EXHIBIT 10.5


 


TERM REVOLVING NOTE


 


	
  $5,000,000.00

  	
   

  	
  October 1,
  2007

  



 


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,  a United States
corporation (the “Lender”), the
principal sum of Five Million and No/100ths ($5,000,000.00) Dollars, or so much
thereof as may be advanced to, or for the benefit of, the Borrower and be
outstanding, with interest thereon, to be computed on each advance from the
date of its disbursement as set forth herein pursuant to that certain Fourth 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 pursuant
to that certain Fourth Supplement to the MLA, dated as 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 “Fourth Supplement”),
and which remains unpaid, in lawful money of the United States and immediately
available funds.  This Term Revolving
Note (the “Note”) is issued pursuant to the
terms and provisions of the MLA and the Fourth Supplement and is entitled to
all of the benefits provided for in the MLA and the Fourth Supplement. All
capitalized terms used and not defined herein shall have the meanings assigned
to them in the MLA and the Fourth Supplement.


 


2.             The outstanding
principal balance of this Note shall bear interest at a variable rate
determined by Lender to be three and one-quarter percent (3.25%) above the
LIBOR Rate in effect on the date of the first Advance pursuant to this Note.  Notwithstanding the foregoing, the rate of
interest under this Note may be adjusted by Lender pursuant to the provisions
the MLA, the Fourth Supplement and this Note.


 


3.             The “LIBOR Rate” means
the rate (rounded upward to the nearest sixteenth and adjusted for reserves
required on Eurocurrency Liabilities (as hereinafter defined) for banks subject
to FRB Regulation D (as hereinafter defined) or required by any other federal
law or regulation, quoted by the British Bankers Association (the “BBA”) at
11:00 a.m. London time two Banking Days (as hereinafter defined) before
the commencement of the Interest Period for the offering of U.S. Dollar
deposits in the London interbank market for an Interest Period of one month, as
published by Bloomberg or another major information vendor listed on BBA’s
official website.  “Banking Day”
shall mean a day on which Lender is open for business, dealings in U.S. dollar
deposits are being carried out in the London interbank market, and banks are
open for business in New York City and London, England.  “Eurocurrency Liabilities”
has the meaning as set forth in FRB Regulation D.  “FRB Regulation D”
means Regulation D as promulgated by the Board of Governors of the Federal
Reserve System, 12 CFR Part 204, as amended from time to time


 


4.             The
rate of interest due hereunder shall initially be determined as of the effective
date of this Note and shall thereafter be adjusted, as and when, the LIBOR Rate
changes. 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
the LIBOR Rate 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 “Adjustment Date”).  All such adjustments to said rate shall be
made and become effective as of the Adjustment Date, and said rate as adjusted
shall remain in effect until and including the day 


 

















 


immediately preceding the next Adjustment
Date.  Interest hereunder shall be
computed on the basis of a year of three hundred sixty-five or three hundred
sixty-six (365 or 366) days, but charged for actual days principal is
outstanding.


 


5.             Beginning
on the first (1st) day of the first calendar month following the
month in which funds have been advanced to Borrower hereunder, and continuing
on the first (1st) day of each succeeding month thereafter until the
Term Revolving Loan Maturity Date, the Borrower shall make monthly payments of
accrued interest.


 


6.             Repayment of principal on the Term Revolving Loan shall be
governed by Section 3 of the Fourth Supplement.  The outstanding principal balance hereof,
together with all accrued interest, if not paid sooner, shall be due and
payable in full on October 1, 2012 (the “Term
Revolving Loan 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.


 


8.             This Note may be prepaid at any time, at the option of
the Borrower, either in whole or in part, subject to the obligation of the
Borrower to compensate the Lender for any loss, cost or expense as a result of
such prepayment as set forth in the MLA and the Fourth Supplement.  This Note is subject to mandatory prepayment,
at the option of the Lender, as provided in the MLA and the Fourth Supplement.


 


9.             In
addition to the rights and remedies set forth in the MLA and the Fourth
Supplement:  (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 2% 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 2% 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 Revolving Loan 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 2% 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.


 


10.           If
the Borrower fails to make any payment to Lender within ten (10) days of
the due date thereof, the Borrower shall pay, in addition to such amount, 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 Third Amended and
Restated Mortgage dated May 18, 2007 (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 


 


2

















 


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, the Fourth Supplement, or
any of the Loan Documents.


 


13.           Upon,
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.           Except as set forth
in Section 2 of the Fourth Supplement, effective on the Closing Date, this
Fourth Supplement, the Term Revolving Note, the Third Supplement, and the Term
Note shall supersede and replace in their entirety the First Supplement and
Construction Note which shall thereafter be of no force or effect.


 


	
   

  	
   

  	
  HERON LAKE BIOENERGY, LLC,
  a 

  Minnesota limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
         /s/
  Robert J. Ferguson

  
	
   

  	
   

  	
  By: Robert J. Ferguson

  
	
   

  	
   

  	
    Its: President

  



 


3