EXHIBIT 10.6

 

SECOND AMENDED AND RESTATED GUARANTY

 

In consideration of and in order to induce AGSTAR FINANCIAL SERVICES, PCA, a
United States instrumentality, with its main banking house located in Mankato,
Minnesota (the “Lender”), to extend financial accommodations to HERON LAKE
BIOENERGY, LLC, a Minnesota limited liability company (the “Borrower”), pursuant
to that certain Sixth Amended and Restated Master Loan Agreement dated to be
effective as of May 17, 2013 (as amended, modified, supplemented, extended or
restated from time to time, the “MLA”), the undersigned (the “Guarantor”),
hereby:

 

1.                                      Unconditionally and absolutely
guarantees to the Lender:

 

a.                                      the full and prompt payment, when due,
whether at the maturity date specified therein or theretofore upon acceleration
of maturity pursuant to the provisions thereof, of the outstanding principal and
accrued interest, and prepayment premium, if any, on the Second Amended and
Restated Term Note and the Second Amended and Restated Term Revolving Note of
the Borrower each dated as of May 17, 2013 (collectively, the “Notes”); and

 

b.                                      the payment and performance by the
Borrower of all of its respective obligations under and pursuant to the Notes,
the MLA and any and all documents related thereto (the Notes, the MLA, and such
other liability, indebtedness and obligations are herein collectively referred
to as the “Obligations”) together with the full and prompt payment of any and
all costs and expenses of and incidental to the collection of the Obligations
for the enforcement of this Guaranty, including, without limitation, attorneys’
fees.

 

c.                                       Capitalized terms used and not
otherwise defined in this Guaranty shall have the meanings attributed to such
terms in the MLA.

 

2.                                      Agrees that the Lender may demand
payment from the Guarantor of any installment (or portion thereof) of principal
or interest on the Notes, when due, and the Guarantor shall immediately pay the
same to the Lender, and the Lender may demand payment or performance of any or
all of the other Obligations, when such payment or performance is due or
required and the Guarantor shall immediately pay or perform the same, whether or
not the Lender has (a) accelerated payment of the Obligations; or (b) commenced
repossession of, or foreclosure of any security interest, mortgage or other lien
in, any or all of the collateral securing the Obligations; or (c) otherwise
exercised its rights and remedies hereunder or under the Obligations, the
documents related thereto or applicable law.  No payments made by or on behalf
of Guarantor to Lender shall be held to discharge or diminish the continuing
liability of Guarantor under this Guaranty for the Obligations, unless and until
Lender agrees in writing that such payments are at the time thereof being made
by Guarantor and accepted by Lender for the purpose of liquidating such
liability.

 

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3.                                      Waives (a) presentment, demand, notice
of nonpayment, protest, and notice of protest and dishonor on the Obligations;
(b) notice of acceptance of this Guaranty by the Lender; and (c) notice of the
creation or incurrence of the Obligations by the Borrower.

 

4.                                      Agrees that the Lender may, from time to
time, without notice to the Guarantor, which notice is hereby waived by the
Guarantor, extend, modify, renew or compromise the Obligations, in whole or in
part, without releasing, extinguishing or affecting in any manner whatsoever the
liability of Guarantor hereunder, the foregoing acts being hereby consented to
by the Guarantor.

 

5.                                      Agrees that the Lender shall not be
required to first resort for payment to the Borrower or any other person,
corporation or entity, or their properties or estate, or any other right or
remedy whatsoever, prior to enforcing this Guaranty.

 

6.                                      Agrees that this Guaranty shall be
construed as a continuing, absolute, and unconditional guaranty without regard
to (a) the validity, regularity or enforceability of the Obligations or the
disaffirmance thereof in any insolvency or bankruptcy proceeding relating to the
Borrower; or (b) any event or any conduct or action of the Borrower or the
Lender or any other party which might otherwise constitute a legal or equitable
discharge of a surety or guarantor but for this provision.

 

7.                                      Agrees that this Guaranty shall remain
in full force and effect and be binding upon the Guarantor until the Obligations
are paid in full.

 

8.                                      Agrees that the Lender is expressly
authorized to forward or deliver any or all collateral and security which may,
at any time, be placed with it by the Borrower, the Guarantor or any other
person, directly to the Borrower for collection and remittance or for credit, or
to collect the same in any other manner and to renew, extend, compromise,
exchange, release, surrender or modify the installments of, any or all of such
collateral and security with or without consideration and without notice to the
Guarantor and without in any manner affecting the absolute liability of the
Guarantor hereunder; and that the liability of the Guarantor hereunder shall not
be affected or impaired by any failure, neglect or omission on the part of the
Lender to realize upon the Obligations, or upon any collateral or security
therefore, nor by the taking by the Lender of any other guaranty or guaranties
to secure the Obligations or any other indebtedness of the Borrower to the
Lender, nor by the taking by the Lender of collateral or security of any kind
nor by any act or failure to act whatsoever which, but for this provision, might
or could in law or in equity act to release or reduce the Guarantor’s liability
hereunder.

