DEBT FACILITIES

Granite Falls Energy:

GFE has a credit facility with a lender. This is a revolving term loan facility in the amount of $18,000,000. However, the amount available for borrowing under this facility reduces by $2,000,000 semi-annually beginning September 1, 2014, with final payment due March 1, 2018.

The interest rate is based on the bank's One Month London Interbank Offered Rate (“LIBOR”) Index Rate, plus 3.05%. The outstanding balance on the revolving term loan on October 31, 2014 and October 31, 2013 was $0 and $2,513,674, respectively.

The credit facility requires GFE to comply with certain financial covenants. As of October 31, 2014 and 2013, GFE was in compliance with these financial covenants and expects to be in compliance throughout fiscal 2015.

The credit facility is secured by substantially all assets of the Company.

At October 31, 2014, GFE also had letters of credit totaling approximately $289,000 with the bank as part of a credit requirement of Northern Natural Gas.

Heron Lake BioEnergy:

Term Note Payable

On October 31, 2013, HLBE had a term loan with AgStar. HLBE was making equal monthly payments of principal and interest of approximately $223,000 on the term loan based on a 10-year amortization, provided the entire principal balance and accrued and unpaid interest on the term loan is due and payable in full on the maturity date of September 1, 2016. On July 30, 2014, using funds from the Credit Facility that HLBE executed with AgStar, HLBE repaid the entire outstanding balance of their credit facilities under the Sixth Amended and Restated Master Loan Agreement dated May 17, 2013 with AgStar.

Revolving Term Note

At October 31, 2013, HLBE had a three-year revolving term loan commitment in the amount of $18,500,000, under which AgStar agreed to make periodic advances to HLBE up to this original amount until September 1, 2016.

On July 30, 2014, HLBE entered into a new master loan agreement and related loan documents (the “Credit Facility”) with AgStar Financial Services, FCLA (“AgStar”). The Credit Facility provides the Company with a new comprehensive revolving term loan commitment in the amount of $28,000,000 (the “Term Revolving Loan”), under which AgStar agreed to make one or more advances to the Company for use by the Company to repay the Company's debt currently outstanding with AgStar, provide a loan financing to Agrinatural Gas, LLC, the Company's indirect subsidiary, provide working capital to the Company, and pay fees and expenses in connection with the Company's refinancing. Following the loan closing, the Company had approximately $7,500,000outstanding on the Term Revolving Loan.

Amounts borrowed by the Company under the Term Revolving Loan and repaid or prepaid may be re-borrowed at any time prior to the March 1, 2022 maturity date, provided that outstanding advances may not exceed the amount of the Term Revolving Loan Commitment. Under the terms of the Credit Facility, the Term Revolving Loan commitment is scheduled to decline by $3,500,000 annually, beginning on March 1, 2015 and each anniversary date thereafter. In the event any amount is outstanding on the Term Revolving Loan in excess of the new credit limit, the Company agreed to repay principal on the loan until they reach the new credit limit. Interest on the Term Revolving Loan accrues at a variable rate equal to 3.25% above the One-Month LIBOR Index rate. The interest rate is subject to weekly adjustment. The Company may elect to enter into a fixed interest rate on this loan at various times throughout the term of the loan as provided in the loan agreements. The Company also agreed to pay an unused commitment fee on the unused portion of the Term Revolving Loan commitment at the rate of 0.050% per annum. The Term Revolving Loan is subject to a prepayment fee for any prepayment on the Term Loan prior to July 1, 2016 due to refinancing. The Credit Facility contains customary financial and affirmative covenants and negative covenants.

In exchange for the Credit Facility, the Company entered into customary loan documents and certificates, including a Security Agreement granting AgStar a first lien security interest in all of the Company’s equipment and other assets; and a Real Estate Mortgage, Assignment of Rents and Profits and Fixture Financing Statement encumbering on a first lien basis all the Company’s real property and improvements, including the ethanol production facility located in Heron Lake, Minnesota; Guaranties from the Company’s wholly-owned subsidiaries Lakefield Farmers Elevator, LLC and HLBE Pipeline Company, LLC, under which the subsidiaries guaranteed full payment and performance of the Company’s obligations to AgStar.

As part of the Credit Facility closing, the Company entered into an Administrative Agency Agreement with CoBank, ACP (“CoBank”). CoBank purchased a participation interest in the AgStar loans and was appointed the administrative agent for the purpose of servicing the loans. As a result, CoBank will act as the agent for AgStar with respect to the Credit Facility. The Company agreed to pay CoBank an annual fee of $2,500 as the agent for Ag Star.

