Exhibit 10.4

 

AMENDED AND RESTATED

FOURTH SUPPLEMENT

TO THE MASTER LOAN AGREEMENT

(TERM REVOLVING LOAN)

 

THIS AMENDED AND RESTATED FOURTH SUPPLEMENT TO THE MASTER LOAN AGREEMENT (this
“Fourth Supplement”), dated as of April 27, 2011, is between AGSTAR FINANCIAL
SERVICES, PCA, an United States corporation (the “Lender”) and HERON LAKE
BIOENERGY,  LLC, a Minnesota limited liability company (the “Borrower”), and
supplements and incorporates all of the provisions of that certain Fourth
Amended and Restated Master Loan Agreement dated October 1, 2007, between the
Lender and the Borrower (as the same has been amended, modified, supplemented,
extended or restated from time to time, the “MLA”).

 

1.                                       Definitions.  As used in this Fourth
Supplement, the following terms shall have the following meanings.  Capitalized
terms used and not otherwise defined in this Fourth Supplement shall have the
meanings attributed to such terms in the MLA.  Terms not defined in either this
Fourth Supplement or the MLA shall have the meanings attributed to such terms in
the Uniform Commercial Code, as enacted in the State of Minnesota and as amended
from time to time.

 

“First Supplement” means that certain Amended and Restated First Supplement
dated                        December 27, 2006.

 

“HLBE — PC” means HLBE Pipeline Company, LLC, a Minnesota limited liability
company, a wholly owned subsidiary of Borrower.

 

“HLBE — PC Investment” shall have the meaning specified in Section 4 of this
Fourth Supplement.

 

“Monthly Payment Date” means the first (1st) day of each calendar month.

 

“Outstanding Credit” means, at any time of determination, the aggregate amount
of Advances then outstanding.

 

“Outstanding Revolving Advance” means the total Outstanding Credit under this
Fourth Supplement and the Term Revolving Note.

 

“Pipeline Project” means any and all buildings, structures, fixtures and other
improvements made on or for the benefit of the Project or the Real Property and
part of the construction of a natural gas pipeline connecting Borrower’s ethanol
production facility to the natural gas pipeline facilities of Northern Border
Pipeline Company in Cottonwood County, Minnesota.

 

“Pipeline Project Budget” means the statement attached hereto as Exhibit A which
identifies the sources and uses of monies in the amount of $3,148,604 for the
construction of the Pipeline Project.

 

“Request for Advance” shall have the meaning specified in Section 7(a) of this
Fourth Supplement.

 

“Revolving Advance” means an advance under this Fourth Supplement and the Term
Revolving Note.

 

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“Term Revolving Note” means that certain promissory note dated October 1, 2007,
in the amount of $5,000,000.00 pursuant to the terms and conditions provided for
in this Fourth Supplement and the MLA.

 

“Term Revolving Loan Commitment” shall mean the following:

 

On the Closing Date

 

$

5,000,000.00

 

October 1, 2008

 

$

4,500,000.00

 

October 1, 2009

 

$

4,000,000.00

 

October 1, 2010

 

$

3,500,000.00

 

October 1, 2011

 

$

3,000,000.00

 

 

“Term Revolving Loan Maturity Date” means October 1, 2012.

 

“Term Revolving Loan Termination Date” shall have the meaning specified in
Section 3 of this Fourth Supplement.

 

“Unused Commitment Fee” shall have the meaning specified in Section 7(d) of this
Fourth Supplement.

 

2.                                       [Intentionally Omitted.]

 

3.                                       Term Revolving Loan Commitment.  On the
terms and conditions set forth in the MLA and this Fourth Supplement, Lender
agrees to make one or more advances to the Borrower, during the period beginning
on the effective date of this Fourth Supplement and ending on the Business Day
immediately preceding the Term Revolving Loan Maturity Date (the “Term Revolving
Loan Termination Date”), in an aggregate principal amount outstanding at any one
time not to exceed Term Revolving Loan Commitment.  The Term Revolving Loan
Commitment shall expire at 12:00 noon Central time on the Term Revolving Loan
Maturity Date.  Term Revolving Loan amounts borrowed and repaid or prepaid may
be reborrowed at any time prior to and including the Term Revolving Loan
Termination Date provided, however, that at no time shall the sum of the
Outstanding Revolving Advances exceed the Term Revolving Loan Commitment.  The
Borrower shall, without penalty or premium and within five (5) days following
October 1 of each year, prepay the Outstanding Revolving Advances in the amount,
if any, by which the Outstanding Credit on such date exceeds the Term Revolving
Loan Commitment then in effect, together with accrued interest thereon to the
date of such prepayment.

