EXHIBIT 10.1

 

SIXTH AMENDED AND RESTATED

MASTER LOAN AGREEMENT

 

by and among

 

HERON LAKE BIOENERGY, LLC

 

and

 

AGSTAR FINANCIAL SERVICES, PCA

 

dated

to be effective as of

May 17, 2013

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

RECITALS

 

1

 

 

 

AGREEMENT

 

2

 

 

 

ARTICLE I.

DEFINITIONS AND ACCOUNTING MATTERS

2

Section 1.01.

Certain Defined Terms

2

Section 1.02.

Accounting Matters

12

Section 1.03.

Construction

12

 

 

 

ARTICLE II

AMOUNTS AND TERMS OF THE LOANS

12

Section 2.01.

Loans

12

Section 2.02.

Term Loan

13

Section 2.03.

Term Revolving Loan

15

Section 2.04.

Adjustments to Interest Rate

19

Section 2.05.

Default Interest

20

Section 2.06.

Late Charge

20

Section 2.07.

Changes in Law Rendering Certain LIBOR Rate Loans Unlawful

20

Section 2.08.

Payments and Computations

20

Section 2.09.

Maximum Amount Limitation

21

Section 2.10.

Lender Records

22

Section 2.11.

Loan Payments

22

Section 2.12.

Purchase of Equity Interests in AgStar Financial Services, PCA

22

Section 2.13.

Compensation

22

Section 2.14.

Funds Held Program

23

Section 2.15.

Underwriting/Participation/Facility Fees

24

 

 

 

ARTICLE III.

CONDITIONS PRECEDENT

24

Section 3.01.

Conditions Precedent to Preliminary Advances

24

 

 

 

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

27

Section 4.01

Representations and Warranties of the Borrower

27

 

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ARTICLE V.

COVENANTS OF THE BORROWER

30

Section 5.01.

Affirmative Covenants

30

Section 5.02.

Negative Covenants

36

 

 

 

ARTICLE VI.

EVENTS OF DEFAULT AND REMEDIES

39

Section 6.01.

Events of Default

39

Section 6.02.

Remedies

41

Section 6.03.

Remedies Cumulative

42

 

 

 

ARTICLE VII.

MISCELLANEOUS

42

Section 7.01.

Amendments, etc.

42

Section 7.02.

Notices, etc.

43

Section 7.03.

No Waiver; Remedies

43

Section 7.04.

Costs, Expenses and Taxes

44

Section 7.05.

Right of Set-off

44

Section 7.06.

Severability of Provisions

44

Section 7.07.

Binding Effect; Successors and Assigns; Participations

45

Section 7.08.

Consent to Jurisdiction

45

Section 7.09.

Governing Law

45

Section 7.10.

Execution in Counterparts

46

Section 7.11.

Survival

46

Section 7.12.

WAIVER OF JURY TRIAL

46

Section 7.13.

Entire Agreement

46

 

 

 

LIST OF SCHEDULES AND EXHIBITS

 

 

Schedule 3.01(d)

Real Property

Schedule 4.01(a)

Description of Certain Transactions Related to the Borrower’s Stock

Schedule 4.01(c)

Governmental Approvals

Schedule 4.01(f)

Description of Certain Threatened Actions, etc.

Schedule 4.01(k)

Location of Inventory and Farm Products; Third Parties in Possession; Crops

Schedule 4.01(l)

Office Locations; Fictitious Names; Etc.

Schedule 4.01(p)

Intellectual Property

Schedule 4.01(t)

Environmental Compliance

Schedule 5.01(o)

Management

Schedule 5.02(a)

Description of Certain Liens, Lease Obligations, etc.

Schedule 5.02(k)

Transactions with Affiliates

 

 

Exhibit A

Loan Restructuring Proposal

Exhibit B

Compliance Certificate

 

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SIXTH AMENDED AND RESTATED

MASTER LOAN AGREEMENT

 

THIS SIXTH AMENDED AND RESTATED MASTER LOAN AGREEMENT (this “Agreement”), dated
to be effective as of May 17, 2013, between AGSTAR FINANCIAL SERVICES, PCA, a
United States corporation (“Lender”) and HERON LAKE BIOENERGY, LLC, a Minnesota
limited liability company (“Borrower”).

 

RECITALS

 

A.                                    Borrower is indebted to Lender under an
Amended and Restated Term Note dated September 1, 2011, in the principal amount
of $40,000,000.00 (“Note One”), and an Amended and Restated Term Revolving Note
dated September 1, 2011, in the principal amount of $8,008,689.00 (“Note Two”). 
As of May 9, 2013, the outstanding principal balance (plus accrued but unpaid
interest, fees and costs) on Note One is $35,810,313.29 and on Note Two is
$1,980,962.67.  The indebtedness evidenced by Note One is made up of a fixed
rate tranche with an outstanding principal balance of $17,942,346.75 (the “Fixed
Rate Tranche”) and a variable rate tranche with an outstanding principal balance
of $17,867,966.54 (the “Variable Rate Tranche”).  The loans extended to the
Borrower under Note One and Note Two are referred to herein collectively as the
“Original Loans.”

 

B.                                    Borrower’s obligations to the Lender are
further evidenced by the Fifth Amended and Restated Master Loan Agreement dated
as of September 1, 2011, (the “2011 MLA”) between Borrower and Lender.

 

C.                                    The Original Loans were made by Lender to
Borrower for the purpose, among other things, of constructing and operating an
ethanol production facility near Heron Lake, Minnesota (the “Project”).

 

D.                                    The Original Notes are secured by, among
other things: (i) a Mortgage, Security Agreement and Assignment of Rents and
Leases dated September 29, 2005 and recorded in the Office of the County
Recorder of Jackson County on September 30, 2005, as Instrument No. 244879; as
amended and restated by that certain Amended and Restated Mortgage, Security
Agreement and Assignment of Rents and Leases dated November 20, 2006 and
recorded in the Office of the County Recorder of Jackson County on December 6,
2006 as Instrument No. 248498; and further amended by that certain Second
Amended and Restated Mortgage, Security Agreement and Assignment of Rents and
Leases dated December 27, 2006 and recorded in the Office of the County Recorder
of Jackson County on December 27, 2006 as Instrument No. 248658; and further
amended by that certain Third Amended and Restated Mortgage, Security Agreement
and Assignment of Rents and Leases dated May 18, 2007 and recorded in the Office
of the County Recorder of Jackson County on June 4, 2007 as Instrument No. A
250019; and further amended by that certain Fourth Amended and Restated
Mortgage, Security Agreement and Assignment of Rents and Leases dated
September 1, 2011, recorded in the Office of the County Recorder of Jackson
County on September 8, 2011 as Document No. A262710; and further amended by that
certain Fifth Amended and Restated Mortgage, Security Agreement and Assignment
of Rents and Leases dated September 20, 2011, recorded in the Office of the
County Recorder of Jackson County on November 1, 2011 as Document No. A263140,
(collectively, as amended, the “Original Mortgage”) under which Lender was
granted a lien in certain real property located in Jackson County, Minnesota, as
described in the Original Mortgage; (ii) security interests in all of the
Personal Property assets of the Borrower pursuant to the provisions of a
Security Agreement dated September 29, 2005 (the “Security Agreement”); and
(iii) collateral assignments of material contracts, deposit account control
agreements, commodity account control agreements, and such other documents,
instruments and agreements as required under the 2011 MLA as amended, modified
and supplemented from time to time.

 

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E.                                     Borrower failed to make the required
monthly installments of principal required by the Original Notes on February 1,
2013, March 1, 2013, April 1, 2013 and May 1, 2013, and failed to maintain the
financial covenants of Section 5.01(d), (e) and (g) of the 2011 MLA; and but for
the provisions of this Agreement, Lender has the right to declare the Original
Notes fully and immediately due and payable without defense or right of setoff.

 

F.                                      Borrower and Lender have previously
entered into Forbearance Agreements dated December 21, 2012, January 22, 2013,
February 12, 2013, March 29, 2013, April 12, 2013, and May 10, 2013
(collectively, the “Forbearance Agreements”).

 

G.                                    Lender has provided Borrower with a notice
of its rights under to 12 CFR § 617.7410(a)(2), a copy of the Distressed Loan
Restructure Policy, and the materials necessary to submit an application for
restructure on April 17, 2013 (the “Borrower Rights Notice”).   In response to
the Borrower Rights Notice, Borrower has submitted to Lender a loan
restructuring plan dated April 26, 2013 (the “Loan Restructuring Proposal”)
attached hereto as Exhibit A. Negotiation between Borrower and Lender has
resulted in this Agreement being reached for the restructuring of the Original
Loans extended to the Borrower under the Original Notes.

 

H.                                   The execution and delivery of this
Agreement, the Second Amended and Restated Term Note, the Second Amended and
Restated Term Revolving Note, and the other Loan Documents (as defined in this
Agreement) and Related Documents (as defined in this Agreement) shall supersede
and replace in their entirety the 2011 MLA, the Original Notes, the Forbearance
Agreements and all supplements, amendments, restatements and other modifications
thereof, which shall hereafter be of no force or effect.  This Agreement, the
Second Amended and Restated Term Note, the Second Amended and Restated Term
Revolving Note, and the other Loan Documents (as defined in this Agreement) and
Related Documents (as defined in this Agreement) shall constitute a loan
restructuring agreement within the meaning of 12 CFR § 617.7410 and Borrower’s
exercise of its restructuring rights accorded to Borrower under the Agricultural
Credit Act of 1987.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing, intending to be legally bound
hereby, and in consideration of Lender making one or more loans to the Borrower,
Lender and the Borrower agree as follows:

 

ARTICLE I.

DEFINITIONS AND ACCOUNTING MATTERS

 

Section 1.01.                          Certain Defined Terms. As used in this
Agreement and in the other Loan Documents, the following terms shall have the
following meanings. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code, in effect in
the State of Minnesota, as amended from time to time (the “UCC”). All references
to dollar amounts shall mean amounts in lawful money of the United States of
America. The terms “include”, “including” and similar terms are to be construed
as if followed by the phrase “without being limited to”.

 

“Advances” means the Loans, Letters of Credit, or Protective Advances provided
the Borrower pursuant to this Agreement.

 

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“Affiliate” means, as to any Person, any other Person: (a) that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, such Person; (b) that directly or indirectly
beneficially owns or holds five percent (5%) or more of any class of voting
stock of such Person; or (c) five percent (5%) or more of the voting stock of
which is directly or indirectly beneficially owned or held by the Person in
question. The term “control” means the possession, directly or indirectly, of
the power to direct or cause direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract, or
otherwise; provided, however, in no event shall the Lender or any Bank be deemed
an Affiliate of the Borrower or any of its Subsidiaries.

 

“Agreement” means this Sixth Amended and Restated Master Loan Agreement, as may
be amended or modified from time to time, together with all exhibits and
schedules attached hereto or thereto from time to time.

 

“Agrinatural Agreements” means that certain Reservation of Natural Gas Delivery
Capacity dated January 10, 2010 and a Firm Gas Transportation Agreement dated
May 13, 2011,between Agrinatural Gas, LLC and the Borrower.

 

“Allowed Distributions” has the meaning set forth in Section 5.02(b).

 

“Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy,” as now or hereafter in effect, or any successor statute.

 

“Borrower” means Heron Lake BioEnergy, LLC, a Minnesota limited liability
company.

 

“Business Day” means any day other than a Saturday, Sunday, or other day on
which commercial banks are authorized to close under the laws of the State of
Minnesota of, or are in fact closed in, the State of Minnesota and, if such day
relates to any LIBOR Rate, means any such day on which dealings in dollar
deposits are conducted by and between banks in the applicable offshore dollar
interbank market.

 

“Capital Expenditures” means, for any period, the sum of all amounts that would,
in accordance with GAAP, be included as additions to property, plant and
equipment on a statement of cash flows for the Borrower during such period, with
respect to: (a) the acquisition, construction, improvement, replacement or
betterment of land, buildings, machinery, equipment or of any other fixed assets
or leaseholds; or (b) other capital expenditures and other uses recorded as
capital expenditures having substantially the same effect.

 

“Cash Payment” means the payment by the Borrower to AgStar in collected funds in
the amount of $1,407,000.00 on the Closing Date to be applied as follows: 
(a) $538,002.47 to the reduction of the outstanding principal balance of the
Fixed Rate Tranche;  (b) $554,082.34 to the reduction of the outstanding
principal balance of the Variable Rate Tranche; (c) an amount sufficient to pay
the accrued interest on the Variable Rate Tranche and Note Two as of the Closing
Date, to pay such interest; and (d) the remaining balance after payments in (a),
(b) and (c) in this definition are made to the reduction of the outstanding
principal balance of Note Two.

 

“Change of Control” means: (a) any “person” or “ group” (as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act), other than Project Viking,
L.L.C. or its Affiliates, is, or becomes, the beneficial owner (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of
Capital Stock of the Borrower representing more than 50% of the voting power of
the total outstanding Capital Stock of the Borrower; (b) any “person” or “group”
(as

 

3

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such terms are used in Section 13(d) and 14(d) of the Exchange Act) obtains the
power (whether or not exercised) to elect a majority of the board of directors
of the Borrower; or (c) the Borrower at any time ceases to own, directly or
indirectly, 100% of the Capital Stock of any Subsidiary Guarantor. “Capital
Stock” means any and all shares, interests, participations or other equivalents
(however designated) of capital stock of a corporation, any and all similar
ownership interests in a Person (other than a corporation) and any and all
warrants, rights or options to purchase any of the foregoing.

 

“Closing Date” means May 17, 2013.

 

“Code” means the Internal Revenue Code, as amended, and the regulations and
published interpretations thereunder.

 

“Collateral” means and includes, without limitation, all property and assets
granted as collateral security for the Loans or Indebtedness, whether real or
personal property, whether granted directly or indirectly, whether granted now
or in the future, and whether granted in the form of a security interest,
mortgage, assignment of rents, deed of trust, assignment, pledge, account
control agreement, chattel mortgage, chattel trust, factor’s lien, equipment
trust, conditional sale, trust receipt, lien, charge, lien or title retention
contract, lease or consignment intended as a security device, or any other
security or lien interest whatsoever, whether created by law, contract or
otherwise.

 

“Commitment” means the respective amounts committed to by Lender under the this
Agreement and the Notes.

 

“Compliance Certificate” means a certificate of the Treasurer, or any other
officer reasonably acceptable to the Lender, of the Borrower, substantially in
the form attached hereto as Exhibit B, setting forth the calculations of current
financial covenants and stating: (a) the Financial Statements are true and
correct and, other than the unaudited interim financial statements, have been
prepared in accordance with GAAP; (b) whether they have knowledge of the
occurrence of any Event of Default under this Agreement, and if so, stating in
reasonable detail the facts with respect thereto; and (c) reaffirm and ratify
the representations and warranties, as of the date of the certificate, contained
in this Agreement.

 

“Current Portion of Long Term Debt” means that portion of Funded Debt payable
within one year from the date of such determination, determined in accordance
with GAAP.

 

“Debt” means: (a) indebtedness for borrowed money or for the deferred purchase
price of property or services; (b) obligations as lessee under leases which
shall have been or should be, in accordance with GAAP, recorded as capital
leases; (c) obligations under direct or indirect guaranties in respect of, and
obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clause (a) or (b) above or
(e) through (g) below; (d) liabilities in respect of unfunded vested benefits
under plans covered by Title IV of ERISA; (e) indebtedness in respect of
mandatory redemption or mandatory dividend rights on equity interests but
excluding dividends payable solely in additional equity interests; (f) all
obligations of a Person, contingent or otherwise, for the payment of money under
any noncompete, consulting or similar agreement entered into with the seller of
a company or its assets or any other similar arrangements providing for the
deferred payment of the purchase price for an acquisition permitted hereby or an
acquisition consummated prior to the date hereof; and (g) all obligations of a
Person under any hedging agreement.

 

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“Default Rate” means the lesser of: (a) the Maximum Rate; or (b) the rate per
annum which shall from day-to-day be equal to four percent (4.0%) in excess of
the then applicable rate of interest under any Note.

 

“Distribution” means any dividend, distribution, payment, or transfer of
property to any member of the Borrower.

 

“EBITDA” means for any period, the total of the following each calculated
without duplication for the Borrower for such period: (i) net income from
operations; plus (ii) any provision for (or less any benefit from) income taxes
included in determining such net income; plus (iii) Interest Expense deducted in
determining such net income; plus (iv) amortization and depreciation expense
deducted in determining such net income.

 

“Environmental Laws” means all laws and regulations relating to environmental,
health, safety and land use matters applicable to any property.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended,
and the regulations and published interpretations thereunder.

 

“ERISA Affiliate” means any Person, trade or business that, together with the
Borrower, is or was treated as a single employer under Section 414 of the Code
or Section 4001 of ERISA.

 

“Events of Default” has the meaning specified in Section 6.01.

 

“Excess Cash Flow” means EBITDA, less the sum of: (i) required payments of
principal and interest in respect of Funded Debt; (ii) Capital Expenditures and
(iii) Allowed Distributions.

 

“Excess Cash Flow Payment” has the meaning set forth in Section 2.02(e).

 

“Extraordinary Items” means items which are material and significantly different
from the Borrower’s typical business activities, determined in accordance with
GAAP.

