Exhibit 10.10


 


CONSTRUCTION
LOAN AGREEMENT


 


This Construction Loan Agreement (the “AGREEMENT”)
is dated as of the 24th day of April, 2008, and is by and among HIGHWATER ETHANOL, LLC,
a Minnesota limited liability company (“BORROWER”), FIRST NATIONAL BANK OF OMAHA (“FNBO”), a national banking
association headquartered at Omaha, Nebraska as a BANK and as administrative
agent for the BANKS (in such capacity, the “ADMINISTRATIVE AGENT”), and as
collateral agent for the BANKS (in such capacity, the “COLLATERAL AGENT”), and
the other financial institutions which are or may become a party to this
AGREEMENT in accordance with the terms of this AGREEMENT and listed in Exhibit H
to this AGREEMENT.


 


WHEREAS, BORROWER has requested BANKS to lend to
BORROWER up to the sum of Fifty Million Four Hundred Thousand and No/100
Dollars ($50,400,000.00) (the “CONSTRUCTION LOAN”), for the purpose of
partially funding the cost of the construction of an ethanol plant on the real
estate described in Exhibit F attached hereto and by this reference made a
part hereof (together with all property encumbered by the MORTGAGE or otherwise
constituting  collateral for the LOANS,
the “PROPERTY”) together with a Five Million and No/100 Dollars ($5,000,000.00)
revolving line of credit (“REVOLVING LOAN”), up to Five Million Six Hundred
Thousand and No/100 Dollars ($5,600,000.00) to support the issuance by FNBO of
Letters of Credit, and SWAP CONTRACTS with an additional exposure to FNBO.  The foregoing may be collectively referred to
in this AGREEMENT as the “LOANS” and singly referred to as a “LOAN”.


 


WHEREAS, BANKS are willing to provide such LOANS to
BORROWER upon the terms and conditions herein set forth.


 


SECTION 1 Definitions.


 


1.1           “ADJUSTED EBITDA” means EBITDA less taxes, less capital
expenditures and less TAX DISTRIBUTIONS and other distributions permitted under
this AGREEMENT, in each case for the applicable reporting period.


 


1.2           “ADMINISTRATIVE
AGENT” means FNBO in its capacity as administrative agent for the BANKS
hereunder, and any successor to FNBO in such capacity.


 


1.3           “AGENT”
means collectively, the ADMINISTRATIVE AGENT and COLLATERAL AGENT.


 


1.4           “ASSIGNMENT
OF CONSTRUCTION CONTRACT” means the assignment of that certain Lump Sum
Design-Build Agreement (as amended, the “CONSTRUCTION CONTRACT”) between
BORROWER and Fagen, Inc. (the “DESIGN-BUILDER”) dated September 28,
2006 for construction of the PROJECT in accordance with PLANS applicable
thereto as amended by those certain First Amendment to Lump Sum Design-Build
Agreement, Second Amendment to Lump Sum Design-Build Agreement, Third Amendment
to Lump Sum Design-Build Agreement and Fourth Amendment to Lump Sum
Design-Build Agreement, by which BORROWER assigns, as additional security for
repayment of the OBLIGATIONS, BORROWER’s interest in the CONSTRUCTION 


 

















 


CONTRACT in a form acceptable to COLLATERAL
AGENT, and pursuant to which BORROWER collaterally assigns to COLLATERAL AGENT
all other construction contracts relating to the PROJECT, including, but not
limited to the construction of the water treatment facility, administration
building, railroad spur and other improvements relating to the PROJECT.


 


1.5           “BANKS”
means collectively the financial institutions which are or become a party to
this AGREEMENT and agree to make the LOANS to BORROWER, with any one of the
BANKS individually referred to as a “BANK”.


 


1.6           “BANKING
DAY” means a day on which ADMINISTRATIVE AGENT is open for substantially all of
its business. “EURODOLLAR BUSINESS DAY” means a BANKING DAY on which commercial
banks are open for international business (including dealings in U.S. Dollar
deposits) in London, England.


 


1.7           “BOND DEBT” means
the indebtedness of BORROWER under those certain $15,180,000 City of Lamberton,
Minnesota Solid Waste Facilities Revenue Bonds, Series 2008A (Highwater
Ethanol, LLC Project), evidenced by a Lease Agreement between BORROWER and the
City of Lamberton, Minnesota (the “CITY”) (the “BOND LEASE”) dated as of April 1,
2008, with the bonds constituting the BOND DEBT issued pursuant to a Trust
Indenture dated as of April 1, 2008 (the “BOND INDENTURE”) between the
BOND TRUSTEE and the BOND ISSUER.