 

4.                                       Purpose.  Revolving Advances under the
Term Revolving Loan may be used for cash and inventory management purposes of
the Borrower, including closing costs and fees associated with the Term
Revolving Loan.  In addition to the foregoing, Borrower may use the proceeds of
one or more Revolving Advances to make equity investments in, and to acquire all
of the limited liability company membership interest in HLBE — PC (the “HLBE —
PC Investment”).  The Borrower agrees that the proceeds of the Term Revolving
Loan are to be used only for the purposes set forth in this Section 4.

 

5.                                       Repayment of the Term Revolving Loan. 
The Borrower will pay interest on the Term Revolving Loan on the first (1st) day
of each month, commencing on the first (1st) Monthly Payment Date following the
date on which the first Advance is made on the Term Revolving Loan, and
continuing on each Monthly Payment Date thereafter until the Term Revolving Loan
Maturity Date.  On the Term Revolving Loan Maturity Date, the amount of the then
unpaid principal balance of the Term Revolving Loan and any and all other
amounts due and owing hereunder or under any other Loan Document relating to the
Term Revolving Loan shall be due and payable.  If any Payment Date is not a
Business Day, then

 

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the principal installment then due shall be paid on the next Business Day and
shall continue to accrue interest until paid.

 

6.                                       Term Revolving Loan Term.  The Term
Revolving Loan shall mature on the Term Revolving Loan Maturity Date.

 

7.                                      Making the Advances.

 

(a)                                  Revolving Advances.  Each Revolving Advance
shall be made, on notice from the Borrower (a “Request for Advance”) to the
Lender delivered before 12:00 Noon (Minneapolis, Minnesota time) on a Business
Day which is at least three (3) Business Days prior to the date of such
Revolving Advance specifying the amount of such Revolving Advance,  provided
that, no Revolving Advance shall be made while an Event of Default exists or if
the interest rate for such LIBOR Rate Loan would exceed the Maximum Rate.  Any
Request for Advance applicable to a Revolving Advance received after 12:00 Noon
(Minneapolis, Minnesota time) shall be deemed to have been received and be
effective on the next Business Day.  The amount so requested from the Lender
shall, subject to the terms and conditions of this Fourth Supplement, be made
available to the Borrower by:  (i) depositing the same, in same day funds, in an
account of the Borrower; or (ii) wire transferring such funds to a Person or
Persons designated by the Borrower in writing.

 

(b)                                 Requests for Advances Irrevocable.  Each
Request for Advance shall be irrevocable and binding on the Borrower and the
Borrower shall indemnify the Lender against any loss or expense it may incur as
a result of any failure to borrow any Advance after a Request for Advance
(including any failure resulting from the failure to fulfill on or before the
date specified for such Advance the applicable conditions set forth in this
Section 7 of this Fourth Supplement and the MLA), including, without limitation,
any loss (including loss of anticipated profits) or expense incurred by reason
of the liquidation or reemployment of deposits or other funds acquired by the
Lender to fund such Advance when such Advance, as a result of such failure, is
not made on such date.

 

(c)                                  Minimum Amounts.  Each Revolving Advance
shall be in a minimum amount equal to $50,000.00.

 

(d)                                 Unused Commitment Fee.  In addition to the
fees payable on the effective date of this Fourth Supplement, Borrower agrees to
pay to the Lender an Unused Commitment Fee on the average daily unused portion
of such Lender’s commitment under the Term Revolving Loan at the rate of 0.35%
per annum, payable in arrears in quarterly installments payable on the first
(1st) day of each calendar quarter during the term of the Term Revolving Loan.

 

(e)                                  Conditions Precedent to All Advances.  The
Lender’s obligation to make each Advance under the Term Revolving Note shall be
subject to the terms, conditions and covenants set forth in the MLA and this
Fourth Supplement, including, without limitation, the following further
conditions precedent:

 

(i)                                     Representations and Warranties.  The
representations and warranties set forth in the MLA and this Fourth Supplement
are true and correct in all material respects as of the date of the request for
any Advance, except as disclosed in writing to the Lender, to the same extent
and with the same effect as if made at and as of the date thereof except as
disclosed in writing to the Lender;

 

(ii)                                  No Defaults.  The Borrower is not in
default under the terms of the MLA, this Fourth Supplement, the Related
Documents or any other Material Contracts to which the

 

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Borrower is a party and which relates to the construction of the Pipeline
Project or the operation of the Borrower’s business; and

 

(iii)                               Government Action.  No license, permit,
permission or authority necessary for the construction or operation of the
Pipeline Project has been revoked or challenged by or before any Governmental
Authority.

