Exhibit 10.8


 


INTERCREDITOR AGREEMENT


 


This INTERCREDITOR AGREEMENT (this “Agreement”)
is entered into as of April 24, 2008, by and between FIRST
NATIONAL BANK OF OMAHA,  a national
banking association established under the law of the United States of America,
in its capacity as Administrative Agent and Collateral Agent for the Banks (in
such capacities, “FNBO”), and
U.S. BANK NATIONAL ASSOCIATION, a national banking association established
under the law of the United States of America , as trustee (the “Trustee”) for
the holders of the $15,180,000 City of Lamberton, Minnesota Parity Senior Solid
Waste Disposal Facility Revenue Bonds, Series 2008 (Highwater Ethanol, LLC
Ethanol Plant Project) (the “Bonds”).


 


RECITALS


 


A.                                 Highwater
Ethanol, LLC, a Minnesota limited liability company (the “Company”)
is the owner of certain real property located in Redwood County and Cottonwood
County, Minnesota, legally described in Exhibit A
attached hereto (the “Premises”).


 


B.                                   Pursuant
to that certain Construction Loan Agreement dated as of April 24, 2008,
(as it may be from time to time amended, the “FNBO Loan
Agreement”), among the Company, FNBO, as Administrative Agent,
Collateral Agent and a Bank, and the Banks a party thereto (collectively, the “Lenders”), the Lenders have agreed to make the Loans as
defined therein in the aggregate principal amount of $64,402,000.00 to the
Company for the purpose of acquiring, constructing, and equipping an ethanol
production facility (the “Plant”) on the
Premises, and for the purpose of financing the general corporate and operating
expenses of the Company upon completion of the Plant, for the purposes of
issuing letters of credit for the account of the Company and for such other
purposes as are provided for in the FNBO Loan Agreement.


 


C.                                   The
Company’s obligations to the Lenders under the FNBO Loan Documents are
evidenced by Construction Notes (converting to the Fixed Rate Notes, Variable
Rate Notes and Long Term Revolving Notes evidencing the Term Loans upon
conversion of the Construction Loan to the Term Loans as defined and provided
for in the FNBO Loan Agreement), Revolving Promissory Notes, Promissory Note
and Continuing Letter of Credit Agreement (collectively, the “FNBO Notes”), and are secured by, among other collateral, a
Construction Loan Mortgage, Security Agreement, Assignment of Leases and Rents
and Fixture Financing Statement dated as of April 24, 2008 (the “FNBO Mortgage”), and a Security Agreement dated as of April 24,
2008 


 

















 


(the “FNBO Security Agreement”) and the other FNBO Loan Documents
which grant a security interest in the Company’s assets and property or
collaterally assign Company’s rights to FNBO as Administrative Agent and/or
Collateral Agent for the Lenders.


 


D.                                  Pursuant
to that certain Lease Agreement dated as of April 1, 2008 (the “Bond Lease Agreement”), the City of Lamberton, Minnesota (the “City”) has agreed to provide financing in the
aggregate principal amount of $15,180,000.00 to the Company (the “Bond Financing”) from the proceeds of its Bonds for the purpose
of acquiring, constructing, equipping and furnishing certain solid waste
disposal facilities constituting a part of the Plant.


 


E.                                    The
Company’s obligations to the Trustee under the Bond Financing Documents are
secured by a Construction Loan Mortgage, Security Agreement, Assignment of
Leases and Rents and Fixture Financing Statement dated as of April 1, 2008
(the “Bond Mortgage”), and a Security
Agreement dated as of April 1, 2008 (the “Bond
Security Agreement”).


 


F.                                        The
solid waste disposal facilities to be financed by the Bond Financing are to be
owned by the City, subject to the prior liens of the FNBO Mortgage, FNBO
Security Agreement and any other liens created by any FNBO Loan Document and
the Bond Mortgage, Bond Security Agreement and any other lien created by any
Bond Financing Document.


 


NOW THEREFORE,
in consideration of the premises and the mutual covenants and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally
bound, the Parties hereby agree as follows:


 


1.                                      Definitions.  All capitalized terms used herein and defined
in the foregoing recitals shall have the meanings ascribed thereto.  All capitalized terms used and not otherwise
defined herein shall have the meaning ascribed to them in Article 9 of the
Uniform Commercial Code as enacted in the State of Minnesota (the “UCC”), or shall have the meanings set forth below:


 


“Bond Debt”
shall mean all Liabilities and indebtedness of every nature of the Company and
City from time to time owed to the Trustee under the Bond Financing Documents
in an amount not exceeding the sum of $15,180,000.00, including any amendments,
modifications, renewals or extensions thereof, plus, respectively, (a) any
Protective Advances, (b) Costs of Completion, (c) accrued and unpaid
interest and (d) all fees, costs and expenses, whether primary, secondary,
direct, contingent, fixed or otherwise, heretofore, now and from time to time
hereafter owing, due or payable, whether before or after the filing of a
Proceeding under the Bankruptcy Code, together with any interest accruing
thereon after the commencement of a Proceeding, without regard to whether or
not such interest is an allowed claim. 
The Bond Debt shall be considered to be outstanding whenever any
obligation under the Bond Financing Documents is outstanding.


 


“Bond
Financing Documents” means the Bond Lease Agreement, Bond Mortgage, Bond
Security Agreement, the Indenture and the Bonds and all other notes, mortgages,
security agreements, documents, instruments, assignments and contracts,
relating thereto, as 


 


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amended,
restated, supplemented or otherwise modified from time to time.  The Bond Financing Documents shall be
provided to the Parties as the same are executed, amended, supplemented,
restated or otherwise modified.


 


“Agreement”
means this Intercreditor Agreement.


 


“Bankruptcy
Code” shall mean Title 11 of the United States Code, as amended from time
to time and any successor statute and all rules and regulations
promulgated thereunder.


 


“Bond
Liabilities” means all obligations of the Company and City to the Trustee
or any other Person under, or arising as a result of, the Bonds or the Bond
Financing Documents.


 


“Collateral”
means and includes all property, contracts, assets and rights of the Company
granted as collateral security for the FNBO Debt, the Bond Debt or other
obligations of the Company under any Financing Document, in favor of FNBO, as
Administrative Agent and/or Collateral Agent for the Lenders, or the holders of
the Bonds, whether real, personal or mixed property, whether granted directly
or indirectly, whether granted now or in the future.


 


“Costs of
Completion” means all costs and expenses in excess of
the principal amount committed by Lenders on the Construction Loan (as defined
in the FNBO Loan Agreement) and in excess of $15,180,000.00 with respect to the
Bonds actually incurred or expended by a Party to complete construction of the
Project and which have not been reimbursed by the Company or other Person
obligated thereof, as provided for under the FNBO Loan Documents or the Bond
Financing Documents, as the case may be, including, without limitation, the
costs and expenses relating to the drawing of plans, the hiring of contractors,
the rental of equipment, the purchase of materials and equipment, the discharge
of mechanics’ or similar liens and any other expenditures incurred in
connection with the completion of the construction of the Project.


