Document:

Exhibit10.2-SubscriptionAgreementIncludingInvestmentRepresentations

EXHIBIT 10.2

HERON LAKE BIOENERGY, LLC

SUBSCRIPTION AGREEMENT
INCLUDING INVESTMENT REPRESENTATIONS

THIS SUBSCRIPTION AGREEMENT (this “Subscription Agreement”) is entered into and made effective on July 31, 2013, by and between Heron Lake BioEnergy, LLC, a Minnesota limited liability company with its principal executive office located at 91246 390th Avenue, P.O. Box 198, Heron Lake, Minnesota 56137 (the “Company”), and Project Viking, L.L.C., a Minnesota limited liability company (“Subscriber”).

W I T N E S S E T H

In consideration of the mutual promises contained herein, and other good and valuable consideration, Subscriber hereby agrees, represents and warrants as follows:
1.    Agreement of Subscription.  

a.    Subscriber hereby subscribes to purchase ** 8,075,000 ** Class A capital units of the Company and ** 15,000,000 ** Class B capital units of the Company (collectively, the “Units”), which Units quantify membership interests in the Company, at a purchase price of $0.30 per Unit, upon the terms and conditions as set forth in this Subscription Agreement, for a Total Purchase Price for the Units of ** $6,922,500.00 **.  All capitalized terms used in this Subscription Agreement and not otherwise defined herein shall have the meaning ascribed to such terms in the Company’s Confidential Disclosure Statement dated June 11, 2013, including appendices (the “Disclosure Statement”).  

b.    This subscription is irrevocable.  The Company will accept this subscription by having one of its officers countersign this Subscription Agreement and return a copy of the signature page to you to confirm acceptance.  Upon acceptance, this Subscription Agreement is binding on Subscriber, and the obligations of Subscriber hereunder are unconditional.
    
c.     Upon the acceptance of this Subscription Agreement, Subscriber agrees to deliver by wire transfer on the same business day of the acceptance the amount of the Total Purchase Price for the Units (100% payment is due upon Subscription).  Subscriber agrees that the Units shall be governed by and that Subscriber is bound by the Company’s Member Control Agreement dated effective September 23, 2004, as amended August 30, 2011, a copy of which is included in the Disclosure Statement as Appendix B (the “Member Control Agreement”).  Subscriber acknowledges that Subscriber is a current member of the Company and therefore has received a copy of the Disclosure Statement including the Member Control Agreement.  

d.    Subscriber acknowledges and agrees that 100% of Subscriber’s purchase price of the Units constitutes “AT-RISK” capital and will not be placed into any type of escrow.  Immediately following acceptance of this Subscription by the Company and tender of the payment for the Units, the Company will use such funds to pay down the Company’s term revolver note with AgStar Financial Services, PCA (“AgStar”).  Subscriber acknowledges that the payment of the proceeds of this subscription to AgStar is the specified use of the funds from this subscription.    

		
	HERON LAKE BIOENERGY, LLC
	JULY 31, 2013

PRIVATE PLACEMENT
SUBSCRIPTION AGREEMENT 

e.    Upon acceptance of this Subscription Agreement and tender of full payment of the entire subscription amount, the Company will issue the Units to Subscriber for the Units purchased hereunder and issue a certificate to Subscriber for the Units purchased hereunder, dated as of the date of such acceptance and full payment.  Subscriber acknowledges and agrees that Subscriber is bound by the Company’s Articles of Organization, a copy of which is included in the Disclosure Statement as Appendix A (the “Articles”) and the Member Control Agreement.      
2.    Representations and Warranties of Subscriber.  

In consideration of the Company's offer to sell the Units, and in order to induce the Company to sell and issue the Units to Subscriber, Subscriber hereby represents and warrants to the Company and its agents as follows:

a.    SEC Reporting Company and Reporting Obligations; Information About the Company, the Units and the Notes Offering.  Subscriber acknowledges that the Company is a public reporting company under the Securities Exchange Act of 1934, and that Subscriber has immediate reporting obligations under such Act as a result of its purchase of the Units hereunder and Subscriber’s ownership of membership interests in the Company and the number of Units purchased.  Subscriber, or its representative(s), has received, read and understands the business, financial and operating information, and the risk factors affecting the Company and its business and the value of the Units being purchased hereunder,  as described in or set forth in the periodic reports and schedules filed by the Company with the SEC (including all exhibits and financial statement schedules attached thereto or included therewith), including but not limited to: (1) FORM 10-K Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “34’ Act”) for the fiscal year ended October 31, 2012; (2) FORM 10-Q Quarterly reports under Section 13 or 15(d) of the Act for the fiscal quarters ended January 31, 2013 and April 30, 2013; (3) the SCHEDULE 14A Definitive Proxy Statement relating to merger or acquisition and Additional Definitive Proxy soliciting materials and Rule 14a-12 materials; and (4) all FORM 8-K reports filed in the past twelve months, including but not limited to the Form 8-K reports filed in connection with the termination of the Asset Purchase Agreement entered into with Guardian Energy, the amendments to the forbearance agreements and related loan agreements between the Company and AgStar Financial Services, PCA, and the amended and restated loan agreement and interim subordinated loan agreements entered into on May 17, 2013.  In addition, Subscriber acknowledges it has received the Company’s unaudited, non-public, financial statements for May 31, 2013 and June 30, 2013 and the 7-month and 8-month periods then ended, by reason of its appointees to the Company’s Board of Governors.  Without limiting the foregoing, Subscriber acknowledges that the Company has affirmative covenants and payment obligations to AgStar in its loan agreements with AgStar, and that there are no assurances that the covenants and payment obligations will be met, that the Company will not violate loan covenants or payment obligations in the future, or that AgStar will not declare an event of default and exercise all of their rights and remedies under the loan agreement if the Company cannot cure any such defaults or violations.  