 

8.                                       Interest Rate.  Subject to the
provisions of Section 2.08 and 2.11 of the MLA and Sections 9 and 12 of this
Fourth Supplement, the Term Revolving Loan shall bear interest at a rate equal
to the LIBOR Rate plus 325 basis points.  The computation of interest,
amortization, maturity and other terms and conditions of the Term Revolving Loan
shall be as provided in the Term Revolving Note, provided, however, in no event
shall the applicable rate exceed the maximum nonusurious interest rate, if any,
that at any time, or from time to time, may be contracted for, taken, reserved,
charged, or received under applicable state or federal laws (the “Maximum
Rate”).

 

9.                                       Default Interest.  In addition to the
rights and remedies set forth in the MLA:  (i) if the Borrower fails to make any
payment to Lender when due, then at Lender’s option in each instance, such
obligation or payment shall bear interest from the date due to the date paid at
2% per annum in excess of the rate of interest that would otherwise be
applicable to such obligation or payment; (ii) upon the occurrence and during
the continuance of an Event of Default beyond any applicable cure period, if
any, at Lender’s option in each instance, the unpaid balances of the Term
Revolving Loan shall bear interest from the date of the Event of Default or such
later date as Lender shall elect at 2% per annum in excess of the rate(s) of
interest that would otherwise be in effect on the Term Revolving Loan under the
terms of the Term Revolving Note; (iii) after the maturity of the Term Revolving
Loan, whether by reason of acceleration or otherwise, the unpaid principal
balance of the Term Revolving Loan (including without limitation, principal,
interest, fees and expenses) shall automatically bear interest at 2% per annum
in excess of the rate of interest that would otherwise be in effect on the Term
Revolving Loan under the terms of the Term Revolving Note.  Interest payable at
the Default Rate shall be payable from time to time on demand or, if not sooner
demanded, on the last day of each calendar month.

 

10.                                 Late Charge.  If any payment of principal or
interest due under this Fourth Supplement or the Term Revolving Note is not paid
within ten (10) days of the due date thereof, the Borrower shall, in addition to
such amount, pay a late charge equal to five percent (5%) of the amount of such
payment.

 

11.                                 Excess Cash Flow.  At the end of each
calendar quarter, in addition to all other payments of principal and interest
required under the MLA, this Fourth Supplement, and the Term Revolving Note, the
Borrower shall remit to Lender an amount equal to 25% of the Borrower’s Excess
Cash Flow for the immediately preceding calendar quarter (the “Excess Cash Flow
Payment”), provided however, that the total Excess Cash Flow Payments required
hereunder shall not exceed $2,000,000.00 in any calendar year.  All Excess Cash
Flow Payments shall be applied to the reduction of the outstanding principal
balance of the Term Loan or the Term Revolving Loan, at the Lender’s sole
discretion.  No Excess Cash Flow Payments shall be required during any calendar
year should the Tangible Owner’s Equity be greater than 50% at the end of the
immediately proceeding fiscal year of the Borrower.

 

12.                                 Changes in Law Rendering Certain LIBOR Rate
Loans Unlawful.  In the event that any change in any applicable law (including
the adoption of any new applicable law) or any change in the interpretation of
any applicable law by any judicial, governmental or other regulatory body
charged with the interpretation, implementation or administration thereof,
should make it (or in the good-faith judgment of the Lender should raise a
substantial question as to whether it is) unlawful for the Lender to make,
maintain or fund LIBOR Rate Loans, then:  (a) the Lender shall promptly notify
Borrower; and (b) the obligation of the Lender to make LIBOR rate loans of such
type shall, upon the effectiveness of

 

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such event, be suspended for the duration of such unlawfulness.  During the
period of any suspension, Lender shall make loans to Borrower that are deemed
lawful and that as closely as possible reflect the terms of the MLA.

