are irrevocably paid in full.

Section
1.4  Construction Loan Addendum.  Terms defined in the Construction Loan
Addendum attached hereto supplement the foregoing definitions.

ARTICLE II

TERMS OF LENDING

Section
2.1  Expansion  Loan.  Upon the terms and subject to the conditions
hereof, the Lender agrees to make a loan (the “Expansion Loan”) to the Borrower
in an amount not to exceed $33,000,000.00 for construction of the Expansion
Improvements, and working capital, payment of interest on the Expansion Loan,
purchase of inventory, and other purposes as may be approved by the Lender.

Section
2.2  The Expansion Construction Note;
Interest and Repayment.  The
Expansion Loan shall be evidenced by the Expansion Construction Note.  The Lender shall enter in its ledgers and
records the Advances of and payments made on the Expansion Loan, and the Lender
is authorized by the Borrower to enter on a schedule attached to the Expansion
Construction Note a record of such payments. 
The Expansion Construction Note shall accrue interest and shall be
payable, together with interest thereon, and may be prepaid, if at all, and is
subject to mandatory

 6
 

 

prepayment, as
provided in the Expansion Construction Note. 
If not sooner paid, the Expansion Construction Note, together with all
accrued and unpaid interest thereon, shall be due and payable in full on the
Maturity Date.

Section
2.3  Expansion Loan Fees.  In consideration of the Lender’s agreement to
make the Expansion Loan, the Borrower shall pay the Lender, at or prior to the
closing of the Expansion Loan, the following fees:

2.3(a)  Closing
Fee.  A closing fee in the sum of
$75,000.00.

2.3(b)  Syndication
Fee.  A syndication fee in the sum of
$75,000.00.

Section
2.4  [Reserved]

Section
2.5  Use of Proceeds.  The proceeds of the Expansion Loan shall be
used for construction of the Expansion Improvements and other items set forth
in Section 2.1.

ARTICLE
III

CONDITIONS
PRECEDENT

Section
3.1  Conditions to the Closing of the
Expansion Loan.  The obligation of
the Lender to close the Expansion Loan hereunder shall be subject to the prior
or simultaneous fulfillment of each of the following conditions:

3.1(a)  Documents.  The Lender shall have received the documents
and other materials as set forth on Schedule 3.1(a) attached hereto and hereby
made a part hereof, except the Air Quality Permit.

3.1(b)  Other
Matters.  All organizational and
legal proceedings relating to the Borrower and its Members and all instruments
and agreements in connection with the transactions contemplated by this
Agreement shall be satisfactory in scope, form and substance to the Lender and
its counsel, and the Lender shall have received all information and copies of
all documents, including records of company proceedings, which it may
reasonably have requested in connection therewith, such documents where
appropriate to be certified by Borrower or governmental authorities.

3.1(c)  Fees
and Expenses.  The Lender shall have
received the Expansion Loan Fees and all other fees and amounts due and payable
by the Borrower on or prior to the Closing Date, including the reasonable fees
and expenses of counsel to the Lender payable pursuant to Section 7.2.  Borrower shall pay all of the Lender’s due
diligence fees, including but not limited to the cost of the appraisal, the
cost of the survey, the cost of the Phase I Environmental Site Assessment, all
property and lien searches, title insurance fees and recording fees.

 7
 

 

3.1(d)  No
Default.  All representations and
warranties of the Borrower made in this Agreement shall remain true and correct
and no Default or Event of Default shall exist.

3.1(e)  Participation.  Financial institutions shall have committed
to purchase from Lender a portion of the Expansion Loan in the aggregate sum of
at least $19,000,000.00, and have signed Participation Agreements and such
other documentation containing such terms as are acceptable to Lender.

Section
3.2  Conditions to Each Advance.  The obligation of the Lender to make the
first and each subsequent advance of Expansion Loan proceeds hereunder shall be
subject to the prior or simultaneous fulfillment of each of the following
conditions:

3.2(a)  Documents.  The Lender shall have received the documents
and other materials as set forth on Schedule 3.2(a) attached hereto and hereby
made a part hereof, and that all such documents and other materials as are
satisfactory to Lender in form and substance.

3.2(b)  Compliance
with Other Conditions.  The Expansion
Loan shall have closed, and the Borrower shall have complied with all of the
terms and conditions of this Agreement (including the completion of any
precondition to Expansion Loan closing under Section 3.1 above, which Lender
may have waived at the time of Expansion Loan closing), including the
Construction Loan Addendum hereto, and the other Loan Documents.

3.2(c)  Perfection.  A Mortgage and Financing Statement, and any
other Loan Document creating or evidencing a lien or security interest which
Lender requires to be filed of record, shall have been appropriately filed to
the satisfaction of the Lender and the priority and perfection of the Lien
created thereby shall have been established to the satisfaction of the
Lender.  The Lender shall receive a first
priority mortgage lien upon the Borrower’s leasehold interest in the Project,
the Access and Rail Agreement and the Borrower’s personal property described in
the Mortgage and Borrower’s Security Agreement, subject only to the Permitted
Encumbrances and Lender’s other Mortgage and Financing Statement.

3.2(d)  No
Default.  All representations and
warranties of the Borrower made in this Agreement shall remain true and correct
as of the date of the Advance as though made on and as of such date, except to
the extent that such representations and warranties relate solely to an earlier
date, and no Default or Event of Default shall exist.

3.2(e)  Equity.  Borrower shall have first paid $5,000,000.00
for the cost of construction of the Expansion Improvements from retained
earnings.

3.2(f)  Draw
Request.  Borrower has provided a
Draw Request and otherwise complied with Section 3.3.

3.2(g)  No
Revocation.  No license or permit
necessary for the construction of the Project Expansion shall have been revoked
or the issuance thereof subjected to challenge before

 8
 

 

any court or other governmental authority having or
asserting jurisdiction as to the Project.

3.2(h)  Certification
of Inspecting Architect.  The
Inspecting Architect shall have certified that the construction completed
respecting the Draw Request has been completed in conformity with the Plans,
the construction schedule, and the total Project Costs as contained in the
Sworn Construction Cost Statement.

Section
3.3  Disbursement Procedures.

3.3(a)  Submission
of Draw Requests.  Whenever the
Borrower desires a disbursement under the Expansion Loan, which shall be no
more often than once a month, the Borrower shall submit to the Escrow Company a
Draw Request, and simultaneously a copy thereof to the Lender and Inspecting
Architect, duly executed on behalf of the Borrower setting forth the
information requested on such form.  Each
Draw Request shall be delivered to the Lender at least five (5) Business Days
before the date the disbursement is desired.

3.3(b)  Amount
of Draw Request.  Each Draw Request
shall be limited to the amount provided for in the Disbursing Agreement.

3.3(c)  Other
Documents.  At the time of submission
of each Draw Request, the Borrower shall submit or cause to be submitted to the
Lender the following:

3.3(c)(i)  All documents and other preconditions
required under the Disbursing Agreement.

3.3(c)(ii)  A written report from the Inspecting
Architect as referenced in Section 3.2(h).

3.3(c)(iii)  Such other supporting evidence as may be
requested by the Lender to substantiate all payments which are to be made out
of the relevant Draw Request and/or to substantiate all payments then made with
respect to the Project Expansion under the Expansion Loan.

3.3(d) Making the
Disbursements.  Upon satisfaction of
all preconditions to payment under a Draw Request under this Agreement, the
Disbursing Agreement, or any other Loan Document, the Lender shall disburse the
appropriate amount of the Expansion Loan directly to the Escrow Company, except
for items due to Lender under the terms of this Agreement, the Expansion
Construction Note, the Disbursing Agreement, or any other Loan Document.  Borrower acknowledges that although Lender
may disburse Expansion Loan proceeds to the Escrow Company, that no
disbursement shall be made from the Escrow Company unless the terms of the
Disbursing Agreement are satisfied as to each such term.

 9
 

 

3.3(e)  Miscellaneous Procedures.  The Lender may establish additional
procedures regarding disbursements as are reasonable to assure the proceeds of
the Expansion Loan are paid only to those persons and entities entitled to the
same, and that the liens securing the Obligations are in all cases first and
paramount liens on the Property.

Section
3.4  Construction Loan Addendum.  Attached hereto and hereby made a part hereof
is a Construction Loan Addendum.  The
Construction Loan Addendum contains terms applicable to the Expansion
Loan.  If there is any conflict or
inconsistency between the terms and provisions of the Construction Loan
Addendum and any other terms and provisions of this Agreement, the terms and
provisions of the Construction Loan Addendum shall control.

Section
3.5  Disbursements of Borrower Funds.  Borrower shall make disbursements of its
funds under Section 3.2(e) and of other amounts Borrower disburses for
Completion of the Project Expansion through the Disbursing Agent under
procedures which shall insure that mechanics and materialmens liens are
satisfied and that the work is in compliance with the Plans, Sworn Construction
Cost Statement and construction schedule.

ARTICLE
IV

REPRESENTATIONS
AND WARRANTIES

The
Borrower represents and warrants to the Lender:

Section
4.1  Organization, Standing, Etc.  The Borrower is a limited liability company
duly organized and validly existing and in good standing under the laws of the
jurisdiction of its organization and, if different, the jurisdiction in which
the Project is located, and has all requisite limited liability company power
and authority to own its properties and to carry on its business as now conducted,
to enter into this Agreement and the other Loan Documents to which it is a
party and to issue the Note and to perform its obligations hereunder and
thereunder.  This Agreement, the Note and
the other Loan Documents to which it is a party have been duly authorized by
all necessary limited liability company action and when executed and delivered
will be the legal and binding obligations of the Borrower.  The execution, delivery and performance of
this Agreement, the Note and the other Loan Documents to which it is a party
will not violate the Borrower’s Articles of Organization, Operating Agreement
and Member Control Agreement or any law applicable to the Borrower, and will
not violate or cause a default under or permit acceleration of any agreement to
which Borrower is a party or by which it or the Project is bound.  Except for consents, approvals and exemptions
previously obtained (copies of which have been delivered to the Lender), no
approval of or exemption by any Person is required in connection with the
Borrower’s execution, delivery and performance of this Agreement, the Note and
the other Loan Documents to which it is a party.  To the Borrower’s knowledge, it is not in
default (beyond any applicable grace period) in the performance of any
agreement, order, writ, injunction, decree or demand to which it is a party or
by which it is bound.

Section
4.2  Litigation.  There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or the Project which, if

 10
 

 

determined
adversely to the Borrower, would have a material adverse effect on the
condition of the Borrower or on the ability of the Borrower to perform its
obligations under the Loan Documents. 
Neither the Borrower nor the Project is in violation of any Governmental
Requirement where such violation could reasonably be expected to impose a
material liability on the Borrower.

Section
4.3  Taxes.  The Borrower has filed all federal, state and
local tax returns required to be filed and has paid or made provision for the
payment of all taxes due and payable pursuant to such returns and pursuant to
any assessments made against it or any of its property (other than taxes, fees
or charges the amount or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which reserves in
accordance with GAAP have been provided on the books of the Borrower).

Section
4.4  Subsidiaries.  The Borrower has no subsidiaries.

