Exhibit
10.3


 




 





$15,180,000


CITY OF
LAMBERTON, MINNESOTA


SOLID
WASTE FACILITIES REVENUE BONDS


(HIGHWATER
ETHANOL, LLC PROJECT)


SERIES
2008A


 


TRUST
INDENTURE


 


Dated as
of April 1, 2008


 


CITY OF
LAMBERTON, MINNESOTA


 


to


 


U.S. BANK
NATIONAL ASSOCIATION,


as Trustee




 





 


This instrument was
drafted


by Faegre &
Benson LLP


2200 Wells Fargo Center


90 South Seventh Street


Minneapolis,
Minnesota  55402-3901


 

















 


$15,180,000 City
of Lamberton, Minnesota


Solid Waste
Facilities Revenue Bonds


(Highwater
Ethanol, LLC Project), Series 2008A


 


TABLE OF CONTENTS


 


	
   

  	
  PAGE

  
	
   

  	
   

  
	
  ARTICLE I
  DEFINITIONS AND INTERPRETATION

  	
  9

  
	
  Section 1.01.  Definitions

  	
  9

  
	
  Section 1.02.  Characteristics of Certificate or Opinion

  	
  16

  
	
  Section 1.03.  Description of
  Project

  	
  17

  
	
  Section 1.04.  Additional
  Provisions as to Interpretation

  	
  17

  
	
   

  	
   

  
	
  ARTICLE II
  FORM, EXECUTION AND REGISTRATION OF BONDS

  	
  19

  
	
  Section 2.01.  Form,
  Maturities and Numeration of Series 2008 Bonds

  	
  19

  
	
  Section 2.02.  Execution of
  Bonds

  	
  19

  
	
  Section 2.03.  Authentication
  of Bonds

  	
  20

  
	
  Section 2.04.  Registration,
  Transfers and Exchange

  	
  20

  
	
  Section 2.05.  Payment of
  Interest on Bonds; Interest Rights Preserved

  	
  21

  
	
  Section 2.06.  Ownership of
  Bonds

  	
  22

  
	
  Section 2.07.  Reissuance of
  Mutilated, Destroyed, Stolen or Lost Bonds

  	
  22

  
	
  Section 2.08.  Conditions for
  Authentication of Series 2008 Bonds

  	
  22

  
	
  Section 2.09.  Authorization
  of Additional Bonds

  	
  23

  
	
  Section 2.10.  Book-Entry
  System

  	
  25

  
	
  Section 2.11.  Termination of
  Book-Entry Only System

  	
  25

  
	
   

  	
   

  
	
  ARTICLE III
  REDEMPTION OF BONDS

  	
  27

  
	
  Section 3.01.  Redemption of
  Series 2008 Bonds

  	
  27

  
	
  Section 3.02.  Written Notice
  to Trustee

  	
  28

  
	
  Section 3.03.  Mailing and
  Publication of Notice

  	
  28

  
	
  Section 3.04.  Deposit for
  Redemption

  	
  28

  
	
  Section 3.05.  Payment of
  Redeemed Bonds

  	
  29

  
	
  Section 3.06.  Cancellation
  of Redeemed Bonds

  	
  29

  
	
  Section 3.07.  Partial
  Redemption of Bonds

  	
  29

  
	
  Section 3.08.  Sinking Fund

  	
  30

  
	
   

  	
   

  
	
  ARTICLE IV BOND PROCEEDS; PROJECT FUND

  	
  32

  
	
  Section 4.01.  Deposit of
  Series 2008 Bond Proceeds

  	
  32

  
	
  Section 4.02.  Establishment
  of Project Fund

  	
  32

  
	
  Section 4.03.  Equipment
  Costs Defined

  	
  33

  
	
  Section 4.04.  Application of
  Balance in Project Fund

  	
  33

  
	
  Section 4.05.  Deposit and
  Investment of Excess Moneys

  	
  34

  



 


i

















 


	
  ARTICLE V DISPOSITION OF PLEDGED
  REVENUES

  	
  35

  
	
  Section 5.01.  Bond Fund

  	
  35

  
	
  Section 5.02.  Optional
  Redemption Fund

  	
  35

  
	
  Section 5.03.  Reserve Fund

  	
  36

  
	
  Section 5.04.  Mandatory
  Sinking Fund Redemption Fund

  	
  37

  
	
  Section 5.05.  Investment of
  Funds

  	
  37

  
	
  Section 5.06.  Compliance
  with Arbitrage Restrictions; Rebate Requirements

  	
  38

  
	
   

  	
   

  
	
  ARTICLE VI PARTICULAR COVENANTS OF THE
  CITY

  	
  40

  
	
  Section 6.01.  Payment of Bonds

  	
  40

  
	
  Section 6.02.  Performance of Covenants by City; Authority;
  Due Execution

  	
  40

  
	
  Section 6.03.  Defense of City’s Rights

  	
  41

  
	
  Section 6.04.  Recording and Filing; Further Instruments

  	
  41

  
	
  Section 6.05.  Rights under Bond Lease

  	
  41

  
	
  Section 6.06.  Arbitrage and Tax Covenants

  	
  42

  
	
  Section 6.07.  No Disposition of Trust Estate

  	
  42

  
	
  Section 6.08.  Access to Books

  	
  42

  
	
  Section 6.09.  Source of Payment of Bonds

  	
  42

  
	
   

  	
   

  
	
  ARTICLE VII REMEDIES ON DEFAULT

  	
  43

  
	
  Section 7.01.  Events of
  Default

  	
  43

  
	
  Section 7.02.  Acceleration
  of Maturity

  	
  43

  
	
  Section 7.03.  Enforcement of
  Covenants and Conditions

  	
  44

  
	
  Section 7.04.  Appointment of
  Receivers

  	
  44

  
	
  Section 7.05.  Application of
  Moneys

  	
  44

  
	
  Section 7.06.  Right of
  Trustee to Act Without Possession of Bonds

  	
  46

  
	
  Section 7.07.  Power of
  Majority of Bondholders

  	
  46

  
	
  Section 7.08.  Limitation on
  Suits by Bondholders

  	
  46

  
	
  Section 7.09.  Waiver by
  Bondholders

  	
  47

  
	
  Section 7.10.  Remedies
  Cumulative, Delay Not To Constitute Waiver

  	
  47

  
	
  Section 7.11.  Restoration of
  Rights Upon Discontinuance of Proceedings

  	
  47

  
	
   

  	
   

  
	
  ARTICLE VIII CONCERNING THE TRUSTEE

  	
  48

  
	
  Section 8.01.  Acceptance of
  Trust and Prudent Performance Thereof

  	
  48

  
	
  Section 8.02.  Trustee
  May Rely Upon Certain Documents and Opinions

  	
  49

  
	
  Section 8.03.  Trustee Not
  Responsible for Indenture Statements, Validity

  	
  50

  
	
  Section 8.04.  Limits on
  Duties and Liabilities of Trustee

  	
  50

  
	
  Section 8.05.  Money Held in
  Trust

  	
  50

  
	
  Section 8.06.  Obligation of
  Trustee

  	
  50

  
	
  Section 8.07.  Notice to
  Bondholders, etc.

  	
  51

  
	
  Section 8.08.  Intervention
  in Judicial Proceedings

  	
  51

  
	
  Section 8.09.  Further
  Investigation by Trustee

  	
  51

  
	
  Section 8.10.  Trustee to
  Retain Financial Records

  	
  51

  
	
  Section 8.11.  Compensation
  of Trustee

  	
  51

  



 


ii

















 


	
  Section 8.12.  Trustee
  May Hold Bonds

  	
  52

  
	
  Section 8.13.  Appointment of
  Trustee

  	
  52

  
	
  Section 8.14.  Merger of
  Trustee

  	
  52

  
	
  Section 8.15.  Resignation or
  Removal of Trustee

  	
  52

  
	
  Section 8.16.  Appointment of
  Successor Trustee

  	
  53

  
	
  Section 8.17.  Transfer of
  Rights and Property to Successor Trustee

  	
  53

  
	
  Section 8.18.  Co-Trustee

  	
  54

  
	
  Section 8.19.  Appointment of
  Successor or Alternate Paying Agents

  	
  56

  
	
  Section 8.20.  Eligibility;
  Disqualification

  	
  56

  
	
   

  	
   

  
	
  ARTICLE IX CONCERNING THE BONDHOLDERS

  	
  57

  
	
  Section 9.01.  Execution of
  Instruments by Bondholders

  	
  57

  
	
  Section 9.02.  Waiver of
  Notice

  	
  57

  
	
  Section 9.03.  Determination
  of Bondholder Concurrence

  	
  57

  
	
  Section 9.04.  Bondholders’
  Meeting

  	
  58

  
	
  Section 9.05.  Revocation by
  Bondholders

  	
  60

  
	
   

  	
   

  
	
  ARTICLE X PAYMENT, DEFEASANCE AND
  RELEASE

  	
  61

  
	
  Section 10.01.  Payment and
  Discharge of Indenture

  	
  61

  
	
  Section 10.02.  Bonds Deemed
  Not Outstanding After Deposits

  	
  62

  
	
  Section 10.03.  Unclaimed
  Money To Be Returned

  	
  62

  
	
   

  	
   

  
	
  ARTICLE XI SUPPLEMENTAL INDENTURES

  	
  63

  
	
  Section 11.01.  Purposes for
  Which Supplemental Indentures may be Executed

  	
  63

  
	
  Section 11.02.  Execution of
  Supplemental Indenture

  	
  64

  
	
  Section 11.03.  Opinion of
  Bond Counsel

  	
  64

  
	
  Section 11.04.  Modification
  of Indenture with Consent of Bondholders

  	
  64

  
	
  Section 11.05.  Supplemental
  Indentures to be Part of Indenture

  	
  65

  
	
  Section 11.06.  Rights of
  Company Unaffected

  	
  65

  
	
   

  	
   

  
	
  ARTICLE XII AMENDMENTS TO THE BOND
  LEASE, BOND MORTGAGE AND GUARANTY

  	
  66

  
	
  Section 12.01.  Amendments to
  the Bond Lease, Bond Mortgage and Guaranty Not Requiring Consent of
  Bondholders

  	
  66

  
	
  Section 12.02.  Amendments to
  Bond Lease, Bond Mortgage and Assignment Requiring Consent of Bondholders

  	
  66

  
	
  Section 12.03.  No Amendment
  May Reduce Lease Payments

  	
  66

  
	
  Section 12.04.  Rights of
  City

  	
  66

  
	
   

  	
   

  
	
  ARTICLE XIII MISCELLANEOUS

  	
  67

  
	
  Section 13.01.  Covenants of
  City Bind Successors and Assigns

  	
  67

  
	
  Section 13.02.  Immunity of
  Officers

  	
  67

  
	
  Section 13.03.  No Benefits
  to Outside Parties

  	
  67

  
	
  Section 13.04.  Separability
  of Indenture Provisions

  	
  67

  



 


iii

















 


	
  Section 13.05.  Execution of
  Indenture in Counterparts

  	
  67

  
	
  Section 13.06.  Headings Not Controlling

  	
  67

  
	
  Section 13.07.  Notices,
  etc., to Trustee, City, Company and Original Purchaser

  	
  67

  



 


iv

















 


TRUST
INDENTURE


 


This TRUST INDENTURE,
dated as of the 1st day of April 2008, by and between CITY OF LAMBERTON,
MINNESOTA, a Minnesota municipal corporation (herein sometimes called the “City”)
and U.S. BANK NATIONAL ASSOCIATION, a national banking association with trust
powers having its main corporate trust offices and place of business in the
City of St. Paul, Minnesota (herein sometimes called the “Trustee”);


 


WITNESSETH:


 


WHEREAS, the City is a
duly organized and existing political subdivision of the State of Minnesota,
and is authorized to issue its revenue bonds pursuant to the provisions of
Minnesota Statutes, Sections 469.152 to 469.1651, as amended, known as the
Minnesota Industrial Development Revenue Bonding Act (herein called the “Act”);
and


 


WHEREAS, Highwater
Ethanol, LLC, a Minnesota limited liability company (the “Company”) has
proposed that the City issue its $15,180,000            City
of Lamberton Solid Waste Facilities Revenue Bonds (Highwater Ethanol, LLC Project),
Series 2008A (the “Series 2008 Bonds” or the “Bonds”) to finance the
acquisition, construction and equipping of solid waste disposal facilities as
part of an ethanol plant (as hereinafter further described the “Project”) ; and


 


WHEREAS, the City has
deemed it advisable to enter into this Indenture and has duly authorized and
directed the issuance of a series of revenue bonds in the aggregate principal
amount of $15,180,000 as provided hereinafter in this Indenture; and


 


WHEREAS, the City is,
under the Act, authorized to issue and sell its revenue bonds for the purpose
of providing funds to finance projects and to assign certain of its interests
in the Bond Lease (as further provided therein and herein) as security
therefor; and


 


WHEREAS the City has undertaken
to finance the acquisition and installation of the Equipment as part of the
Project and lease the Equipment to the Company pursuant to the provisions of a
Lease Agreement of even date herewith between the City and the Company (the “Bond
Lease”); and


 


WHEREAS, the Redwood
County Board of Commissioners has consented to the issuance of the Bonds by the
City to provide financing for the Project; and


 


WHEREAS, the Project is
defined as and is eligible to be a project under the Act, and the City has determined
that the Project will promote the welfare of the City; and


 


WHEREAS, the Bond Lease
requires the Company to make payments thereunder in amounts and at times
sufficient to pay the principal of, premium (if any) and interest on the Series 2008
Bonds when due; and


 


1

















 


WHEREAS, the Company has
agreed to execute and deliver to the Trustee a Mortgage, Security Agreement and
Assignment of Leases and Rents (the “Bond Mortgage”) and an Assignment and
Security Agreement (the “Bond Security Agreement”), of even date herewith, to
secure the payment of the Series 2008 Bonds and any Additional Bonds
hereunder and the Company’s obligations under the Bond Lease; and


 


WHEREAS, the Series 2008
Bonds, the form of assignment and the Trustee’s authentication certificate to
be endorsed on the Series 2008 Bonds are to be in substantially the
following forms (the text of which forms may be printed on the face, or on the
back, or partly on the face and partly on the back), to wit:


 


(Form of
fully registered Series 2008 Bond)


 


UNITED STATES OF
AMERICA


STATE OF MINNESOTA


CITY OF LAMBERTON


 


	
  No. R-1

  	
   

  	
  $15,180,000

  



 


Solid Waste
Facilities Revenue Bond, Series 2008A


(Highwater
Ethanol, LLC Project)


 


	
  Interest 

  Rate

  	
   

  	
  Maturity

  	
   

  	
  Date of 

  Original Issue

  	
   

  	
  CUSIP

  	
   

  
	
  8.50

  	
  %

  	
  December 1, 2022

  	
   

  	
  April 25, 2008

  	
   

  	
  513303 AA5

  	
   

  



 


Registered Owner:       Cede & Co.


 


Principal Amount:        Fifteen Million One Hundred Eighty
Thousand Dollars


 


City of Lamberton, a
political subdivision of the State of Minnesota (the “City”), for value
received, hereby promises to pay, but solely from the sources hereinafter
described, to the registered owner specified above or registered assigns, the
principal amount set forth above on the maturity date specified above, upon the
presentation and surrender hereof, and to pay to the registered owner hereof
interest on such principal amount from such sources at the interest rate
specified above from the date of original issue set forth above, or the most
recent interest payment date to which interest has been paid or duly provided
for as specified below, on June 1 and December 1 of each year,
commencing December 1, 2008, until said principal amount is paid.  Principal and the redemption price are
payable in lawful money of the United States of America at the office of U.S.
Bank National Association, in St. Paul, Minnesota, as Trustee under the
Indenture hereinafter described or of its successor as Trustee.  Interest shall be paid on each interest payment
date by check or draft mailed to the person in whose name this Bond is
registered at the close of business on the fifteenth day of the month
immediately preceding such interest payment date (whether or not a business
day) at the owner’s address set forth on the registration records maintained by
the Trustee.  Any 


 


2

















 


such interest not punctually paid or provided for will cease to be
payable on such regular record dates and such defaulted interest may be paid to
the person in whose name this Bond shall be registered at the close of business
on a special record date for the payment of such defaulted interest established
by the Trustee pursuant to the Indenture.


 


This Bond is issued
pursuant to the Minnesota Municipal Industrial Development Act, Minnesota
Statutes, Sections 469.152 to 469.1651, as amended (herein called the “Act”),
and in conformity with the provisions, restrictions and limitations
thereof.  This Bond does not constitute
or give rise to a charge against the general credit or properties or taxing
powers of the City and does not grant to the owner of this Bond any right to
have the City levy any taxes or appropriate any funds for the payment of the
principal hereof or interest hereon, nor is this Bond a general obligation or a
pecuniary liability of the City or the individual officers or agents
thereof.  This Bond does not constitute
an indebtedness of the City, within the meaning of any state constitutional
provision or statutory limitation.  This
Bond and interest hereon are payable solely from the moneys received pursuant
to the Lease Agreement dated as of April 1, 2008 between the City and the
Highwater Ethanol, LLC (hereinafter called the “Company”) (the “Bond Lease”),
or held by the Trustee in a Fund or Account appropriated to the payment of the
Bonds of this series under the Indenture, hereinafter mentioned, including
lease payments to be made by the Company, and is secured by a Mortgage,
Security Agreement, Assignment of Leases and Rents and Fixture Financing
Statement dated as of April 1, 2008 from the Company to the Trustee (the “Bond
Mortgage”) on certain ethanol manufacturing facilities owned and operated by
the Company and an Assignment and Security Agreement dated as of April 1,
2008 (the “ Bond Security Agreement”) from the Company to the Trustee and a
Guaranty dated as of April 1, 2008 executed by the Company to the Trustee
(the “Bond Guaranty”).


 


This Bond is one of a
duly authorized series of special, limited obligation Bonds in an aggregate
principal amount of $15,180,000, in denominations of $100,000 or integral
multiples of $5,000 above $100,000 not exceeding the principal amount maturing
in any year, and numbered from R-1 upwards, and of like tenor and effect except
as to serial number, denomination, interest rate, maturity and right of prior
redemption, all of which have been authorized by law to be issued and have been
issued or are to be issued for the purpose of providing financing for the
acquisition, construction and equipping of solid waste disposal facilities in
the City to be leased by the City to the Company (as more fully described in
the Bond Lease and the Indenture referred to below, the “Project”).


 


The Series 2008A
Bonds are subject to optional redemption and prepayment prior to the stated
maturities thereof, at the direction of the Company, in whole or in part, and
if in part in an amount of at least $100,000 and integral multiples of $5,000
above $100,000 and in inverse order of maturity and by lot or random selection
within a maturity, on December 1, 2013, and any business day thereafter,
at a redemption price equal to the principal amount thereof to be redeemed,
plus accrued interest to the date of redemption, plus a premium (expressed as a
percentage of the principal amount of Bonds to be redeemed), as follows:


 


3

















 


	
  Redemption Date

  	
   

  	
  Premium

  	
   

  
	
  December 1,
  2013 through November 30, 2014

  	
   

  	
  8.00

  	
  %

  
	
  December 1,
  2014 through November 30, 2015

  	
   

  	
  6.00

  	
  %

  
	
  December 1,
  2015 through November 30, 2016

  	
   

  	
  4.00

  	
  %

  
	
  December 1,
  2016 through November 30, 2017

  	
   

  	
  2.00

  	
  %

  



 


and thereafter without
premium.


 


The Bonds of this series
are also subject to extraordinary redemption on any interest payment date as a
whole but not in part in certain events of damage to or destruction or condemnation
of the Equipment as provided in the Bond Lease, at a redemption price equal to
par plus accrued interest.


 


The Bonds of this series
are subject to mandatory sinking fund redemption through operation of the
Sinking Fund provided for in Section 3.08 of the Indenture and the
Mandatory Sinking Fund Redemption Fund provided for in Section 5.04 of the
Indenture.


 


The Bonds of this series
are also subject to mandatory redemption in the event of a Determination of
Taxability, as defined in the Indenture, that interest upon the Bonds is
includible in gross income for purposes of federal income taxation when held by
persons other than “substantial users” and “related persons,” as such terms are
defined in Section 147(a) of the Internal Revenue Code and pertinent
regulations.  In the event of a
Determination of Taxability, the Company is obligated to cause each of the
Bonds of this series to be redeemed at a redemption price equal to 108% of the
principal amount to be redeemed plus accrued interest.


 


Notice of any such
redemption shall be given to the registered owner of each such Bond by first
class mail, addressed to him at his registered address, not earlier than sixty
days nor later than thirty days prior to the date fixed for redemption and
shall be published as may be required by law. 
Prior to the date fixed for redemption, funds shall be deposited with
the Trustee sufficient to pay the Bonds called and accrued interest thereon,
plus any premium required.  Upon the
happening of the above conditions, Bonds thus called shall not bear interest
after the call date and, except for the purpose of payment, from the funds so
deposited, shall no longer be protected by the Indenture.


 


This Bond is
transferable, as provided in this Indenture, only upon the registration records
maintained by the Trustee by the registered owner hereof in person or by the
owner’s duly authorized attorney, upon surrender of this Bond for transfer at
the office of the Trustee, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by the
registered owner hereof or the owner’s duly authorized attorney, and, upon
payment of any tax, fee or other governmental charge required to be paid with
respect to such transfer, one or more fully registered Bonds of this series of
the same principal amount and interest rate will be issued to the designated
transferee or transferees.


