Document:

Exhibit 10.3

 

FIFTH AMENDMENT TO

FORBEARANCE AGREEMENT

 

THIS FIFTH AMENDMENT TO FORBEARANCE AGREEMENT (this “Amendment”) is made as of August 1, 2011 (the “Effective Date”), between HERON LAKE BIOENERGY, LLC, a Minnesota limited liability company (“Borrower”), and AGSTAR FINANCIAL SERVICES, PCA, a United States instrumentality (“Lender”).

 

RECITALS

 

A.            The Borrower and the Lender have previously entered into a Forbearance Agreement dated as of July 2, 2010, a First Amendment to Forbearance Agreement dated December 31, 2010, a Second Amendment to Forbearance Agreement dated March 1, 2011, a Third Amendment to Forbearance Agreement dated April 27, 2011, and a Fourth Amendment to Forbearance Agreement dated June 30, 2011 (collectively, the “Forbearance Agreement”), which provided for a forbearance period which expires on or before August 1, 2011.

 

B.            The Borrower has requested an extension of the Forbearance Period (as defined in the Forbearance Agreement), and the Lender is willing to grant such an extension upon the terms and conditions set forth in this Amendment.

 

C.            Unless otherwise expressly defined herein, capitalized terms used herein shall have the same meaning ascribed to them in the Forbearance Agreement.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the facts set forth in the foregoing Recitals, which the parties agree are true and correct, and in consideration for entering into this Amendment, the parties hereto agree as follows:

 

1.             Amendments to Forbearance Agreement.

 

a.             Section 3 of the Forbearance Agreement is amended, restated and replaced in its entirety by the following:

 

3.             Forbearance Period. Provided that the Conditions Precedent set forth below have first been satisfied and Borrower complies with the terms of this Agreement, the Lender agrees it will not declare a default under the Loan Documents or enforce any remedies available to it under the Loan Documents or applicable law on account of the Borrower’s default beginning on the Effective Date, and ending on the earlier of (i) September 1, 2011 and (ii) the date of any Event of Default (as defined below) hereunder (the “Forbearance Period”).

 

 

b.             Section 11(f) of the Forbearance Agreement is amended, restated and replaced in its entirety by the following:

 

f.              Restructuring Milestones.  Borrower shall have failed to meet or achieve any of the following milestones on or before the specified dates:

 

·              On or before September 1, 2011, Borrower shall have closed on, and all funding for the New Equity in accordance with the terms of Section 10 of this Agreement (except as the same are expressly modified by this Amendment) shall have occurred or shall be scheduled to be closed on and occur within a reasonable time thereafter in accordance with the terms and conditions of the LOI; and Borrower shall have executed and delivered all amendments to the Loan Documents as contemplated by Section 10 of this Agreement, which amendments shall also include such terms, conditions and covenants as Lender may reasonably request, including without limitation, provisions requiring that all officers, directors, managers, and other key employees comprising the management of the Borrower be reasonably acceptable to the Lender, any such provisions however subject to the management and other applicable provisions of Borrower’s Member Control Agreement and providing for such other limitations on changes thereto or resulting from changes in control of the Borrower; and

 

·              On or before September 1, 2011, Borrower shall have completed, or shall have caused its subsidiaries and Affiliates to complete, all project milestones necessary to begin construction of a natural gas pipeline connecting Borrower’s ethanol production facility to the natural gas pipeline facilities of Northern Border Pipeline Company in Cottonwood County, Minnesota, which milestones have been previously delivered to the Lender.

 

2.             Conditions Precedent. As conditions precedent to the Lender’s continuing forbearance under the Forbearance Agreement, as set forth in the preceding paragraph, the following shall have been executed and/or delivered to the Lender:

 

a.             the Borrower shall have executed and delivered to the Lender this Amendment and any other documents and agreements ancillary or incident hereto;

 

b.             the Borrower shall have executed and delivered to the Lender any and all further documentation reasonably requested by the Lender, including without limitation: (i)

 

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Amendment No. 4 to the Amended and Restated Fifth Supplement to the Master Loan Agreement, and (ii) the Allonge No. 4 to the Revolving Line of Credit Note; and

 

c.             the Borrower shall have paid to Lender all costs and expenses incurred by Lender in connection with the execution of this Amendment, including without limitation reasonable attorney’s fees associated with the preparation and negotiation of this Amendment and the documents relating thereto.

 

3.             Effect of Amendment. Except as expressly provided in this Amendment, the Forbearance Agreement, Loan Agreement, Notes, Mortgage and Security Agreement remain in full force and effect in accordance with their respective terms, and this Amendment shall not be construed to: (i) impair the validity, perfection or priority of any security interest or lien securing the Loans; (ii) waive or impair any rights, powers or remedies of the Lender under the Forbearance Agreement, Loan Agreement, Notes, Mortgage or Security Agreement; or (iii) constitute an agreement by the Lender or require it to extend the Forbearance Period, or grant additional forbearance periods.

