HERON LAKE BIOENERGY, LLC SUBSCRIPTION AGREEMENT INCLUDING INVESTMENT REPRESENTATIONS
EXHIBIT 10.1
INCLUDING INVESTMENT REPRESENTATIONS
THIS SUBSCRIPTION AGREEMENT is entered into and made on this 2nd day of July, 2010, by and between Heron Lake BioEnergy, LLC, a Minnesota limited liability company with its principal executive office located at 00000 000xx Xxxxxx, X.X. Xxx 000, Xxxxx Xxxx, Xxxxxxxxx 00000 (the “Company”), and Project Viking, L.L.C., a Minnesota limited liability company, (“Subscriber”), effective as of the date on which the Company accepts this Subscription Agreement by executing the Acceptance form below.
W I T N E S S E T H
In consideration of the mutual promises contained herein, and other good and valuable consideration, Subscriber hereby agrees, represents and warrants as follows:
1. Agreement of Subscription.
a. Subscriber hereby subscribes to purchase ** 3,103,449 ** Class A capital units of the Company (the “Units”), which Units quantify membership interests in the Company, at a purchase price of $1.45 per Unit, upon the terms and conditions as set forth in this Subscription Agreement, for a Total Purchase Price for the Units of ** $4,500,001.05 **. (All capitalized terms used in this Subscription Agreement and not otherwise defined herein shall have the meaning ascribed to such terms in the prospectus of the Company dated September 17, 2004.)
b. Upon the acceptance of this Subscription Agreement, Subscriber agrees to deliver by wire transfer on the same business day of the acceptance the amount of the Total Purchase Price for the Units (100% payment is due upon Subscription). Subscriber agrees that the Units shall be governed by and that Subscriber is bound by the Company’s Member Control Agreement dated effective September 23, 2004, as amended, (the “Member Control Agreement”). Subscriber acknowledges that Subscriber is a current member of the Company and therefore has received a copy of the Member Control Agreement.
c. This subscription is irrevocable. The Company will accept this subscription by having one of its officers countersign this Subscription Agreement and return a copy of the signature page to you to confirm acceptance.
d. Upon acceptance, this Subscription Agreement is binding on Subscriber, and the obligations of Subscriber hereunder are unconditional.
e. Subscriber acknowledges and agrees that 100% of Subscriber’s purchase price of the Units constitutes “AT-RISK” capital and will not be placed into any type of escrow. Immediately following acceptance of this Subscription by the Company and tender of the payment for the Units, the Company will use such funds for general working capital and other corporate purposes, as determined by or under the direction of the Board of Governors of the Company at its sole discretion. Subscriber acknowledges that there is no specified use of the funds from this subscription.
f. Company acknowledges and agrees that, as an inducement to Subscriber to subscribe for the purchase of Units, Company will, within sixty (60) days of receipt of written request from Subscriber, allow ICM, Inc. (“ICM”) at ICM’s sole cost and expense to enter upon Company’s premises for a period of five (5) business days during normal business hours (“Training Period”) and allow ICM to operate the plant alongside Company’s operators in a joint effort to achieve optimal efficiencies with respect to operations and emissions; and to train Company’s operators in a joint effort to achieve optimal operations of the plant under sustainable operating conditions; PROVIDED and ONLY upon the following conditions: (a) Company shall in all cases maintain control
and final authority over all operational decisions during such Training Period; (b) at no time during such Training Period shall the plant be operated under non-sustainable or unsafe operating conditions, meaning without limitation no injections of dry sorbents (other than limestone) directly into the combustor and no short term massive injections of dry sorbents into the baghouse; (c) all such training and joint efforts by ICM shall be at absolutely no cost to Company whatsoever; and (d) all such training and joint efforts shall not disrupt or interfere with normal operations of the plant or other day-to-day business activities of Company.
g. Upon acceptance of this Subscription Agreement and tender of full payment of the entire subscription amount, the Company will issue the Units to Subscriber for the Units purchase hereunder and issue a certificate to Subscriber for the Units purchased hereunder. Subscriber acknowledges and agrees that Subscriber is bound by the Company’s Articles of Organization attached to the Company’s prospectus dated September 17, 2004 as Appendix A (the “Articles”) and the Member Control Agreement.
