8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported):  March 1, 2011

Heron Lake BioEnergy, LLC

(Exact name of Registrant as Specified in its Charter)

Minnesota

(State Or Other Jurisdiction Of Incorporation)

000-51825	41-2002393
(Commission File Number)	(I.R.S. Employer Identification No.)

91246 390th Avenue
Heron Lake, MN	56137-1375
(Address Of Principal Executive Offices)	(Zip Code)

(507) 793-0077

Registrant’s Telephone Number, Including Area Code

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Items under Sections 2 through 8 are not applicable and are therefore omitted.

ITEM 1.01ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT

On March 1, 2011, AgStar Financial Services, PCA (“AgStar”) agreed to extend the maturity date of the Revolving Line of Credit Loan and the Forbearance Agreement with Heron Lake BioEnergy, LLC (the “Company”) for up to sixty (60) days, provided that the Company accomplish certain conditions by certain time benchmarks prior to May 1, 2011.  In exchange for this extension, the Company paid the amount equal to fifty percent (50%) of the Deferred Interest pursuant to the provisions of Section 5.d. of the Forbearance Agreement, in full satisfaction of the obligation of the Company to pay the Deferred Interest.

To effect the foregoing extension, the Company and AgStar entered into the following three agreements on March 1, 2011:

(1)           A First Amendment (the “First Amendment to the Fifth Supplement”) to the Amended and Restated Fifth Supplement to the Master Loan Agreement dated December 30, 2010 (the “Fifth Supplement”), under which AgStar agreed to extend the Revolving Line of Credit Loan Maturity Date in the Fifth Supplement to the later of (i) April 1, 2011 or (ii) the occurrence of an Event of Default under that certain Second Amendment to Forbearance Agreement between AgStar and the Company dated March 1, 2011; but in any case no later than May 1, 2011;

(2)           An Allonge to extend the maturity date of the Third Amended and Restated Revolving Line of Credit Note to match the extended maturity date described in the First Amendment to the Fifth Supplement; and

(3)           A Second Amendment to Forbearance Agreement (the “Second Amendment to Forbearance Agreement”), under which, provided that the Conditions Precedent set forth in the Forbearance Agreement have been satisfied and the Company complies with the terms of the Forbearance Agreement, AgStar agreed 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 Company’s default beginning on March 1, 2011, and ending on the later of (i) April 1, 2011 or (ii) the occurrence of an Event of Default (as defined under the Second Amendment to Forbearance Agreement), but in any case no later than May 1, 2011 (the “Forbearance Period”).  Under the Second Amendment to Forbearance Agreement, the Company must deliver to AgStar, on or before March 10, 2011, a final detailed proposal and request for restructuring of the Loans extended to the Company under the Loan Agreement, Notes and related Loan Documents; which proposal and timeline to complete such proposal must be in form and substance acceptable to AgStar, and must provide as much detail as AgStar may request in its sole discretion.

The Company and AgStar had originally entered into a Forbearance Agreement dated July 2, 2010 that provided for a forbearance period relating to certain covenant defaults for the period ending on the earlier of December 31, 2010 or an event of default.  On December 30, 2010, the Company and AgStar entered into a First Amendment to Forbearance Agreement that extended the forbearance period of the Forbearance Agreement to the earlier of March 1, 2011 or an event of default (as defined under the First Amendment to Forbearance Agreement).  Under Section 10 of the First Amendment to the Forbearance Agreement, the Company agreed, subject to the escrow provisions set forth in Section 10, to obtain additional equity investments on terms and conditions acceptable to AgStar of an amount not less than $4,500,000 (the “New Equity”) on or before March 1, 2011. One effect of the Second Amendment to Forbearance Agreement is to extend the date by which the Company must meet the foregoing New Equity requirement to the end of the Forbearance Period defined in the Second Amendment, but in any case no later than May 1, 2011.