 


“Distribution”
means, with respect to any indebtedness, obligation or security: (a) any
payment or distribution by any Person of cash, securities or other property, by
set-off or otherwise, on account of such indebtedness, obligation or security, (b) any
redemption, purchase or other acquisition of such indebtedness, obligation or
security by any Person; or (c) the granting of any Lien or security
interest to or for the benefit of the holders of such indebtedness, obligation
or security in or upon any property of any Person.


 


“Enforcement
Action” means any action to enforce or attempt to enforce any right or
remedy available to any Party under any Financing Document, pursuant to
applicable law or otherwise, including any action to: (a) accelerate any
indebtedness under any Financing Document or declare the entire amount of any
indebtedness under any Financing Document to be due and payable, (b) exercise
any right of set-off with respect to the Company, (c) commence, continue
or participate in any judicial, arbitral or other proceeding, or any other
collection or enforcement action of any kind, against the Company or any of the
assets of Company (including any Proceeding), seeking, directly or indirectly,
to enforce any rights or remedies, or to enforce any of the obligations 


 


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incurred by
the Company under or in connection with any Financing Document, (d) commence
or pursue any judicial, arbitral or other proceeding or legal action of any
kind, seeking injunctive or other equitable relief to prohibit, limit or impair
the commencement or pursuit by any Party of any of their respective rights or
remedies under or in connection with any Financing Document, or otherwise
available under applicable law, (e) commence bankruptcy or other
insolvency proceedings against the Company, (f) request the appointment of
a receiver for the Company or its assets; (g) exercise remedies with
respect to rents or other revenues payable with respect to the Project or the
Premises, (h) accept a transfer of the Premises or the Project in lieu of
foreclosure, (i) seek a monetary judgment against the Company or (j) exercise
remedies under the provisions of any state or federal law, including, without
limitation, the UCC, or under any contract or agreement, to enforce, foreclose
upon, take possession of or sell any property or assets of the Company or to
exercise any rights of the Company under any contract collaterally assigned
under any Financing Document.


 


“Event of
Default” means (i) with respect to the FNBO Loan Liabilities and the
FNBO Loan Documents, any Event of Default thereunder which has occurred, is
continuing and has not been cured, and (ii) with respect to the Bond
Liabilities and the Bond Financing Documents, any Event of Default thereunder
which has occurred, is continuing and has not been cured.


 


“Financing
Document” means the FNBO Loan Documents and the Bond Financing Documents.


 


“FNBO Debt”
shall mean all Liabilities and indebtedness of every nature of the Company from
time to time owed to the Lenders under the FNBO Loan Documents and any Swap
Contracts (as defined in the FNBO Loan Agreement), including any amendments,
modifications, renewals, restatements or extensions thereof, plus,
respectively, (a) all additional loans by the Lenders to the Company as
permitted under Section 7.1.1 below, (b) any Protective Advances, (c) Costs
of Completion, (d) accrued and unpaid interest and (e) all fees,
costs and expenses, whether primary, secondary, direct, contingent, fixed or
otherwise, heretofore, now and from time to time hereafter owing, due or
payable, whether before or after the filing of a Proceeding under the
Bankruptcy Code, together with any interest accruing thereon after the
commencement of a Proceeding, without regard to whether or not such interest is
an allowed claim.  FNBO Debt shall be
considered to be outstanding whenever any loan commitment or loan under the
FNBO Loan Documents is outstanding.


 


“FNBO Loan
Documents” means the FNBO Loan Agreement, the FNBO Notes, the FNBO
Mortgage, the FNBO Security Agreement, the Swap Contracts, and all other notes,
mortgages, security agreements, documents, instruments, control agreements,
assignments and contracts relating thereto, as amended, supplemented, restated
or otherwise modified from time to time. 
The FNBO Loan Documents shall be provided to the Parties as the same are
executed, amended, supplemented, restated or otherwise modified.


 


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“FNBO Loan
Liabilities” means all obligations of the Company to the Lenders under, or
arising as a result of, the FNBO Loan Documents, including any Negative
Termination Value (as defined in the FNBO Loan Agreement).


 


“Liabilities”
means all obligations of Company, howsoever created, arising or evidenced,
whether direct or indirect, absolute or contingent, joint or several, now or
hereafter existing, or due or to become due.


 


“Lien”
means any consensual mortgage, security, charge, deed of trust, pledge,
security interest, collateral assignment encumbrance or other lien of any
nature, whether now existing or hereafter created, acquired or arising.


 


“Financing
Documents” means the FNBO Loan Documents and the Bond Financing Documents.


 


“Parity
Indebtedness” means all Liabilities of the Company to the Lenders under the
FNBO Debt and of the Company and City to the Trustee under the Bond Debt.


 


“Party”
or “Parties” means individually or together any one or more of FNBO, in
FNBO’s capacity as Administrative Agent and Collateral Agent for the Lenders,
the Trustee, and their respective successors and assigns.


 


“Person”
means any natural person, corporation, general or limited partnership, limited
liability company, firm, trust, association, government, governmental agency or
other entity, whether acting in an individual, fiduciary or other capacity.


 


“Proceeding”
means: (a) any insolvency or bankruptcy case or proceeding (including any
case under the Bankruptcy Code, as amended from time to time, or any successor
statute), or any receivership, custodianship, liquidation, reorganization or
other similar case or proceeding, relative to Company, (b) any
liquidation, dissolution, reorganization or winding down of Company, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy,
(c) any assignment for the benefit of creditors or any other marshalling
of assets and liabilities of Company, or (d) any sale, transfer or other
disposition of all or substantially all of the assets of Company in connection
with any of the foregoing.


 


“Project”
means the acquisition, construction and financing of the Premises and the Plant
and all related facilities and improvements.


 


“Protective
Advances” means all sums advanced for the purpose of payment of real estate
taxes (including special payments in lieu of real estate taxes), personal
property taxes (including special payments in lieu of personal property taxes),
maintenance costs, insurance premiums, other items (including capital items)
reasonably necessary to protect the Project, or any other Collateral from
forfeiture, casualty, loss or waste and any other protective advance made
pursuant to the FNBO Mortgage, Bond Mortgage or other Financing Documents.


 


“Senior
Lenders” means the Lenders and the Trustee.


 


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2.                                      Lien
Priority.