 

“Fixed Charge Coverage Ratio” means the ratio of (EBITDA +/- Extraordinary
Items) divided by the sum of Current Portion of Long Term Debt + Interest
Expense + Distributions + Maintenance Capital Expenditures) measured on a
consolidated basis.

 

“Food Security Act” means the Food Security Act of 1985, 7 U.S.C. §1631, as
amended, and the regulations promulgated thereunder.

 

“Funded Debt” means the principal amount of all Debt of the Borrower having a
final maturity of more than one year from the date of origin thereof (or which
is renewable or extendible at the option of the obligor for a period or periods
more than one year from the date of origin) excluding, however, the non-cash
portion of any required principal reduction required under
Section 2.03(e)(iii) as a result of the annual reductions in the maximum Term
Revolving Loan Commitment.

 

“GAAP” means generally accepted accounting principles of the United States of
America, consistently applied.

 

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“Gavilon” means Gavilon, LLC, a Delaware limited liability company, and its
permitted Affiliates, subsidiaries and assigns.

 

“Gavilon Intercreditor Agreement” means that certain Intercreditor Agreement
dated September 1, 2011, as amended from time to time, between Gavilon and
Lender, pursuant to which the parties have set forth their agreements relative
to the Collateral described therein.

 

“Gavilon Agreements” means the (a) Master Netting, Setoff, Credit and Security
Agreement between Gavilon and Borrower, (b) Corn Supply Agreement between
Gavilon and Borrower, and (c) Ethanol and Distiller’s Grains Marketing Agreement
between Gavilon and Borrower,  each dated on or about September 1, 2011, as the
same may be extended, renewed, amended or otherwise modified from time to time.

 

“Governmental Authority” means and includes any and all courts, boards,
agencies, commissions, offices, or authorities of any nature whatsoever for any
governmental unit (federal, state, county, district, municipal, city, or
otherwise) whether now or hereafter in existence.

 

“Guarantor(s)” means the Subsidiary Guarantors, together with all other of the
guarantors, sureties, and accommodation parties in connection with any Loan.

 

“Guaranty” and “Guaranties” shall mean those guaranties given by a Guarantor,
pursuant to which the Guarantor shall guarantee the full and prompt payment and
performance of the Borrower under the Notes and this Agreement.

 

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

 

“Incentive Payments” means any and all federal or state governmental subsidies,
payments, transfers or other benefits, whether now or hereafter established,
received, or scheduled to be received within thirty (30) days, by the Borrower.

 

“Income Taxes” means the applicable state, local or federal tax on the net
income of the Borrower.

 

“Indenture Intercreditor Agreement” means an Intercreditor Agreement between
U.S. Bank, N.A., as Trustee, and Lender, pursuant to which the parties set forth
their agreements relative to the Indenture Subordinated Debt and the Collateral
described therein.

 

“Indenture Subordinated Debt” means the Subordinated Debt incurred by the
Borrower evidenced by the Convertible Secured 7.25% Subordinated Debt Securities
in an amount equal to or greater than $6,400,000.00 and bearing terms and
conditions reasonably acceptable to the Lender and subject to the Indenture
Intercreditor Agreement.

 

“Intellectual Property” has the meaning specified in Section 4.01(p).

 

“Interim Subordinated Debt” means Subordinated Debt incurred by the Borrower in
an amount not to exceed $1,407,000.00 and evidenced by loan documents dated on
or about the Closing Date and bearing terms and conditions reasonably acceptable
to the Lender and subject to the Interim Subordinated Debt Intercreditor
Agreement.

 

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“Interim Subordinated Debt Intercreditor Agreement” means the intercreditor
agreement between                  and the Lender dated as of the Closing Date,
pursuant to which the parties have set forth their agreements relative to the
Interim Subordinated Debt and the Collateral described therein.

 

“Interest Expense” means for any period, the total interest expense of the
Borrower calculated on a consolidated basis.

 

“Interest Period” means the period commencing on the first day of each calendar
month and shall remain in effect until and including the last day of each
calendar month. Notwithstanding the foregoing: (a) each Interest Period which
would otherwise end on a day which is not a Business Day shall end on the next
succeeding Business Day or if such succeeding Business Day falls in the next
succeeding calendar month, on the next preceding Business Day, (b) any Interest
Period which would otherwise extend beyond the Maturity Date shall end on the
Maturity Date, and (c) no Interest Period shall have a duration of less than one
(1) month except the first and last month.

 

“Inventory” means all of the Borrower’s inventory, as such term is defined in
the UCC, whether now owned or hereafter acquired, whether consisting of whole
goods, spare parts or components, supplies or materials, whether acquired, held
or furnished for sale, for lease or under service contracts or for manufacture
or processing, and wherever located.

 

“Law” means, with respect to any Governmental Authority, any constitutional
provision, law, statute, rule, regulation, ordinance, treaty, order, decree,
judgment, decision, common law, holding injunction, Governmental Approval or
requirement of such Governmental Authority. Unless the context clearly requires
otherwise, the term “Law” shall include each of the foregoing (and each
provision thereof) as in effect at the time in question, including any
amendments, supplements, replacements, or other modifications thereto or
thereof, and whether or not in effect as of the date of this Agreement.

 

“Lender” means AgStar Financial Services, PCA, and its successors and assigns.

 

“Letter of Credit” means any letter of credit issued by Lender pursuant to the
terms of this Agreement.

 

“Letter of Credit Liabilities” means, at any time, the aggregate maximum amount
available to be drawn under all outstanding Letters of Credit (in each case,
determined without regard to whether any conditions to drawing could then be
met) and all unreimbursed drawings under Letters of Credit.

 

“LIBOR Rate” means the One Month London Interbank Offered Rate (“One Month
LIBOR”), rounded upward to the nearest ten thousandth of one percent, reported
on the tenth day of the month immediately preceding the month for which interest
is being calculated by the Wall Street Journal in its daily listing of money
rates, defined therein as the average of interbank offered rates for dollar
deposits in the London market. If One Month LIBOR is not reported on the tenth
day of a month, the One Month LIBOR reported on the first Business Day preceding
the tenth day of the month will be used. If this index is no longer available,
Lender will select a new index which is based upon comparable information. For
purposes of clarity, the parties hereto agree that it is their intention to
utilize the One Month LIBOR rate described above for each one-month period with
the applicable One Month LIBOR rate being reset for each successive one-month
period as described above, including with respect to outstanding Advances.

 

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“Loan Documents” means this Agreement, the Notes, Letters of Credit, the
Security Agreement, the Mortgage and all other agreements, documents,
instruments, and certificates of the Borrower delivered to, or in favor of, the
Lender under this Agreement or in connection herewith or therewith, including,
without limitation, all agreements, documents, instruments, certificates and
delivered in connection with the extension of Advances by the Lender.

 

“Loan Obligations” means all obligations, indebtedness, and liabilities of the
Borrower to the Lender arising pursuant to any of the Loan Documents, whether
now existing or hereafter arising, whether direct, indirect, related, unrelated,
fixed, contingent, liquidated, unliquidated, joint, several, or joint and
several, including, without limitation, the obligation of the Borrower to repay
the Advances, interest on the Advances, and all fees, costs, and expenses
(including attorneys’ fees and expenses) provided for in the Loan Documents.

 

“Loan/Loans” means and includes the Term Loan, the Term Revolving Loan and any
other financial accommodations extended to the Borrower by the Lender pursuant
to the terms of this Agreement and the Notes.

 

“Loan Restructuring Proposal” means the application and proposed debt
restructuring plan submitted by the Borrower to the Lender and attached hereto
as Exhibit A.

 

“Long Term Debt” means indebtedness that matures more than one year after the
date of determination thereof.

 

“Long Term Marketing Agreement” means any contract, agreement or understanding
of the Borrower having a term of one year or more after the date of
determination thereof relating to the sale of any raw materials, inventory,
products or by-products of the Borrower, including without limitation the
Gavilon Agreements.

 

“Maintenance Capital Expenditures” means all Capital Expenditures made in the
ordinary course of business to maintain existing business operations of the
Borrower in any fiscal year, determined in accordance with GAAP.

 

“Material Adverse Effect” means any materially adverse impact on (a) the
business, assets, operations, property, condition (financial or otherwise) of
the Borrower or any Subsidiary taken as a whole, (b) the validity or
enforceability of this Agreement or any of the other Loan Documents or the
rights or remedies of the Lender hereunder or thereunder, (c) the ability of the
Borrower to fully and timely perform any of its obligations under the Loan
Documents or (d) the Collateral or the Security Interests in favor of the Lender
on such Collateral or the perfection or priority of such Security Interests.

 

“Material Contract” means (i) any contract or any other agreement, written or
oral, of any of the Borrower or its Subsidiaries involving monetary liability of
or to any such person in an amount in excess of $500,000.00 per annum; and
(ii) any other contract or agreement, written or oral, of any of the Borrower or
any of its Subsidiaries the failure to comply with which could reasonably be
expected to have a Material Adverse Effect; provided, however, that (x) any
contract or agreement which is terminable by a party other than any of the
Borrower or its Subsidiaries without cause upon notice of 90 days or less, and
(y) any contract or agreement for the sale and purchase of corn for delivery
within 12 months, shall not be considered a Material Contract; provided,
however, that the Gavilon Agreements shall for all purposes be deemed to be
Material Contracts.

 

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“Materials of Environmental Concern” means chemicals, pollutants, contaminants,
wastes, toxic substances and hazardous substances, any toxic mold, radon gas or
other naturally occurring toxic or hazardous substance or organism and any
material that is regulated in any way, or for which liability is imposed,
pursuant to an Environmental Law.

 

“Maturity Date” means September 1, 2016.

 

“Maximum Rate” means the maximum nonusurious interest rate, if any, at any time,
or from time to time, that may be contracted for, taken, reserved, charged or
received under applicable state or federal laws.

 

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

 

“Mortgage” means that certain Sixth Amended and Restated Mortgage, Security
Agreement and Assignment of Rents and Leases of even date herewith, pursuant to
which a mortgage interest shall be given by the Borrower to the Lender in the
Real Property to secure payment to the Lender of the Loan Obligations.

 

“Net Income” means net income of the Borrower as determined in accordance with
GAAP, after all operating expenses including salaries and bonuses.

 

“Note/Notes” means and includes the Term Note, the Term Revolving Note and any
promissory notes executed and delivered to the Lender by the Borrower pursuant
to the terms of this Agreement as the same may be amended, modified,
supplemented, extended, replaced or restated from time to time.

 

“Ordinary Trade Payable Dispute” means trade accounts payable, in an aggregate
amount not in excess of $50,000.00 with respect to the Borrower, with respect to
which: (a) there exists a bona fide dispute between Borrower and the vendor;
(b) the Borrower is contesting the same in good faith by appropriate
proceedings; and (c) the Borrower has established appropriate reserves on its
financial statements.

 

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

 

“Outstanding Revolving Advance” means the Outstanding Credit under the Term
Revolving Note.

 

“Owner Equity Ratio” means Tangible Net Worth divided by total assets, measured
on a consolidated basis, and expressed as a percentage.

 

“Person” means any individual, corporation, business trust, association,
company, partnership, joint venture, Governmental Authority, or other entity.

 

“Personal Property” means all buildings, structures, equipment, fixtures,
improvements, building supplies and materials and personal property now or
hereafter attached to, located in, placed in or necessary to the use of the
improvements on the Real Property including, but without being limited to, all
machinery, fixtures, equipment, furnishings, and appliances, as well as all
renewals, replacements, additions, and substitutes thereof, and all products and
proceeds thereof, and including without limitation all accounts, instruments,
chattel paper, payment intangibles, other

 

9

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rights to payment, inventory, farm products, equipment, investment property,
money, deposit accounts, instruments, insurance proceeds and general intangibles
of the Borrower, whether now owned or hereafter acquired.

 

“Plan” means an employee pension benefit plan (as defined in Section 3(3) of
ERISA) subject to Title IV of ERISA or Section 412 of the Code that is sponsored
or maintained by the Borrower or any ERISA Affiliate, or in respect of which any
Borrower or any ERISA Affiliate has any obligations to contribution or
liability.

 

“Program” means the funds held program that Lender may offer, in its sole
discretion and on such terms and conditions as Lender may establish from time to
time, to permit the Borrower to make advance conditional payments on eligible
loans.

 

“Program Account” means that account established by the Lender under the
Program.

 

“Project” means any and all buildings, structures, fixtures, and other
improvements made to the Real Property.

 

“Protective Advances” means all sums advanced for the purpose of payment of real
estate taxes (including special payments in lieu of real estate taxes), personal
property taxes (including special payments in lieu of personal property taxes),
maintenance costs, insurance premiums, remediation costs, all other items
(including capital items) deemed appropriate by the Lender to preserve and
protect the Project, Real Property, or any other Collateral from forfeiture,
casualty, loss, waste or diminution of value, and all other costs to otherwise
prepare the Project, Real Property or Collateral for sale including the cost of
any professional consultants or advisors deemed necessary or appropriate by the
Lender, and the costs of sale.

 

“Real Property” means that real property located in the County of Jackson, State
of Minnesota, owned by the Borrower, upon which the Project was constructed and
which is described in Schedule 3.01(d).

 

“Reimbursement Obligation” means the obligation of the Borrowers to reimburse
the Lender for any demand for payment or drawing under a Letter of Credit.

 

“Related Documents” means and includes without limitation all promissory notes,
credit agreements, loan agreements, guaranties, security agreements, mortgages,
deeds of trust, assignments and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection with the Indebtedness.

 

“Request for Advance” shall have the meaning specified in Section 2.03(f).

 

“Revolving Advance” means an advance under the Term Revolving Note.

 

“SARA” means the Superfund Amendment and Reauthorizations Act of 1986, as
amended, and all regulations promulgated thereunder.

 

“Security Agreement” means and includes, without limitation, any agreements,
promises, covenants, arrangements, understandings, or other agreements, whether
created by law, contract, or otherwise, which evidence, govern, represent, or
create a Security Interest, as the same has been and may hereafter be amended or
otherwise modified.

 

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“Security Interest” means and includes without limitation any type of collateral
security, whether in the form of a lien, charge, mortgage, assignment of rents,
deed of trust, assignment, pledge, account control agreement, chattel mortgage,
chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt,
lien or title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever, whether created by
law, contract, or otherwise.

 

“Subordinated Debt” means the following Debt: (i) tax increment financing;
(ii) debt owed the State of Minnesota or its agencies; (iii) debt owed Federated
Rural Electric Association/USDA; (iv) the Interim Subordinated Debt, while
outstanding; (v) the Indenture Subordinated Debt; and (vi) other Debt which has
been approved by Lender in writing and subject to a subordination agreement
acceptable to Lender in its sole discretion.

 

“Subsidiary” as to any Person, means any corporation or other entity in which
more than 50% of all equity interests is owned directly or indirectly by such
Person. Unless otherwise qualified herein, all references to a “Subsidiary” or
“Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Borrower.

 

“Subsidiary Guarantors” means collectively Lakefield Farmers Elevator, LLC, a
Minnesota limited liability company, HLBE-PC, and any other Person which becomes
a Subsidiary Guarantor as provided under Section 5.02(h).

 

“Tangible Net Worth”  means the excess of total assets over total liabilities
except Subordinated Debt, total assets and total liabilities each to be
determined in accordance with GAAP consistent with those applied in the
preparation of the financial statements referred to in Section 5.01(c) for the
Borrower, excluding, however, from the determination of total assets:
(i) goodwill, organizational expenses, research and development expenses,
trademarks, trade names, copyrights, patents, patent applications, licenses and
rights in any thereof, and other similar intangibles; (ii) treasury stock;
(iii) securities which are not readily marketable; (iv) cash held in a sinking
or other analogous fund established for the purpose of redemption, retirement or
prepayment of capital stock or Debt; (v) any write-up in the book value of any
asset resulting from a revaluation thereof subsequent to the Closing Date; and
(vi) any items not included in clauses (i) through (vi) above which are treated
as intangibles in conformity with GAAP.

 

“Tax Distributions” has the meaning specified in Section 5.02(b).

 

“Term Loan Adjustment Date” has the meaning specified in Section 2.02(c).

 

“Term Loan” means any amortizing loan with a maturity of greater than one year
provided by the Lender to the Borrower pursuant to the terms and conditions of
this Agreement.

 

“Term Note” means that certain Second Amended and Restated Term Note of even
date herewith executed and delivered to the Lender by the Borrower in the amount
of $17,404,344.28 and pursuant to the terms and conditions provided for in the
Agreement.

 

“Term Revolving Loan Adjustment Date” has the meaning specified in
Section 2.03(d).

 

“Term Revolving Loan Commitment” shall mean the following:

 

On the Closing Date

 

$

20,500,000.00

 

October 1, 2013

 

$

18,500.000.00

 

October 1, 2014

 

$

16,500,000.00

 

October 1, 2015

 

$

14,500,000.00

 

 

11

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“Term Revolving Loan” means the revolving loan provided by the Lender to the
Borrower pursuant to the terms and conditions of the Term Revolving Note and
this Agreement.

 

“Term Revolving Loan Principal Payment(s)” shall have the meaning specified in
Section 2.03(e).

 

“Term Revolving Loan Termination Date” shall have the meaning specified in
Section 2.03(a).