Subscriber acknowledges and represents and warrants to the Company that Subscriber has received and carefully read: (i) the Company’s Confidential Disclosure Statement dated June 11, 2013, including appendices; (ii) the form of Indenture dated as of _______________, 2013 among the Company and U.S. Bank National Association attached as Appendix E to the Disclosure Statement (the “Indenture”); (iii) the form of Note to be delivered under and governed by the Indenture attached as Exhibit A to the Indenture; (iv) the form of Indenture Subordination Agreement dated effective as of _______________, 2013 by and between AgStar Financial Services, PCA and U.S. Bank National Association; and (v) all other information incorporated by reference into the Disclosure Statement relating to the Company, its business, or the Company’s offering of its 7.25% Secured Subordinated Notes due 2018 (the “Notes”) pursuant to the terms 

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	HERON LAKE BIOENERGY, LLC
	JULY 31, 2013

PRIVATE PLACEMENT
SUBSCRIPTION AGREEMENT 

and conditions of the Disclosure Statement (the “Notes Offering”), as supplemented in accordance with the Subscription Supplement Agreement referenced herein.  Subscriber acknowledges and understands that the Company will amend the Notes Offering and require subscribers to the Notes to confirm their subscription in accordance with the Subscription Supplement Agreement of even date herewith by and among Subscriber, the Company, and Granite Falls Energy, LLC (“Subscription Supplement Agreement”).

b.    Access to Information.  Subscriber represents that it or its representatives has been given access to full and complete information regarding the Company and has had an opportunity to obtain, and has received, any and all additional information deemed necessary by Subscriber in order to form a decision regarding an investment in the Company, and Subscriber has utilized such access to Subscriber’s satisfaction.  As a result, Subscriber believes it has sufficient knowledge about the business, management and financial affairs of the Company, the Company’s ethanol plant and subsidiaries and the operations thereof, the planned used of proceeds of this subscription, the terms and conditions of this Subscription Agreement, the Notes Offering described in the Disclosure Statement, the planned amendment and confirmation procedures with respect to the Notes Offering, the Articles and Member Control Agreement, the terms and conditions of the purchase of Units contemplated hereby, and any other relevant matters, to make an informed investment decision regarding an investment in the Company and the purchase of Units contemplated hereby.
.
c.    High Degree of Risk.  Subscriber realizes that an investment in the Units involves a high degree of risk, including, but not limited to, the risks of receiving no return on the investment and of losing Subscriber's entire investment in the Company.

d.    Ability to Bear the Risk.  Subscriber is able to bear the economic risk of investment in the Units, including the total loss of such investment.

e.    No Market for Units; Restrictions on Transfer.  Subscriber realizes that (i) there are substantial restrictions on the transfer of the Units, both under the Securities Act and State Laws, as well as under the Articles and the Member Control Agreement; (ii) there is not currently, and it is unlikely that in the future there will exist, a public market for the Units; and (iii) accordingly, for the above and other reasons, Subscriber may not be able to liquidate an investment in the Units for an indefinite period.  Subscriber realizes that the Units have not been registered for sale under the Securities Act of 1933, as amended (the “Securities Act”) or applicable state securities laws (the “State Laws”).  Subscriber acknowledges and agrees that the Units may be sold only pursuant to registration under the Securities Act and State Laws, or an opinion of counsel acceptable to the Company that such registration is not required, and in accordance with the Articles and the Member Control Agreement.  

f.    Suitability.  Subscriber believes that the investment in the Units is suitable for the undersigned based upon Subscriber's investment objectives and financial needs, and Subscriber has adequate means for providing for his, her or its current financial needs and personal contingencies and has no need for liquidity of investment with respect to the Units.  Subscriber has such knowledge and experience in financial and business matters that he, she or it is capable of evaluating the merits and risks of an investment in the Units or Subscriber has obtained, to the extent Subscriber deems necessary, his, her or its own professional advice with respect to the risks inherent in the investment in the Units, and the suitability of the investment in the Units in light of Subscriber's financial condition and investment needs.

g.    Investment Intent.  Subscriber has been advised that the Units are not being registered under the Securities Act or the relevant State Laws but are being offered and sold pursuant to exemptions from such laws and that the Company's reliance upon such exemptions is predicated in part on Subscriber's representations to it as contained herein.  Subscriber represents and warrants that the Units are being 

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	HERON LAKE BIOENERGY, LLC
	JULY 31, 2013

PRIVATE PLACEMENT
SUBSCRIPTION AGREEMENT 

purchased for Subscriber's own account and for Subscriber's investment and without the intention of reselling or redistributing the same, that Subscriber has made no agreement with others regarding any of the Units and that Subscriber's financial condition is such that it is not likely that it will be necessary to dispose of any of the Units in the foreseeable future.  Subscriber is aware that, in the view of the Securities and Exchange Commission, a purchase of the Units with an intent to resell by reason of any foreseeable specific contingency or anticipated change in market values, or any change in the condition of the Company, or in connection with a contemplated liquidation or settlement of any loan obtained for the acquisition of the Units and for which the Units were pledged as security, would represent an intent inconsistent with the representations set forth above.  Subscriber further represents and agrees that if, contrary to the foregoing stated intentions, Subscriber should later desire to dispose of or transfer any of the Units in any manner, he, she or it shall not do so without first obtaining the consent of the Company as required by the Company’s Articles and the Member Control Agreement and (i) the opinion of counsel satisfactory to the Company that such proposed disposition or transfer lawfully may be made without the registration of the Units pursuant to the Securities Act and applicable State Laws, or (ii) such registration (it being expressly understood that the Company shall not have any obligation to register such Units for such purpose).    

h.    Brokers or Finders.  Subscriber has not taken any action that will cause the Company to incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Subscription Agreement. 

i.    Tax Liability.  Subscriber has reviewed with Subscriber's own tax advisors the tax consequences of this investment and the transactions contemplated by this Subscription Agreement, and has and will rely solely on such advisors and not on any statements or representations of the Company or any of its agents.  Subscriber understands that Subscriber (and not the Company) shall be responsible for Subscriber's own tax liability that may arise as a result of this investment or the transactions contemplated by this Subscription Agreement.

j.    Residency.  Subscriber specifically represents and warrants to the Company that Subscriber is a resident of the State of                Minnesota                 (please complete) and is not a resident of any other State.  

Please check one indicating the basis for Subscriber’s residency:

	
		
	 
	Subscriber is an individual that has, at the time of the offer and sale to him or her, his or her principal residence in Minnesota.

	 X
	Subscriber is a corporation, partnership, trust or other form of business organization that has, at the time of the offer and sale to it, its principal office within Minnesota.