 


4

















 


The Bonds of this series
are issuable only as fully registered bonds without coupons in denominations of
$100,000 or any integral multiple of $5,000 above $100,000 not exceeding the
principal amount maturing in any year. 
As provided in the Indenture and subject to certain limitations therein
set forth, the Bonds of this series are exchangeable for a like aggregate
principal amount of Bonds of this series of a different authorized
denomination, as requested by the registered owner or the owner’s duly
authorized attorney upon surrender thereof to the Trustee.


 


In case an Event of
Default as defined in the Indenture or the Bond Lease occurs, the principal of
this Bond and all other Bonds outstanding may be declared or may become due and
payable prior to the stated maturity hereof in the manner and with the effect
and subject to the conditions provided in the Indenture, but no owner of any
Bond shall have any right to enforce the provisions of the Indenture, Bond
Lease, Bond Mortgage or Guaranty except as provided in the Indenture.


 


With the consent of the
City and Trustee and to the extent permitted by and as provided in the
Indenture, the terms and provisions of the Indenture, Bond Lease, Bond Mortgage
or any instrument supplemental thereto, may be modified or altered by the
assent or authority of the holders of at least 51% in aggregate principal
amount of the Bonds then outstanding thereunder.


 


It is hereby certified
and recited:  That the Project is an
eligible “project” as defined in the Act; that all acts, conditions and things
required to be done precedent to and in the issuance of this Bond and the
series of which it is a part have been properly done, have happened and have
been performed in regular and due time, form and manner as required by law; and
that this Bond and the series of which it is a part does not constitute a debt
of the City within the meaning of any constitutional or statutory limitation.


 


This Bond shall not be
valid or become obligatory for any purpose until it shall have been
authenticated by the execution of the certificate hereon endorsed by the Trustee
under the Indenture.


 


IN WITNESS WHEREOF, City
of Lamberton, by its City Council, has caused this Bond to be executed in its
name by the facsimile signature of its Mayor, and by the facsimile signature of
its City Clerk, all as of the Date of Original Issue specified above.


 


	
   

  	
  CITY OF LAMBERTON,
  MINNESOTA

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Facsimile)

  
	
   

  	
  Mayor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Facsimile)

  
	
   

  	
  City Clerk

  



 


5

















 


(Form of Trustee’s Certificate)


 


This is one of the Bonds
described in the within mentioned Indenture.


 


Date:  April 25, 2008


 


 


	
   

  	
  U.S. BANK NATIONAL
  ASSOCIATION

  
	
   

  	
  Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Authorized Signature

  



 


ASSIGNMENT


 


FOR VALUE RECEIVED, the
undersigned hereby sells, assigns and transfers unto


 


(Please Print or
Typewrite Name and Address of Transferee)


the within Bond and all
rights thereunder, and hereby irrevocably constitutes and appoints
                                            
attorney to transfer the within Bond on the books kept for registration
thereof, with full power of substitution in the premises.


 


	
  Date:

  	
   

  	
   

  



 


 


	
  Please Insert Social
  Security Number or 

  Other Identifying Number of Assignee

  	
   

  	
  Notice: The signature
  to this assignment must correspond with the name as it appears on the face of
  this Bond in every particular, without alteration or any change whatever.

  



 


and


 


WHEREAS, the execution
and delivery of this Indenture and the Bond Lease have been duly authorized by
the City Council, and all conditions, acts and things necessary and required by
the Constitution and Laws of the State of Minnesota, or otherwise, to exist, to
have happened or to have been performed precedent to and in the execution and
delivery of this Indenture, and in the issuance of the Series 2008 Bonds,
do exist, have happened or have been performed in regular form, time and
manner, and the execution and delivery of this Indenture and the Bond Lease
have been in all respects duly authorized; and


 


WHEREAS, the Trustee has
accepted the trust created by this Indenture and in evidence thereof has joined
in the execution hereof;


 


6

















 


NOW, THEREFORE, THIS
INDENTURE WITNESSETH:


 


GRANTING CLAUSES


 


That City of Lamberton,
Minnesota in order to secure the payment of the principal of, premium (if any)
and interest on the Bonds issued under this Indenture according to their tenor
and effect and the performance and observance of each and all of the covenants
and conditions herein and therein contained, and for and in consideration of
the premises and of the purchase and acceptance of the Bonds by the respective
purchaser or purchasers and registered owners or Holders thereof, and for other
good and valuable consideration, the receipt whereof is hereby acknowledged,
has executed and delivered this Indenture and has granted, bargained, sold,
assigned, transferred, conveyed, pledged and set over, and by these presents
does hereby grant, bargain, sell, assign, transfer, convey, pledge and set
over, unto the Trustee, and to its successor or successors in the trust hereby
created and to its assigns forever:


 


I.


 


All of the rights and
interests of the City in the Bond Lease dated as of April 1, 2008 between
the City and Highwater Ethanol, LLC, except for the rights of the City relating
to expenses, indemnity, payment of attorneys’ fees and advances of the City
under Sections 4.3, 7.4 and 9.5.


 


II.


 


A first lien on and
pledge of all right, title and interest in (i) the moneys and investments
in the Bond Fund, the Reserve Fund, and the Optional Redemption Fund covenanted
to be created and maintained under this Indenture, (ii) that portion of
any moneys and investments in the Project Fund not needed for payment of
Equipment Costs equal the ratio between proceeds of the Bonds and all funds
deposited into the Equipment Account, as further provided herein, and (iii) Net
Proceeds of any insurance or condemnation award held by the Trustee pursuant to
the terms of the Bond Lease or this Indenture.


 


III.


 


Any and all other
property of every name and nature from time to time hereafter by delivery or by
writing of any kind conveyed, mortgaged, assigned or transferred, or in which a
security interest is granted by the City or the Company or by anyone in behalf
of them or with their written consent, to the Trustee, which is hereby
authorized to receive any and all such property at any and all times and to
hold and apply the same according to the terms hereof, including but not
limited to the Bond Mortgage and the Bond Security Agreement.


 


TO HAVE AND TO HOLD all
and singular the said property hereby conveyed and assigned, or agreed or
intended so to be, to the Trustee, its successor or successors in trust and its
and their assigns, FOREVER.


 


7

















 


IN TRUST NEVERTHELESS,
upon the terms and trust herein set forth, for the equal and proportionate
benefit, security and protection of all Holders of the Bonds issued or to be
issued under and secured by this Indenture, without preference, priority or
distinction as to lien or otherwise of any of the Bonds over any of the others;


 


PROVIDED, HOWEVER, that
if the City, its successors or assigns, shall well and truly pay or cause to be
paid the principal of the Bonds and the premium (if any) and interest due or to
become due thereon, at the times and in the manner mentioned in the Bonds
according to the true intent and meaning thereof, or shall provide, as
permitted hereby, for the payment thereof by depositing with the Trustee sums
sufficient to pay the entire amount due or to become due thereon, and shall
well and truly keep, perform and observe all the covenants and conditions
pursuant to the terms of this Indenture to be kept, performed and observed by
it and shall pay to the Trustee all sums of money due or to become due to it in
accordance with the terms and provisions hereof; then upon such final payment
this Indenture and the rights hereby granted shall cease, determine and be
void; otherwise, this Indenture to be and remain in full force and effect.


 


THIS INDENTURE FURTHER
WITNESSETH, and it is expressly declared that all Bonds issued and secured
hereunder are to be issued, authenticated and delivered and all said property
hereby assigned or pledged is to be dealt with and disposed of under, upon and
subject to the terms, conditions, stipulations, covenants, agreements, trusts,
uses and purposes as hereinafter expressed, and the City has agreed and
covenanted and does hereby agree and covenant with the Trustee and with the
respective owners from time to time of the said Bonds or any part thereof, as
follows, that is to say:


 


8
















 


ARTICLE I


 


DEFINITIONS AND INTERPRETATION


 


Section 1.01.  Definitions  Unless the context otherwise requires, the
terms defined in this Article I and in the recitals and succeeding
Articles of this Indenture shall, for all purposes of this Indenture and of any
indenture supplemental hereto, have the meanings herein specified, such
definitions to be equally applicable to both the singular and plural forms of
any of the terms defined:


 


“Act” means the Minnesota
Municipal Industrial Development Act, Minnesota Statutes, Sections 469.152
to 469.1651, as amended.


 


“Additional Bonds” means
any Additional Bonds issued pursuant to the terms and conditions of Section 2.09
of this Indenture.


 


“Additional Secured
Indebtedness” means any indebtedness of the Company which is in addition to the
indebtedness under the FNBO Loan which additional indebtedness is or will be
secured by a mortgage lien or other security interest against all or part of
the Plant, or any other asset of the Company, on parity with the Bond Mortgage.


 


“Authorized Company
Representative” means the President or the CEO/General Manager of the Company,
acting individually, or any person at the time designated to act on behalf of
the Company by written certificate furnished to the City and the Trustee, containing
the specimen signature of such person and signed on behalf of the Company by
any member.  Such Certificate may
designate an alternate or alternates.


 


“Authorized Denominations” means $100,000 and any
integral multiple of $5,000 in excess of $100,000.  Series 2008 Bonds may be redeemed in
denominations of $5,000 or any integral multiple thereof, provided that the
principal amount of the portion of any Series 2008 Bond not being redeemed
shall be in a denomination of at least $100,000.


 


“Beneficial Owner” means,
with respect to any Authorized Denomination of a Bond of any series in
Book-Entry Form, each person who beneficially owns such Bond in such Authorized
Denomination and on whose behalf, directly or indirectly, such authorized
denomination of Bond is held by the Depository pursuant to the Book-Entry
System.


 


“Bond Counsel” means
Independent nationally recognized bond counsel.


 


“Bond Fund” means the
Bond Fund established under Section 5.01 of this Indenture.


 


“Bond Lease” means the
Lease Agreement of even date herewith between the City, as lessor, and the
Company, as lessee, as amended or supplemented from time to time, including any
renewals or extensions thereof.


 


9

















 


“Bond Mortgage” means the
Mortgage, Security Agreement, Assignment of Leases and Rents and Fixture
Financing Statement of even date herewith from the Company, as mortgagor, to
the Trustee, as mortgagee, securing repayment of the Bonds, and all amendments
and supplements thereto.


 


“Bond Security Agreement”
means the Security Agreement of even date herewith between the Company and the
Trustee and all amendments and supplements thereto.


 


“Bonds” means Series 2008
Bonds and any Additional Bonds issued under Section 2.09 pursuant to a
supplement to this Indenture.


 


“Book-Entry Form” means
all Bonds of any series, if such Bonds are all held (i) in the name of the
Depository (or its nominee) with each stated maturity evidenced by a single
Bond certificate or (ii) with the approval of the City and Trustee, in any
similar manner for which Beneficial Owners do not receive Bond certificates
evidencing their beneficial ownership in any Bond of such series.


 


“Book-Entry System” means
a system of recordkeeping, securities clearance and funds transfer and
settlement maintained for securities by the Depository and Participants (or
Indirect Participants).


 


“Capitalized Interest
Account” means the account by that name established within the Project Fund
pursuant to this Indenture.


 


“Cede & Co.”
means, initially, Cede & Co., as nominee of DTC and any successor or
subsequent such nominee designated by DTC respecting DTC’s functions as
book-entry depository for any Bond or Bonds;


 


“Certificate” means a
certification in writing required or permitted by the provisions of the Bond
Lease or this Indenture signed and delivered to the Trustee or other proper
person or persons.  If and to the extent
required by the provisions of Section 1.02 hereof, each Certificate shall
include the statements provided for in said Section 1.02.


 


“Certified Resolution”
means a copy of a resolution of the City Council, certified by the City Clerk
to have been duly adopted by said City Council and to be in full force and
effect on the date of such certification.


 


“City” means the City of
Lamberton, a Minnesota municipal corporation, its successors and assigns.


 


“City Council” or “Council”
means the Lamberton City Council, or its successor as governing body of the
City.


 


“Closing Date” means the
date on which the Series 2008 Bonds are delivered to the Original
Purchaser thereof.


 


10

















 


“Code” means the Internal
Revenue Code of 1986, as amended.


 


“Company” means Highwater
Ethanol, LLC, a Minnesota limited liability company, its successors and assigns.


 


“Construction Period”
means the period between the beginning of construction of the Project or the
date on which the Series 2008 Bonds are first delivered to the Original
Purchaser, whichever is earlier, and the Completion Date.


 


“Debt Service Coverage
Ratio” means, for any period, the ratio of EBITDA to interest expense and
scheduled principal payments payable during such period in respect of the FNBO
Loan and any Additional Secured Indebtedness existing at the time the
calculation is made.


 


“Default” means default
by the City in the performance or observance of any of the covenants,
agreements or conditions on its part contained in this Indenture, or in the Series 2008
Bonds and Additional Bonds outstanding hereunder, exclusive of any notice or
period of grace required for a default to constitute an “event of default” as
hereinafter provided.


 


“Depository” means The
Depository Trust Company in New York, New York, its successors or assigns, or
any other person who shall be a Holder of all Bonds of any series directly or
indirectly for the benefit of Beneficial Owners and approved by the Authority
and Trustee to act as the Depository; provided any Depository shall be
registered or qualified as a “clearing agency” within the meaning of Section 17A
of the Securities Exchange Act of 1934, as amended.


 


“Determination of
Taxability” means the issuance of a statutory notice of deficiency by the
Internal Revenue Service, or a ruling of the National Office or any District
Office, or a final decision by any court of competent jurisdiction that
interest on the Bonds is includible in the gross income of the recipient under Section 103
and related Sections of the Internal Revenue Code and regulations thereunder as
in effect at the date of issuance of the Series 2008 Bonds, for any reason
other than a change of law or that the Holder is a substantial user or a
related person under Section 147(a), provided that the period for a
contest or appeal, if any, of such action, ruling or decision has expired
without any such appeal or contest having been instituted, or, if instituted,
such contest or appeal has been unsuccessfully concluded.


 


“Disbursing Agreement”
means the Disbursing Agreement to be entered into among the Company, the
Trustee, FNBO and Homestead Escrow and Exchange Company, as disbursing agent.


 


“DTC” means The
Depository Trust Company, New York, New York, a limited purpose trust company
organized under the laws of the State of New York, or any successor book-entry
securities depository for the Bonds;


 


11

















 


“DTC Participant” means
those broker-dealers, banks and other financial institutions from time to time
for which DTC holds Bonds or securities as depository;


 


“EBITDA” means for any
period, an amount determined in accordance with GAAP, equal to (a) Net
Income for such period, plus (b) to the extent deducted in determining Net
Income for such period, the sum of (1) interest expense, (2) payments
to the members of the Company in respect of estimated tax amounts (payments of
estimated tax amounts shall be deemed to have been made in the tax fiscal
quarter to which the applicable payment related), (3) depreciation and
amortization and (4) all other non-cash charges, in each case for such
period.


 


“Equipment” or “Items”
means the equipment described in Exhibit A to the Bond Lease, and any
additional equipment described in a Lease Supplement, together with any and all
accessories from time to time incorporated therein or installed thereon.


 


“Equipment Account” means
the account by that name established within the Project Fund pursuant to this
Indenture.


 


“Equipment Costs” means
the costs described in Section 3.2 of the Bond Lease.


 


“Event of Default” means
an Event of Default described in Section 7.0l of this Indenture which has
not been cured.


 


“Fair Market Value
Purchase Price” means an amount be determined on the basis of, and shall be
equal in amount to, the value which would be agreed to in an arm’s-length
transaction between an informed and willing buyer (other than a buyer currently
in possession) and an informed and willing seller, under no compulsion to buy
or sell.


 


“FNBO” means First
National Bank of Omaha, a national bank.


 


“FNBO Loan” means the
loans from FNBO to the Company in the aggregate authorized amount of
$64,402,000 made under the FNBO Loan Documents, and any refinance, extensions,
renewals, modifications, or substitutions thereof.


 


“FNBO Loan Agreement”
means the Loan Agreement dated April 24, 2008 between FNBO and the
Company.


 


“FNBO Loan Documents” means
the FNBO Loan Agreement and supplements thereto, the FNBO Note, the FNBO
Mortgage, the FNBO Security Agreement and amendments and supplements thereto.


 


“FNBO Mortgage” means the
Mortgage, Security Agreement and Assignment of Rents and Leases dated April 24,
2008 from the Company to FNBO to secure the FNBO Loan.


 


12

















 


“FNBO Note” means the
Note executed by the Company to evidence its obligations under the FNBO Loan
Documents, and any refinance, extensions, renewals, modifications, or
substitutions thereof.


 


“FNBO Security Agreement”
means the Security Agreement dated April 24, 2008 between the Company and
FNBO to secure the FNBO Loan.


 


“Guaranty” means the
Guaranty dated as of April 1, 2008 executed by the Company to the Trustee
to guaranty payment of the principal and interest on the Bonds when due.


 


“Holder”, “Bondholder” or
“owner” whenever employed herein with respect to a Bond means the person in
whose name such Bond shall be registered.


 


“Indenture” means this
Trust Indenture between the City and U.S. Bank National Association, as
Trustee, dated as of April 1, 2008, under which the Bonds are authorized
to be issued, and including any amendments or supplements thereto.


 


“Independent”, when used
with reference to an attorney, engineer, architect, certified public
accountant, consultant or other professional person, means a person who (i) is
in fact independent, (ii) does not have any material financial interest in
the Company or the transaction to which his Certificate or opinion relates
(other than payment to be received for professional services rendered), and (iii) is
not connected with the City or the Company as an officer, director or employee.


 


“Independent Counsel”
means an Independent attorney duly admitted to practice law before the highest
court of any state.


 


“Independent Engineer”
means an Independent engineer or engineering firm or an Independent architect
or architectural firm qualified to practice the profession of engineering or
architecture under the laws of Minnesota.


 


“Intercreditor Agreement”
means the Intercreditor Agreement to be entered into between the Trustee and
FNBO..


 


“Internal Revenue Code”
or “Code” means the Internal Revenue Code of 1986, as amended.


 


“Issuance Expense Account”
means the account by that name established within the Project Fund pursuant to
this Indenture.


 


“Item” or Item of
Equipment” means any such item of Equipment.


 


“Land” means the land and
interests in land constituting the site of the Plant as described in Exhibit A
to the Bond Mortgage, less any portion of the Land released in accordance with
the provisions of the Bond Mortgage.


 


13

















 


“Lease Payments” means
the payments made or to be made by the Company pursuant to Section 4.2 of
the Bond Lease.


 


“Net Income” means, for
any period, the net income (or loss) of Company for such period determined in
accordance with generally accepted accounting principles, but excluding
therefrom (to the extent otherwise included therein) (a) any extraordinary
gains or losses, (b) any gains attributable to write-ups of assets, (c) any
equity interest in the un-remitted earnings of any Person that is not a
subsidiary of the Company, and (d) any income (or loss) of any Person
accrued prior to the date it becomes a subsidiary of, or is merged into or
consolidated with, the Company on the date that such Person’s assets are
acquired by the Company.


 


“Net Proceeds” means,
when used with respect to proceeds of insurance or a condemnation award, moneys
received or receivable by the Company, as owner, or the Trustee, as secured
party, of the Equipment, less the cost of recovery (including attorneys’ fees)
of such moneys from the insuring company or the condemning authority.


 


“Opinion of Counsel” means
a written opinion of counsel (who need not be Independent Counsel unless so
specified) appointed by the Company or the City and acceptable to the Trustee
or appointed by the Trustee.  If and to
the extent required by the provisions of Section 1.02 hereof, each Opinion
of Counsel shall include the statements provided for in said Section 1.02.


 


“Optional Redemption Fund”
means the Optional Redemption Fund established under Section 5.02 of this
Indenture.


 


“Original Purchaser”
means Northland Securities, Inc.


 


“Outstanding” or “outstanding”
when used as of any particular time with reference to Bonds means (subject to
the provisions of Section 9.03 of this Indenture pertaining to Bonds held
by the City and the Company) all Bonds theretofore authenticated and delivered
by the Trustee under the Indenture except: 
(i) Bonds theretofore cancelled by the Trustee or surrendered to
the Trustee for cancellation; (ii) Bonds for the payment or redemption of
which funds or direct obligations of or obligations fully guaranteed by the
United States of America in the necessary amount shall have theretofore been
deposited with the Trustee (whether upon or prior to the maturity or the
redemption date of such Bonds), provided that if such Bonds are to be redeemed
prior to the maturity thereof, notice of such redemption shall have been given
pursuant to Article III of this Indenture, or provision satisfactory to
the Trustee shall have been made for the giving of such notice; and (iii) Bonds
in lieu of or in substitution for which other Bonds shall have been
authenticated and delivered by the Trustee pursuant to the terms of Section 2.07
pertaining to replacement of Bonds.