 


1.8           “BOND
COLLATERAL” means the LIENS granted by BORROWER
to the BOND ISSUER to secure the BOND DEBT on BORROWER’s property and assets
described in a Construction Loan Mortgage, Security Agreement, Assignment of
Leases and Rents and Fixture Financing Statement dated as of April 1, 2008
on the PROJECT (“BOND MORTGAGE”), and a Security Agreement (“BOND SECURITY
AGREEMENT”) and related financing statements and control agreements, all
executed by BORROWER in favor of the BOND TRUSTEE.


 


1.9           “BOND
DOCUMENTS” means collectively the BOND
LEASE, BOND INDENTURE, BOND MORTGAGE, BOND SECURITY AGREEMENT, financing
statements naming the BOND TRUSTEE as Secured Party and BORROWER as Debtor and
describing the BOND COLLATERAL, control agreements, that certain Continuing
Disclosure Agreement dated as of April 1, 2008 between BORROWER, the BOND
TRUSTEE and April 1, the Bond Underwriter, that certain Private Placement
Memorandum dated April 1, 2008, and the other Bond Documents as defined in
the INTERCREDITOR AGREEMENT.


 


1.10         “BOND ISSUER” means
the City of Lamberton, Minnesota.


 


1.11         “BOND TRUSTEE” means
U.S. Bank National Association, the trustee of the BONDS under the BOND INDENTURE.


 


1.12         “BORROWING
BASE” means the lesser of:


 


(i)         $5,000,000.00,


 


2

















 


 or


 


(ii)        The aggregate of (i) 75% of BORROWER’s corn inventory at
the lesser of cost or current market value on the date reported to AGENT less
all accounts payable for such corn inventory, plus (ii) 75% of the amount
of BORROWER’s Ethanol and Distillers Grains Accounts aged thirty (30) days or
less, excluding any such Accounts reasonably deemed ineligible by BANK, plus (iii) 75%
of BORROWER’s Finished Goods-Ethanol and Distillers Grains Inventory (both wet
and dry), valued at the lower of cost or current market value on the date
reported to AGENT, plus (iv) 75% of the amount of BORROWER’s USDA
Commodity Credit Corporation Bioenergy Program Accounts or payments due
BORROWER aged less than one hundred twenty (120) days, excluding any such
Accounts or payments reasonably deemed ineligible by AGENT, plus (v) 100%
of the positive balance of BORROWER’s hedging accounts pledged to, and subject
to a perfected security interest in favor of, COLLATERAL AGENT, valued at fair
market value on the date of reporting and less (v) the negative balance of
BORROWER’s hedging accounts pledged to, and subject to a perfected security
interest in favor of, COLLATERAL AGENT.


 


1.13         “CLOSING”
shall mean the date on which ADMINISTRATIVE AGENT receives this AGREEMENT,
executed by BORROWER and the BANKS, together with the CONSTRUCTION NOTES, the
REVOLVING NOTES and the other LOAN DOCUMENTS which must be delivered by the
CLOSING as provided for in this Agreement.


 


1.14         “COLLATERAL
AGENT” means FNBO in its capacity as collateral agent and COLLATERAL AGENT for
the BANKS hereunder, and any successor to FNBO in such capacities.


 


1.15         “COMMITMENTS”
means with respect to each BANK, as applicable, such BANK’s respective amount
of each LOAN, as applicable, committed to BORROWER by such BANK under this
AGREEMENT, which COMMITMENTS for each BANK are listed in Exhibit H to this
AGREEMENT.


 


1.16         “CONSTRUCTION
LOAN TERMINATION DATE” means the earlier of (i) February 26, 2010, or
(ii) such earlier date upon which BANKS’ commitment to make a disbursement
under the CONSTRUCTION LOAN is terminated in accordance with the terms of the
CONSTRUCTION NOTES or this AGREEMENT and the outstanding balance of the
CONSTRUCTION LOAN became due and payable in full.


 


1.17         “COMPLETION
DATE” means the earlier of February 26, 2010, or the date ADMINISTRATIVE
AGENT determines following a proper inspection and in the exercise of
ADMINISTRATIVE AGENT’s reasonable discretion, that the PROJECT has been
completed in accordance with the PLANS.


