LONG-TERM NOTES PAYABLE

Dakota Ethanol has a note payable to First National Bank of Omaha, Nebraska (the Bank) (Term Note 5).

As part of the note payable agreement, Dakota Ethanol is subject to certain restrictive covenants establishing minimum reporting requirements, ratios, working capital and net worth requirements. The notes are collateralized by the ethanol plant and equipment, its accounts receivable and inventories. We are in compliance with our financial covenants as of September 30, 2011.

On June 6, 2011, Dakota Ethanol restructured Term Note 5. Term Note 5 is a reducing revolving note with an availability of $5,000,000. Interest on outstanding principal balances will accrue at 350 basis points above the 1 month LIBOR rate (4.00 percent at September 30, 2011). The rate is subject to a floor of 4.0 percent. Dakota Ethanol may elect to borrow any principal amount repaid on Term Note 5 up to $5,000,000 subject to the terms of the agreement. Should Dakota Ethanol elect not to utilize this feature, the lender will assess an unused commitment fee of 0.4 percent on the unused portion of the note. Term Note 5 has a reducing feature through which the available amount of the note is reduced by $500,000 on the anniversary of the note. The note matures on May 1, 2014. On September 30, 2011, Dakota Ethanol had $0 outstanding and $5,000,000 available to be drawn on Term Note 5. On December 31, 2010, Dakota Ethanol had $0 outstanding and $5,000,000 available to be drawn on Term Note 5.

During December 2008, Dakota Ethanol issued a note payable related to the purchase of land adjacent to the plant site. The note was issued for $450,000. The note matures on December 1, 2012. The note is payable in annual installments of $112,500 plus interest. Interest on outstanding principal balances will accrue at a fixed rate of 7.0 percent.

Dakota Ethanol conducted a private placement offering of subordinated unsecured debt securities which closed on May 30, 2009. We raised $1,439,000 in subordinated debt through this offering. Interest on the outstanding balances accrued at a fixed rate of 9 percent. The securities matured two years after the date of issuance. Interest was paid annually on January 30^th of each year beginning on January 30, 2010. The outstanding balances were paid off during the second quarter of 2011.

On May 22, 2009, Dakota Ethanol entered into two loan agreements for alternative financing for our corn oil extraction equipment as we had agreed with FNBO; one loan with Rural Electric Economic Development, Inc (REED) and the other loan with First District Development Company (FDDC).

The note to REED for $1 million has a fixed interest rate of 4.7%. The note requires monthly installments of $18,734 and matures on May 25, 2014. The note is secured by the oil extraction equipment.

The note to FDDC for $200,000 has a fixed interest rate of 5.5%. The note requires monthly installments of $3,820 and matures on May 22, 2014. The note is secured by the oil extraction equipment.

The balances of the notes payable are as follows:



	September 30, 2011			December 31, 2010*
Note payable to First National Bank, Omaha
Term Note 5	$	—		$	—
Note payable - Land	225,000			225,000
Note payable - Subordinated notes	—			1,439,000
Note payable - REED	562,992			708,881
Note payable - FDDC	113,464			142,497
Note payable - Other	111,391			131,771
	1,012,847			2,647,149

Less current portion	(384,181		)	(1,813,494		)

	$	628,666		$	833,655

*Derived from audited financial statements

Minimum principal payments for the next five years are as follows:



Years Ending September 30,	Amount
2012	$	384,181
2013	397,658
2014	209,210
2015	21,798
2016	—