 


“Permitted Encumbrances”
means, as of any particular time, (i) liens for ad valorem taxes and
special assessments not then delinquent, (ii) utility, access and other
easements and rights-of-way, mineral rights, restrictions and exceptions that
an Independent Engineer 


 


14

















 


certifies will not interfere with or impair the use of or operations
being conducted in the Plant, (iii) such minor defects, irregularities,
encumbrances, easements, rights-of-way and clouds on title as normally exist
with respect to properties similar in character to the Plant and as do not in the
aggregate, in the opinion of Independent Counsel, materially impair the
property affected thereby for the purposes for which it was acquired or is held
by the Company, (iv) the Bond Mortgage, (v) any mortgage lien granted
by Company in connection with incurring Permitted Parity Indebtedness permitted
under the Bond Lease, (vi) any mortgage lien superior to the lien of the
Bond Mortgage granted by the Company in connection with the FNBO Loan or
Additional Secured Indebtedness, (vii) the Bond Lease, and (viii) those
additional encumbrances identified in Exhibit B to the Bond Mortgage.


 


“Permitted Parity
Indebtedness” means any additional indebtedness of the Company which is on a
parity with the Bond Lease and the FNBO Loan.


 


“Person” means any
individual, corporation, business trust, association, company, partnership,
joint venture, governmental authority or other entity.


 


“Plant” means the 50
million gallon per year nameplate capacity ethanol production facility to be
constructed on the Land, as it may exist from time to time.


 


“Project” means the
Project described in Section 1.03 hereof.


 


“Project Costs” means the
costs defined in Section 4.03 of this Indenture.


 


“Project Fund” means the
Project Fund established under Section 4.02 hereof.


 


“Qualified Investments”  means investments authorized by the Act and
described in Section 5.05 of this Indenture.


 


“Redeem” or “redemption”
means and includes “prepay” or “prepayment” as the case may be.


 


“Regular Record Date” for
the interest payable on any interest payment date on the fully registered Bonds
of any series means the date specified in the provisions of this Indenture
creating such series.


 


“Representation Letter”
means such Letter of Representations to DTC or other documentation required by
DTC as a condition to its acting as book-entry depository for any Bond or Bonds
together with any replacement thereof or amendment or supplement thereto (and
including any standard procedures or policies referenced therein or applicable
thereto) respecting the procedures and other matters relating to DTC’s role as
book-entry depository for the Bonds;


 


“Reserve Fund” means the
Reserve Fund established under Section 5.03 hereof.


 


15

















 


“Reserve Requirement”
means an amount equal to $1,518,000, plus any amount required to be deposited
in the Reserve Fund in connection with the issuance of Additional Bonds.


 


“Resolution” means the
resolution of the City adopted by the City Council on March 24, 2008,
authorizing the issuance and sale of the Series 2008 Bonds, as the same
may be amended, modified or supplemented by any amendments or modifications
thereof.


 


“Responsible Officer” of
any Trustee hereunder means and includes the Chairman of the board of
directors, the president, every vice president, every assistant vice president,
the cashier, every assistant cashier, every corporate trust officer, and every
officer and assistant officer of such trustee, other than those specifically
above mentioned, to whom any corporate trust matter is referred because of his
knowledge of, and familiarity with, a particular subject.


 


“Series 2008 Bonds”
means the City of Lamberton Solid Waste Facilities Revenue Bonds (Highwater
Ethanol, LLC Project), Series 2008A, authorized by this Indenture and the
Bond Resolution, and described in Section 2.01 of this Indenture.


 


“Sinking Fund” means any
Sinking Fund established under Section 3.08 hereof.


 


“Special Record Date” for
the payment of any Defaulted Interest (as defined in Section 2.05 hereof)
on fully registered Bonds means a date fixed by the Trustee pursuant to Section 2.05
hereof.


 


“Total Debt Service
Coverage Ratio” means, for any period, the ratio of EBITDA to interest expense
and scheduled principal payments payable during such period in respect of the FNBO
Loan, any Additional Secured Indebtedness and any amounts owing under this Bond
Lease existing at the time the calculation is made.


 


“Trustee” means the
trustee at the time serving as such under this Indenture.


 


“Trust Estate” means the
interest of the City in the Bond Lease assigned under Granting Clause I of
the Indenture; the revenues, moneys, investments, contract rights, general
intangibles and instruments and proceeds and products and accessions thereof as
set forth in Granting Clause II of this Indenture; and additional property
held by the Trustee pursuant to Granting Clause III of this Indenture,
including the interests of the Trustee under the Bond Mortgage.


 


“Working Capital Expenses”
means expenses which are working capital expenditures within the meaning of
Treas. Reg. § 1.150–1(b) except expenses meeting the exceptions set
forth in Treas. Reg. § 1.148–6(d)(3)(ii).


 


Section 1.02.  Characteristics of Certificate or Opinion.  Every Certificate or Opinion of Counsel with
respect to compliance with a condition or covenant provided for in this
Indenture or the Bond Lease, and except for certificates and opinions given
pursuant to Section 2.08 hereof, shall include:  (i) a statement that the person or
persons making such 


 


16

















 


Certificate or opinion have read such covenant or condition and the
definitions herein relating thereto; (ii) a brief statement as to the
nature and scope of the examination or investigation upon which the statements
or opinions contained in such Certificate or opinion are based; (iii) a
statement that, in the opinion of the signers, they have made or caused to be
made such examination or investigation as is necessary to enable them to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and (iv) a statement as to whether, in the opinion of
the signers, such condition or covenant has been complied with.


 


Any Certificate made or
given by an officer of the City or the Company or by an Independent engineer,
architect, consultant or other person may be based, insofar as it relates to
legal matters, upon an Opinion of Counsel, unless such person knows that the
Opinion with respect to the matters upon which his Certificate may be based as
aforesaid is erroneous, or, in the exercise of reasonable care, should have
known that the same was erroneous.  Any
such Certificate or Opinion of Counsel may be based, insofar as it relates to
factual matters, information with respect to which is in the possession of the
City or the Company, upon a supporting Certificate of an officer or officers of
the City or the Company, unless the signer knows that the supporting
Certificate with respect to the matters upon which his Certificate or opinion
may be based as aforesaid is erroneous, or, in the exercise of reasonable care,
should have known that the same was erroneous.


 


Section 1.03.  Description of Project.  The term “Project” refers to the acquisition,
purchase and installation of solid waste disposal facilities (including
centrifuge, dryer, evaporator and related equipment) in connection with
construction of a 50 million gallon nameplate capacity ethanol production
facility, to be owned
by the City and operated by the Company, including the Equipment and site improvements
necessary or desirable for such purposes.


 


Section 1.04.  Additional Provisions as to Interpretation.  All references herein to “Articles”, “Sections”
and other subdivisions are to the corresponding Articles, Sections or
subdivisions of this Indenture; and the words “herein”, “hereof”, “hereunder”
and other words of similar import refer to this Indenture as a whole and not
any particular Article, Section or subdivision hereof.


 


Whenever in this
Indenture it is provided or permitted that there be deposited with or held in
trust by the Trustee money or funds in the necessary amount to pay or redeem
any Bonds, the amount so to be deposited or held shall be the principal amount
of such Bonds and all unpaid interest thereon to maturity, except that in the
case of Bonds which are to be redeemed prior to maturity and in respect of
which there shall have been furnished to the Trustee proof satisfactory to it
that notice of such redemption on a specified redemption date has been duly
given or provision satisfactory to the Trustee shall be made for such notice,
the amount so to be deposited or held shall be the principal amount of such
Bonds and interest thereon to the redemption date, together with the redemption
premium, if any.


 


Any terms defined in the Bond
Lease but not defined herein shall have the same meaning herein unless the
context hereof clearly requires otherwise.


 


17

















 


This Indenture is
governed by and shall be construed in accordance with the laws of Minnesota.


 


18

















 


ARTICLE
II


 


FORM, EXECUTION AND REGISTRATION OF BONDS


 


Section 2.01.  Form, Maturities and Numeration of Series 2008
Bonds.  The Series 2008 Bonds to
be issued and secured under this Indenture shall each be designated “City of
Lamberton Solid Waste Facilities Revenue Bond (Highwater Ethanol, LLC Project),
Series 2008A”.  The Series 2008
Bonds and Certificates of Trustee and Assignment shall be substantially in the
form set forth in the recitals hereof. 
The Series 2008 Bonds shall be issued in fully registered form,
shall be in Authorized Denominations not exceeding the principal amount
maturing in any year, initially numbered from R-1 upwards in order of maturity,
and the Series 2008 Bonds originally issued shall be dated the date of
issuance and initial delivery thereof to the Original Purchaser.  No Series 2008 Bond shall represent
principal payable or maturing in different years.  The Series 2008 Bonds shall bear
interest payable semiannually on June 1 and December 1 of each year,
commencing December 1, 2008, from the date of issuance and initial
delivery thereof to the Original Purchaser or the most recent interest payment
date to which interest has been paid or duly provided for.  Interest shall be calculated on the basis of
a 360-day year, consisting of twelve 30-day months.  The principal and redemption price of the Series 2008
Bonds shall be payable to the registered owner upon presentation at the office
of the Trustee in such coin or currency of the United States of America as may
be, on the respective dates of payment thereof, legal tender for the payment of
public and private debts, and interest on Series 2008 Bonds shall be paid
by check or draft mailed to the registered owner at the owner’s registered
address.  The Regular Record Date
referred to in Section 2.05 for the payment of interest on the Series 2008
Bonds payable, and punctually paid or duly provided for, on any interest
payment date shall be the 15th day (whether or not a business day) of the
calendar month next preceding such interest payment date.  The Series 2008 Bonds shall be in the
aggregate principal amount of Fifteen Million One Hundred  Eighty Thousand Dollars ($15,180,000), and
shall mature on December 1, 2022.


 


The Series 2008
Bonds shall be subject to mandatory redemption through operation of the Sinking
Fund as provided in Section 3.08.


 


Section 2.02.  Execution of Bonds.  The Bonds shall be signed in the name of the
City by the manual or the facsimile signature of the City Council Chair and the
manual or facsimile signature of the City Clerk, or by the manual or facsimile
signatures of other officers of the City, said signatures shall be
authenticated by the Trustee, which is hereby designated as authenticating agent,
and shall be sealed with the official seal of the City or facsimile
thereof.  In the event that any of the
officers whose signatures appear on any Bonds shall cease to be officers of the
City before such Bonds shall have been authenticated or delivered by the
Trustee, such Bonds may, nevertheless, be authenticated, delivered, and issued,
and upon such authentication, delivery and issue, shall be binding upon the
City as though those officers who signed and sealed the same had continued to
be such officers of the City; and, also, any Bond may be signed and sealed on
behalf of the City by such person 


 


19

















 


who, at the actual date of execution of such Bond, shall be the proper
officer of the City, although at the date of such Bond such person shall not
have been such an officer of the City. 
Upon the execution and delivery of this Indenture the City shall execute
and deliver the Series 2008 Bonds to the Trustee for authentication.


 


Section 2.03.  Authentication of Bonds.  No Bonds shall be valid or obligatory for any
purpose or shall be entitled to any right or benefit hereunder or under the
Bond Lease or the Bond Resolution unless a Responsible Officer of the Trustee
shall manually endorse and execute on such Bond a certificate of authentication
substantially in the form of the Certificate of Trustee hereinabove set
forth.  Such Certificate of Trustee upon
any Bond shall be conclusive evidence that such Bond so authenticated has been
duly issued under this Indenture and that the Holder thereof is entitled to the
benefits of this Indenture and the Bond Resolution.


 


No Bonds shall be
authenticated by the Trustee except in accordance with this Article.


 


The Trustee shall not be
required to authenticate any Bond unless provided with the documents referred
to in Section 2.08 and, with respect to Additional Bonds, Section 2.09
hereof and such further Certified Resolutions, Certificates, instruments or
Opinions of Counsel as the Trustee may reasonably require with respect to the
validity of the Bonds to be issued and the right and authority of the Trustee
to authenticate such Bonds.


 


Section 2.04.  Registration, Transfers and Exchange.  As long as any of the Bonds issued hereunder
shall remain outstanding, the City shall maintain and keep at the office of the
Trustee, as paying agent, an office or agency for the payment of the principal
of and interest on such Bonds, as in this Indenture provided, and for the
registration and transfer of such Bonds, and shall also keep at said office of
the Trustee records for such registration and transfer.  The City does hereby appoint the Trustee, and
its successors in the trust from time to time, as its agent to maintain said
office and agency at the office of the Trustee.


 


Upon surrender for
transfer of any fully registered Bond at the office of the Trustee with a
written instrument of transfer satisfactory to the Trustee, duly executed by
the registered owner or his duly authorized attorney, and upon payment of any
tax, fee or other governmental charge required to be paid with respect to such
transfer, the City shall execute and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
fully registered Bonds of the same series, of any authorized denominations and
of a like aggregate principal amount, interest rate and maturity.


 


Except as the right of
exchange may be limited as to Bonds of any series, fully registered Bonds, upon
surrender thereof at the office of the Trustee may, at the option of the
registered owner thereof, be exchanged for an equal aggregate principal amount
of fully registered Bonds of the same series, maturity and interest rate of any
authorized denominations.


 


20

















 


In all cases in which the
privilege of exchanging Bonds or transferring fully registered Bonds is
exercised, the City shall execute and the Trustee shall deliver Bonds in
accordance with the provisions of this Indenture.  For every such exchange or transfer of Bonds,
whether temporary or definitive, the City or the Trustee may make a charge
sufficient to reimburse it for any tax, fee or other governmental charge
required to be paid with respect to such exchange or transfer, which sum or
sums shall be paid by the person requesting such exchange or transfer as a
condition precedent to the exercise of the privilege of making such exchange or
transfer.  Notwithstanding any other
provision of this Indenture, the cost of preparing each new Bond upon each
exchange or transfer, and any other expenses of the City or the Trustee
incurred in connection therewith (except any applicable tax, fee or other
governmental charge) shall be paid by the Company pursuant to the Bond
Lease.  The City shall not be obligated
to make any such exchange or transfer of Bonds during the fifteen (l5) days
next preceding the date of the first publication or the mailing (if there is no
publication) of notice of redemption in the case of a proposed redemption of
Bonds.  The City and Trustee shall not be
required to make any transfer or exchange of any Bonds called for redemption.


 


Section 2.05.  Payment of Interest on Bonds; Interest
Rights Preserved.  Interest on any
fully registered Bond of any series which is payable, and is punctually paid or
duly provided for, on any interest payment date shall be paid to the person in
whose name that Bond is registered at the close of business on the Regular
Record Date for such interest specified in the provisions of this Indenture
creating such series.


 


Any interest on the Bonds
which is payable, but is not punctually paid or duly provided for, on any
interest payment date (herein called “Defaulted Interest”) shall forthwith
cease to be payable to the registered Holder on the relevant Regular Record Date
solely by virtue of such Holder having been such Holder; and such Defaulted
Interest may be paid by the Trustee, as provided in Subsection A or B below:


 


A.            The Trustee may elect to make
payment of any Defaulted Interest on the fully registered Bonds of any series
to the persons in whose names such Bonds are registered at the close of
business on a Special Record Date for the payment of such Defaulted Interest,
which shall be fixed in the following manner. 
The Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 nor less than 10 days prior
to the date of the proposed payment and not less than 10 days after the receipt
by the Trustee of the notice of the proposed payment.  The Trustee shall promptly notify the Company
and the City of such Special Record Date and, in the name of the City and at
the expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed, first
class postage prepaid, to each Holder of a fully registered Bond of such series
at his address as it appears in the registration records maintained by the
Trustee not less than 10 days prior to such Special Record Date.  The Trustee may, in its discretion and at the
expense of the Company, cause a similar notice to be published at least once in
a financial newspaper, but such publication shall not be a condition precedent
to the establishment of such Special 


 


21

















 


Record Date.  Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been mailed as
aforesaid, such Defaulted Interest shall be paid to the persons in whose names
the Bonds of such series are registered on such Special Record Date and shall
no longer be payable pursuant to the following Subsection B.


 


B.            The Trustee may make payment of any
Defaulted Interest on the Bonds of any series in any other lawful manner, if
such payment shall be deemed practicable by the Trustee.


 


Subject to the foregoing
provisions of this Section, each Bond delivered under this Indenture upon
transfer of or in exchange for or in lieu of any other Bond shall carry all the
rights to interest accrued and unpaid, and to accrue, which were carried by
such other Bond and each such Bond shall bear interest from such date that
neither gain nor loss in interest shall result from such transfer, exchange or
substitution.


 


Section 2.06.  Ownership of Bonds.  As to any Bond, the City, the Company and the
Trustee and their respective successors, each in its discretion, may deem and
treat the person in whose name the same for the time being shall be registered
as the absolute owner thereof for all purposes and neither the City nor the
Trustee nor their respective successors shall be affected by any notice to the
contrary.  Payment of or on account of
the principal of any such Bond shall be made only to or upon the order of the
registered owner thereof, but such registration may be changed as above
provided.  All such payments shall be
valid and effectual to satisfy and discharge the liability upon such Bond to
the extent of the sum or sums so paid.


 


Section 2.07.  Reissuance of Mutilated, Destroyed, Stolen
or Lost Bonds.  In case any
outstanding Bond shall become mutilated or be destroyed, stolen or lost, the
Trustee shall authenticate and deliver a new Bond of like tenor, number and
amount as the Bond so mutilated, destroyed, stolen or lost, in exchange and
substitution for such mutilated Bond, upon surrender of such mutilated Bond or
in lieu of and substitution for the Bond destroyed, stolen or lost, upon filing
with the Trustee evidence satisfactory to the City and the Trustee that such
Bond has been destroyed, stolen or lost and upon furnishing the City, the
Trustee and the Company with indemnity satisfactory to them and complying with
such other reasonable regulations as the City, the Trustee and the Company may
establish and payment of any expenses which the City, the Trustee or the
Company may incur in connection therewith. 
In the event any such Bond shall have matured, instead of issuing a
substitute Bond, the City may pay the same without surrender thereof.


 


Section 2.08.  Conditions for Authentication of Series 2008
Bonds.  The Trustee shall not
authenticate and deliver the Series 2008 Bonds to be issued and delivered
pursuant to the Indenture unless theretofore or simultaneously therewith there
shall have been delivered to the Trustee the following:


 


22

















 


(a)           Certified copies of the Resolution
authorizing the issuance of the Series 2008 Bonds and the execution and
delivery of the Bond Lease and this Indenture, and of the resolutions adopted
by the City Council on March 24, 2008.


 


(b)           Executed counterparts of the Bond
Lease, this Indenture, the Bond Mortgage, the Intercreditor Agreement, the
Disbursing Agreement, the Guaranty and UCC-1 financing statements executed by
the Company as Debtor and describing as collateral any tangible personal property
described in the granting clauses of the Bond Mortgage, and by the City as
Debtor and describing as collateral all rights of the City under the Bond Lease
(except certain rights to indemnity and repayment of expenses, advances and
legal fees).


 


(c)           The manually signed approving opinion
of Bond Counsel, concerning the validity and legality of the Series 2008
Bonds and exclusion of interest thereon from gross income under the Internal
Revenue Code.


 


(d)           An order for authentication and
registration of the Series 2008 Bonds, signed by the City Clerk specifying
the aggregate principal amount of the Series 2008 Bonds to be issued and
directing the Trustee to deliver the Series 2008 Bonds described therein
to or upon the order of the purchaser upon payment of the purchase price set
forth therein.


 


(e)           A Certificate by the City pursuant to
Section 148 of the Internal Revenue Code as to absence of arbitrage
expectation, which may be based on certifications of the Company.


 


(f)            Such further certifications,
documents and Opinions of Counsel as the Trustee, the City or Bond Counsel may
require.


 


Section 2.09.  Authorization of Additional Bonds.  In addition to the Series 2008 Bonds,
the City is authorized under this Indenture, in its discretion, and upon
request of the Company, to issue, and the Trustee shall authenticate and
deliver, Additional Bonds to provide financing for completion or expansion of
the Project or, subject to applicable law, to refund any Bonds then outstanding
and, in case of an advance refunding, the interest thereon to maturity or a
specified redemption date.  Any such
Additional Bonds shall be authorized by resolution of the City and described in
a supplemental indenture executed by the City and the Trustee and, when so
issued, authorized and described, shall be secured by the Indenture and the
Trust Estate on a parity with the Bonds then outstanding under the Indenture;
provided, that no such Additional Bonds shall be issued under the Indenture or
secured by the Trust Estate on a parity with the outstanding Bonds unless the
following conditions are met:


 


(a)           The Bond Lease shall be in effect and
no event of default, as such term is defined in the Bond Lease, shall exist
thereunder which has not been or is not to be cured.


 


23
















 


(b)          The exemption of the interest on any
Bonds then outstanding from federal income taxation shall not be impaired by
the issuance of the Additional Bonds and the Trustee shall have been furnished
an opinion of Bond Counsel to such effect.


 


(c)          Supplements
to the Bond Mortgage and Bond Security Agreement shall be entered into
describing the Additional Bonds and the Bond Lease Payments for the Additional
Bonds as additional indebtedness secured by the Bond Mortgage and Bond Security
Agreement, and subjecting to the liens of the Bond Mortgage and Bond Security
Agreement any additional property to be acquired or improved in connection with
the issuance of the Additional Bonds.


 


(d)          A
Certificate of the Authorized Company Representative shall be delivered to the
Trustee to the effect that the proceeds of the Additional Bonds, together with
any additional funds supplied or to be supplied by the Company, are estimated
to be sufficient to complete the improvements to be financed thereby or the
cost of the refunding, as the case may be.