 


1.18         “CONSTRUCTION
NOTES” means the promissory notes executed and delivered by BORROWER to each
BANK substantially in the form of Exhibit A evidencing borrowings under the
CONSTRUCTION LOAN up to an aggregate maximum amount of Fifty Million Four
Hundred Thousand and No/100 Dollars ($50,400,000.00).


 


3

















 


1.19         “DEFAULTING
BANK” means any BANK that (a) has failed to make any portion of the LOANS
required to be funded by it hereunder on the date required to be funded by it
hereunder, (b) has otherwise failed to pay over to the ADMINISTRATIVE
AGENT or any other BANK any other amount required to be paid by it hereunder or
under any LOAN DOCUMENT within one (1) BANKING DAY of the date when due,
unless the subject of a good faith dispute, or (c) has been deemed
insolvent, become the subject of a bankruptcy or insolvency proceeding or had
its assets and/or control frozen or seized by the applicable banking regulators
or other governmental agency.


 


1.20         “DRAW REQUEST” means
forms acceptable to ADMINISTRATIVE AGENT to be submitted to ADMINISTRATIVE
AGENT by BORROWER when an advance is requested under the CONSTRUCTION LOAN.


 


1.21         “EBITDA”
means without duplication Earnings Before Interest, Taxes, Depreciation and
Amortization, in each case during the applicable reporting period, all as
determined in accordance with GAAP.


 


1.22         “EQUITY
INTEREST” means, with respect to any PERSON, all of the shares of capital stock
or units, shares or membership interests of (or other ownership or profit
interests in) such PERSON, all of the warrants, options or other rights for the
purchase or acquisition from such PERSON of shares of capital stock of (or other
ownership or profit interests in) such PERSON, all of the securities
convertible into or exchangeable for shares of capital stock or units, shares
or membership interests of (or other ownership or profit interests in) such
PERSON or warrants, rights or options for the purchase or acquisition from such
PERSON of such shares, units or membership interests (or such other interests),
and all of the other ownership or profit interests in such PERSON (including
partnership, member or trust interests therein), whether voting or nonvoting,
and whether or not such shares, units, membership interests, warrants, options,
rights or other interests are outstanding on any date of determination, in each
such case including all voting rights and economic rights related thereto.


 


1.23         “EVENT
OF DEFAULT” has the meaning provided for in Section 7 of this AGREEMENT.


 


1.24         “EXCESS CASH FLOW”
means ADJUSTED EBITDA, less scheduled payments on the LOANS and scheduled
interest payments due on the BOND DEBT, in each case for the applicable
reporting period.


 


1.25         “FIXED
CHARGE COVERAGE RATIO” means the ratio derived when comparing (i) ADJUSTED
EBITDA to (ii) BORROWER’s scheduled payments on the principal and interest
of the LOANS made during the applicable reporting period, excluding any
principal repaid on the REVOLVING LOAN and LONG TERM REVOLVING NOTES.


 


1.26         “GAAP”
means generally accepted accounting principles in the United States, applied on
a basis consistent with the accounting principles applied in the preparation of
the annual financial statements of BORROWER referred to in Section 6.1 of
this AGREEMENT and the 


 


4

















 


PROJECTIONS described in Section 5.7 of
this AGREEMENT.  All accounting terms not
otherwise defined in this AGREEMENT have the meaning assigned to them in
accordance with GAAP.


 


1.27         “INDEBTEDNESS”
means, as to BORROWER, all indebtedness for borrowed money from any lender
including long-term debt, short-term debt, the NEGATIVE TERMINATION VALUE of
SWAP CONTRACTS, capital leases and the BOND DEBT.


 


1.28         “INDEPENDENT
INSPECTOR” means the firm which will be retained by ADMINISTRATIVE AGENT, at
BORROWER’s cost, to conduct on site inspections of the work-in-progress on the
PROJECT, and to issue periodic reports to BANKS as to the progress of
construction of the PROJECT and adherence to the PLANS.


