Exhibit 10.4


 


GUARANTY AGREEMENT


 


THIS GUARANTY AGREEMENT (the “Guaranty”) made and entered into as of April 1,
2008, by and between HIGHWATER ETHANOL, LLC, a Minnesota limited liability
company having its principal offices at 205 N. Main Street, Lamberton,
Minnesota (the “Company”), and U.S. BANK NATIONAL ASSOCIATION, a national
banking association duly organized, existing and authorized to accept and
execute agreements of the character herein set out under and by virtue of the
laws of the United States of America, and having its main office and place of
business in St. Paul, Minnesota (the “Trustee”), together with any successor
trustee, at the time serving as such under the Trust Indenture dated as of the
date hereof, and as the same may be amended or supplemented from time to time,
between the City of Lamberton and the Trustee (the “Indenture”);


 


WITNESSETH:


 


WHEREAS, City of Lamberton, a political subdivision of the State of
Minnesota having its principal office at Lamberton, Minnesota (the “City”),
intends to issue its Solid Waste Facilities Revenue Bonds, Series 2008A
(Highwater Ethanol, LLC Project) in the aggregate principal amount of
$15,180,000 (the “Bonds”); and


 


WHEREAS, the Bonds are to be issued under and pursuant to the
Indenture; and


 


WHEREAS, the Bonds are being issued to finance the acquisition and
installation of certain solid waste disposal facilities for the Company (the “Equipment”),
as part of the Company’s ethanol plant as more fully described in the Indenture
(the “Project”); and


 


WHEREAS, the Equipment is to be leased to the Company by the City
pursuant to the terms of a Lease Agreement dated as of the date hereof and as
the same may be amended and supplemented from time to time (the “Bond Lease”);
and


 


WHEREAS, the Company is desirous that the City issue the Bonds and
apply the proceeds as aforesaid and is willing to enter into this Guaranty
Agreement in order to enhance the marketability of the Bonds and thereby
achieve cost and other savings to itself and as an inducement to the purchase
of the Bonds by all who shall at any time become holders of the Bonds;


 


ARTICLE I


 


REPRESENTATIONS AND WARRANTIES OF THE COMPANY


 


Section 1.1.            Organization, etc. 
The Company represents and warrants that the Company is duly organized
and in good standing under the laws of the State of Minnesota, has power to
enter into this Guaranty, and by proper corporate action has authorized the
execution and delivery of this Guaranty.


 


Section 1.2.            Absence of Conflicting Provision.  The Company represents and warrants that the
execution and delivery of this Guaranty and the fulfillment of the terms and
conditions hereof do not and will not conflict with or result in a breach of
any of the terms or provisions of 


 

















 


any agreement or instrument to which the Company is now a party, and do
not and will not constitute a default under any of the foregoing, or result in
the creation or imposition of any lien, charge or encumbrance of any nature
upon any of the property or assets of the Company contrary to the terms of any
instrument or agreement.


 


Section 1.3.            Direct Benefit.  The Company represents and warrants that the
assumption by the Company of its obligations hereunder will result in a direct
financial benefit to the Company.


 


ARTICLE II


 


COVENANTS AND AGREEMENTS OF COMPANY


 


Section 2.1.            Obligation.  The Company hereby unconditionally guarantees
to pay promptly to the Trustee for the benefit of the Holders from time to time
of the Bonds and of the interest coupons appertaining thereto (a) the full
amount of each installment of principal of and premium, if any, on any Bond
when and as the same shall become due, whether at the stated maturity thereof,
by acceleration, call for redemption or otherwise, and (b) the full amount
of any interest on any Bond when and as the same shall become due.  All payments by the Company shall be paid in
lawful money of the United States of America. 
Each and every default in payment of the principal of, premium, if any,
or interest on any Bond shall give rise to a separate cause of action hereunder,
and separate suits may be brought hereunder as each cause of action arises.


 


Section 2.2.            Term.  The obligations of the Company under this
Guaranty shall arise absolutely and unconditionally when the Bonds shall have
been issued, sold and delivered by the City and shall remain in full force and
effect until the entire principal of, premium (if any) and interest on the
Bonds shall have been paid or provided for in accordance with the Indenture.


 


Section 2.3.            Obligations Unconditional.  The obligations of the Company under this
Guaranty shall be absolute and unconditional and shall remain in full force and
effect until the entire principal of, premium, if any, and interest on the
Bonds shall have been paid or provided for, and such payment shall not be
affected, modified or impaired upon the happening from time to time of any
event, including without limitation any of the following:


 


(a)           the compromise, settlement, release or
termination of any or all of the obligations, covenants or agreements of the
City under the Indenture except by reason of payment in full of the Bonds;


 


(b)           the failure to give notice to the Company of
the occurrence of any default or Event of Default under the terms and
provisions of this Guaranty, the Bond Lease or the Indenture;


 


(c)           the assignment or mortgaging or the
purported assignment or mortgaging of all or any part of the interest of the
City in the Equipment or any failure of rights or title with respect to the
City’s interest in the Equipment or the site thereof;


 


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(d)           the waiver of the payment, performance or
observance by the City or the Company of any of the obligations, covenants or
agreements of either of them contained in the Indenture, the Bond Lease or this
Guaranty;