 

“Term Revolving Note” means that Second Amended and Restated Term Revolving Note
of even date herewith, in the amount of $20,500,000.00 pursuant to the terms and
conditions provided for herein.

 

“Underwriting Fee” shall have the meaning specified in Section 2.15.

 

“Unused Commitment Fee” shall have the meaning specified in Section 2.15.

 

“Working Capital” means current assets of the Borrower, including the available
commitment under the Term Revolving Loan, less current liabilities of the
Borrower.

 

Section 1.02.                          Accounting Matters. All accounting terms
not specifically defined herein shall be construed in accordance with GAAP,
except as otherwise stated herein. To enable the ready and consistent
determination of compliance by the Borrower with its obligations under this
Agreement, the Borrower will not change the manner in which either the last day
of its fiscal year or the last days of the first three fiscal quarters of its
fiscal years is calculated.

 

Section 1.03.                          Construction. Wherever herein the
singular number is used, the same shall include the plural where appropriate,
and words of any gender shall include each other gender where appropriate. The
headings, captions or arrangements used in any of the Loan Documents are, unless
specified otherwise, for convenience only and shall not be deemed to limit,
amplify or modify the terms of the Loan Documents, nor affect the meaning
thereof.

 

ARTICLE II

AMOUNTS AND TERMS OF THE LOANS

 

Section 2.01.                          Loans. Subject to the terms and
conditions of this Agreement and in reliance upon the representations and
warranties set forth in this Agreement, the Lender has agreed to lend to
Borrower the following amounts, for the purposes as further described below:

 

(a)                                 Term Loan. Lender agrees to lend to the
Borrower and the Borrower agrees to borrow from the Lender a Term Loan in the
amount of Seventeen Million Four Hundred Four Thousand Three Hundred Forty-Four
and 28/100 Dollars ($17,404,344.28) pursuant to the terms and conditions set
forth in Section 2.02 and the Term Note.

 

(b)                                 Term Revolving Loan. Lender agrees to lend
to the Borrower, on the Closing Date, and from time to time thereafter on a
revolving basis, an amount not to exceed $20,500,000.00, pursuant to the terms
and conditions set forth in Section 2.03 and the Term Revolving Note.  On the
Closing Date, $17,313,884.20 will be advanced to reduce the Term Loan to the
amount set forth in Section 2.01(a).

 

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Section 2.02.                          Term Loan.

 

(a)                                 Term Loan. Lender agrees to lend to the
Borrower and the Borrower agrees to borrow from the Lender a Term Loan in the
amount of Seventeen Million Four Hundred Four Thousand Three Hundred Forty-Four
and 28/100 Dollars ($17,404,344.28) pursuant to the terms and set forth in this
Section 2.02 and the Term Note. The Term Loan shall bear interest on the
outstanding principal balance at the rate set forth in Section 2.02(c).

 

(b)                                 Term Loan Term. The Term Loan term shall run
for a period beginning on the Closing Date and ending on the Maturity Date.

 

(c)                                  Term Loan Interest Rates.  The Term Loan
shall bear interest:

 

(i)                                     from the Closing Date until July 31,
2013, at a fixed rate per annum equal to:

 

(A)                               if the Borrower is in compliance with the
Working Capital covenant set forth in Section 5.02(d) (as tested monthly), five
and three-quarters percent (5.75%); and

 

(B)                               if the Borrower is not in compliance with the
Working Capital covenant set forth in Section 5.02(d) (as tested monthly), seven
and three-quarters percent (7.75%).  For purposes of this Section 2.02(c)(i)(B),
the Default Rate shall not be assessed on the outstanding Term Loan balance
prior to July 31, 2013, for a default or Event of Default based solely on
Borrower’s failure to maintain the required Working Capital set forth in
Section 5.02(d).

 

(ii)                                  from August 1, 2013 until September 1,
2014 (the “Term Loan Adjustment Date”), at a fixed rate equal to five and
three-quarters percent (5.75%) per annum, subject to Section 2.05.

 

(iii)                               on Term Loan Adjustment Date, the interest
rate on the Term Loan will adjust and be recalculated by adding 350 basis points
to the then “current index;” provided that the adjusted interest rate shall not
be less than five percent (5.00%) per annum, subject to Section 2.05.  The
current index for adjustments will be the Lender’s cost of funds for three-year
adjustable rate products. Lender’s cost of funds is the rate determined by the
Lender to represent the Lender’s direct and indirect cost of acquiring funds
with a term equal to the applicable interest period and interest rate product
selected by the Borrower. Interest shall be computed on the basis of a year of
three hundred sixty five (365) days but charged for actual days principal is
outstanding.

 

(d)                                 Term Loan Payments. Beginning on first
Monthly Payment Date following the Closing Date and on each Monthly Payment Date
thereafter until the Maturity Date, the Borrower shall make equal monthly
payments of principal and accrued interest in such amounts as will be required
to fully amortize the entire outstanding principal of the Term Loan, as of the
Closing Date, over a period not to exceed ten (10) years from the Closing Date.
The amount of said monthly payments shall be recalculated and, if necessary,
adjusted to account for changes in the effective rate of interest hereunder and
to maintain said ten (10) year amortization. The entire unpaid principal balance
and accrued and unpaid interest on the Term Loan is due and payable in full on
the Maturity Date.

 

(e)                                  Excess Cash Flow Sweep. In addition to all
other payments of principal and interest required hereunder and under the Term
Note, the Borrower shall remit to Lender, beginning with the first fiscal year
end following the Closing Date and continuing throughout the term of the Term
Loan,

 

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an amount equal to 25% of the Borrower’s Excess Cash Flow for the immediately
preceding fiscal year (the “Excess Cash Flow Payment”), which shall be
calculated based upon the immediately preceding fiscal year end audited
financial statements of the Borrower, on or before 90 days after the end of each
fiscal year, and which shall be paid on or before 120 days after the end of the
fiscal year for which the payment is calculated. Total Excess Cash Flow Payments
required hereunder shall not exceed Two Million and No/100 Dollars
($2,000,000.00) for any fiscal year. All Excess Cash Flow Payments shall be
applied to the reduction of the outstanding principal balance of the Term Loan;
provided, however, that if any Excess Cash Flow Payment would result in a
prepayment fee under Section 2.02(f), Borrower may elect to have such Excess
Cash Flow Payment applied to reduce the outstanding principal balance of the
Term Revolving Loan with a corresponding dollar for dollar reduction in the Term
Revolving Loan Commitment, which reduction would be reversed when such
prepayment fee would no longer be applicable and Borrower has prepaid the Term
Loan by an amount equal to the Excess Cash Flow Payment previously applied
against the outstanding principal balance of the Term Revolving Loan. No Excess
Cash Flow Payments shall be required for a fiscal year where Borrower’s Owner’s
Equity Ratio is greater than 50% as calculated at the end of the fiscal year for
which the Excess Cash Flow Payment is being calculated.

 

(f)                                   Prepayment of Term Loan. The Borrower may,
by notice to the Lender, prepay the outstanding amount of the Term Loan in whole
or in part with accrued interest to the date of such prepayment on the amount
prepaid, without penalty or premium, except set forth in this Section 2.02(f),
or as otherwise provided in this Agreement. Any prepayment does not otherwise
affect Borrower’s obligations to pay any fees due hereunder. The Term Loan is
subject to mandatory prepayment, at the option of the Lender, as set forth
herein.  Notwithstanding any language in this Agreement or the Term Note to the
contrary, the Borrower shall have no right to make advance payments of principal
on the Term Note (hereinafter in this Section 2.02(f), a “prepayment”) without
the Lender’s consent, which consent the Lender will grant solely upon the terms
and subject to the conditions hereinafter provided. In order to induce the
Lender to accept any prepayment, the Borrower agrees to pay the Lender a
prepayment interest charge (hereinafter in this Section 2.02(f), a “prepayment
fee”) for each such prepayment.  A prepayment fee shall be due and payable for
each prepayment on the Term Note made prior to September 1, 2015 (the “Fee End
Date”). The prepayment fee shall be due and payable for each prepayment, whether
made voluntarily or involuntarily, including any prepayment effected by the
Lender’s exercise of the acceleration clause in the Term Note. The prepayment
fee due from the Borrower for each prepayment shall be calculated as follows:

 

(i)                                     Compare the Initial Reference Rate, as
defined below, to the Final Reference Rate, as defined below.  If the Initial
Reference Rate is less than or equal to the Final Reference Rate, the prepayment
fee is zero.

 

(ii)                                  If the Initial Reference Rate is greater
than the Final Reference Rate, the prepayment fee shall be calculated as
follows:

 

(A)                               Calculate an amortization schedule using the
Initial Reference Rate, the amount of the principal prepayment, the prepayment
date and the Maturity Date. If the Fee End Date is prior to the Maturity Date,
assume for purposes of the calculation that all scheduled repayments of
principal due on or after the Fee End Date are paid on the Fee End Date;

 

(B)                               Calculate the interest payment(s) which will
accrue on the advance payment(s) of principal through the Fee End Date at the
Initial Reference Rate (“Initial Interest Amount(s)”);

 

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(C)                               Calculate the interest payment(s) which will
accrue on the advance payment(s) of principal through the Fee End Date at the
Final Reference Rate (“Final Interest Amount(s)”);

 

(D)                               Calculate the “Differential Interest Amount”
for each interest payment scheduled through the Fee End Date by subtracting the
Final Interest Amount from the Initial Interest Amount for each such payment;
and

 

(E)                                The discounted present value of each
Differential Interest Amount shall be calculated by using the Final Reference
Rate as the discount rate. The prepayment fee shall be the sum of the discounted
present value of each Differential Interest Amount.

 

(iv)                              In this Section 2.02(f), the following terms
shall have the following meanings:

 

(A)                               “Initial Reference Rate” means the annualized
interest rate charged to Borrower.

 

(B)                               “Final Reference Rate” means the annualized
interest rate Lender would allocate to fund a new advance, on the date of
prepayment, with similar scheduled repayment of principal from the time of each
such advance payment through the Fee End Date, assuming all scheduled repayments
of principal due on or after the Fee End Date are paid on the Fee End Date.

 

Section 2.03.                          Term Revolving Loan.

 

(a)                                 Term Revolving Loan. On the terms and
conditions set forth herein, Lender agrees to make one or more advances to the
Borrower, during the period beginning on the Closing Date and ending on the
Business Day immediately preceding the 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 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 each anniversary date of the Closing Date,
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.

 

(b)                                 Purpose. Revolving Advances under the Term
Revolving Loan may be used for working capital and cash management purposes (but
not for the purchase of corn inventory, unless otherwise agreed by the Lender)
of the Borrower, including closing costs and fees associated with the Term
Revolving Loan. The Borrower agrees that the proceeds of the Term Revolving Loan
are to be used only for the purposes set forth in this Section 2.03(b).

 

(c)                                  Term Revolving Loan Term. The Term
Revolving Loan shall mature on the Maturity Date.

 

(d)                                 Interest Rate. The Term Revolving Loan shall
bear interest:

 

(i)                                     from the Closing Date until July 31,
2013, at a variable rate per annum equal to:

 

15

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(A)                               if the Borrower is in compliance with the
Working Capital covenant set forth in Section 5.02(d) (as tested monthly), the
greater of (A) the LIBOR Rate plus three hundred fifty (350) basis points or
(B) five percent (5.0%); and

 

(B)                               if the Borrower is not in compliance with the
Working Capital covenant set forth in Section 5.02(d) (as tested monthly), the
greater of (A) the LIBOR Rate plus five hundred fifty (550) basis points or
(B) seven percent (7.0%), per annum.  For purposes of this
Section 2.03(d)(i)(B), the Default Rate shall not be assessed on the Term
Revolving Loan prior to July 31, 2013, for a default or Event of Default based
solely on Borrower’s failure to maintain the required Working Capital set forth
in Section 5.02(d).

 

(ii)                                  from August 1, 2013 until the Maturity
Date, at a variable rate equal to the greater of (A) the LIBOR Rate plus three
hundred fifty (350) basis points or (B) five percent (5.0%), per annum, subject
to Sections 2.04 and 2.05.

 

(iii)                               The rate of interest due on the Term
Revolving Loan shall initially be determined as of the Closing Date and shall
thereafter be adjusted as and when LIBOR Rate changes and, as applicable, with
the submission of each Compliance Certificate due hereunder.  All such
adjustments to the rate of interest shall be made and become effective as of the
first day of the month following the date of any change in LIBOR Rate (or under
Section 2.03(4)(i)(B), a change to Borrower’s Working Capital below the
applicable threshold set forth in Section 5.02(d)) and shall remain in effect
until and including the day immediately preceding the next such adjustment (each
such day hereinafter being referred to as an “Term Revolving Loan Adjustment
Date”).  Interest shall be computed on the basis of a year of three hundred
sixty five (365) days, but charged for actual days principal is outstanding.

 

(e)                                  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
Closing Date, and continuing on each Monthly Payment Date thereafter until the
Maturity Date.  In addition to such periodic payments of interest, Borrower
shall make principal payments (the “Term Revolving Loan Principal Payments”) as
follows:

 

(i)                                     On or before July 31, 2013, the greater
of (i) an amount equal to the proceeds of the Indenture Subordinated Debt less
the Cash Payment, or (ii) $5,000,000.00;

 

(ii)                                  On or before October 1, 2013, an amount
equal to the Indenture Subordinated Debt in excess of $6,407,000.00, if any; and

 

(iii)                               On October 1, 2013, and on the first day of
each October thereafter, all amounts necessary to reduce the Outstanding
Revolving Advances to the amount of the then applicable maximum Term Revolving
Loan Commitment.

 

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

 

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(f)                                   Making the Advances.

 

(i)                                     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 Agreement, 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.

 

(ii)                                  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 is
made (including any failure resulting from the failure to fulfill on or before
the date specified for such Advance the applicable conditions set forth herein,
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.

 

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

 

(iv)                              Unused Commitment Fee. In addition to the fees
payable hereunder, 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.

 

(v)                                 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 herein, including,
without limitation, the following further conditions precedent:

 

(A)                               Representations and Warranties. The
representations and warranties set forth herein 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;

 

(B)                               No Defaults. No Event of Default has occurred
and is continuing; and

 

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

 

(g)                                  Letters of Credit.

 

(i)                                     Commitment to Issue. The Borrower may
request Revolving Advances by the Lender, and the Lender, subject to the terms
and conditions of this Agreement, may, in its sole discretion, issue letters of
credit for any Borrower’s account; provided, however, that:

 

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(A)                               the aggregate amount of outstanding Letter of
Credit Liabilities shall not at any time exceed $3,000,000.00;

 

(B)                               the maturity or expiry date of each Letter of
Credit shall be no later than the Maturity Date; and

 

(C)                               the sum of the outstanding Letters of Credit
plus the Outstanding Revolving Advances shall not at any time exceed the
available Term Revolving Loan Commitment.

 

(ii)                                  Letter of Credit Request Procedure. The
Borrower shall give the Lender irrevocable prior notice (effective upon receipt)
on or before 3:00 P.M. (Minneapolis, Minnesota time) on the Business Day three
Business Days prior to the date of the requested issuance of a Letter of Credit
specifying the requested amount, expiry date and issuance date of each Letter of
Credit to be issued and the nature of the transactions to be supported thereby.
Any such notice received after 3:00 P.M. (Minneapolis, Minnesota time) on a
Business Day shall be deemed to have been received and be effective on the next
Business Day. Each Letter of Credit shall have an expiration date that occurs on
or before the Maturity Date, shall be payable in U.S. dollars, must be
satisfactory in form and substance to the Lender, and shall be issued pursuant
to such documentation as the Lender may require, including, without limitation,
the Lender’s standard form letter of credit request and reimbursement agreement.

 

(iii)                               Letter of Credit Fees. The Borrower shall
pay to the Lender for (A) all fees, costs, and expenses of the Lender arising in
connection with any Letter of Credit, including the Lender’s customary fees for
amendments, transfers, and drawings on Letters of Credit, and (B) on the date of
the issuance of the Letter of Credit, and at the anniversary date of issuance of
such Letter of Credit, an issuance fee equal to two and one-half (2.5%) percent,
on an annualized basis, of the maximum amount available to be drawn under the
Letter of Credit.

 

(iv)                              Funding of Drawings. Upon receipt from the
beneficiary of any Letter of Credit of any demand for payment or other drawing
under such Letter of Credit, the Lender shall promptly notify the Borrower as to
the amount to be paid as a result of such demand or drawing and the respective
payment date. Any notice pursuant to the forgoing sentence shall specify the
amount to be paid as a result of such demand or drawing and the respective
payment date.

 

(v)                                 Reimbursements. After receipt of the notice
delivered pursuant to clause (iv) of this subsection with respect to a Letter of
Credit, the Borrower shall be irrevocably and unconditionally obligated to
reimburse the Lender for any amounts paid by the Lender upon any demand for
payment or drawing under the applicable Letter of Credit, without presentment,
demand, protest, or other formalities of any kind other than the notice required
by clause (iv) of this subsection. Such reimbursement shall occur no later than
3:00 P.M. (Minneapolis, Minnesota time) on the date of payment under the
applicable Letter of Credit if the notice under clause (iv) of this subsection
is received by 2:00 P.M. (Minneapolis, Minnesota time) on such date or by
11:00 A.M. (Minneapolis, Minnesota time) on the next Business Day, if such
notice is received after 2:00 P.M. (Minneapolis, Minnesota time). All payments
on the Reimbursement Obligations (including any interest earned thereon) shall
be made to the Lender for the account of the Lender in U.S. dollars and in
immediately available funds, without set-off, deduction, or counterclaim.