 


1.29         “INTEREST
PERIOD” means for the FIXED RATE NOTES, VARIABLE RATE NOTES, CONSTRUCTION
NOTES, LONG TERM REVOLVING NOTES and REVOLVING NOTES a period of one (1) month;
provided that:


 


1.29.1   subject to clause 1.29.2 below, any INTEREST
PERIOD which would otherwise end on a day which is not a EURODOLLAR BUSINESS
DAY shall be extended to the next succeeding EURODOLLAR BUSINESS DAY; and


 


1.29.2   no INTEREST PERIOD shall extend beyond the
LOAN TERMINATION DATE applicable to such NOTE.


 


1.30         “LIBOR
RATE” means, for each INTEREST PERIOD, the London Interbank Offered Rate for
U.S. Dollar Deposits for such INTEREST PERIODS as quoted by the Bloomberg
service as its LIBOR Rate Index or such other vendor chosen by ADMINISTRATIVE
AGENT for the purpose of determining the London Interbank Offered Rate for U.S.
Dollar Deposits for each INTEREST PERIOD. 
ADMINISTRATIVE AGENT will tell BORROWER the current LIBOR RATE upon
BORROWER’s request.  ADMINISTRATIVE AGENT
may designate a substitute index after notifying BORROWER.  The LIBOR Rate is not necessarily the lowest
rate charged by BANKS on their loans. 
BORROWER understands that BANKS may make loans based on other rates as
well.


 


1.31         “LOAN
DOCUMENTS” means this AGREEMENT and each agreement or instrument referred to in
Section 4 of this AGREEMENT which is executed by or on behalf of BORROWER
to govern, evidence or secure the OBLIGATIONS.


 


1.32         “LOAN
TERMINATION DATE” means the earliest to occur of the following: (i) as to
the CONSTRUCTION NOTES, the CONSTRUCTION LOAN TERMINATION DATE, as to the
REVOLVING PROMISSORY NOTES, April 24, 2009 as such date may be extended by
the parties in writing, as to the FIXED RATE NOTES, the VARIABLE RATE NOTES,
and as to the LONG TERM REVOLVING NOTES, a date which is five years subsequent
to the CONSTRUCTION LOAN TERMINATION DATE, (ii) the date the OBLIGATIONS
are accelerated pursuant to this AGREEMENT, and (iii) the date
ADMINISTRATIVE AGENT has received (a) notice in writing from BORROWER of
BORROWER’s election to terminate this AGREEMENT and (b) indefeasible
payment in full of the OBLIGATIONS.


 


5

















 


1.33         “MATERIAL
ADVERSE EFFECT” means, with respect to any event, act, condition or occurrence
of whatever nature (including any adverse determination in any litigation,
arbitration, or governmental investigation or proceeding), whether singularly
or in conjunction with any other event or events, act or acts, condition or
conditions, occurrence or occurrences whether or not related, a material
adverse change in, or a material adverse effect on, (a) the construction,
operation or performance of the PROJECT, (b) the business, operations,
results of operations, financial condition, assets, or liabilities, of
BORROWER, (c) the ability of BORROWER to perform any of its obligations
under the LOAN DOCUMENTS and/or BOND DOCUMENTS, (d) the rights and
remedies of BANKS under any of the LOAN DOCUMENTS or (e) the legality,
validity or enforceability of any of the LOAN DOCUMENTS.


 


1.34         MARKETING
AND RISK MANAGEMENT CONTRACTS” collectively means SUPPLY CONTRACTS and the
contracts between BORROWER and third parties for the marketing and sale of
ethanol products, the marketing and sale of distiller’s dried grains (“DDGS”),
consulting services, engineering services, risk management, grain procurement,
and commodity hedging accounts, as any of such agreements and contracts are
amended, restated, supplemental or otherwise modified from time to time, all of
which shall be assigned to the COLLATERAL AGENT and shall be subject to the
reasonable approval of the ADMINISTRATIVE AGENT, and include, without
limitation, that certain Distiller’s Grain Marketing Agreement dated October 11,
2007 between BORROWER and CHS, that certain Ethanol Fuel Marketing Agreement
dated September 28, 2006 between BORROWER and Renewable Products Marketing
Group, L.L.C., that certain Energy Management Agreement dated June 8, 2006
between BORROWER and U.S. Energy Services, Inc., that certain Continuous
Services Agreement for Engineering Services dated April 25, 2006 between
BORROWER and TransSystems Corporation and that certain Consulting Agreement and
Authorization to Proceed dated May 4, 2006 between BORROWER and ETI-Earth
Tech, Inc., as the foregoing may be amended, modified, extended or
replaced.  “SUPPLY CONTRACTS” means all
agreements and contracts related to the supply of input material for the
operation of BORROWER’s business in effect presently and entered into from time
to time hereafter, as any of such agreements and contracts are amended,
restated, supplemental or otherwise modified from time to time, including, but
not limited to that certain Grain Procurement Agreement dated July 25,
2006 between BORROWER and Meadowland Farmers Co-Op, and any amendments,
modifications, extensions and replacements thereof.