 


(e)           the extension of the time for payment of
principal of, premium, if any, or interest on any Bond under this Guaranty or
of the time for performance of any other obligations, covenants or agreements
under or arising out of the Indenture, the Bond Lease or this Guaranty;


 


(f)            the modification or amendment (whether
material or otherwise) of any obligation, covenant or agreement set forth in
the Indenture, the Bond Lease or in the Bonds except as expressly permitted by
and in accordance with the provisions of the Indenture;


 


(g)           the taking or omission of any of the actions
referred to in the Indenture or the Bond Lease or this Guaranty;


 


(h)           any failure, omission, delay or lack on the
part of the City or Trustee to enforce, assert or exercise any right, power or
remedy conferred on the City or Trustee in this Guaranty, the Bond Lease or the
Indenture, or any other act or acts on the part of the City, Trustee or any of
the holders from time to time of the Bonds or of the interest coupons
appertaining thereto;


 


(i)            the voluntary or involuntary liquidation,
dissolution, sale or other disposition of all or substantially all the assets,
marshalling of assets and liabilities, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition with creditors or readjustment of, or other similar proceeding
affecting the Company or the City, or a substantial part of the assets of any
of them, or any allegation or contest of the validity of this Guaranty or the Bond
Lease in any such proceeding;


 


(j)            the release or discharge (including
discharge in bankruptcy) of the Company from the performance or observance of
any obligation, covenant or agreement contained in this Guaranty or the Bond
Lease by operation of law or otherwise;


 


(k)           the foreclosure of the Bond Lease, the
termination of the Bond Lease, or the pursuit of any other remedy under the
Bond Mortgage, the Indenture or the Bond Lease; or


 


(l)            the default or failure of the Company fully
to perform any of its obligations set forth in this Guaranty or the Bond Lease.


 


Section 2.4.            Set-Offs, Counterclaims.  Except for payments made by Company and
received by City, no set-off, counterclaim, reduction, or diminution of any
obligation, or any defense of any kind or nature which the Company has or may
have against the City or Trustee or the holder of any Bond shall be available
hereunder to the Company, provided that the Company shall not be deemed by the
provisions of this Section to have waived any right to proceed
independently against the City or the Trustee.


 


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Section 2.5.            Waiver of Acceptance.  The Company hereby expressly waives notice
from the Trustee or the holders from time to time of any of the Bonds or of the
interest coupons appertaining thereto of their acceptance of and reliance on
this Guaranty.


 


Section 2.6.            Attorneys’ Fees and Expenses.  The Company agrees to pay all the costs,
expenses and fees including all reasonable attorney’s fees, which may be incurred
by the Trustee or any Bondholder in enforcing or attempting to enforce this
Guaranty following any default on the part of the Company hereunder, whether
the same shall be enforced by suit or otherwise.


 


Section 2.7.            Maintenance of Existence.  The Company will maintain its existence, will
not dissolve or otherwise dispose of all or substantially all of its assets,
and will not consolidate with or merge into another entity or permit any other
entity to consolidate with or merge into it without the consent of the Trustee,
which consent will not unreasonably be withheld or conditioned, unless the
surviving, resulting or transferee corporation either (i) is the Company
or (ii) if other than the Company, assumes in writing all of the
obligations of the Company under the Bond Lease and this Guaranty and has a net
worth at least equal to that of the Company as of the date of such
consolidation, merger or transfer.  Every
surviving, resulting or transferee corporation shall be bound by all of the
covenants and agreements of the Company herein with respect to any further
consolidation, merger, sale or transfer.


 


ARTICLE III


 


RIGHTS AND RESPONSIBILITIES OF TRUSTEE


 


Section 3.1.            Duties of Trustee.  Except during the continuance of a default
under Section 2.1 hereof, the Trustee undertakes to perform such duties
and only such duties as are specifically set forth in this Guaranty, and no
implied covenants or obligations shall be read into this Guaranty against the
Trustee.  In case a default under Section 2.1
has occurred and is continuing, the Trustee shall exercise such of the rights
and powers vested in it by this Guaranty and use the same degree of care and
skill in their exercise as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.  No provision of this Guaranty shall be
construed to relieve the Trustee from liability for its own negligent act, its
own negligent failure to act or its own willful misconduct.


 


Section 3.2.            Default.  Upon the happening of a default in the payment
of principal of or premium, if any, on any Bond when and as the same shall
become due, whether at the stated maturity thereof, by acceleration, call for
redemption or otherwise, or in the payment of any interest on any Bond when and
as the same shall become due, and after the expiration of any applicable cure
period, the Trustee shall have the right to proceed first and directly against
the Company under this Guaranty without proceeding against City under the
Indenture, or the Company under the Bond Lease, or any other person, firm or
corporation, or exhausting any other remedies which it may have and without
resorting to any other security held by the City or the Trustee.