 


2.1                                 Lien
Priorities.  Notwithstanding the
date, manner or order of perfection of the security interests and Liens granted
by the Company to any Party, and notwithstanding any provisions of the UCC,
applicable law, or the Financing Documents or whether any Party hereto holds
possession of all or any part of the Collateral, the following, as between the
Parties shall be the relative priority of the Liens of the Parties in the
Collateral:


 


2.1.1                        Real
Property.   The mortgage Lien and security interest of
each of the FNBO Mortgage and the Bond Mortgage (hereinafter the “Consolidated Mortgages”) are hereby consolidated to
constitute a single first mortgage Lien and security interest on or in the
Premises and the Project and the other Mortgaged Property (as defined in the
FNBO Mortgage and the Bond Mortgage) which shall equally and ratably secure all
holders from time to time of the Parity Indebtedness in proportion to the
amount owed to each as either principal or interest, with the same force and
effect as if FNBO and the Trustee held a single mortgage Lien on and security
interest in the Premises and the Project and the Mortgaged Property to secure
all Parity Indebtedness.  The
consolidated mortgage Lien and security interest of the Consolidated Mortgages
shall be deemed to contain and be subject to all of the terms and conditions
set forth in the FNBO Mortgage and the Bond Mortgage.  To the extent consistent with this Agreement,
inconsistent terms as between such agreements shall be controlled first by the
FNBO Mortgage and then by the Bond Mortgage.


 


2.1.2                        Personal
Property Collateral.  The Lien and security interest of
each of the FNBO Security Agreement and the Bond Security Agreement
(hereinafter the “Consolidated Security
Agreements”) are hereby consolidated to constitute a single first
priority Lien or security interest on or in the Collateral described therein
which shall equally and ratably secure all holders from time to time of the
Parity Indebtedness in proportion to the amount owed to each as either
principal or interest, with the same force and effect as if FNBO and the
Trustee held a single Lien on and security interest in such Collateral to
secure all Parity Indebtedness.  The
consolidated Lien and security interest shall be deemed to contain and be
subject to all of the terms and conditions set forth in the FNBO Security
Agreement and the Bond Security Agreement. 
To the extent consistent with this Agreement, inconsistent terms as between
such agreements shall be controlled first by the FNBO Security Agreement and
then by the Bond Security Agreement.


 


2.1.3                        Other
Collateral. The Lien and security interest of each of the Senior Lenders
pursuant to any other Financing Documents which grant a Lien on or security
interest in any Collateral other than as described in Sections 2.1.1 and 2.1.2
above are hereby consolidated to constitute a single first priority Lien or
security interest on or in the Collateral described therein (other than the
Separate Collateral) which shall equally and ratably secure all holders from
time to time of the Parity Indebtedness in proportion to the amount owed to
each as either principal or interest, with the same force and effect as if FNBO
and the Trustee held a single Lien on and security interest in such Collateral
to secure all Parity Indebtedness. The consolidated Lien and security interest
shall be deemed to contain and be subject to all of the terms and conditions
set forth in the applicable FNBO Loan Documents and the applicable Bond
Financing Documents. To the extent consistent with this Agreement, inconsistent
terms as 


 


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between such agreements
shall be controlled first by the applicable FNBO Loan Documents and then by the
applicable Bond Financing Documents.


 


2.2                                 Agreement
to Cooperate.  Subject to this
Agreement, FNBO and the Trustee hereby agree to coordinate and cooperate with
respect to enforcing their respective rights under the Consolidated Mortgages,
the Consolidated Security Agreements and the other Collateral as described in Section 2.1.3
above, including all rights related thereto, including administering and
managing all proceeds paid under any title or casualty insurance policy and all
condemnation awards and all sums realized upon taking possession of any of the
Collateral pursuant to foreclosure, upon receipt of a deed in lieu of
foreclosure, or pursuant to any Enforcement Action.


 


3.                                      Special
Rights of FNBO.  The Parties
irrevocably agree to accept performance and compliance (including, but not
limited to cure of any Company defaults under the Financing Document) by FNBO
of and with any term, covenant, agreement, provision, condition or limitation
on the Company’s part to be kept, observed or performed under any of the
Financing Documents with the same force and effect as though kept, observed, or
performed by the Company. 
Notwithstanding any provision in this Agreement or any Financing
Document, FNBO shall not be required to perform any such obligations either
before or after an Event of Default.  The
Parties covenant and agree that they shall promptly send, in the manner set
forth in Section 10 below, to each other Party, a copy of each notice it
may deliver to the Company relating to any default or Event of Default by the
Company of any of its Financing Documents or the taking or proposed taking of
any Enforcement Action at the same time as and whenever any such notice shall
be given by a Party to the Company, addressed to such Party at the address set
forth herein.


 


4.                                      Payments
Prior to Acceleration or Demand for Payment.  Until notice of acceleration or demand
for payment of the Parity Indebtedness is given by a Party pursuant to Section 10,
each Party shall be entitled to collect all payments of principal, premium, if
any, and interest due and payable to it under its own Financing Documents, and
all related fees, costs and expenses, at the time and in the manner specified
therein; provided, however, that the Trustee acknowledges and agrees that
principal payments may not be made or applied on the Bond Debt until the
earlier to occur of (i) the indefeasible repayment in full of the FNBO
Liabilities or (ii) the Loan Termination Date of the Term Loans (as
defined in the FNBO Loan Agreement).  In
the event of receipt of such payments from the Company by a Party, prior to the
acceleration or demand for payment of the Parity Indebtedness, such payments
shall belong to such Party as its own property, and such Party shall have no
obligation under this Agreement to hold or remit any part of such payments for
the account of any other Party.


 


5.                                      Payments
After Acceleration of Demand for Payment. 
In the event of receipt of any payments from the Company by any
Party after notice of acceleration or demand for payment of the Parity
Indebtedness has been given, such payments shall be held in trust by the
receiving Party and shall promptly be transferred at the direction of FNBO and
the Trustee to be applied to the payment of the Parity Indebtedness in the
manner set forth as follows:


 


5.1                                 Application
of Moneys.  In
the event of the acceleration or demand for payment of the Parity Indebtedness,
all payments, collections and cash received or effected by 


 


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FNBO under the FNBO Loan
Documents and/or by the Trustee under the Bond Financing Documents shall be
applied first to pay or reimburse FNBO and the Trustee for all of their
reasonable costs and expenses incurred and documented in realizing upon or
effecting such payments, collections, and proceeds, then to any Protective
Advances made by FNBO or the Trustee, then to any Costs of Completion incurred
or expended by FNBO or the Trustee, then to any debt service payments, if any,
made by FNBO on the Bond Debt, or by the Trustee on the FNBO Debt.  After payment, reimbursement, or allowance
for such costs, expenses, damages, liabilities, Protective Advances, Costs of
Completion or debt service payments, the remainder will be applied ratably to
the payment of the Parity Indebtedness, in that proportion which the unpaid
principal amount of, and accrued interest then due and owing on, the FNBO Debt
on the date of application and the unpaid principal amount of, and accrued
interest then due and owing on the Bond Debt on the date of application each
bear to the aggregate unpaid principal balance of, and accrued and unpaid
interest then due and owing on, the FNBO Debt and Bond Debt on the date of
application.