 

(vi)                              Reimbursement Obligations Absolute. The
Reimbursement Obligations of the Borrower under this Agreement are absolute,
unconditional, and irrevocable, and shall be performed strictly in accordance
with the terms of the Loan Documents under all circumstances whatsoever and the
Borrower hereby waives any defense to the payment of the Reimbursement

 

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Obligations based on any circumstance whatsoever, including, without limitation,
in any case, the following circumstances: (A) any lack of validity or
enforceability of any Letter of Credit or any other Loan Document; (B) any
amendment or waiver of or any consent to departure from any Loan Document;
(C) the existence of any claim, set-off, counterclaim, defense, or other rights
which any Borrower or any other Person may have at any time against any
beneficiary of any Letter of Credit, the Lender or any other Person, whether in
connection with any Loan Document or any unrelated transaction; (D) any
statement, draft, or other documentation presented under any Letter of Credit
proving to be forged, fraudulent, invalid, or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect whatsoever;
(E) payment by the Lender under any Letter of Credit against presentation of a
draft or other document that does not comply with the terms of such Letter of
Credit; or (F) any other circumstance whatsoever, whether or not similar to any
of the foregoing; provided that Reimbursement Obligations with respect to a
Letter of Credit may be subject to avoidance by a Borrower if the Borrower
proves in a final non-appealable judgment that it was damaged and that such
damage arose directly from the Lender’s willful misconduct or gross negligence
in determining whether the documentation presented under the Letter of Credit in
question complied with the terms thereof.

 

(vii)                           Lender Responsibility. Borrower assumes all
risks of the acts or omissions of any beneficiary of any Letter of Credit with
respect to its use of such Letter of Credit. Neither the Lender, nor any of its
respective officers or directors shall have any responsibility or liability to
the Borrower or any other Person for: (A) the failure of any draft to bear any
reference or adequate reference to any Letter of Credit, or the failure of any
documents to accompany any draft at negotiation, or the failure of any Person to
surrender or to take up any Letter of Credit or to send documents apart from
drafts as required by the terms of any Letter of Credit, or the failure of any
Person to note the amount of any instrument on any Letter of Credit, each of
which requirements, if contained in any Letter of Credit itself, it is agreed
may be waived by the Lender; (B) errors, omissions, interruptions, or delays in
transmission or delivery of any messages; (C) the validity, sufficiency, or
genuineness of any draft or other document, or any endorsement(s) thereon, even
if any such draft, document or endorsement should in fact prove to be in any and
all respects invalid, insufficient, fraudulent, or forged or any statement
therein is untrue or inaccurate in any respect; (D) the payment by the Lender to
the beneficiary of any Letter of Credit against presentation of any draft or
other document that does not comply with the terms of the Letter of Credit; or
(E) any other circumstance whatsoever in making or failing to make any payment
under a Letter of Credit. The Lender may accept documents that appear on their
face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary.

 

Section 2.04.                          Adjustments to Interest Rate. Subject to
the limitations regarding minimum rates of interest and compliance with the
Working Capital covenant as set forth in Section 2.03(d), the rate of interest
under any Loan which bears interest on a variable rate, may be adjusted
according to the following schedule should the Owner’s Equity Ratio of the
Borrower, measured quarterly on a consolidated basis, achieve the levels set
forth below:

 

Owner’s Equity

 

Interest Rate

Less than 49.99%

 

the greater of the Applicable LIBOR Rate plus 350 basis and five percent (5.00%)
per annum

50.00%—59.99%

 

the greater of the Applicable LIBOR Rate plus 325 basis and five percent (5.00%)
per annum

Greater Than 60.00%

 

the greater of the Applicable LIBOR Rate plus 300 basis and five percent (5.00%)
per annum

 

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Upon delivery of the Compliance Certificate pursuant to Section 5.01(c)(iii) for
each fiscal quarter, the rate of interest shall automatically be adjusted in
accordance with the Owner’s Equity Ratio set forth therein and the rates set
forth above. Such automatic adjustment to the rate of interest shall take effect
as of the first Business Day of the month following the month in which the
Lender received the related Compliance Certificate. For purposes of this
section, the term “Adjustment Date” shall mean each such Business Day when such
rates, margins or fees change pursuant to the immediately prior sentence or the
next following sentence. If the Borrower fails to deliver such Compliance
Certificate which so sets forth the Owner’s Equity Ratio within the period of
time required by Section 5.01(c)(iii) hereof or if any Event of Default occurs,
the rate of interest shall automatically be adjusted to a rate equal to the
applicable LIBOR Rate plus 375 basis points, such automatic adjustments: (a) to
take effect as of the first Business Day after the last day on which the
Borrower were required to deliver the applicable Compliance Certificate in
accordance with Section 5.01(c)(iii) hereof or in the case of an Event of
Default, on the date the written notice is given to the Borrower; and (b) to
remain in effect until subsequently adjusted in accordance herewith upon the
delivery of such Compliance Certificate or, in the case of an Event of Default,
when such Event of Default has been cured to the satisfaction of the Lender.

 

Section 2.05.                          Default Interest. In addition to the
rights and remedies set forth above and notwithstanding any Note: (i) if the
Borrower fails to make any payment to Lender when due (including, without
limitation, any purchase of equity of Lender when required), then at Lender’s
option in each instance, such obligation or payment shall bear interest from the
date due to the date paid at 4% 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 Loans shall bear interest form the date of the Event of Default
or such later date as Lender shall elect at 4% per annum in excess of the
rate(s) of interest that would otherwise be in effect on the Loans under the
terms of the applicable Note; (iii) after the maturity of any Loan, whether by
reason of acceleration or otherwise, the unpaid principal balance of the Loan
(including without limitation, principal, interest, fees and expenses) shall
automatically bear interest at 4% per annum in excess of the rate of interest
that would otherwise be in effect on the Loan under the terms of the applicable
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.

 

Section 2.06.                          Late Charge. If any payment of principal
or interest due under this Agreement or any 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.

 

Section 2.07.                          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 each of the other parties hereto; and (b) the obligation of the
Lender to make LIBOR rate loans of such type shall, upon the effectiveness of
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 this Agreement.

 

Section 2.08.                          Payments and Computations.

 

(a)                                 Method of Payment. Except as otherwise
expressly provided herein, all payments of principal, interest, and other
amounts to be made by the Borrower under the Loan Documents shall be

 

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made to the Lender in U.S. dollars and in immediately available funds, without
set-off, deduction, or counterclaim, not later than 2:00 P.M. (Minneapolis,
Minnesota time) on the date on which such payment shall become due (each such
payment made after such time on such due date to be deemed to have been made on
the next succeeding Business Day). The Borrower shall, at the time of making
each such payment, specify to the Lender the sums payable under the Loan
Documents to which such payment is to be applied and in the event that the
Borrower fail to so specify or if an Event of Default exists, the Lender may
apply such payment and any proceeds of any Collateral to the Loan Obligations in
such order and manner as it may elect in its sole discretion.

 

(b)                                 Application of Funds. Lender may apply all
payments received by it to the Loan Obligations in such order and manner as
Lender may elect in its sole discretion; provided that any payments received
from any Guarantor or from any disposition of any collateral provided by such
Guarantor shall only be applied against obligations guaranteed by such
Guarantor.

 

(c)                                  Payments on a Non-Business Day. Whenever
any payment under any Loan Document shall be stated to be due on a day that is
not a Business Day, such payment may be made on the next succeeding Business
Day, and such extension of time shall in such case be included in the
computation of the payment of interest and fees, as the case may be.

 

(d)                                 Proceeds of Collateral. All proceeds
received by the Lender from the sale or other liquidation of the Collateral when
an Event of Default exists shall first be applied as payment of the accrued and
unpaid fees and expenses of the Lender hereunder, including, without limitation,
under Section 7.04 and then to all other unpaid or unreimbursed Loan Obligations
(including reasonable attorneys’ fees and expenses) owing to the Lender and then
any remaining amount of such proceeds shall be applied to the unpaid amounts of
Loan Obligations, until all the Loan Obligations have been paid and satisfied in
full or cash collateralized. After all the Loan Obligations (including without
limitation, all contingent Loan Obligations) have been paid and satisfied in
full, all Commitments terminated and all other obligations of the Lender to the
Borrower otherwise satisfied, any proceeds of Collateral shall be delivered to
the Person entitled thereto as directed by the Borrower or as otherwise
determined by applicable law or applicable court order.

 

(e)                                  Computations. Except as expressly provided
otherwise herein, all computations of interest and fees shall be made on the
basis of actual number of days lapsed over a year of 365 days, as appropriate.
Interest shall accrue from and include the date of borrowing, but exclude the
date of payment.

 

Section 2.09.                          Maximum Amount Limitation. Anything in
this Agreement, any Note, or the other Loan Documents to the contrary
notwithstanding, Borrower shall not be required to pay unearned interest on any
Note or any of the Loan Obligations, or ever be required to pay interest on any
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
this Agreement, any 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 this Agreement, any 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 this Agreement, any 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 such Note, be either refunded to the Borrower, or
credited on the principal of such Note. It is further agreed that, without
limitation of the foregoing and to the extent permitted by applicable law, all
calculations of the

 

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rate of interest or discount contracted for, charged or received by the Lender
under its 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 Notes, and any
renewals thereof all interest at any time contracted for, charged or received by
Lender in connection therewith. This Section 2.09 shall control every other
provision of all agreements among the parties to this Agreement pertaining to
the transactions contemplated by or contained in the Loan Documents, and the
terms of this Section 2.09 shall be deemed to be incorporated in every Loan
Document and communication related thereto.

 

Section 2.10.                          Lender Records. All advances and all
payments or prepayments made thereunder on account of principal or interest may
be evidenced by the Lender in accordance with its usual practice in an account
or accounts evidencing such advances and all payments or prepayments thereunder
from time to time and the amounts of principal and interest payable and paid
from time to time thereunder; in any legal action or proceeding in respect of
the Notes, the entries made in such account or accounts shall be prima facie
evidence of the existence and amounts of all advances and all payments or
prepayments made thereunder on account of principal or interest. Lender shall
provide monthly statements of such entries to Borrower for the purpose of
confirming the accuracy of such entries.

 

Section 2.11.                          Loan Payments. During the continuance of
an Event of Default, the Lender may deduct any obligations due or any other
amounts due and payable by the Borrower under the Loan Documents from any
accounts maintained with the Lender.

 

Section 2.12.                          Purchase of Equity Interests in AgStar
Financial Services, PCA. In addition to (and not in lieu of) the other amounts
payable by Borrower under this Agreement, Borrower shall purchase $1,000.00 of
equity interests in AgStar Financial Services, PCA. The purchase price for the
equity interests shall be payable in full on or prior to the date hereof. Such
purchases of equity interests shall comply with AgStar Financial Services, PCA’s
respective by-laws and capital plans applicable to borrowers generally. Borrower
hereby acknowledges receipt of the following information and materials
pertaining to AgStar Financial Services, PCA prior to the execution of this
Agreement: (i) copies of the by-laws of AgStar Financial Services, PCA; (ii) a
written description of the terms and conditions under which the equity interests
are issued; (iii) a copy of the most recent annual reports of AgStar Financial
Services, PCA; and (iv) if more recent than the latest annual reports, the
latest quarterly reports of AgStar Financial Services, PCA. AgStar Financial
Services, PCA shall possess a statutory security interest in its equity
interests. AgStar Financial Services, PCA reserves the right to sell
participations on a non-patronage basis. Borrower acknowledges and agrees that:
(a) only the portions of the Loans provided to Borrower by AgStar Financial
Services, PCA are entitled to patronage distributions in accordance with the
bylaws of AgStar Financial Services, PCA and its practices and procedures; and
(b) any patronage or similar payments to which Borrower is entitled as a result
of its ownership of the equity interests in AgStar Financial Services, PCA will
not be based on any of the Loans not belonging to AgStar Financial Services, PCA
or in which AgStar Financial Services, PCA has granted a participation interest
at any time.

 

Section 2.13.                          Compensation. In addition to all other
fees, costs and expenses due hereunder, upon the request of the Lender, the
Borrower shall pay to the Lender such amount or amounts as shall be sufficient
(in the reasonable opinion of the Lender) to compensate it for any loss, cost,
or expense (excluding loss of anticipated profits incurred by it) as a result of
(i) any payment, prepayment, or conversion of a LIBOR rate loan for any reason
on a date other than the last day of the Interest Period for such Loan; or
(ii) any failure by the Borrower for any reason (including, without limitation,
the failure of any condition precedent specified in Section 3.01 to be
satisfied) to borrow, extend, or prepay a LIBOR rate loan on the date for such
borrowing, extension, or prepayment specified in the relevant notice of

 

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borrowing, extension or prepayment under this Agreement. Such indemnification
may include any amount equal to the excess, if any, of: (a) the amount of
interest which would have accrued on the amount so prepaid, or not so borrowed,
converted or extended, for the period from the date of such prepayment or of
such failure to borrower, convert or extend to the last day of the applicable
Interest Period (or in the case of a failure to borrow, convert or extend, the
Interest Period that would have commenced on the date of such failure) in each
case at the applicable rate of interest for such loan as provided for herein;
over (b) the amount of interest (as reasonably determined by the Lender) which
would have accrued to the Lender on such amount by placing such amount on
deposit for a comparable period with leading banks in the interbank LIBOR
market. The covenants of the Borrower set forth in this Section 2.13 shall
survive the repayment of the Loans and other obligations under the Loan
Documents hereunder.

 

Section 2.14.                          Funds Held Program. Lender, in its sole
discretion, may offer a funds held program (the “Program”) to permit the
Borrower to make advance conditional payments on designated loans, on such terms
and conditions as the Lender may establish from time to time. Lender reserves
the right, in its discretion, to amend or terminate the Program at any time upon
notice to Borrower. The following terms and conditions apply to all Program
accounts in connection with loans from Lender:

 

(a)                                 Advance Payments. Subject to Lender’s rights
to direct the application of payments, an advance payment made to be applied to
any amounts due and owing to the Lender on the Loan Obligations in the future,
or used for any other purpose allowed by the Program, will be in a designated
Program account as of the date received. If a special prepayment of principal is
desired, Borrower must so specify when an advance payment is made.

 

(b)                                 Program Interest. Interest will accrue on
funds in the Program account at such times and at such rates determined by
Lender. Lender may change the interest rate or accrual period from time to time
without notice. The Program may provide for different interest rates for
different categories of loans.

 

(c)                                  Application of Funds. Funds in the Program
account for a designated loan will be automatically applied by Lender on the
Quarterly Payment Date toward payment of the installment or related charges when
the loan installment or other related charge becomes due. Any accrued interest
in the Program account will be applied first to the installment or related
charges. If the funds in the Program account are insufficient to pay the entire
installment or related charges, Borrower shall pay the difference by the
Quarterly Payment Date. Funds received after a loan installment or related
charges have been billed will be applied to the installment or related charges
due. Funds received in excess of the billed installment amount or related
charges will be placed in the Program account unless otherwise designated as a
special principal payment by Borrower or designated for another purpose allowed
by the Program.

 

(d)                                 Withdrawal of Funds. Lender may, in its sole
discretion, permit Borrower to withdraw funds from the Program account in
accordance with Lender’s Program.

 

(e)                                  Limitations. Lender, in its sole
discretion, may restrict the availability of any funds in the Borrower’s Program
account.

 

(f)                                   Lender Options. The Lender may, in its
sole discretion, apply funds from the Program account without notice to
Borrowers for the following reasons:

 

(i)                                     Protective Advance. If the Borrower
fails to pay when due any amounts Borrower is required to pay pursuant to the
Loan Documents, Lender may apply funds in the Program account to pay such
amounts.

 

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(ii)                                  Account Ceiling. If at any time the
Program account balance exceeds the unpaid balance on the designated loan,
Lender may apply the funds in the Program account to pay off the loan. Any
excess funds will be returned to Borrower.

 

(iii)                               Transfer of Security. If Borrower sells,
assigns, or transfers any interest in any collateral for the loan, Lender may
apply the funds in the Program account to the remaining loan balance.

 

(iv)                              Termination. In the event the Lender, in its
sole discretion, terminates the Program, Lender may apply all funds in the
Program account to the remaining loan balance effective on the termination date.

 

(g)                                  No Program Account Insurance. Neither the
advance payments nor the accrued interest in a Program account are insured by a
governmental agency or instrumentality.

 

(h)                                 Liquidation of Lender. If Lender is placed
in liquidation, Borrower shall be sent by the receiver such notices as required
by the Farm Credit Administration regulations then in effect. Such regulations
currently provide for advance notice from the receiver that funds in the Program
account will be applied to the loan and that funds in the Program account will
not earn interest after the receiver is appointed.

 

Section 2.15.                          Underwriting Fee. The Borrower has paid
to the Lender the Underwriting Fee of $80,000.00 and all other costs, expenses,
fees, etc. required hereunder, including those provided for in Section 7.04.