 


(e)          In
the event that Additional Bonds are issued to provide financing for completion
or expansion of the Project, evidence of the consent of the holders of at least
51% of the outstanding Bonds.


 


(f)           In
the event that the Additional Bonds are to be issued to advance refund any then
Outstanding Bonds, the Trustee shall have been furnished with a report of an
Independent accountant to the effect that (A) the proceeds (excluding
accrued interest but including any premium) of the Additional Bonds plus any
moneys to be withdrawn from the Bond Fund, the Sinking Fund, the Reserve Fund
and the Optional Redemption Fund for such purpose, as hereinafter provided,
together with any other funds to be deposited with the Trustee for such
purpose, will be not less than an amount sufficient to pay the principal of and
the redemption premium, if any, on the outstanding Bonds to be refunded and all
principal and interest which will become due and payable on or prior to the
redemption date, or that (B) from the proceeds of the Additional Bonds or
other sources there shall be purchased and deposited in trust with the Trustee
obligations of or obligations fully guaranteed by the United States which do
not permit the redemption thereof at the option of the City and the principal
of and the interest on which when due and payable (or redeemable at the option
of the holder thereof) will provide, together with any other moneys which are
to be deposited with the Trustee for such purpose, sufficient moneys to pay such
principal, redemption premium and interest.


 


The Trustee shall not
authenticate any such Additional Bonds until there is also delivered to the
Trustee a Certified Resolution of the City authorizing the Additional Bonds,
executed counterparts of amendments to the Bond Lease providing for the
additional payments and related provisions to provide for the payment of the
Additional Bonds, and such amendments and further documents of the kind not
described in this Section but described in Section 2.08 to the extent
applicable to the Additional Bonds.


 


24

















 


Section 2.10.  Book-Entry System. Upon request of a
Holder any Bond may be registered in the Bond Register in the name of Cede &
Co., as the nominee of DTC, who will thereafter act as securities depository
for such Bond or Bonds.


 


With respect to Bonds
registered in the Bond Register in the name of Cede & Co., as nominee
of DTC, neither the Issuer, the Company nor the Trustee shall have any
responsibility or obligation to any DTC Participant or to any Beneficial Owner.
Without limiting the immediately preceding sentence, neither the Issuer, the
Company, nor the Trustee shall have any responsibility or obligation with
respect to (i) the accuracy of the records of DTC, Cede & Co., or
any DTC Participant with respect to any ownership interest in the Bonds, (ii) the
delivery to any DTC Participant, any Beneficial Owner or any other Person,
other than DTC, of any notice with respect to the Bonds, including any notice
of redemption, (iii) the payment to any DTC Participant, any Beneficial
Owner or any other Person, other than DTC, of any amount with respect to the
principal of or premium, if any, or interest on the Bonds, or (iv) the
failure of DTC to provide any information or notification on behalf of any DTC
Participant or Beneficial Owner.


 


The City, the Company and
the Trustee may treat as and deem DTC to be the absolute owner of each Bond for
the purpose of payment of the principal of and premium and interest on such
Bond, for the purpose of giving notices of redemption and other matters with
respect to such Bond, for the purpose of registering transfers with respect to
such Bonds, and for all other purposes whatsoever (except for the giving of
certain Bondholder consents) The Trustee shall pay all principal of and
premium, if any, and interest on the Bonds to the Bondholders as shown on the
Bond Register, and all such payments shall be valid and effective to fully
satisfy and discharge the Issuer’s obligations with respect to the principal of
and premium, if any, and interest on the Bonds to the extent of the sum or sums
so paid.


 


Upon delivery by DTC to
the Trustee of written notice to the effect that DTC has determined to
substitute a new nominee in place of Cede & Co., and subject to the
transfer provisions in Section 2.04, references to “Cede & Co.”
in this Section shall refer to such new nominee of DTC.


 


Notwithstanding the
provisions of this Indenture to the contrary (including without limitation
surrender of Bonds, registration thereof, and Authorized Denominations), as
long as the Bonds are in book-entry form, full effect shall be given to the
Representation Letter and the procedures and practices of DTC thereunder.


 


Section 2.11.  Termination of Book-Entry Only System.
DTC may determine to discontinue providing its services with respect to any
Bonds registered in the name of Cede & Co. at any time by giving
written notice to the Trustee and discharging its responsibilities with respect
thereto under applicable law. Upon the termination of the services of DTC as
provided above, the Bonds may be registered in whatever name or names the
Bondholders shall designate at that time, in accordance with Section 2.04.
To the extent that the Beneficial Owners are designated as the transferee by
the Bondholders, in accordance with Section 2.04 


 


25

















 


the Bonds will be delivered in appropriate form, content and Authorized
Denomination to the Beneficial Owners.


 


So long as any Bond is
registered in the name of Cede & Co., as nominee of DTC, all payments
with respect to the principal of and premium, if any, and interest on such Bond
and all notices with respect to such Bond shall be made and given,
respectively, to DTC as provided in the Representation Letter.


 


26

















 


ARTICLE
III


 


REDEMPTION OF BONDS


 


Section 3.01.  Redemption of Series 2008 Bonds.  The Series 2008 Bonds shall be subject
to redemption prior to maturity only as follows:


 


(a)          Optional
Redemption.  The Series 2008
Bonds are subject to optional redemption, prior to the stated maturities
thereof, in whole or in part, and if in part in inverse order of maturity and
by lot or random selection within a maturity, and in an Authorized
Denomination, at the direction of the Company, on December  1, 2013,
and any business day thereafter, at a redemption price equal to the principal
amount to be redeemed plus accrued interest, plus a premium (expressed as a
percentage of the principal amount of Bonds to be redeemed), as follows:


 


	
  Redemption Date

  	
   

  	
  Premium

  	
   

  
	
  December 1, 2013 through November 30, 2014

  	
   

  	
  8.00

  	
  %

  
	
  December 1,
  2014 through November 30, 2015

  	
   

  	
  6.00

  	
  %

  
	
  December 1,
  2015 through November 30, 2016

  	
   

  	
  4.00

  	
  %

  
	
  December 1,
  2016 through November 30, 2017

  	
   

  	
  2.00

  	
  %

  



 


and thereafter without
premium.


 


(b)          Extraordinary
Redemption.  The Series 2008
Bonds are subject to extraordinary redemption on any interest payment date as a
whole but not in part, at a redemption price equal to par, plus accrued interest
to the redemption date, upon the happening of certain events of damage to or
destruction or condemnation of the Project, all as more fully provided in Section 6.1
of the Bond Lease, or upon certain amendments or refinancing of the FNBO Loan
which was not approved by the Holders of the Bonds as provided in Section 7.10
of the Bond Lease.


 


(c)          Sinking
Fund Redemption.  The Series 2008
Bonds maturing on December 1, 2022 are subject to mandatory redemption, in
advance of their stated maturities, from Lease Payments to be made by the
Company, through application of any Sinking Fund provided for in Section 3.08
hereof, at a redemption price equal to par, plus accrued interest, at the times
and in the amounts set forth in Section 3.08.


 


(d)          Mandatory
Redemption Upon Determination of Taxability.  The Series 2008 Bonds are subject to
mandatory redemption in whole at a redemption price equal to 108% of the
principal amount of the Bonds to be redeemed, plus accrued interest thereon to
the Redemption Date, upon the occurrence of a Determination of Taxability on
the Redemption Date established by the Trustee. 
Upon a Determination of Taxability all of the Outstanding Bonds are
subject to mandatory redemption unless Bond Counsel determines that redemption
of only a portion of the Outstanding Series 2008 Bonds would result in
interest on the remaining Outstanding Series 2008 Bonds 


 


27

















 


not being included in
gross income of the Holders of such remaining Outstanding Series 2008
Bonds, in which case only such principal amount specified by Bond Counsel will
be subject to mandatory redemption by the Trustee on the earliest practicable
date for which notice can be given.


 


(e)          Mandatory
Redemption Upon Failure to Meet Disbursement Conditions.  The Series 2008 Bonds are subject to
mandatory redemption in whole on the earliest date for which notice may be
given at a redemption price of 100% of the principal amount of Series 2008
Bonds, plus accrued interest to the Redemption Date in the event the conditions
for the initial disbursement of the FNBO Loan are not met on or prior to August 1,
2008.


 


Notice of any such
redemption of Bonds shall be mailed in the form provided by Section 3.02
herein and in the manner and to the extent required by Section 3.03
herein.  Prior to the date fixed for
redemption, funds shall be deposited with the Trustee sufficient to pay the
Bonds called and accrued interest thereon, plus any premium required.  Upon the happening of the above conditions,
any Bonds thus called shall not bear interest on or after the call date, and
except for the purpose of payment by application of the funds so deposited,
shall no longer be protected by the Indenture.


 


Section 3.02.  Written Notice to Trustee.  If the Bonds are to be redeemed pursuant to Section 3.01
hereof, and written notice of an election to exercise an option to redeem Bonds
under Section 8.2 of the Bond Lease or written notice of a Determination
of Taxability under Section 7.8 of the Bond Lease shall have been given to
the Trustee by the Company, the Trustee shall prepare a notice in the name of
the City or in its own name describing the outstanding Bonds to be redeemed,
the date of redemption, and the redemption price.  If the Company shall fail to give such notice
of redemption under Section 8.4 of the Bond Lease, the Trustee shall give
notice of redemption pursuant to the terms of the Bond Lease.


 


Section 3.03.  Mailing and Publication of Notice.  Notice of redemption (including when only a
portion of the Bonds is to be redeemed, the series and numbers of such Bonds or
the maturities thereof) shall be mailed by the Trustee, not less than thirty
days nor more than sixty days before the redemption date, by first class mail,
to the registered owners of any Bonds which are to be redeemed, at their last
addresses appearing upon the registration records maintained by the
Trustee.  If required by the Act or other
applicable law a similar notice shall also be published in such manner as may
be required by the Act or other applicable law. 
No notice of redemption need be given if the Holders of all Bonds called
for redemption waive notice thereof in writing and such waiver is filed with
the Trustee.


 


Section 3.04.  Deposit for Redemption.  On or prior to the redemption date, there
shall be deposited with the Trustee cash in an aggregate amount which shall be
sufficient to pay the redemption price of the Bonds to be redeemed, and
interest thereon to the redemption date; and there shall be deposited, or
arrangements shall be made with the Trustee to deposit, with the Trustee a sum
sufficient to pay the proper expenses and charges of the Trustee in connection
with such redemption.  Upon deposit with
the Trustee of the aggregate amount of 


 


28

















 


such redemption price and interest, such moneys shall be set aside by
the Trustee and held by it for the account of the respective Holders of the
Bonds being redeemed.


 


Section 3.05.  Payment of Redeemed Bonds.  After notice of redemption shall have been
given as provided in Section 3.03 of this Indenture, the Bonds specified
in such notice shall become due and payable on the redemption date.  Payment of the redemption price and interest
shall be made to or upon order of each registered owner, upon the surrender of
the Bonds.  Any installment of interest
maturing on or prior to the redemption date shall be payable to the registered
owners of Bonds on the relevant Record Dates according to the terms of such
Bonds and the provisions of Section 2.05 hereof and the notice of
redemption herein provided for may so state. 
If redemption moneys are available for the payment of all of the Bonds
called for redemption on the redemption date, the Bonds so called shall cease
to draw interest after the redemption date, and such Bonds shall not be deemed
to be outstanding hereunder for any purpose, except that the Holders thereof,
on presentation, as herein provided, shall be entitled to receive payment of
the redemption price and interest accrued thereon to the redemption date from
the moneys set aside by the Trustee as aforesaid.


 


Section 3.06.  Cancellation of Redeemed Bonds.  All Bonds so redeemed shall forthwith be
cancelled and destroyed by the Trustee and a certificate of destruction
furnished to the City; and no further Bonds shall be executed or authenticated
or issued hereunder in exchange or substitution therefor.


 


Section 3.07.  Partial Redemption of Bonds.  If less than all of the Bonds of a particular
maturity at the time outstanding are to be called for prior redemption, the
particular Bonds or portions thereof of such maturity to be redeemed shall be
selected by lot or random selection, except as otherwise provided herein, by
the Trustee in such manner as the Trustee, in its discretion, may determine.  The Trustee shall call for redemption in
accordance with the foregoing provisions as many Bonds or portions thereof as
will, as nearly as practicable, exhaust the moneys available therefor provided
that the principal amount not being redeemed is in an Authorized
Denomination.  Particular Bonds or
portions thereof shall be redeemed only in Authorized Denominations.


 


In the case of Bonds in
Authorized Denominations, if less than all of such Bonds then outstanding are
to be called for redemption, then for all purposes in connection with
redemption, each $5,000 of principal amount above $100,000 shall be treated as
though it was a separate Bond of the denomination of $5,000.  If it is determined that one or more, but not
all of the $5,000 units of principal amount above $100,000 represented by any
such fully registered Bond is to be called for redemption, then upon notice of
intention to redeem such $5,000 unit or units, the owner of such fully
registered Bond shall forthwith surrender such Bond to the Trustee (l) for
payment of the redemption price (including the redemption premium, if any, and
interest to the date fixed for redemption) of the unit or units of principal
amount called for redemption and (2) exchange for a new Bond or Bonds of
the aggregate principal amount of the unredeemed balance of the principal
amount of such fully registered Bond shall be issued to the registered owner
thereof, without charge therefor.  If the
owner of 


 


29

















 


any such fully registered Bond of an Authorized Denomination shall fail
to present such Bond to the Trustee for payment and exchange as aforesaid, such
Bond shall nevertheless become due and payable on the date fixed for redemption
to the extent of the Authorized Denomination called for redemption (and to that
extent only).  Interest shall cease to
accrue on the portion of the principal amount of such Bond represented by such
Authorized Denomination on and after the date fixed for redemption provided
that funds sufficient for the payment of the redemption price shall have been
deposited with the Trustee and shall be available for the redemption of said
Authorized Denomination on the date fixed for redemption, and in such event,
such Bond shall not be entitled to the benefit or security of this Indenture,
the Bond Lease, or Bond Resolution to the extent of the portion of its
principal amount (and accrued interest thereon to the date fixed for redemption
and applicable premium, if any) represented by such Authorized Denomination of
principal amount, nor shall new Bonds be thereafter issued corresponding to
said unit or units.


 


Section 3.08.  Sinking Fund.  So long as any of the Series 2008 Bonds
shall be outstanding, there shall be established and maintained with the
Trustee a separate fund to be designated “City of Lamberton Revenue Bonds
(Highwater Ethanol, LLC Project), Series 2008 Sinking Fund” (herein called
the “Sinking Fund”).  For the retirement
of the Series 2008 Bonds, the Company has covenanted in the Bond Lease to
deposit in the Sinking Fund, as required, an amount sufficient to redeem on December 1
of the years indicated below the following principal amounts of the Series 2008
Bonds maturing on December 1, 2022, on the dates specified (each such date
being herein called a “Sinking Fund Redemption Date”) at a redemption price
equal to the principal amount thereof, plus accrued interest to the redemption
date:


 


For the 2022 Term Bonds:


 


	
  December 1 of 

  the Year

  	
   

  	
  Amount

  	
   

  	
  December 1 of

  the Year

  	
   

  	
  Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2015

  	
   

  	
  $

  	
  1,400,000

  	
   

  	
  2019

  	
   

  	
  $

  	
  1,945,000

  	
   

  
	
  2016

  	
   

  	
  1,520,000

  	
   

  	
  2020

  	
   

  	
  2,110,000

  	
   

  
	
  2017

  	
   

  	
  1,650,000

  	
   

  	
  2021

  	
   

  	
  2,285,000

  	
   

  
	
  2018

  	
   

  	
  1,790,000

  	
   

  	
  2022*

  	
   

  	
  2,480,000

  	
   

  
										



 






*Stated
Maturity 


 


provided, however, that
in the event the FNBO Loan is paid in full on or prior to December 1,
2013, then the foregoing mandatory redemption schedule shall be revised so that
the Series 2008 Bonds shall be subject to mandatory redemption on December 1
in each of the remaining years to the maturity of the Series 2008 Bonds in
such amounts that, with interest payable, result as nearly as practicable in
level annual payments of principal and interest over such period.  In addition, the Company has covenanted to
deposit in the Mandatory Sinking Fund Redemption Fund 25% of Excess Cash Flow
following payment in full of the FNBO Loan.


 


30

















 


From such cash Sinking
Fund payments, to the maximum extent possible, and with written notice provided
as set forth in Section 3.02 hereof, the Trustee shall redeem at 100% of
the principal amount thereof plus accrued interest to the Sinking Fund
redemption date the Series 2008 Bonds. 
At its option, to be exercised on or before the forty-fifth day next
preceding any such Sinking Fund redemption date, the Company may (i) deliver
to the Trustee for cancellation such Series 2008 Bonds in any aggregate
principal amount desired, or (ii) receive a credit in respect of such
Sinking Fund redemption obligation for any such Series 2008 Bonds which
prior to said date have been purchased or redeemed (otherwise than at the
stated maturity thereof or through the operation of such Sinking Fund) and
cancelled by the Trustee and not theretofore applied as a credit against such
Sinking Fund redemption obligation.  Each
such Series 2008 Bond so delivered or previously purchased or redeemed
shall be credited by the Trustee at 100% of the principal amount thereof on the
obligation of the Company on such Sinking Fund redemption date and any excess
amount shall be credited on future Sinking Fund redemption obligations in
chronological order, and the principal amount of such Series 2008 Bonds to
be redeemed by operation of the Sinking Fund shall be accordingly reduced.  The Company shall on or before the
forty-fifth day next preceding each such Sinking Fund redemption date furnish
the Trustee with a Certificate of the Authorized Company Representative
indicating whether or not and to what extent the provisions of clauses (i) and
(ii) of this Section are to be availed of with respect to such Sinking
Fund payment.


 


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ARTICLE
IV


 


BOND
PROCEEDS; PROJECT FUND


 


Section 4.01.  Deposit of Series 2008 Bond Proceeds.  The City shall deposit, or shall direct the
Original Purchaser of the Series 2008 Bonds to deposit, with the Trustee
all of the net proceeds of the sale of the Series 2008 Bonds (including
accrued interest thereon from the date from which interest is to be paid
thereon to the date of delivery to the purchaser or purchasers thereof), and
the Trustee out of such proceeds shall:


 


(a)                               Deposit $-0- to the credit of the Bond
Proceeds Issuance and Expense Subaccount of the Issuance Expense Account of the
Project Fund;


 


(b)                              Deposit $1,830,960 to the credit of the
Capitalized Interest Account of the Project Fund;


 


(c)                               Deposit $1,518,000 to the credit of the
Reserve Fund, an amount equal to the Reserve Requirement; and


 


(d)                              Deposit to the credit of the Revenue Bond
Subaccount of the Equipment Account of the Project Fund the balance of such
proceeds.


 


In addition, the Company
shall, from sources other than the Series 2008 Bonds, pay an underwriting
fee to the Original Purchaser in the amount of $151,800 and deposit $135,000 in
the Company Equity Issuance Expense Subaccount of the Issuance Expense Account
of the Project Fund.


 


Section 4.02.  Establishment of Project Fund.  There shall be established with the Trustee
an Account and there shall be deposited with the Trustee to the credit of such
Account (herein called the “Project Fund”) the proceeds of the Series 2008
Bonds, except as otherwise provided herein.


 


(a)                               Deposits.  There shall
be deposited in the proper Account of the Project Fund, in accounts separate
from any other funds or Accounts and designated relating to the Bonds, any and
all amounts required to be deposited therein pursuant to Section 4.01.  The amounts in the Project Fund, other than
the Company Equity Issuance Expense Subaccount, shall be subject to a security
interest in favor of the Trustee until disbursed as provided herein.  The Trustee shall apply the amounts on
deposit in the Project Fund, except amounts on deposit in the Company Equity
Issuance Expense Subaccount, in accordance with Section 3.5 of the Bond
Lease.


 


(b)                              Issuance Expense Account.


 


(i)          Bond
Proceeds Issuance Expense Subaccount. 
The Trustee shall deposit amounts from Bond Proceeds, if any, in an
amount not in excess of two 


 


32

















 


percent (2%) of the
principal amount of the Bonds in the Bond Proceeds Issuance Expense Subaccount
in an Account separate from any other Trust Fund or Account and designated
relating to the Bonds, and apply such amounts to pay Bond issuance costs.  Such disbursements shall be made at the
direction of the Company.  If there shall
be any balance in the Issuance Expense Account remaining after all Bond
issuance costs have been paid, the Trustee shall transfer such remaining
balance to the Revenue Bond Subaccount of the Equipment Account.


 


(ii)         Company
Equity Issuance Expense Subaccount. 
The Trustee shall deposit amounts received from the Company, but not
from Bond proceeds, to pay costs of issuance of the Bonds in excess of two
percent (2%) of the principal amount of the Bonds, in the Company Equity
Issuance Expense Subaccount and apply such amounts to pay Bond issuance
costs.  Such disbursements shall be made
upon receipt of a written direction of the Company.  If there shall be any balance in the Borrower
Equity Issuance Expense Subaccount remaining after all Bond issuance costs have
been paid, the Trustee shall transfer such remaining balance to the Company.