 


5.2                                 Application
of Proceeds of Collateral.  In the
event of the acceleration or demand for payment of the Parity Indebtedness, or
of any foreclosure, sale or other realization on or disposition in liquidation
of any of the Collateral, all moneys collected or received constituting
identifiable proceeds of any item of the Collateral in excess of the amounts
paid to third parties to discharge prior Liens, if any, upon such Collateral
shall be applied first to the payment of all costs incurred in the collection
thereof, including reasonable and documented expenses and disbursements of FNBO
and its counsel and of the Trustee and its counsel, then to any Protective
Advances made by FNBO or the Trustee, then to any Costs of Completion incurred
or expended by FNBO or the Trustee, then to any debt service payments, if any,
made by FNBO on the Bond Debt, or by the Trustee on the FNBO Debt and the
balance of such monies shall be applied as follows:


 


5.2.1                        Collateral.  All amounts received in respect of any of the
Collateral shall be applied ratably to payment of the Parity Indebtedness in
that proportion which the unpaid principal amount of, and accrued interest then
due and owing on, the FNBO Debt, on the date of application, and the unpaid
principal amount of, and accrued interest then due and owing on the Bond Debt
on the date of application each bear to the aggregate unpaid principal balance
of, and accrued and unpaid interest then due and owing, on the FNBO Debt and
Bond Debt on the date of application. 
All amounts received in respect of any of the Collateral in excess of
the amount necessary to effect indefeasible payment in full of the Parity
Indebtedness shall be remitted to the Company or the Person legally entitled
thereto.


 


5.2.2                        Purchase
of Collateral.  If FNBO shall purchase Collateral
at a foreclosure sale or otherwise, it shall hold such title in trust for the
benefit of the holders of the Parity Indebtedness and shall exercise
commercially reasonable efforts to dispose of such Collateral so acquired, the
proceeds of which disposition shall be applied first to the payment of all
costs incurred in the collection thereof, including reasonable and documented
expenses and disbursements of FNBO and its counsel, then to any Protective
Advances made by FNBO, then to any Costs of Completion incurred or expended by
FNBO, then to any debt service payments, if any, made by FNBO on the Bond Debt
and the balance shall be applied pursuant to Section 5.2.1 above.  FNBO shall provide prior written notice to
the Trustee and shall consult with the 


 


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Trustee prior to
exercising any rights or remedies hereunder, but in the event that the FNBO and
the Trustee cannot agree, the decision of FNBO shall govern.


 


5.2.3                        Standard
of Care.  Each Party shall promptly
perform and observe all of its obligations and agreements contained in this
Agreement; provided that, unless otherwise provided herein, each Party shall be
liable hereunder only for its willful misconduct, gross negligence or bad faith
in the performance of its obligations and duties hereunder, or the reckless
disregard of its obligations and duties hereunder.


 


5.3                                 Setoff.  In the event that any funds of the Company on
deposit with any Party or subject to any control agreement shall be taken or
appropriated by such Party by way of setoff in payment or satisfaction of the
obligations of the Company to such Party under any Financing Documents, such
funds shall be applied as follows:


 


5.3.1                        Identifiable
Proceeds.  To the extent such funds
constitute identifiable proceeds of any item of Collateral, such funds shall be
applied in the manner set forth in Section 5.2 of this Agreement.


 


5.3.2                        Other
Funds.  To the extent such funds do
not constitute Collateral or identifiable proceeds of any item of Collateral,
such funds shall be applied in the manner set forth in Section 4 of this
Agreement notwithstanding that any acceleration or demand for payment was made
prior to the exercise of setoff.


 


5.4                                 Possession
of Collateral.  In the event any item
of Collateral, a security interest in which is perfected by possession, is
delivered into the possession of a Party, such Party shall be deemed to hold
such item of Collateral as custodian for itself and each other Party in order
to perfect its own security interest and the security interest of the other
Parties pursuant to the Financing Documents. 
If such Party’s security interest is released under circumstances that
do not require any other Party’s security interest to be released, such Party
shall deliver to the other Parties such items of Collateral in order that the
security interest of the other Parties may continue to be perfected.


 


5.5                                 Liquidation,
Dissolution, Bankruptcy.  In the event of any Proceeding:


 


5.5.1                        The Parity
Indebtedness shall first be indefeasibly paid in full in cash before any
Distribution, whether in cash, securities or other property, shall be made on
account of any other indebtedness or Liability of Company.


 


5.5.2                        Each Party
agrees to execute, verify, deliver and file any proofs of claim in respect of
the Parity Indebtedness requested by any other Party in connection with any
Proceeding involving the Company.


 


5.5.3                        The Parity
Indebtedness shall continue to be treated as Parity Indebtedness and the
provisions of this Agreement shall continue to govern the relative rights and
priorities of the Parties even if all or part of the Parity Indebtedness or the
security interests securing the same are set aside, avoided, invalidated or
disallowed in connection with any such Proceeding, and this Agreement shall be
reinstated if at any time any payment of any of the 


 


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Parity Indebtedness is
rescinded or must otherwise be returned by any holder thereof or any
representative of such holder.


 


5.6                                 Insurance
and Condemnation.   All proceeds of any property or casualty
insurance or condemnation awards relating to the Collateral shall be applied in
accordance with the provisions of Section 5.2 of this Agreement, subject
to the priorities herein set forth, and no other Person or Party shall have the
right to participate in the adjustment of any such insurance claims or
condemnation awards.


 


5.7                                 Waiver
of Right to Require Marshaling.  Each
Party hereby expressly waives any right that it otherwise might have to require
any other Party to marshal assets or to resort to Collateral in any particular
order or manner, whether provided for by common law or statute.  No Party shall be required to enforce any
guaranty or any security interest given by any Person other than the Company as
a condition precedent or concurrent to the taking of any Enforcement Action.


 


5.8                                 Subrogation.  No payment or distribution by a Party to any
other Party pursuant to the provisions of this Agreement and no Protective
Advance by any of the Parties shall entitle such Party to exercise any right of
subrogation in respect thereof prior to the payment in full of the Parity
Indebtedness.


 


5.9                                 Enforcement
of Remedies.  FNBO
and the Trustee agree to cooperate with each other and take any lawful action,
including joining in such proceedings at law or in equity and executing such
documents as a Party may reasonably request and direct, to enforce the
obligations of the Company under the Financing Documents, and in order that the
rents, issues, profits, revenues and other income from the Plant and Premises
shall be available to satisfy the Company’s obligations under the Financing
Documents.


 


5.10                           Other
Security Interests.  No Party shall
obtain or possess any Lien, security interest, encumbrance or claim in the
Company’s assets other than, or in addition to, the Collateral without the
prior written consent of each other Party except for judgment liens that are
entered against the Company following the occurrence of an Event of Default
under such Party’s Financing Documents.


 


5.11                           Benefit
of Security Interests.  This
Agreement shall not give any rights to any Party if and to the extent that its
respective security interest in any item of Collateral in which it seeks to
claim an interest or to share such interest, as the case may be, is (i) not
then perfected; (ii) voidable under the Bankruptcy Code; (iii) held
by a court of competent jurisdiction to be unenforceable; or (iv) junior
to the security interest of an intervening interest of a third party.