 

ARTICLE III.

CONDITIONS PRECEDENT

 

Section 3.01.                          Conditions Precedent to Preliminary
Advances. The effectiveness of this Agreement and obligations of the Lender to
make any Advance, are subject to the conditions precedent that the Lender shall
have received the following, in form and substance satisfactory to the Lender:

 

(a)                                 the Cash Payment;

 

(b)                                 this Agreement, duly executed by the
Borrower and the Lender;

 

(c)                                  the Term Note, duly executed by the
Borrower;

 

(d)                                 the Term Revolving Note, duly executed by
the Borrower;

 

(e)                                  the Sixth Amended and Restated Mortgage,
fully executed and notarized, to secure the Loans encumbering on a first Lien
basis the fee interest and/or leasehold interest of the Borrower in the Real
Property and the fixtures thereon described in Schedule 3.01(d);

 

(f)                                   amendments and restatements of each
Subsidiary Guaranty, duly executed by each Subsidiary Guarantor;

 

(g)                                  the Interim Subordinated Debt Intercreditor
Agreement,  fully executed by all parties thereto;

 

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(h)                                 to the extent not previously delivered to
the Lender, collateral assignments of the Gavilon Agreements, duly executed by
the Borrower and consented to by Gavilon;

 

(i)                                     to the extent not previously delivered
to the Lender, the Gavilon Intercreditor Agreement duly executed by Gavilon,
Lender and acknowledged by Borrower;

 

(j)                                    to the extent not previously delivered to
the Lender, copies and collateral assignments of all other Material Contracts,
duly executed by the Borrower and pursuant to which the Borrower shall have
assigned to the Lender all of the Borrower’s right, title and interest in and to
each such contracts, and which assignment shall have been consented to and
certified in writing by the other party(ies) to each such contract;

 

(k)                                 copies of UCC, tax and judgment lien search
reports listing all financing statements and other encumbrances which name the
Borrower (under its present name and any previous name) and which are filed in
the jurisdictions in which the Borrower is located, organized or maintains
collateral, together with copies of such financing statements (none of which
shall cover the collateral purported to be covered by the Security Agreement);

 

(l)                                     evidence that all other actions
necessary or, in the opinion of the Lender, desirable to enable the Lender to
perfect and protect the security interests created by the Security Agreement
have been taken;

 

(m)                             to the extent not previously delivered to the
Lender, an ALTA mortgagee title insurance policy issued by a title insurance
company acceptable to Lender, with respect to the Real Property, assuring the
Lender that the Mortgage creates a valid and enforceable encumbrance on the Real
Property, free and clear of all defects and encumbrances except Permitted Liens
and containing: (i) a comprehensive endorsement (ALTA form 9); (ii) a zoning
endorsement (ALTA form 3.1) specifying an ethanol production facility as a
permitted use for all of the parcels included in the Real Property; and
(iii) such endorsements as the Lender shall reasonably require. All such title
insurance policies shall be in form and substance reasonably satisfactory to the
Lender and shall provide for affirmative insurance and such reinsurance as the
Lender may reasonably request, all of the foregoing in form and substance
reasonably satisfactory to the Lender;

 

(n)                                 to the extent not previously delivered to
the Lender, Maps or plats of the Real Property certified to the Lender and the
title insurance company issuing the policy referred to in subsection
3.01(j) (the “Title Insurance Company”) in a manner reasonably satisfactory to
each of the Lender and the Title Insurance Company, dated a date reasonably
satisfactory to each of the Lender and the Title Insurance Company by an
independent professional licensed land surveyor, which maps or plats and the
surveys on which they are based shall be sufficient to delete any standard
printed survey exception contained in the applicable title policy and be made in
accordance with the Minimum Standard Detail Requirements for Land Title Surveys
jointly established and adopted by the American Land Title Association and the
American Congress on Surveying and Mapping in 1992, and, without limiting the
generality of the foregoing, there shall be surveyed and shown on such maps,
plats or surveys the following: (i) the locations on such sites of all the
buildings, structures and other improvements and the established building
setback lines; (ii) the lines of streets abutting the sites and width thereof;
(iii) all access and other easements appurtenant to the sites necessary to use
the sites; (iv) all roadways, paths, driveways, easements, encroachments and
overhanging projections and similar encumbrances affecting the site, whether
recorded, apparent from a physical inspection of the sites or otherwise known to
the surveyor; (v) any encroachments on any adjoining property by the building
structures and improvements on the sites; and (vi) if the site is described as
being on a filed map, a legend relating the survey to said map;

 

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(o)                                 to the extent not previously delivered to
the Lender, Evidence as to: (i) whether any portion of the Real Property is in
an area designated by the Federal Emergency Management Agency as having special
flood or mud slide hazards (a “Flood Hazard Property”); and (ii) if any portion
of the Real Property is a Flood Hazard Property: (a) whether the community in
which such Real Property is located is participating in the National Flood
Insurance Program; (b) the Borrower’s written acknowledgment of receipt of
written notification from the Lender (1) as to the fact that such Real Property
is a Flood Hazard Property and (2) as to whether the community in which each
such Flood Hazard Property is located is participating in the National Flood
Insurance Program; and (c) copies of insurance policies or certificates of
insurance of the Borrower evidencing flood insurance satisfactory to the Lender
and naming the Lender as sole loss payee on behalf of the Lender;

 

(p)                                 to the extent not previously delivered to
the Lender, Evidence reasonably satisfactory to the Lender that the Real
Property and the contemplated use of the Real Property, are in compliance in all
material respects with all applicable Laws including without limitation health
and Environmental Laws, including, but not limited to all concentrated animal
feedlot operations rules and regulations, erosion control ordinances, storm
drainage control laws, doing business and/or licensing laws, zoning laws (the
evidence submitted as to zoning should include the zoning designation made for
the Real Property, the permitted uses of the Real Property under such zoning
designation and zoning requirements as to parking, lot size, ingress, egress and
building setbacks) and laws regarding access and facilities for disabled persons
including, but not limited to, the Federal Architectural Barriers Act, the Fair
Housing Amendments Act of 1988, the Rehabilitation Act of 1973 and the Americans
with Disabilities Act of 1990;

 

(q)                                 certificates of the secretary of the
Borrower and each Subsidiary Guarantor together with true and correct copies of
the following: (i) its Articles of Organization, including all amendments
thereto, certified by the Office of the Secretary of State of the state of its
incorporation and dated within 30 days prior to the date hereof; (ii) its/their
Operating Agreements, including all amendments thereto; (iii) its/their
resolutions of the Board of Governors authorizing the execution, delivery and
performance of this Agreement, the other Loan Documents, and all documentation
executed and delivered in connection therewith to which the it/they are a party;
(iv) certificates of the appropriate government officials of the state of
organization as to its/their existence and good standing, and certificates of
the appropriate government officials in each state where each corporate Borrower
and Guarantor does business and where failure to qualify as a foreign
corporation would have a material adverse effect on the business and financial
condition of the Borrower and Guarantor, as to their good standing and due
qualification to do business in such state, each dated within 30 days prior to
the date hereof; and (v) the names of the officers authorized to sign this
Agreement and the other Loan Documents to be executed by it/them, together with
a sample of the true signature of each such officer;

 

(r)                                    legal opinion of Lindquist & Vennum
L.L.P., legal counsel for the Borrower, in a form and substance reasonably
requested by the Lender;

 

(s)                                   evidence the Underwriting Fee due pursuant
to Section 2.15 and the costs and expenses (including, without limitation,
attorney’s fees) referred to in Section 7.04, to the extent incurred and
invoiced, shall have been paid in full;

 

(t)                                    The results of the Lender’s inspection of
the Collateral, and the Lender’s receipt of an appraisal of the Collateral
acceptable to Lender in its sole discretion;

 

(u)                                 to the extent not previously delivered to
the Lender, a Deposit Account Control Agreement for all deposit accounts kept
and maintained by the Borrower or any of its Subsidiaries;

 

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(v)                                 to the extent not previously delivered to
the Lender, evidence that the insurance required by this Agreement and the
Mortgage has been obtained by the Borrower;

 

(w)                               An assignment of the Borrower’s business
interruption insurance policy, duly executed by the Borrower and pursuant to
which the Borrower shall have assigned to the Lender all of the Borrower’s
right, title and interest in and to it’s business interruption insurance policy,
and which assignment shall have been consented to and certified in writing by
the other party(ies) to the insurance policy; and

 

ARTICLE IV.

REPRESENTATIONS AND WARRANTIES

 

Section 4.01                             Representations and Warranties of the
Borrower. The Borrower and each of its Subsidiaries represent and warrant as
follows:

 

(a)                                 Borrower. The Borrower and each of its
Subsidiaries are limited liability companies duly organized and validly existing
and in good standing under the laws of the State of Minnesota and are qualified
to do business in all jurisdictions in which the nature of their businesses make
such qualification necessary and where failure to so qualify would have a
Material Adverse Effect on their respective financial conditions or operations.
The Borrower and each of its Subsidiaries have the power and authority to own
and operate their assets and to carry on their business and to execute, deliver,
and perform their respective obligations under the Loan Documents to which they
may become a party. There are no outstanding subscriptions, options, warrants,
calls, or rights (including preemptive rights) to acquire, and no outstanding
securities or instruments convertible into, membership interests (units) of the
Borrower or any of its Subsidiaries, except for those transactions set forth on
Schedule 4.01(a).

 

(b)                                 The Loan Documents. The execution, delivery
and performance by the Borrower and the Subsidiary Guarantor of the Loan
Documents are within their respective powers, have been duly authorized by all
necessary action, do not contravene: (i) the articles or organization or
operating agreements of either the Borrower or the Subsidiary Guarantor; or
(ii) any law or any contractual restriction binding on or affecting the Borrower
or the Subsidiary Guarantor, and do not result in or require the creation of any
lien, security interest or other charge or encumbrance (other than pursuant to
the terms thereof) upon or with respect to any of their respective properties.

 

(c)                                  Governmental Approvals. Except for (i) the
outstanding permits identified on Schedule 4.01(c); and (ii) the registration of
the Borrower’s Class A Units pursuant to Section 12(g) of the Securities
Exchange Act of 1934 and regulations promulgated thereunder relating thereto, no
consent, permission, authorization, order or license of any Governmental
Authority or of any party to any agreement to which any of the Borrower or any
of its Subsidiaries is a party or by which they or any of their respective
property may be bound or affected, is necessary in connection with the Project,
acquisition or other activity being financed by this Agreement, the execution,
delivery, performance or enforcement of the Loan Documents or the creation and
perfection of the liens and security interest granted thereby, except as such
have been obtained and are in full force and effect or which are required in
connection with the exercise of remedies hereunder.

 

(d)                                 Enforceability. This Agreement is, and each
other Loan Document to which the Borrower or the Subsidiary Guarantor is a party
when delivered will be, legal, valid and binding obligations of the Borrower or
the Subsidiary Guarantor enforceable against the Borrower or the Subsidiary
Guarantor in accordance with their respective terms, except as may be limited by
applicable

 

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bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting
the enforcement of creditor’s rights generally and by general principles of
equity.

 

(e)                                  Financial Condition and Operations. The
balance sheets of the Borrower on a consolidated basis with each of its
Subsidiaries, as of October 31, 2012, and the related statements of income and,
with respect to the period ended October 31, 2012, the related statement of cash
flow of the Borrower for the fiscal period then ended, copies of which have been
furnished to the Lender, fairly present in all material respects the financial
condition of the Borrower as at such date and the results of the operations of
the Borrower for the period ended on such dates, all in accordance with GAAP,
except for unaudited statements, consistently applied, and since October 31,
2012, there has been no material adverse change in such condition or operations,
or the outstanding licenses, permits and consents identified on Schedule
4.01(c).

 

(f)                                   Litigation. Except as described on
Schedule 4.01(f), there is no pending or threatened action or proceeding
affecting the Borrower or any of its Subsidiaries or the transactions
contemplated hereby before any court, governmental agency or arbitrator, which
may materially adversely affect the financial condition or operations of the
Borrower. As of the Closing Date, there are no outstanding judgments against the
Borrower or any of its Subsidiaries.

 

(g)                                  Use of Proceeds of Advances, etc. (i) No
proceeds of the Loans will be used to acquire any security in any transaction
which is subject to Sections 13 and 14 of the Securities Exchange Act of 1934
(provided, however, that this provision shall not prohibit Borrower from
investing in certain value added cooperatives for the purposes of carrying out
their overall business operations); (ii) the Borrower and any of its
Subsidiaries are not engaged in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulation U
issued by the Board of Governors of the Federal Reserve System); and (iii) no
proceeds of the Loans will be used to purchase or carry any margin stock or to
extend credit to others for the purpose of purchasing or carrying any margin
stock.

 

(h)                                 Liens. There is no lien, security interest
or other charge or encumbrance, and no other type of preferential arrangement,
upon or with respect to any of the properties or income of the Borrower or any
of its Subsidiaries, which secures Debt of any Person, except as permitted by
Section 5.02(a) and liens created by the Loan Documents.

 

(i)                                     Taxes. Each of the Borrower and its
Subsidiaries have filed or caused to be filed all federal, state and local tax
returns that are required to be filed and have paid all other taxes,
assessments, and governmental charges or levies upon it and its property,
income, profits and assets which are due and payable, except where the payment
of such tax, assessment, government charge or levy is being contested in good
faith and by appropriate proceedings and adequate reserves in compliance with
GAAP have been set aside on the Borrower’s or such Subsidiary’s books therefore.

 

(j)                                    Solvency. As of and from and after the
date of this Agreement, the Borrower: (i) owns and will own assets the fair
saleable value of which are: (a) greater than the total amount of liabilities
(including contingent liabilities); and (b) greater than the amount that will be
required to pay the probable liabilities of its then existing debts as they
become absolute and matured considering all financing alternatives and potential
asset sales reasonably available to it; (ii) has capital that is not
unreasonably small in relation to its business as presently conducted or any
contemplated or undertaken transaction; and (iii) does not intend to incur and
does not believe that it will incur debts beyond its ability to pay such debts
as they become due.

 

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(k)                                 Location of Inventory and Farm Products;
Third Parties in Possession; Crops. The inventory and farm products pledged as
collateral under the Security Agreement are located at the places (or, as
applicable, jurisdictions) specified in Schedule 4.01(k), except to the extent
any such inventory and farm products are in transit. Schedule 4.01(k) correctly
identifies, as of the date hereof, the landlords or mortgagees, if any, of each
of its locations identified in Schedule 4.01(k). Except for the Persons
identified on Schedule 4.01(k), no Person other than the Borrower or its
Subsidiaries and the Lender has possession of any of the Collateral. Except as
described in above, none of its Collateral has been located in any location
within the past four months other than as set forth on Schedule 4.01(k).

 

(l)                                     Office Locations; Fictitious Names;
Predecessor Companies; Tax I.D. Number. Each of the Borrower’s and the
Subsidiary Guarantor’s chief places of business, chief executive offices, and
jurisdiction of organization is located at the place identified on Schedule
4.01(l). Within the last four months neither the Borrower or any of its
Subsidiaries has had any other chief place of business, chief executive office,
or jurisdiction of organization. Schedule 4.01 (l) also sets forth all other
places where the Borrower and the Subsidiary Guarantor keep their books and
records and all other locations where the Borrower and the Subsidiary Guarantor
have a place of business. Neither the Borrower or the Subsidiary Guarantor does
business nor has the Borrower or the Subsidiary Guarantor done business during
the past five (5) years under any trade-name or fictitious business name except
as disclosed on Schedule 4.01(l). Schedule 4.01(l) sets forth an accurate list
of all names of all predecessor companies of the Borrower and the Subsidiary
Guarantor including the names of any entities it acquired (by stock purchase,
asset purchase, merger or otherwise) and the chief place of business and chief
executive office of each such predecessor company. For purposes of the
foregoing, a “predecessor company” shall mean any Person whose assets or equity
interests are acquired by the Borrower or any of its Subsidiaries or who was
merged with or into the Borrower or any of its Subsidiaries within the last four
months prior to the date hereof. The Borrower’s and the Subsidiary Guarantor’s
United States Federal Income Tax I.D. Numbers and state organizational
identification numbers are identified on Schedule 4.01(l).

 

(m)                             Title to Properties. Each of the Borrower and
its Subsidiaries have such title or leasehold interest in and to the real
property owned or leased by them as is necessary or desirable to the conduct of
their business and valid and legal title or leasehold interest in and to all of
their Personal Property, including those reflected on the financial statements
of the Borrower and its Subsidiaries previously delivered to Lender, except
those which have been disposed of by the Borrower or its Subsidiaries subsequent
to the date of such delivered financial statements which dispositions have been
in the ordinary course of business or as otherwise expressly permitted
hereunder.

 

(n)                                 Disclosure. All factual information
furnished by or on behalf of the Borrower or its Subsidiaries in writing to the
Lender (including, without limitation, all factual information contained in the
Loan Documents) for purposes of or in connection with this Agreement, the other
Loan Documents or any transaction contemplated herein or therein is, and all
other such factual information hereafter furnished by or on behalf of the
Borrower or its Subsidiaries to the Lender, will be true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any fact necessary to make such
information not misleading in any material respect at such time in light of the
circumstances under which such information was provided.