2. Representations and Warranties of Subscriber.
In consideration of the Company’s offer to sell the Units, and in order to induce the Company to sell the Units to Subscriber, Subscriber hereby represents and warrants to the Company and its agents as follows:
a. SEC Reporting Obligations; Information About the Company and the Units. Subscriber acknowledges that the Company is a public reporting company under the Securities Exchange Act of 1934, and that Subscriber has immediate reporting obligations under such Act of its purchase of the Units hereunder, as a result of Subscriber’s ownership of membership interests in the Company and the number of Units purchased. Subscriber, or its representative(s), has received, read and understands the business, financial and operating information, and the risk factors affecting the Company and its business and the value of the Units being purchased hereunder, as described in or set forth in the following reports and schedules filed by the Company with the SEC (including all exhibits and financial statement schedules attached thereto or included therewith): (1) FORM 10-K Annual Report filed pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “34’ Act”) for the fiscal year ended October 31, 2009; (2) SCHEDULE 14A Definitive Proxy Statement filed pursuant to Section 14(a) of the 34’ Act for the Annual Meeting of Member held on march 18, 2010; and (3) FORM 10-Q Quarterly reports under Section 13 or 15(d) of the Act for the fiscal quarters ended January 31, 2010 and April 30, 2010. In addition, Subscriber acknowledges it has received the Company’s unaudited, non-public, financial statements for May 31, 2010 and the 7-month period then ended, by reason of its appointees to the Company’s Board of Governors. Without limiting the foregoing, Subscriber acknowledges that the Company is seeking a new air permit with the MPCA and the Company will remain out of compliance with one or more covenants in its loan agreement with its senior lenders. There are no assurances that a new permit will be issued, that the covenant(s) violations can be cured or that the Company will not violate additional loan covenants in the near future, or that the Senior lenders will not declare an event of default and exercise all of their rights and remedies under the loan agreement if the Company cannot cure such defaults or violations. Subscriber, or its representative, has had an opportunity to obtain, and has received, any additional information and has had an opportunity to ask such questions of, and receive answers from, the Company or an agent or representative of the Company, to the extent deemed necessary by Subscriber in order to form a decision concerning an investment in the Company. As a result, Subscriber believes it has sufficient knowledge about the business, management and financial affairs of the Company and the ethanol plant and the Company’s planned use of the proceeds of this subscription, and the terms and conditions of the purchase of Units contemplated hereby.
b. High Degree of Risk. Subscriber realizes that an investment in the Units involves a high degree of risk, including, but not limited to, the risks of receiving no return on the investment and of losing Subscriber’s entire investment in the Company.
c. Ability to Bear the Risk. Subscriber is able to bear the economic risk of investment in the Units, including the total loss of such investment.
d. No Market for Units; Restrictions on Transfer. Subscriber realizes that (i) there are substantial restrictions on the transfer of the Units, both under the Securities Act and State Laws, as well as under the Articles
and the Member Control Agreement; (ii) there is not currently, and it is unlikely that in the future there will exist, a public market for the Units; and (iii) accordingly, for the above and other reasons, Subscriber may not be able to liquidate an investment in the Units for an indefinite period. Subscriber realizes that the Units have not been registered for sale under the Securities Act of 1933, as amended (the “Securities Act”) or applicable state securities laws (the “State Laws”). Subscriber acknowledges and agrees that the Units may be sold only pursuant to registration under the Securities Act and State Laws, or an opinion of counsel acceptable to the Company that such registration is not required, and in accordance with the Articles and the Member Control Agreement.
e. Suitability. Subscriber believes that the investment in the Units is suitable for the undersigned based upon Subscriber’s investment objectives and financial needs, and Subscriber has adequate means for providing for his, her or its current financial needs and personal contingencies and has no need for liquidity of investment with respect to the Units. Subscriber has such knowledge and experience in financial and business matters that he, she or it is capable of evaluating the merits and risks of an investment in the Units or Subscriber has obtained, to the extent Subscriber deems necessary, his, her or its own professional advice with respect to the risks inherent in the investment in the Units, and the suitability of the investment in the Units in light of Subscriber’s financial condition and investment needs.