Section
4.5  Employee Benefit Plans.  Except as disclosed in writing to the
Lender:  (a) the Borrower is not an
employee benefit plan as defined in Section 3(1) of ERISA, whether or not
subject to ERISA; (b) no assets of the Borrower constitute assets of any such
plan under ERISA regulations or rulings; (c) with respect to any such plan that
the Borrower sponsors, participates in or has fiduciary duties with respect to,
the Borrower has materially complied with all federal and state laws, plan
documents and funding requirements; (d) the Borrower does not sponsor,
participate in, or have fiduciary duties with respect to any defined benefit
pension plan subject to Title IV of ERISA or any multi-employer pension plan as
defined in Section 3(37)(A) of ERISA or any plan providing medical or other welfare
benefits to retirees or other former employees (except as required by federal
or state law); and (e) the Borrower is not (and has not ever been) a member of
a group of trades or businesses (whether or not incorporated) that is treated
as a single employer under Section 414 of the Internal Revenue Code.

Section
4.6  Federal Reserve Regulations.  The Borrower is not engaged principally or as
one of its important activities in the business of extending credit for the
purpose of purchasing or carrying margin stock (as defined in Regulation U of
the Board of Governors of the Federal Reserve System or any successor
thereto).  The value of all margin stock
owned by the Borrower does not constitute more than 25% of the value of the
assets of the Borrower.

Section
4.7  Construction of the Project
Expansion.  The Project Expansion
will be constructed strictly in accordance with the Plans, will be constructed
entirely on the Property, and will not encroach upon or overhang any easement
or right-of-way on property not constituting part of the Property, except for
the rail spur line which shall in part be located upon the rail line property
owned by the State of South Dakota, or other third party satisfactory to
Lender.  The Project Expansion, both
during construction and at the time of completion, and the contemplated use
thereof, will not violate any applicable zoning or use statute, ordinance,
building code, rule or regulation, or any covenant or agreement of record.  The Borrower agrees that it will furnish from
time to time such satisfactory evidence with respect thereto as may be require
by the Lender.

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Section
4.8  Taxpayer Identification Number.  The Borrower’s Internal Revenue Service
Taxpayer Identification Number is 46-0460145, and the Borrower shall use such
number as its exclusive Internal Revenue Service Taxpayer Identification Number
until all of its Obligations under this Agreement are satisfied in full.  The Borrower will not change its name as
incorporated, without the Lender’s prior written consent, which may be
conditioned upon the Borrower’s signing amendments to UCC-1s or other documents
as the Lender may require.

Section
4.9  Borrower not a Transmitting
Utility.  The Borrower is not a
transmitting utility within the meaning of the UCC, and in particular will not
ship its inventory by pipeline.

Section
4.10  Purchase of Corn.  Any purchase of corn or other inputs used or
consumed in the production of the Borrower’s ethanol or other inventory shall
be free of any security or lien interest of any third party, and in particular
Borrower shall see to the termination of any security interest in any such farm
products or goods it may purchase.

Section
4.11  Operating Contracts.  All Operating Contracts set forth on Exhibit
B hereto are current and in effect.  To
the extent that an Operating Contract set forth on Exhibit B is identical to an
Operating Contract set forth in Schedule B of the First Loan Agreement, such
Operating Contract has not been amended or replaced.

ARTICLE V

COVENANTS

Until
the Note and all of the Borrower’s other Obligations shall have been paid and
performed in full, unless the Lender shall otherwise consent in writing:

Section
5.1  Financial Statements and Reports.  The Borrower will furnish to the Lender:

5.1(a)  As soon
as available and in any event within 120 days after the end of each fiscal year
of the Borrower, financial statements consisting of at least statements of
income, cash flow and changes in members’ equity, a balance sheet as of the end
of such year, and a statement of contingent liabilities as at the end of such
year, setting forth in each case in comparative form corresponding figures from
the previous annual audit, certified without qualification by an independent
certified public accountant of recognized standing selected by the Borrower, as
the case may be, and acceptable to the Lender.

5.1(b)  As soon
as available and in any event within 30 days after the end of each fiscal
quarter of the Borrower, unaudited financial statements and a financial
covenant compliance certificate on a form provided by Lender for such quarter
and for the period from the beginning of such fiscal year to the end of such
quarter, substantially similar to the annual audited statements.

 12
 

 

5.1(c) 
Immediately upon any officer of the Borrower becoming aware of any
Default or Event of Default, a notice describing the nature thereof and what
action the Borrower proposes to take with respect thereto.

5.1(d)  From
time to time, such other information regarding the business, operation and
financial condition of the Borrower and the Project as the Lender may
reasonably request.

Section
5.2  Books and Records.  The Borrower will keep adequate and proper
records and books of account in which full and correct entries will be made of
its dealings, business and affairs, including its use and operation of the
Project.

Section
5.3  Inspection.  The Borrower will permit any Person
designated by the Lender upon reasonable notice to visit and inspect any of the
properties (including the Project), books and financial records of the
Borrower, to examine and to make copies of the books of accounts and other
financial records of the Borrower, and to discuss the affairs, finances and
accounts of the Borrower with its officers at such reasonable times and
intervals as the Lender may designate.

Section
5.4 Existence.  The Borrower will
maintain its existence in good standing under the laws of its jurisdiction of
organization or formation, and, if different, the jurisdiction where the
Project is located, and its qualification to transact business in each
jurisdiction (including the jurisdiction where the Project is located) where
failure so to qualify would permanently preclude the Borrower from enforcing
its rights with respect to any material asset or would expose the Borrower to
any material liability.

Section
5.5  Notice of Litigation.  The Borrower will give prompt written notice
to the Lender of the commencement of any action, suit or proceeding affecting
the Borrower.

Section
5.6  Employee Benefit Plans.  The Borrower shall neither take any action,
nor omit to take any action, if such action or omission would result in any of
the statements set forth in Section 4.5 (including any written disclosures made
by the Borrower to the Lender under Section 4.5) becoming inaccurate or
misleading at any time while the Note remains outstanding.

Section
5.7  Insurance.  The Borrower will maintain with financially
sound and reputable insurance companies such insurance as may be required by
law and such other insurance in such amounts and against such hazards as is
customary in the case of reputable companies engaged in the same or similar
business and similarly situated, including, without limitation, the insurance
which the Borrower is required to maintain pursuant to Section 1.4 of the Mortgage.

Section
5.8  Payment of Taxes.  The Borrower will file all tax returns and
reports which are required by law to be filed by it and will pay before they
become delinquent, all taxes, assessments and governmental charges and levies
imposed upon it or its property and all claims or demands of any kind
(including those of suppliers, mechanics, carriers, warehousemen, landlords and
other like Persons) which, if unpaid, might result in the creation of a Lien
upon its property.  Notwithstanding the
foregoing, Borrower shall not be in default hereunder if a tax assessment or
governmental charge or levy results in a Lien upon Borrower’s property so long
as

 13
 

 

Borrower timely
files and prosecutes any proceeding whereby Borrower contests the imposition or
amount of said tax, assessment or governmental charge or levy.

Section
5.9  Maintenance of Properties,
Compliance.  The Borrower will
maintain its properties in good condition, repair and working order, and
supplied with all necessary equipment, and make all necessary repairs,
renewals, replacements, betterments and improvements thereto, all as may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times.  The Borrower will comply in all material
respects with all Governmental Regulations to which it may be subject.

Section
5.10  Merger.  The Borrower will not merge or consolidate or
enter into any analogous reorganization or transaction with any Person or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution).

Section
5.11  Sale of Assets.  The Borrower will not sell, transfer, lease
or otherwise convey all or any substantial part of its assets except for sales
and leases of inventory in the ordinary course of business.

Section
5.12 Voluntary Liens.  The
Borrower will not grant any Lien in its properties without the prior written
consent of the Lender, except Liens securing additional indebtedness permitted
under Section 5.15.

Section
5.13  Mechanic’s Liens.  The Borrower shall cause all mechanic’s or
similar Liens to be removed of record within 120 days of their attachment,
unless the Borrower shall initiate proceedings to remove the mechanic’s Lien;
and in all events shall cause the mechanic’s Lien to be removed of record
within 30 days following the date of a final and non-appealable judicial
determination that the mechanic’s Lien is enforceable.

Section
5.14 Transactions with Related Parties. 
Except for the Operating Contracts described in Exhibit B, and except
for any future contract for the sale of DDGS or carbon dioxide with Broin
Enterprises, Inc., d/b/a Dakota Gold Marketing and its Affiliates, the Borrower
shall not enter into any transactions with Affiliates.

Section
5.15  No Additional Indebtedness.  The Borrower shall not, without Lender’s
prior written consent, borrow from any financial institution or other Person
any sum of money, or enter into any capital leases in an amount in excess of
One Hundred Thousand Dollars ($100,000.00) (individually or in the aggregate)
during any Borrower fiscal year.

Section
5.16 Deposit Accounts.  In order
to further secure the Borrower’s obligations hereunder, the Borrower will
maintain its primary operating account and all savings/investment accounts with
the Lender.  Lender agrees to offer
interest rates that are reasonably competitive with other commercial banking
institutions.

Section
5.17  Additional Covenants.  For additional covenants, see Schedule V
attached hereto and hereby made a part hereof.

 14
 

 

 

ARTICLE
VI

EVENTS OF DEFAULT AND REMEDIES

Section 6.1  Events
of Default.  The occurrence of any
one or more of the following events shall constitute an Event of Default:

6.1(a)  The
Borrower shall fail to make when due, and such failure to make payments shall
continue for ten (10) calendar days after the date the Lender gives notice of
such failure to the Borrower, any payment of principal of or interest on the
Note or any other Obligations of the Borrower to the Lender pursuant to this
Agreement or any of the other Loan Documents.

6.1(b)  Any
representation or warranty made by or on behalf of the Borrower in this
Agreement or any of the other Loan Documents or by or on behalf of the Borrower
in any certificate, statement, report or document herewith or hereafter
furnished to the Lender pursuant to this Agreement or any of the other Loan
Documents shall prove to have been false or misleading in any material respect
on the date as of which the facts set forth are stated or certified.

6.1(c)  The
Borrower shall fail to comply with Sections 5.7, 5.10 or 5.11.

6.1(d)  The
Borrower shall fail to comply with Section 5.1 and such failure to comply shall
continue for ten (10) calendar days after the date the Lender gives notice of
such failure to the Borrower.

6.1(e)  The
Borrower shall fail to comply with any covenant contained in Schedule V hereto
and such failure to comply shall continue for thirty (30) calendar days after
the date of determination or measurement of said covenant.

6.1(f)  A sale,
transfer, conveyance or encumbrance of the Project or any part thereof or of
all or any part of the Borrower’s interest therein in violation of Section 1.3
of the Mortgage shall occur.

6.1(g)  The
Borrower shall fail to comply with any other agreement, covenant, condition,
provision or term contained in this Agreement or any of the other Loan
Documents (other than those hereinabove set forth in this Section 6.1) and such
failure to comply shall continue for thirty (30) calendar days after the date
the Lender gives notice of such failure to the Borrower.

6.1(h)  The
Borrower shall become insolvent or shall generally not pay its debts as they
mature, including additional indebtedness permitted under Section 5.15, or
shall apply for, shall consent to, or shall acquiesce in the appointment of a
custodian, trustee or receiver of itself or for a substantial part of its
property, or, in the absence of such

 15
 

 

application, consent or acquiescence, a custodian,
trustee or receiver shall be appointed for the Borrower or for a substantial
part of the property thereof and shall not be discharged within forty-five (45)
days, or the Borrower shall make an assignment for the benefit of creditors.