 


(c)                               Capitalized Interest Account. 
The Trustee shall apply the amounts in the Capitalized Interest Account
in an account separate from any other Trust Fund or Account and designated
relating to the Bonds, and apply such amount to the payment of the interest on
the Bonds as the same shall become due until the earlier of the Completion Date
or the exhaustion of amounts in such Account (the “Capitalized Interest Period”).  On the Business Day immediately preceding
each Interest Payment Date during the Capitalized Interest Period, the Trustee
shall transfer from the Capitalized Interest Account to the Bond Fund an amount
sufficient to pay the interest on the Bonds becoming due on the immediately
succeeding Interest Payment Date.  Upon
the Completion Date, the Trustee shall transfer any balance remaining in the
Capitalized Interest Account to the Equipment Account to pay any remaining
Equipment Costs.


 


(d)                              Equipment Account. 
The Trustee shall apply the amounts in the Equipment Account in an
account separate from any other Trust Fund or Account and designated relating
to the Bonds, and apply such amount to the payment of Equipment Costs pursuant
to Section 4.03 of this Indenture and Section 3.2 of the Bond Lease.


 


Section 4.03.  Equipment Costs Defined.  For the purposes of this Article, the
Equipment Costs shall include, without intending thereby to limit or restrict
any proper definition of such cost under any applicable laws and generally
accepted accounting principles, the costs described in Section 3.2 of the
Bond Lease.


 


Section 4.04.  Application of Balance in Project Fund.  When a Certificate of the Company
Representative pursuant to Section 3.6 of the Bond Lease shall have been
furnished to the Trustee, any balance in the Project Fund (after reserving such
amount as the 


 


33

















 


Authorized Company Representative shall deem necessary for the payment
of any remaining amounts due or to become due for Equipment Costs, after
returning to the Company any contingent funds which it may have deposited into
the Project Fund as additional funds to finance the total Project Costs and
found to be unnecessary for such purpose and after returning to the City any
funds on remaining deposit in the Revenue Bond Subaccount of the Equipment
Account, shall be deposited in the Bond Fund, but only if the result thereof
would not be to cause less than 95% of the net proceeds of the Series 2008
Bonds to have been used for the acquisition, construction, reconstruction or
improvement of land or property of a character subject to the allowance for
depreciation under the Internal Revenue Code. 
Any balance not transferable to the Bond Fund shall be used to redeem
the largest portion of outstanding Series 2008 Bonds then subject to
redemption without premium under this Indenture that does not exceed the amount
of such balance.  Any portion of such
balance not used to redeem outstanding Series 2008 Bonds because the
amount of Series 2008 Bonds subject to redemption without premium is less
than such balance shall be held by the Trustee in escrow and applied to the
redemption of Bonds at the earliest possible redemption date on which no
premium is payable.  The amount held in
escrow may not be invested to produce a yield greater than the yield on the Series 2008
Bonds.


 


Section 4.05.  Deposit and Investment of Excess Moneys.  To the extent permitted by the Act, the
Trustee shall invest the moneys on deposit in the Project Fund at the request of
the Authorized Company Representative in Qualified Investments which shall (i) be
payable in such amounts and at such times not later than the time or times when
such moneys will be needed to pay Equipment Costs, and (ii) mature or may
be redeemed no later than six months from the date of investment.  The type, amount and maturity of Qualified
Investments made pursuant to this Section shall conform to any
instructions of the Authorized Company Representative.  The Trustee may, from time to time, cause any
such investments to be sold or otherwise be converted into cash, whereupon the
proceeds derived from such sale or conversion shall be deposited into the
Project Fund.  Any interest or profit
derived from investments shall be credited to said Account.  Any loss derived from investments shall be
debited to such account.  Investments
permitted under this Section may be purchased from the Trustee or from any
of its affiliates.  The City covenants,
based on the representations of the Company, that no portion of the Project
Fund representing proceeds of the Bonds shall be directed or permitted to be
invested or used in such manner that any of the Bonds would be “arbitrage bonds”
under Section 148 of the Internal Revenue Code or regulations thereunder.


 


34

















 


ARTICLE V


 


DISPOSITION
OF PLEDGED REVENUES


 


Section 5.01.  Bond Fund.  There shall be established and maintained, so
long as any of the Bonds are outstanding, with the Trustee a separate Fund to
be designated “City of Lamberton Solid Waste Facilities Revenue Bond Fund
(Highwater Ethanol, LLC Project) (herein call the “Bond Fund”) into which the
City and Trustee shall make the following deposits:


 


(a)    After the Series 2008 Bonds have been
delivered and on or before the first day of each month thereafter, or as soon
thereafter as received from the Company, all payments by the Company as Lease
Payments under paragraphs (a) and (b) of Section 4.02 of the
Bond Lease.


 


(b)    All other moneys received by the Trustee
from the Company when accompanied by directions of the Company that such moneys
are to be paid into the Bond Fund or used for purposes for which moneys in the
Bond Fund may be used.


 


(c)    All other moneys required to be deposited in
the Bond Fund pursuant to any provision of this Indenture, the Bond Lease, the
Bond Mortgage or the Resolution.


 


The moneys and
investments in the Bond Fund are irrevocably pledged and shall be used by the
Trustee, from time to time, to the extent required:


 


	
  FIRST:

  	
   

  	
  For the payment of principal
  of, premium (if any) on and interest on the Bonds, due or to become due
  within one year, as and when such principal, premium and interest shall
  become due and payable; and

  
	
   

  	
   

  	
   

  
	
  SECOND:

  	
   

  	
  To be used, upon
  direction by the Company, to purchase outstanding Bonds at purchase prices
  not exceeding par plus accrued interest.

  



 


Section 5.02.  Optional Redemption Fund.  There shall be established and maintained,
with the Trustee, so long as any of the Bonds are outstanding, a separate Fund
to be designated “City of Lamberton Solid Waste Facilities Revenue Bonds
(Highwater Ethanol, LLC Project) Optional Redemption Fund” (herein called the “Optional
Redemption Fund”).  There shall be
deposited into the Optional Redemption Fund all amounts required to be
deposited therein pursuant to any provision of the Bond Lease or this
Indenture.


 


Amounts on deposit to the
credit of the Optional Redemption Fund shall be used, first, to make up
deficiencies in the Bond Fund and, second, for the redemption of
outstanding Bonds at the request or direction of the Company pursuant to Article III
hereof or, at the 


 


35

















 


request of the Company, for the purchase of outstanding Bonds on the
market at prices not exceeding the redemption price on the next available date
for redemption.


 


Notwithstanding the
foregoing, the Trustee, in its discretion, is authorized to use funds and
investments in the Optional Redemption Fund to pay the amount of any rebate due
the United States in respect of the Bonds under Section 148 of the
Internal Revenue Code, if the Company shall have failed to pay or provide for
the payment thereof under Section 3.2 of the Bond Lease.


 


Section 5.03.  Reserve Fund.  There shall be established and maintained,
with the Trustee, so long as any of the Bonds are outstanding, a separate Fund
to be designated “City of Lamberton Revenue Bonds (Highwater Ethanol, LLC
Project) Reserve Fund” (herein called the “Reserve Fund”), into which the City
and Trustee shall make the following deposits:


 


(a)    From the proceeds of issuance of the Series 2008
Bonds, an amount equal to the Reserve Requirement.


 


(b)    After the Series 2008 Bonds have been
delivered, the Trustee shall deposit into the Reserve Fund all moneys and
income of the Trust Estate not deposited or required to be deposited in the
Bond Fund, and all Lease Payments pursuant to Section 4.2 of the Bond
Lease, in order to maintain the funds and investments on deposit in the Reserve
Fund in an amount at least equal to the Reserve Requirement.


 


(c)    All other amounts required or permitted to
be deposited into the Reserve Fund under the Bond Lease.


 


In computing the amount
in the Reserve Fund, Qualified Investments shall be valued at face value if
purchased at par or at the amortized value if purchased at other than par;
provided, however, that such Qualified Investments in the Reserve Fund are
required to be valued only on each January 1.  For purposes of this Section, “amortized
value,” when used with respect to an obligation purchased at a premium above or
at a discount below par, means the value as of any given time obtained by
dividing the total premium or discount at which such obligation was purchased
by the number of days remaining to maturity on such obligation at the date of
such purchase and by multiplying the thus calculated by the number of days
having passed since such purchase; and (1) in the case of an obligation
purchased at a premium by deducting the product thus obtained from the purchase
price, and (2) in the case of an obligation purchased at a discount by
adding the product thus obtained to the purchase price.  Valuation of any particular date shall
include the amount of interest then earned or accrued to such date on any
moneys or investments in the Reserve Fund.


 


The funds and investments
in the Reserve Fund are irrevocably pledged to and shall be used by the
Trustee, from time to time, as may be required, for the payment of principal
of, premium (if any) on and interest on the Bonds as and when such principal
and interest shall become due and payable, and for those purposes only;
provided that (i) if earnings 


 


36

















 


credited to the Reserve Fund shall cause the amount on deposit in the
Reserve Fund to exceed the Reserve Requirement, the Trustee shall transfer the
excess to the Bond Fund and the amount so credited shall be credited against
Basic Payments next to become due, and (ii) moneys and investments in the
Reserve Fund shall be transferred to the Bond Fund or Sinking Fund, as the case
may be, when the moneys and proceeds of investments in the Reserve Fund shall
be sufficient (with moneys and proceeds of investments in the Bond Fund and
Sinking Fund) to pay when due the principal of and interest on all outstanding
Bonds.


 


Section 5.04.  Mandatory Sinking Fund Redemption Fund.  There shall be established and maintained,
with the Trustee, so long as any of the Bonds are outstanding, a separate Fund
to be designated “City of Lamberton Solid Waste Facilities Revenue Bonds
(Highwater Ethanol, LLC Ethanol Plant Project) Mandatory Sinking Fund
Redemption Fund” (herein called the “Mandatory Sinking Fund Redemption Fund”).  There shall be deposited into the Mandatory
Sinking Fund Redemption Fund all amounts required to be deposited therein
pursuant to any provision of the Bond Lease, including Section 4.2(1)(c) of
the Bond Lease, or this Indenture.


 


Amounts on deposit in the
Mandatory Sinking Fund Redemption Fund will be applied on each Interest Payment
Date to the redemption of the Outstanding Bonds.


 


Section 5.05.  Investment of Funds.  To the extent authorized by the Act, moneys
on deposit to the credit of any Fund or Account maintained by the Trustee under
this Indenture shall, upon request by the Authorized Company Representative, be
invested by the Trustee in (i) direct obligations of or obligations fully
guaranteed by the United States of America; (ii) deposits in
interest-bearing time deposits or certificates of deposit or similar
arrangements, including repurchase agreements, secured by obligations described
in (i) hereof which are in the possession of the Trustee or its agent and
with respect to which the Trustee has a valid and perfected security interest
free and clear of prior claims of third parties; (iii) obligations issued
by any federal agency to the extent that such obligations are either guaranteed
by or are direct obligations of the United States of America (other than as
provided in (i) hereof) and bonds, debentures, participation certificates
or notes issued by the Federal National Mortgage Association; (iv) deposits
in interest-bearing time deposits or certificates of deposit or similar
arrangements (without regard to whether such deposits or arrangements are
insured by the Federal Deposit Insurance Corporation) of the Trustee or any
lead bank of a bank holding company which has at least an A-1 and prime-one
rating or their equivalents from Standard & Poor’s Corporation and
Moody’s Investors Service, Inc., or their successors, or certificates of
deposit of any national bank if the amount thereof is fully insured by the
FDIC; (v) fixed income securities of any corporation organized and
existing under the laws of any state of the United States of America or the
District of Columbia which are rated not less than A by Standard &
Poor’s Corporation and Moody’s Investors Service, Inc., or their
successors; (vi) commercial paper or finance company paper of an City
which is rated not less than A-1 and prime-one or their equivalents by Standard &
Poor’s Corporation and Moody’s Investors Service, Inc., or their
successors, and whose obligations have at least an A rating from Standard &
Poor’s Corporation and Moody’s Investors Services, Inc., or their 


 


37

















 


successors; (vii) shares in any Investment Company registered
under the Federal Investment Company Act of 1940 whose shares are fully
registered under the Federal Securities Act of 1933 and whose only investments
are obligations described in (i) or (iii) above; (viii) a common
trust fund or similar fund maintained by the Trustee exclusively for the
collective investment and reinvestment of moneys contributed thereto by the
Trustee in its capacity as trustee and whose only investments are in securities
described herein; (ix) an investment agreement (whether or not
collateralized) issued by any financial institution maintaining at least an A
rating from Standard & Poor’s Corporation or Moody’s Investors Service, Inc.,
or their successors; and (x) a money market fund limited to U.S. government
obligations, U.S. agency obligations, or repurchase agreements backed by such
obligations (“Qualified Investments”). 
Investments permitted under this Section may be purchased from the
Trustee or from any of its affiliates. 
Investments so made shall be deemed at all times to be a part of the
respective Fund or Account, but may from time to time be sold or otherwise
converted into cash, whereupon the proceeds derived from such sale or
conversion shall be credited to such Fund or Account.  Any interest accruing on and any profit
realized from such investment shall be credited to the respective Fund or
Account, except that, so long as there shall be credited to the Reserve Fund a
sum not less than the Reserve Requirement, earnings thereon may be credited to the
Bond Fund.  Any investments purchased
with amounts on deposit in any Fund under this Indenture may be exchanged for
cash or investments of equal value credited to any other Fund.  The Trustee shall redeem or sell, at the best
price obtainable, any investments so made, whenever it shall be necessary to do
so in order to provide moneys to meet any payment from the respective
Fund.  Neither the Trustee nor the City
shall be liable for any loss resulting from any such investment purchased at
the request of the Company, nor from failure to preserve rights against
endorsers or other prior parties to instruments evidencing any such
investment.  Investment of funds pursuant
to this Section shall be limited as to amount and yield of investment in
such manner that no part of the outstanding Bonds shall be deemed “arbitrage
bonds” under Section l48 of the Internal Revenue Code and regulations
thereunder.


 


The
Trustee shall furnish the Company, not less than annually, a detailed
accounting of all investments and investment transactions.  The Company
acknowledges that regulations of the Comptroller of the Currency grant the
Company the right to receive brokerage confirmations of the security
transactions as they occur.  The Company specifically waives such notification
to the extent permitted by law.


 


Section 5.06.  Compliance with Arbitrage Restrictions;
Rebate Requirements.  The City and
the Trustee hereby acknowledge and confirm that the maintenance of the
tax-exempt status of interest on the Bonds is dependent, among other things, on
compliance with the arbitrage requirements set forth in Section 148 of the
Internal Revenue Code and regulations thereunder.  In order to confirm and carry out such
understanding, the Company has agreed under the Bond Lease, inter alia, to make
or cause to be made such periodic computations and make such rebate payments to
the United States as and when required by said Section 148(f) and
regulations thereunder.  Specifically,
the Company is to cause to be computed as of each computation date all
rebatable arbitrage earned with respect to nonpurpose 


 


38

















 


investments made with gross proceeds of the Bonds.  Payment of all required rebate payments to be
made to the United States under Section 3.2 of the Bond Lease and under
this Section shall be made from Lease Payments made by the Company under Section 4.2
of the Bond Lease or from other available funds held under this Indenture.  Such required rebate payments shall be made
in the minimum amounts required by said Section 148(f) and
regulations thereunder not later than 60 days after each computation date.  Not later than 60 days after the final
computation date, the Trustee shall pay or cause to be paid from the sources
described in the Bond Lease and in this Section 5.06 100 percent of the
aggregate amount described above not theretofore paid to the United
States.  In construing this Section 5.06,
all terms used in this Section shall have the meanings provided in Section 148(f) of
the Internal Revenue Code and regulations thereunder.  Notwithstanding any other provision of this Section 5.06,
any requirement imposed hereunder may be deemed inapplicable and of no force or
effect if an opinion of Bond Counsel is rendered to the Trustee to the effect that
the failure to impose such requirement will not adversely effect the tax-exempt
status of interest on the Bonds.


 


In order to comply with
the provisions of this Section 5.06 or Section 2.2 of the Bond Lease,
the Trustee is hereby authorized to obtain such Opinions of Counsel, reports of
accountants and Certificates of the Company as may be necessary for the purpose
and any expenses thereof shall be borne by the Company.  The Trustee is also authorized to apply amounts
credited to the Optional Redemption Fund to the making of any rebate payment
then owing, as further provided in Section 5.02 hereof, and to establish
such other fund or account hereunder as it may deem necessary or desirable in
order to maintain funds for the purpose of making any payment required under
this Section 5.06.


 


39
















 


ARTICLE
VI


 


PARTICULAR
COVENANTS OF THE CITY


 


The City covenants and
agrees, so long as any Bonds shall be outstanding and subject to the
limitations on its obligations herein set forth, that:


 


Section 6.01.  Payment
of Bonds.


 


(a)           The City covenants that
it will promptly pay or cause to be paid the principal of, and premium, if any,
and interest on, every Bond issued under this Indenture at the place, on the
dates and in the manner provided herein and in the Bonds, provided that the principal, premium if any,
and interest are payable by the City solely from the sources pledged to the
payment thereof, and nothing in the Bonds or this Indenture shall be considered
as assigning or pledging any other funds or assets of the City other than the
Trust Estate.


 


(b)           Each and every covenant
made herein by the City is predicated upon the condition that the City shall
not in any event be liable for the payment of the principal of, or premium, if
any, or interest on the Bonds, or the performance of any pledge, mortgage,
obligation or agreement created by or arising under this Indenture or the Bonds
from any property other than the Trust Estate; and, further, that neither the
Bonds nor any such obligation or agreement of the City shall be construed to
constitute an indebtedness or a lending of credit of the City within the
meaning of any constitutional or statutory provision whatsoever, or constitute
or give rise to a pecuniary liability of the City or a charge against its
general credit.


 


Section 6.02.  Performance of Covenants by City;
Authority; Due Execution.  The City covenants that it
will faithfully perform at all times any and all covenants, undertakings,
stipulations and provisions contained in this Indenture, in any and every Bond
executed, authenticated and delivered hereunder and in all of its proceedings
pertaining thereto.  The City represents
that it is duly authorized under the Constitution and laws of the State to
issue the Bonds and to execute this Indenture, to execute and deliver the Bond
Lease, to assign the Bond Lease and amounts payable thereunder, and to pledge
the amounts hereby pledged in the manner and to the extent herein set
forth.  The City further represents that
all action on its part for the issuance of the Bonds and the execution and
delivery of this Indenture has been duly and effectively taken, and that the
Bonds in the hands of the Owners thereof are and will be valid and binding
limited obligations of the City. The City shall fully cooperate with the
Trustee and with the Owners of the Bonds to the end of fully protecting the
rights and security of the Owners of any Bonds. 
Except to the extent otherwise provided in this Indenture or the
Intercreditor Agreement, the City shall not enter into any contract or take any
action by which the rights of the Trustee or the Owners of the Bonds may be
impaired and shall, from time to time, execute and deliver such further
instruments and take such further action as may be reasonably required to carry
out the purposes of this Indenture.


 


40

















 


Anything contained in
this Indenture to the contrary notwithstanding, it is hereby understood and
agreed that all of the representations and warranties or covenants of the City
contained in this Indenture are subject to the limitations set forth herein and
are not intended to and do not create a general obligation of the City. The
Bonds are issued pursuant to the Act and do not and shall never become general
obligations of the City, but are limited obligations payable solely and only
from the Trust Estate, and as authorized by the Act and provided herein. No
covenant or agreement contained in the Bonds, in this Indenture or in any other
agreement referred in this Indenture shall be deemed to be the covenant or
agreement of any trustee, officer, member, agent or employee of the City in his
or her individual capacity, and neither such persons nor any official executing
the Bonds shall be liable personally on the Bonds or be subject to any personal
liability or accountability by reason of the issuance thereof.


 


Section 6.03.  Defense of City’s Rights.  The
City agrees that the Trustee may defend the City’s rights to the payments and
other amounts due under the Bond Lease, for the benefit of the Owners of the
Bonds, against the claims and demands of all persons whomsoever.  The City covenants that it will do, execute,
acknowledge and deliver, or cause to be done, executed, acknowledged and
delivered, such indentures supplemental hereto and such further acts,
instruments and transfers as the Trustee may reasonably require for the better
assuring, transferring, pledging, assigning and confirming to the Trustee all
and singular the rights assigned hereby and the amounts pledged hereby to the
payment of the principal of, and premium, if any, and interest on, the
Bonds.  The City covenants and agrees
that, except as herein and in the Bond Lease provided, it will not sell,
convey, assign, pledge, encumber or otherwise dispose of any part of the Trust
Estate.


 


Section 6.04.  Recording and Filing; Further Instruments.


 


(a)           The City and the
Trustee shall cooperate with the Company in causing to be filed and recorded
all documents, notices and financing statements related to this Indenture and
to the Bond Lease which are necessary, as required by law, in order to perfect
the lien of this Indenture in the Trust Estate.


 


(b)           The City shall upon the
reasonable request of the Trustee, from time to time execute and deliver such
further instruments and take such further action as may be reasonable (and
consistent with the Bond Documents) and as may be required to effectuate the
purposes of this Indenture or any provisions hereof, provided however, that no such instruments or actions shall
pledge the general credit or the full faith of the City.


