ASSET PURCHASE AGREEMENT

EXHIBIT 2.1

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (“Agreement”) made this 3rd day of January, 2013, by Heron Lake BioEnergy, LLC, hereinafter Company, the sole member of Lakefield Farmers Elevator, LLC, hereinafter Seller, whose address is 111 Main Street, Lakefield, Minnesota, and FCA CO-OP, a Minnesota Cooperative, hereinafter referred to as Buyer, whose address is 105 Jackson Street, PO Box 228, Jackson, MN 56143.

WHEREAS, Seller has conducted and operated a grain elevator, a petroleum retail outlet and related business services in the cities of Lakefield and Wilder Minnesota; and,

WHEREAS, Company owns all of the outstanding membership interests of Seller and desires to sell the assets of the Seller; and,

WHEREAS, Buyer desires to purchase the assets of the Seller identified hereinafter.

NOW THEREFORE, in consideration of the terms and conditions contained herein and other good and valuable consideration, it is agreed by and between the parties as follows:

1.                                      Assets.           On and subject to the terms and conditions set forth in this Agreement and the consummation of the transactions contemplated by the Agreement, on the closing date (hereinafter specified in Section 2 below and hereinafter referred to herein as the “Closing Date”), Seller hereby agrees to sell and transfer to Buyer and Buyer does hereby purchase and acquire all the assets of Seller as existed on November 27, 2012, other than the excluded assets, which acquired assets includes all real estate identified on the attach “EXHIBIT B”, customer lists, the machinery, equipment, bunkers, rolling stock, tools, shop parts, furniture, fixtures, and other fixed assets, and computers, identified on the attach “EXHIBIT A”, the “consumable” shop inventory used to operate the business and not held for resale, such as engine oil for rolling stock and machinery and equipment, propane at Wilder and Lakefield sites, oil to control dust, etc,, the grain bin identified on the attach “EXHIBIT D”, the grain inventory purchased pursuant to the Grain Transfer Agreement provisions of Section 19, and the consumable fuel inventory used to operate the card-troll retail fuel business purchased pursuant to the Fuel Inventory Agreement provisions of Section 19, free and clear of all liens and encumbrances except as otherwise specifically identified herein. Buyer is not purchasing any of Seller’s cash, cash equivalents, license deposits, contracts (other than the grain contracts identified in Section 19), inventory (other than grain inventory or fuel inventory or the consumable shop inventory used to operate the business and not held for resale, purchased at Closing hereunder), obligations, name, accounts receivable, or any other excluded assets identified on the attach “EXHIBIT C” or any other interest in the Company or Seller, and is not herewith entering into any legal relationship or acquiring any interest in the Company or Seller other than the purchase of the specified assets. All of the Company’s, Seller’s and Gavilon, LLC inventory will be removed on or before closing, or purchased pursuant to the Grain Transfer Agreement provisions of Section 19, unless prior arrangements are made with Buyer.

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2.                                      Purchase Price; Closing.        The purchase price shall be Three Million Seven Hundred Fifty Thousand Dollars ($3,750,000.00), plus the purchase price for the grain inventory or fuel inventory purchased pursuant to the provisions of Section 19. Buyer shall deposit Three Hundred Seventy Five Thousand Dollars ($375,000) as earnest money with First American Title Insurance Company, 801 Nicollet Mall, Minneapolis, MN 55402 Attn: Kristi Broderick, within one (1) business day of execution of this Agreement (the “Earnest Money”), which amount shall be refunded to Buyer upon any termination of this Agreement by Buyer hereunder, paid over to Seller upon any termination of this Agreement by Seller as a result of Buyer’s failure to cure its breach of this Agreement or the failure of a condition to closing the transactions contemplated hereby as a result of Buyer’s actions or inactions (other than the financing contingency described in Section 15 hereof), or credited to the purchase price at the closing of this transaction (the “Closing”) by mail or in person at a location to be mutually agreed upon by the parties hereto on January 30th , 2013 (the “Closing Date”), unless the parties mutually agree to extend the Closing Date or the Closing Date is extended pursuant to the terms hereof.  On the Closing Date: a) Seller shall cease operations of the Lakefield and Wilder locations; allow Buyer to undertake a final inspection of the assets sold; confirm the existence and operating condition of all equipment sold (identified on the Schedule of Fixed Assets on the attach “EXHIBIT A” or in “REPLACEMENT EXHIBIT A” to be attached to the Bill of Sale, as provided at the end of this Section 2; and, to undertake the measure of all inventory (fuel and grain) to be transferred pursuant to this agreement; b) Seller shall deliver to Buyer the duly-executed documents, instruments and considerations specified in this Agreement or as reasonably required to transfer the acquired assets to Buyer or otherwise effect the consummation of the transactions described herein, including but not limited to General Warranty Bills of Sale for the fixed assets and other personal property acquired hereby substantially in the form of the General Warranty Bill of Sale attached hereto and incorporated herein by reference as “EXHIBIT D” for the transfer of the Grain Bin; and c) Buyer shall deliver to Seller the purchase price for the acquired assets less the earnest money deposit by wire transfer or immediately available funds to a bank account specified by Seller, the assumption agreements related to DP corn grain contracts specified in Section 19 and the Grain Bin transfer and the Koedam Bill of Sale, and such other duly-executed documents, instruments and considerations reasonably required to transfer the acquired assets to Buyer or otherwise effect the consummation of the transactions described herein.  If there any changes in the items listed on the attached “EXHIBIT A” between the date of this Agreement and the Closing Date, then Seller and Buyer shall prepare (based on its inspection on the Closing Date) an Updated Schedule of Fixed Assets listing the fixed assets sold as of the Closing Date and shall be attached to this Agreement as “REPLACEMENT EXHIBIT A”.  The $850,000 portion of the purchase price allocated for the fixed assets sold as of the Closing Date shall be adjusted plus or minus the fair market value (as agreed to by Seller and Buyer) of any fixed assets listed on or missing from “REPLACEMENT EXHIBIT A” which represents additions or deletions from EXHIBIT A.