 


1.35         “MAXIMUM
AVAILABILITY” means the maximum principal amount on the LONG TERM REVOLVING
NOTES available to BORROWER for borrowing on the date of determination (which
shall initially be $5,000,000.00) as such MAXIMUM AVAILABILITY is reduced by (i) $125,000.00
on each REDUCTION DATE and (ii) the EXCESS CASH FLOW calculation provided
for in Section 6.2.3 of this AGREEMENT on each EXCESS CASH FLOW REDUCTION
DATE as defined in Section 6.2.3 of this AGREEMENT.


 


1.36         “MORTGAGE”
means the Construction Loan Mortgage, Security Agreement, Assignment of Leases
and Rents and Fixture Financing Statement  executed and
delivered by  BORROWER as grantor in favor of
COLLATERAL AGENT as mortgagee and COLLATERAL AGENT for the BANKS, creating a
first lien on the PROPERTY, a security interest in all of the personal property



 


6

















 


located on the PROPERTY and the collateral
assignment of the BOND LEASE as security for payment of the OBLIGATIONS, and
all modifications and amendments thereof.


 


1.37         “NEGATIVE
TERMINATION VALUE” means, with respect to any SWAP CONTRACT of BORROWER, the
amount (if any) that BORROWER would be required to pay if such SWAP CONTRACT
were terminated by reason of a default by or other termination event relating
to BORROWER, such amount to be determined on the basis of a good faith estimate
made by ADMINISTRATIVE AGENT, in consultation with BORROWER.  The NEGATIVE TERMINATION VALUE of any such
SWAP CONTRACT at any date shall be determined (i) as of the end of the
most recent fiscal quarter ended on or prior to such date if such SWAP CONTRACT
was then outstanding or (ii) as of the date such SWAP CONTRACT is
terminated.  However, if an applicable
agreement between BORROWER and the relevant counterparty provides that, upon
any such termination by such counterparty, one or more other SWAP CONTRACTS (if
any exist) between BORROWER and such counterparty would also terminate and the
amount (if any) payable by BORROWER would be a net amount reflecting the
termination of all the SWAP CONTRACTS so terminated, then the NEGATIVE
TERMINATION VALUE of all the SWAP CONTRACTS subject to such netting shall be,
at any date, a single amount equal to such net amount (if any) payable by
BORROWER, determined as of the later of (i) the end of the most recently
ended fiscal quarter or (ii)  the date on which the most recent SWAP
CONTRACT subject to such netting was terminated.


 


1.38         “NET
WORTH” means, as to BORROWER as of any date, total assets less total
liabilities and less the following types of assets: (1) leasehold
improvements; (2) receivables (other than those created by sale of goods)
from a member and other investments in or amounts due from any member, employee
or other person or entity related to or affiliated with BORROWER); (3) goodwill,
patents, copyrights, mailing lists, trade names, trademarks, servicing rights,
organizational and franchise costs, bond underwriting costs and other like
assets properly classified as intangible, and (4) treasury stock or EQUITY
INTERESTS in BORROWER, all as determined in accordance with GAAP; provided,
however, (x) NET WORTH shall not include any debt due to BORROWER not
acceptable to ADMINISTRATIVE AGENT in the exercise of its reasonable
discretion, and (y) any TIF Grant funds actually received by BORROWER may
be included in the determination of total assets.