The foregoing summaries of the First Amendment to the Fifth Supplement, the Allonge and the Second Amendment to Forbearance Agreement do not purport to be complete and are subject to and qualified in their entirety by reference to the First Amendment to the Fifth Supplement, the Allonge and the Second Amendment to Forbearance Agreement, which are attached hereto as Exhibits 10.1, 10.2, and 10.3, respectively.

2

ITEM 9.01FINANCIAL STATEMENTS AND EXHIBITS

Exhibit	Description
10.1	First Amendment to Amended and Restated Fifth Supplement to the Master Loan Agreement dated December 30, 2010 by and between Heron Lake BioEnergy, LLC and AgStar Financial Services, PCA.
10.2	Allonge to Third Amended and Restated Revolving Line of Credit Note dated December 30, 2010 entered into by Heron Lake BioEnergy, LLC as borrower to AgStar Financial Services, PCA as lender.
10.3	Second Amendment to Forbearance Agreement dated July 2, 2010 by and between Heron Lake BioEnergy, LLC and AgStar Financial Services, PCA.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		HERON LAKE BIOENERGY, LLC
		By:	/s/ Robert J. Ferguson
				Robert J. Ferguson
				Chief Executive Officer
Date:	March 7, 2011

3

EX-10.1

EXHIBIT 10.1

FIRST AMENDMENT TO

AMENDED AND RESTATED FIFTH SUPPLEMENT

TO THE MASTER LOAN AGREEMENT

(REVOLVING LINE OF CREDIT LOAN)

This First Amendment to Amended and Restated Fifth Supplement to the Master Loan Agreement dated December 30, 2010 (which document was erroneously captioned First Amendment to Fifth Supplement to the Master Loan Agreement) (this “Amendment”) is effective as of March 1, 2011, by and between HERON LAKE BIOENERGY, LLC, a Minnesota limited liability company (“Borrower”), and AGSTAR FINANCIAL SERVICES, PCA (“Lender”).

RECITALS

A.Unless otherwise expressly defined herein, capitalized terms used herein shall have the same meaning ascribed to them in that certain Fourth Amended and Restated Master Loan Agreement dated as of October 1, 2007 (as the same may be or has been amended, supplemented, modified, extended or restated from time to time, the “MLA”) or in the Amended and Restated Fifth Supplement to the Master Loan Agreement dated December 30, 2010 (which document was erroneously captioned First Amendment to Fifth Supplement to the Master Loan Agreement) (the “Fifth Supplement”), as applicable.

B.Under the MLA and Fifth Supplement, Lender extended various credit facilities to Borrower for purposes relating to the operation, among other things, of an ethanol production facility in Jackson County, Minnesota.

C.Borrower has requested that Lender extend the maturity date of the Revolving Line of Credit Loan extended to Borrower under the MLA and Fifth Supplement, and Lender has agreed to such extension upon the terms and conditions set forth herein.

AGREEMENT

NOW, THEREFORE, in consideration of the premises herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1.Amendments to Fifth Supplement.  The following defined term, as used in the Fifth Supplement and the other Loan Documents, is hereby amended and restated as follows:

“Revolving Line of Credit Loan Maturity Date” the later of (i) April 1, 2011 or (ii) the occurrence of an Event of Default under that certain Second Amendment to Forbearance Agreement between Lender and Borrower dated March 1, 2001; but in any case no later than May 1, 2011.

2.Conditions Precedent to Effectiveness of this Amendment. The obligations of the Lender hereunder are subject to the conditions precedent that the Lender shall have received the following, in form and substance satisfactory to the Lender:

a.this Amendment duly executed by the Borrower and the Lender;

b.the Allonge (to Third Amended and Restated Revolving Line of Credit Note) duly executed by the Borrower and the Lender;

c.Borrower shall have paid to Lender, concurrent with the execution of this Amendment, fifty percent (50%) of the Deferred Interest pursuant to that certain First Amendment to Forbearance Agreement between Borrower and Lender dated December 30, 2010; and

d.all other documents, instruments, or agreements required to be delivered to the Lender under the Loan Agreement and not previously delivered to the Lender.