6.1(i)  Any
bankruptcy, reorganization, debt arrangement or other proceedings under any
bankruptcy or insolvency law shall be instituted by or against the Borrower
and, if instituted against the Borrower, shall have been consented to or
acquiesced in by the Borrower, as the case may be, or shall remain undismissed
for sixty (60) days, or an order for relief shall have been entered against the
Borrower.

6.1(j)  Any
dissolution or liquidation proceeding shall be instituted by or against the
Borrower and, if instituted against the Borrower, shall be consented to or
acquiesced in by the Borrower, as the case may be, or shall remain for sixty
(60) days undismissed.

6.1(k)  A
judgment or judgments for the payment of money in excess of the sum of
$250,000.00 in the aggregate shall be rendered against the Borrower and either
(i) the judgment creditor executes on such judgment or (ii) such judgment
remains unpaid or undischarged for more than sixty (60) days from the date the
judgment becomes final and non-appealable.

6.1(l)  The
maturity of any material indebtedness of the Borrower (other than the Loan)
shall be accelerated, or the Borrower shall fail to pay any such material
indebtedness when due (after the lapse of any applicable grace period) or any
event shall occur or condition shall exist and shall continue for more than the
period of grace, if any, applicable thereto and shall have the effect of
causing, or permitting the holder of any such indebtedness to cause, such
material indebtedness to become due prior to its stated maturity or to realize
upon any collateral given as security therefor. 
For purposes of this Section, indebtedness shall be deemed “material” if
it exceeds $250,000.00 as to any item of indebtedness or in the aggregate for
all items of indebtedness with respect to which any of the events described in
this Section has occurred.

6.1(m)  Any
execution or attachment shall be issued whereby any substantial part of the
property of the Borrower shall be taken or attempted to be taken and the same
shall not have been vacated or stayed within thirty (30) days after the
issuance thereof.

6.1(n)  The
Lease and/or the Access and Rail Agreement shall be terminated or cancelled or
the Borrower shall be in default thereunder beyond the applicable grace period,
if any.

6.1(o) The termination or assignment, other than to an
Affiliate, or Borrower’s breach of the (i) Agreement Between Owner and Design
Builder dated October 19, 2005, with Broin and Associates, Inc., (ii) the
Management Agreement dated April 20, 2005, and Amendment to Management
Agreement dated October 25, 2005, with Broin Management, LLC, (iii) the Ethanol
Marketing and Services Agreement dated March 5, 2002, and First Amendment to
Ethanol Marketing and Services Agreement dated October

 16
 

 

18, 2002, with Ethanol Products, LLC, and DDGS
Marketing and Services Agreement (for sale of the DDGS), dated March 8, 2002,
and First Amendment to DDGS Marketing and Service Agreement effective May 10,
2002, with Broin Enterprises, Inc., d/b/a Dakota Commodities, n/k/a Dakota Gold
Marketing, without the Lender’s prior written consent.

6.1(p)  Be in
material breach (beyond any commercially reasonable cure period) of any
Operating Contract, or terminate any Operating Contract, or allow substitution
or assignment of, or substantial change in control of, any other party to any
Operating Contract, without Lender’s prior written consent.

6.1(q)  The
construction of the Project Expansion is abandoned or shall be unreasonably
delayed or be discontinued for a period of fifteen (15) consecutive calendar
days, in each instance for reasons other than acts of God, fire, storm,
strikes, blackouts, labor difficulties, riots, inability to obtain materials,
equipment or labor, governmental restrictions or any similar cause over which
the Borrower is unable to exercise control.

6.1(r)  The
Borrower at any time prior to the Completion of the Project Expansion, shall
delay construction or suffer construction to be delayed for any period of time,
for any reason whatsoever, so that the Completion of the Project Expansion
cannot be accomplished, in the reasonable judgment of the Inspecting Architect,
by the Completion Deadline.

Section
6.2  Remedies.  If (a) any Event of Default described in
Sections 6.1 (h), (i) or (j) shall occur with respect to the Borrower, the Note
and all other obligations of the Borrower to the Lender under this Agreement
and the other Loan Documents shall automatically become immediately due and
payable, or (b) any other Event of Default shall occur and be continuing, then
the Lender may declare the Note and all other obligations of the Borrower to
the Lender under this Agreement and the other Loan Documents to be forthwith
due and payable, whereupon the same shall immediately become due and payable,
in each case without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived, anything in this Agreement or in the
Note or in any of the other Loan Documents to the contrary
notwithstanding.  Upon the occurrence of
any of the events described in clauses (a) or (b) of the preceding sentence the
Lender may exercise all rights and remedies under this Agreement, the Note and
any of the other Loan Documents and under any applicable law.  In addition, the Lender may cure the Event of
Default on behalf of the Borrower, and, in doing so, may enter upon the
Project, and may expend such sums as it may deem desirable, including attorneys’
fees, all of which shall be deemed to be advances hereunder and under the Note,
even though causing the debt outstanding under any Note to exceed the face
amount of the Note, shall bear interest at the Default Rate and shall be payable
by the Borrower on demand, and shall be secured by the Mortgage and all other
Loan Documents securing the Loan.

Section
6.3  Offset.  In addition to the remedies set forth in
Section 6.2, upon the occurrence of any Event of Default and thereafter while
the same be continuing, the Borrower hereby irrevocably authorizes the Lender
to set off all sums owing by the Borrower to the Lender

 17
 

 

against all
deposits and credits of the Borrower with, and any and all claims of the
Borrower against, the Lender.

ARTICLE
VII

MISCELLANEOUS

Section
7.1  Modifications.  Notwithstanding any provisions to the
contrary herein, any term of this Agreement may be amended with the written
consent of the Borrower; provided that no amendment, modification or
waiver of any provision of this Agreement or consent to any departure by the
Borrower therefrom shall in any event be effective unless the same shall be in
writing and signed by the Lender, and then such amendment, modification, waiver
or consent shall be effective only in the specific instance and for the purpose
for which given.

Section
7.2  Costs and Expenses.  Whether or not the transactions contemplated
hereby are consummated, the Borrower agrees to reimburse the Lender upon demand
for all reasonable out-of-pocket expenses paid or incurred by the Lender
(including filing and recording costs and fees and expenses of legal counsel to
the Lender) in connection with the negotiation, preparation, approval, review,
execution, delivery, amendment, modification, interpretation, collection and
enforcement of this Agreement, the Note and the other Loan Documents.  The obligations of the Borrower under this
Section shall survive any termination of this Agreement.

Section
7.3  Waivers, etc.  No failure on the part of the Lender or the
holder of the Note to exercise and no delay in exercising any power or right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any power or right preclude any other or further exercise thereof
or the exercise of any other power or right. 
The rights and remedies of the Lender hereunder are cumulative and not
exclusive of any right or remedy the Lender otherwise has.

Section
7.4  Notices.  Except when telephonic notice is expressly
authorized by this Agreement, any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, telegram, telex, facsimile transmission, overnight courier or United
States mail (postage prepaid) addressed to such party at the address specified
on the signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. 
All periods of notice shall be measured from the date of delivery thereof
if manually delivered, from the date of sending thereof if sent by telegram,
telex or facsimile transmission, from the first Business Day after the date of
sending if sent by overnight courier, or from four days after the date of
mailing if mailed.  Either party may
change its address for notices by a notice given not less than five (5)
Business Days prior to the effective date of the change.

Section
7.5  Successors and Assigns;
Disposition of Loans.  This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and assigns, except that
the Borrower may not assign its rights or delegate its obligations hereunder
without the prior written consent of the Lender.  The Lender

 18
 

 

may at any time
sell, assign, transfer, grant participations in, or otherwise dispose of any
portion of the Loan to banks or other financial institutions.  The Lender may disclose any information
regarding the Borrower in the Lender’s possession to any prospective buyer or
participant.

Section 7.6 Governing Law and Construction.
THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT AND THE NOTE
SHALL BE GOVERNED BY THE INTERNAL 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
AGREEMENT 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
AGREEMENT 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 AGREEMENT OR ANY OTHER STATEMENT,
INSTRUMENT OR TRANSACTION CONTEMPLATED HEREBY OR RELATING HERETO.

Section 7.7 
Consent to Jurisdiction. 
AT THE OPTION OF THE LENDER, THIS AGREEMENT AND THE NOTE MAY BE ENFORCED
IN ANY FEDERAL COURT OR SOUTH DAKOTA CIRCUIT COURT SITTING IN GRANT COUNTY OR
MINNEHAHA COUNTY; AND THE BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF
ANY SUCH COURTS AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT
CONVENIENT.  IN THE EVENT THE 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 AGREEMENT, THE 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.

Section 7.8 
Waiver of Jury Trial.  EACH
OF THE BORROWER AND THE LENDER IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
NOTE AND ANY OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.

 19
 

 

Section
7.9  Captions and Recitals.  The captions or headings herein and any table
of contents hereto are for convenience only and in no way define, limit or
describe the scope or intent of any provision of this Agreement.  The Recitals at the beginning of this
Agreement are incorporated herein as substantive provisions.

Section
7.10  Number; Gender.  The singular of all terms used herein shall
include the plural and the plural shall include the singular, and the use of
any gender herein shall include all other genders, where the context so
requires or permits.

Section
7.11  Entire Agreement.  This Agreement and the other Loan Documents
embody the entire agreement and understanding between the Borrower and the
Lender with respect to the subject matter hereof and thereof.  This Agreement supersedes all prior
agreements and understandings relating to the subject matter hereof.

Section
7.12  Counterparts.  This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and either of the parties hereto may execute this Agreement by
signing any such counterpart.

Section
7.13  Participation.  Notwithstanding any other provision of this
Agreement, the Borrower understands that the Lender may enter into
participation agreements with other lenders whereby the Lender will allocate a
certain percentage of the Loan to them. 
The Borrower specifically permits and authorizes the Lender to exchange
financial information about the Borrower with actual or potential
participants.  The borrower acknowledges
that, for the convenience of all parties. This Agreement is being entered into
with the Lender only and that its obligations under this Agreement are
undertaken for the benefit of, and as an inducement to, each of the
Participating Lenders as well as the Lender, and the Borrower hereby grants to
each of the Participating Lenders to the extent of its participation in the
Loan, the right to set off deposit accounts maintained by the Borrower with
such Bank.  The Borrower understands that
the terms of such participation agreements with any of the participants will
limit the Lender’s rights to amend, waive or modify the terms and conditions of
this Agreement without the express written consent of all or a designated
percentage of such participants.  Every
requirement that the Borrower pay the expenses of the Lender, including costs
of the Lender’s attorneys, service tax thereon, and expense reimbursement for
such attorneys, shall also be deemed to include such reasonable costs and
expenses of each such participant.

 20
 

 

 

IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be executed as of the date first
above written.