f. Investment Intent. Subscriber has been advised that the Units are not being registered under the Securities Act or the relevant State Laws but are being offered and sold pursuant to exemptions from such laws and that the Company’s reliance upon such exemptions is predicated in part on Subscriber’s representations to it as contained herein. Subscriber represents and warrants that the Units are being purchased for Subscriber’s own account and for Subscriber’s investment and without the intention of reselling or redistributing the same, that Subscriber has made no agreement with others regarding any of the Units and that Subscriber’s financial condition is such that it is not likely that it will be necessary to dispose of any of the Units in the foreseeable future. Subscriber is aware that, in the view of the Securities and Exchange Commission, a purchase of the Units with an intent to resell by reason of any foreseeable specific contingency or anticipated change in market values, or any change in the condition of the Company, or in connection with a contemplated liquidation or settlement of any loan obtained for the acquisition of the Units and for which the Units were pledged as security, would represent an intent inconsistent with the representations set forth above. Subscriber further represents and agrees that if, contrary to the foregoing stated intentions, Subscriber should later desire to dispose of or transfer any of the Units in any manner, he, she or it shall not do so without first obtaining the consent of the Company as required by the Company’s Articles and the Member Control Agreement and (i) the opinion of counsel satisfactory to the Company that such proposed disposition or transfer lawfully may be made without the registration of the Units pursuant to the Securities Act and applicable State Laws, or (ii) such registration (it being expressly understood that the Company shall not have any obligation to register such Units for such purpose).
g. Brokers or Finders. Subscriber has not taken any action that will cause the Company to incur, directly or indirectly, any liability for brokerage or finders’ fees or agents’ commissions or any similar charges in connection with this Subscription Agreement.
h. Tax Liability. Subscriber has reviewed with Subscriber’s own tax advisors the tax consequences of this investment and the transactions contemplated by this Subscription Agreement, and has and will rely solely on such advisors and not on any statements or representations of the Company or any of its agents. Subscriber understands that Subscriber (and not the Company) shall be responsible for Subscriber’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Subscription Agreement.
i. Residency. Subscriber has its principal place of business in the following State:
3. Accredited Status.
SECTION 3 IS REQUIRED IN CONNECTION WITH THE EXEMPTIONS FROM THE SECURITIES ACT AND STATE LAWS BEING RELIED ON BY THE COMPANY WITH RESPECT TO THE OFFER AND SALE OF THE UNITS. SUBJECT TO SECURITIES LAWS REQUIREMENTS, ALL FINANCIAL INFORMATION IN SECTION 3 WILL BE KEPT CONFIDENTIAL, AND WILL BE REVIEWED ONLY BY THE COMPANY AND ITS COUNSEL, EXCEPT AS DISCLOSURE MAY BE REQUIRED OR COMPELLED UNDER APPLICABLE SECURITIES LAWS. The undersigned agrees to furnish any additional information that the Company or its counsel deems reasonably necessary in order to verify the responses set forth below.
Subscriber represents and warrants as follows (EACH SUBSCRIBER MUST COMPLETE. PLEASE CHECK ALL THAT APPLY — YOU MUST BE AN ACCREDITED INVESTOR TO PURCHASE THE UNITS):
INDIVIDUALS
o (a) Subscriber (hereinafter in this Section 3, “the undersigned”) is an individual with a net worth, or a joint net worth together with his or her spouse, in excess of $1,000,000. (In calculating net worth, you may include equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities. Equity in personal property and real estate should be based on the fair market value of such property minus debt secured by such property.)
o (b) The undersigned is an individual that had an individual income in excess of $200,000 in each of the prior two years and reasonably expects an income in excess of $200,000 in the current year.
o (c) The undersigned is an individual that had with his/her spouse joint income in excess of $300,000 in each of the prior two years and reasonably expects joint income in excess of $300,000 in the current year.
o (d) The undersigned is a director or executive officer or general partner (or its equivalent) of the Company.