3.Representations and Warranties of Borrower.  The Borrower hereby agrees with, reaffirms, and acknowledges as follows:

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

b.This Amendment is, and each other Loan Document to which Borrower is a party when delivered will be, legal, valid and binding obligations of Borrower enforceable against 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; and

c.All other representations, warranties and covenants contained in the MLA, Fifth Supplement and the other Loan Documents are true and correct and in full force and effect.

4.Miscellaneous.

a.Effect; Ratification.  The amendments set forth herein are effective solely for the purposes set forth herein and shall be limited precisely as written, and shall not be deemed to (i) be a consent to, or an acknowledgment of, any amendment, waiver or modification of any other term or condition of the MLA or Fifth Supplement, including, without limitation, a waiver of any rights or remedies available to the Lender on account of any default or Event of Default, which may have occurred prior to the date of this Amendment, or (ii) prejudice any right or remedy which Lender may now have or may have in the future under or in connection with the MLA and Fifth Supplement, as amended hereby, or any other instrument or agreement referred to therein. It is further understood and agreed by and between the Borrower and the Lender that all other terms and provisions of the MLA and Fifth Supplement shall remain in full force and effect, enforceable by the Lender against the Borrower as fully as though no amendments had been made hereby, and this Amendment shall not be deemed to hinder, compromise or lessen the enforceability of the MLA, Fifth Supplement, the Notes, or any mortgage, security interest, or guaranty securing repayment of the Loans, in any way.  Each

2

reference in the MLA, Fifth Supplement and in any other Loan Document to the “Fifth Supplement” shall mean the Fifth Supplement, as amended hereby.

b.Loan Documents.  This Amendment is a Loan Document executed pursuant to the MLA and shall be construed, administered and applied in accordance with the terms and provisions thereof.

c.Defined Terms.  All terms used and not otherwise defined herein shall have the meanings assigned to them in the MLA or the Fifth Supplement, as applicable.

d.Counterparts.  This Amendment may be executed in any number of counterparts, each such counterpart constituting an original and all of which when taken together shall constitute one and the same instrument.

e.Severability.  Any provision contained in this Amendment which is held to be inoperative, unenforceable or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable or invalid without affecting the remaining provisions of this Amendment in that jurisdiction or the operation, enforceability or validity of such provision in any other jurisdiction.

f.GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MINNESOTA.

g.WAIVER OF JURY TRIAL.  THE BORROWER AND THE LENDER HEREBY IRREVOCABLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENT TO WHICH IT IS A PARTY OR ANY INSTRUMENT OR DOCUMENT DELIVERED THEREUNDER.

{SIGNATURE PAGE FOLLOWS}

3

SIGNATURE PAGE TO

FIRST AMENDMENT TO

AMENDED AND RESTATED FIFTH SUPPLEMENT

TO THE MASTER LOAN AGREEMENT

BY AND BETWEEN

HERON LAKE BIOENERGY, LLC

AND

AGSTAR FINANCIAL SERVICES, PCA

DATED AS OF:  March 1, 2011

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their respective duly authorized officers as of the date first written above.

BORROWER:
HERON LAKE BIOENERGY, LLC,
a Minnesota limited liability company
By:	/s/ Robert J. Ferguson
	Robert J. Ferguson
	Its: President
LENDER:
AGSTAR FINANCIAL SERVICES, PCA,
a United States corporation
By:	/s/ Mark Schmidt
	Mark Schmidt
	Its: Vice President

4

EX-10.2

EXHIBIT 10.2

ALLONGE

(to Third Amended and Restated Revolving Line of Credit Note)

This ALLONGE (to Third Amended and Restated Revolving Line of Credit Note) (“Allonge”) is made and entered into as of March 1, 2011, by and between HERON LAKE BIOENERGY, LLC, a Minnesota limited liability company (the “Borrower”) and AGSTAR FINANCIAL SERVICES, PCA, (the “Lender”).