	 
	Subscriber is a corporation, partnership, trust or other form of business organization that is organized for the specific purpose of acquiring Units and all of the beneficial owners of that organization are residents of the State of Minnesota.

STOP:  Subscriber must be a resident of the State of Minnesota in order to be eligible to subscribe for Units.  If Subscriber is not a resident of Minnesota or is a resident of another State, Subscriber may not subscribe for Units.

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	HERON LAKE BIOENERGY, LLC
	JULY 31, 2013

PRIVATE PLACEMENT
SUBSCRIPTION AGREEMENT 

3.    Accredited Status.  
    
SECTION 3 IS REQUIRED IN CONNECTION WITH THE EXEMPTIONS FROM THE SECURITIES ACT AND STATE LAWS BEING RELIED ON BY THE COMPANY WITH RESPECT TO THE OFFER AND SALE OF THE UNITS.  SUBJECT TO SECURITIES LAWS REQUIREMENTS, ALL FINANCIAL INFORMATION IN SECTION 3 WILL BE KEPT CONFIDENTIAL, AND WILL BE REVIEWED ONLY BY THE COMPANY AND ITS COUNSEL, EXCEPT AS DISCLOSURE MAY BE REQUIRED OR COMPELLED UNDER APPLICABLE SECURITIES LAWS.  The undersigned agrees to furnish any additional information that the Company or its counsel deems reasonably necessary in order to verify the responses set forth below.

Subscriber represents and warrants as follows (EACH SUBSCRIBER MUST COMPLETE. PLEASE CHECK ALL THAT APPLY – YOU MUST BE AN ACCREDITED INVESTOR TO PURCHASE THE NOTE):

INDIVIDUALS

		
	______
	(a)    Subscriber (hereinafter in this Section 3, “the undersigned”) is an individual with a net worth, or a joint net worth together with his or her spouse, in excess of $1,000,000.  (In calculating net worth, the persons primary residence shall not be included as an asset, and indebtedness that is secured by the person’s primary residence, up to the estimated fair market value of the primary residence at the time of the sale of the securities, shall not be included as a liability, except that if the amount of such indebtedness outstanding at the time of sale of securities exceeds the amount outstanding 60 days before such time, other than as a result of acquisition of the primary residence, the amount of such excess shall be included as a liability.  Indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the primary residence at the time of the sale of securities shall be included as a liability.  You may include equity in personal property and real estate, excluding your primary residence, cash, short-term investments, stock and securities.  Equity in personal property and real estate, excluding your primary residence, should be based on the fair market value of such property minus debt secured by such property.)

		
	______
	(b)    The undersigned is an individual that had an individual income in excess of $200,000 in each of the prior two years and reasonably expects an income in excess of $200,000 in the current year.

		
	______
	(c)    The undersigned is an individual that had with his/her spouse joint income in excess of $300,000 in each of the prior two years and reasonably expects joint income in excess of $300,000 in the current year.  

		
	______ 
	(d)    The undersigned is a director or executive officer or general partner (or its equivalent) of the Company.

ENTITIES

		
	_____
	(e)    The undersigned, if other than an individual, is an entity all of whose equity owners meet one of the tests set forth in (a) through (d) above.  (If relying on this category alone, each equity owner must complete a separate copy of this Subscription Agreement.)

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	HERON LAKE BIOENERGY, LLC
	JULY 31, 2013

PRIVATE PLACEMENT
SUBSCRIPTION AGREEMENT 

		
	   x      
	(f)    The undersigned is an entity, and is an "Accredited Investor" as defined in Rule 501(a) of Regulation D under the Securities Act.  This representation is based on the following (check one or more, as applicable):

		
	_____
	(i)    The undersigned (or, in the case of a trust, the undersigned trustee) is a bank or savings and loan association as defined in Sections 3(a)(2) and 3(a)(5)(A), respectively, of the Securities Act acting either in its individual or fiduciary capacity.

		
	_____
	(ii)    The undersigned is an insurance company as defined in Section 2(13) of the Securities Act.

		
	_____
	(iii)    The undersigned is an investment company registered under the Investment Company Act of 1940 or a business development Company as defined in Section 2(a)(48) of that Act.

		
	_____
	(iv)    The undersigned is a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958.

		
	_____
	(v)    The undersigned is an employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974 and either (check one or more, as applicable):

		
	_____
	(aa)    the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance Company, or registered investment adviser; or

		
	_____
	(bb)    the employee benefit plan has total assets in excess of $5,000,000; or

		
	_____
	(cc)    the plan is a self‐directed plan with investment decisions made solely by persons who are "Accredited Investors" as defined under the Securities Act.

		
	_____
	(vi)    The undersigned is a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940.

		
	    x    
	(vii)    The undersigned has total assets in excess of $5,000,000, was not formed for the specific purpose of acquiring securities of the Company and is one or more of the following (check one or more, as appropriate):

		
	_____
	(aa)    an organization described in Section 501(c)(3) of the Internal Revenue Code; or

		
	   x     
	(bb)    a corporation or limited liability company; or

		
	_____
	(cc)    a Massachusetts or similar business trust; or

		
	_____
	(dd)    a partnership.

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	HERON LAKE BIOENERGY, LLC
	JULY 31, 2013

PRIVATE PLACEMENT
SUBSCRIPTION AGREEMENT 

		
	_____
	(viii)    The undersigned is a trust with total assets exceeding $5,000,000, which was not formed for the specific purpose of acquiring securities of the Company and whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the investment in the Units.  

4.    Entities.  

If Subscriber is an entity, the individual signing on behalf of such entity and the entity jointly and severally agree and certify that:

a.    if entity is accredited solely by reason of the category described in Section 3(f)(vii) or (viii) above, then the undersigned entity was not organized for the specific purpose of acquiring the Units; and

b.    this Subscription Agreement has been duly authorized by all necessary action on the part of the undersigned entity, has been duly executed by an authorized officer or representative of the undersigned entity, and each is a legal, valid, and binding obligation of the undersigned entity enforceable in accordance with its terms.
5.    Relationship to Brokerage Firms.  