 


Section 6.05.  Rights under Bond Lease.  The
Bond Lease, a duly executed counterpart of which has been filed with the
Trustee, sets forth the covenants and obligations of the City and the Company,
including provisions that, subsequent to the issuance of the Bonds and prior to
the payment in full or provision for payment thereof in accordance with the
provisions hereof, the Bond Lease (except as expressly provided therein) may
not be effectively amended, changed, modified, altered or terminated without
the concurring written consent of the Trustee, as provided in Article XI
hereof, and reference is hereby made to the 


 


41

















 


Bond Lease for a detailed statement of such covenants and obligations
of the Company, and the City agrees that the Trustee in its name or (to the
extent required by law) in the name of the City may enforce all rights of the
City and all obligations of the Company under and pursuant to the Bond Lease,
whether or not the City is in default hereunder.  The City shall cooperate with the Trustee in
enforcing the obligations of the Company to pay or cause to be paid all amounts
payable by the Company under the Bond Lease, subject to the conditions of the
Intercreditor Agreement.


 


Section 6.06.  Arbitrage and Tax Covenants.  Subject to the Company’s direction of the
investment of moneys on the deposit in certain funds pursuant to Section 5.05
hereof, the City covenants that it will not take or fail to take any action and
within the reasonable control of the City that would impair the exclusion of
interest on the Bonds from gross income for federal income tax purposes.  Subject to the appropriate Company’s
direction of the investment of moneys on deposit in certain funds pursuant to Section 6.01
hereof, the City further will not knowingly act or fail to act so as to cause
the proceeds of the Bonds, any moneys derived, directly or indirectly, from the
use or investment thereof and any other moneys on deposit in any fund or
account maintained in respect of the Bonds (whether such moneys were derived
from the proceeds of the sale of the Bonds or from other sources) to be used in
a manner which would cause the Bonds to be treated as “arbitrage bonds” within
the meaning of Section 148 of the Code, or which would otherwise adversely
affect the Tax-Exempt status of the Bonds. 
The City shall be deemed to have complied with the requirements of this Section 6.06,
so long as the City acts on the written direction of the Company, and the City
shall be required to take action only based upon the written direction of the
Company.


 


Section 6.07.  No Disposition of Trust Estate.  Except
as permitted by this Indenture, the City shall not sell lease, pledge, assign
or otherwise encumber or dispose of its interest in the Trust Estate and will
promptly pay (but only from the Revenues) or cause to be discharged, or make
adequate provision to discharge, any lien or charge on any part thereof not
permitted hereby.


 


Section 6.08.  Access to Books.  All
books and documents in the possession of the City relating to the Bond Lease
and the Trust Estate shall at all reasonable times be open to inspection by
such accountants or other agencies as the Trustee may from time to time
designate.


 


Section 6.09.  Source of Payment of Bonds.  The Bonds are not general obligations
of the City, nor are they payable in any manner from revenues raised by
taxation, but are limited obligations payable solely from the Basic Payments
and other amounts pledged to the Trustee. 
The Basic Payments have been pledged and assigned as security for the
equal and ratable payment of the Bonds and shall be used for no other purpose
than to pay the principal of, and premium, if any, and interest on, the Bonds,
except as may be otherwise expressly authorized in this Indenture or the Bond
Lease.


 


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ARTICLE
VII


 


REMEDIES
ON DEFAULT


 


Section 7.01.  Events of Default.  Each of the following events is hereby
defined as, and is declared to be and to constitute, an “Event of Default”:


 


(a)           If payment of the
principal of any of the Bonds, or any premium thereon, when the same shall
become due and payable, whether at maturity or proceedings for redemption,
declaration or otherwise) shall not be made; or


 


(b)           If payment of any
interest on the Bonds when the same shall become due and payable (in which case
interest shall be payable to the extent permitted by law on any overdue
installments of interest, in each case at the interest rate borne by the Bonds
in respect of which such interest is overdue) shall not be made; or


 


(c)           If the City shall
default in the due and punctual performance of any of the other covenants,
conditions, agreements and provisions contained in the Bonds or in this
Indenture, or in any indenture supplemental hereto on the part of the City to
be performed, and such default shall have continued for a period of sixty days
after written notice, specifying such default and requiring the same to be
remedied, shall have been given to the City and to the Company by the Trustee,
or if such notice is given to the Trustee, the City and the Company by the
Holders of not less than twenty-five per cent (25%) in principal amount of the
Bonds then outstanding; or


 


(d)           If any event of default
as that term is defined in the Bond Lease, the Bond Mortgage or Bond Security
Agreement shall occur and be continuing.


 


Section 7.02.  Acceleration of Maturity.  Upon the occurrence of an Event of Default,
the Trustee may, and upon written request of the Holders of twenty-five per
centum (25%) in aggregate principal amount of Bonds outstanding hereunder
shall, by notice in writing delivered to the City and the Company declare the
principal of all Bonds hereby secured then outstanding and the interest accrued
thereon immediately due and payable, and such principal and interest shall
thereupon become and be immediately due and payable subject, however, to the
right of the Holders of a majority in aggregate principal amount of Bonds then
outstanding hereunder, by written notice to the City and to the Trustee, to
annul such declaration and destroy its effect at any time if all covenants with
respect to which default shall have been made shall be fully performed or made
good, and all arrears of interest upon all Bonds outstanding hereunder and the
reasonable expenses and charges of the Trustee, its agent and attorneys, and
all other indebtedness secured hereby (except the principal of any Bonds which
have not then attained their stated maturity and interest accrued on such Bonds
since the last interest payment date) shall be paid, or the amount thereof
shall be paid to the Trustee for the benefit of those entitled thereto.


 


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Section 7.03.  Enforcement of Covenants and Conditions.  In any case of Default or breach of any of
the covenants and conditions of this Indenture, or to protect the Trust Estate,
the Trustee, anything herein contained to the contrary notwithstanding and
without any request from any Bondholder (subject, however, to the provisions of
Section 8.06 hereof), may take such action or actions for the enforcement
of its rights and the rights of the Bondholders and the rights of the City
under the Bond Lease as due diligence, prudence and care would require and to
pursue the same with like diligence, prudence and care.


 


Upon the happening and
continuance of an Event of Default, the Trustee may, and shall upon the written
request of the Holders of not less than twenty-five per centum (25%) in
aggregate principal amount of outstanding Bonds, proceed forthwith by suit or
suits at law or in equity or by any other appropriate remedy to enforce payment
of the Bonds, to enforce application to such payment of the funds, revenues and
income appropriated thereto by this Indenture and by the Bonds, to enforce
rights of the City under the Bond Lease, to foreclose the Bond Mortgage and to
enforce the Guaranty and any such other appropriate legal or equitable remedy
as the Trustee, being advised by counsel, shall deem most effectual to protect
and enforce any of its rights or any of the rights of the Bondholders.  Notwithstanding the foregoing, the Trustee
need not proceed upon any such written request of the Bondholders, as
aforesaid, unless such Bondholders shall have offered to the Trustee security
and indemnity satisfactory to it against the costs, expenses and liabilities to
be incurred therein or thereby.


 


Section 7.04.  Appointment of Receivers.  Upon the occurrence of an Event of Default,
and upon the filing of a suit or other commencement of judicial proceedings to
enforce the rights of the Trustee and the Holders of Bonds under this
Indenture, the Trustee shall be entitled, as a matter of right, to the
appointment of a receiver or receivers of the Trust Estate and of the revenues,
issues, payments and profits thereof, pending such proceedings, with such
powers as the court making such appointment shall confer.


 


Section 7.05.  Application of Moneys.  All moneys received by the Trustee pursuant
to any right given or action taken under the provisions of this Indenture, the
Bond Lease, the Bond Mortgage or the Assignment shall, after payment of the
cost and expenses of the proceedings resulting in the collection of such moneys
and of the expenses, liabilities and advances incurred or made by the Trustee,
be deposited in the Bond Fund, and all moneys then held hereunder, including
but not limited to moneys in the Bond Fund, the Sinking Fund, the Reserve Fund
and the Optional Redemption Fund maintained with the Trustee shall be applied
as follows:


 


(a)           Unless the principal of
all the Bonds shall have become or shall have been declared due and payable,
all such moneys shall be applied:


 


First:                     To the payment to the persons
entitled thereto of all installments of interest then due on the Bonds, in the
order of the maturity of the installments of such interest, and, if the amount
available shall not be sufficient to pay 


 


44

















 


in full any particular
installment, then to the payment ratably, according to the amounts due on such
installment, to the persons entitled thereto, without any discrimination or
privilege; and


 


Second:     To the payment to the persons entitled thereto of
the unpaid principal of any of the Bonds which shall have become due (other
than Bonds called for redemption for the payment of which moneys are held
pursuant to the provisions of this Indenture), in the order of their due dates,
and, if the amount available shall not be sufficient to pay in full Bonds due
on any particular date, then to the payment ratably, according to the amount of
principal due on such date, to the persons entitled thereto without any
discrimination or privilege.


 


(b)           If the principal of all
the Bonds shall have become due or shall have been declared due and payable,
all such moneys shall be applied to the payment of the principal and interest
then due and unpaid upon the Bonds, without preference or priority of principal
over interest or of interest over principal, or of any installment of interest
over any other installment of interest, or of any Bond over any other Bond,
ratably, according to the amounts due respectively for principal and interest,
to the persons entitled thereto without any discrimination or privilege.


 


(c)           If the principal of all
the Bonds shall have been declared due and payable, and if such declaration
shall thereafter have been rescinded and annulled under the provisions of this
Article, then, subject to the provisions of paragraph (b) of this Section in
the event that the principal of all the Bonds shall later become due or be
declared due and payable, the moneys shall be applied in accordance with the
provisions of paragraph (a) of this Section.


 


Whenever moneys are to be
applied by the Trustee pursuant to the provisions of this Section, such moneys
shall be applied by it at such times, and from time to time, as the Trustee
shall determine, having due regard to the amount of such moneys available for
application and the likelihood of additional moneys becoming available for such
application in the future.  Whenever the
Trustee shall apply such funds, it shall fix the date (which shall be an
interest payment date unless it shall deem another date more suitable) upon
which such application is to be made and upon such date interest on the amounts
of principal to be paid on such dates shall cease to accrue.  The Trustee shall give such notice as it may
deem appropriate of the deposit with it of any such moneys and of the fixing of
any such date, and shall not be required to make payment to the holder of any
unpaid Bond until such Bond shall be presented to the Trustee for appropriate
endorsement or for cancellation if fully paid.


 


Whenever all Bonds and
interest thereon have been paid under the provisions of this Section and
all expenses and charges of the Trustee and the City have been paid, any
balance 


 


45

















 


remaining shall be paid to the persons entitled to receive the same; if
no other person shall be entitled thereto, then the balance shall be paid to
the Company as its interests may appear.


 


Section 7.06.  Right of Trustee to Act Without Possession
of Bonds.  All rights of action
(including the right to file proof of claim) under this Indenture, the Bond
Lease, the Bond Mortgage, the Guaranty or the Bond Resolution, or under any of
the Bonds, may be enforced by the Trustee without the possession of any of the
Bonds or the production thereof in any trial or other proceeding relating
thereto, and any such suit or proceeding instituted by the Trustee shall be
brought in its name as Trustee, without the necessity of joining as plaintiffs
or defendants any Holders of the Bonds hereby secured, and any recovery of
judgment shall be for the equal benefit of the Holders of the outstanding
Bonds, subject to the provisions of Section 6.02 hereof with respect to
extended Bonds and claims for interest.


 


Section 7.07.  Power of Majority of Bondholders.  Anything in this Indenture to the contrary
notwithstanding, the Holders of a majority in aggregate principal amount of
Bonds outstanding hereunder shall have the right, at any time, by an instrument
or instruments in writing executed and delivered to the Trustee, to direct the
method and place of conducting all proceedings to be taken under this
Indenture, the Bond Lease, the Bond Mortgage, the Guaranty and the Bond
Resolution; provided that such direction shall not be otherwise than in
accordance with the provisions of law and that the Trustee shall be indemnified
as provided in Section 8.06 hereof.


 


Section 7.08.  Limitation on Suits by Bondholders.  No Holder of any Bond shall have any right to
institute any suit, action or proceeding in equity or at law for the
enforcement of this Indenture, or for the execution of any trust hereof or for
any other remedy hereunder, unless a Default has occurred of which the Trustee
has been notified or of which it is deemed to have notice; nor unless also such
Default shall have become an Event of Default and the Holders of twenty-five
per centum (25%) in aggregate principal amount of Bonds outstanding hereunder
shall have made written request to the Trustee and shall have offered it
reasonable opportunity either to proceed to exercise the powers hereinbefore
granted or to institute such action, suit or proceeding in its own name; nor
unless also they shall have offered to the Trustee indemnity as provided
hereinafter; and such notification, request and offer of indemnity are hereby
declared in every such case at the option of the Trustee to be conditions
precedent to the execution of the powers and trusts of this Indenture, and to
any action or cause of action for enforcement or for any other remedy
hereunder; it being understood and intended that no one or more Holders of the
Bonds shall have any right in any manner whatsoever to affect, disturb, or prejudice
the lien of this Indenture by his or their action or to enforce any right
hereunder except in the manner herein provided, and that all proceedings at law
or in equity shall be instituted, had and maintained in the manner herein
provided and for the equal benefit of the Holders of all  Bonds outstanding hereunder.  Nothing in this Indenture contained shall,
however, affect or impair the right of any Bondholder, which is absolute and
unconditional, to enforce and bring suit for the payment of the principal of
and interest on any Bond at and after the maturity thereof or the obligations
of the City to pay the principal of and interest on each of the Bonds issued
hereunder to the 


 


46

















 


respective Holders thereof at the time and place in said Bonds
expressed, in accordance with the terms of the Bonds.


 


Section 7.09.  Waiver by Bondholders.  The Trustee, upon the written request of the
Holders of not less than a majority in aggregate principal amount of the Bonds
at the time outstanding hereunder, shall waive any Event of Default hereunder
and its consequences, except an Event of Default in the payment of the
principal of the Bonds at the date of maturity specified therein; provided,
however, that an Event of Default in the payment of interest on the Bonds shall
not be waived unless, prior to such waiver, all arrears of interest, and all
expenses of the Trustee shall have been paid or shall have been provided for by
deposit with the Trustee of a sum sufficient to pay the same.  In case of any such waiver, the City, the
Trustee and the Holders of the Bonds shall be restored to their former
positions and rights hereunder respectively. 
No such waiver shall extend to any subsequent or other Default or any
Event of Default or impair any right consequent thereon.


 


Section 7.10.  Remedies Cumulative, Delay Not To
Constitute Waiver.  No remedy by the
terms of this Indenture, the Bond Lease, the Bond Mortgage, the Guaranty or the
Bond Resolution conferred upon or reserved to the Trustee (or to the
Bondholders) is intended to be exclusive of any other remedy, but each and
every such remedy shall be cumulative and shall be in addition to any other
remedy given hereunder or now or hereafter existing at law or in equity or by statute.


 


No delay or omission to
exercise any right or power accruing upon any Default or Event of Default shall
impair any such right or power or shall be construed to be a waiver of any such
Default or Event of Default or acquiescence therein, and every such right and
power may be exercised from time to time and as often as may be deemed
expedient.


 


No waiver of any Default
or Event of Default hereunder, whether by the Trustee or by the Bondholders,
shall extend to or shall affect any subsequent Default or Event of Default or
shall impair any rights or remedies consequent thereon.


 


Section 7.11.  Restoration of Rights Upon Discontinuance
of Proceedings.  In case the Trustee
or Bondholders shall have proceeded to enforce any right under this Indenture
and such proceedings shall have been discontinued or abandoned for any reason,
or shall have been determined adversely to the Trustee or Bondholders, then and
in every such case the City, the Company, the Trustee and the Bondholders shall
be restored to their former positions and rights hereunder with respect to the
Trust Estate, and all rights, remedies and powers of the Trustee or Bondholders
shall continue as if no such proceedings had been taken.


 


47
















 


ARTICLE
VIII


 


CONCERNING
THE TRUSTEE


 


Section 8.01.  Acceptance of Trust and Prudent
Performance Thereof.  The Trustee,
prior to the occurrence of an Event of Default and after the curing of all such
Events of Default as may have occurred, undertakes to perform such duties and
only such duties as are specifically set forth in this Indenture.  The Trustee shall during the existence of any
such Event of Default (which has not been cured) exercise such of the rights
and powers vested in it by this Indenture, and use the same degree of care and
skill in its exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.


 


The Trustee shall not be
required to take notice or be deemed to have notice of any Default or Event of
Default hereunder except Default in the deposits or payments specified, or
failure by the City or the Company to file with it any of the documents
required, or to deposit with it evidence of the insurance policies required
hereunder or under the Bond Lease, unless the Trustee shall be specifically
notified in writing of such Default or Event of Default by the Company, by the
City or by the Holders of at least twenty-five per centum (25%) in aggregate
principal amount of Bonds outstanding hereunder, and all notices or other
instruments required by this Indenture to be delivered to the Trustee must, in
order to be effective, be delivered at the office of the Trustee, and in the
absence of such notice so delivered, the Trustee may conclusively assume that
there is no Default or Event of Default except as aforesaid.


 


No provision of this
Indenture shall be construed to relieve the Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that


 


(a)           prior to such an Event
of Default hereunder, and after the curing of all such Events of Default which
may have occurred:


 


(1)           the duties and
obligations of the Trustee shall be determined solely by the express provisions
of this Indenture, and the Trustee shall not be liable except for the
performance of such duties and obligations as are specifically set forth in
this Indenture, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and


 


(2)           in the absence of bad
faith on the part of the Trustee, the Trustee may conclusively rely, as to the
truth of the statements and to the correctness of the opinions expressed
therein, upon any certificate or opinion furnished to the Trustee conforming to
the requirements of this Indenture; but in the case of any such certificate or
opinion which by any provision hereof is specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not it conforms to the requirements of this Indenture; and


 


48

















 


(b)           at all times,
regardless of whether or not any such Event of Default shall exist:


 


(1)           the Trustee shall not
be liable for any error of judgment made in good faith by a Responsible Officer
or Officers of the Trustee unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts, and


 


(2)           the Trustee shall not
be liable with respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of not less than a
majority in aggregate principal amount of all the Bonds at the time outstanding
relating to the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred
upon the Trustee under this Indenture.


 


None of the provisions
contained in this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur individual financial liability in the performance of
any of its duties or in the exercise of any of its rights or powers if it shall
have reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.


 


Section 8.02.  Trustee May Rely Upon Certain
Documents and Opinions.  Except as
otherwise provided in Section 8.0l,


 


(a)           the Trustee may rely
and shall be protected in acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties;


 


(b)           any request, direction,
election, order, certification or demand of the City or the Company shall be
sufficiently evidenced by an instrument signed by an Authorized City
Representative or an Authorized Company Representative, as the case may be
(unless otherwise in this Indenture specifically prescribed), and any
resolution of the City may be evidenced to the Trustee by a Certified
Resolution;


 


(c)           the Trustee may consult
with counsel (who may be counsel for the City or the Company) and the opinion
of such counsel shall be full and complete authorization and protection in
respect of any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel; and


 


(d)           whenever, in the
administration of the trusts of this Indenture, the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking
or suffering any action hereunder, such matter (unless other evidence in
respect thereof be herein specifically prescribed) may, in the absence of
negligence or bad faith on the part of the Trustee, be deemed to be
conclusively proved and established by a Certificate of the City and such
Certificate of the City shall, in the 


 


49

















 


absence of negligence or
bad faith on the part of the Trustee, be full warrant to the Trustee for any
action taken or suffered by it under the provisions of this Indenture upon the
faith thereof.


 


Section 8.03.  Trustee Not Responsible for Indenture
Statements, Validity.  The Trustee
shall not be responsible for any recital or statement herein, or in the Bonds
(except in respect of the Certificate of the Trustee endorsed on Bonds), or for
the validity of the execution by the City of this Indenture or the validity or
execution of the Bond Lease or the Bond Resolution or of any supplemental
instrument, or for the sufficiency of the security of the Bonds issued
hereunder or intended to be secured hereby, or for the value or title of any of
the Trust Estate, or otherwise as to the maintenance of the security hereof;
and the Trustee shall not be bound to ascertain or inquire as to the
performance or observance of any covenant, condition or agreement on the part
of the City or the Company except as herein set forth, but the Trustee may
require of the City and the Company full information and advice as to the
performance of the covenants, conditions and agreements aforesaid and of the
condition of the physical property included in the Trust Estate.  The Trustee shall not be accountable for the
use of any Bonds authenticated or delivered hereunder.


 


Section 8.04.  Limits on Duties and Liabilities of
Trustee.  The permissive right of the
Trustee to do things enumerated in this Indenture shall not be construed as a
duty of the Trustee and the Trustee shall be answerable only for its own
negligence or willful default.  The
Trustee shall not be required to give any bond or surety in respect of the
execution of the said trusts and powers or otherwise in respect of the
premises.


 


Section 8.05.  Money Held in Trust.  Money held by the Trustee hereunder is held
in trust but need not be segregated from other funds except to the extent
required by law.  The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed with the City or the Company.