3.                                      Corporate ownership transfer.   Seller shall execute and tender to Buyer all necessary corporate documents to transfer all assets of the Seller identified herein. Buyer shall execute and tender to Seller all necessary corporate documents to purchase all assets of the Seller identified herein or assume the grain contracts identified in Section 19. Seller and Buyer each

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agree to execute any and all other documents that may later be required or reasonably requested to complete the transfer of ownership of the acquired assets, the assumption of the grain contracts specified in Section 19, or to allow the Buyer to transfer any necessary license, permit or acquired contract.

4.                                      Covenant Not to Compete.        Seller agrees it shall not compete with the Buyer in the grain purchasing business in cities of Lakefield, Jackson, Round Lake, Trimont, Sherburn or Wilder Minnesota for a period of five (5) years from the close of this sale. This provision shall survive the Closing, and Seller agrees to execute any reasonable documentation confirming this non-compete agreement at Closing.  Company agrees it shall not compete with the Buyer in the grain purchasing business in cities of Lakefield, Jackson, Round Lake, Trimont, Sherburn or Wilder Minnesota for a period of five (5) years from the close of the sale of its elevator facility. This provision shall survive the Closing, and Company agrees to execute any reasonable documentation confirming this non-compete agreement at Closing.

5.                                      Seller debts; Buyer’s assumptions.         At Closing, Seller shall pay all account payables of the Seller due and owing as of January 30th, 2013 and any and all debt owed by Seller as of January 30th, 2013 as necessary for Seller to deliver marketable title at Closing to any assets purchased herein. Seller shall indemnify and hold the Buyer harmless against all such accounts payable and other liabilities not expressly assumed by Buyer hereunder.  Unless specifically provided in this agreement, Buyer is not acquiring, directly or indirectly, any of Seller’s or the Company’s liabilities or obligations and no such assumption shall accrue to Buyer by operation of law or otherwise.  Buyer shall indemnify and hold Seller and the Company harmless against all liabilities or obligations assumed by Buyer under Section 19 with respect to DP grain contracts, the Grain Bin and any other contracts expressly assumed by Buyer hereunder.

6.                                      Employees.       Parties acknowledge that this is a purchase agreement for the assets of Seller and that there is no guarantee to acquire or obligation to employ employees of the Company or Seller.

7.                                      Representations of Seller.  Seller represents and warrants to the Buyer as follows:

a)                                     the assets to be transferred to the Buyer pursuant to this Agreement, whether tangible or intangible, shall be at the time of transfer free of any and all liens, security interests, claims and encumbrances;

b)                                     Seller is not in breach or in default of any contract, lease or arrangement affecting the operation of the assets being acquired hereunder and Seller shall duly perform any such contract, leases and arrangements until Closing;

c)                                      there are no actions or proceedings pending or threatened against Seller or the Company affecting the operation of the assets being acquired hereunder;

d)                                     Seller is not insolvent and the Company is not insolvent and neither will be rendered insolvent by this sale;