 


5.12                           Control
Agreement.  The Company shall grant
FNBO and the Trustee a Deposit Account Control Agreement acceptable to FNBO and
the Trustee with respect to any and all accounts maintained by the Company into
which Collateral or the proceeds thereof are or may be deposited or held.


 


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6.                                      Notice
of Default/Termination of Financing.


 


6.1                                 Notice of Default/Termination of Financing.  Should any Party terminate its obligations to the Company
pursuant to any Financing Document, or commence any Enforcement Action or
acceleration of the Parity Indebtedness, it shall provide the other Parties
with a copy of any notice of default and/or acceleration simultaneously with
the notice provided to the Company.


 


6.2                                 Rights
to Cure.


 


6.2.1                        FNBO’s
Rights to Cure.  Prior to the Trustee
commencing any Enforcement Action under any Bond Financing Document, the
Trustee shall provide written notice of the default which would permit the
Trustee to commence such Enforcement Action to each other Party pursuant to Section 10
of this Agreement, whether or not the Trustee is obligated to give notice
thereof to Company (a “Bond Default Notice”)
and shall permit FNBO an opportunity to cure such default in accordance with
the provisions of this Section 6.2.1. 
If the default is a monetary default relating to a liquidated sum of
money, FNBO shall have until five (5) Business Days (as such term is
defined in the FNBO Loan Agreement) after the later of (i) the giving by
the Trustee of the Bond Default Notice and (ii) the expiration of Company’s
cure period, if any, (an “FNBO Monetary Cure Period”)
to cure such monetary default.  If the
default is of a non-monetary nature, FNBO shall have the same period of time as
the Company under the Bond Financing Documents to cure such non-monetary
default; provided, however, if such non-monetary default is susceptible of cure
but cannot reasonably be cured within such period and if curative action was
promptly commenced and is being continuously and diligently pursued by FNBO,
FNBO shall be given an additional period of time as is reasonably necessary for
FNBO in the exercise of due diligence to cure such non-monetary default for so
long as (i) FNBO makes or causes to be made timely payment of Company’s
regularly scheduled payments under the Bond Financing Documents, (ii) such
additional period of time does not exceed thirty (30) days, unless such
non-monetary default is of a nature that can not be cured within such thirty
(30) days, in which case, FNBO shall have such additional time as is reasonably
necessary to cure such non-monetary default, (iii) such default is not
caused by a bankruptcy, insolvency or assignment for the benefit of creditors
of Company and (iv) during such non-monetary cure period, there is no
material impairment to the value, use or operation of the Project.  Any additional cure period granted to FNBO
hereunder shall automatically terminate upon the bankruptcy (or similar
insolvency) of the Company.


 


6.2.2                        The
Trustee’s Rights to Cure.  Prior to
FNBO commencing any Enforcement Action under any FNBO Loan Document, FNBO shall
provide written notice of the default which would permit FNBO to commence such
Enforcement Action to each other Party pursuant to Section 10 of this
Agreement, whether or not FNBO is obligated to give notice thereof to Company
(an “FNBO  Default
Notice”) and shall permit the Trustee an opportunity to cure such
default in accordance with the provisions of this Section 6.2.2.  If the default is a monetary default relating
to a liquidated sum of money the Trustee shall have until five (5) Business
Days after the later of (i) the giving by FNBO of the FNBO Default Notice
and (ii) the expiration of Company’s cure period, if any, (a “Trustee  Monetary Cure Period”)
to cure such monetary default.  If the
default is of a non-monetary nature, the Trustee shall have the same period of
time as the Company under the FNBO Loan Documents to cure such non-monetary 


 


11

















 


default; provided,
however, if such non-monetary default is susceptible of cure but cannot
reasonably be cured within such period and if curative action was promptly
commenced and is being continuously and diligently pursued by the Trustee, the
Trustee shall be given an additional period of time as is reasonably necessary
for the Trustee in the exercise of due diligence to cure such non-monetary
default for so long as (i) the Trustee makes or causes to be made timely
payment of Company’s regularly scheduled payments under the FNBO Loan
Documents, (ii) such additional period of time does not exceed thirty (30)
days, unless such non-monetary default is of a nature that can not be cured
within such thirty (30) days, in which case, the Trustee shall have such
additional time as is reasonably necessary to cure such non-monetary default, (iii) such
default is not caused by a bankruptcy, insolvency or assignment for the benefit
of creditors of Company and (iv) during such non-monetary cure period,
there is no material impairment to the value, use or operation of the
Project.  Any additional cure period
granted to the Trustee hereunder shall automatically terminate upon the
bankruptcy (or similar insolvency) of the Company.


 


6.3                                 Estoppel.   Each Party shall,
within ten (10) days following a request from any other Party, provide the
requesting Party with a statement setting forth the then current outstanding
principal balance of the obligations owed to it by the Company under its
Financing Documents, the aggregate accrued and unpaid interest thereunder, and
stating whether to the knowledge of such Party any default or Event of Default
exists thereunder.


 


6.4                                 Acceleration
of Loans/Bonds.  Prior to a Party
accelerating the obligations of the Company to it under its Financing
Documents, such Party shall provide written notice to the other Parties at
least five (5) Business Days prior to formally accelerating the same,
provided however, that nothing in this paragraph shall limit the discretion of
any Party to accelerate or to exercise any rights or remedies provided in this
Agreement, the Financing Documents, or applicable law, except as may be otherwise
expressly provided in this Agreement.


 


7.                                      Representations
and Warranties.


 


7.1                                 By
FNBO.  Notwithstanding any of the
terms of the FNBO Loan Documents, FNBO hereby acknowledges (i) that it has
received copies of all Financing Documents and hereby consents to the execution
and delivery of the same by the Company and (ii) agrees that the execution
and delivery of the Financing Documents by the Company shall not constitute a
breach or Event of Default under the FNBO Loan Documents and waives any Event
of Default the execution and delivery of the Financing Documents may have
otherwise caused under the FNBO Loan Documents.


 


7.1.1                        Modification
of FNBO Loan Documents.  FNBO shall
have the right without the consent of any other Party to enter into any
amendment, deferral, modification, increase, renewal, replacement, restatement,
consolidation, supplement or waiver (collectively, an “FNBO Loan
Modification”) of the FNBO Debt or the FNBO Loan Documents provided
that no such FNBO Loan Modification shall, without the prior written consent of
the other Party, (i) increase any fixed interest rate, the margin of any
variable interest rate, or principal amount of the FNBO Debt, or (ii) extend
or shorten the scheduled maturity date of any FNBO Debt (except that FNBO may
permit the Company to exercise any extension options in accordance with the
terms and provisions of the FNBO Loan Documents in effect as of the date hereof
and FNBO 


 


12

















 


may extend the Revolving
Loan for additional periods not in excess of one (1) year upon the Loan
Termination Date of the Revolving Loan), or (iii) increase any cash
reserve or escrow requirements of the Company. 
In addition and notwithstanding the foregoing provisions of this Section 7.1.1,
any amounts funded by FNBO under the FNBO Loan Documents as a result of (x) the
making of any Protective Advances or other advances by FNBO, (y) incurring
any Costs of Completion or (z) interest accruals or accretions and any
compounding thereof (including default interest), shall not be deemed to
contravene this Section 7.1.1.