(Please answer the following questions by checking the appropriate response.)

a.    _____YES      x    NO:  Are you a director, officer, partner, branch manager, registered representative, employee, shareholder of, or similarly related to or employed by a brokerage firm?  

b.    _____YES     x    NO:  Is your spouse, father, mother, father‐in‐law, mother‐in‐law, or any of your brothers, sisters, brothers‐in‐law, sisters‐in‐law or children, or any relative which you support, a director, officer, partner, branch manager, registered representative, employee, shareholder of, or similarly related to or engaged by, a brokerage firm?  

c.    _____YES    x   NO:  Does Subscriber own voting securities of any brokerage firm?  

d.    _____YES   x  NO:  If the undersigned is an entity, is any director, officer, partner or 5% owner of the undersigned also a director, officer, partner, branch manager, registered representative, employee, shareholder of, or similarly related to or employed by, a brokerage firm?  

e.    If the answer to any of the above items is "YES", please supply details below:  ________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
		
	6.
	Securities Law Exemptions. 

Subscriber acknowledges that the offer and sale of the Units has not been registered under the Securities Act, or any state securities laws and that the Company will offer and sell the Units and the Units will be issued to Subscriber in reliance on exemptions from the registration requirements of the Securities Act and exemptions under applicable state securities laws and in reliance on the representations, warranties and agreements made by Subscriber herein.  Without limiting the foregoing, the Units were offered and sold 

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	HERON LAKE BIOENERGY, LLC
	JULY 31, 2013

PRIVATE PLACEMENT
SUBSCRIPTION AGREEMENT 

in reliance on exemptions from federal and state securities laws including without limitation section 4(2) of the Securities Act covering nonpublic offers and sales and section 3(a)(11) and Rule 147 of the Securities Act covering intrastate offers and sales of securities.  Accordingly, Subscriber agrees not to sell, pledge, distribute, offer for sale, transfer or otherwise dispose of the Units in the absence of: (i) an effective registration statement under the Securities Act as to the Units and registration or qualification of the Units under any applicable federal or state securities laws then in effect; or (ii) an opinion of counsel, satisfactory to the Company, that such registration and qualification are not required.  Additionally, the Units may be sold or transferred only to persons resident of the State of Minnesota during the period in which the Notes are being offered and sold by the Company and for a period of nine months from the date of last sale by the Company of such securities.     
7.    Restrictive Legend.  

In addition to the restrictions to transfer of the Units contained in the Articles and Member Control Agreement, and any corresponding restrictive legends required thereunder, Subscriber also agrees that the Company shall place a restrictive legend on any statement of interest prepared by the Company with respect to the Units containing substantially the following language:

The securities represented by this Statement of Interest have not been registered under the Securities Act of 1933, as amended (the “Act”) or under applicable state securities laws and are also subject to a Subscription Agreement.  The securities may not be sold, transferred or pledged in the absence of such registration, unless pursuant to an exemption from the registration requirements of the Act and applicable state securities laws.  The Company reserves the right to require an opinion of counsel satisfactory to it before effecting any transfer of the securities.  Without limiting the foregoing, the Units were offered and sold in reliance on section 4(2) of the Act and section 3(a)(11) and Rule 147 of the Act covering intrastate offers and sales of securities.  Accordingly, the Units may be sold or transferred only to persons resident of the State of Minnesota during the period in which the Notes are being offered and sold by the Company and for a period of nine months from the date of last sale by the Company of such securities.          
8.    Miscellaneous.

a.    Survival of Representations and Warranties; Indemnification.  Subscriber understands the meaning and legal consequences of the agreements, representations and warranties contained herein, agrees that such agreements, representations and warranties shall survive and remain in full force and effect after the execution hereof and payment for the Units, and further agrees to indemnify and hold harmless the Company and each current and future employee, agent and member of the Company from and against any and all loss, damage or liability due to, or arising out of, a breach of any agreement, representation or warranty of the undersigned contained herein.  
b.    No Assignment or Revocation; Binding Effect.  Neither this Subscription Agreement, nor any interest herein, shall be assignable by Subscriber without prior written consent of the Company.  Subscriber hereby acknowledges and agrees that Subscriber is not entitled to cancel, terminate or revoke this Subscription Agreement and that it shall survive the death, incapacity, dissolution or bankruptcy of Subscriber.  The provisions of this Subscription Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective heirs, legal representatives, successors and assigns.
c.    Choice of Law.  This Subscription Agreement shall be construed and interpreted in accordance with Minnesota law, without regard to its choice of law or conflicts of law provisions.

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	HERON LAKE BIOENERGY, LLC
	JULY 31, 2013

PRIVATE PLACEMENT
SUBSCRIPTION AGREEMENT 

9.    Representations and Warranties of the Company.  
In consideration of Subscriber’s agreement to purchase the Units, the Company represents and warrants to Subscriber as follows:
a.    Existence.  The Company is a duly organized and validly existing limited liability company under the laws of the State of Minnesota.  
b.    Good Standing.  The Company is in good standing under the laws of the State of Minnesota and there are no proceedings or actions pending to limit or impair any of its powers, rights, privileges, or to dissolve it.  
c.    Due Authorization and Approval.  The execution, delivery and performance of this Subscription Agreement and the consummation of the transactions contemplated hereby have been duly authorized by proper corporate action of the Company and do not contravene the Articles or Member Control Agreement or contractual restriction binding on or affecting the Company.
d.    Class B Units. Neither the Company nor its Board of Governors has increased the minimum ownership requirements of or placed other membership restrictions on the holders of Class B Units.  The Class B Units issued pursuant to this Subscription Agreement are identical to the Company’s Class A Units with respect to all rights and privileges.         
e.    Units.  Upon receipt of full payment for the Units, the Units shall be duly authorized, fully-paid, validly issued and non-assessable Units of the Company.  
10.    Additional Agreements.  
a.    Subscription Supplement Agreement; Voting Agreement to Waive Purchase Option.  As a material part of the consideration for each party to enter into and accept this Subscription Agreement, the parties acknowledge that they have entered into the Subscription Supplement Agreement and the Voting Agreement to Waive Purchase Option contemporaneously with this Subscription Agreement, and all respective representations, warranties, agreements and covenants of the parties thereunder shall be in addition to, and not limited by, superseded, or replaced by, the representations, warranties, agreements and covenants of the parties hereunder.  

       * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * 

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	HERON LAKE BIOENERGY, LLC
	JULY 31, 2013

PRIVATE PLACEMENT
SUBSCRIPTION AGREEMENT 

SIGNATURE

/s/ Ron Fagen                                                
		
	Subscriber (Signature)
	Subscriber (Signature, if more than one investor)

Project Viking, LLC                                            
		
	Print Name of Subscriber
	Print Name of Subscriber (If more than one investor)

/s/ Ron Fagen, President & Managing Member
Name and Title of Signatory (for entities)

Address:

501 W. Highway 212                

P.O. Box 159                    

Granite Falls, MN  56241            

NOTE:   Please be certain to complete the Subscriber Information Page attached hereto and, if Subscriber is an entity, the attached Certificate of Signatory.

ACCEPTANCE OF SUBSCRIPTION AND AGREEMENT TO TERMS

The Company hereby accepts the subscription evidenced by this Subscription Agreement including Investment Representations, effective as of July 31, 2013.    

HERON LAKE BIOENERGY, LLC  

By: /s/ Robert Ferguson                     
                         Its:  CEO                                                                
                

10

EXHIBIT 10.2

SUBSCRIBER INFORMATION

                        

Project Viking LLC                                            
 (Please print name(s) in which the Note is to be issued)

25-1922419                        ________________________________
Taxpayer I.D. No.                    Taxpayer I.D. No.
(If more than one investor)

501 W. Hwy 212 – P.O. Box 159                                
Address

City: Granite Falls          State: MN          Zip Code:56241            

Telephone Number:  (320) 564-3324                                

Name of Authorized Representative (if other than individual): Ron or Diane Fagen            

Form of Ownership:     (check one)

__________ Individual Ownership             Tenants in Common

__________   Joint Tenants (JTWROS)             Corporation

       x            Limited Liability Company             Trust (Signature and title pages of Trust
   Agreement and all amendments must 
   be enclosed)
   Trustee Name:                 
   Trust Date:                 

 Other:  Provide information below.
                                                
                                                
                                                

 

		
	HERON LAKE BIOENERGY, LLC
	JULY 31, 2013

PRIVATE PLACEMENT
SUBSCRIPTION AGREEMENT 

CERTIFICATE OF SIGNATORY

(To be completed if Units are being subscribed for by an Entity)

I, Ron Fagen                , am the President & Managing Member      of Project Viking, LLC                                     (the "Entity").
I certify that I am empowered and duly authorized by the Entity to execute and carry out the terms of this Subscription Agreement and to purchase and hold the Units pursuant to the terms of this Subscription Agreement and the Company’s Articles and the Member Control Agreement, and to act on behalf of the Entity with respect to any actions or consents of the Entity required thereunder or this Subscription Agreement.  I further certify that this Subscription Agreement and such actions or consents been duly and validly executed on behalf of the Entity and each constitutes a legal and binding obligation of the Entity.

IN WITNESS WHEREOF, I have set my hand hereto effective July 31            , 2013.

/s/ Roland J. Fagen                    
(Signature)

President & Managing Member            
(Title)

Roland J. Fagen                    
(Please Print Name)

12Exhibit10.3-SubscriptionSupplementAgreement

EXHIBIT 10.3

SUBSCRIPTION SUPPLEMENT AGREEMENT
This Subscription Supplement Agreement (this “Agreement”) is made and entered into as of July 31, 2013 (the “Effective Date”), by and among Heron Lake BioEnergy, LLC (the “Company”), Granite Falls Energy, LLC, a Minnesota limited liability company (“GFE”) and Project Viking, L.L.C., a Minnesota limited liability company (“Project Viking”) (each of the Company, GFE and Project Viking, a “Party” to this Agreement, and collectively, the “Parties”).
RECITALS
WHEREAS, on the Effective Date, Project Viking subscribed for 8,075,000 Class A capital units and 15,000,000 Class B capital units of the Company (collectively, the “Purchased Units”), at a purchase price of $0.30 per capital unit, upon the terms and conditions set forth in a Subscription Agreement of even date herewith (the “Viking Subscription Agreement”), for a total purchase price for the Purchased Units of $6,922,500.00; 
WHEREAS, immediately following execution and delivery of the Viking Subscription Agreement to the Company, acceptance by the Company, and delivery by wire transfer of the total purchase price for the Units by Project Viking, GFE acquired and fully-paid for 100% of the membership interests of Project Viking (including all governance rights and financial rights) from Roland J. Fagen and Diane K. Fagen pursuant to a Membership Interest Purchase Agreement of even date herewith, said acquisition effective on the Effective Date;  
WHEREAS, to supplement the Viking Subscription Agreement, the Parties desire to make certain representations and warranties to one another as provided in this Agreement; 
WHEREAS, the Company, GFE and Project Viking have reached agreement with respect to the appointment of governors to the Company’s Board of Governors (the “Board”), the voting of any Class A Units or Class B Units including the Purchase Units (collectively, the “Units”) held by Project Viking on certain matters, and certain other governance matters, as provided in this Agreement; 
WHEREAS, the Company is also offering a maximum of $12 million in aggregate principal amount of promissory notes (the “Offering”) titled “7.25% Secured Subordinated Notes due 2018” (the “Notes”) pursuant to the terms of that certain Confidential Disclosure Statement dated June 11, 2013, as supplemented on June 21, 2013 (the “Disclosure Statement”); 
NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto, intending to be legally bound hereby, agree as follows:
1.Governance Agreements.  The Company, Project Viking, GFE each agree as follows:

1

EXHIBIT 10.3

a.    The Company acknowledges and agrees that following the issuance of the Purchased Units to Project Viking on the Effective Date, Project Viking owns ***24,080,949*** Class A Units of the Company and ***15,000,000*** Class B Units of the Company, for a total of ***39,080,949*** Units of the Company, which number of Units held by Project Viking constitutes a majority of the Units outstanding as of the Effective Date.  
b.    As of the close of business on the Effective Date, under Section 5.3(a)(iv) of the Member Control Agreement of the Company as amended through August 30, 2011 (the “Member Control Agreement”), a copy of which was attached to the Disclosure Statement as Appendix B, Project Viking is entitled to appoint five (5) governors to the Board.  
c.    One of the five (5) elected governors currently serving on the Board of Governors of the Company shall resign from the Board, effective as of the close of business on the Effective Date.  The written resignation shall be made in writing and shall be delivered to the acting President of the Board on August 1, 2013, and said resignation shall not require acceptance of resignation to make it effective.  The elected governor who resigns shall serve as an alternate to the remaining four (4) elected governors.    
d.    Project Viking hereby provides written notice to the Board and the Company that Kenton Johnson and Steve Core are removed from the Board, effective as of close of business on the Effective Date.  Project Viking hereby appoints the following five (5) governors to the Board pursuant to Section 5.3(a)(iv) of the Member Control Agreement, effective as of the close of business on the Effective Date:  Paul Enstad, Rodney Wilkison, Dean Buesing, Marten Goulet, and Shannon Johnson.  Project Viking hereby appoints Leslie Bergquist and David Thompson to serve as alternates to the five (5) Project Viking appointed governors.  
e.    Alternates will receive notice of all Board meetings and all information provided the Board.  Alternates shall be entitled to attend all meeting of the Board.  Alternates shall not be entitled to vote at Board meetings, provided that alternates may participate in Board meetings, and provided further that alternates shall serve as replacement governors and shall be entitled to vote at any Board meeting at which the appointed governor or elected governor for which the alternate is serving as alternate is absent.    
f.    Project Viking shall cause each governor it has a right to appoint under Section 5.3(a)(iv) to vote in favor of the Specified Amendments and in favor of such matters as are necessary to call a meeting of the members as soon as practicable following the Effective Date to consider the Specified Amendments and provide a Board recommendation to vote in favor of the Specified Amendments.  The term “Specified Amendments” shall mean (i) an amendment to Section 5.1(c) of the Member Control Agreement to add those actions identified in Section 5.1(d)(i)-(iv) of the Member Control Agreement to the actions, agreements, instruments or items specified in Section 5.1(c) that require the affirmative vote of at least two-thirds of the voting power of the 

2

EXHIBIT 10.3

governors in office, (ii) an amendment to Section 5.1(k) of the Member Control Agreement to add provisions consistent with this Agreement relating to alternates acting in the place and stead of absentee governors, and (iii) and amendment to Section 6.2(a) to delete the last sentence thereof.  
g.    At any meeting, and at every adjournment or postponement thereof, with respect to outstanding Units owned beneficially or of record by Project Viking, Project Viking shall: (i) appear at such meeting or otherwise cause such Units to be counted as present thereat for purposes of establishing a quorum; (ii) vote or cause to be voted such Units in favor of the Specified Amendments and any action required in furtherance thereof; and (iii) vote or cause to be voted, or execute consents in respect of, such Units against any proposal, action or transaction presented to the members of the Company (regardless of any recommendation of the Board) or in respect of which vote or consent of Project Viking is requested or sought (A) that could reasonably be expected to prevent or materially impede or delay the effectiveness of the Specified Amendments (including any proposal to amend Section 5.1(c) of the Member Control Agreement in a manner other than the Specified Amendments), (B) to change in any manner the voting rights of the Units or the appointment rights of Members or their Affiliates, or (C) to alter or amend in any manner Section 5.6 or Section 5.8 with respect to contracts or transactions between the Company and Governors or their Affiliates. 
h.    Until the approval of the Specified Amendments by members, Project Viking shall cause each governor it has a right to appoint under Section 5.3(a)(iv) to vote in favor of any action identified in Section 5.1(d)(i)-(iv) of the Member Control Agreement only if at least one elected governor then serving on the Board also votes in favor of such action.
i.    Project Viking hereby covenants and agrees that, except for actions taken in furtherance of this Agreement, Project Viking (i) has not entered, and shall not enter at any time while this Agreement remains in effect, into any voting agreement or voting trust with respect to the Units owned beneficially or of record by Project Viking or its Affiliates; and (ii) has not granted, and shall not grant at any time while this Agreement remains in effect, a proxy, consent or power of attorney with respect to the Units owned beneficially or of record by Project Viking or its Affiliates that is inconsistent with Project Viking or its appoint governors obligations under this Agreement.  During the term of this Agreement, Project Viking shall not take any action that would in any way restrict, limit or interfere with the performance of Project Viking’s obligations hereunder or the effectiveness of the Specified Amendments as contemplated hereby on a timely basis.  
j.    GFE shall cause Project Viking to act in compliance with its covenants and obligations under this Agreement and the Viking Subscription Agreement.  
2.    Company Representations and Warranties. The Company represents and warrants to Project Viking that:

3

EXHIBIT 10.3

a.    The Company is authorized to issue 80,000,000 capital units, of which 65,000,000 capital units are designated as Class A Units and 15,000,000 capital units are designated Class B Units.  Immediately prior to the Effective Date, 38,622,107 Class A Units are issued and outstanding and no Class B Units are issued and outstanding.  Following completion of the Offering and the issuance of the Purchased Units to Project Viking pursuant to the Viking Subscription Agreement, and assuming Project Viking elects to convert its Interim Subordinated Note in the amount of $102,000.00 to capital units, Project Viking shall own, on a fully diluted basis, a majority of the issued and outstanding capital units of the Company.     
b.    The Company has placed no increased minimum ownership requirements or other membership restrictions on the holders of Class B Units. 
c.    Other than the Viking Subscription Agreement, there are no outstanding subscriptions, options, warrants, calls, contracts, demands, commitments, convertible securities or other agreements or arrangements of any character or nature whatever under which the Company is obligated to issue any securities of any kind representing an ownership interest in the Company, except for subscriptions for approximately $6,650,000 in principal amount of Notes (“Member and Non-Member Subscriptions”) currently held in escrow, $1,407,000 in principal amount of Interim Subordinated Notes (as defined in the Disclosure Statement) to be exchanged for an equal principal amount of Notes, and the Units issuable upon conversion of the Notes.  With respect to Member and Non-Member Subscriptions currently held in escrow or subscriptions for Notes subsequently received by the Company, the Company shall accept no more than $3,670,500 of  such subscriptions.  For the sake of clarity, such maximum amount does not include the principal amount of the Interim Subordinated Notes or any exchange for Notes therefor.    
d.    Within ten (10) days following the Effective Date, the Company will initiate a confirmation/re-subscription process with all Member and Non-Member Subscriptions and holders of the Interim Subordinated Notes by: (i) providing such persons and the other members of the Company a supplement to the Disclosure Statement that describes (1) the change of ownership of Project Viking and its material terms, (2) the Viking Subscription Agreement, (3) the material terms of this Agreement including exhibits, (4) updated AgStar information, and (5) such other material information determined by the Company; and (ii) allowing such persons to (1) confirm / re-subscribe their subscription or Interim Subordinated Notes for Notes pursuant to the terms of the Offering under the Disclosure Statement, as supplemented or amended, or (2) elect to convert the principal amount of their subscription or Interim Subordinated Notes into a subscription for capital units, at the rate of $0.30 per unit.  The subscription payments of such persons (other than the holders of the Interim Subordinated Notes, who shall not have the right to rescind their obligation to exchange the Interim Subordinated Notes for Notes under the Offering or capital units) who do not affirmatively confirm / re-subscribe their subscription by the end of the confirmation / re-subscription period (which shall be 

