Document:

Exhibit 10.26

 

SECOND AMENDMENT TO LOAN AGREEMENT

(NORTHERN
LIGHTS ETHANOL, LLC)

 

U.S.
BANK NATIONAL ASSOCIATION (“Lender”), and NORTHERN
LIGHTS ETHANOL, LLC,

a South
Dakota limited liability company (“Borrower”), by this Second Amendment to Loan
Agreement (this “Amendment”), hereby agree to amend the terms of “Schedule V”
which is attached to and incorporated into the Loan Agreement between them
dated the 11th day of July, 2001, as amended by a “Amendment to Loan Agreement”
dated as of the 22nd day of June, 2004 (collectively referred to herein as the “Loan
Agreement”) as follows:

 

NOW THEREFORE, Schedule V of the Loan Agreement is
amended as follows:

 

Amendment Section 1. That unnumbered paragraph entitled “Working
Capital” is deleted in its entirety and replaced with the following:

 

‘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, and
at any time thereafter. 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 $5,000,000.00
Revolving Promissory Note amended March 30, 2005 (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.

 

Amendment Section 2. That unnumbered paragraph entitled “Fixed
Charge Coverage Ratio” is deleted in its entirety and replaced with the
following:

 

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

 

(a)
EBITDA minus (i) any dividends or other distributions, and
(ii) the greater of (A) expenditures for fixed and capital assets not financed
or (B) $500,000,

 

to

 

(b) all required principal payments with respect to Total Liabilities
(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.

 

Amendment Section 3. Those unnumbered paragraphs entitled
“Cash Flow Recapture” and “Excess Cash
Flow” are deleted in their entirety.

 

Amendment Section 4. That unnumbered paragraph entitled “Dividends” is deleted in its
entirety and replaced with the following:

 

 

“Dividends.”
The Borrower may periodically make distributions to its Members as the Borrower
may determine are appropriate where: (i) Borrower first
provides Lender a full 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 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.

 

Amendment Section 5.
This Amendment is
effective March 30, 2005. This
Amendment shall be interpreted
consistently with the terms of the Loan Agreement; however to the extent there is a conflict in the provisions of
the Loan Agreement and this Amendment, the terms
of this Amendment shall control. Any
capitalized terms not defined herein shall have the definition given such term
in the Loan Agreement.

 

IN WITNESS WHEREOF, the parties have entered into this
Amendment effective as of the 30th day of March, 2005.

 

	
   

  	
  NORTHERN LIGHTS ETHANOL, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
  Delton Strasser

  	
   

  
	
   

  	
   

  	
   

  	
  Delton Strasser

  	
   

  
	
   

  	
   

  	
  Its: President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  U.S. BANK NATIONAL ASSOCIATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
  Carl Johnson

  	
   

  
	
   

  	
   

  	
   

  	
  Carl Johnson

  	
   

  
	
   

  	
   

  	
  Its: Assistant Vice
  President

  	
   

  

 

2Exhibit 10.27

 

PROMISSORY NOTE

(Renewal Note)

(Fixed Rate)

 

	
  Not to Exceed $15,800,000.00

  	
   

  	
  Sioux Falls, South Dakota

  
	
   

  	
   

  	
  March 30, 2005

  

 

FOR VALUE RECEIVED,
NORTHERN LIGHTS ETHANOL, LLC, a South Dakota Limited Liability Company (“Borrower’),
hereby promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION, a national banking association (“Lender”,
which term shall include any future holder hereof), at 141 N. Main Avenue,
Sioux Falls, South Dakota, or at such other place as Lender may from
time-to-time designate in writing, in lawful money of the United States of
America, the principal sum of Fifteen Million Eight Hundred Thousand &
00/100 Dollars ($15,800,000.00) or so much thereof as may be advanced
hereunder, including all amounts due or incurred by Borrower in accordance with
the terms of the Loan Agreement between Borrower and Lender dated as of July 11,
2001, or due or incurred by Borrower under the terms of any other Loan Document
as defined in such Loan Agreement.

 

PARTIAL RENEWAL OF N0TE.
This Promissory Note partially supercedes and replaces those Promissory Notes
dated January 1, 2003, in the original principal amounts of $15,000,000.00
and $11,100,000.00 which Borrower delivered to Lender pursuant to the Loan
Agreement between Borrower and Lender dated as of January 1, 2003 (the “Prior
Notes”). This Promissory Note and the $3,900,000.00 Note dated this same date
represent an aggregate $18,667,631.25 principal amount outstanding under the
Prior Notes, plus an additional $1,032,368.75 in new credit extended the date
of this Promissory Note.

 

REPAYMENT. Borrower
agrees to pay to the order of Lender interest at the fixed annual rate of Six
and Thirty-eight Hundredths percent (6.38%) on all outstanding amounts
hereunder. The principal amount of this Promissory Note shall be amortized over
a period of ten (10) years (120 months) commencing March 30, 2005.
Payments of all interest accrued hereunder and amortized principal shall be
made June 30, September 30, December 31 and March 31 of
each year unless such day is not a Business Day as defined in the Loan
Agreement (in which case the Business Day which immediately follows such day
shall apply) (the “Quarterly Payment Date”). The first Quarterly Payment Date
shall be June 30, 2005, and each Quarterly Payment Date thereafter until March 31,
2012 (the “Maturity Date”). 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 balanced, multiplied by
the actual number of days the principal balance is outstanding. Each such
quarterly payment if timely made shall be in the amount of $537,500.00, except
for the payment made on the Maturity Date. In addition to the foregoing
payments, Borrower shall pay Lender all interest accrued (or prepay interest
which shall accrue) under the Prior Notes, as well as any non-principal item
accrued under such Prior Notes, if any, through March 30, 2005, not later
than the close of such Business Day.