 


7.1.2                        Copies
of FNBO Loan Modifications.  FNBO
shall deliver to each other Party copies of any and all modifications,
amendments, extensions, consolidations, restatements, alterations, changes or
revisions to any one or more of the FNBO Loan Documents (including, without
limitation, any side letters, waivers, or consents entered into, executed or
delivered by FNBO) within a reasonable time after any of such applicable
instruments have been executed by the Company and FNBO.


 


7.2                                 By
the Trustee.  Notwithstanding any of
the terms of the Bond Financing Documents, the Trustee hereby acknowledges (i) that
it has received copies of all Financing Documents and hereby consents to the
execution and delivery of the same by the Company and (ii) agrees that the
execution and delivery of the Financing Documents by the Company shall not
constitute a breach or Event of Default under the Bond Financing Documents and
waives any Event of Default the execution and delivery of the Financing
Documents may have otherwise caused under the Bond Financing Documents.  The Trustee agrees that it shall not contest
the validity, perfection, priority, or enforceability of any Lien, security
interest, encumbrance, or claim granted by the Company to any Party under any
Financing Document.


 


7.2.1                        Modification
of Bond Financing Documents.  The
Trustee shall have the right without the consent of any other Party to enter
into any amendment, deferral, modification, increase, renewal, replacement,
restatement, consolidation, supplement or waiver (collectively, a “Bond Financing Modification”) of the Bond Debt or the Bond
Financing Documents provided that no such Bond Financing Modification shall,
without the prior written consent of the other Party, (i) increase the
interest rate or principal amount of the Bond Debt, or (ii) extend or
shorten the principal payment commencement date and/or the scheduled maturity
date of the Bond Debt (except that the Trustee may permit the Company to
exercise any extension options in accordance with the terms and provisions of
the Bond Financing Documents in effect as of the date hereof).  In addition and notwithstanding the foregoing
provisions of this Section 7.2.1, any amounts funded by the Trustee under
the Bond Financing Documents as a result of (x) the making of any
Protective Advances or other advances by the Trustee, (y) incurring any
Costs of Completion or (z) interest accruals or accretions and any
compounding thereof (including default interest), shall not be deemed to
contravene this Section 7.2.1.


 


7.2.2                        Copies
of Bond Financing Modifications.  The
Trustee shall deliver to FNBO copies of any and all modifications, amendments,
extensions, consolidations, restatements, alterations, changes or revisions to
any one or more of the Bond Financing Documents (including, without limitation,
any side letters, waivers or consents entered into, executed or delivered by
the Trustee) within a reasonable time after any of such applicable instruments
have been executed by the Company and the Trustee.


 


13
















 


7.3           By the Parties.  The Parties agree that the purpose of this
Agreement is to establish priority as to interests otherwise created by
independent loan and bond arrangements between the Parties and the Company and
each Party agrees that this Agreement shall not be utilized by any of them to
claim an expansion of any security interest or Lien granted to them by the
Company.


 


8.             Decisions
by Voting.  If (i) the Company requests a consent or
waiver relating to, or required by, a then existing provision of the FNBO Loan
Documents or the Bond Financing Documents, which with respect to the Bond Debt
is in the discretion of the Trustee without the consent of the owners of the
Bonds, and requires action by both FNBO and the Trustee, (ii) FNBO and the
Trustee cannot reach agreement as to those matters set forth in Section 2.2
hereof (for which the Trustee has discretion to act without consent of the
owners of the Bonds) after good faith efforts, or (iii) if any other
matter arises with respect to the administration of the FNBO Loan by FNBO or
the Bond Debt by the Trustee (for which the Trustee has discretion to act
without consent of the owners of the Bonds) which requires consent, agreement
or action by the other party and FNBO and the Trustee cannot reach agreement
after good faith negotiations, then such matter shall be resolved by a vote of
FNBO and the Trustee.  If the outstanding
principal amount of the FNBO Loan, together with all accrued and unpaid
interest, at such time is more than fifty percent (50%) of the sum of the
unpaid principal and accrued interest on the FNBO Loan and the Bond Debt, the
determination of FNBO shall prevail. 
If  the outstanding principal
amount of the Bond Debt, together with all accrued and unpaid interest, at such
time is more than fifty percent (50%) of the sum of the unpaid principal and
accrued interest on the FNBO Loan and the Bond Debt, the determination of the
Trustee shall prevail.


 


9.             Further Assurances.  Each Party will promptly execute and
deliver such further instruments and agreements and do such further acts and
things as may be reasonably requested by any other Party hereto in writing that
may be necessary or desirable to effect fully the purposes of this Agreement.


 


10.          Notices.  All notices or other communications hereunder
shall be in writing and shall be sufficiently given and shall be deemed given
the third Business Day after mailed by first class registered or certified
mail, return receipt requested, postage prepaid, or on the First Business Day
after delivered to a recognized overnight courier service for next day delivery
with proper address as indicated below. 
Each Party may, by written notice given to the other Parties, designate
any other address or addresses to which notices or other communications to them
shall be sent when required as contemplated by this Agreement.  Until otherwise so provided by the respective
Party, all notices and communications to each of them shall be addressed as
follows:


 


	
  If to FNBO:

  	
   

  	
  First National Bank of Omaha

  
	
   

  	
   

  	
  1620 Dodge Street, Stop 1050

  
	
   

  	
   

  	
  Omaha, Nebraska 68197

  
	
   

  	
   

  	
  Attention: Jeremy Reineke

  
	
   

  	
   

  	
  Telephone: (402) 633-3056

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Stinson Morrison Hecker LLP

  
	
   

  	
   

  	
  1299 Farnam Street, Suite 1500

  
	
   

  	
   

  	
  Omaha, Nebraska 68102

  
	
   

  	
   

  	
  Attention: James M. Pfeffer

  
	
   

  	
   

  	
  Telephone: (402) 930-1735

  



 


14

















 


	
  If to the Trustee:

  	
   

  	
  U.S. Bank National Association

  
	
   

  	
   

  	
  60 Livingston Avenue

  
	
   

  	
   

  	
  EP-MN-WS3C

  
	
   

  	
   

  	
  St. Paul, Minnesota 55107

  
	
   

  	
   

  	
  Attention: Corporate Trust

  
	
   

  	
   

  	
  Telephone: (651) 495-3917

  



 


11.          Successors and
Assigns.  Whenever in this
Agreement each of the Parties is named or referred to, the successors and
assigns of such Party shall be deemed to be included and all covenants,
promises and agreements in this Agreement by and on behalf of the respective
Parties hereto shall bind and inure to the benefit of the respective successors
and assigns of such Party, whether so expressed or not.


