EXHIBIT 10.2

 

SECOND AMENDED AND RESTATED

TERM NOTE

 

$17,404,344.28

 

May 17, 2013

 

1.                                      FOR VALUE RECEIVED, HERON LAKE
BIOENERGY, LLC, a Minnesota limited liability company (the “Borrower”), hereby
promises to pay to the order of AGSTAR FINANCIAL SERVICES, PCA, an United States
corporation (the “Lender”), the principal sum of Seventeen Million Four Hundred
Four Thousand Three Hundred Forty-four and 28/100ths ($17,404,344.28) Dollars
(the “Term Loan”), with interest thereon from the date of this Second Amended
and Restated Term Note (this “Note”) until fully paid in lawful money of the
United States and immediately available funds.  This Note is issued pursuant to
the terms and provisions of that certain Sixth Amended and Restated Master Loan
Agreement of even date herewith by and between the Lender and the Borrower (as
it may be amended, modified, supplemented, extended or restated from time to
time, the “MLA”) and is entitled to all of the benefits provided for herein and
therein.  All capitalized terms used and not defined herein shall have the
meanings assigned to them in the MLA.

 

2.                                      The outstanding principal balance of
this Note shall bear interest as follows:

 

(i)                                     from the date of this Note 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) of the MLA (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) of the MLA (as tested
monthly), seven and three-quarters percent (7.75%). For purposes of this
paragraph 2, 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) of the MLA.

 

(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 paragraph 9.

 

(iii)                               on Term Loan Adjustment Date, the interest
rate on the outstanding principal balance of this Note 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 paragraph 9, below.  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.

 

3.                                      Intentionally Omitted.

 

4.                                      Beginning June 1, 2013, and continuing
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 this Note, together with accrued interest thereon, over a period not to
exceed ten (10) years from date of this Note.  The

 

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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.

 

5.                                      In addition to all other payments of
principal and interest required under the MLA and this Note, the Borrower shall
remit to Lender, beginning with the first fiscal year end following the date of
this Note and continuing throughout the term of the Term Loan, 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 under the
MLA and this Note 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 this Note;
provided, however, that if any Excess Cash Flow Payment would result in a
prepayment fee under Section 2.02(f) of the MLA, Borrower may elect to have such
Excess Cash Flow Payment applied to reduce the outstanding principal balance of
the Term Revolving Loan (as defined in the MLA) with a corresponding dollar for
dollar reduction in the Term Revolving Loan Commitment (as defined in the MLA),
which reduction would be reversed when such prepayment fee would no longer be
applicable and Borrower has prepaid this Note 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.

 

6.                                      The outstanding principal balance
hereof, together with all accrued interest, if not paid sooner, shall be due and
payable in full on September 1, 2016 (the “Maturity Date”).

 

7.                                      All payments and prepayments shall, at
the option of the Lender, be applied first to any costs of collection, second to
any late charges, third to accrued interest and the remainder thereof to
principal, in the sole discretion of the Lender.

 

8.                                      This Note may, by notice to the Lender,
prepay the this Note 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 Section 2.02(f) of the MLA, or as otherwise provided in this Note or in
the MLA. Any prepayment does not otherwise affect Borrower’s obligations to pay
any fees due hereunder or under the MLA.  This Note is subject to mandatory
prepayment, at the option of the Lender, as provided in the MLA.

 

9.                                      In addition to the rights and remedies
set forth in the MLA :  (i) if the Borrower fails to make any payment to Lender
when due under this Note, 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 under this Note; (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 under this Note shall bear interest from 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 under the terms of
this Note; (iii) after the maturity date, whether by reason of acceleration or
otherwise, the unpaid principal balance of this Note (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 under this   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.

 

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10.                               If the Borrower fails to make any payment to
Lender within ten (10) days of the due date thereof (including, without
limitation, any purchase of equity of Lender when required), the Borrower shall,
in addition to such amount, pay a late charge equal to five percent (5%) of the
amount of such payment.

 

11.                               This Note is secured by, among other
instruments, that certain Sixth Amended and Restated Mortgage of even date
herewith (as amended, restated or otherwise modified from time to time, the
“Mortgage”) covering various parcels of real property, fixtures, and personal
property located in Jackson County, Minnesota, and that certain Security
Agreement dated September 29, 2005.  In the event any such security is found to
be invalid for whatever reason, such invalidity shall constitute an event of
default hereunder.  All of the agreements, conditions, covenants, provisions,
and stipulations contained in the Mortgage, or any instrument securing this Note
are hereby made a part of this Note to the same extent and with the same force
and effect as if they were fully set forth herein. It is agreed that time is of
the essence of this Note.

 

12.                               Upon the occurrence at any time of an Event of
Default or at any time thereafter, the outstanding principal balance hereof plus
accrued interest hereon plus all other amounts due hereunder shall, at the
option of the Lender, be immediately due and payable, without notice or demand
and Lender shall be entitled to exercise all remedies provided in this Note, the
MLA or any other Loan Document.

 

13.                               The occurrence at any time of an Event of
Default or at any time thereafter, the Lender shall have the right to set off
any and all amounts due hereunder by the Borrower to the Lender against any
indebtedness or obligation of the Lender to the Borrower.

 

14.                               The Borrower promises to pay all reasonable
costs of collection of this Note, including, but not limited to, reasonable
attorneys’ fees paid or incurred by the Lender on account of such collection,
whether or not suit is filed with respect thereto and whether or not such costs
are paid or incurred, or to be paid or incurred, prior to or after the entry of
judgment.

 

15.                               Demand, presentment, protest and notice of
nonpayment and dishonor of this Note are hereby waived.

 

16.                               This Note shall be governed by and construed
in accordance with the laws of the State of Minnesota.

 

17.                               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 Note, the MLA 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 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.  Nothing in this Note shall affect the right of the Lender to bring
any action or proceeding against the Borrower or its property in the courts of
any other jurisdiction to the extent permitted by law.

 

18.                               Effective on the date of this Note, this Note
shall supersede and replace in its entirety the Amended and Restated Term Note
of the Borrower dated September 1, 2011, which superseded and replaced that
certain Term Note of the Borrower dated October 1, 2007 (and all amendments
thereto) which shall hereafter be of no force or effect.

 

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HERON LAKE BIOENERGY, LLC, a Minnesota limited liability company

 

 

 

 

 

/s/ Robert J. Ferguson

 

By: Robert J. Ferguson

 

Its: President

 

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