4

EXHIBIT 10.3

no later than August 31) shall be returned promptly to the subscriber from escrow without interest or deduction.       
e.    At the end of the confirmation / re-subscription period, the Company will accept all confirmed / re-subscribed subscriptions in the Offering for Notes or capital units in the original order in which the subscription was received, on a first-come, first-served basis, to purchase $3,670,500 in principal amount of Notes or capital units, such that the Company shall issue a maximum of $5,077,500 in principal amount of Notes or capital units (at $0.30 per unit) in the Offering, including the Notes exchanged for the $1,407,00 in Interim Subordinated Notes, but excluding the Purchased Units issued to Project Viking pursuant to the Viking Subscription Agreement.  If the principal amount of confirmed / re-subscribed subscriptions of Member and Non-Member Subscriptions is less than $3,670,500, the Company shall continue to offer Notes pursuant to the terms of the Offering in the Disclosure Statement (as supplemented or amended).  The Company shall not issue more than $5,077,500 in principal amount of Notes or capital units (at $0.30 per unit) in the Offering, including the Notes exchanged for the $1,407,000 in Interim Subordinated Notes.
f.    Neither the offer nor the issuance or sale of the Purchased Units or the Notes constitutes an event, under any anti-dilution provisions of any securities issued or issuable by the Company or any agreements with respect to the issuance of securities by the Company, which will either increase the number of Units issuable pursuant to such provisions or decrease the consideration per Units to be received by the Company pursuant to such provisions.  No holder of any security of the Company is entitled to any preemptive or similar rights to purchase any securities of the Company, except as provided in the Notes.
g.    The Company has no outstanding or contingent obligations to repurchase or redeem any of its securities from holders thereof except for the exchange of Interim Subordinated Notes for Notes.  The Company is not a party or subject to any agreement or understanding, and to the knowledge of the Company, there is no agreement or understanding, that effects or relates to transfers, voting or the giving of written consents with respect to any security of the Company, or by any member of the Board, except for the Member Control Agreement and this Agreement.
h.    All corporate action necessary to the issuance and delivery of the Purchased Units to Project Viking has been taken by the Company or will be taken by the Company on or prior to the Effective Date. When (i) the terms of the Notes have been established in accordance with the Indenture in the form attached as Appendix E to the Disclosure Statement, (ii) the Indenture has been validly executed and delivered by the Company and the trustee thereunder and (iii) the Notes have been executed, issued, delivered and authenticated in accordance with the terms of the Indenture and the applicable subscription agreement against the receipt of requisite consideration therefor provided for therein, the Notes will constitute legal, valid and binding obligations of the Company, except as enforcement thereof may be limited by applicable bankruptcy, 

5

EXHIBIT 10.3

insolvency, reorganization, moratorium, fraudulent conveyance or similar laws generally affecting the rights of creditors and subject to general equity principles.  With respect to the Units issuable upon conversion of the Notes, when the Units have been issued and delivered in accordance with the terms of the Note, such Units will be validly issued, fully paid and non-assessable.   
i.    The execution, delivery and performance of this Agreement has been duly authorized and approved by proper corporate action of the Company, and does not contravene the Articles of Organization or Member Control Agreement of the Company or any law or contractual restriction binding on or affecting the Company.
j.    As of the date hereof, the Company does not have any liabilities, obligations or commitments, except for liabilities, obligations or commitments which (i) are described in, set forth or referenced in the periodic reports and schedules filed by the Company with the SEC (including all exhibits and financial statements and financial statement schedules attached thereto or included therewith) or the unaudited financial statements that are referred to or referenced in Section 2.a. of the Viking Subscription Agreement, (ii) fully-covered by insurance, except for reasonable deductibles or self-insured retention levels, (iii) incurred in the ordinary course of business consistent with past practices, (iv) are described in, set forth or referenced in the Disclosure Statement, as supplemented or amended, including all appendices, (v) arise under this Agreement or the Viking Subscription Agreement, (vi) individually or in the aggregate would not have a material adverse effect on the business, property, operations or financial condition of the Company, or (vii) which have otherwise been disclosed to GFE or its representatives.
k.    As of the date hereof, the Company is in compliance in all material respects with all applicable laws the violation of which would have a material adverse effect on the Company and its business as currently conducted.  As of the date hereof, the Company has all material licenses and permits required by law or otherwise necessary for the proper operation of its business as currently conducted, and all of such licenses and permits are in full force and effect.
l.    Since the date of the Disclosure Statement, the Company’s ethanol plant has operated in the ordinary course of business consistent with past practice and its nameplate capacity, ordinary wear and tear excepted.     
m.    Notwithstanding anything herein or in the Viking Subscription Agreement to the contrary, except for the due authorization and approval representation and warranty made by the Company under Section 2.h. hereof, no warranty or representation is made regarding any shareholder or member claim asserting breach of fiduciary duty by the Board or its governors or violation of the Member Control Agreement or applicable law in connection with the Offering or the Viking Subscription Agreement or this Agreement or the absence thereof.              
3.    Representations of GFE and Project Viking.  