 

13.                                 Maximum Amount Limitation.  Anything in the
MLA, this Fourth Supplement, or the other Loan Documents to the contrary
notwithstanding, Borrower shall not be required to pay unearned interest on the
Term Revolving Note or any of the Loan Obligations, or ever be required to pay
interest on the Term Revolving Note or any of the Loan Obligations at a rate in
excess of the Maximum Rate, if any.  If the effective rate of interest which
would otherwise be payable under the MLA, this Fourth Supplement, the Term
Revolving Note, or any of the other Loan Documents would exceed the Maximum
Rate, if any, then the rate of interest which would otherwise be contracted for,
charged, or received under the MLA, this Fourth Supplement, the Term Revolving
Note, or any of the other Loan Documents shall be reduced to the Maximum Rate,
if any.  If any unearned interest or discount or property that is deemed to
constitute interest (including, without limitation, to the extent that any of
the fees payable by Borrower for the Loan Obligations to the Lender under the
MLA, this Fourth Supplement, the Term Revolving Note, or any of the other Loan
Documents are deemed to constitute interest) is contracted for, charged, or
received in excess of the Maximum Rate, if any, then such interest in excess of
the Maximum Rate shall be deemed a mistake and canceled, shall not be collected
or collectible, and if paid nonetheless, shall, at the option of the holder of
the Term Revolving Note, be either refunded to the Borrower, or credited on the
principal of the Term Revolving Note.  It is further agreed that, without
limitation of the foregoing and to the extent permitted by applicable law, all
calculations of the rate of interest or discount contracted for, charged or
received by the Lender under the Term Revolving Note, or under any of the Loan
Documents, that are made for the purpose of determining whether such rate
exceeds the Maximum Rate applicable to the Lender, if any, shall be made, to the
extent permitted by applicable laws (now or hereafter enacted), by amortizing,
prorating and spreading during the period of the full terms of the Advances
evidenced by the Term Revolving Note, and any renewals thereof all interest at
any time contracted for, charged or received by Lender in connection therewith. 
This section shall control every other provision of all agreements among the
parties to the MLA pertaining to the transactions contemplated by or contained
in the Loan Documents, and the terms of this section shall be deemed to be
incorporated in every Loan Document and communication related thereto.

 

14.                                 Security.  The Borrower’s obligations
hereunder and, to the extent related thereto, the MLA, shall be secured as
provided in the MLA.

 

15.                                 Representation and Warranty.  The Borrower
hereby agrees with, reaffirms, and acknowledges that Borrower has the power and
authority to execute, deliver, and perform this Fourth Supplement and any
documents required under this Fourth Supplement and that all documents
contemplated herein when executed and delivered to Lender will constitute the
valid, binding and legally enforceable obligations of Borrower in accordance
with their respective terms and conditions, except as enforceability may be
limited by any applicable bankruptcy or insolvency laws.

 

16.                                 Effect on First Supplement.  This Fourth
Supplement, the Term Revolving Note, the Third Supplement, and the Term Note
shall supersede and replace in their entirety the First Supplement and
Construction Note which shall be of no force or effect.

 

17.                                 Construction of the Natural Gas Pipeline. 
Borrower shall, and shall cause all of its subsidiaries and Affiliates to:

 

(a)                                  diligently proceed with, and complete
construction of, the Pipeline Project in accordance with plans and
specifications and Pipeline Project Budget provided to the Lender, and in
accordance with all applicable laws and ordinances;

 

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(b)                                 use commercially reasonable best efforts to
require all Contractors to comply with all rules, regulations, ordinances and
laws relating to work on the Pipeline Project;

 

(c)                                  obtain the Lender’s prior written approval
of any change in the timeline or plans and specifications for the Pipeline
Project or to the Pipeline Project Budget, which might materially adversely
affect the value of the Lender’s Security Interests in the Collateral, and has a
cost of $25,000.00 or greater.  The Lender will have a reasonable time to
evaluate any requests for its approval of any changes referred to in this
subsection. The Lender may approve or disapprove changes in its discretion,
reasonably exercised;

 

(d)                                 comply with and keep in effect all necessary
permits and approvals obtained from any Governmental Authority relating to the
lawful construction of the Pipeline Project; and comply with all applicable
laws, regulations, orders, and requirements of any Governmental Authority,
judicial, or legal authorities having jurisdiction over the Real Property or
Pipeline Project, and with all recorded restrictions affecting the Real
Property;

 

(e)                                  furnish to the Lender from time to time on
request by the Lender, in a form acceptable to the Lender, correct lists of all
contractors and subcontractors employed in connection with construction of the
Pipeline Project and true and correct copies of all executed contracts and
subcontracts.  The Lender may contact any contractor or subcontractor to verify
any facts disclosed in the lists, Borrower must consent to, or obtain the
consent to, the disclosure of such information by the contractors and
subcontractors to Lender or its agents upon Lender’s request, and Borrower must
assist Lender or its agents in obtaining such information upon Lender’s request;

 