	
  NORTHERN
  LIGHTS

  	
   

  	
  U.S. BANK NATIONAL

  
	
   

  	
   

  	
  ETHANOL, LLC

  	
   

  	
   

  	
   

  	
  ASSOCIATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/

  	
  Delton Strasser

  	
   

  	
   

  	
  By:

  	
  /s/

  	
  Carl Johnson

  	
   

  
	
   

  	
   

  	
  Print Name:  Delton
  Strasser

  	
   

  	
   

  	
   

  	
  Print Name:  Carl
  A. Johnson

  
	
   

  	
   

  	
  Title: President

  	
   

  	
   

  	
   

  	
  Title:  Assistant
  Vice President

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Borrower’s Address:

  	
   

  	
   

  	
   

  	
  Lender’s Address:

  
	
   

  	
   

  	
  48416 144th Street

  	
   

  	
   

  	
   

  	
  U.S. Bank National Association

  
	
   

  	
   

  	
  PO Box 356

  	
   

  	
   

  	
   

  	
  141 North Main Avenue

  
	
   

  	
   

  	
  Big Stone City, South Dakota 57216

  	
   

  	
   

  	
   

  	
  Post Office Box 5308

  
	
   

  	
   

  	
  Phone: (605) 862-7902

  	
   

  	
   

  	
   

  	
  Sioux Falls, South Dakota 57117

  
	
   

  	
   

  	
  Fax:  (605)
  862-7904

  	
   

  	
   

  	
   

  	
  Phone: (605) 333-3829

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Fax:  (605)
  333-3825

  
									

 

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CONSTRUCTION
LOAN ADDENDUM

Section
1. Definitions.  The following
definitions are hereby added to Article I of the Amended and Restated Loan
Agreement (the “Amended Loan Agreement”) to which this Construction Loan
Addendum (this “Addendum”) is attached:

“Advance”:
An advance of Expansion Loan proceeds by the Lender pursuant to this Agreement.

“Air
Quality Permit”: Borrower’s Title V Air Quality Operating Permit No.
28.0502-29 dated July 3, 2001, as amended June 3, 2002, issued by the South
Dakota Department of Environment and Natural Resources.  As of the date of this Agreement the Air
Quality Permit is the subject of an application for major amendment to allow
Borrower to expand its ethanol production and/or DDGS production capacity as
contemplated by the Project Expansion.

“Assignment
of Construction Contract”: The Assignment of Construction Contract dated of
even date herewith, by and between the Borrower, the Lender and the General
Contractor.

“Assignment
of Plans”: The Assignment of Plans executed by the Borrower in favor of the
Lender, and consented to by the General Contractor.

“Completion”:  The Improvements are completed in accordance
with the Plans and paid for in full; such completion has been approved by the
Inspecting Architect; a certificate of substantial completion for the
Improvements has been signed by the Borrower and the General Contractor and
delivered to the Lender, and no punch-list items remain to be completed; an
unconditional certificate of occupancy for all of the Improvements has been
issued by the appropriate governmental authority, if required by applicable
law; the Borrower has delivered to the Lender copies of all licenses and
permits needed to operate the Project; Lender has received copies of all
warranties from suppliers covering materials, equipment and appliances included
within the Project and evidence that all insurance required hereby is in full
force and effect; and no Default or Event of Default exists hereunder.

“Completion
Deadline”:  The earlier of the
following to occur: (i) August 31, 2007, or (ii) the 120th day following that
stage in the progress of the construction of the Expansion Improvements such
that the construction is sufficiently complete so that Borrower can utilize the
Project, including Project Expansion, for its intended use.

“Contractor”:  Any Person who has a contract or subcontract
under which payment may be required for any work done, material supplied or
services furnished in connection with acquiring, constructing, financing,
equipping and/or developing the Project Expansion. A Contractor includes anyone
eligible to file a lien pursuant to SDCL ch 44-9.

“Disbursing-
Agreement”: The separate disbursing agreement of even date herewith between
the Borrower, the Lender and the Escrow Company, including any amendments and
supplements thereto.

 22
 

 

“Draw
Request”: A written request by the Borrower for an Advance.

“Expansion
Improvements”:  The buildings and
other improvements to be placed or constructed upon the Land, and all
reconfiguring, retrofitting and other work to be done to the Project, according
to the Plans and in furtherance of the Project Expansion.

“Final
Advance”: that advance which will extend the Expansion Loan funds advanced to
$33,000,000 or such lesser amount as the Borrower may borrow to complete the
Project Expansion.

“General
Contractor”: Broin and Associates, Inc., an Affiliate of the Borrower.

“Plans”:  The final working plans for the construction
of the Expansion Improvements, including drawings, specifications, details and
manuals, as approved by the Lender prior to the Closing Date.

“Reserves”:  The reserves for payment of construction
period interest, contingencies and change orders, as set forth on the Sworn
Construction Cost Statement.

“Sworn
Construction Cost Statement”: An itemized, certified statement of actual
and estimated costs of the Project, signed and sworn to by the Borrower and the
General Contractor as the same may be amended or supplemented with the approval
of the Lender from time to time.

The
term “Loan Documents”, as used in the Loan Agreement, shall include, in
addition to the documents described in the definition of Loan Documents
contained in Article I of the Loan Agreement, the Assignment of Construction
Contract, the Assignment of Plans and the Disbursing Agreement.

Section
2. Advances.

(a)           General.  The Lender agrees to lend to the Borrower,
and the Borrower agrees to borrow from the Lender, the proceeds of the
Expansion Loan, from time to time until the Completion Deadline, for the
purpose of developing the Project Expansion and constructing the Expansion
Improvements.  All sums advanced by the
Lender shall constitute Advances under this Agreement and shall be evidenced by
the Note and secured by the Mortgage.  No
Advance shall constitute a waiver of any Default or Event of Default or any
condition precedent to the obligation of the Lender to make any further
Advance.  If the total amount of the
Expansion Loan exceeds the amount needed to fully pay all project costs
approved by the Lender, the Lender shall not be required to advance the
excess.  The Borrower shall keep the
Lender advised of the name of each Contractor and of the type of work, material
or services and the dollar amount covered by each of their respective contracts
with the Borrower.  If requested by the
Lender, the Borrower shall also furnish to the Lender a copy of each contract
with each of the Contractors.  THE
BORROWER MAY COMMENCE CONSTRUCTION WORK ON, OR ACCEPT DELIVERY

 23
 

 

OF MATERIALS FOR,
THE EXPANSION IMPROVEMENTS PRIOR TO THE RECORDING OF THE MORTGAGE.

(b)           Procedure for Advances.  The Expansion Loan proceeds shall be advanced
by the Lender in accordance with the terms and conditions set forth in this
Section 2, and in accordance with the Disbursing Agreement.  All monies advanced by the Lender to the
Escrow Company shall constitute Advances under this Agreement, and shall bear
interest from the date of advance to the Escrow Company, whether such Advances
are fully disbursed by the Escrow Company or are withheld in full or in part.

(c)           Advances by Lender to Itself or
Others.  The Lender may, at the
Lender’s option, advance to itself or to others all sums due or to become due
to the Lender or to others under any of the Loan Documents, whether or not an
Advance is requested by the Borrower.

(d)           Inspections.  The Lender, the Escrow Company, the
Inspecting Architect, the Lender’s consultants and their representatives shall
have access to the Project at all reasonable times to conduct such inspections
thereof as they deem necessary or desirable for the protection of the Lender’s
interests.  All costs of the Inspecting
Architect and any other consultants deemed necessary or desirable by the Lender
to make periodic inspections of the Project and to review all Draw Requests and
change orders shall be paid by the Borrower. 
Neither the Borrower nor any third party shall have the right to use or
rely upon the reports of the Inspecting Architect or any other reports
generated by the Lender or its consultants for any purpose whatsoever.  By advancing funds after any inspection of
the Project, the Lender shall not be deemed to waive any Default or Event of
Default, waive any right to require construction defects to be corrected, or
acknowledge that all construction conforms with the Plans.

(e)           Lender Not Responsible for Project.  The Lender assumes no liability or
responsibility for the sufficiency of the Expansion Loan proceeds to complete
the Project Expansion, to service any interest or other payment due under the
terms of the Expansion Loan under Section 2(c) above, for protection of the
Project, for the satisfactory Completion of the Project Expansion, for the
Plans, for the compliance of the Plans and the Project with Governmental
Requirements, for inspection during construction, for the adequacy of Reserves,
for the adequacy or accuracy of the Sworn Construction Cost Statement, for any
representations made by the Borrower, or for any acts on the part of the
Borrower or its Contractors to be performed in the construction of the Project
Expansion.  The Borrower assumes sole
responsibility for all of the foregoing.

(f)            Loan in Balance.  Borrower acknowledges that Borrower is
responsible for all cost overruns on the Project Expansion.  The Lender shall not be obligated to make any
Advance unless and until the Borrower has provided the Lender with evidence
that the Borrower has paid sufficient costs of the Project Expansion so that
all remaining unpaid costs of the Project Expansion, including the Reserves, do
not exceed the amount of the Expansion Loan proceeds not yet Advanced by the
Lender.  If the Lender or the Borrower
determines that the unAdvanced balance of Expansion Loan proceeds is
insufficient to cover any cost allocation set forth on the Sworn Construction
Cost Statement, including the Reserves and interest during construction, or

 24
 

 

to complete the
Project Expansion, it shall notify the other party of such determination, and
the Borrower shall, within ten (10) Business Days after such notice, deposit
with the Lender funds equal to the amount of the deficiency.  The Borrower hereby assigns and pledges to
the Lender all funds so deposited as additional security for the
Obligations.  The Borrower may not
reallocate items of cost or change the Sworn Construction Cost Statement
without the consent of the Lender.

Section
3. Conditions Precedent to Advances. 
The Lender shall not be required to make any Advances until the
conditions and requirements set forth below have been satisfied, at the
Borrower’s sole cost and expense.  The
Lender may, in its discretion, make Advances prior to satisfaction of any or
all of the conditions and requirements set forth below, all of which are for
the sole benefit of the Lender, without waiving its right to require such
satisfaction before any additional Advances are made.

(a)           Conditions Precedent to Initial
Advance.  The Lender shall not be
obligated to make the initial Advance until the conditions precedent set forth
in Article III of the Loan Agreement have been satisfied and the Lender has
received all of the following in form and substance acceptable to the Lender:

(i)            The
General Contractor’s construction contract and a schedule listing all
subcontracts relating to the construction of the Project Expansion.

(ii)           The
Sworn Construction Cost Statement, and a disbursement schedule showing the
anticipated time and amount of disbursements hereunder.

(iii)          Copies
of all building permits required to complete the construction of the Expansion
Improvements, or evidence satisfactory to the Lender that such permits will be
obtained.

(iv)          The
Assignment of Construction Contract and the Assignment of Plans and the
Disbursing Agreement, each duly executed by the parties thereto.

(v) The parties acknowledge that work on the Expansion
Improvements commenced prior to closing, and that all preconditions to any
subsequent Advances hereunder apply to the initial Advance hereunder.

(b)           Conditions Precedent to All
Advances.  The obligation of the
Lender to make each Advance (including the initial Advance) is subject to the
following conditions precedent:

(i)            No
Default or Event of Default shall have occurred and be continuing or will exist
upon the making of such Advance.

(ii)           All
representations and warranties of the Borrower made in the Loan Agreement shall
remain true and correct as of the date of the Advance as though made on and as
of

 25
 

 

such date, except to the extent that such
representations and warranties relate solely to an earlier date and no Default
or Event of Default shall exist.

(iii)          All
requirements and conditions for an Advance under Section 2 of this Addendum
shall have been complied with and satisfied.

(iv)          There
shall not have occurred any change, which in the sole judgment of the Lender is
materially adverse, in the condition (financial or otherwise) or operations of
the Borrower or in the Project or the prospects for the timely and satisfactory
completion of the construction of the Expansion Improvements and operation of
the Project.