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e)                                      all equipment, tools, furniture, fixtures, machinery and computers of Seller are in good operating condition and repair, normal wear and tear excepted;

f)                                   Seller and the Company have complied with all applicable federal, state and local laws in any way related to the conduct and operation of Seller;

g)                                      no special consents are required to carry out the transaction contemplated in this Agreement, other than the consent of mortgagee that encumbers the real estate described on Exhibit “B”;

8.                                      Real estate transfer.       The following conditions shall apply to the transfer of the real estate (Property) pursuant to this Agreement:

a.                                      Real estate taxes:  Seller shall pay the real estate taxes payable in 2012 and all prior years.  Real estate taxes due and payable in 2013 shall be prorated to the day of closing. Buyer shall pay the real estate taxes due and payable in 2014 and all subsequent years. In the event that the property is encumbered by assessments, Seller shall pay the portion of the assessments due and payable with Seller’s portion of the real estate taxes to be paid in the year 2013; and Buyer agrees to pay all assessments or any part of any assessment that becomes due and payable thereafter.

b.                                      Possession:  Seller shall deliver possession of the Property to Buyer at Closing on the Closing Date.

c.                                       Conveyance of title:  Subject to Buyer’s performance, Seller shall deliver to Buyer at Closing a Limited Warranty Deed in fully executed, recordable form, conveying marketable title in and to the real estate identified on “Exhibit B”, free and clear from any liens or encumbrances not objected to under subsection (d) hereof, subject to the following exceptions:

Building and zoning laws, ordinances, State and Federal regulations; restrictions relating to the use or improvement of the Property without effective forfeiture provisions; reservation of any minerals or mineral rights to the State of Minnesota, if previously so reserved; covenants, conditions, restrictions, declarations and easements of record, and the use of the weigh scale and egress and ingress set forth in the form of the Koedam Bill of Sale on the Grain Bin which is included in the attach “EXHIBIT D”.

d.                                      Owners Policy of Title Insurance and objections to title:  Within a reasonable time after the date of this agreement, Seller shall provide an updated Owners Policy of Title Insurance commitment for the real estate which shall be certified to date at Sellers’ expense to include proper searches covering bankruptcies, State and Federal liens, and judgments.  Seller shall also provide to Buyer a drawing from the surveyor of the boundaries of the real estate Buyer is purchasing at Lakefield and Wilder hereunder, provided no further survey is required and the surveyor may use his existing data to provide a current drawing of the real estate being sold and purchased hereunder.  Buyer shall be allowed ten (10) days after receipt of the title commitment and surveyor drawings to consider any exceptions to coverage in the title insurance commitment and to make any commercially reasonable objections to title, which shall be in writing or shall be deemed waived.  If any such objections to title are made, the Seller shall be allowed 120 days to remove the exceptions. Pending correction of title, the payments hereunder

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shall be postponed; but upon correction of title, and within 10 days after written notice to Buyer, the parties shall perform this Agreement according to its terms.

e.                                       Risk of loss:  If for any reason — including, but not limited to, fire, vandalism, flood, earthquake, or act of God — there is any loss or damage to the real estate or

personal property being purchased hereunder (“Property”) prior to closing, the risk of loss shall be on the Seller.  If the Property or assets are destroyed or substantially damaged before the closing, Buyer, at Buyer’s option, may declare this agreement to be null and void, and in such event Seller and Buyer shall sign an instrument canceling and terminating this agreement.

f.                                        General warranties:  Seller warrants [a] that there is a right of access to the real estate from a public right-of-way; [b] that prior to closing payment in full has been made for all labor, materials, machinery, fixtures, or tools furnished within 120 days immediately preceding the date of closing in connection with construction, alteration, or repair of any structure on or improvement to the real estate; [c] that Seller has not received notice from any person or governmental authority as to any violation of any law, ordinance, regulation, or restrictive covenant and that any such notice received by Seller will be provided to Buyer immediately.  Seller certifies that there are no known water wells or septic systems located on the real estate and these warranties shall satisfy all reporting requirements.  Buyer represents and warrants that at the time of Closing, it shall have all permits, licenses, bonds and all required governmental authority to conduct the business of the elevator that may be required by law.  Seller and Buyer each represent and warrant to the other party that, as of the date of this Agreement and as of the Closing Date, each has and will have the power and authority to enter into and perform its obligations under this Agreement, this Agreement has been duly and validly authorized by all required corporate action, and upon execution this Agreement shall constitute the valid and binding obligation of each party that shall be enforceable against each party in accordance with the terms hereof.  These warranties shall survive closing.