 

(o)                                 Operation of Business. The outstanding
licenses, permits and consents identified on Schedule 4.01(c) and the
registration of Borrower’s Class A Units under Section 12(g) of the Securities
Exchange Act of 1934, the Borrower and each of its Subsidiaries possess all
licenses, permits, franchises, patents, copyrights, trademarks, and tradenames,
or rights thereto, necessary to conduct their businesses substantially as now
conducted and will obtain all such licenses, permits, franchises, patents,
copyrights, trademarks, and tradenames, or rights thereto necessary to conduct
its business as presently proposed to be conducted except those that the failure
to so possess could not reasonably be expected to

 

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have a Material Adverse Effect, and the Borrower and its Subsidiaries are not in
violation of any valid rights of others with respect to any of the foregoing
except violations that could not reasonably be expected to have such a Material
Adverse Effect.

 

(p)                                 Intellectual Property. The Borrower and each
of its Subsidiaries owns, or has the legal right to use, all patents,
trademarks, tradenames, copyrights, technology, know-how and processes (the
“Intellectual Property”) necessary for them to conduct their businesses as
currently conducted except for those the failure to own or have such legal right
to use could not reasonably be expected to have a Material Adverse Effect. As of
the Closing Date, set forth in Schedule 4.01(p) is a list of all Intellectual
Property registered with the United States Copyright Office or the United States
Patent and Trademark Office and owned by the Borrower and each of its
Subsidiaries or that the Borrower and its Subsidiaries have the right to use.
Except as provided in Schedule 4.01(p), no claim has been asserted and is
pending by any Person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual
Property, nor does the Borrower or any of its Subsidiaries know of any such
claim, and, to the knowledge of the Borrower and its Subsidiaries, the use of
such Intellectual Property by the Borrower or its Subsidiaries does not infringe
on the rights of any Person, except for such claims and infringements that, in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect.

 

(q)                                 Employee Benefit Plans. Each of the Borrower
and its Subsidiaries are in compliance in all material respects with the
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended, and the regulations and published interpretations thereunder, the
failure to comply with which could have a Material Adverse Effect on the
Borrower or any of its Subsidiaries.

 

(r)                                    Investment Company Act. The Borrower and
its Subsidiaries are not required to be registered as an “investment company”
within the meaning of the Investment Company Act of 1940, as amended.

 

(s)                                   Compliance with Laws. Each of the Borrower
and its Subsidiaries are in compliance in all material respects with all laws,
rules, regulations, ordinances, codes, orders, and the like, the failure to
comply with which could have a Material Adverse Effect.

 

(t)                                    Environmental Compliance. Borrower and
each of its Subsidiaries, except as set forth in Schedule 4.01(t), are in
material compliance with all applicable Environmental Laws.

 

(u)                                 Material Change. Except as previously
disclosed in writing to the Lender, each of the Borrower and its Subsidiaries
have performed all of their material obligations, other than those obligations
for which performance is not yet due, under all Material Contracts and, to the
best knowledge of the Borrower or its Subsidiaries, each other party thereto is
in compliance with each such Material Contract. Each such Material Contract is
in full force and effect in accordance with the terms thereof. Each of the
Borrower and its Subsidiaries has made available a true and complete copy of
each such Material Contract for inspection by Lender.

 

ARTICLE V.

COVENANTS OF THE BORROWER

 

Section 5.01.                          Affirmative Covenants. So long as any
Loan Obligations remain unpaid or the Lender shall have any commitment
hereunder, the Borrower and each Subsidiary (but expressly excluding Agrinatural
Gas, LLC) will, unless the Lender shall otherwise consent in advance in writing:

 

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(a)                                 Compliance with Laws, etc. Comply in all
material respects with all applicable laws, rules, regulations and orders, such
compliance to include, without limitation, (i) all applicable zoning and land
use laws; (ii) all employee benefit and Environmental Laws, and (iii) paying
before the same become delinquent all taxes, assessments and governmental
charges imposed upon it or upon its property except to the extent contested in
good faith.

 

(b)                                 Visitation Rights; Field Examination. At any
reasonable time and from time to time, permit the Lender or representatives, to
(i) examine and make copies of and abstracts from the records and books of
account of the Borrower and each of its Subsidiaries, and (ii) enter onto the
property of the Borrower and each of its Subsidiaries to conduct unannounced
field examinations and collateral inspections, with such frequency as Lender in
its sole discretion may deem appropriate, and (iii) discuss the affairs,
finances, and accounts of the Borrower and each of its Subsidiaries with any of
Borrower’s and its Subsidiaries officers or directors. Borrower and any of its
Subsidiaries consent to and authorize Lender to enter onto the property of
Borrower or any of its Subsidiaries for purposes of conducting the examinations,
inspections and discussions provided above. Upon and during the occurrence of an
Event of Default or in the event that there are deemed by the Lender to be any
material inconsistencies and/or material noncompliance with respect to any
financial or other reporting on the part of the Borrower or any of its
Subsidiaries, any and all visits and inspections deemed necessary or desirable
on account of such Event of Default, inconsistency and/or noncompliance shall be
at the expense of the Borrower. In addition to the foregoing, at any reasonable
time and from time to time, the Borrower and its Subsidiaries also shall permit
the Lender or representatives thereof, at the expense of the Lender, to examine
and make copies of and abstracts from the records and books of account of, and
visit the properties of, the Borrower or its Subsidiaries, and to discuss the
affairs, finances and accounts of the Borrower or its Subsidiaries with any of
their respective officers or directors.

 

(c)                                  Reporting Requirements. Furnish to the
Lender:

 

(i)                                     As soon as available, but in no event
later than 120 days after the end of each fiscal year of the Borrower occurring
during the term hereof, annual consolidated financial statements of the
Borrower, prepared in accordance with GAAP and in a format that demonstrates any
accounting or formatting change that may be required by the various
jurisdictions in which the business of the Borrower is conducted (to the extent
not inconsistent with GAAP). Such financial statements shall: (i) be audited by
independent certified public accountants selected by the Borrower and reasonably
acceptable to Lender; (ii) be accompanied by a report of such accountants
containing a certified opinion, without qualification, thereon reasonably
acceptable to Lender; (iii) be prepared in reasonable detail, and in comparative
form; and (iv) include a balance sheet, a statement of income, a statement of
stockholders’, members’ or partner’s equity, a statement of cash flows, and all
notes and schedules relating thereto and any management letter;

 

(ii)                                  Beginning with the first (1st) month
following the Closing Date, as soon as available and in any event within 30 days
after the end of each month, (A) consolidated balance sheets of the Borrower
prepared in accordance with GAAP as of the end of such month and consolidated
statement of income of the Borrower for the period commencing at the end of the
previous fiscal year and ending with the end of such month, certified by an
authorized officer of the Borrower; (B) a status report on the progress of the
Borrower in implementing the items set forth in the Loan Restructuring Proposal
in form and content reasonably acceptable to the Lender; and (C) a risk
management report in form and content reasonably acceptable to the Lender.

 

(iii)                               As soon as available but in no event later
than 45 days after the end of each of the first three fiscal quarters of each
fiscal year of the Borrower occurring during the term hereof, unaudited
quarterly consolidated financial statements of the Borrower, in each case
prepared in

 

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accordance with GAAP consistently applied (except for the omission of footnotes
and for the effect of normal year-end audit adjustments) and in a format that
demonstrates any accounting or formatting change that may be required by various
jurisdictions in which the business of the Borrower is conducted (to the extent
not inconsistent with GAAP). Each of such financial statements shall (i) be
prepared in reasonable detail and in comparative form, including a comparison of
actual performance to the budget for such quarter and year-to-date, delivered to
Lender under Subsection 5.01(c)(vi) below, and (ii) include a balance sheet, a
statement of income for such quarter and for the period year-to-date, and such
other quarterly statements as Lender may specifically request which quarterly
statements shall include any and all supplements thereto. Such quarterly
statements shall be certified by an authorized officer of the Borrower, and be
accompanied by a Compliance Certificate which: (a) states that no Event of
Default, and no event or condition that but for the passage of time, the giving
of notice or both would constitute an Event of Default, has occurred or is in
existence; and (b) shows in detail satisfactory to the Lender the calculation
of, and the Borrower’ compliance with, each of the covenants contained in
Sections 5.01(d), 5.01(e), 5.01(f), and 5.01(g);

 

(iv)                              promptly upon the Lender’s request therefor,
copies of all reports and notices which the Borrower or any of its Subsidiaries
files under ERISA with the Internal Revenue Service or the Pension Benefit
Guaranty Corporation or the U.S. Department of Labor or which the Borrower or
any its Subsidiary receives from such Corporation;

 

(v)                                 notwithstanding the foregoing
Section 5.01(c)(iv), provide to Lender within 30 days after it becomes aware of
the occurrence of any Reportable Event (as defined in Section 4043 of ERISA)
applicable to the Borrower or any of its Subsidiaries, a statement describing
such Reportable Event and the actions it proposes to take in response to such
Reportable Event;

 

(vi)                              by November 1 of each fiscal year of the
Borrower, an annual (with monthly break out) operating and capital assets budget
of the Borrower for the immediately succeeding fiscal year containing, among
other things, pro forma financial statements and forecasts for all planned lines
of business;

 

(vii)                           as soon as available but in any event not more
than 30 days after the end of each month, production reports for the immediately
preceding calendar month setting forth corn inputs, ethanol output, DDGS output,
natural gas usage and CO2 output, together with such additional production
information as reasonably requested by Lender;

 

(viii)                        promptly, upon the occurrence of an Event of
Default or an event or condition that but for the passage of time or the giving
of notice or both would constitute an Event of Default, notice of such Event of
Default or event;

 

(ix)                              promptly after the receipt thereof, a copy of
any management letters or written reports submitted to the Borrower by its
independent certified public accountants with respect to the business, financial
condition or operation of the Borrower;

 

(x)                                 promptly after the receipt thereof, a copy
of any notice of default under any Long-Term Marketing Agreement;

 

(xi)                              furnish to the Lender, promptly after
transmittal or filing thereof by the Borrower, copies of all proxy statements,
notices and reports as it shall send to its members and copies of all
registration statements (without exhibits) and all reports which it files with
the Securities and Exchange Commission (or any governmental body or agency
succeeding to the functions of the Securities and Exchange Commission), and
promptly after the receipt thereof by the Borrower, copies of all

 

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management letters or similar documents submitted to the Borrower by independent
certified public accountants in connection with each annual and any interim
audit of the accounts of the Borrower or of the Borrower and any of its
Subsidiaries.

 

(xii)                           such other information respecting the condition
or operations, financial or otherwise, of the Borrower or any of its respective
Subsidiaries as the Lender may from time to time reasonably request;

 

(xiii)                        promptly after the commencement thereof, notice of
the commencement of all actions, suits, or proceedings before any court,
arbitrator, or government department, commission, board, bureau, agency, or
instrumentality affecting the Borrower or any of its Subsidiaries which, if
determined adversely, could have a Material Adverse Effect;

 

(xiv)                       without limiting the provisions of
Section 5.01(c)(xiii) above, promptly after receipt thereof, notice of the
receipt of all pleadings, orders, complaints, indictments, or any other
communication alleging a condition that may require the Borrower or any of its
Subsidiaries to undertake or to contribute to a cleanup or other response under
all laws relating to environmental protection, or which seek penalties, damages,
injunctive relief, or criminal sanctions related to alleged violations of such
laws, or which claim personal injury or property damage to any person as a
result of environmental factors or conditions;

 

(xv)                          promptly after filing, receipt or becoming aware
thereof, copies of any filings or communications sent to and notices or other
communications received by the Borrower or any of its Subsidiaries from any
Governmental Authority, including, without limitation, the Securities and
Exchange Commission, the FCC, the PUC, or any other state utility commission
relating to any material noncompliance by the Borrower or any of its
Subsidiaries with any laws or with respect to any matter or proceeding the
effect of which, if adversely determined, could have a Material Adverse Effect;

 

(xvi)                       promptly after becoming aware thereof, notice of any
matter which has had or could have a Material Adverse Effect

 

(xvii)                    promptly upon the Lender’s request, but not less than
10 days after such request, copies of all reports, invoices, notices, and other
documents and information regarding the Gavilon Agreements and transactions
contemplated thereunder, as Lender may from time to time request.

 

(d)                                 Working Capital. Maintain Working Capital of
at least $5.0 million, measured monthly on a consolidated basis, beginning
July 31, 2013.

 

(e)                                  Owner Equity Ratio. Beginning October 31,
2013, maintain an Owner Equity Ratio of at least 35% measured quarterly on a
consolidated basis; and beginning October 31, 2014, maintain an Owner Equity
Ratio of at least 40% measured quarterly on a consolidated basis.

 

(f)                                   Fixed Charge Coverage Ratio.  Beginning
October 31, 2014, maintain a Fixed Charge Coverage Ratio of not less than 1.15
to 1.00.  The Fixed Charge Coverage Ratio will be measured annually at end of
each fiscal year, on a consolidated basis.

 

(g)                                  Liens. There shall be no lien, security
interest or other charge or encumbrance, and no other type of preferential
arrangement, upon or with respect to any of the properties or income of the
Borrower or any of its Subsidiaries, which secures Debt of any Person, except
for the security interests of the Security Agreement or except as identified on
Section 5.02(a).

 

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(h)                                 Landlord and Mortgagee Waivers. Obtain and
furnish to the Lender as soon as available, waivers, acknowledgments and
consents, duly executed by each: (i) real property owner, landlord and mortgagee
having an interest in any of the premises owned or leased by the Borrower or any
Subsidiary Guarantor or in which any Collateral is located or to be located (and
if no Collateral is located at a parcel of property not owned or leased by a
Borrower or any of its Subsidiaries, no such waivers, acknowledgments or
consents will be required); and (ii) each third party holding any Collateral,
all in form and substance acceptable to the Lender, except as otherwise agreed
to by the Lender.

 

(i)                                     Insurance. Maintain insurance with
financially sound and reputable insurance companies in such amounts and covering
such risks as are usually carried by entities engaged in similar businesses and
owning similar properties in the same general areas in which the Borrower and
any of its Subsidiaries operate, and make such increases in the type of amount
or coverage as Lender may reasonably request, provided that in any event the
Borrower will maintain and cause each of its Subsidiaries to maintain workers’
compensation insurance, property insurance and comprehensive general liability
insurance reasonably satisfactory to the Lender. All such policies insuring any
collateral for the Borrower’s obligations to Lender shall have lender or
mortgagee loss payable clauses or endorsements in form and substance acceptable
to Lender. Each insurance policy covering Collateral shall be in compliance with
the requirements of the Security Agreement.

 

(j)                                    Property and Insurance Maintenance.
Maintain and preserve all of its property and each and every part and parcel
thereof that is necessary to or useful in the proper conduct of its business in
good repair, working order, and condition, ordinary wear and tear excepted, and
in material compliance with all applicable laws, and make all alterations,
replacements, and improvements thereto as may from time to time be necessary in
order to ensure that its properties remain in good working order and condition
and compliance. The Borrower and each of its Subsidiaries agree that upon the
occurrence and continuing existence of an Event of Default, at Lender’s request,
which request may not be made more than once a year, the Borrower and each of
its Subsidiaries will furnish to Lender a report on the condition of the
Borrower’s and any of its Subsidiaries’ property prepared by a professional
engineer satisfactory to Lender.

 

(k)                                 Keeping Books and Records. Maintain and
cause each of its Subsidiaries to, maintain proper books of record and account
in which full, true, and correct entries in conformity with GAAP shall be made
of all dealings and transactions in relation to its business and activities.

 

(l)                                     Food Security Act Compliance. If the
Borrower or any of its Subsidiaries acquire any Collateral which may have
constituted farm products in the possession of the seller or supplier thereof,
such Borrower or Subsidiary shall, at its own expense, use its commercially
reasonable efforts to take such steps to insure that all Liens (except the liens
granted pursuant hereto) in such acquired Collateral are terminated or released,
including, without limitation, in the case of such farm products produced in a
state which has established a Central Filing System (as defined in the Food
Security Act), registering with the Secretary of State of such state (or such
other party or office designated by such state) and otherwise take such
reasonable actions necessary, as prescribed by the Food Security Act, to
purchase farm products free of liens (except the liens granted pursuant hereto);
provided, however, that such Borrower or any of its Subsidiaries may contest and
need not obtain the release or termination of any lien asserted by any creditor
of any seller of such farm products, so long as it shall be contesting the same
by proper proceedings and maintain appropriate accruals and reserves therefor in
accordance with GAAP. Upon the Lender’s request made, the Borrower and each of
its Subsidiaries agree to forward to the Lender promptly after receipt copies of
all notices of liens and master lists of Effective Financing Statements
delivered to the Borrower and its Subsidiaries pursuant to the Food Security
Act, which notices and/or lists pertain to any of the Collateral. Upon the
Lender’s request, the Borrower and each of its Subsidiaries agree to provide the
Lender with the names of Persons who supply the Borrower and its Subsidiaries
with

 

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such farm products and such other information as the Lender may reasonably
request with respect to such Persons.