 


1.39         “OBLIGATIONS” means
the obligation of the BORROWER:


 


1.39.1  To pay
the principal of, and interest on, the LOANS in accordance with the terms
thereof, to pay any fees owed to
ADMINISTRATIVE AGENT or BANKS under this AGREEMENT,
and to satisfy all of its other liabilities to BANKS whether hereunder or
otherwise, whether now existing or hereafter incurred, matured or unmatured,
direct or contingent, joint or several, including any extensions,
modifications, renewals thereof, and substitutions therefore and including, but
not limited to, any obligations under letter of credit agreements  and SWAP CONTRACTS;


 


1.39.2  To
repay to BANKS all amounts advanced by BANKS hereunder, under any other LOAN
DOCUMENT (including, without limitation, any protective advance made under the
MORTGAGE) or otherwise on behalf of BORROWER, including, but without
limitation, 


 


7

















 


advances for principal or interest payments to prior
secured parties, mortgagees, or licensors, or taxes, levies, insurance, rent,
or repairs to, or maintenance or storage of, any of the real or personal
property securing BORROWER’s payment and performance of this AGREEMENT; and


 


1.39.3  To
reimburse BANKS, on demand, for BANKS’ reasonable and necessary out of pocket
expenses and costs, including the reasonable fees and expenses of counsel, in
connection with the preparation, administration, amendment, modification, or
enforcement of this AGREEMENT and the LOAN DOCUMENTS required hereunder,
including, without limitation, any proceeding brought or threatened, to enforce
payment of any of the OBLIGATIONS referred to in this section of the AGREEMENT.


 


1.40         “PERMIT”
or “PERMITS” means all licenses, consents, approvals, authorizations and
permits of governmental authorities which BORROWER is required to obtain in
connection with the PROJECT and operation of BORROWER’s business as
contemplated following completion of the PROJECT, including but not limited to
any of the foregoing related to ENVIRONMENTAL LAWS (including an air emissions
permit and a national pollution discharge elimination system construction
permit, each of which will allow BORROWER to operate its facilities at maximum
capacity), zoning and land-use laws (including any requirement to obtain a
special exception, if applicable), water use laws, waste disposal laws, laws
requiring construction permits and occupancy certificates, and laws relating to
construction and operation of above or below ground storage tanks, including
without limitation the following:


 


1.40.1 An air emissions permit, which PERMIT will
allow BORROWER after the COMPLETION DATE to operate the ethanol plant on the
PROPERTY after construction of the PROJECT at maximum capacity;


 


1.40.2  All
permits required in connection with the construction and operation of all above
or below ground storage tanks included in the PLANS for the ethanol plant;


 


1.40.3  A
National Pollution Discharge Elimination System Construction Permit for any
storm water and/or waste water that is discharged during construction and after
construction of the PROJECT; and


 


1.40.4  The
other permits listed on Exhibit I attached hereto and incorporated herein
by reference.


 


1.41         “PERSON” means an
individual, partnership, limited liability company, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
GOVERNMENTAL AUTHORITY, or other entity of whatever nature.  GOVERNMENTAL AUTHORITY means any federal,
state, county, or local governmental department, commission, board, bureau,
agency, authority, instrumentality or judicial or regulatory body or entity
having or asserting jurisdiction as to any of the PROPERTY, the PROJECT or
BORROWER, either during the construction of the PROJECT or the operation of the
PROJECT following completion thereof, including courts of appropriate
jurisdiction.


 


8

















 


1.42         “PLANS”
means collectively all of the plans, specifications and materials listing for
the construction of the PROJECT, including but not limited to the plans,
specifications and materials prepared by Fagen Engineering, LLC (“FAGEN
ENGINEERING”) and DESIGN-BUILDER on behalf of BORROWER for the construction of
the ethanol plant and certified to BANKS as the plans for the ethanol plant by
the DESIGN-BUILDER, FAGEN ENGINEERING and BORROWER, all plans for the
construction of the water treatment facility, and all surveys and plans
prepared by Yaggy Colby Associates and all plans for the construction of the
water line in the WATER EASEMENT area.


 


1.43         “PROJECT”
means collectively the design and construction of BORROWER’s ethanol plant,
administration building, water treatment facility and railroad spur, together
with all necessary and appropriate fixtures, equipment, attachments, and
accessories, as described in the PLANS and the plans, specifications and
materials listing relating to the administration building and railroad spur, to
be constructed on the PROPERTY.


 


1.44         “REDUCTION
DATE” means the date of any scheduled quarterly payment on the TERM LOANS as
provided for in Section 2.5 below, on which dates the MAXIMUM AVAILABILITY
on the LONG TERM REVOLVING NOTE shall reduce by $125,000.00.