(c)           Condition
Precedent to Final Advance.   The
obligation of Lender to make the Final Advance is subject to Borrower obtaining
the Air Quality Permit.

Section
4. Warranties.  Representations.  Covenants and Agreements.  In addition to the warranties,
representations, covenants and agreements of the Borrower contained in the Loan
Agreement, the Borrower hereby warrants, represents, covenants and agrees to
and with the Lender as follows:

(a)           Boundary Lines.  Governmental Requirements and Restrictions.  The exterior lines of the Expansion
Improvements are, and at all times will be, within the boundary lines of the
Land and any required set back lines, and the Borrower has examined and is
familiar with all applicable covenants, conditions, restrictions and
reservations, and with all applicable Governmental Requirements affecting the
Project, and the Project will conform to and comply with all of the foregoing.

(b)           Loan in Balance.  The amount of the Expansion Loan proceeds not
yet advanced by the Lender equals or exceeds the total of all remaining unpaid
costs of the Project Expansion, including the Reserves.

(c)           Commencing and Completing-
Construction.  Regardless of whether
or not there are sufficient Expansion Loan proceeds or sufficient funds
disbursed under the Disbursing Agreement, the Borrower shall expeditiously
complete and fully pay for the development and construction of the Project
Expansion in a good and workmanlike manner and in accordance with the
contracts, subcontracts and Plans submitted to and approved by the Lender, and
in compliance with all applicable Governmental Requirements, and any applicable
covenants, conditions, restrictions and reservations, so that Completion occurs
on or before the Completion Deadline. 
The Borrower shall correct or cause to be corrected (a) any defect in
the Expansion Improvements, (b) any departure in the construction of the
Expansion Improvements from the Plans or Governmental Requirements, and (c) any
encroachment by any part of the Expansion Improvements or any other structure
located on the Land on any building line, easement, property line or restricted
area.  The Borrower shall cause the
bearing capacity of the soil on the Land to be made sufficient to support the
Expansion Improvements, and sufficient local utilities to be made available to
the Project and installed at costs (if any) set out in the Sworn Construction
Cost Statement, on or before the Completion Deadline.

 26
 

 

(d)           Changing Costs, Scope or Timing of
Work.  The Borrower shall deliver to
the Lender revised, sworn statements of estimated costs of the Project
Expansion, showing changes in or variations from the original Sworn
Construction Cost Statement, as soon as such changes are known to the
Borrower.  The Borrower shall furnish the
Lender with copies of all changes or modifications in the Plans, contracts or
subcontracts for the construction of the Expansion Improvements, prior to
incorporation of any such change or modification into the Expansion
Improvements, whether or not the Lender’s consent to such change or
modification is required.  The Borrower
shall not make or consent to any change or modification in such Plans,
contracts or subcontracts, and no work shall be performed with respect to any
such change or modification, without the prior written consent of Lender, if
such change or modification would in any material way alter the design or
structure of the Expansion Improvements, or increase or decrease the cost of
the construction of the Expansion Improvements by $250,000.00 or more for any
single change or modification, or if the aggregate amount of all changes and
modifications exceeds $1,000,000.00.

(e)           Paying Costs of Project and
Expansion Loan.  The Borrower shall
pay and discharge, when due, all taxes, assessments and other governmental
charges upon the Project, as well as all claims for labor and materials which,
if unpaid, might become a lien or charge upon the Project; provided, however,
that the Borrower shall have the right to contest the amount, validity and/or
applicability of any of the foregoing in strict accordance with the terms of
the Mortgage.  The Borrower shall also
pay all costs and expenses of the Lender, the Lender’s consultants and the
Borrower in connection with the Project, the preparation and review of the Loan
Documents and the making, closing, administration, repayment and/or transfer of
the Expansion Loan, including but not limited to the fees of the Lender’s
attorneys, fees of the Inspecting Architect, title insurance costs,
disbursement expenses, and all other costs and expenses payable to third
parties incurred by the Lender or the Borrower in connection with the Expansion
Loan.  Such costs and expenses shall be
paid by the Borrower whether or not the Expansion Loan is fully advanced or
disbursed.

(f)            Using Expansion Loan Proceeds.  The Borrower shall use the Expansion Loan
proceeds solely to pay, or to reimburse the Borrower for paying, costs and
expenses shown on the Sworn Construction Cost Statement approved by the Lender
and incurred by the Borrower in connection with the acquisition, development
and construction of the Project Expansion. 
The Borrower shall take all steps necessary to assure such use of
Expansion Loan proceeds by its Contractors.

(g)           Keeping Records.  The Borrower shall maintain accurate and
complete books, accounts and records pertaining to the Project in a manner
reasonably acceptable to the Lender and to the Escrow Company.  The Borrower will permit representatives of
the Lender, the Inspecting Architect and the Escrow Company to have free access
to and to inspect and copy all books, records and contracts of the Borrower.

(h)           Providing- Evidence of Completion.  Upon Completion, and prior to the final
Advance of Expansion Loan proceeds to pay for hard costs of construction of the
Project

 27
 

 

Expansion, and as
a condition of the same, the Borrower shall furnish the Lender with all items
required to evidence Completion, including an unconditional occupancy
certificate if required by applicable law to occupy the Project; a zoning
endorsement (Form 3.1 or equivalent) to the Title Policy; a final, certified
Project “as-built” survey (3 copies) if requested by Lender; the evidence of
insurance required by Section 1.4 of the Mortgage; and photographs of the
completed Improvements.

Section
5. Events of Default.  In addition
to the Events of Default set forth in Article VI of the Loan Agreement, the
following events shall constitute an Event of Default under the Loan Agreement:

(a)           Abandonment of or Delay in
Construction.  Work on the Project
Expansion shall be substantially abandoned, or shall, by reason of the Borrower’s
fault, be unreasonably delayed or discontinued for a period of thirty (30)
days, or shall be delayed for any reason whatsoever to the extent that
Completion of the Project Expansion cannot, in the reasonable judgment of the
Lender, be accomplished prior to the Completion Deadline.

(b)           Expansion Loan Imbalance Not
Remedied.  The Lender determines that
the remaining undisbursed Expansion Loan proceeds are insufficient to fully pay
all of the then unpaid costs of the Project Expansion and estimated expenses of
completion, and the Borrower (i) fails to deposit with the Lender, within ten
(10) Business Days after demand, sufficient funds to permit the Lender to pay
said excess costs as the same become payable or (ii) does not pay said excess
costs directly and deliver to the Lender unconditional mechanics’ lien waivers
therefor (or paid receipts for nonlienable items), at the Lender’s option.

Section
6. Remedies.  If an Event of
Default shall occur under the Loan Agreement, then in addition to the rights
and remedies set forth in the Loan Agreement and the other Loan Documents, the
Lender shall be entitled, at the option of the Lender, to exercise any or all
of the following rights and remedies:

(a)           Make or Refrain from Making
Further Advances.  The Lender may
make one (1) or more further Advances, without liability to make any subsequent
Advances.

(b)           Suspend Advances.  The Lender may suspend or terminate its
obligation to make Advances, and if it does so, shall promptly notify Borrower.

(c)           Completion of Expansion
Improvements by the Lender.  In
addition, in case of the occurrence of any Event of Default caused by, or which
results in, the Borrower’s failure, for any reason, to continue with the
construction of the Project Expansion as required by the Loan Agreement and
this Addendum, the Lender may (but shall not be obligated to) take over and
complete the construction of the Project Expansion in accordance with the
Plans, with such changes therein as the Lender may, in its discretion, deem
appropriate, all at the risk, cost and expense of the Borrower.  The Lender may assume or reject any contracts
entered into by the Borrower in connection with the Project Expansion, may
enter into additional or different contracts, and may pay, compromise and
settle all claims in connection with the Project

 28
 

 

Expansion.  All costs and expenses, including attorneys’
fees, incurred by the Lender in completing or attempting to complete the
Project Expansion (whether aggregating more, or less, than the face amount of
the Note), shall be deemed Advances made by the Lender to the Borrower
hereunder, and the Borrower shall be liable to the Lender, on demand, for the
repayment of such sums, together with interest on such sums from the date of
their expenditure at the Default Rate. 
The Lender may, in its discretion, at any time abandon work on the
Project Expansion, after having commenced such work, and may recommence such
work at any time.  Nothing in this
Section 6(c) shall impose any obligation on the Lender either to complete or
not to complete the Project Expansion. 
For the purpose of carrying out the provisions of this Section 6(c), the
Borrower irrevocably appoints the Lender its attorney-in-fact, with full power
of substitution, to execute and deliver all such documents, to pay and receive
such funds, and to take such action as may be necessary, in the judgment of the
Lender, to complete the Project Expansion. 
This power of attorney is coupled with an interest and is irrevocable.

IN
WITNESS WHEREOF, the parties hereto have caused this Construction Loan Addendum
to be executed the same date as execution of the Loan Agreement.

	
  NORTHERN LIGHTS

  	
   

  	
  U.S. BANK NATIONAL

  
	
   

  	
   

  	
  ETHANOL, LLC

  	
   

  	
   

  	
   

  	
  ASSOCIATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Delton Strasser

  	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Carl Johnson

  	
   

  
	
   

  	
   

  	
  Print Name:  Delton
  Strasser

  	
   

  	
   

  	
   

  	
  Print Name:  Carl
  A. Johnson

  
	
   

  	
   

  	
  Title: President

  	
   

  	
   

  	
   

  	
  Title:  Assistant
  Vice President

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Borrower’s Address:

  	
   

  	
   

  	
   

  	
  Lender’s Address:

  
	
   

  	
   

  	
  48416 144th Street

  	
   

  	
   

  	
   

  	
  U.S. Bank National Association

  
	
   

  	
   

  	
  PO Box 356

  	
   

  	
   

  	
   

  	
  141 North Main Avenue

  
	
   

  	
   

  	
  Big Stone City, South Dakota 57216

  	
   

  	
   

  	
   

  	
  Post Office Box 5308

  
	
   

  	
   

  	
  Phone: 

  	
  (605) 862-7902

  	
   

  	
   

  	
   

  	
  Sioux Falls, South Dakota 57117

  
	
   

  	
   

  	
  Fax:  

  	
  (605) 862-7904

  	
   

  	
   

  	
   

  	
  Phone: (605) 333-3829

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Fax:  (605)
  333-3825

  
										

 

 29
 

 

 

EXHIBIT A

(Legal Description of Land)

Section 11:

(1) Parcel B in the SE1/4
of Section 11, Township 121 North, Range 47 West of the 5th P.M., Grant County, South Dakota; and (2)
nonexclusive easement over, upon and across that portion of access road located
in said SE1/4, as depicted on
Exhibit C attached, for driveway and ingress and egress purposes.

Section 12:

(1) Parcel A in the SW1/4
of Section 12, Township 121 North, Range 47 West of the 5th P.M., Grant County, South Dakota; and (2)
nonexclusive easement over, upon and across that portion of access road located
in said SW1/4, as depicted on Exhibit C attached, for driveway and ingress and
egress purposes; and (3) a portion of Easement No. 1 for Northern Lights
Railroad Spurline area in the SW1/4 of said Section 12, as depicted on Exhibit
A attached; and (4) Easement No. 1 for Steam Pipe Rack and Fireline in the
SW1/4 of said Section 12, as depicted on Exhibit D; and (5) Easement No. 2 for
RO-Water and Process Waste Water Line in the SW1/4 of said Section 12, as depicted
on Exhibit E; and (6) Easement No. 4 for Meter Pit Location and Water Line in
the S1/2 of said Section 12, as depicted on Exhibit G.