 

4.             Representations and Warranties. The Borrower represents and warrants to Lender as follows:

 

a.             Borrower. The Borrower is a limited liability company duly organized and validly existing and in good standing under the laws of the State of Minnesota and is qualified to do business in all jurisdictions in which the nature of its business makes such qualification necessary and where failure to so qualify would have a Material Adverse Effect on its respective financial condition or operations. The Borrower has the power and authority to own and operate its assets and to carry on its business and to execute, deliver, and perform its obligations under the Loan Documents, the Forbearance Agreement, and this Amendment.

 

b.             Execution. The execution, delivery and performance by the Borrower of this Amendment is within the Borrower’s powers, has been duly authorized by all necessary action, does not contravene: (i) the articles of organization or operating agreements of the Borrower; or (ii) any law or any contractual restriction binding on or affecting the Borrower, and does not result in or require the creation of any lien, security interest or other charge or encumbrance (other than pursuant to the terms of the Loan Documents) upon or with respect to any of its respective properties.

 

c.             Enforceability. This Amendment is, the Forbearance Agreement is, and each of the Loan Document to which the Borrower is a party are, or when delivered will be, legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting the enforcement of creditor’s rights generally and by general principles of equity.

 

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5.             Miscellaneous.

 

a.             Recitals Incorporated. The Recitals set forth at the beginning of this Amendment are deemed incorporated herein, and the parties hereto represent they are true, accurate and correct.

 

b.             Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of Minnesota.

 

c.             Severability. If any provision of this Amendment shall be invalid, illegal or otherwise unenforceable, such provision shall be severable from the remainder of such agreement and the validity, legality and enforceability of the remaining provisions shall not be adversely affected or impaired thereby and shall remain in full force and effect.

 

d.             Counterparts. This Amendment may be executed in two or more counterparts, each of which shall be considered one and the same agreement and shall become effective when two or more counterparts have been signed by each of the parties and delivered to the other parties.

 

e.             Entire Agreement. This Amendment, the Forbearance Agreement, and the other Loan Documents set forth the entire agreement between the parties pertaining to the transactions contemplated by this Amendment.  This Amendment may be amended or modified only by a written instrument signed by the party against which enforcement is sought.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the date and year set forth below.

 

	
Dated:   August 1, 2011
    	
 
    
	
 
    	
HERON   LAKE BIOENERGY, LLC, a
    
	
 
    	
Minnesota   limited liability company
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Robert J. Ferguson
    
	
 
    	
By:   Robert J. Ferguson
    
	
 
    	
 Its:   President
    
	
 
    	
 
    
	
Dated:   August 1, 2011
    	
 
    
	
 
    	
AGSTAR   FINANCIAL SERVICES, PCA,
    
	
 
    	
a   United States instrumentality,
    
	
 
    	
 
    
	
 
    	
/s/   Mark Schmidt
    
	
 
    	
By:   Mark Schmidt
    
	
 
    	
 Its:   Vice President
    

 

[Signature Page to Fifth Amendment to Forbearance Agreement]

 

5Exhibit 10.1

 

CONFORMED COPY

 

AMENDMENT TO JOINT VENTURE AGREEMENT

RELATING TO GULF RE HOLDINGS LIMITED

 

This Amendment is made as of May 18, 2011, to the Joint Venture Agreement (Agreement), dated January 22, 2008, between GULF INVESTMENT CORPORATION GSC, a company incorporated in the State of Kuwait whose principal office is at Jaber Al-Mubarak Street, Al-Sharq, Kuwait City, State of Kuwait (GIC), and ARCH REINSURANCE LTD., a limited company incorporated in Bermuda whose principal office is at Wessex House, 45 Reid Street, PO Box HM 339, Hamilton, HM 12 (Arch Re).

 

WHEREAS GIC and Arch Re desire to amend the Agreement in the manner described below;

 

NOW THEREFORE, GIC and Arch Re hereby agree as follows:

 

1.                                      Section 15.1(a) of the Agreement is hereby replaced in its entirety with the following:

 

“(a)         Except as expressly required by Subclause 16.5 or 17.3 or as permitted by Subclause 15.2(b)(i), no Shareholder may transfer or otherwise dispose of or Encumber any of its Shares or any interest in any of its Shares for a period of five years from the date of this Amendment (the Initial Period).”

 

2.                                      Except as expressly set forth in this Amendment, the terms of the Agreement are unchanged, and said Agreement, as amended, shall continue in full force and effect.

 

3.                                      This Amendment shall be construed in accordance with and governed by English law.

 

4.                                      This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same Amendment, and any party may enter into this Amendment by executing a counterpart.

 

SIGNATORIES

 

	
Signed   by
    	
)
    
	
for   GULF INVESTMENT CORPORATION GSC
    	
)
    
	
 
    	
 
    
	
 
    	
 
    
	
/s/   Shafic Ali, Director, Principal Investments
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Signed   by
    	
)
    
	
for   ARCH REINSURANCE LTD.
    	
)
    
	
 
    	
 
    
	
 
    	
 
    
	
/s/ Marc Grandisson, Chairman & CEO, Arch   Worldwide Reinsurance Group and Director, Arch Reinsurance Ltd.

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