ENTITIES
x (e) The undersigned, if other than an individual, is an entity all of whose equity owners meet one of the tests set forth in (a) through (d) above. (If relying on this category alone, each equity owner must complete a separate copy of this Subscription Agreement.)
o (f) The undersigned is an entity, and is an “Accredited Investor” as defined in Rule 501(a) of Regulation D under the Securities Act. This representation is based on the following (check one or more, as applicable):
o (i) The undersigned (or, in the case of a trust, the undersigned trustee) is a bank or savings and loan association as defined in Sections 3(a)(2) and 3(a)(5)(A), respectively, of the Securities Act acting either in its individual or fiduciary capacity.
o (ii) The undersigned is an insurance company as defined in Section 2(13) of the Securities Act.
o (iii) The undersigned is an investment company registered under the Investment Company Act of 1940 or a business development Company as defined in Section 2(a)(48) of that Act.
o (iv) The undersigned is a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958.
o (v) The undersigned is an employee benefit plan within the meaning of Title I of the Employee Retirement Income Security Act of 1974 and either (check one or more, as applicable):
o (aa) the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance Company, or registered investment adviser; or
o (bb) the employee benefit plan has total assets in excess of $5,000,000; or
o (cc) the plan is a self-directed plan with investment decisions made solely by persons who are “Accredited Investors” as defined under the Securities Act.
o (vi) The undersigned is a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940.
x (vii) The undersigned has total assets in excess of $5,000,000, was not formed for the specific purpose of acquiring securities of the Company and is one or more of the following (check one or more, as appropriate):
o (aa) an organization described in Section 501(c)(3) of the Internal Revenue Code; or
o (bb) a corporation or limited liability company; or
o (cc) a Massachusetts or similar business trust; or
x (dd) a partnership. (LLC)
o (viii) The undersigned is a trust with total assets exceeding $5,000,000, which was not formed for the specific purpose of acquiring securities of the Company and whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the investment in the Units.
4. Entities.
If Subscriber is an entity, the individual signing on behalf of such entity and the entity jointly and severally agree and certify that:
a. if entity is accredited solely by reason of the category described in Section 3(f)(vii) or (viii) above, then the undersigned entity was not organized for the specific purpose of acquiring the Units; and
b. this Subscription Agreement has been duly authorized by all necessary action on the part of the undersigned entity, has been duly executed by an authorized officer or representative of the undersigned entity, and each is a legal, valid, and binding obligation of the undersigned entity enforceable in accordance with its terms.
5. Relationship to Brokerage Firms.
(Please answer the following questions by checking the appropriate response.)
a. o YES x NO: Are you a director, officer, partner, branch manager, registered representative, employee, shareholder of, or similarly related to or employed by a brokerage firm?
b. o YES x NO: Is your spouse, father, mother, father-in-law, mother-in-law, or any of your brothers, sisters, brothers-in-law, sisters-in-law or children, or any relative which you support, a director, officer, partner, branch manager, registered representative, employee, shareholder of, or similarly related to or engaged by, a brokerage firm?
c. o YES x NO: Does Subscriber own voting securities of any brokerage firm?
d. o YES x NO: If the undersigned is an entity, is any director, officer, partner or 5% owner of the undersigned also a director, officer, partner, branch manager, registered representative, employee, shareholder of, or similarly related to or employed by, a brokerage firm?
e. If the answer to any of the above items is “YES”, please supply details below: N/A
6. Securities Law Exemptions.
Subscriber acknowledges that the offer and sale of the Units has not been registered under the Securities Act, or any state securities laws and that the Company will offer and sell the Units and the Units will be issued to Subscriber in reliance on exemptions from the registration requirements of the Securities Act and exemptions under applicable state securities laws and in reliance on the representations, warranties and agreements made by Subscriber herein.
7. Restrictive Legend.
In addition to the restrictions to transfer on the Units contained in the Articles and Member Control Agreement, and any corresponding restrictive legends required thereunder, Subscriber also agrees that the Company shall place a restrictive legend on any statement of interest prepared by the Company with respect to the Units containing substantially the following language:
The securities represented by this statement have not been registered under the Securities Act of 1933, as amended (the “Act”) or under applicable state securities laws and are also subject to a Subscription and Investment Representation Agreement. The securities may not be sold, transferred or pledged in the absence of such registration, unless pursuant to an exemption from the registration requirements of the Act and applicable state securities laws. The Company reserves the right to require an opinion of counsel satisfactory to it before effecting any transfer of the securities.