 

(m)                             Warehouse Receipts. If any warehouse receipt or
receipts in the nature of a warehouse receipt is issued in respect of any
portion of the Collateral, then the Borrower and its Subsidiaries: (i) will not
permit such warehouse receipt or receipts in the nature thereof to be
“negotiable” as such term is used in Article 7 of the Uniform Commercial Code;
and (ii) will deliver all such receipts to the Lender (or a Person designated by
the Lender) within five (5) days of the Lender’s request and from time to time
thereafter. If no Event of Default exists, the Lender agrees to deliver to such
Borrower or Subsidiary any receipt so held by the Lender upon such Borrower’s
request in connection with such sale or other disposition of the underlying
inventory, if such disposition is in ordinary course of the Borrower’s or
Subsidiary’s business.

 

(n)                                 Management of Borrower.

 

(i)                                     Identify an interim Chief Executive
Officer reasonably acceptable to the Lender who shall be the chief operations
officer and responsible for daily operations of the Project on or before June 1,
2013 with a starting date no later than June 15, 2013, and who shall remain
employed or engaged by the Borrower until a permanent Chief Executive Officer
assumes responsibility for the Borrower’s operations;

 

(ii)                                  Hire a permanent Chief Executive Officer
reasonably acceptable to the Lender with a starting date no later than
October 31, 2013;

 

(iii)                               Except as set forth in
Section 5.01(n)(i) and (ii), management of the Borrower shall be maintained as
set forth on Schedule 5.01(n) hereto, unless otherwise approved in Lender’s
reasonable discretion; and

 

(iv)                              Use reasonable commercial efforts to timely
address the items set forth in the Loan Restructuring Proposal.

 

(o)                                 Compliance with Other Agreements. Perform in
all material respects all obligations and abide in all material respects by all
covenants and agreements contained in the: (i) the Long Term Marketing
Agreements; (ii) the Gavilon Agreements; (iii) the Agrinatural Agreements;
(iv) any consulting or management contracts or agreements to which it is a
party; and (v) all other Material Contracts, while in force.

 

(p)                                 Additional Assurances. Make, execute and
deliver to Lender such promissory notes, mortgages, deeds of trust, financing
statements, control agreements, instruments, documents and other agreements as
Lender or its counsel may reasonably request to evidence and secure the Loans
and to perfect all Security Interest. Without limiting the generality of the
foregoing, Borrower agrees that it will (i) cooperate with the Lender to ensure
that all encumbrances affecting the Real Property, based on the new legal
description of the same, are removed or excepted to the reasonable satisfaction
of the Lender; and (ii) cooperate to ensure that Lender’s Mortgage constitutes a
first priority mortgage lien on the Real Property, as described in the updated
legal description.

 

(q)                                 Bank Accounts. Each bank account of the
Borrower shall at all times be (i) held as Collateral to secure the repayment
and/or performance of the Loan Obligations, (ii) held at a financial institution
approved by the Lender, which approval shall not be unreasonably withheld and
(iii) subject to a perfected control agreement in favor of the Lender, with all
rights and remedies in respect thereto as set forth in the Loan Documents. The
Borrower shall not open a new bank account or any other account at a

 

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financial institution without the prior written consent of the Lender, which
approval will not be unreasonably withheld.

 

(r)                                    Environmental Matters.

 

(i) The Borrower shall (a) comply in all material respects with, and ensure
compliance in all material respects by any and all occupants and operators of
the Project with, all Environmental Laws, (b) keep the Project free of any Debt
imposed pursuant to any Environmental Law, and (c) pay or cause to be paid when
due and payable by the Borrower any and all costs in connection with any
Environmental Laws, including the cost of identifying the nature and extent of
the presence of any Materials of Environmental Concern in, on or about the
Project or on any real property owned or leased by the Borrower, and the cost of
delineation, management, remediation, removal, treatment and disposal of any
such Materials of Environmental Concern.

 

(ii)                                  The Borrower shall not use or allow the
Project to generate, manufacture, refine, produce, treat, store, handle, dispose
of, transfer, process or transport Materials of Environmental Concern other than
in compliance in all material respects with Environmental Laws.

 

(s)                                   Maintenance of Existence. Preserve, renew
and keep in full force and effect its limited liability company existence and
good standing in the State of Minnesota and take all actions to maintain all
rights, privileges and franchises necessary or desirable in the normal conduct
of its business.

 

Section 5.02.                          Negative Covenants. So long as any of the
Loan Obligations remain unpaid or the Lender shall have any commitment
hereunder, the Borrower will not, without the prior written consent of the
Lender:

 

(a)                                 Liens, etc. Create or suffer to exist, or
permit any of its Subsidiaries to create or suffer to exist, any lien, security
interest or other charge or encumbrance, or any other type of preferential
arrangement, upon or with respect to any of its properties, whether now owned or
hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any
right to receive income, in each case to secure any Debt (as defined below) of
any Person, other than:

 

(i)                                     those described on Schedule
5.02(a) hereto and renewals and extensions on the same or substantially the same
terms and conditions and at no increase in the debt or obligation; or

 

(ii)                                  liens or security interests which are
subject to an intercreditor agreement in form and substance acceptable to Lender
in Lender’s sole discretion; or

 

(iii)                               the liens or security interests of the
Security Agreement; or

 

(iv)                              liens (other than liens relating to
environmental liabilities or ERISA) for taxes, assessments, or other
governmental charges that are not more than 30 days overdue or, if the execution
thereof is stayed, which are being contested in good faith by appropriate
proceedings diligently pursued and for which adequate reserves have been
established; or

 

(v)                                 liens of warehousemen, carriers, landlords,
mechanics, materialmen, or other similar statutory or common law liens securing
obligations that are not yet due and are incurred in the ordinary course of
business or, if the execution thereof is stayed, which are being contested in
good faith by appropriate proceedings diligently pursued and for which adequate
reserves have been established in accordance with GAAP; or

 

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(vi)                              liens resulting from good faith deposits to
secure payments of workmen’s compensation unemployment insurance, or other
social security programs or to secure the performance of tenders, leases,
statutory obligations, surety, customs and appeal bonds, bids or contracts
(other than for payment of Debt); or

 

(vii)                           any attachment or judgment lien not constituting
an Event of Default; or

 

(viii)                        liens arising from filing UCC financing statements
regarding leases not prohibited by this Agreement; or

 

(ix)                              customary offset rights of brokers and deposit
banks arising under the terms of securities account agreements and deposit
agreements; or

 

(x)                                 any real estate easements and easements,
covenants and encumbrances that customarily do not affect the marketable title
to real estate or materially impair its use; or

 

(xi)                              purchase money security interests in equipment
and vehicles, not to exceed $25,000.00 for any single purchase; or

 

(xii)                           liens arising under the Gavilon Agreements and
subject to the Gavilon Intercreditor Agreement; or

 

(xiii)                        liens securing the Interim Subordinated Debt and
subject to the Interim Subordianted Debt Intercreditor Agreement; or

 

(xiv)                       liens securing the Indenture Subordinated Debt and
subject to the Indenture Subordinated Debt Intercreditor Agreement.

 

(b)                                 Distributions, etc. Declare or pay any
dividends, purchase or otherwise acquire for value any of its membership
interests (units) now or hereafter outstanding, or make any distribution of
assets to its stockholders, members or general partners as such, or permit any
of its Subsidiaries to purchase or otherwise acquire for value any stock,
membership interest or partnership interest of the Borrower, provided, however,
the Borrower and its Subsidiaries may: (i) declare and pay dividends and
distributions payable in membership interests (units); (ii) purchase or
otherwise acquire shares of the membership interests (units) of the Borrower or
its Subsidiaries with the proceeds received from the issuance of new membership
interests (units); (iii) so long as the Borrower first provides such supporting
documentation as the Lender may request with respect to any fiscal year of the
Borrower, the Borrower may pay aggregate cash dividends/distributions, during
such fiscal year in an amount not to exceed the amount necessary for the members
of the Borrower to pay their Income Taxes on such member’s allocable share of
the taxable income of the Borrower for such taxable year or fiscal year, as
applicable (“Tax Distributions”); (iv) pay redemptions, dividends or
distributions in an amount not to exceed, in the aggregate, 40% of the
Borrower’s immediately preceding fiscal year’s Net Income including Incentive
Payments (except to the extent such Incentive Payments would not otherwise be
classified as Net Income according to GAAP) (“Allowed Distributions”); (v) pay
dividends or distributions which are immediately reinvested in the Borrower
(“Reinvestment Distributions”) provided, however, that immediately prior to the
proposed payment of any such dividends or distributions, or after giving effect
thereto, no Event of Default shall exist; and (vi) complete the transactions
reflected on Schedule 4.01(a); or

 

(c)                                  Capital Expenditures. Make any investment
in fixed assets in the aggregate amount of $500,000.00 during any fiscal year
during the term of this Agreement; or

 

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(d)                                 Consolidation, Merger, Dissolution, Etc.
Directly or indirectly, merge or consolidate with any other Person, permit any
other Person to merge into or with or consolidate with the Borrower or any of
its Subsidiaries, or permit any other Change of Control to occur; or

 

(e)                                  Indebtedness, etc. Create, incur, assume or
suffer to exist any Debt or other indebtedness, liabilities or obligations,
whether matured or unmatured, liquidated or unliquidated, direct or contingent,
joint or several, except: (i) the liabilities of the Borrower to the Lender
hereunder; (ii) trade accounts payable and accrued liabilities (other than Debt)
arising in the ordinary course of the Borrower’s or any of its Subsidiaries
business; (iii) the Interim Subordinated Debt; (iv) the Indenture Subordinated
Debt; (v) liabilities of the Borrower or its Subsidiaries described on Schedule
5.02(a); and (vi) indebtedness under the Gavilon Agreements, Long Term Marketing
Agreements or other Material Contracts; or

 

(f)                                   Organization; Name; Chief Executive
Office. Change its state of organization, name or the location of its chief
executive office without the prior written consent of the Lender; or

 

(g)                                  Loans, Guaranties, etc. Make any loans or
advances to (whether in cash, in-kind, or otherwise) any Person, or directly or
indirectly guaranty or otherwise assure a creditor against loss in respect of
any indebtedness, obligations or liabilities (contingent or otherwise) of any
Person; or

 

(h)                                 Subsidiaries; Affiliates. Form, invest in,
or otherwise acquire or increase any interest in any Subsidiary or affiliated
business, including but not limited to Agrinatural Gas, LLC, or acquire the
assets of or acquire any equity or ownership interest in any Person; or

 

(i)                                     Transfer of Assets. Sell, lease, assign,
transfer, or otherwise voluntarily dispose of any of its assets, or permit any
of its Subsidiaries to sell, lease, assign, transfer, or otherwise voluntarily
dispose of any of its assets except: (i) dispositions of inventory in the
ordinary course of business; (ii) dispositions required under the Gavilon
Agreements; and (iii) dispositions of: (a) obsolete or worn out equipment;
(b) equipment or real property not necessary for the operation of its business;
or (c) equipment or real property which is replaced with property of equivalent
or greater value as the property which is disposed; or

 

(j)                                    Lines of Business. Engage in any line or
lines of business activity other than the production of ethanol, corn oil and
DDGS, and any activities incidental or reasonably related thereto; or

 

(k)                                 Transactions with Affiliates. Directly or
indirectly enter into or permit to exist any transaction (including the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate, Subsidiary, director, officer or employee of the
Borrower, except (i) transactions listed on Schedule 5.02(k), (ii) transactions
in the ordinary course of and pursuant to the reasonable requirements of the
business of the Borrower or any of its Subsidiaries and upon fair and reasonable
terms which are fully disclosed to Lender and are no less favorable to the
Borrower or such Subsidiary than would be obtained in a comparable arm’s length
transaction with a Person or entity that is not an Affiliate of the Borrower,
(iii) payment of compensation to directors, officers and employees in the
ordinary course of business for services actually rendered in their capacities
as directors, officers and employees, provided such compensation is reasonable
and comparable with compensation paid by companies of like nature and similarly
situated, and (iv) transactions with Agrinatural Gas, LLC, a Delaware limited
liability company, made pursuant to the Agrinatural Agreements. Notwithstanding
the foregoing, upon the election of Lender, no payments may be made with respect
to any items set forth in clauses (i) and (ii) of the preceding sentence upon
the occurrence and during the continuation of an Event of Default, except for
the payments for corn otherwise in compliance with this Section 5.02(k); or

 

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(l)                                     Management Fees and Compensation.
Directly or indirectly pay any management, consulting or other similar fees to
any person, except (i) for fees and compensation listed on Schedule 5.02(l), and
(ii) for management, legal or consulting fees paid to persons or entities that
are not Affiliates of the Borrower or its Subsidiaries for services actually
rendered and in amounts typically paid by entities engaged in the Borrower’s or
such Subsidiary’s business; or

 

(m)                             Material Control or Management.  Except as set
forth in Section 5.01(n) or under the Loan Restructuring Proposal (i) there
should be any change in the Chief Executive Officer of the Borrower, unless
within 90 days of such event a person reasonably acceptable to Lender is
appointed to such position, or (ii) the Borrower shall fail at any time to hold,
legally or beneficially, 100% of the equity of each of the Subsidiary
Guarantors; or

 

(n)                                 Material Contracts. Change, alter or amend
any of its Material Contracts including the Gavilon Agreements, the Agrinatural
Agreements, or other Long Term Marketing Agreements. No accounts receivable
under any Material Contract, Gavilon Agreement or any other Long Term Marketing
Agreement shall at any time remain unpaid for more than 15 days after the
invoice date thereunder.

 

ARTICLE VI.

EVENTS OF DEFAULT AND REMEDIES

 

Section 6.01.                          Events of Default. Each of the following
events shall be an “Event of Default”:

 

(a)                                 The Borrower shall fail to pay any
installment of principal or interest, fees, expenses, charges or other amounts
payable hereunder or under the other Loan Documents, including, without
limitation, any Term Revolving Loan Principal Payment, or to make any deposit of
funds required under this Agreement when due; or

 

(b)                                 Any representation or warranty made by the
Borrower, or any of its officers or directors under or in connection with any
Loan Document shall prove to have been incorrect in any material respect when
made; or

 

(c)                                  The Borrower shall fail to perform or
observe any term, covenant or agreement contained in Sections 5.01(d), (e),
(f) or (g) or take any action as prohibited by Section 5.02; or

 

(d)                                 The Borrower shall fail to deliver the
financial statements or Compliance Certificate under Section 5.01(c) within 5
days of the date due; or

 

(e)                                  The Borrower shall fail to perform or
observe any term, covenant or agreement contained in any Loan Document (other
than those listed in clauses (a) through (d) of this Section 6.01) on its part
to be performed or observed (other than the covenants to pay the Loan
Obligations) and any such failure shall remain unremedied for ten (10) days
after written notice thereof shall have been given to the Borrower by the
Lender, provided, however, that no Event of Default shall be deemed to exist if,
within said ten (10) day period, Borrower have commenced appropriate action to
remedy such failure and shall diligently and continuously pursue such action
until such cure is completed, unless such cure is or cannot be completed within
thirty (30) days after written notice shall have been given; or

 

(f)                                   The Borrower shall fail to pay any
indebtedness, other than scheduled payments on the Subordinated Debt where such
payments would result in an Event of Default under this Agreement, in an amount
in excess of $50,000.00 (either in any individual case or in the aggregate)
excluding indebtedness evidenced by the Notes and excluding Ordinary Trade
Payable Disputes, or any

 

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interest or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such indebtedness; or any other default under any
agreement or instrument relating to any such indebtedness, or any other event,
shall occur and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such default or
event is to accelerate, or to permit the acceleration of, the maturity of such
indebtedness (excluding Ordinary Trade Payable Disputes); or any such
indebtedness shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), prior to the stated
maturity thereof (excluding Ordinary Trade Payable Disputes); or

 

(g)                                  The Borrower shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to pay
its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Borrower
seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee or other similar official for
it or for any substantial part of its property, and, in the case of any such
proceeding instituted against it (but not instituted by it) either such
proceeding shall remain undismissed or unstayed for a period of 30 days or any
of the actions sought in such proceeding (including, without limitation, the
entry of an order for relief against it or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part
of its property) shall occur; or the Borrower shall take any corporate action to
authorize any of the actions set forth above in this subsection; or

 

(h)                                 Any one or more judgment(s) or order(s) for
the payment of money in excess of $50,000.00 in the aggregate shall be rendered
against the Borrower and either: (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order; or (ii) there shall be
any period of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; or

 

(i)                                     Any provision of any Loan Document shall
for any reason cease to be valid and binding on the Borrower or the Borrower
shall so state in writing, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditor’s rights generally and by general principles of equity;
or

 

(j)                                    The Mortgage or the Security Agreement
shall for any reason, except to the extent permitted by the terms thereof, cease
to create a valid lien, encumbrance or security interest in any of the property
purported to be covered thereby; or

 

(k)                                 Any termination prior to its stated
expiration date, change, or other amendment to any Material Contract, including
the Gavilon Agreements, unless the same is/are replaced by similar
agreement(s) reasonably acceptable to the Lender, within thirty (30) days of
such change, amendment or termination; or

 

(l)                                     A Change of Control shall occur; or

 

(m)                             Any event, change or condition not referred to
elsewhere in this Section 6.01 should occur which results in a Material Adverse
Effect; or

 

(n)                                 Any guarantee, suretyship, subordination
agreement, maintenance agreement, or other agreement furnished in connection
with the Borrower’s obligations hereunder and under any Note

 

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shall, at any time, cease to be in full force and effect, or shall be revoked or
declared null and void, or the validity or enforceability thereof shall be
contested by the guarantor, surety or other maker thereof, or any Subsidiary
Guarantor shall deny any liability or obligations thereunder or under any
Subsidiary Guaranty, or shall fail to perform its obligations thereunder, or any
representation or warranty set forth therein shall be breached, or the
Subsidiary Guarantor shall breach or be in default under the terms of any other
agreement with Lender (including any loan agreement or security agreement); or

 

(o)                                 The loss, suspension or revocation of, or
failure to renew, any franchise, license, certificate, permit, authorization,
approval or the like now held or hereafter acquired by the Borrower or any of
its Subsidiaries, if such loss, suspension, revocation or failure to renew
results in a Material Adverse Effect or (ii) any regulatory or Governmental
Authority replaces the management of the Borrower or any of its Subsidiaries or
assumes control over the Borrower or such Subsidiary; or

 

(p)                                 The Borrower or any of its Subsidiaries
should breach or be in default under a Material Contract, other than for the
failure to make any scheduled payment on the Subordinated Debt where such
payment would result in an Event of Default under this Agreement, and other than
those covered under this Section 6.01(t), below, such breach has or could
reasonably be expected to have a Material Adverse Effect, including any
termination or other event which would permit any party other than the Borrower
or its Subsidiaries to cause a termination; or

 

(q)                                 The Borrower or any of its Subsidiaries
should terminate, change, amend or restate, without the Lender’s prior consent,
any Material Contract and such termination, change, amendment or restatement
results in a Material Adverse Effect; or

 

(r)                                    The issuance of any order, judgment or
decree which has the affect of revoking or suspending the Air Quality Emissions
permit for the Project; or

 

(s)                                   Borrower or any Subsidiary or Affiliate of
the Borrower dissolves, suspends, or discontinues doing business; or

 

(t)                                    The occurrence of a default or event of
default however defined under any of the the Agrinatural Agreements or any other
Long Term Marketing Agreement.