 


12.          Relative Rights.  Nothing in this Agreement shall (a) impair,
as between any Party and the Company, the obligations of the Company with
respect to the payment of the FNBO Debt or the Bond Debt in accordance with
their respective terms, or (b) impair, as between any Party and the
Company, the obligations of the Company with respect to the performance of the
FNBO Loan Documents and  the Bond
Financing Documents in accordance with their respective terms, or (c) impair
the relative rights of FNBO or the Trustee as against any other creditor of the
Company.


 


13.          Conflict.  In the event of any conflict between any
term, covenant or condition of this Agreement and any term, covenant or
condition of any Financing Documents, the provisions of this Agreement shall
control and govern.


 


14.          Headings.  The paragraph headings used in this Agreement
are for convenience only and shall not affect the interpretation of any of the
provisions hereof.


 


15.          Counterparts.  This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.


 


16.          Severability.  In the event that any provision of this
Agreement is deemed to be invalid, illegal or unenforceable by reason of the
operation of any law or by reason of the interpretation placed thereon by any
court or governmental authority, the validity, legality and enforceability of
the remaining provisions of this Agreement shall not in any way be affected or
impaired thereby, and the affected provision shall be modified to the minimum
extent permitted by law so as most fully to achieve the intention of this
Agreement.


 


17.          Continuing Agreement.  This Agreement is a continuing agreement and
shall remain in full force and effect until the earliest of (a) payment in
full of the Parity Indebtedness or (b) transfer of the Collateral by the
foreclosure, by sale of the Collateral by the exercise of 


 


15

















 


Senior Lender’s legal and contractual remedies, or by the transfer of
the Collateral to FNBO or the Trustee by the Company’s deed-in-lieu of
foreclosure and distribution of the proceeds thereof in accordance with this
Agreement; provided, however, that any rights or remedies of any Party hereto
arising out of any breach of any provision hereof occurring prior to such date
of termination shall survive such termination.


 


18.          Applicable Law.  This Agreement shall be governed by and
shall be construed and enforced in accordance with the internal laws of the
State of Minnesota, without regard to conflicts of law principles.


 


19.          WAIVER OF JURY TRIAL.  EACH PARTY HERETO HEREBY WAIVES ITS
RESPECTIVE RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR ANY OF THE FINANCING DOCUMENTS.  THE PARTIES ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP THAT EACH HAS RELIED
ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO
RELY ON THE WAIVER IN ITS RELATED FUTURE DEALINGS.  THE PARTIES REPRESENT AND WARRANT THAT EACH
HAS HAD THE OPPORTUNITY TO REVIEW THIS AGREEMENT AND THIS WAIVER WITH LEGAL
COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.


 


20.          Effectiveness of
Agreement.  Notwithstanding the
execution and delivery of this Agreement by any Party, no Party shall be bound
by the terms and conditions of this Agreement unless and until the Bonds have
been sold and the Bond Financing Documents executed and delivered to the
Trustee.


 


IN WITNESS
WHEREOF, the Trustee and FNBO have caused this Agreement to be executed as of
the day and year first above written.


 


16

















 


SIGNATURE PAGE TO:


 


INTERCREDITOR AGREEMENT


 


FNBO:


FIRST NATIONAL BANK OF OMAHA


as Administrative Agent and Collateral Agent for the Lenders


 


 


	
                /s/
  Jeremy Reineke

  	
   

  	
   

  
	
  By: Jeremy Reineke

  	
   

  	
   

  
	
  Its: Second Vice President

  	
   

  	
   

  



 


17

















 


SIGNATURE PAGE TO:


 


INTERCREDITOR AGREEMENT


 


Trustee:


 


U.S. BANK, NATIONAL ASSOCIATION, as Trustee
for the owners of the $15,180,000 City of Lamberton, Minnesota Parity Senior
Solid Waste Disposal Facility Revenue Bonds, Series 2008 (Highwater
Ethanol, LLC Ethanol Plant Project)


 


 


	
  By:

  	
          /s/ Christine
  Robinette

  	
   

  
	
  Its:

  	
          Vice President

  	
   

  



 


18

















 


COMPANY’S ACKNOWLEDGEMENT


 


The
undersigned hereby acknowledges and agrees to the terms and provisions of this
Intercreditor Agreement.  By executing
this Acknowledgement, the Company, through the undersigned authorized officer,
agrees to be bound by the provisions of the Intercreditor Agreement insofar as
such provisions relate to the relative rights of the Parties thereto as between
such Parties.  The undersigned further
agrees that the terms of the Intercreditor Agreement shall not give the
undersigned any substantive rights vis-à-vis any Party and does not affect the
undersigned’s obligations to any Party under any Financing Document.


 


	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  HIGHWATER ETHANOL, LLC,

  
	
   

  	
  a Minnesota limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
         /s/
  Brian Kletscher

  
	
   

  	
   

  	
  Brian Kletscher,
  President

  



 


19

















 


EXHIBIT A


 


LEGAL DESCRIPTION OF THE REAL PROPERTY


 


PARCEL I (PROJECT
SITE)


 


TRACT A: 
That part of the Southwest Quarter of Section 21, Township 109
North, Range 37 West, Redwood County, Minnesota, lying north of the northerly
right-of-way line of the Dakota Minnesota & Eastern Railroad.


 


Excepting therefrom that part of said Tract A
which lies northwesterly of “Line 1” described below, southerly of a line run
parallel with and distant 50 feet southerly of “Line 2” described below, and
easterly of the easterly right-of-way line of Township Road T-190, as now
located and established, said exception containing 0.20 acres more or less.


 


“Line 1”: 
Beginning at the intersection of the easterly right-of-way line of said
township road with a line run parallel with and distant 180 feet southerly of “Line
2” described below; thence northeasterly to a point distant 50 feet southerly
(measured at right angles) of a point on said “Line 2”, distant 167.4 feet
easterly of its point of beginning, and there terminating.


 


“Line 2”: 
Beginning at a point on the west line of the Northwest Quarter of Section 21,
distant 1.0 foot north of the southwest corner thereof; thence run
northeasterly at an angle of 92 degrees 05 minutes 00 seconds (as measured from
south to east) from said west line of 1521.8 feet; thence deflect to the right
at an angle of 01 degree 03 minutes 00 seconds for 1100 feet and there
terminating.


 


Also Excepting that part of said Tract A
hereinbefore described, which lies within a distance of 35 feet southerly of a
line run parallel with and distant 50 feet southerly of the following described
line:  Beginning at a point on “Line 2”
hereinbefore described, distant 484.4 feet westerly of its point of
termination; thence easterly on said “Line 2” for 484.4 feet and there
terminating; said exception containing 0.37 acres more or less.


 


Subject to Township Road right-of-way over
the westerly 33 feet of said Southwest Quarter, also subject to Trunk Highway
14 right-of-way.


