Exhibit 10.1

 

November 20, 2008

 

Ms. Carol Larson, HR

Mr. Luke Schneider

Heron Lake BioEnergy LLC

91246 390th Avenue

Heron Lake, MN 56137

 

Dear Carol and Luke:

 

On behalf of CFO Systems, we appreciated the opportunity to meet you and your
accounting team, and to present our credentials and proposal.  It has been a
pleasure learning about Heron Lake BioEnergy, your organization, and your
culture.

 

This letter agreement expresses the understanding between Heron Lake BioEnergy,
LLC (“you” or the “Company”) and CFO Systems, LLC (“we” or “CFO Systems”)
regarding the consulting services we will provide you.  If the provisions of
this agreement are acceptable to you, please sign one copy of this letter and
return it to me at your earliest convenience.  The second original copy is for
your files.

 

As a condition of giving any member of the CFO Systems team access to you or
your files, CFO Systems will require that such person agree to be bound by the
terms of this agreement.  CFO Systems also agrees that it will be responsible
for the breach of this agreement by any such person.

 

At this time, CFO Systems anticipates assigning Brett L. Frevert, CPA to this
project and using our other personnel on an as-needed basis.  The services
described in this agreement will be provided on an independent contractor
basis.  Neither CFO Systems nor Mr. Frevert (or any other person assigned to
your project) is an employee, partner, or co-venturer of, or in any other
service relationship with, the Company.

 

We understand that neither CFO Systems nor any member of its team is authorized
to speak for, represent, or obligate the Company in any manner without the prior
authorization from the Company’s Chief Executive Officer which authorization may
be oral, by email, or in writing.  We will not hold ourselves out as having such
authority to any other person and we will not enter into any agreement or incur
any obligations on the Company’s behalf, or commit the Company in any manner
without the Company’s prior written consent.  Because of our independent
contractor relationship, you are not obligated and will not obtain any workers’
compensation insurance for any person providing services under this agreement. 
Further, we understand that neither CFO Systems nor any member of its team is
entitled to participate in or receive benefits under any group benefit plan
maintained or sponsored by you. CFO Systems will be solely responsible for all
payroll and other taxes

 

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arising from compensation and other amounts paid to it under this agreement.

 

During the term of our engagement, we will comply with all of the Company’s
written policies and procedures which have been provided to us, including the
Company’s Procedures and Guidelines Governing Insider Trading and Tipping, as
well as direction given by the Company’s Board of Governors.  CFO Systems and
any member of its team will report to the Company’s Board of Governors, but may
receive direction from, and work with, the CEO on a day to day basis.

 

We will perform the services described in this letter either at your office or
at a location we specify, as the circumstances require.

 

We have agreed to provide the following services in the following areas:

 

·                  day-to-day leadership and oversight for the Heron Lake
BioEnergy finance department.  As part of this role, we will coach, train and
guide your full-time staff.

 

·                  CFO-level expertise in areas such as the annual audit, SEC
filings, reports to members, lender reporting and tax filings.

 

·                  Strategic planning, forecasting, and budgeting.

 

We currently estimate that the total hours for these services will be between
500 and 800 hours; we will review the services provided on a bi-weekly basis.

 

We bill for our services on an hourly basis for actual hours of service
provided.  You will be billed a rate equal to $130/hour regardless of which
member of the CFO Systems team performs the services.  We will submit invoices
on a bi-weekly basis and payment will be due within two weeks of receipt.  You
will use these invoices as one means of evaluating our progress, and to set
future goals.  In addition, you agree to reimburse us for all actual reasonable
and necessary expenditures that are directly related to the services provided to
you.  These expenditures may include expenses related to travel (i.e. mileage,
hotel, meals, etc.), telephone calls, postal expenditures, equipment or office
supply purchases; provided, however, that any single expenditure which exceeds
two hundred fifty dollars ($250) must be authorized by the Company’s CEO or
Human Resources Manager in writing prior to the expenditure.  We understand that
the Company reserves the right to refuse to reimburse us for any expenses that
do not receive the required pre-approval.