8. Miscellaneous.
a. Survival of Representations and Warranties; Indemnification. Subscriber understands the meaning and legal consequences of the agreements, representations and warranties contained herein, agrees that such agreements, representations and warranties shall survive and remain in full force and effect after the execution hereof and payment for the Units, and further agrees to indemnify and hold harmless the Company and each current and future employee, agent and member of the Company from and against any and all loss, damage or liability due to, or arising out of, a breach of any agreement, representation or warranty of the undersigned contained herein.
b. No Assignment or Revocation; Binding Effect. Neither this Subscription Agreement, nor any interest herein, shall be assignable by Subscriber without prior written consent of the Company. Subscriber hereby acknowledges and agrees that Subscriber is not entitled to cancel, terminate or revoke this Subscription Agreement and that it shall survive the death, incapacity, dissolution or bankruptcy of Subscriber. The provisions of this Subscription Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective heirs, legal representatives, successors and assigns.
c. Choice of Law. This Subscription Agreement shall be construed and interpreted in accordance with Minnesota law, without regard to its choice of law or conflicts of law provisions.
d. Issue Date of Units. Upon acceptance of this Subscription Agreement by the Company, the issuance of the Units subscribed for hereunder shall be the date of acceptance and full tender of the purchase price by Subscriber.
9. Representations and Warranties of the Company.
In consideration of Subscriber’s agreement to purchase the Units, the Company represents and warrants to Subscriber as follows:
a. Existence. The Company is a duly organized and validly existing limited liability company under the laws of the State of Minnesota.
b. Good Standing. The Company is in good standing under the laws of the State of Minnesota and there are no proceedings or actions pending to limit or impair any of its powers, rights, privileges, or to dissolve it.
c. Due Authorization and Approval. The execution and delivery of this Subscription Agreement and the consummation of the transactions contemplated hereby have been duly authorized by proper corporate action of the Company.
d. Units. Upon receipt of full payment for the Units, the Units shall be duly authorized, fully-paid, validly issued and non-assessable Class A Units of the Company.
e. Additional Issuance Price. The per unit price of $1.45 per unit for the Units purchased hereunder will equate to the same pricing for any additional equity raised in any member offering commenced on or before December 31, 2010.
f. Management Review Report. The Company agrees to provide Subscriber with a copy of the written report of the consultant retained by the Company to conduct a complete review of the Company’s risk management, marketing, operations and financial systems and procedures, provided the Company and Subscriber have entered into a mutually acceptable confidentiality and nondisclosure and nonuse agreement regarding such report in advance of Subscriber’s receipt thereof.
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SIGNATURE
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/s/ Xxx Xxxxx |
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Subscriber (Signature) |
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Project Viking, LLC |
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Print Name of Subscriber |
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Xxx Xxxxx, Managing Member |
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Name and Title of Signatory (for entities) |
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Address:
000 X. Xxx. 000
XX Xxx 000
Xxxxxxx Xxxxx, XX 00000
NOTE: Please be certain to complete the Subscriber Information Page attached hereto and, if Subscriber is an entity, the attached Certificate of Signatory.
ACCEPTANCE OF SUBSCRIPTION
The Company hereby accepts the subscription evidenced by this Subscription Agreement including Investment Representations as of the 2nd day of July, 2010.
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By: |
/s/ Xxxxxx X. Xxxxxxxx |
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Its: |
CEO |
SUBSCRIBER INFORMATION
[omitted and available to the Securities and Exchange Commission upon request]
CERTIFICATE OF SIGNATORY
(To be completed if Units are being subscribed for by an Entity)
I, Xxx Xxxxx, am the Managing Member of Project Viking, LLC (the “Entity”).
I certify that I am empowered and duly authorized by the Entity to execute and carry out the terms of this Subscription Agreement and to purchase and hold the Units pursuant to the Company’s Articles and the Member Control Agreement, and to act on behalf of the Entity with respect to any actions or consents of the Entity required thereunder or this Subscription Agreement. I further certify that this Subscription Agreement and such actions or consents been duly and validly executed on behalf of the Entity and each constitutes a legal and binding obligation of the Entity.
IN WITNESS WHEREOF, I have set my hand hereto this 2nd day of July, 2010.
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/s/ Xxx Xxxxx |
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(Signature) |
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Managing Member |
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(Title) |
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Xxx Xxxxx |
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(Please Print Name) |