 

 

PAYMENT IN FULL AT MATURITY. The
total unpaid principal amount and all interest thereon and any other amount due
hereunder shall be payable on the Maturity Date. THIS NOTE REQUIRES A BALLOON
PAYMENT.

 

PAYMENTS. All
payments under this Note shall be made in immediately available funds. In the
event there is no outstanding Event of Default, all payments made hereunder
shall be credited to amounts due hereunder (including principal, accrued
interest, and late payment charges), in such order as U.S. Bank may elect

 

BREAKFUNDING
PREPAYMENT INDEMNITY.

 

Prepayment: 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, a
prepayment indemnity (“Prepayment Fee”) equal to the greater of zero, or that
amount, calculated on any date of prepayment (‘Prepayment Date”), which is
derived by subtracting: (a) the principal amount of the Note or portion of the
Note to be prepaid from (b) the Net Present Value of the Note or portion of the
Note to be prepaid on such date of Prepayment Date; provided, however, that the
Prepayment Fee shall not in any event exceed the maximum prepayment fee
permitted by applicable law.

 

“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 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, adjusted
for any reserve requirements and any subsequent costs arising from a change in
government regulation. 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 Prepayment Date, 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 

 

2

 

specific prospective Note payment or repricing date, adjusted for any
reserve requirements and any subsequent costs arising from a change in
government regulation. 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 markets
available to Lender, including negotiable certificates of deposit, commercial
paper, eurodollar deposits, bank notes, federal funds, interest rate swaps, or
others.

 

In calculating the amount of such Prepayment Fee, Lender is hereby
authorized by Borrower to make such assumptions regarding the source of
finding, redeployment of funds and other related matters, as Lender may deem
appropriate. If Borrower fails to pay any Prepayment Fee when due, the amount
of such Prepayment Fee 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 prepayments
shall be in an amount of at least $100,000.00 or, if less, the remaining entire
principal balance of this Note.

 

COLLATERAL; COORDINATION WITH LOAN AGREEMENT.
This Note is within the definition of the “Note” in the Loan Agreement, and is
subject to the additional terms and conditions set forth in the Loan Agreement
and the Loan Documents referred to therein. This Note is secured by a Mortgage,
Security Agreement, Assignment of Leases and Rents and Fixture Financing
Statement dated as of July 11,2001, on the Project, as well as other
collateral described in the Loan Agreement and the other Loan Documents.
Capitalized terms not defined herein shall have the meaning given such terms in
the Loan Agreement.

 

LATE PAYMENT; GRACE PERIOD.  If a payment due hereunder is not made within
ten (10) days after the date when due, Borrower shall pay to Lender a late
payment charge of Five Hundred Dollars ($500.00) to compensate Lender for a
portion of the cost related to handling the overdue payment. After any Event of
Default, as defined in the Loan Agreement, then the entire principal sum
evidenced by this Note, together with all accrued and unpaid interest, shall,
at the option of the holder hereof, bear interest at the rate per annum (the ‘Default
Rate”) equal to 3% in excess of the rate of interest per annum which would
otherwise be payable hereunder, and become immediately due and payable without
further notice (except as provided in the Loan Agreement), demand or
presentment for payment, and without any relief whatever from any valuation or
appraisement laws.

 

PAYMENT OF OTHER ITEMS.
If Borrower defaults under any of the terms of this Note, Borrower shall pay
all reasonable costs and expenses, including without limitation attorneys’ fees
(including any service tax thereon) and costs, incurred by Lender in enforcing
this Note immediately upon Lenders demand, whether or not any action or
proceeding is commenced by Lender. Without limiting the generality of the
preceding sentence, such costs and expenses

 

3

 

shall include all attorneys’ fees and costs
incurred by Lender in connection with any federal or state bankruptcy,
insolvency, reorganization, or other similar proceeding by or against Borrower
or any surety, guarantor or endorser of this Note which in any way affects
Lender’s exercise of its rights and remedies under this Note or under the Loan
Agreement or any other Loan Document. Maker hereby stipulates that Lender is a “regulated
lender” within the meaning of SDCL 54-3-13 and other applicable South Dakota
statutes.

 

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

 

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

 

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

 

NO WAIVER; CERTAIN MISCELLANEOUS PROVISIONS. Failure
to exercise any option provided herein shall not constitute a waiver of the
right to exercise the same in the event of any subsequent default. No
modification or waiver by Lender of any of the terms of this Note shall be
valid or binding on Lender unless such modification or waiver is in writing and
signed by Lender. Without limiting the generality of the preceding sentence, no
delay,

 

4

 

omission or forbearance by Lender in
exercising or enforcing any of its rights and remedies under this Note shall
constitute a waiver of such rights or remedies. Lender’s rights and remedies
under this Note are cumulative with and in addition to all other legal and
equitable rights and remedies which Lender may have in connection with the
Loan. The headings of paragraphs of this Note are for convenience of the
parties only and shall not be used in interpreting this Note. If this Note is
lost, stolen, or destroyed, upon Borrower’s receipt of a reasonably
satisfactory indemnification agreement executed by Lender, or if this Note is
mutilated, upon Lender’s surrender of the mutilated Note to Borrower, Borrower
shall execute and deliver to Lender a new promissory note which is identical in
form and content to this Note to replace the lost, stolen, destroyed or
mutilated Note. Time is of the essence in the performance of each provision of
this Note by Borrower.

 

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

 

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

 

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

 

	
   

  	
  NORTHERN LIGHTS ETHANOL, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /s/ Delton
  Strasser

  	
   

  
	
   

  	
   

  	
  Delton
  Strasser

  	
   

  
	
   

  	
   

  	
  Its:

  	
  President

  	
   

  

 

5

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