Note Payable on Pipeline Assets (Agrinatural)

HLBE had a note payable to a lending institution for the construction of the pipeline assets of Agrinatural. The note was initially due in December 2011, however, was subsequently converted in February 2012 to a term loan with a three year repayment period. During November 2013, the note payable was refinanced with the lending institution with additional borrowings of approximately $759,000 being made. Amounts outstanding on the term loan were to bear interest at 5.29%, payable monthly, with a maturity in December 2016. The term loan was secured by substantially all assets of Agrinatural. The note was paid off in full during July of 2014.

Subordinated Convertible Debt

On May 17, 2013, HLBE's Board of Governors loaned HLBE approximately $4,000,000 as part of the subordinated convertible debt offering. An additional $7,000,000 was raised as part of a subordinated convertible debt offering during September 2013. The convertible secured debt is subordinated to the AgStar debt. The notes bear interest at 7.25% and were due on October 1, 2018. Each note was convertible into Class A stock at a rate of $0.30 per Class A unit. At the issuance, each debt holder had the option to convert to Class A units. As a result, holders elected to convert $934,500 in September 2013 for 3,115,000 Class A units.

On May 2, 2014, the Company issued a notice that the Company intends to redeem all of the outstanding principal amount of the subordinated convertible notes on July 1, 2014. The announced redemption is pursuant to the Company's "optional redemption" right in the indenture governing the notes. The outstanding principal balance of $4,143,000, could be redeemed at a redemption price equal to 100% of the aggregate principal amount plus accrued and unpaid interest to interest to, but excluding, the redemption date. The Company's obligation to pay the redemption price on the redemption date was subject to the right of the holders of the notes to elect to convert the principal amount of their notes into capital units of the Company at a conversion rate of $0.30 per unit.

As of the close of business on June 20, 2014, the last day to elect conversion, note holders holding an aggregate principal amount of $3,936,000 of Notes elected to convert their Notes into units of the Company. On July 1, 2014, the Company issued 13,120,000 Class A units of the Company to the holders of the Notes electing conversion and redeemed the remaining $207,000 of the Notes at par value. In addition, on the same day, the Company paid accrued and unpaid interest through July 1, 2014 to all note holders, including those electing conversion, per the terms of the Notes and the Indenture. As a result of the conversion, the Company’s ownership percentage in HLBE decreased from 60.8% as of October 31, 2013 to 50.6% as of October 31, 2014.

Long-term debt consists of the following:



	October 31, 2014		October 31, 2013
GRANITE FALLS ENERGY:
Capital One Shuttlewagon Railcar Mover. This debt was paid in full January 2014.	$	—	$	382,918
Revolving Term Loan	—		2,513,674

HERON LAKE BIOENERGY:
Term note payable to lending institution (including premium of approximately $1,700,000)	—		18,317,800
Revolving term note payable to lending institution (2013 includes premium of approximately $283,000)	—		6,263,158
Assessment payable as part of water treatment agreement, due in semi-annual installments of $189,393 with interest at 6.55%, enforceable by statutory lien, with the final payment due in 2021. The Company made deposits for one years' worth of debt service payments of approximately $364,000 which is included with other assets that are held on deposit to be applied with the final payments of the assessment .	2,018,767		2,246,771
Assessment payable as part of water treatment agreement, due in semi-annual installments of $25,692 with interest at 0.50%, enforceable by statutory lien, with the final payment due in 2016.	102,074		152,698
Assessment payable as part of water supply agreement, due in monthly installments of $3,942 with interest at 8.73%, enforceable by statutory lien, with the final payment due in 2019.	172,072		205,209
Note payable to electrical company with monthly payments of $6,250 with a 1% maintenance fee due each October, due September 2017. The electrical company is a member of the Company.	218,750		293,750
Note payable to a lending institution for the construction of the pipeline assets with a maturity in December 2016. Interest is at 5.29% and the note is secured by substantially all assets of Agrinatural.	—		1,013,132
Note payable to noncontrolling interest member of Agrinatural. Interest rate is at One-Month LIBOR plus 4.0%, with an initial maturity date of October 2014, and then due on demand thereafter.	300,000		300,000
Equipment payable on corn oil separation equipment from a vendor. The Company pays approximately $40,000 per month conditioned upon revenue generated from the corn oil equipment. The monthly payment includes implicit interest of 5.57% until maturity in May 2015 and the note is secured by the equipment.	146,984		640,653
Subordinated Convertible Debt, see terms above.	—		4,143,000
Totals	2,958,647		36,472,763
Less amounts due within one year	846,235		3,490,808
Net long-term debt	$	2,112,412	$	32,981,955

Estimated maturities of long-term debt at October 31, 2014 are as follows:



2015	$	846,235
2016	418,011
2017	380,064
2018	332,182
2019	319,596
After 2019	662,559
Total long-term debt	$	2,958,647