Section 13:

(1) A portion of Easement
No.1 for Northern Lights Railroad Spurline area in the NW1/4 of Section 13, Township
121 North, Range 47 West of the 5th P.M., Grant County, South Dakota, as depicted
on Exhibit A attached; and (2) Easement No. 2 for Northern Lights maintenance
road area in said NW1/4, as also depicted on Exhibit A attached; and (3) a
nonexclusive easement for all rail access to Big Stone Plant co-owner’s
railroad spurline in the N1/2, as depicted on Exhibit B attached; and (4)
Easement No. 3 for Sanitary Sewer Line in the NW1/4 of said Section 13, as
depicted on Exhibit F.

Section 18:

A portion of a
nonexclusive easement for rail access to Big Stone Plant co-owners’ railroad
spurline, as depicted on Exhibit B attached, on the following described parcels
in Section 18, Township 121 North, Range 46 West of the 5th P.M., Grant County, South Dakota:

(1) SE1/4SWl/4, except
Burlington Northern Santa Fe railroad right-of-way; and the W1/2SE1/4 lying
northerly of the present right-of way of Chicago, Milwaukee, St. Paul and
Pacific Railway Company; and that part of Outlot 47 (which is also described as
the NE1/4SE1/4, except Outlot 48), and including the abandoned right-of-way of
the Chicago, Milwaukee, St. Paul and Pacific Railroad Company, all in Section
18, Township 121 North, Range 46 West of the 5th P.M., Grant County, South Dakota, according to
plat thereof on file and of record in the office of the Register of Deeds of
said county and state.

 30
 

 

(2) Sl/2NW1/4; and the
N1/2SW1/4, except railroad right-of-way; and except Hay’s Outlot located in the
NW1/4SW1/4 and the SW1/4NW1/4; and except a metes and bounds tract of land
described as follows: Commencing at the southwest corner of the NW1/4SW1/4,
thence North 45 rods, thence East 16 rods, thence South 45 rods, thence West 16
rods to the place of beginning (now known as Lots 1,2, and 3, Replat of Lot C
in NW1/4SW1/4 of 18-121-46), according to plat thereof on file and of record in
the office of the Register of Deeds of said county and state.

(3) N1/2NW114, except township road deeded at Deed
Record 58, page 561, in Section 18, Township 121 North, Range 46 West of the 5th P.M., Grant County, South Dakota.  (Copy of Deed Record 58, page 561 attached)

(4) The West 1613 feet of
that part of the NE1/4 lying South of the highway known as the Yellowstone
Trail, passing in an easterly direction through said quarter section, except
the West 500 feet of the South 403 feet of the North 2351 feet of the
SW1/4NE1/4; and except that part deeded for cemetery purposes to St. Charles
Catholic Church, but including the abandoned railroad right-of-way of the
Chicago, Milwaukee, St. Paul and Pacific Railway Co., all in Section 18,
Township 121 North, Range 46 West of the 5th P.M., Grant County, South Dakota, according to
plat thereof on file and of record in the office of the Register of Deeds of
said county and state.

(5) NE 1/4 lying North of
the highway known as the Yellowstone Trail, except the Cheese Company Outlot,
in Section 18, Township 121 North, Range 46 West of the 5th P.M., Grant County, South Dakota, according to
plat thereof on file and of record in the office of the Register of Deeds of
said county and state.

Section 7:

Easement No. 4 for meter
pit location and water line in the S1/2 of Section 7, Township 121 North, Range
6 West of the 5th P.M., Grant County, South Dakota, as depicted on Exhibit G.

SOMETIMES MORE GENERALLY
DESCRIBED AS:

Parcel A in the
Southwest Quarter (SW 1/4) of Section Twelve (12), Township One Hundred
Twenty-One (121) North, Range Forty-Seven (47) West of the Fifth Principal
Meridian, Grant County, South Dakota, according to the recorded plat thereof.

Parcel B in the
Southeast Quarter (SE 1/4) of Section Eleven (11), Township One Hundred
Twenty-One (121) North, Range Forty-Seven (47) West of the Fifth Principal
Meridian, Grant County, South Dakota, according to the recorded plat thereof

The Borrower holds
an ingress and egress easement rights on certain land and railroad spur lines
identified in the Access and Rail Agreement dated April 18, 2001, granted by
Otter Tail Corporation, f/k/a Otter Tail Power Company; Montana-Dakota
Utilities Co., a division of MDU Resources Group, Inc., f/k/a Montana-Dakota
Utilities Co.;

 31
 

 

Northwestern Public
Service, a division of NorthWestern Corporation, f/k/a Northwestern Public
Service Company and Northern Lights Ethanol, LLC:

The Southeast
Quarter (SE 1/4) of Section Eleven (11), Township One Hundred Twenty-One North
(121), Range Forth-Seven (47), West of the Fifth Principal Meridian, Grant
County, South Dakota;

The Southwest
Quarter (SW 1/4) of Section Twelve (12), Township One Hundred Twenty-One North
(121), Range Forty-Seven (47) West of the Fifth Principal Meridian, Grant
County, South Dakota;

The Northeast
Quarter (NE 1/4) and the Northwest Quarter (NW 1/4) of Section Thirteen (13),
Township One Hundred Twenty-One (121) North, Range Forty-Seven (47) West of the
Fifth Principal Meridian, Grant County, South Dakota; and

The Northwest
Quarter (NW 1/4), the Northeast Quarter (NE 1/4) and that portion of the
Southeast Quarter (SE 1/4) lying North of the Burlington Northern Sante Fe Main
line railroad Right of Way in Section Eighteen (18), Township One Hundred
Twenty-One (121) North, Range Forty-Six (46) West of the Fifth Principal
Meridian, Grant County, South Dakota.

 

 32
 

 

 

EXHIBIT B

(Operating
Contracts)

Agreement Between
Owner and Design Builder dated October 19, 2005, and all exhibits referenced
therein, including Process Guaranty dated October 19, 2005, and the Technology
and Patent Right License Agreement and Raw Starch Technology and Patent Rights
Addendum, dated October 25, 2005, by and between Borrower and Broin and Associates,
Inc.

Management
Agreement dated April 20, 2005, and an Amendment to Management Agreement dated
October 25, 2005, by and between Borrower and Broin Management, LLC.

Ethanol Marketing
and Services Agreement dated March 5, 2002, and the First Amendment to Ethanol
Marketing and Services Agreement dated October 18, 2002, by and between
Borrower and Ethanol Products, LLC.

DDGS Marketing and
Services Agreement dated March 8, 2002, and the First Amendment to DDGS
Marketing and Services Agreement effective May 10, 2002, by and between
Borrower and Broin Enterprises, Inc. d/b/a Dakota Commodities n/k/a Dakota Gold
Marketing.

Corn Price Risk
Management Agreement dated November 16, 2001, by and between Borrower and Broin
Management, LLC.

Commodity Advisory
Agreement dated August 1, 2004, by and between Borrower and Commodity Marketing
Co., Inc. Commodity Trading Advisor.

Steam Sale
Agreement dated April 18, 2001, by and between Borrower and Otter Tail
Corporation, f/k/a Otter Tail Power Company, Montana-Dakota Utilities Co., a
division of MDU Resources Group, Inc., f/k/a Montana-Dakota Utilities, Co.,
Northwestern Public Service, a division of Northwestern Corporation, f/k/a
Northwestern Public Service Company.

Water and Fuel Oil
Agreement dated August 14, 2001, by and between Borrower and Otter Tail Power
Company, a division of Otter Tail Corporation, as operating agent for
Montana-Dakota Utilities Co., a division of MDU Resources Group, Inc.,
Northwestern Public Service, a division of Northwestern Corporation, and Otter
Tail Power Company.

Access and Rail
Agreement dated April 18, 2001, by and between Borrower and Otter Tail
Corporation, f/k/a Otter Tail Power Company, Montana-Dakota Utilities Co., a
division of MDU Resources Group, Inc., f/k/a Montana-Dakota Utilities, Co.,
Northwestern Public Service, a division of Northwestern Corporation, f/k/a
Northwestern Public Service Company.

Letter Agreement
dated August 15, 2000, Assignment of Agreement (U.S. Energy Services, Inc.
Contract) dated March 3, 2001, and Letter Agreement Regarding Appointment of
Agent dated November 23, 2003, by and between Borrower and U.S. Energy
Services, Inc.

 33
 

 

Electric Service
Agreement dated September 26, 2001, by and between Borrower and Otter Tail
Power Company.

Water and Sanitary
Sewer Agreement dated December 26, 2001, by and between Borrower and City of
Big Stone City, South Dakota.

(Natural Gas)
Extended Service Agreement dated December 4, 2001, by and between Borrower and
Northwestern Public Service.

Industry Track
Agreement dated January 8, 2002, by and between Borrower and Burlington
Northern and Santa Fe Railway Company.

 34
 

 

 

EXHIBIT C

(Permitted
Encumbrances)

1.             An easement for the purpose of
granting the right to have a Pollution Control Project located on the subject
property and to have ingress and egress on and over such lands, as set forth in
Easement Agreement between Montana-Dakota Utilities, Northwestern Public
Service Company, and Otter Tail Power Company and Grant County, South Dakota,
dated February 1, 1974, and recorded in Miscellaneous Record 159, page 169, on
2/6/74 as Document Number 149365.

2.             A non-exclusive easement for the
purpose of granting the right to have transmission lines located on the subject
property and to have ingress to and egress from said lines, as set forth in
Easement Agreement between Montana-Dakota Utilities, Northwestern Public
Service Company, and Otter Tail Power Company and Cooperative Power
Association, dated July 1, 1976, and recorded in Miscellaneous Record 161, page
845, on 8/6/76 as Document Number 154178.

3.             Any rights claimed as set forth in
Bill of Sale and Assignment of Easements between Otter Tail Power Company and
Cooperative Power Association, dated July 1, 1976, and recorded in
Miscellaneous Record 161, page 855, on 8/6/76 as Document Number 154179.

4.             An easement for the purpose of
granting the right to construct, maintain and operate various utility lines on
the subject property as set forth in an Utility Easement Agreement dated
December 7, 2001, by and between Borrower and Big Stone City, South Dakota, and
recorded as Miscellaneous Record No. 200508 in Book 223, Pages 866-870

5.             An easement for the purpose of
granting the right to construct, maintain and operate various utility lines on
the subject property as set forth in an Utility Easement Agreement dated
December 26, 2001, by and between Borrower and Otter Tail Power Company,
operating agent for Otter Tail Power Company, Montana-Dakota Utilities Co., a
division of MDU Resources Group, Inc., Northwestern Public Service Company, a
division of Northwestern Corporation, and recorded as Miscellaneous Record No.
200531 in Book 223, Pages 877-882.

 

	
  Initials on behalf of
  Borrower:

  	
   /s/ DS

  	
   

  

 35
 

 

 

SCHEDULE
3.1(a)

This
Agreement, the Expansion Construction Note, the Mortgage, the Security
Agreement, the Indemnification Agreement, the Financing Statement of even date
herewith, and, except to the extent provided in connection with the Original
Loan, Assignments of Operating Contracts, each duly executed by the Borrower
(and in the case of the Assignments of Operating Contracts by the Contracting
Parties).

