ITEM 1.01 - ENTRY INTO A MATERIAL DEFINITIVE AGREEMENTS
Merger Agreement
On or about March 24, 2021, Granite Falls Energy, LLC, a Minnesota limited liability company (“GFE”), and Heron Lake BioEnergy, LLC, a Minnesota limited liability company (“HLBE”), executed a Merger Agreement, pursuant to which GFE will acquire the minority interest of HLBE (the “Merger”). The structure of the transaction will be a merger in which a wholly owned subsidiary of GFE (the “Merger Sub”) will merge with and into HLBE, with HLBE surviving the transaction as a wholly owned subsidiary of GFE.
A copy of the Merger Agreement is furnished as Exhibit 10.1 to this report. The proposed transaction is further detailed in a Plan of Merger, which is furnished as Exhibit 2.1 to this report.
Prior to the Merger, GFE owns approximately 50.7 percent of the issued and outstanding units of HLBE. Excluding the units owned by GFE, there are 38,456,283 units of HLBE issued and outstanding (the “Minority Interest”). The purchase price for the entire Minority Interest is $14,000,000 in cash payable at the closing of the Merger. Each issued and outstanding unit of the Minority Interest will be canceled and converted into the right to receive $0.36405 per Unit. (the “Merger Consideration”).
The units of HLBE held by GFE immediately prior closing of Merger shall be cancelled with no consideration issued to GFE. GFE will emerge from the transaction as the sole owner of HLBE.
At the time the Merger becomes effective, 100 percent of the membership interest in the Merger Sub shall be converted into and become 100 percent of the membership interests in HLBE, as the surviving company in the Merger.
The Merger is subject to approval by a majority of the Minority Interest of HLBE. A special meeting of the members of HLBE will be called to vote on the Plan of Merger. The Merger is also subject to (i) the consent of GFE’s lender, (ii) GFE’s ability to obtain financing for the transaction, (iii) confirmation that the Merger will not have materially adverse tax consequences for GFE, (iv) the receipt of regulatory approval, including approval by the Securities and Exchange Commission and (v) the receipt of third-party consents.
Pursuant to the Merger Agreement, GFE and HLBE release, acquit, and discharge each other and all related parties from all claims, including, all liabilities, obligations, claims, litigation, actions, causes of action, suits, proceedings, executions, judgments, demands, damages, losses, duties, debts, dues, accounts, fees, costs, expenses and penalties, and agree not to initiate, maintain, prosecute or continue to maintain or prosecute any action, suit or proceeding, or seek to enforce any right or claim against the other or its related parties.
Pursuant to the Merger Agreement, HLBE and GFE shall appoint an exchange agent who shall be responsible for, among other things, dispersing Merger Consideration to holders of Minority Interest units who properly surrender their units. Both HLBE and GFE agree to pay their own transaction expenses related to the Merger.
Voting agreements related to Merger
On or about March 24, 2021, GFE and HLBE entered into a Voting Agreement, pursuant to which GFE agrees to vote its units of HLBE in favor of the proposed Merger (the “GFE Voting Agreement”). The GFE Voting Agreement also provides that GFE will designate HLBE as its proxy for the purposes of voting for the Merger, GFE will refrain from transferring any of its units of HLBE prior to the Merger, and GFE authorizes HLBE to suspend trading of all units until the Merger is complete or is terminated. A copy of the GFE Voting Agreement is furnished as Exhibit 10.2 to this report.
Additionally, on or about March 24, 2021, GFE and the governors of HLBE appointed by HLBE’s Minority Interest (the “Governors”) entered into a Voting Agreement (the “HLBE Voting Agreement”). Pursuant to the HLBE Voting Agreement, the Governors agree to vote for the Merger, recommend the members of HLBE vote for the Merger, and