 

(u)                                 The occurrence of a default or event of
default however defined under any of the Gavilon Agreements, which remains
uncured to the satisfaction of the Lender within 60 days after Borrower is
notified of such default or event of default by Gavilon; provided that Borrower
shall provide Lender with any information reasonably requested by it regarding
Borrower’s negotiations with Gavilon or efforts to cure or remedy such default
or event of default.

 

Section 6.02.                          Remedies. Upon the occurrence of an Event
of Default and at any time while such Event of Default is continuing, the
Lender:

 

(a)                                 may accelerate the due date of the unpaid
principal balance of the Notes, all accrued but unpaid interest thereon and all
other amounts payable under this Agreement making such amounts immediately due
and payable, whereupon the Notes, all such interest and all such amounts shall
become and be forthwith immediately due and payable, without presentment, notice
of intent to accelerate or notice of acceleration, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower and
its Subsidiaries; provided, however, that in the event of an actual or deemed
entry of an order for relief with respect to any of the Borrower or any of its
Subsidiaries under the Bankruptcy Code, the Notes, all such interest and all
such amounts shall automatically become due and

 

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payable, without presentment, demand, protest or any notice of any kind, all of
which are hereby expressly waived by the Borrower and its Subsidiaries;

 

(b)                                 may withhold any one or more Advances in its
discretion, and terminate the Lender’s obligations, if any, under this Agreement
to make any Advances whereupon the commitment and obligations of the Lender to
extend credit or to make Advances hereunder shall terminate, and no disbursement
of Loan funds by the Lender will cure any default of the Borrower, unless the
Lender agrees otherwise in writing;

 

(c)                                  may, by notice to the Borrower and its
Subsidiaries, obtain the appointment of a general receiver to take possession of
all Collateral of the Borrower and its Subsidiaries, including, but not limited
to all Real Property and Personal Property, including all fixtures and equipment
leased, occupied or used by any of the Borrower and its Subsidiaries. Borrower
and each of its Subsidiaries hereby irrevocably consent to the appointment of
such receiver and agree to cooperate and assist any such receiver as reasonably
requested to facilitate the transfer of possession of the Collateral to such
receiver and to provide such receiver access to all books, records, information
and documents as requested by such receiver;

 

(d)                                 may, by notice to the Borrower, require the
Borrower to pledge to the Lender as security for the Loan Obligations an amount
in immediately available funds equal to the then outstanding Letter of Credit
Liabilities, such funds to be held in an interest bearing cash collateral
account at the Lender without any right of withdrawal by the Borrower; provided,
however, that in the event of an actual or deemed entry of an order for relief
with respect to the Borrower or any of its Subsidiaries under the Federal
Bankruptcy Code, the Borrower shall, without notice, pledge to the Lender as
security for the Loan Obligations an amount in immediately available funds equal
to the then outstanding Letter of Credit Liabilities, such funds to be held in
such an interest bearing cash collateral account at the Lender; and

 

(e)                                  may exercise all rights to notify or
instruct any commodity intermediary under any commodity account control
agreement or bank under any Deposit Account Control Agreement;

 

(f)                                   may apply any funds held by Lender in a
Program Account toward the outstanding Loan Obligations of the Borrower; and

 

(g)                                  may exercise any other rights and remedies
afforded to the Lender under the Loan Documents or by applicable law or equity.

 

Section 6.03.                          Remedies Cumulative. Each and every power
or remedy herein specifically given shall be in addition to every other power or
remedy, existing or implied, given now or hereafter existing at law or in
equity, and each and every power and remedy herein specifically given or
otherwise so existing may be exercised from time to time and as often and in
such order as may be deemed expedient by Lender, and the exercise or the
beginning of the exercise of one power or remedy shall not be deemed a waiver of
the right to exercise at the same time or thereafter any other power or remedy.
No delay or omission of Lender in the exercise of any right or power accruing
hereunder shall impair any such right or power or be construed to be a waiver of
any default or acquiescence therein.

 

ARTICLE VII.

MISCELLANEOUS

 

Section 7.01.                          Amendments, etc. No amendment or waiver
of any provision of any Loan Document to which the Borrower and its Subsidiaries
are a party, nor any consent to any departure by the Borrower and its
Subsidiaries therefrom, shall in any event be effective unless the same shall be
agreed or

 

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consented to by the Lender and the Borrower, and each such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.

 

Section 7.02.                          Notices, etc. All notices and other
communications provided for under any Loan Document shall be in writing and
mailed, faxed, or delivered at the addresses set forth below, or at such other
address as such party may specify by written notice to the other parties hereto:

 

If to the Borrower:

 

Heron Lake BioEnergy, LLC

 

 

91246 390th Avenue

 

 

P.O. Box 198

 

 

Heron Lake, MN 56137-0198

 

 

Telephone: (507) 793-0077

 

 

Fax: (507) 793-0078

 

 

Attention: President

 

 

 

With a copy to:

 

Lindquist & Vennum L.L.P.

 

 

4200 IDS Center

 

 

80 South Eighth Street

 

 

Minneapolis, MN 55402-2205

 

 

Telephone: (612) 371-3211

 

 

Fax: (612) 371-3207

 

 

Attn. Michael Weaver

 

 

 

If to the Lender:

 

AgStar Financial Services, PCA

 

 

1921 Premier Drive

 

 

P.O. Box 4249 Mankato, MN 56002-4249

 

 

Telephone: (507) 386-4242

 

 

Facsimile: (507) 344-5088

 

 

Attention: Steven Grosland

 

 

 

With copy to:

 

Phillip L. Kunkel

 

 

Gray Plant Mooty

 

 

1010 West St. Germain, Suite 600

 

 

St. Cloud, MN 56301

 

 

Facsimile: (320) 252-4482

 

All such notices and communications shall have been duly given and shall be
effective: (a) when delivered; (b) when transmitted via facsimile to the number
set forth above; (c) the Business Day following the day on which the same has
been delivered prepaid (or pursuant to an invoice arrangement) to a reputable
national overnight air courier service; or (d) the third Business Day following
the day on which the same is sent by certified or registered mail, postage
prepaid. Any confirmation sent by the Lender to the Borrower of any borrowing
under this Agreement shall, in the absence of manifest error, be conclusive and
binding for all purposes

 

Section 7.03.                          No Waiver; Remedies, Etc.

 

(a)                                 No failure on the part of the Lender to
exercise, and no delay in exercising, any right under any Loan Document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right under any Loan Document preclude any other or further exercise thereof or
the exercise of any other right. The remedies provided in the Loan Documents are
cumulative and not exclusive of any remedies provided by law.

 

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(b)                                 Notwithstanding Section 7.03(a), the
execution and delivery of this Agreement, the Second Amended and Restated Term
Note, the Second Amended and Restated Term Revolving Note, and the other Loan
Documents and Related Documents described herein shall supersede and replace in
their entirety the 2011  MLA, the Forbearance Agreements and all supplements,
amendments, restatements and other modifications thereof, which shall hereafter
be of no force or effect.

 

Section 7.04.                          Costs, Expenses and Taxes.

 

(a)                                 The Borrower agrees to pay on demand all
costs and expenses in connection with the preparation, execution, delivery,
filing, recording and administration of the Loan Documents and the other
documents to be delivered under the Loan Documents, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Lender (who may be in-house counsel), and local counsel who may be retained by
said counsel, with respect thereto and with respect to advising the Lender as to
its respective rights and responsibilities under the Loan Documents, and all
costs and expenses (including reasonable counsel fees and expenses) for the
Lender in connection with the filing of the Financing Statements and the
enforcement of the Loan Documents and the other documents to be delivered under
the Loan Documents, including Protective Advances and including, without
limitation, all such costs and expenses associated with defending, protecting or
enforcing the Loan documents, whether in the context of any bankruptcy
proceedings or otherwise. In addition, the Borrower agrees to pay on demand the
expenses described in Section 5.01(b). In addition, the Borrower shall pay any
and all stamp and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of the Loan
Documents and the other documents to be delivered under the Loan Documents, and
agrees to save the Lender harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes
and fees.

 

(b)                                 If, due to payments made by the Borrower due
to acceleration of the maturity of the Advances pursuant to Section 6.01 or due
to any other reason, the Lender receives payments of principal of any Loan other
than on the last day of an Interest Period relating thereto, the Borrower shall
pay to the Lender on demand any amounts required to compensate the Lender for
any additional losses, costs or expenses which it may incur as a result of such
payment, including, without limitation, any loss (including loss of anticipated
profits), cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by the Lender to fund or maintain such Loan.

 

Section 7.05.                          Right of Set-off. The Lender is hereby
authorized at any time and from time to time after an Event of Default, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Lender to or for the credit or the
account of the Borrower and each of its Subsidiaries against any and all of the
Loan Obligations, irrespective of whether or not the Lender shall have made any
demand under such Loan Document and although deposits, indebtedness or such
obligations may be unmatured or contingent. The Lender agrees promptly to notify
the Borrower after any such set-off and application, provided that the failure
to give such notice shall not affect the validity of such set-off and
application. The rights of the Lender under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) which the Lender may have.

 

Section 7.06.                          Severability of Provisions. Any provision
of this Agreement or of any other Loan Document which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or thereof or affecting the validity or
unenforceability of such provision in any other jurisdiction.

 

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Section 7.07.                          Binding Effect; Successors and Assigns;
Participations.

 

(a)                                 This Agreement shall be binding upon and
inure to the benefit of the Borrower, the Lender and their respective successors
and assigns, except that the Borrower shall not have the right to assign or
otherwise transfer its rights hereunder or any interest herein without the prior
written consent of the Lenders. Upon the request of Borrower, Lender shall
provide copies of all invoices for costs and expenses to be reimbursed by
Borrower under this Agreement or under any of the Loan Documents.

 

(b)                                 Borrower agrees and consents to Lender’s
sale or transfer, whether now or later, of one or more participation interests
in the Loans to one or more purchasers, whether related or unrelated to Lender.
Lender may provide, without any limitation whatsoever, to any one or more
purchasers, or potential purchasers, any information or knowledge Lender may
have about Borrower or about any other matter relating to the Loans, and
Borrower hereby waives any rights to privacy it may have with respect to such
matters; provided, however, that any information received by any such purchaser
or potential purchaser under this provision which concerns the personal,
financial or other affairs of the Borrower shall be received and kept by the
purchaser or potential purchaser in full confidence and will not be revealed to
any other persons, firms or organizations nor used for any purpose whatsoever
other than for determining whether or not to participate in the Loans and in
accord with the rights of Lender if a participation interest is acquired.
Borrower additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such participation
interest. Borrower also agrees that the purchasers of any such participation
interests will be considered as the absolute owners of such interests in the
Loans and will have all the rights granted under the participation agreement or
agreements governing the sale of such participation interests. Borrower further
waives all rights of offset or counterclaim that it may have now or later
against Lender or against any purchaser of such a participation interest arising
out of or by virtue of the participation and unconditionally agrees that either
Lender or such purchaser may enforce Borrower’s obligation under the Loans
irrespective of the failure or insolvency of any holder of any interests in the
Loans. Borrower further agrees that the purchaser of any such participation
interests may enforce its interests irrespective of any personal claims or
defenses that Borrower may have against Lender.

 

Section 7.08.                          Consent to Jurisdiction.

 

(a)                                 The Borrower hereby irrevocably submits to
the jurisdiction of any Minnesota state court or federal court over any action
or proceeding arising out of or relating to this Agreement, the Note and any
instrument, agreement or document related hereto or thereto, and the Borrower
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such Minnesota state court or federal
court. The Borrower hereby irrevocably waives, to the fullest extent it may
effectively do so, the defense of an inconvenient forum to the maintenance of
such action or proceeding. The Borrower irrevocably consents to the service of
copies of the summons and complaint and any other process which may be served in
any such action or proceeding by the mailing of copies of such process to
Borrower at its address specified in Section 7.02. The Borrower agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.

 

(b)                                 Nothing in this Section 7.08 shall affect
the right of the Lender to serve legal process in any other manner permitted by
law or affect the right of the Lender to bring any action or proceeding against
the Borrower or its property in the courts of other jurisdictions.

 

Section 7.09.                          Governing Law. THIS AGREEMENT AND THE
NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS
OF THE STATE OF MINNESOTA.

 

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Section 7.10.                          Execution in Counterparts. This Agreement
may be executed in any number of counterparts and on facsimile or electronic
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute but one and the same
agreement.

 

Section 7.11                             Waiver and Release.  To the extent any
claims or defenses may exist, the Borrower and Guarantors, on behalf of
themselves and their respective successors and assigns, hereby forever and
irrevocably release the Lender and its officers, representatives, agents,
attorneys, employees, predecessors, successors, and assigns, from any and all
such claims and defenses, whether known or unknown arising out of any acts or
omissions occurring prior to the date of this Agreement, including those arising
under the Agricultural Credit Act of 1987 regarding restructuring of distress
loans, in existence as of the date of the Agreement.

 

Section 7.12.                          Survival. All covenants, agreements,
representations and warranties made by the Borrower in the Loan Documents and in
the certificates or other instruments delivered in connection with or pursuant
to this Agreement or any other Loan Document shall be considered to have been
relied upon by the other parties hereto and shall survive the execution and
delivery of the Loan Documents and the making of any Advances and issuance of
any Letters of Credit, regardless of any investigation made by any such other
party or on its behalf and notwithstanding that Lender may have had notice or
knowledge of any Event of Default or incorrect representation or warranty at the
time any credit is extended hereunder, and shall continue in full force and
effect as long as any Loan Obligations are outstanding and unpaid and so long as
the Lender has any unexpired commitments under this Agreement or the Loan
Documents. The expense reimbursement, additional cost, capital adequacy and
indemnification provisions of this Agreement shall survive and remain in full
force and effect regardless of the consummation of the transactions contemplated
hereby, the repayment of the Loan Obligations or the termination of this
Agreement or any provision hereof.

 

Section 7.13.                          WAIVER OF JURY TRIAL. THE BORROWER AND
THE LENDER HEREBY IRREVOCABLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT TO
WHICH IT IS A PARTY OR ANY INSTRUMENT OR DOCUMENT DELIVERED THEREUNDER.

 

Section 7.14.                          Entire Agreement. THIS AGREEMENT, THE
NOTES, AND THE OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE
AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES
HERETO OR THERETO.

 

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT, AND
AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF THE DATE FIRST ABOVE STATED.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers and duly authorized, as of the date first above
written.

 

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SIGNATURE PAGE TO:

FIFTH AMENDED AND RESTATED MASTER LOAN AGREEMENT

by and among

HERON LAKE BIOENERGY, LLC

and

AGSTAR FINANCIAL SERVICES, PCA

Dated to be effective as of May 17, 2013

 

BORROWER:

 

 

 

HERON LAKE BIOENERGY, LLC, a Minnesota limited liability company

 

 

 

 

/s/ Robert J. Ferguson

 

By Robert J. Ferguson

 

Its President

 

 

 

 

 

LENDER:

 

 

 

AGSTAR FINANCIAL SERVICES, PCA

 

a United States instrumentality

 

 

 

 

 

/s/ Steven Grosland

 

By Steven Grosland

 

Its Senior Lending Services Executive

 

 

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