 


Section 8.06.  Obligation of Trustee.  The Trustee shall be under no obligation to
institute any suit, or to take any proceeding under this Indenture, or to enter
any appearance or in any way defend in any suit in which it may be defendant,
or to take any steps in the execution of the trusts hereby created or in the
enforcement of any rights and powers hereunder, until it shall have reasonable
grounds for believing that repayment of all costs and expenses, outlays and
counsel fees and other reasonable disbursements in connection therewith and
adequate indemnity against all risk and liability is reasonably assured to it;
the Trustee may, nevertheless, begin suit, or appear in and defend suit, or do
anything else in its judgment proper to be done by it as such Trustee, without
assurance of reimbursement or indemnity, and in such case the Trustee shall be
reimbursed for all costs and expenses, outlays and counsel fees and other
reasonable disbursements properly incurred in connection therewith.  If the City shall fail to make such
reimbursement, the Trustee may reimburse itself from any moneys in its
possession under the provisions of this Indenture and shall be entitled to a
preference therefor over any of the Bonds outstanding hereunder.


 


50

















 


Section 8.07.  Notice to Bondholders, etc.  The Trustee shall give to the Holders of the
Bonds whose names and addresses are known to it written notice of all Events of
Default known to the Trustee by virtue of actual knowledge of a Responsible
Officer, within thirty (30) days after the occurrence of the Event of Default
unless such Event of Default shall have been cured before the giving of such
notice; provided that, except in the case of Events of Default in the payment
of principal or interest on any of the Bonds, the Trustee shall be protected in
withholding such notice if and so long as its Council of directors, an
executive committee or trust committee of directors or chief executive officer
of the Trustee in good faith determines that the withholding of such notice is
in the interest of the Bondholders; and further provided that no such notice
shall be given unless and until any Default becomes an Event of Default.


 


Section 8.08.  Intervention in Judicial Proceedings.  In any judicial proceeding to which the City
or the Company is a party and which, in the opinion of the Trustee, based upon
an Opinion of Counsel which shall be reasonably satisfactory to the Company,
has a substantial bearing on the interest of owners of Bonds issued hereunder,
the Trustee may intervene on behalf of Bondholders and shall do so if requested
in writing by the owners of at least twenty-five percent (25%) in aggregate
principal amount of Bonds outstanding hereunder.  The rights and obligations of the Trustee
under this Section are subject to the approval of the court having
jurisdiction in the premises.


 


Section 8.09.  Further Investigation by Trustee.  The resolutions, opinions, certificates and
other instruments provided for in this Indenture may be accepted by the Trustee
as conclusive evidence of the facts and conclusions stated therein and shall be
in full warrant, protection and authority to the Trustee for its actions
hereunder; but the Trustee may, in its unrestricted discretion, and shall, if
requested in writing so to do by the Holders of not less than twenty-five per
centum (25%) in aggregate principal amount of Bonds outstanding hereunder,
cause to be made such independent investigation as it may see fit, and in that
event may decline to release any property, or pay over cash, or take other
action unless satisfied by such investigation of the truth and accuracy of the
matters so investigated.  The expense of
such investigation shall be paid by the Company, or, if paid by the Trustee,
shall be repaid to it, with interest a rate equal to 10% per annum by the
Company or from the Trust Estate.


 


Section 8.10.  Trustee to Retain Financial Records.  The Trustee shall retain all financial
statements furnished by the City or the Company in accordance with this
Indenture or the Bond Lease so long as any of the Bonds shall be outstanding.


 


Section 8.11.  Compensation of Trustee.  All advances, counsel fees and other expenses
reasonably made or incurred by the Trustee in and about the execution of the
trust hereby created and reasonable compensation to the Trustee for its
services in the premises shall be paid by the Company.  The compensation of the Trustee shall not be
limited to or by any provision of law in regard to the compensation of trustees
of an express trust.  If not paid by the
Company, the Trustee shall have a first lien, with right of payment prior to
payment on 


 


51

















 


account of interest or principal of any Bond issued hereunder, for
reasonable compensation, expenses, advances and counsel fees incurred in and
about the execution of the trusts hereby created and exercise and performance
of the powers and duties of the Trustee hereunder and the cost and expense
incurred in defending against any liability in the premises of any character whatsoever
(unless such liability is adjudicated to have resulted from the negligence or
willful default of the Trustee).


 


Section 8.12.  Trustee May Hold Bonds.  The Trustee and its officers and directors
may acquire and own, or become the pledgee of, Bonds and otherwise deal with
the City or the Company in the same manner and to the same extent and with like
effect as though it were not Trustee hereunder.


 


Section 8.13.  Appointment of Trustee.  There shall at all times be a trustee
hereunder which shall be an association or a corporation organized and doing
business under the laws of the United States or any State thereof, authorized
under such laws to exercise corporate trust powers, having a combined capital,
surplus and undivided profits of at least Ten Million Dollars ($10,000,000),
and subject to supervision or examination by Federal or State authority.  If such association or corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of any supervising or examining authority above referred to, then for the
purposes of this Section the combined capital, surplus and undivided
profits of such corporation shall be deemed to be its combined capital as set
forth in its most recent report of condition so published.  In case at any time the Trustee shall cease
to be eligible in accordance with the provisions of this Section, and another
association or corporation is eligible, the Trustee shall resign immediately in
the manner and with the effect specified in Section 8.l6 hereof.


 


Section 8.14.  Merger of Trustee.  Any corporation or national banking
association into which the Trustee or substantially all of its corporate trust
business may be converted or merged, or with which it may be consolidated, or
to which it may sell or transfer its trust business and assets as a whole or
substantially as a whole, or any corporation or national banking association
resulting from any such conversion, sale, merger, consolidation or transfer to
which it is a party, ipso facto, shall be and become successor trustee
hereunder and vested with all of the title to the Trust Estate and all the
trusts, powers, discretions, immunities, privileges and all other matters as
was its predecessor, without the execution or filing of any instrument or any
further act, deed or conveyance on the part of any of the parties hereto,
anything herein to the contrary notwithstanding.


 


Section 8.15.  Resignation or Removal of Trustee.  The Trustee may resign and be discharged from
the trusts created by this Indenture by giving to the City thirty days’ notice
in writing, and to the Bondholders notice by certified or registered mail at
its or his address as set forth on the registration books, of such resignation,
specifying a date when such resignation shall take effect.  Such resignation shall take effect on the day
specified in such notice unless previously a successor trustee shall have been
appointed by the Bondholders as 


 


52

















 


hereinafter provided, in which event such resignation shall take effect
immediately on the appointment of such successor trustee.


 


Any Trustee hereunder may
be removed at any time by an instrument or instruments in writing, appointing a
successor to the Trustee so removed, filed with the Trustee and executed by the
Holders of a majority in principal amount of the Bonds hereby secured and then
outstanding.


 


Section 8.16.  Appointment of Successor Trustee.  In case at any time the Trustee shall resign
or shall be removed or otherwise shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or if a receiver of the Trustee or of its
property shall be appointed, or if a public supervisory office shall take
charge or control of the Trustee or of its property or affairs, a vacancy shall
forthwith and ipso facto be created in the office of such Trustee hereunder,
and a successor may be appointed by the Holders of a majority in principal
amount of the said Bonds hereby secured and then outstanding by an instrument
or instruments in writing filed with the Trustee and executed by such
Bondholders, notification thereof being given to the City, but until a new
Trustee shall be appointed by the Bondholders as herein authorized, the City
shall, subject to the provisions hereof, appoint a Trustee to fill such
vacancy.  After any such appointment by
the City, it shall cause notice of such appointment to be mailed within 30 days
of such appointment to the registered Holders of the Bonds or to be published
at least once within 30 days of such appointment in a financial journal or
newspaper, but any new Trustee so appointed by the City shall immediately and
without further act be superseded by a Trustee appointed in the manner above
provided by the Holders of a majority in principal amount of said Bonds
whenever such appointment by said Bondholders shall be made.


 


If, in a proper case, no
appointment of a successor Trustee shall be made pursuant to the foregoing
provisions of this Section within six months after a vacancy shall have
occurred in the office of Trustee, the Holder of any Bond hereby secured or any
retiring Trustee may apply to any court of competent jurisdiction to appoint a
successor Trustee.  Said court may
thereupon, after such notice, if any, as such court may deem proper and prescribe,
appoint a successor Trustee.


 


Section 8.17.  Transfer of Rights and Property to
Successor Trustee.  Every successor
Trustee appointed hereunder shall execute, acknowledge and deliver to its
predecessor and also to the City an instrument in writing accepting such
appointment hereunder, and thereupon such successor, without any further act,
deed or conveyance, shall become fully vested with all the estates, properties,
rights, powers, trusts, duties and obligations of its predecessor; but such
predecessor shall, nevertheless, on the written request of the City or of its
successor execute and deliver an instrument transferring to such successor all
the estate, properties, rights, powers and trusts of such predecessor
hereunder, and every predecessor trustee shall deliver all securities and
moneys held by it as Trustee hereunder to its successor.  Should any assignment, conveyance or
instrument in writing from the City be required by any successor Trustee for
more fully and certainly vesting in such successor Trustee the 


 


53

















 


estates, rights, powers and duties hereby vested or intended to be
vested in the predecessor Trustee, any and all such assignments, conveyances
and instruments in writing shall, on request, be executed, acknowledged and
delivered by the City.  The resignation
of any Trustee and the instrument or instruments removing any Trustee and
appointing a successor hereunder, together with all assignments, conveyances
and other instruments provided for in this Article shall, at the expense
of the City, be forthwith filed and/or recorded by the successor Trustee in
each recording office where the Indenture shall have been filed and/or
recorded.


 


Section 8.18.  Co-Trustee.  At any time or times, for the purpose of
meeting any legal requirements of any jurisdiction in which any part of the
Trust Estate may at the time be located, the City and the Trustee shall have
power to appoint one or more persons approved by the Trustee either to act as
co-trustee or co-trustees, jointly with the Trustee of all or any part of the
Trust Estate, or to act as separate trustee or separate trustees of all or any
part of the Trust Estate, and to vest in such person or persons, in such
capacity, such title to the Trust Estate or any part thereof, and such rights,
powers, duties, trusts or obligations as the City and the Trustee may consider
necessary or desirable, subject to the remaining provisions of this Section.


 


Upon the request of the
Trustee or of the Holders of at least twenty-five per cent (25%) in aggregate
principal amount of Bonds outstanding hereunder, the City shall for such
purpose join with the Trustee in the execution, delivery and performance of all
instruments and agreements necessary or proper to appoint the co-trustee.  If the City shall not have joined in such
appointment within fifteen (l5) days after the receipt by it of a request so to
do, or in case an Event of Default shall have occurred and be continuing, the
Trustee alone shall have power to make such appointment.


 


The City shall execute,
acknowledge and deliver all such instruments as may be required by any such
co-trustee or separate trustee for more fully confirming such title, rights,
powers, trusts, duties and obligations to such co-trustee or separate trustee.


 


Every co-trustee or
separate trustee shall, to the extent permitted by law but to such extent only,
be appointed subject to the following terms, namely:


 


(a)           The Bonds shall be
authenticated and delivered and all rights, powers, trusts, duties and
obligations by this Indenture conferred upon the Trustee in respect of the
custody, control or management of moneys, papers, securities and other personal
property shall be exercised solely by the Trustee.


 


(b)           All rights, powers,
trusts, duties and obligations conferred or imposed upon the trustees shall be
conferred or imposed upon and exercised or performed by the Trustee, or by the
Trustee and such co-trustees or separate trustee or separate trustees jointly,
as shall be provided in the instrument appointing such co-trustee or
co-trustees or separate trustee or separate trustees, except to the extent
that, under the law of any jurisdiction in which any particular act or acts are
to be performed, the 


 


54

















 


Trustee shall be incompetent or unqualified to perform
such act or acts, in which event such act or acts shall be performed by such
co-trustee or co-trustees or separate trustee or separate trustees.


 


(c)           Any request in writing
by the Trustee to any co-trustee or separate trustee to take or to refrain from
taking any action hereunder shall be sufficient warrant for the taking, or the
refraining from taking, of such action by such co-trustee or separate trustee.


 


(d)           Any co-trustee or
separate trustee may delegate to the Trustee the exercise of any right, power,
trust, duty or obligation, discretionary or otherwise.


 


(e)           The Trustee at any
time, by an instrument in writing, with the concurrence of the City, may accept
the resignation of or remove any co-trustee or separate trustee appointed under
this Section and in case an Event of Default shall have occurred and be
continuing, the Trustee shall have power to accept the resignation of, or
remove, any such co-trustee or separate trustee without the concurrence of the
City.  Upon the request of the Trustee,
the City shall join with the Trustee in the execution, delivery and performance
of all instruments and agreements necessary or proper to effectuate such resignation
or removal.


 


(f)            No trustee hereunder
shall be personally liable by reason of any act or omission of any other
trustee hereunder.


 


(g)           Any demand, request,
direction, appointment, removal, notice, consent, waiver or other action in
writing delivered to the Trustee shall be deemed to have been delivered to each
such co-trustee or separate trustee.


 


(h)           Any moneys, papers,
securities or other items of personal property received by any such co-trustee
or separate trustee hereunder shall forthwith, so far as may be permitted by
law, be turned over to the Trustee.


 


Upon the acceptance in
writing of such appointment by any such co-trustee or separate trustee, it or
he shall be vested with such title to the Trust Estate or any part thereof, and
with such rights, powers, duties and obligations, as shall be specified in the
instrument of appointment jointly with the Trustee (except insofar as local law
makes it necessary for any such co-trustee or separate trustee to act alone)
subject to all the terms of this Indenture. 
Every such acceptance shall be filed with the Trustee.  Any co-trustee or separate trustee may, at
any time by an instrument in writing, constitute the Trustee its or his
attorney-in-fact and agent, with full power and authority to do all acts and
things and to exercise all discretion on its or his behalf and in its or his
name.


 


In case any co-trustee or
separate trustee shall die, become incapable of acting, resign or be removed,
the title to the Trust Estate, and all rights, powers, trusts, duties and
obligations of said co-trustee or separate trustee shall, so far as permitted
by law, vest in and 


 


55

















 


be exercised by the Trustee unless and until a successor co-trustee or
separate trustee shall be appointed in the manner herein provided.


 


Section 8.19.  Appointment of Successor or Alternate
Paying Agents.  In the event the
initial Trustee shall also have been appointed paying agent for the Series 2008
Bonds or for any Additional Bonds, a successor Trustee shall become successor
paying agent with respect to such Bonds unless otherwise provided in the
instrument appointing such successor Trustee. 
If any paying agent other than the initial Trustee shall resign or
become incapable of acting, or shall be removed under a supplemental indenture
entered into pursuant to the terms hereof, the Trustee may appoint a successor
paying agent which is a bank or trust company qualified to act as paying agent
under the Act and which is willing to accept the office on reasonable and
customary terms approved by an Authorized Company Representative.  The Trustee may appoint successor paying
agents.  “Paying agent” as used in this Section refers
to the bank or trust company named in the form of Bond provided for the Series 2008
Bonds in the recitals hereof, or provided for Additional Bonds in a
supplemental indenture, where principal of and interest on Bonds may be paid.


 


Section 8.20.  Eligibility; Disqualification.  Notwithstanding any other provision of this
Indenture, this Indenture shall always have a Trustee that is a bank or trust
company subject to examination by federal regulatory authorities.


 


In the event the Trustee
shall at any time have or acquire any conflicting interest, the Trustee shall,
within ninety (90) days after ascertaining that it has such a conflicting
interest, either eliminate such conflicting interest or resign as trustee, such
resignation to become effective upon the effectiveness of the appointment of a
successor Trustee, as provided in this Indenture.  The Trustee and the City agree to take prompt
steps to have a successor Trustee appointed in the manner provided in this
Indenture.  As used in this paragraph, a “conflicting
interest” shall exist in all situations in which an indenture trustee would be
deemed to have a conflicting interest under Section 310(b)(1) of the
Trust Indenture Act of 1939, as amended, 15 U.S.C. Section 77jjj(b)(1).


 


56

















 


ARTICLE
IX


 


CONCERNING THE BONDHOLDERS


 


Section 9.01.  Execution of Instruments by Bondholders.  Any request, direction, consent or other
instrument in writing required by this Indenture to be signed or executed by
Bondholders may be in any number of concurrent instruments of similar tenor and
may be signed or executed by such Bondholders in person or by agent duly
appointed by an instrument in writing. 
Proof of the execution of any such instrument and of the ownership of
Bonds shall be sufficient for any purpose of this Indenture and shall be
conclusive in favor of the Trustee with regard to any action taken by it under
such instrument if made in the following manner:


 


(a)           The fact and date of
the execution by any person of any such instrument may be proved by the
certificate of any officer in any jurisdiction who, by the laws thereof, has
power to take acknowledgments of deeds to be recorded within such jurisdiction,
to the effect that the person signing such instrument acknowledged to him the
execution thereof, or by an affidavit of a witness to such execution.


 


(b)           The ownership of Bonds
shall be proved by the registration records kept under the provisions of this
Indenture.


 


Nothing contained in this
Article shall be construed as limiting the Trustee to the proof above
specified, it being intended that the Trustee may accept any other evidence of
the matters herein stated which to it may seem sufficient.


 


Section 9.02.  Waiver of Notice.  Any notice or other communication required by
this Indenture to be given by delivery, publication or otherwise to the
Bondholders or any one or more thereof may be waived, at any time before such
notice or communication is so required to be given, by a writing mailed or
delivered to the Trustee by the Holder or Holders of all of the Bonds entitled
to such notice or communication.


 


Section 9.03.  Determination of Bondholder Concurrence.  In determining whether the Holders of the
requisite aggregate principal amount of Bonds have concurred in any demand,
request, direction, consent or waiver under this Indenture, Bonds which are
owned by the City or the Company shall be disregarded and deemed not to be
outstanding for the purpose of any such determination, provided that for the
purpose of determining whether the Trustee shall be protected in relying on any
such demand, request, direction, consent or waiver only Bonds which the Trustee
knows to be so owned shall be disregarded. 
Bonds so owned which have been pledged in good faith may be regarded as
outstanding for the purposes of this Section if the pledgee shall
establish to the satisfaction of the Trustee the pledgee’s right to vote such
Bonds and that the pledgee is not a person directly or indirectly controlling
or controlled by or under common control with the City or the Company.  In case of a dispute as to such right, any decision
by the Trustee taken upon the advice of counsel shall be full protection to the
Trustee.


 


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Section 9.04.  Bondholders’ Meeting.  A meeting of the Bondholders may be called at
any time and from time to time for any of the following purposes:


 


(1)           to give any notice to
the City or to the Trustee, or to give any direction to the Trustee, or to make
any request of the Trustee, or to consent to the waiving of any default
hereunder and its consequences, or to take any other action authorized to be
taken by Bondholders pursuant to any of the provisions of Article VII
hereof;


 


(2)           to remove the Trustee
or appoint a successor Trustee pursuant to the provisions of Article VIII
hereof;


 


(3)           subject to Article XI
hereof, to consent to the execution of an indenture or indentures supplemental
hereto;


 


(4)           subject to Article XII
hereof, to consent to any amendment of the Bond Lease or the Bond Mortgage or
to any instrument supplemental thereto; or


 


(5)           to take any other
action authorized to be taken by or on behalf of the Holders of any percentage
of the outstanding Bonds under any other provisions of this Indenture or under
applicable law.


 


Any Bondholders’ meeting
may be called and held as follows:


 


(a)           A meeting of
Bondholders may be held at such place within the City or in the city where the
Trustee has its principal office as the Trustee or, in case of its failure to
act, the City or Bondholders calling the meeting shall prescribe.


 


(b)           Notice of every meeting
of Bondholders, setting forth the time and place of such meeting and in general
terms the action proposed to be taken at such meeting, shall be published at
least three (3) times in a Financial Journal, the first publication to be
not less than 20 nor more than l80 days prior to the date fixed for the
meeting.  At the time of the first
publication of such notice, the Trustee shall also mail, postage prepaid, a
copy of such notice to each owner of registered Bonds and to the Company.  Any failure of the Trustee to mail such
notice, or any defect therein shall not, however, in any way impair or affect
the validity of any such meeting.  If all
the Bonds outstanding are registered Bonds, no such notice need be given except
notice by mail as hereinabove provided.


 


(c)           In case at any time the
City, pursuant a Certified Resolution, or the Holders of at least ten percent
(l0%) in aggregate principal amount of the Bonds then outstanding, shall have
requested the Trustee to call a meeting of the Bondholders, by written request
setting forth in reasonable detail the action proposed to be taken at the
meeting, and the Trustee shall not have made the first giving of the notice of
such meeting within 20 days after receipt of such request, then the City or the
Holders of Bonds in the amount above specified may call such meeting to take
any action 


 


58

















 


authorized in this Section by
giving notice thereof as provided in paragraph (b) of this Section.


 


(d)           Only a Holder of one or
more Bonds or a person appointed as proxy by an instrument in writing of such
Holder shall be entitled to vote at or to participate with their counsel and
the representatives of the Trustee or the City in such meeting.  Each Holder shall be entitled to one vote for
each $l,000 in principal amount of outstanding Bonds held.