 

9.                                      Agrees that notwithstanding any payment
or payments made by the Guarantor hereunder or any setoff or application of
funds of the Guarantor by the Lender, the Guarantor shall not be entitled to be
subrogated to any of the rights of the Lender against the Borrower or any other
guarantor or any collateral security or guaranty or right of offset held by the
Lender for the payment of the Obligations, nor shall the Guarantor seek or be
entitled to seek any contribution or reimbursement from the Borrower or any
other guarantor in respect of payments made by the Guarantor hereunder, until
all amounts owing to the Lender by the Borrower and on account of the

 

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Obligations are paid in full.  Notwithstanding any of the foregoing, to the
extent (a) any right of subrogation which the Guarantor may have pursuant to
this Guaranty or otherwise, or (b) any right of reimbursement or contribution or
similar right against the Borrower, any property of the Borrower or any other
guarantor of any of the Obligations would result in the Guarantor being
“creditors” of or the holders of a “claim” against the Borrower within the
meaning of Title 11 of the United States Bankruptcy Code as now in effect or
hereafter amended, or any comparable provision of any successor statute; until
all Obligations are paid in full, the Guarantor hereby irrevocably waives such
right of subrogation, reimbursement or contribution.

 

10.                               Agrees that the liability of the Guarantor
hereunder shall not be affected or impaired by the existence or creation from
time to time, with or without notice to the Guarantor, which notice is hereby
waived, of indebtedness from the Borrower to the Lender in addition to the
indebtedness evidenced by the Notes; the creation or existence of such
additional indebtedness being hereby consented to by the Guarantor.

 

11.                               Agrees that the possession of this instrument
of guaranty by the Lender shall be conclusive evidence of due execution and
delivery hereof by the Guarantor.

 

12.                               Agrees that this Guaranty shall be binding
upon the legal representative, successors and assigns of the Guarantor, and
shall inure to the benefit of the Lender and its successors, assigns and legal
representative; that notwithstanding the foregoing, the Guarantor shall have no
right to assign or otherwise transfer their rights and obligations under this
Guaranty to any third party without the prior written consent of the Lender; and
that any such assignment or transfer shall not release or affect the liability
of the Guarantor hereunder in any manner whatsoever.

 

13.                               Agrees that the Guarantor may be joined in any
action or proceeding commenced against the Borrower in connection with or based
upon the Obligations and recovery may be had against the Guarantor in any such
action or proceeding or in any independent action or proceeding against the
Guarantor should the Borrower fail to duly and punctually pay any of the
principal of or interest on the Obligations without any requirement that the
Lender first assert, prosecute or exhaust any remedy or claim against the
Borrower.

 

14.                               Agrees that upon the occurrence at any time of
an Event of Default (as defined in the MLA), the Lender shall have the right to
set off any and all amounts due hereunder by the Guarantor to the Lender against
any indebtedness or obligation of the Lender to the Guarantor.

 

15.                               Agrees that the Guarantor shall be liable to
the Lender for any deficiency remaining after foreclosure of any mortgage on
real estate or any security interest in personal property granted by the
Borrower, the Guarantor or any third party to the Lender to secure repayment of
the Obligations and the subsequent sale by the Lender of the property subject
thereto to a third party (whether at a foreclosure sale or at a sale thereafter
by the Lender in the event the Lender purchases said property at the foreclosure
sale) notwithstanding any provision of applicable law which may prevent the
Lender from obtaining a deficiency judgment against, or otherwise collecting a
deficiency from, the Borrower, including without limitation, Minnesota Statutes
Section 580.23.

 

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16.                               Agrees that this Guaranty shall be deemed a
contract made under and pursuant to the laws of the State of Minnesota and shall
be governed by and construed under the laws of such state; and that, wherever
possible, each provision of this Guaranty shall be interpreted in such a manner
as to be effective and valid under applicable law, but if any provisions of this
Guaranty shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or the remaining provisions
of the Guaranty.

 

17.                               Agrees that no failure on the part of the
Lender to exercise, and no delay in exercising, any right or remedy hereunder
shall operate as or constitute a waiver thereof; nor shall any single or partial
exercise of any right or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other right or remedy granted hereby or by any
related document or by law.

 

18.                               Agrees to deliver to the Lender, as soon as
available and in any event within one hundred twenty (120) days after the end of
Guarantor’s fiscal year ending December 31, 2013, and for each succeeding fiscal
year, a copy of its annual consolidated financial statements (including balance
sheet, statements of income and cash flows, all accompanying notes thereto and
any management letter), for such year for the Guarantor, certified, without
qualification, in an opinion acceptable to the Lender by independent certified
public accountants of recognized standing selected by the Guarantor and
acceptable to the Lender, and the federal and state income tax returns and
schedules of the Guarantor, or copies of all extensions for such returns and
returns within 30 days of filing.  In addition, Guarantor agrees with reasonable
promptness, to provide to Lender such further information regarding the
business, operations, affairs and financial and other condition of the Guarantor
as the Lender may reasonably request.