The
Indemnification Agreement executed by the Borrower and dated the Closing Date.

The
opinion of counsel to the Borrower covering such matters as the Lender may request.

An
appraisal of the Project as expanded, addressed to the Lender, prepared in
conformance with the Lender’s real estate appraisal and evaluation policy, and
signed by an appraiser acceptable to the Lender.

A
survey prepared by a registered land surveyor licensed in the state where the
Land is located and complying with Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys (Urban) (1992), including items 1, 2, 3, 4, 6, 7a,
7b, 8, 9, 10, 11 and 13 of Table A thereof and such other information as the
Lender may reasonably request, and certified in a manner acceptable to the
Lender.

A
written environmental assessment addressed to the Lender, conducted by an
environmental engineer or consultant acceptable to the Lender, setting forth
the results of an investigation of the Project Expansion, containing an
analysis and evaluation of any and all environmental risks associated with the
Project Expansion, and concluding that there is no significant risk of any
hazardous materials contamination of any portion of the Project Expansion.

A
financial forecast of the Borrower as of a date not more than six months prior
to the Closing Date.

A
true, correct and complete copy of each lease of the Project or any part
thereof.

A
Lessor (i) consent to assignment of the Lease and construction of Improvements,
and (ii) acknowledgement of satisfaction of all preconditions to construction
of the Improvements, executed by Big Stone-Grant Industrial Development and
Transportation, L.L.C.

Insurance
policies or certificates thereof in form satisfactory to the Lender, satisfying
the requirements of Section 1.4 of the Mortgage.

A
flood check satisfactory to the Lender and satisfying the requirements of 42
U.S.C. § 4104b and any rules and regulations promulgated pursuant thereto.

 36
 

 

True,
correct and complete copies of the Operating Contracts.

A
copy of the resolutions of the Borrower’s Board of Managers authorizing the
execution, delivery and performance of the Loan Documents Lender requires in
connection with the Expansion Loan, and containing an incumbency certificate
showing the names and titles, and bearing the signatures of, the officers of
such party authorized to execute the Loan Documents, certified as of the
Closing Date by the Secretary or an Assistant Secretary of the Borrower.

A
Sworn Construction Cost Statement executed by the Borrower.

A
copy of the Articles of Organization of the Borrower with all amendments
thereto, certified by the appropriate governmental official of the jurisdiction
of its formation as of a date not more than 15 days prior to the Closing Date.

A
certificate of good standing (or other evidence satisfactory to the Lender) for
the Borrower in the jurisdiction of its formation, and, if different than the
jurisdiction of its formation, the jurisdiction in which the Project is
located, certified by the appropriate governmental officials as of a date not
more than 45 days prior to the Closing Date.

Copies
of the Operating Agreement and Member Control Agreement of the Borrower,
certified as of the Closing Date by the Secretary or an Assistant Secretary of
the Borrower.

A
copy of the Plans, as certified by the Borrower and General Contractor.

Assignment
of the Construction Contract and Plans.

A
copy of all governmental permits as may be required to construct and operate
the Project as expanded and reconfigured pursuant to the Project Expansion.

Such
other documents as the Lender may reasonably require to assure compliance with
the requirements of this Agreement.

 

	
  Initials on behalf of
  Borrower:

  	
   /s/ DS

  	
   

  

 37
 

 

 

SCHEDULE
3.2(a)

The
Title Policy, or a suitably marked up title insurance commitment issued by
Title Company unconditionally agreeing to issue the Title Policy upon
recordation of the Mortgage.

UCC
chattel lien searches from the Register of Deeds in Grant County, South Dakota,
and from the office of the Secretary of State of South Dakota.

Certification
of the continuing accuracy of all representations and warranties, compliance
with covenants in absence of any Event of Default or any event, with the past
due time would constitute an Event of Default.

 

	
  Initials on behalf of
  Borrower:

  	
   /s/ DS

  	
   

  

 38
 

 

 

SCHEDULE
V

ADDITIONAL
COVENANTS

Until
the Note and all of the other Obligations shall have been paid and performed in
full, unless the Lender shall otherwise consent in writing:

Capital
Expenditures.  The
Borrower will not make any expenditures for fixed or capital assets in an
amount exceeding $1,000,000.00 in any calendar year.  Further, significant plant expansions will be
negotiated by the parties outside of this Covenant.

Distributions.  The Borrower may periodically make
distributions to its Members of up to 80% of Net Income each fiscal year as the
Borrower may determine are appropriate where: (i) Borrower first provides
Lender a fully and accurately completed and signed Compliance Certificate
establishing that after the payment of the proposed distributions Borrower will
remain in compliance with the requirements of this Amended Loan Agreement,
including Schedule V hereto and the other Loan Documents; and (ii) such
distribution would not be in violation of SDCL 47-34A-406, or any other
applicable law.  The Compliance
Certificate shall be in the form Lender may from time-to-time otherwise
specify.  In addition to the foregoing,
commencing October 1, 2005, Borrower’s distributions to its Members shall be
limited to 50% of Net Income until Borrower retains at least $5,000,000.00 in
cash (which in Borrower’s ordinary course would otherwise be paid as a
Distribution to Members) required for initial project equity under Section
3.2(a) of this Agreement.

Investments.  The Borrower will not make any loans,
Advances or extensions of credit to any other Person (except for trade and
customer accounts receivable for inventory sold or services rendered in the
ordinary course of business and payable in accordance with customary trade
terms) or purchase or acquire any stock or other debt or equity securities of
or any interest in any other Person or any integral part of any business or the
assets comprising such business or part thereof, except for:

(a)           Investments
in readily marketable direct obligations issued or unconditionally guaranteed
by the United States government or any agency thereof and supported by the full
faith and credit of the United States.

(b)           Certificates
of deposit or bankers’ acceptances issued by any commercial bank organized
under the laws of the United States or any State thereof which has (i) combined
capital and surplus of at least $100,000,000, and (ii) a credit rating with
respect to its unsecured indebtedness from a nationally recognized rating
service that is satisfactory to the Lender.

(c)           Commercial
paper given the highest rating by a nationally recognized rating service.

 39
 

 

 

(d)           Repurchase
agreements relating to securities of the kind described in clause (a) above.

(e)           Other
readily marketable investments in debt securities which are reasonably
acceptable to the Lender.

(f)            Travel
advances to officers and employees in the ordinary course of business.

Any investments
under clauses (a), (b), (c) or (d) above must mature within one year of the
acquisition thereof by the Borrower.

Indebtedness.  Except as permitted in Section 5.15 and
subject to Section 5.12 of the Amended Loan Agreement, the Borrower will not
borrow any money or issue any bonds, debentures or other debt securities or
otherwise become obligated on any interest-bearing indebtedness except for the
Loan under this Agreement.

Liens.  The Borrower will not create, incur, assume
or suffer to exist any Lien, or enter into any arrangement for the acquisition
of any property through conditional sale, lease-purchase or other title
retention agreements except:

(a)           Liens
granted to the Lender.

(b)           Liens
existing on the date of this Agreement and heretofore disclosed in writing by
the Borrower to the Lender.

(c)           Deposits
or pledges to secure payment of workers’ compensation, unemployment insurance,
old age pensions or other social security obligations arising in the ordinary
course of business of the Borrower.

(d)           Liens
for taxes, fees, assessments and governmental charges not delinquent.

(e)           Liens
of carriers, warehousemen, mechanics and materialmen, and other like Liens
arising in the ordinary course of business, for sums not due, and except as
provided in Section 5.13.

(f)            Liens
incurred or deposits or pledges made or given in connection with, or to secure
payment of, indemnity, performance or other similar bonds.

(g)           Except
for the Permitted Encumbrances, encumbrances in the nature of zoning
restrictions, easements and rights or restrictions of record on the use of land
and landlord’s Liens under leases on the premises rented, which do not
materially detract from the value of such property or impair the use thereof in
the business of the Borrower.

Contingent
Obligations.  The
Borrower will not guarantee or otherwise become liable on the indebtedness of
any other Person.

 40
 

 

Tangible
Net Worth.  The
Borrower will not permit its Tangible Net Worth (the excess of its assets,
excluding intangible assets, over its liabilities) to be less than
$25,023,621.00, as of December 31, 2004. 
Borrower’s Tangible Net Worth will increase at the end of each year
thereafter in an amount equal to Net Income after distributions to Members.

Working
Capital.  The Borrower
will not permit its Working Capital (the excess of its current assets over its
current liabilities) to be less than $4,000,000.00 as of the effective date of
this Amendment.  Commencing Borrower’s
first fiscal quarter end following the Conversion Date Borrower will not permit
its Working Capital to be less than $7,500,000.00.  For purposes of this definition “current
assets” includes that amount of principal which at the date Working Capital is
calculated is available for advance to Borrower under the $8,000,000.00
revolving Promissory Note referenced in Recital G of this Agreement (including
any renewal or replacement of such Note); provided that on such date Borrower
would be entitled to have such additional amount advanced under the terms of
such Note.

Fixed
Charge Coverage Ratio. 
The Borrower will not permit the Fixed Charge Coverage Ratio, as of the
last day of any fiscal quarter for the four consecutive fiscal quarters ending
on that date, commencing with the quarter ending December 31, 2005, to be less
than 1.15 to 1.

Minimum
Balance Sheet Equity Percentage.  The Borrower will not permit its minimum
balance sheet equity percentage to be less than 40%, commencing with the first
fiscal year end following the Completion Deadline, and each fiscal year end
thereafter.  For purposes of this
definition “minimum balance sheet equity percentage” means the Borrower’s net
worth divided by its total assets.

For
purposes hereof, the following definitions have the following meanings:

“EBITDA”:  For any period of determination, the Net
Income of the Borrower before deductions for income taxes, interest expense,
depreciation and amortization, all as determined in accordance with GAAP.

“Fixed
Charge Coverage Ratio”:  For any
period of determination with respect to the Borrower, the ratio of

(a)           EBITDA
minus the sum of (i) any dividends or other distributions and (ii) the greater
of (A) expenditures for fixed and capital assets not financed, or (B)
$1,000,000.00,

to

(b)           all required principal payments with
respect to the Loan (including but not limited to all payments with respect to
capitalized lease obligations of the Borrower), plus interest expenses in each
case determined for said period in accordance with GAAP.

 41
 

 

 

“Net Income”:  means net income as defined by GAAP.

“Total Liabilities”:  At the time of any determination, the amount
of all items of Indebtedness of the Borrower that would constitute “liabilities”
for balance sheet purposes in accordance with GAAP.

“Diligent
Construction”:  Diligently proceed
with construction of the Project Expansion according to the Plans and in
accordance with all applicable laws and ordinances, and complete the Project
Expansion by the Completion Deadline.

“Use of
Expansion Loan Proceeds”:  Use of the
proceeds of each of the disbursements under the Expansion Loan solely for the
purposes set forth in this Agreement.

Use its best
efforts to require the General Contractor and each Subcontractor to comply with
all rules, regulations, ordinances and laws bearing on its conduct of work on
the Project Expansion.

By “re-incorporation”,
“merger” or otherwise change the Borrower’s state of incorporation to a state
other than South Dakota.

Borrower shall not
engage in any line of business materially different from that presently engaged
in by the Borrower.