 


AND ALSO


 


PARCEL II (PROJECT
SITE)


 


All that part of the Southeast Quarter of Section 21,
Township 109 North, Range 37 West, Redwood County, Minnesota, lying north of
the northerly right-of-way line of the Dakota Minnesota & Eastern
Railroad, subject to Highway 14 right-of-way.


 


Excepting therefrom that part of said
Southeast Quarter which lies within a distance of 35 feet southerly of the
following described line:  Beginning at a
point on the westerly boundary of said 


 


20

















 


Southeast Quarter, distant 40 feet southerly
of the northwest corner thereof; thence run easterly for 345.6 feet along a
line that intersects the easterly boundary of the Southeast Quarter of said Section 21,
distant 64.4 feet southerly of the northeast corner thereof and there
terminating.


 


Also Excepting therefrom that part of the
Northeast Quarter of the Southeast Quarter of Section 21, Township 109
North, Range 37 West, Redwood County, Minnesota, described as follows:  Commencing at the northeast corner of said
Southeast Quarter; thence southerly on a Minnesota State Plane Grid Azimuth
from north of 181 degrees 50 minutes 35 seconds along the east line of said
Southeast Quarter 102.21 feet; thence westerly 270 degrees 48 minutes 42
seconds azimuth 665.31 feet to the point of beginning; thence continue westerly
270 degrees 48 minutes 42 seconds azimuth 400.00 feet; thence southerly 180
degrees 48 minutes 42 seconds azimuth 200.00 feet; thence easterly 90 degrees
48 minutes 42 seconds azimuth 400.00 feet; thence northerly 00 degrees 48
minutes 42 seconds azimuth 200.00 feet to the point of beginning.


 


Containing 0.27 acres, more or less.


 


AND ALSO


 


PARCEL III
(LAMBERTON ECONOMIC DEVELOPMENT AUTHORITY PARCEL)


 


That part of the South Half (S1⁄2) of Section Twenty-two
(22), Township One Hundred Nine (109) North, Range Thirty-seven (37) West,
Redwood County, Minnesota, lying northerly of the northerly right-of-way line
of the Dakota Minnesota & Eastern Railroad, and southerly of the
following described line:  Commencing at
a point on the west line of the Southwest Quarter (SW1⁄4) of said Section Twenty-two
(22) where said line intersects the northerly right-of-way line of the Dakota
Minnesota and Eastern Railroad, said right-of-way line being 50 feet northerly
of and parallel with the center line of the tracks; thence northerly along said
west line on an assumed azimuth of 01 degrees 50 minutes 35 seconds 145.69 feet
to the point of beginning of the line to be described; thence easterly 84
degrees 21 minutes 14 seconds azimuth 388.43 feet; thence 85 degrees 21 minutes
11 seconds azimuth 900.66 feet; thence easterly 83 degrees 46 minutes 16
seconds azimuth 896.53 feet; thence easterly 81 degrees 30 minutes 37 seconds
azimuth 193.47 feet; thence easterly 78 degrees 15 minutes 04 seconds 396.89
feet; thence easterly 80 degrees 37 minutes 13 seconds 299.78 feet; thence
easterly 77 degrees 40 minutes 49 seconds 199.61 feet; thence easterly 80
degrees 37 minutes 44 seconds azimuth 200.67 feet; thence easterly 77 degrees
47 minutes 42 seconds azimuth 316.70 feet to the southerly right-of-way line of
Trunk Highway No. 14; thence easterly 90 degrees 48 minutes 42 seconds
azimuth along said southerly right-of-way line 619.24 feet to its intersection
with said northerly right-of-way line of said Dakota Minnesota and Eastern
Railroad and there terminating.


 


21

















 


AND ALSO


 


PARCEL IV (ERICKSON
WELL SITE PARCEL)


 


The East 2040.20 feet of the North 128.10
feet of the Northwest Quarter of Section 14, Township 108 North, Range 37
West, Cottonwood County, Minnesota.  Said
tract subject to a 33.00 foot township road right-of-way easement.  Said tract contains 6.00 acres more or less,
including 1.55 acres of township road right-of-way.


 


AND ALSO


 


PARCEL V (GEIS WELL
SITE PARCEL)


 


The East 1188.00 feet of the South 220.00
feet of the Southeast Quarter of the Southwest Quarter of Section 29,
Township 109 North, Range 37 West, Redwood County, Minnesota.  Said tract subject to a 33.00 foot township
road right-of-way easement.  Said tract
contains 6.00 acres more or less, containing 0.90 acres of township road
right-of-way.


 


22

















 


	
  STATE OF SOUTH DAKOTA

  	
  )

  
	
   

  	
  ) ss.

  
	
  COUNTY OF Minnehaha

  	
  )

  



 


On this 24th day of April, 2008, before me a Notary Public
within and for said County, personally appeared Brian Kletscher, to me known,
who being by me duly sworn, did say that he is the President of Highwater
Ethanol, LLC, the Minnesota limited liability company named in the foregoing
instrument, and that said instrument was signed on behalf of said company by
authority of its Board of Governors and as the free act and deed of said
company.


 


 


	
              /s/
  Vicki Blake

  	
   

  	
   

  
	
  Notary Public – South Dakota

  	
   

  	
   

  
	
  My Commission Expires 2/10/12

  	
   

  	
   

  



 


23

















 


	
  STATE OF OHIO

  	
  )

  
	
   

  	
  ) ss.

  
	
  COUNTY OF CUYAHOGA

  	
  )

  



 


On this 25th day of April, 2008, before me a Notary Public
within and for said County, personally appeared Christine Robinette, to me
known, who being by me duly sworn, did say that she is the Vice President of
U.S. Bank, National Association, the Trustee named in the foregoing instrument,
and that said instrument was signed on behalf of said bank by authority of its
board and as the free act and deed of said bank.


 


 


	
              /s/
  Laneda F. Reed

  	
   

  	
   

  
	
  Notary Public

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  [SEAL]

  	
   

  	
  LANEDA F. REED

  	
   

  	
   

  
	
   

  	
   

  	
  Notary Public, State of Ohio

  	
   

  	
   

  
	
   

  	
   

  	
  My Commission Expires
  Aug. 23, 2012

  	
   

  
						



 


24

















 


	
  STATE OF SOUTH DAKOTA

  	
  )

  
	
   

  	
  ) ss.

  
	
  COUNTY OF Minnehaha

  	
  )

  



 


On this 24th day of April, 2008, before me a Notary Public
within and for said County, personally appeared Jeremy Reineke, to me known,
who being by me duly sworn, did say that he is a Second Vice President of First
National Bank of Omaha, the national bank named in the foregoing instrument,
and that said instrument was signed on behalf of said instrumentality by
authority of its board and as the free act and deed of said instrumentality.


 


 


	
              /s/
  Vicki Blake

  	
   

  	
   

  
	
  Notary Public – South Dakota

  	
   

  	
   

  
	
  My Commission Expires 2/10/12

  	
   

  	
   

  



 


25