6

EXHIBIT 10.3

a.    GFE and Project Viking each represent and warrant to the Company that as of the Effective Date, GFE has acquired and fully-paid for 100% of the membership interests of Project Viking, GFE has sole voting and dispositive power over all of the Units and Interim Subordinated Notes held by Project Viking, with no limitations, qualification or restrictions on such rights imposed by Roland J. Fagen, Diane K. Fagen or any other person as a result of the sale and transfer to GFE from Roland J. Fagen and Diane K. Fagen of 100% of the membership interests in Project Viking.  
b.    In consideration of the Company’s offer to sell and sale and issuance of the Purchased Units to Project Viking, GFE hereby represents and warrants and covenants to the Company each of the representations, warranties and covenants set forth in Sections 2, 3, 5, 6, 7, 8 and 10 of the Viking Subscription Agreement, including without limitation that GFE has received and carefully read the Disclosure Statement and appendices thereto.    
c.    GFE represents and warrants to the Company that the execution, delivery and performance of this Agreement has been duly authorized and approved by proper corporate action of GFE, and does not contravene GFE’s organizational documents or any law or contractual restriction binding on or affecting GFE.  
d.    Project Viking represents and warrants to the Company that the execution, delivery and performance of the Viking Subscription Agreement and this Agreement has been duly authorized and approved by proper corporate action of Project Viking, and does not contravene Project Viking’s organizational documents or any law or contractual obligation or restriction binding on or affecting Project Viking.
4.    Management Agreement. GFE and the Company agree to execute and enter into the Management Services Agreement attached hereto as Exhibit A, effective as of the Effective Date.  
5.    Agrinatural Gas, LLC .  GFE, the Company, and Project Viking each agree to execute and deliver the Voting Agreement to Waive Purchase Option in the form attached hereto as Exhibit B.  
6.    Specific Performance. Each Party acknowledges and agrees that irreparable injury to the other Parties hereto would occur in the event any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached and that such injury may not be adequately compensable by the remedies available at law (including the payment of money damages).  It is accordingly agreed that each Party (the “Moving Party”) shall each be entitled to specific enforcement of, and injunctive relief to prevent any violation of, the terms hereof, without the requirement to post bond or other security, and no other Party hereto will take action, directly or indirectly, in opposition to the Moving Party seeking such relief on the grounds that any other remedy or relief is available at law or in equity.  Each of the Parties hereto irrevocably agrees that any legal action or proceeding with respect to this Agreement for specific performance or for recognition and enforcement of any judgment in respect of this Agreement shall be brought and determined exclusively in the state or federal court of Minnesota 

7

EXHIBIT 10.3

and any state or federal appellate court therefrom within the State of Minnesota or the Eighth Judicial Circuit.  Each of the Parties hereto hereby irrevocably submits, with regard to any such action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any such action in any court other than the aforesaid courts.  Each of the Parties hereto hereby irrevocably waives, and agrees not to assert in any such action or proceeding, (a) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason, (b) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any such legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) to the fullest extent permitted by applicable legal requirements, any claim that (i) the suit, action or proceeding in such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) such action may not be enforced in or by such courts.  This Section 6 is not the exclusive remedy for any violation of this Agreement.
7.    Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.  It is hereby stipulated and declared to be the intention of the Parties that the Parties would have executed the remaining terms, provisions, covenants and restrictions without including any of such which may be hereafter declared invalid, void or unenforceable.  In addition, the Parties agree to use their best efforts to agree upon and substitute a valid and enforceable term, provision, covenant or restriction for any of such that is held invalid, void or enforceable by a court of competent jurisdiction.
8.    Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Minnesota without reference to the conflict of laws principles thereof.  Notwithstanding any provision of the Member Control Agreement to the contrary, and except for actions brought under Section 6 of this Agreement, the Parties agree to resolve disputes arising out of or relating to this Agreement or the Viking Subscription Agreement pursuant to this Section 8.  If any dispute arises out of or relates to this Agreement or the Viking Subscription Agreement, the parties agree first to try in good faith to settle the dispute by mediation under the Commercial Mediation Rules of the American Arbitration Association, before resorting to arbitration. Thereafter, any remaining unresolved controversy or claim arising out of or relating to this Agreement or the Viking Subscription Agreement, or the performance or breach thereof, shall be settled by binding arbitration pursuant to the Commercial Arbitration Rules of the American Arbitration Association; PROVIDED, that this Section 8 shall not require use of the American Arbitration Association (only that such Rules as modified by this Section 8 shall be followed).  The arbitration shall be conducted in the State of Minnesota.  Any award rendered shall be final and conclusive upon the parties and a judgment thereon may be entered in any court having competent jurisdiction.  The cost and expense of the arbitrator and location costs shall be borne equally by the parties to the dispute. All other costs and expenses, including reasonable attorney's fees and expert's fees, of all parties incurred in any dispute which is 

8

EXHIBIT 10.3

determined and/or settled by arbitration pursuant to this Section 8 shall be borne by the party incurring such cost and expense.  
9.    Counterparts.  This Agreement may be executed in two or more counterparts, each of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the Parties and delivered to the other Parties (including by means of electronic delivery or facsimile).
10.    Entire Agreement; Amendment and Waiver; Successors and Assigns; Third Party Beneficiaries.  This Agreement contains the entire understanding of the Parties hereto with respect to its subject matter.  There are no restrictions, agreements, promises, representations, warranties, covenants or undertakings between the Parties other than those expressly set forth herein.  No modifications of this Agreement can be made except in writing signed by an authorized representative of each the Company, GFE and Project Viking.  No failure on the part of any Party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such Party preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law.  The terms and conditions of this Agreement shall be binding upon, inure to the benefit of, and be enforceable by the Parties hereto and their respective successors, heirs, executors, legal representatives, and permitted assigns.  No Party shall assign this Agreement or any rights or obligations hereunder without, with respect to Project Viking or GFE, the prior written consent of the Company, and with respect to the Company, the prior written consent of Project Viking and GFE.  This Agreement is solely for the benefit of the Parties hereto and is not enforceable by any other persons.

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized signatories of the Parties as of the date hereof.
HERON LAKE BIOENERGY, LLC  
By:  /s/ Robert Ferguson                  
Its:   CEO                    
Name:  Robert J. Ferguson            

GRANITE FALLS ENERGY, LLC 
By: /s/ Paul Enstad                
Its: Chairman                    
Name: Paul Enstad                

9

EXHIBIT 10.3

PROJECT VIKING, L.L.C.  
By: /s/ Paul Enstad                
Its:  President                    
Name:  Paul Enstad                

10

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