 


(e)           The Trustee or, in case
of its failure to act, the City or Bondholders calling or requesting the
meeting, may make such reasonable regulations as it may deem advisable for any
meeting of Bondholders in regard to proof of the holding of Bonds and of the
appointment of proxies and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates
and other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall deem appropriate.


 


(f)            At any meeting of
Bondholders, the presence of persons holding or representing Bonds in an
aggregate principal amount sufficient under the appropriate provision of this
Indenture to take action upon the business for the transaction of which such
meeting was called shall constitute a quorum. 
Any meeting of Bondholders duly called pursuant to this Section may
be adjourned from time to time by vote of the Holders (or proxies for the
Holders) of a majority of the Bonds represented at the meeting and entitled to
vote, whether or not a quorum shall be present; and the meeting may be held as
so adjourned without further notice.


 


(g)           The vote upon any
resolution submitted to any meeting of Bondholders shall be by written ballots
on which shall be subscribed the signatures of the Holders of Bonds or of their
representatives by proxy and the serial number or numbers of the Bonds held or
represented by them.  The presiding
officer of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. 
A record, at least in duplicate, of the proceedings of each meeting of
Bondholders shall be prepared by the secretary of the meeting and there shall
be attached to said record the original reports of the inspectors of votes on
any vote by ballot taken there at and affidavits by one or more persons having
knowledge of the facts setting forth a copy of the notice of the meeting and
showing that said notice was published or mailed as provided in paragraph (b) hereof.  Each copy shall be signed and verified by the
affidavits of the presiding officer and secretary of the meeting and one such
copy shall be delivered to the Company and the City and another to the Trustee
to be preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting.  Any record so
signed and verified shall be conclusive evidence of the matters therein stated.


 


59

















 


Section 9.05.  Revocation by Bondholders.  At any time prior to (but not after) the
evidencing to the Trustee of the taking of any action by the Holders of the
percentage in aggregate principal amount of the Bonds specified in this
Indenture in connection with such action, any Holder of any such Bond may, by
filing written notice with the Trustee at its principal office revoke any
consent given by such Holder or the predecessor Holder of such Bond.  Except as aforesaid, any such consent given
by the Holder of any Bond shall be conclusive and binding upon such Holder and
upon all future Holders of such Bond and of any Bond issued in exchange
therefor or in lieu thereof, irrespective of whether or not any notation in
regard thereto is made upon such Bond. 
Any action taken by the Holders of the percentage in aggregate principal
amount of the specified in this Indenture in connection with such action shall
be conclusively binding upon the City, the Trustee and the Holders of all the
Bonds.


 


60

















 


ARTICLE X


 


PAYMENT,
DEFEASANCE AND RELEASE


 


Section 10.01.  Payment and Discharge of Indenture.  If the Company or the City, its successors or
assigns, shall


 


(a)           pay or cause to be paid
the principal of and premium, if any, and interest on the Bonds at the time and
in the manner stipulated therein and herein, or


 


(b)           provide for the payment
of principal and premium, if any, of the Bonds and interest thereon by
depositing with the Trustee at or at any time before maturity amounts
sufficient either in cash or in direct obligations of or obligations fully
guaranteed as to principal and interest by the United States of America, the
principal and interest on which when due and payable (or redeemable at the
option of the holder thereof but not at the option of the City thereof) and
without consideration of any reinvestment thereof shall be sufficient, to pay
the entire amount due or to become due thereon for principal and premium, if
any, and interest to maturity of all said Bonds outstanding, or


 


(c)           deliver to the Trustee (l) proof
satisfactory to the Trustee that notice of redemption of all of the outstanding
callable Bonds not surrendered or to be surrendered to it for cancellation has
been given or waived as provided in Article III hereof, or that
arrangements satisfactory to the Trustee have been made insuring that such
notice will be given or waived, or (2) a written instrument executed by
the City under its official seal and expressed to be irrevocable, authorizing
the Trustee to give such notice for and on behalf of the City, or (3) file
with the Trustee a waiver of such notice of redemption signed by the holders of
all of such outstanding Bonds, and in any such case, deposit with the Trustee
before the date on which such Bonds are to be redeemed, as provided in said Article III,
the entire amount of the redemption price, including accrued interest and
premium, if any, either in cash or direct obligations of or obligations fully
guaranteed as to principal and interest by the United States of America (which
do not permit the redemption thereof at the option of the City) in such
aggregate face amount, bearing interest at such rates and maturing at such
dates as shall be sufficient to provide for the payment of such redemption
price on the date such Bonds are to be redeemed, and on such prior dates when
principal of and interest on the outstanding Bonds is due and payable, or


 


(d)           surrender to the
Trustee for cancellation all Bonds for which payment is not so provided, and
shall also pay all other sums due and payable hereunder by the City or the
Company,


 


provided that if Bonds
are to be defeased under either paragraph (b) or (c) above, an
opinion of bond counsel shall be rendered to the Trustee to the effect that the
tax-exempt status of interest on the Bonds shall not be impaired thereby, then
and in that case, all the Trust Estate 


 


61

















 


shall revert to the City
and the Company as their interests may appear, and the entire estate, right,
title and interest of the Trustee and of the registered owners of the Bonds in
respect thereof shall thereupon cease, determine and become void; and the
Trustee in such case, upon the cancellation of all Bonds for the payment of
which cash or securities shall not have been deposited in accordance with the
provisions of this Indenture, shall, upon receipt of a written request of the
City and of a Certificate of the City and an Opinion of Counsel as to
compliance with conditions precedent, and at its cost and expense, execute to
the City, or its order, proper instruments acknowledging satisfaction of this
Indenture and surrender to the City and the Company, as their interests appear,
all cash and deposited securities, if any (other than cash or securities for
the payment of the Bonds and interest thereon), which shall then be held
hereunder as a part of the Trust Estate.


 


Nothing contained in this
Section 10.01 shall be construed to prohibit the defeasance of one or
more, but not all, series of Bonds by any of the methods set forth in clauses
(a), (b), (c) or (d) above, as the same would apply to the particular
series of Bonds being discharged.


 


Section 10.02.  Bonds Deemed Not Outstanding After
Deposits.  When there shall have been
deposited at any time with the Trustee in trust for the purpose, cash or direct
obligations of or obligations fully guaranteed by the United States of America
the principal and interest on which shall be sufficient to pay the principal of
any Bonds (and premium, if any) when the same become due, either at maturity or
otherwise, or at the date fixed for the redemption thereof and to pay all interest
with respect thereto at the due dates for such interest or to the date fixed
for redemption, for the use and benefit of the holders thereof, then upon such
deposit all such Bonds shall cease to be entitled to any lien, benefit or
security of this Indenture except the right to receive the funds so deposited,
and such Bonds shall be deemed not to be outstanding hereunder; and it shall be
the duty of the Trustee to hold the cash and securities so deposited for the
benefit of the Holders of such Bonds and from and after such date, redemption
date or maturity, interest on such Bonds thereof called for redemption shall
cease to accrue.


 


Section 10.03.  Unclaimed Money To Be Returned.  Any moneys deposited with the Trustee
pursuant to the terms of this Indenture, for the payment or redemption of Bonds
and remaining unclaimed by the Holders of such Bonds on the date fixed for
redemption of the same, as the case may be, for a period of four years after
the due date, shall, upon the written request of the City or of the Company,
and if the City or any successor to the obligations of the City under the
Indenture and the Bonds shall not at the time, to the knowledge of the Trustee,
be in default with respect to any of the terms and conditions contained in the
Indenture or in such Bonds, be paid to the Company, and such Holders of the
Bonds shall thereafter look only to the Company for payment and then only to
the extent of the amounts so received without interest thereon.


 


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ARTICLE
XI


 


SUPPLEMENTAL INDENTURES


 


Section 11.01.  Purposes for Which Supplemental Indentures
may be Executed.  The City, upon
resolution, and the Trustee from time to time and at any time, subject to the
conditions and restrictions in this Indenture contained, may enter into such
indentures supplemental hereto as may or shall by them be deemed necessary or
desirable without the consent of any Bondholder for any one or more of the
following purposes:


 


(a)           To correct the
description of any property hereby pledged or intended so to be, or to assign,
convey, pledge or transfer and set over unto the Trustee, subject to such liens
or other encumbrances as shall be therein specifically described, additional
property or properties of the City or the Company for the equal and
proportional benefit and security of the Holders and owners of all Bonds at any
time issued and outstanding under this Indenture, subject, however, to the
provisions hereinabove set forth with respect to extended Bonds;


 


(b)           To add to the covenants
and agreements of the City in this Indenture contained other covenants and
agreements thereafter to be observed, or to surrender any right or power
reserved to or conferred upon the City or to or upon any successor;


 


(c)           To evidence the succession
or successive successions of any other department, agency, body or corporation
to the City and the assumption by such successor of the covenants, agreements
and obligations of the City in the Bonds hereby secured and in this Indenture
and in any and every supplemental indenture contained or the succession,
removal or appointment of any trustee or paying agent hereunder;


 


(d)           To cure any ambiguity
or to correct or supplement any provision contained herein or in any
supplemental indentures which may be defective or inconsistent with any other
provision contained herein or in any supplemental indenture, or to make such
other provisions in regard to matters or questions arising under this Indenture
or any supplemental indenture as the City may deem necessary or desirable and
which shall not be inconsistent with the provisions of this Indenture or any
supplemental indenture and which shall not impair the security of the same; and


 


(e)           To modify, eliminate
and/or add to the provisions of this Indenture to such extent as shall be
necessary to effect the qualification of this Indenture under the Trust
Indenture Act of 1939, as then amended, or under any similar Federal statute
hereafter enacted, and to add to this Indenture such other provisions as may be
expressly permitted by said Trust Indenture Act of 1939, excluding, however,
the provisions referred to in Section 316(a)(2) of said Trust
Indenture Act of 1939; and


 


63

















 


(f)            To provide for the
issuance of any Additional Bonds permitted to be issued pursuant to, but only
in accordance with the requirements of, Section 2.09 of this Indenture.


 


Section 11.02.  Execution of Supplemental Indenture.  The Trustee is authorized to join with the
City in the execution of any such supplemental indenture, to make the further
agreements and stipulations which may be therein contained, and to accept the
conveyance, transfer and assignment of any property thereunder, but the Trustee
shall not be obligated to enter into any such supplemental indenture which
affects its rights, duties or immunities under this Indenture.


 


Section 11.03.  Opinion of Bond Counsel.  Before the City and the Trustee shall enter
into any Supplemental Indenture pursuant to Section 11.01, there shall
have been delivered to the Trustee and the City an Opinion of Bond Counsel
(upon which the Trustee shall be entitled to conclusively rely) stating that
such Supplemental Indenture is authorized or permitted by this Indenture and
the Act, complies with their respective terms, will, upon the execution and
delivery thereof, be valid and binding upon the City in accordance with its
terms and will not adversely affect the exemption from federal income taxation
of interest on the Bonds.


 


Section 11.04.  Modification of Indenture with Consent of
Bondholders.  Subject to the terms
and provisions contained in this Section, the Holders of not less than
fifty-one per centum (51%) in aggregate principal amount of the Bonds then
outstanding shall have the right, from time to time, to consent to and approve
the execution by the City and the Trustee of such indenture or indentures
supplemental hereto as shall be deemed necessary or desirable by the City for
the purpose of modifying, altering, amending, adding to or rescinding in any particular,
any of the terms or provisions contained in this Indenture or in any
supplemental indenture; PROVIDED, HOWEVER, that nothing herein contained shall
permit or be construed as permitting, without the consent of the Holders of all
outstanding Bonds, (a) an extension of the maturity of any Bond issued
hereunder, or (b) a reduction in the principal amount of any Bond or the
redemption premium or the rate of interest thereon, or (c) the creation of
a lien upon or a pledge of revenues ranking prior to or on a parity with the
lien or pledge created by this Indenture and the Bond Mortgage (except as
provided in Section 2.09 hereof), or (d) a preference or priority of
any Bond or Bonds over any others, or (e) a reduction in the aggregate
principal amount of the Bonds required to consent to supplemental indentures,
amendments to the Bond Lease or amendments to the Bond Mortgage or (f) a
reduction in the aggregate principal amount of the Bonds required to waive an
Event of Default.


 


Whenever the City shall
deliver to the Trustee a resolution of Bondholders adopted at a Bondholders’
meeting approved by, or an instrument or instruments purporting to be executed
by, the Holders of not less than fifty-one per centum (51%) in aggregate
principal amount of the Bonds then outstanding, which resolution or instrument
or instruments shall refer to the proposed supplemental indenture and shall
specifically consent to and approve 


 


64

















 


the execution thereof, thereupon, the City and the Trustee may execute
such supplemental indenture without liability or responsibility to any Holder
of any Bond, whether or not such Holder shall have consented thereto.


 


If the Holders of not
less than fifty-one per centum (51%) in aggregate principal amount of the Bonds
outstanding at the time of the execution of such supplemental indenture shall
have consented to and approved the execution thereof as herein provided, no
Holder of any Bond shall have any right to object to the execution of such supplemental
indenture, or to object to any of the terms and provisions contained therein or
the operation thereof, or in any manner to question the propriety of the
execution thereof, or to enjoin or restrain the Trustee or the City from
executing the same or from taking any action pursuant to the provisions
thereof.


 


Section 11.05.  Supplemental Indentures to be Part of
Indenture.  Any supplemental
indenture executed in accordance with any of the provisions of this Article shall
thereafter form a part of this Indenture; and all the terms and conditions
contained in any such supplemental indenture as to any provisions authorized to
be contained therein shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes, and the respective
rights, duties and obligations under this Indenture of the City, the Trustee
and all Holders of Bonds then outstanding shall thereafter be determined,
exercised and enforced hereunder, subject in all respects to such modifications
and amendments.  If deemed necessary or
desirable by the Trustee, reference to any such supplemental indenture or any
of such terms or conditions thereof may be set forth in reasonable and
customary manner in the text of the Bonds or in a legend stamped on the Bonds.


 


Section 11.06.  Rights of Company Unaffected.  Anything herein to the contrary
notwithstanding, a supplemental indenture under this Article XI which
adversely affects the rights of the Company under the Bond Lease, the Bond
Mortgage or this Indenture, so long as the Bond Lease, this Indenture and the
Bond Mortgage are in effect, shall not become effective unless and until the
Company shall have consented to the execution and delivery of such supplemental
indenture.  The Trustee shall cause
notice of the proposed execution and delivery of any such supplemental
indenture to the execution and delivery of which the Company has not already
consented, together with a copy of the proposed supplemental indenture, to be
mailed to the Company at least thirty (30) days prior to the proposed date of
execution and delivery of any such supplemental indenture.


 


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ARTICLE
XII


 


AMENDMENTS
TO THE BOND LEASE,


BOND
MORTGAGE AND GUARANTY


 


Section 12.01.  Amendments to the Bond Lease, Bond
Mortgage and Guaranty Not Requiring Consent of Bondholders.  The City, the Company and the Trustee shall,
without the consent of or notice to the Bondholders, consent to any amendment,
change or modification of the Bond Lease, Bond Mortgage or Guaranty as may be
required (i) by the provisions of the Bond Lease, Bond Mortgage Assignment
or this Indenture, (ii) in connection with the issuance of Additional
Bonds as provided in Section 2.09 hereof, (iii) for the purpose of
curing any ambiguity or formal defect or omission, or (iv) in connection
with any other change therein which, in the judgment of the Trustee, is not to
the prejudice of the Trustee or the Holders of the Bonds.


 


Section 12.02.  Amendments to Bond Lease, Bond Mortgage
and Assignment Requiring Consent of Bondholders.  Except for the amendments, changes or
modifications as provided in Section 12.01 hereof, neither the City nor
the Trustee shall consent to any other amendment, change or modification of the
Bond Lease, Bond Mortgage or Guaranty without the written approval or consent
of the Holders of not less than fifty-one per centum (51%) in aggregate
principal amount of the Bonds at the time outstanding given and procured as in
this Section provided; provided, however, that no such amendment, change
or modification shall ever affect the unconditional obligation of the Company
to make Bond Lease Payments as they become due and payable.  If the Holders of not less than fifty-one per
centum (51%) in aggregate principal amount of the Bonds outstanding hereunder
at the time of the execution of any such amendment, change or modification
shall have consented to and approved the execution thereof as herein provided,
no Holder of any Bond shall have any right to object to any of the terms and
provisions contained therein, or in the operation thereof, or in any manner to
question the propriety of the execution thereof, or to enjoin or restrain the
Trustee, the City or the Company from executing the same or from taking any
action pursuant to the provisions thereof.


 


Section 12.03.  No Amendment May Reduce Lease
Payments.  Under no circumstances
shall any amendment to the Bond Lease or Bond Mortgage reduce the Lease
Payments without the consent of the Holders of all the Bonds outstanding.


 


Section 12.04.  Rights of City.  The City has no duty or obligation to consent
to any proposed amendment to the Bond Lease, Bond Mortgage or Guaranty and may,
at the expense of the Company, request and receive an opinion of such counsel
as the City may select in connection with any matter relating to a proposed
amendment.


 


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ARTICLE
XIII


 


MISCELLANEOUS


 


Section 13.01.  Covenants of City Bind Successors and
Assigns.  All the covenants,
stipulations, promises and agreements in this Indenture contained, by or in
behalf of the City, shall bind and inure to the benefit of its successors and
assigns, whether so expressed or not.


 


Section 13.02.  Immunity of Officers.  No recourse for the payment of any part of
the principal of or interest on any Bond or for the satisfaction of any
liability arising from, founded upon or existing by reason of the issue,
purchase or ownership of the Bonds shall be had against any officer, member or
agent of the City Council, the City or the State of Minnesota, as such, all
such liability being hereby expressly released and waived as a condition of and
as a part of the consideration for the execution of this Indenture and the
issuance of the Bonds.


 


Section 13.03.  No Benefits to Outside Parties.  Nothing in this Indenture, express or
implied, is intended or shall be construed to confer upon or to give to any
person or corporation, other than the Company, the parties hereto and the
Holders of the Bonds issued hereunder, any right, remedy or claim under or by
reason of this Indenture or covenant, condition or stipulation thereof; and the
covenants, stipulations and agreements in this Indenture contained are and
shall be for sole and exclusive benefit of the Company, the parties hereto,
their successors and assigns, and the Holders of the Bonds.


 


Section 13.04.  Separability of Indenture Provisions.  In case any one or more of the provisions
contained in this Indenture or in the Bonds shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Indenture,
but this Indenture shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein.


 


Section 13.05.  Execution of Indenture in Counterparts.  This Indenture may be simultaneously executed
in several counterparts, each of which, when so executed, shall be deemed to be
an original, and such counterparts shall together constitute one and the same
instrument.


 


Section 13.06.  Headings Not Controlling.  The headings of the several Articles and
Sections hereof are inserted for the convenience of reference only and shall
not control or affect the meaning or construction of any of the provisions hereof.


 


Section 13.07.  Notices, etc., to Trustee, City, Company
and Original Purchaser.  Any request,
demand, authorization, direction, notice, consent of Bondholders or other
document provided or permitted by this Indenture shall be sufficient for any
purpose under this Indenture, the Bond Lease or the Bond Mortgage, when hand
delivered or mailed registered or certified mail, return receipt requested,
postage prepaid (except as otherwise provided in this Indenture) (with a copy
to the other parties) at the following addresses (or such other 


 


67

















 


address as may be
provided by any party by notice) and shall be deemed to be effective upon
receipt:


 


	
  To the City:

  	
  City
  of Lamberton

  112
  Second Avenue West

  P.O. Box
  356

  Lamberton,
  MN  56152-0356

  Attn:
  City Administrator/Clerk

  
	
   

  	
   

  
	
  To the Trustee:

  	
  U.S.
  Bank National Association

  Mail Station: EP-MN-WS3C

  60 Livingston Avenue, 3rd
  Floor

  St.
  Paul MN 55107

  
	
   

  	
   

  
	
  To the Company:

  	
  Highwater
  Ethanol, LLC

  205
  N. Main Street, PO Box 96

  Lamberton,  MN 
  56152

  Attn:
  President

  
	
   

  	
   

  
	
  To the Original
  Purchaser:

  	
  Northland
  Securities, Inc.

  45
  South Seventh Street

  Suite 2500

  Minneapolis,
  Minnesota 55402

  Attn:
  Senior Vice President

  



 


68

















 


IN WITNESS WHEREOF, CITY
OF LAMBERTON by its City Council has caused this Indenture to be signed in its
name by its duly authorized officers, and U.S. BANK NATIONAL ASSOCIATION, as
Trustee, to evidence its acceptance of the trust hereby created, has caused
this Indenture to be signed in its name by authorized officers of the Trustee,
all as of the day and year first above written, but actually on the 25th
day of April, 2008.


 


	
   

  	
  CITY OF LAMBERTON,
  MINNESOTA

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
          /s/
  Craig Wetter

  
	
   

  	
   

  	
  Its Mayor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  And

  	
  by

  	
          /s/
  Steven Flaig

  
	
   

  	
   

  	
  Its City Clerk

  



 


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  U.S. BANK NATIONAL
  ASSOCIATION,

  
	
   

  	
  Trustee

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
          /s/
  Christine Robinette

  
	
   

  	
   

  	
  Its

  	
               Vice
  President

  



 


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