 

	
  Initials on behalf of
  Borrower:

  	
   /s/ DS

  	
   

  

 

 42Exhibit
10.2

EXPANSION
CONSTRUCTION NOTE

	
  $33,000,000.00

  	
   

  	
  Sioux Falls, South
  Dakota

  
	
   

  	
   

  	
  August 28, 2006

  

 

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 banking association (“Lender”, which term shall include
any future holder hereof), at 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 Thirty-Three Million and no/100 Dollars ($33,000,000.00) (the “Expansion
Loan”) or so much thereof as may be advanced hereunder, and to pay interest on
the outstanding principal balance hereof from time to time at the rate set
forth herein.  This Note is given
pursuant to that Amended and Restated Loan Agreement (the “Amended Loan
Agreement”) between Lender and Borrower dated the same date as this Note.  The Expansion Loan shall initially be known
as the “Expansion Loan” and in the event the Expansion Loan converts to long
term financing, will be known as the “Term Loan” as of the Conversion Date, as
defined in the Amended Loan Agreement.

EXPANSION
LOAN.  Borrower will pay the Expansion
Loan in accordance with the following terms and conditions:

1.             Calculation
of Interest.  Interest on each
Advance hereunder shall accrue at an annual rate equal to 2.75% plus the
one-month LIBOR rate quoted by Lender (LIBOR + 2.75%), 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.

2.             Payment
Schedule.  Borrower shall make
payments of all accrued interest commencing on the last day of the month in
which the First Advance Date (as defined in the Amended Loan Agreement) falls,
and continuing on the last day of each month thereafter.

3.             Conversion
to Term Loan.  In the event the
Expansion Loan qualifies for conversion to the Term Loan under the terms of the
Amended Loan Agreement, the outstanding principal balance of the Expansion Loan
and all accrued interest thereon shall

 

be convert­ed to the Term Loan on the Conversion Date,
as defined in the Amended Loan Agreement, which shall not be later than August
31, 2007.

4.             Payment
of Interest in Full on Conversion Date. 
All accrued interest owed on the Expansion Loan shall be paid in full on
the Conversion Date.  In the event the
Loan has not been accelerated under the terms of the Amended Loan Agreement
prior to the Conversion Date, and the Loan does not qualify for conversion to
the Term Loan under the terms of the Amended Loan Agreement, the Maturity Date
of the Loan shall be the Conversion Date, which in no event will be later than
August 31, 2007.

TERM
LOAN.  In the event the Loan qualifies
for conversion from the Expansion Loan to the Term Loan under the terms of the
Amended Loan Agreement, Borrower will pay the Term Loan in accordance with the
following terms and conditions.  Borrower
acknowledges that any fixed interest rate will increase according to the term
of the Term Loan (the period between the Conversion Date and the Maturity
Date).  In no event will the Maturity
Date be later than the seventh (7th) anniversary of the Conversion Date.

1.             Interest
Rate Options; Variable and Fixed. 
Borrower shall have two interest rate options for the Term Loan.  The first option shall be the same variable
rate as provided for the Expansion Loan. 
If the variable rate option is chosen, the interest rate shall continue
to be adjusted each time that the Index changes. The second option is a fixed
interest rate which will be negotiated by the parties prior to the Conversion
Date, excluding any fixed interest rate negotiated as part of an interest rate
swap arrangement between Borrower and Lender. 
If the parties negotiate and agree to a fixed interest rate, such
agreement shall be evidenced by Lender and Borrower executing an amendment to
this Note setting forth the fixed interest rate agreed upon by the
parties.  If such an amendment to this
Note is not executed prior to the Conversion Date, the variable rate option
shall apply to the Term Loan from and after the Conversion Date.  Borrower further acknowledges that Lender may
be required to obtain the consent of all participants in the Loan and that
Lender may be unable to agree to a fixed interest rate without the prior
consent of such participants.

2.             Term
of Loan.  The Term Loan shall be
amortized over a period of ten (10) years commencing on the Conversion Date.

3.             Payment
Schedule for Variable Rate Loan.  In
this Note each “Quarterly Payment Date” shall be May 31, August 31, November 30
and February 28 of each year.  If the
variable interest rate option applies to the Term Loan, Borrower shall make (i)
quarterly installments of principal in the amount of $825,000 each commencing
on the first Quarterly Payment Date following the Conversion Date, and each
Quarterly Payment Date thereafter, plus (ii) payments of all accrued interest
commencing on the last day of the month in which the Conversion Date falls, and
continuing on the last day of each month thereafter.  On each Quarterly Payment Date, borrower
shall make both these principal and interest payments.

 2
 

 

 

4.             Payment
Schedule for Fixed Interest Loan.  If
a fixed rate option applies to the Term Loan, Borrower shall make equal
quarterly installments of amortized principal and interest commencing on the
first Quarterly Payment Date following the Conversion Date, and continuing on
the first day of each Quarterly Payment Date thereafter.  Such quarterly payments shall be sufficient
to fully amortize this Note over the amortization period.

5.             Payment
in Full on Maturity Date.  The
outstanding principal balance and all interest accrued thereon and all other
amounts due hereunder shall be paid in all events on the Maturity Date.

TERMS
APPLICABLE TO EXPANSION LOAN AND TERM LOAN. The remaining terms of this Note
apply to the Expansion Loan and the Term Loan, if the Loan converts to a Term
Loan:

PAYMENTS
DUE ON NON-BUSINESS DAY.  In the event
any payment under this Note is due on a date other than a Business Day (as
defined in the Amended Loan Agreement), such payment shall be due on the
Business Day immediately following the day the payment was otherwise due.

INTEREST
COMPUTATION.  Interest shall be
calculated on a 365/360 simple basis; that is, by applying the ratio of the
annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal
balance is outstanding.

COORDINATION
WITH AMENDED LOAN AGREEMENT.  This Note
is the Expansion Construction Note referred to in the Amended Loan Agreement,
and is subject to the additional terms and conditions set forth in the Amended
Loan Agreement and the Loan Documents referred to therein.  This Note is secured by a Mortgage, Security
Agreement, Assignment of Leases and Rents and Fixture Financing Statement of
even date herewith on real property located in Grant County, South Dakota,
therein described, as well as other collateral described in the Amended Loan
Agreement and the other Loan Documents.  Capitalized terms not defined herein shall
have the meaning given such terms in the Amended Loan Agreement.  The headings of paragraphs of this Note are
for convenience of the parties only and shall not be used in interpreting this
Note.

LATE
PAYMENT; GRACE PERIOD.  If a payment due
hereunder is not made within five 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 an Event of Default, as
defined in the Amended 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 Amended Loan Agreement), demand or
presentment for payment, and without any relief whatever from any valuation or
appraisement laws.  Failure to exercise
any option provided

 3
 

 

herein shall not
constitute a waiver of the right to exercise the same in the event of any
subsequent default.  Borrower agrees that
if, and as often as, this Note is given to an attorney for collection or to
defend or enforce any of Lender’s rights hereunder, Borrower will pay to Lender
Lender’s reasonable attorneys’ fees together with all court costs, service tax
and other expenses paid by Lender, whether or not any action or proceeding is
commenced by the Lender.

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.

PREPAYMENT;
VARIABLE RATE.  So long as (i) a variable
interest rate is applicable to this Loan, and (ii) Borrower has not entered
into an interest rate swap agreement with Lender restricting prepayment,
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 suspend any
required payments of either principal or interest on this Note or reduce the
amount of any scheduled payment.

PREPAYMENT;
FIXED RATE.  If a fixed interest rate is
applicable to this Loan (other than through an interest rate swap arrangement
between Lender and Borrower), there shall be no prepayments of this Note,
provided that Lender may consider requests for its consent with respect to
prepayment of this Note, without incurring an obligation to do so, and Borrower
acknowledges that in the event that such consent is granted, Borrower shall be
required to pay Lender, upon prepayment of all or part of the principal amount
before final maturity, an Indemnity Amount equal to the maximum of:  (a) zero, or (b) that amount, calculated on
any prepayment date, which is derived by subtracting:  (1) the principal amount of the Note or
portion of the Note to be prepaid from (2) the Net Present Value of the Note or
portion of the Note to be prepaid on such date of prepayment.

“Net
Present Value” shall mean the amount which is derived by summing the
present values of each prospective payment of principal and interest which,
without such full or partial prepayment, could otherwise have been received by
Lender over the shorter of the remaining contractual life of the Note or next
repricing date if Lender had instead initially invested the Note proceeds at
the Initial Money Market Rate.  The
individual discount rate used to present value each prospective payment of
interest and/or principal shall be the Money Market Rate at Prepayment for the
maturity matching that of each specific payment of principal and/or interest.

“Initial
Money Market Rate” shall mean the rate per annum, determined solely by
Lender, on the first day of the term of this Note or the most recent repricing
date or as mutually agreed upon by Borrower and Lender, as the rate at which
Lender would be able to borrow funds

 4
 

 

in Money Markets
for the amount of this Note and with an interest payment frequency and
principal repayment schedule equal to this Note and for a term as may be
arranged and agreed upon by Borrower and Lender.  Such a rate shall include FDIC insurance,
reserve requirements and other explicit or implicit costs levied by any
regulatory agency.  Borrower acknowledges
that Lender is under no obligation to actually purchase and/or match funds for
the Initial Money Market Rate of this Note.

“Money
Market Rate At Prepayment” shall mean that zero-coupon rate, calculated on
the date of prepayment, and determined solely by Lender, as the rate in which
Lender would be able to borrow funds in Money Markets for the prepayment amount
matching the maturity of a specific prospective Note payment or repricing
date.  Such a rate shall include FDIC
insurance, reserve requirements and other explicit or implicit costs levied by
any regulatory agency.  A separate Money
Market Rate at Prepayment will be calculated for each prospective interest
and/or principal payment date.

“Money
Markets” shall mean one or more wholesale funding mechanisms available to
Lender, including negotiable certificates of deposit, Eurodollar deposits, bank
notes, fed funds, interest rate swaps, or others.

In calculating the
amount of such an Indemnity Amount, Lender is hereby authorized by Borrower to
make such assumptions regarding the source of funding, redeployment of funds
and other related matters, as Lender may deem appropriate.  If Borrower fails to pay any Indemnity Amount
when due, the amount of such Indemnity Amount shall thereafter bear interest
until paid at the Default Rate specified in this Note (computed on the basis of
a 360-day year, actual days elapsed). 
Any prepayment of principal shall be accompanied by a payment of interest
accrued to date thereon; and such prepayment shall be applied to the principal
installments in the inverse order of their maturities.  All partial prepayments shall be in
increments of $100,000.00.

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 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 Amended 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

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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, 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.

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.

AT
THE OPTION OF LENDER, THIS NOTE MAY BE ENFORCED IN ANY FEDERAL COURT OR SOUTH
DAKOTA CIRCUIT COURT SITTING IN GRANT OR MINNEHAHA COUNTY, SOUTH DAKOTA; AND
BORROWER CONSENTS TO THE

 6
 

 

JURISDICTION AND
VENUE OF ANY SUCH COURTS 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 Amended Loan Agreement) or the transactions
contemplated hereby or thereby.

	
  

  	
  NORTHERN LIGHTS ETHANOL, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
  Delton Strasser

  	
   

  
	
   

  	
   

  	
  Print Name:
  Delton Strasser

  
	
   

  	
   

  	
  Its: President

  
					

 

 7

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