EXHIBIT 10.6


 


PERSONAL 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 Fourth Amended and Restated Master Loan Agreement of
even date herewith (the “Master Loan Agreement”), the Fourth Amended and
Restated Second Supplement to the Master Loan Agreement dated May 18,
2007, the Third Supplement to the Master Loan Agreement of even date herewith, and
the Fourth Supplement to the Master Loan Agreement of even date herewith, by
and between the Lender and the Borrower (collectively with the Master Loan
Agreement, the “Credit Agreement”), 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 principal and accrued
interest, and prepayment premium, if any, on that certain Term Note of even
date herewith, executed and delivered by the Borrower to the Lender, in the original
principal amount of $59,583,000.00 (the “Note”); and


 


b.                                      the payment and performance by the Borrower
of all of its respective obligations under and pursuant to the Note, the Credit
Agreement, and any and all documents related thereto (the Note, the Credit
Agreement, 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.


 


Notwithstanding
any other provision of this Guaranty, Guarantor will be liable for not more
than $3,740,000.00 of the unpaid principal balance of the Note, together with
interest, late charges, collection costs, attorneys’ fees and the like as
provided for in the Credit Agreement and the Note.


 


2.             Agrees
that the Lender may demand payment from the Guarantor of any installment (or
portion thereof) of principal or interest on the Note, 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 (1) accelerated
payment of the Obligations; or (2) commenced repossession of, or
foreclosure of any security interest, mortgage or other lien in, any or all of
the collateral securing the Obligations; or (3) otherwise exercised its
rights and remedies hereunder or under the Obligations, the documents related
thereto or applicable law.


 


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 or 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 earlier of (a) the date on which the Obligations
are paid in full or (b) the date on which (i) an air quality
emissions permit for the Borrower is issued to the Borrower and is not subject
to challenge or appeal; (ii) the litigation pending as of the date of this
Guaranty initiated by the Minnesota Center for Environmental Advocacy, the
Izaak Walton League of America, and Minnesotans for an Energy-Efficient Economy
challenging the issuance of the air quality emissions permit for the Borrower,
is resolved by the entry of a final, nonappelable order or judgment by any
court or agency with jurisdiction over such litigation in favor of the Borrower;
and (iii) the Project has met all the performance criteria as stipulated
in (a) that certain Standard Form of Agreement Between Owner and
Design-Builder – Lump Sum dated September 28, 2005, by and between the
Borrower and Fagen, Inc. and (b) that certain License Agreement dated
September 28, 2005, by and between the Borrower and ICM, Inc..


 


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 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 


 


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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, 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 Note; 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 or 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
Credit Agreement), 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.


 


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.


 


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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
possible, but in no event later than ninety (90) days after the end of the
Guarantor’s fiscal year, a signed personal financial statement in a form
acceptable to Lender and dated as of December 31 of the immediately
preceding year, which financial statement presents the financial condition
(including all guaranty and other contingent obligations) of the Guarantor,
together with the Guarantor’s federal and state income tax returns and
schedules.  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 Note 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).


 


b.                                      Litigation.  There is no action, suit or
proceeding pending or, to the knowledge of the Guarantor, threatened against or
affecting 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.


 


c.                                       Default.  Guarantor is not in default of
a material provision under any material agreement, instrument, decree or order
to which they are parties or by which they or their 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 


 


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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 Note; (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; (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 Note, the
Credit Agreement, 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 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 1st day of October, 2007.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   /s/ Roland Fagen

  
	
   

  	
   

  	
  Roland
  Fagen

  



 


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