 


Section 3.3.            Filing Claims.  In the event a right of action and claim has
arisen under this Guaranty, in case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to the 


 


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Company or the property of the
Company, the Trustee shall be entitled and empowered, by intervention in such
proceeding or otherwise:


 


(i)            to file and prove a claim for the whole
amount of principal, premium (if any) and interest owing and unpaid in respect
of the Bonds and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents, and counsel) and of the Bondholders allowed in such
judicial proceeding, and


 


(ii)           to collect and receive any moneys or other
property payable or deliverable on any such claims and to distribute the same;


 


and any receiver, assignee, trustee, liquidator, sequestrator (or other
similar official) in any such judicial proceeding is hereby authorized by each
Bondholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Bondholders to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.


 


Section 3.4.            Authority of Trustee.  All rights of action and claims under this
Guaranty or the Bonds or coupons may be prosecuted and enforced by the Trustee
without the possession of any of the Bonds or coupons or the production thereof
in any proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall, after provision for the payment of the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, be for the ratable benefit of the holders of the Bonds
and coupons in respect of which such judgment has been recovered.


 


Section 3.5.            Immunities of Trustee.  The rights and immunities granted the Trustee
in Article VIII of the Indenture shall apply equally to the activities of
the Trustee hereunder.


 


ARTICLE IV


 


RIGHTS OF BONDHOLDERS


 


Section 4.1.            Directions to Trustee.  In the event a cause of action arises under
this Guaranty, the holders of at least fifty-one per centum (51%) in principal
amount of the outstanding Bonds shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available hereunder to
the Trustee, provided that


 


(1)           such direction shall not be in conflict with
any law or this Guaranty,


 


(2)           the Trustee shall not determine that the
action so directed would be unjustly prejudicial to the holders not taking part
in such direction, and


 


(3)           the Trustee may take any other action deemed
proper which is not inconsistent with such direction.


 


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The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by the Guaranty at the request or direction of any of
the Bondholders pursuant to this Guaranty, unless such Bondholders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction.


 


Section 4.2.            Right of Payment.  Notwithstanding any limitations on the
ability of Bondholders to direct the actions of the Trustee hereunder, and
notwithstanding any other provisions of this Guaranty, the holder of any Bond
shall have the right, which is absolute and unconditional, to receive payment
of the principal of, premium (if any) and interest on such Bond on the respective
maturity date expressed in such Bond and such right shall not be impaired
without the consent of such Holder.


 


ARTICLE V


 


MISCELLANEOUS


 


Section 5.1.            Remedies
Not Exclusive.  No remedy herein
conferred upon or reserved to the Trustee is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Guaranty, the Bond Lease or the Indenture or now or hereafter existing at law
or in equity.  No delay or omission to
exercise any right or power accruing upon any default, omission or failure of
performance hereunder shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power may be exercised
from time to time and as often as may be deemed expedient.  In order to entitle the Trustee to exercise
any remedy reserved to it in this Guaranty, it shall not be necessary to give
any notice, other than such notice as may be herein or in the Indenture
expressly required, provided that demand for payment hereunder has been made by
the Trustee.


 


Section 5.2.            Waivers and Amendments.  In the event any provision contained in the
Guaranty should be breached by the Company and thereafter duly waived by Trustee,
such waiver shall not be deemed to waive any other breach hereunder.  No waiver, amendment, release or modification
of this Guaranty shall be established by conduct, custom or course of dealing,
but solely by an instrument in writing duly executed by the Trustee.  The Trustee shall not consent to any
amendment or modification of this Guaranty without the written approval of a
majority in aggregate principal amount of the Bonds outstanding under the
Indenture.  Nothing contained herein
shall permit, or be construed as permitting any amendment, change or
modification of this Guaranty which would (a) reduce the amount payable by
the Company hereunder, (b) change the time for payment of the amounts
payable by the Company hereunder, or (c) change the unconditional nature
of the Guaranty herein contained.


 


Section 5.3.            Entire Agreement.  This Guaranty constitutes the entire
agreement, and supersedes all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof.


 


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Section 5.4.            Separability.  The invalidity or unenforceability of any one
or more phrases, sentences, clauses or Sections in this Guaranty shall not
affect the validity or enforceability of the remaining portion of this
Guaranty, or any part thereof.


 


Section 5.5.            Definitions.  Any words or phrases capitalized herein but
not defined herein shall have the meanings given in the Indenture.


 


Section 5.7.            Counterparts.  This Guaranty may be executed simultaneously
in several counterparts, each of which shall be deemed an original, and all of
which together shall constitute one and the same instrument.


 


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IN WITNESS WHEREOF, the Company has caused this Guaranty to be executed
in its name and behalf and its corporate seal affixed hereto and attested by
its duly authorized officers as of the date first above written.


 


	
   

  	
   

  	
  HIGHWATER ETHANOL, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
          /s/ Brian Kletscher

  
	
   

  	
   

  	
   

  	
  Its President

  



 

















 


	
  Accepted this 25th day of April 2008 by

  	
   

  	
   

  
	
  U.S. BANK NATIONAL ASSOCIATION,

  	
   

  	
   

  
	
  as Trustee.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  U.S. BANK NATIONAL ASSOCIATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
          /s/ Christine
  Robinette

  	
   

  	
   

  
	
   

  	
  Its Vice President

  	
   

  	
   

  



 


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