 

19.                               Waives any and all claims against the Lender
and defenses to performance and payment hereunder relating in any way, directly
or indirectly, to the performance of the Lender’s obligations or exercise of any
of its rights under the Notes and the documents related thereto.

 

20.                               Warrants and represents to the Lender as
follows:

 

a.                                      Enforceability.  This Guaranty
constitutes the legal, valid and binding obligation of the Guarantor enforceable
in accordance with its terms (subject, as to enforceability, to limitations
resulting from bankruptcy, insolvency or other similar laws affecting creditors’
rights generally).  The person signing this Guaranty on behalf of the Guarantor
has the requisite corporate authority to execute the same and to bind the
Guarantor.

 

b.                                      Litigation.  There is no action, suit or
proceeding, pending or, to the knowledge of the Guarantor, threatened against
the Guarantor which, if adversely determined, would have a material adverse
effect on the condition (financial or otherwise), property or assets of the
Guarantor, or which would question the validity of this Guaranty or any
instrument, document or other agreement related hereto or required hereby, or
impair the ability of the Guarantor to perform their obligations hereunder or
thereunder.

 

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c.                                       Default.  Guarantor is not in default
of a material provision under any material agreement, instrument, decree or
order to which it is a party or by which its property is bound or affected.

 

d.                                      Consents.  No consent, approval, order
or authorization, registration, declaration or filing with, or notice to, any
governmental authority or any third party is required in connection with the
execution and delivery of this Guaranty or any of the agreements or instruments
herein mentioned to which Guarantor is a  party or the carrying out or
performance of any of the transactions required or contemplated hereby or
thereby or, if required, such consent, approval, order or authorization has been
obtained or such registration, declaration or filing has been accomplished or
such notice has been given prior to the date hereof.

 

e.                                       Taxes.  Guarantor has filed all tax
returns required to be filed and have paid all taxes shown thereon to be due,
including interest and penalties, which are not being contested in good faith
and by appropriate proceedings and none of them has any information or knowledge
of any objections to or claims for additional taxes in respect of federal income
or excess profits tax returns for prior years.

 

21.                               Agrees that (a) the Guarantor will indirectly
benefit by and from the making of the loan by the Lender to the Borrower
evidenced by the Notes by virtue of the fact that the Guarantor is a subsidiary
of the Borrower and the Borrower is the sole member of the Guarantor; (b) the
Guarantor has received legal and adequate consideration for the execution of
this Guaranty and has executed and delivered this Guaranty to the Lender in good
faith in exchange for reasonably equivalent value; (c) the Guarantor is not
presently insolvent and will not be rendered insolvent by virtue of the
execution and delivery of this Guaranty, taking into account the fair salable
value of the assets of the Borrower, Guarantor and other affiliates, taken as a
whole, and without giving effect to (or assuming the inapplicability of) any
waiver of any right of contribution, indemnity, subrogation or reimbursement;
(d) the Guarantor has not executed or delivered this Guaranty with actual intent
to hinder, delay or defraud the Guarantor’s creditors; and (e) the Lender has
agreed to make such loan in reliance upon this Guaranty.

 

22.                               Agrees that if, at any time, all or any part
of any payment previously applied by the Lender to any of the Obligations must
be returned by the Lender for any reason, whether by court order, administrative
order or settlement, the Guarantor shall remain liable for the full amount
returned as if said amount had never been received by the Lender,
notwithstanding any term of this Guaranty or the cancellation or return of any
note or other agreement evidencing the Obligations.

 

23.                               Agrees that (a) the Guarantor irrevocably
submits to the jurisdiction of any Minnesota state court or federal court over
any action or proceeding arising out of or relating to the Notes, the MLA, and
any instrument, agreement or document related thereto; (b) all claims in respect
of such action or proceeding may be heard and determined in such Minnesota state
or federal court; (c) the Guarantor irrevocably waives, to the fullest extent
they may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding; (d) the Guarantor irrevocably

 

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consent to the service of copies of the Summons and Complaint and any other
process which may be served in any such action or proceeding by the mailing by
United States certified mail, return receipt requested, of copies of such
process to the Guarantor’s last known addresses; (e)  judgment final by appeal,
or expiration of time to appeal without an appeal being taken, in any such
action or proceeding shall be conclusive and may be enforced in any other
jurisdictions by suit on the judgment or in any other manner provided by law;
and (f) nothing in this Paragraph shall affect the right of the Lender to serve
legal process in any other manner permitted by law or affect the right of Lender
to bring any action or proceeding against the Guarantor or their property in the
courts of any other jurisdiction to the extent permitted by law.

 

Dated this 17th day of May, 20133.

 

 

 

 

GUARANTOR:

 

 

 

HLBE PIPELINE COMPANY, LLC, a Minnesota limited liability company

 

 

 

 

 

 

/s/ Robert J. Ferguson

 

By:

Robert J. Ferguson

 

Its:

President & Chief Manager

 

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