 

The term of this agreement shall extend from the signing of this letter by both
parties until terminated by mutual agreement or until terminated by either party
upon fourteen (14) days notice to the other.  After 500 hours of services have
been provided, the Company and CFO Systems will meet to determine the need for
additional services.  Further, the Company may terminate this agreement
immediately for “cause” which means one or more of the following by CFO Systems
or any member of the team providing the Company services:

 

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(i) any fraud, misappropriation, theft, embezzlement or other material act of
dishonesty against the Company; (ii) any conviction of, or nolo contendere plea
to, a felony or gross misdemeanor; (iii) intentional or malicious misconduct or
other willful or wanton misconduct in the performance of the services described
in this agreement; (iv) illegal or dishonest acts; (v) any public conduct that
has or can reasonably be expected to have a detrimental effect on the Company;
or (vi) any material breach of this agreement.

 

Upon the expiration or earlier termination of this agreement, you will pay us
for the hours of service accrued and unpaid through the date of expiration or
termination, as well as for any reimbursable expenses incurred through such date
and for which we have not received reimbursement.

 

CFO Systems hereby agrees to indemnify and hold the Company, its employees,
governors and affiliates, harmless from and against all claims, damages, costs,
expenses, fines, or liabilities (including, without limitation, reasonable
attorneys’ fees and expenses) directly arising out of material breach of this
agreement by CFO Systems or any person providing services to the Company under
this agreement (with the violation of any of the covenants in Exhibit A
constituting a material breach), material violation of law or violation of any
policy of the Company by any of the foregoing, or willful misconduct by any of
the foregoing.  CFO Systems will not be liable to the Company for any special,
consequential, indirect or punitive damages, except as CFO Systems may otherwise
be obligated to indemnify the Company against the same pursuant to this
paragraph.  Neither termination of, nor completion of the services under, this
agreement shall affect these indemnification provisions, which shall survive any
such termination or completion and remain operative and in full force and
effect.

 

The provisions relating to non-solicitation and protection of your confidential
information, which are set forth on the attached Exhibit A, will survive any
termination of this agreement and remain in full force and effect thereafter. 
The provisions relating to confidentiality supersede and replace any previous
agreement between CFO Systems and the Company relating to confidentiality and
non-disclosure of information.

 

Brett L. Frevert, by countersigning this agreement, agrees to serve as the
Company’s Interim Chief Financial Officer when appointed by, and at the pleasure
of, the Company’s Board of Governors.  Mr. Frevert further acknowledges and
agrees that in the capacity as Interim Chief Financial Officer he will serve as
the “principal financial officer” and “principal accounting officer” of the
Company.

 

This agreement constitutes the complete agreement of the parties, setting forth
the entire understanding and agreement of the parties as to the subject matter
contained therein and supersedes all prior discussions and understandings in
respect to the subject of this agreement, whether written or oral.  This
agreement shall be governed by and construed in accordance with the substantive
laws of the State of Minnesota, without regard to the rules or

 

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statutes of any jurisdiction with respect to conflict of laws.

 

As always, please feel free to contact us immediately with any issues, concerns,
or questions.  We appreciate the opportunity to work with you, and are looking
forward to our relationship with Heron Lake BioEnergy.

 

Sincerely,

 

CFO Systems, LLC

 

 

 

 

 

/s/ Brett L. Frevert

 

 

 

Brett L Frevert, CPA

 

Managing Director

 

402 884 0066 ext. 102

 

bfrevert@cfosystemsllc.com

 

 

 

ACCEPTED AND AGREED:

 

Heron Lake BioEnergy, LLC

 

 

By:

  /s/ Robert J. Ferguson

 

 

 

 

  Robert J. Ferguson

 

  Chief Executive Officer

 

Dated:

    11/25/08

 

 

ACCEPTED AND AGREED:

 

 

    /s/  Brett L. Frevert

 

 

Brett L. Frevert

 

Dated:

    11/25/08

 

 

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This is Exhibit A to that certain letter agreement entered into between Heron
Lake BioEnergy, LLC and CFO Systems, LLC dated November 20, 2008.  Capitalized
terms in this Exhibit which are not otherwise defined have the meanings assigned
to them in the letter agreement.

 

EXHIBIT A

CONFIDENTIAL INFORMATION AND OTHER COVENANTS

 

1.             Definition.  “Confidential Information” means information not
generally known whether presently existing or developed in the future, including
trade secrets, about the Company’s methods, processes, technology, intellectual
property, products or services, inventions, vendor names, customer lists,
management systems, capitalization or funding, compensation structure, and sales
and marketing plans.  All information disclosed to CFO Systems or to which we
have access or which we generate on behalf of the Company during the term of
this agreement shall be presumed to be Confidential Information.

