EXHIBIT
10.7


 


FOURTH 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 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 the outstanding 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;
on that certain Term Revolving Note of even date herewith, executed and
delivered by the Borrower to the Lender, in the original principal amount of
$5,000,000.00; and on that certain Second Amended and Restated Revolving Note dated
May 18, 2007, executed and delivered by the Borrower to the Lender, in the
original principal amount of $7,500,000.00; (the “Notes”);
and


 


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


 


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


 


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 (1) accelerated
payment of the Obligations; or (2) commenced repossession of, or
foreclosure of any security interest, mortgage or 


 


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other
lien in, any or all of the collateral securing the Obligations; or (4) 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 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 


 


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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 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 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 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 


 


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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.


 


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,
2006, and for each succeeding fiscal year, a copy of the audited 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).


 


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b.                                      Litigation.  There is no action, suit or proceeding, other
than the Permit Litigation, 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 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; (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.


 


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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 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.


 


	
   

  	
   

  	
  GUARANTOR:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LAKEFIELD FARMERS ELEVATOR,

  
	
   

  	
   

  	
  LLC, a Minnesota limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
        /s/ Robert J. Ferguson

  
	
   

  	
   

  	
  By: Robert J. Ferguson

  
	
   

  	
   

  	
  Its:  President

  



 


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