(f)                                    provide the Lender and its
representatives with access to the Real Property and the Pipeline Project at any
reasonable time and upon reasonable notice to enter the Real Property and
inspect the work or construction and all materials, plans, specifications, and
other matters relating to the construction.  The Lender will also have the right
to, at any reasonable time and upon reasonable notice, examine, copy, and audit
the books, records, accounting data, and other documents relating to the Real
Property or construction of the Pipeline Project;

 

(g)                                 pay and discharge all claims and liens for
labor done and materials and services furnished in connection with the
construction of the Pipeline Project.  The Borrower and its subsidiaries and
Affiliates shall have the right to contest in good faith any claim or lien,
provided that it does so diligently and without prejudice to the Lender or
Lender’s Security Interests in the Collateral.  Upon the Lender’s request, the
Borrower will, or will cause its subsidiaries or Affiliates to, promptly provide
a bond, cash deposit, or other security reasonably satisfactory to the Lender to
protect the Lender’s interest and Security Interests in the Collateral should
the contest be unsuccessful;

 

(h)                                 maintain in force until completion of the
Pipeline Project builder’s risk  insurance in such amounts, form, risk coverage,
deductibles, insurer, loss payable and cancellation provisions as are usual,
customary and reasonable for project of the nature and scope of the Pipeline
Project;

 

(i)                                     take such actions as are reasonable and
necessary to bring about the timely completion of the Pipeline Project, and
resolve all disputes arising during the work of construction thereof in a manner
which will allow work to proceed expeditiously.  With respect to such disputes,
the Borrower, and its subsidiaries and Affiliates will have the right to contest
in good faith claims resulting in disputes, provided that it does so diligently
and without prejudice to the Lender or Lender’s Security Interests in the
Collateral.  Upon the Lender’s request, the Borrower will, or will cause its
subsidiaries or Affiliates to, promptly provide a bond, cash deposit, or other
security reasonably satisfactory to the

 

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Lender to protect the Lender’s interest and Security Interests in the Collateral
should the contest be unsuccessful;

 

(j)                                     pay the Lender’s out of pocket costs and
expenses incurred in connection in the exercise of any of its rights or remedies
under this Agreement, including but not limited to legal fees and disbursements,
and reasonable fees and costs for services which are not customarily performed
by the Lender’s salaried employees and are not specifically covered by the fees
charged to originate the Loans, if any.  The provision of this paragraph will
survive the termination of this Agreement and the repayment of the Loans;

 

(k)                                  keep true and correct financial books and
records on a cash basis for the construction of the Pipeline Project and
maintain adequate reserves for all contingencies.  If required by the Lender,
submit to the Lender at such times as it requires (which will in no event be
more often than monthly) a statement which accurately shows the application of
all funds expended to date for construction of the Pipeline Project and the
source of those funds as well as an estimate of the funds needed to complete the
Pipeline Project and the source of those funds.  The Borrower will promptly
supply the Lender with all financial statements and other information concerning
its affairs and the affairs of its subsidiaries and Affiliates, as the Lender
may reasonably request, and promptly notify the Lender of any material adverse
change in its or their financial condition or in the physical condition of the
Property or Pipeline Project;

 

(l)                                     comply with the requirements of any
commitment or agreement entered into with any Governmental Authority to assist
the construction or financing of the Pipeline Project and with the terms of all
applicable laws, regulations, and requirements governing such assistance;

 

(m)                               indemnify and hold the Lender harmless from
and against all liabilities, claims, damages, reasonable costs, and reasonable
expenses (including but not limited to reasonable legal fees and disbursements)
relating to or in connection with any third party claims, lawsuits or actions
arising out of or resulting from any defective workmanship or materials
occurring in the construction of the Pipeline Project.  Upon demand by the
Lender, defend any action or proceeding brought against the Lender alleging any
defective workmanship or materials, or the Lender may elect to conduct its own
defense at the reasonable expense of the Borrower or its subsidiaries or
Affiliates.  The provisions of this paragraph will survive the termination of
this Agreement and the repayment of the Loans; and

 

(n)                                 obtain and deliver to the Lender copies of
all necessary permits, licenses, approvals, and material contracts relating to
the Pipeline Project.

 

IN WITNESS WHEREOF, the parties have caused this Amended and Restated Fourth
Supplement to the Fourth Amended and Restated Master Loan Agreement to be
executed by their duly authorized officers as of the date shown above.

 

HERON LAKE BIOENERGY, LLC, a

AGSTAR FINANCIAL SERVICES, PCA

Minnesota limited liability company

an United States corporation

 

 

 

 

/s/ Robert J. Ferguson

 

By:

/s/ Mark Schmidt

By: Robert J. Ferguson

 

Mark Schmidt

Its: President

 

Its Vice President

 

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