 

2.             Exceptions.  The burden of establishing that any information
possessed by CFO Systems is not Confidential Information shall be CFO System’s. 
This burden shall be met only if we are able to establish by clear and
convincing evidence that the information, free of any obligations of
confidentiality:

 

(a)           became generally known or available to the public other than as a
result of a disclosure by CFO Systems or anyone to whom we transmitted the
information;

 

(b)           was available to CFO Systems on a non-confidential basis prior to
the Company’s disclosure to us (as evidenced by written records of CFO Systems
in existence prior to a disclosure by the Company of the information involved);
or

 

(c)           became available to CFO Systems on a non-confidential basis from a
source other than one who is bound by a nondisclosure or confidentiality
agreement or other obligation of secrecy with respect to such information.

 

3.             Non-Disclosure.  In performing the services described in the
agreement, CFO Systems may be exposed to and will be required to use certain
Confidential Information of the Company.  We agree that we will not use directly
or indirectly, such Confidential Information for the benefit of any person,
entity or organization other than the Company, or disclose such Confidential
Information without the written authorization of the Chief Financial Officer of
the Company, either during or after the term of this agreement, for as long as
such information retains the characteristics of Confidential Information.

 

4.             Ownership and Use. We agree that all materials developed by CFO
Systems on behalf of the Company in connection with the services, or provided by
or on behalf of the Company to CFO Systems, whether or not conceived or provided
by or on behalf of the Company during our affiliation therewith, are and shall
remain the exclusive property of the Company, and we shall not copy, summarize
or remove from the Company’s premises such Confidential Information or material
in whole or in part at any time prior to or after termination except as
permitted in writing by an officer of the Company.  Promptly upon the expiration
or termination of this agreement, or upon the request of the Company, we shall
return to the Company all documents and tangible items, including samples,
provided to CFO Systems or

 

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created by CFO Systems for use in connection with the services, including
without limitation all Confidential Information, together with all copies and
abstracts thereof.

 

5.             Use of Information.  Confidential Information furnished by the
Company to CFO Systems under this agreement shall be used by CFO Systems solely
for the purpose and furtherance of the services described in the agreement and
will be treated by CFO Systems with at least the same degree of care as we
accord our own confidential and proprietary information.  We shall not disclose
Confidential Information except to those employees and representatives of the
Company who are required to have the Confidential Information in order to
perform their respective duties in connection with the services.

 

6.             Non-Solicitation Covenant.  In consideration of CFO System’s
engagement as a consultant of the Company and the compensation to be paid to CFO
Systems pursuant to the terms of this agreement, we covenant that we will not,
during the term of this agreement and for one (1) year following the termination
of this agreement, without the Company’s prior written consent, either directly
or indirectly, on CFO System’s own behalf or in the service or on behalf of
others, solicit, divert, or hire away, or attempt to solicit, divert, or hire
away any person employed by or who is a consultant of the Company, whether or
not such employee is a full-time, or part time employee or consultant of the
Company.

 

7.             Return of Property.  On termination of this agreement, (i) we
shall deliver promptly to the Company all records, manuals, books, blank forms,
documents, letters, memoranda, notes, notebooks, reports, data, tables,
calculations or copies thereof, which are the property of the Company or which
relate in any way to the services, the business, products, practices or
techniques of the Company, and all other property, trade secrets and
Confidential Information (as defined above), including, but not limited to, all
documents which in whole or in part contain any trade secrets or Confidential
Information or relating to the services, which in any of these cases are in CFO
Systems’ possession or under its control; and (ii) the Company shall return to
CFO Systems all property and information, if any, in the possession of the
Company or any of its employees, representatives or agents not furnished to the
Company in connection with the services on the request of CFO Systems.

 

8.             Injunctive Relief.  The parties acknowledge it would be
impossible or inadequate to measure and calculate the damages to the Company
from any breach of the covenants set forth on this Exhibit.  Accordingly, in the
event of a breach of any of those sections by CFO Systems, the Company shall be
entitled, in addition to any other right or remedy available to it, to obtain an
injunction from a court of competent jurisdiction restraining or preventing that
breach or threatened breach and to specific performance of any such provision of
this agreement.  No bond or other security shall be required of the Company in
obtaining any such equitable relief.

 

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