RECITALS

A.The Borrower previously executed and delivered to the Lender the Third Amended and Restated Revolving Line of Credit Note in the original principal amount of $6,750,000.00, dated December 30, 2010 (the “Note”).

B.The Borrower has requested that Lender extend the maturity date of the Note.

C.The Lender is willing to make such modification in accordance with the terms and conditions of this Allonge.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained in this Allonge and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Borrower and the Lender, the parties agree as follows:

1.Modification of Note.  Notwithstanding any of the provisions of that certain Fourth Amended and Restated Master Loan Agreement dated as of October 1, 2007 (as the same may be amended, supplemented, modified, extended or restated from time to time, the “MLA”) or that certain Amended and Restated Fifth Supplement to the Master Loan Agreement (which document was erroneously captioned First Amendment to Fifth Supplement to the Master Loan Agreement) dated December 30, 2010, the Note is amended as follows:

a.Paragraph #6 of the Note is hereby amended to read as follows:

“The outstanding principal balance hereof, together with all accrued interest, if not paid sooner, shall be due and payable in full on the later of (i) April 1, 2011 or (ii) the occurrence of an Event of Default under that certain Second Amendment to Forbearance Agreement between Lender and Borrower dated March 1, 2001; but in any case no later than May 1, 2011 (the “Maturity Date”).”

2.Remaining Terms.  It is further understood and agreed by and between the Borrower and the Lender that all other terms and provisions of the Note shall remain in full force and effect, enforceable by the Lender against the Borrower as fully as though no amendments had been made hereby, and this Allonge shall not be deemed to hinder, compromise or lessen the enforceability of the Note, or any mortgage, security interest, or guaranty securing repayment of the Note, in any way.

SIGNATURE PAGE TO

ALLONGE

(TO THIRD AMENDED AND RESTATED REVOLVING LINE OF CREDIT NOTE)

BY AND BETWEEN

HERON LAKE BIOENERGY, LLC

AND

AGSTAR FINANCIAL SERVICES, PCA

DATED:  March 1, 2011

IN WITNESS WHEREOF, the parties hereto have caused this Allonge to be duly executed and delivered as of the date and year first above written.

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

2

EX-10.3

EXHIBIT 10.3

SECOND AMENDMENT TO

FORBEARANCE AGREEMENT

THIS SECOND AMENDMENT TO FORBEARANCE AGREEMENT (this “Amendment”) is made as of this 1st day March, 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, and a First Amendment to Forbearance Agreement dated December 31, 2010 (collectively, the “Forbearance Agreement”), which provided for a forbearance period which expires on March 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 later of (i) April 1, 2011 or (ii) the occurrence of an Event of Default (as defined below), but in any case no later than May 1, 2011 (the “Forbearance Period”).

b.The following subsection shall be added to Section 11 of the Forbearance Agreement and shall be included as additional “Events of Default” as used in therein:

e.Delivery of Final Restructuring Proposal.  Borrower shall have failed to deliver on or before March 10, 2011, a final detailed proposal and request for restructuring of the Loans extended to Borrower by Lender under the Loan Agreement, Notes and related Loan Documents; which proposal and timeline to complete such proposal shall be in form and substance acceptable to the Lender, and shall provide as much detail as Lender may request in its sole discretion.

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 obtained and delivered to the Lender any and all further documentation reasonably requested by the Lender; and

c.the Borrower shall have paid to Lender fifty percent (50%) of the Deferred Interest pursuant to Section 5 of the Forbearance Agreement, and all other costs and expenses incurred by Lender in connection with the execution of this Amendment, including, without limitation, reasonable attorneys’ fees.

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.

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, all 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]

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

[Signature Page to Second Amendment to Forbearance Agreement]