 


1.45         “REQUIRED
BANKS” means, at any time, ADMINISTRATIVE AGENT and any combination of BANKS
(other than AGENT) whose COMMITMENTS in the LOANS aggregate at least fifty-one
percent (51%) of the aggregate COMMITMENTS; provided, however, that the
COMMITMENTS of any DEFAULTING BANK other than AGENT shall be excluded for
purposes of making a determination of the REQUIRED BANKS.


 


1.46         “REVOLVING
NOTES” means the promissory note of BORROWER to each BANK in the amount of such
BANK’s COMMITMENT evidencing the REVOLVING LOAN described in Section 2.8
of this AGREEMENT, its renewals, modifications and extensions.


 


1.47         “SECURITY
AGREEMENT” means the SECURITY AGREEMENT between BORROWER, as debtor, and
COLLATERAL AGENT, as secured party and collateral agent for the BANKS, creating
a first priority security interest in all of BORROWER’s assets, including
general intangibles and payment intangibles, securing the OBLIGATIONS.


 


1.48         “SUBCONTRACTOR”
means any person who contracts with the DESIGN-BUILDER, the general contractor
of the administration building, the general contractor of the railroad spur,
the general contractor of the water treatment facility, or the BORROWER to
perform any work or supply any of the materials or equipment necessary to complete
the PROJECT.


 


1.49         “SWAP
CONTRACT” or “SWAP CONTRACTS” means (a) any and all rate swap
transactions, basis swaps, credit derivative transactions, forward rate
transactions, commodity swaps, commodity options, forward commodity contracts,
equity or equity index swaps or options, bond or bond price or bond index swaps
or options or forward bond or forward bond price or forward bond index
transactions, interest rate options, forward foreign exchange transactions, cap
transactions, 


 


9

















 


floor transactions, collar transactions,
currency swap transactions, cross currency rate swap transactions, currency
options, spot contracts, or any other similar transactions or any combination
of any of the foregoing (including any options to enter into any of the
foregoing), whether or not any such transaction is governed by or subject to
any master agreement, and (b) any and all transactions of any kind, and
the related confirmations, which are subject to the terms and conditions of, or
governed by, any form of master agreement published by the International Swaps
and Derivatives Association, Inc. 
Provided, however, the term SWAP CONTRACT shall not, for the purposes of
this AGREEMENT, include commodity hedging or commodity risk management
contracts.  The term “commodity” includes
ethanol, grain, natural gas and other traded commodities.


 


1.50         “TAX
DISTRIBUTIONS” means cash distributions to each or any of BORROWER’s members in
an amount equal to such member’s estimated combined federal, state and local
tax liability, after application of all available federal, state and local tax
credits allocable to such members, in respect of BORROWER’s income, gain and/or
earnings, at the times permitted in accordance with Section 6.4.12 below.


 


1.51         “TERM
NOTES” means collectively the FIXED RATE NOTES, VARIABLE RATE NOTES and LONG
TERM REVOLVING NOTES to be executed by BORROWER in favor of each BANK up to the
amount of each BANK’s COMMITMENT which evidence permanent financing to pay the
CONSTRUCTION LOAN as described in Section 2.5 of this AGREEMENT, their
renewals, modifications and extensions.


 


1.52         “TOTAL
PROJECT COST” means the aggregate total cost to acquire the PROPERTY and
construct the PROJECT, including all hard and soft costs, as shown in the TOTAL
PROJECT COST STATEMENT.


 


1.53         “TOTAL
PROJECT COST STATEMENT” means the budget detailing by category the TOTAL
PROJECT COST to acquire the PROPERTY and construct the PROJECT in accordance
with the PLANS, as attached hereto as Exhibit G, which has been approved
by BANKS, as such TOTAL PROJECT COST STATEMENT may be modified, amended or
supplemented by “CONSTRUCTION VARIANCE REPORTS” submitted by BORROWER to
ADMINISTRATIVE AGENT in connection with a DRAW REQUEST.  The “CONSTRUCTION COST STATEMENT” shall be
the portion of the TOTAL PROJECT COST STATEMENT applicable to the costs
incurred under the CONSTRUCTION CONTRACT with the DESIGN-BUILDER.  The TOTAL PROJECT COST STATEMENT includes a “SOURCES
AND USES OF FUNDS” which demonstrates the source of funds to be applied to the
TOTAL PROJECT COST as shown in the TOTAL PROJECT COST STATEMENT.


 


1.54         “WORKING
CAPITAL” means current assets (less investments in or other amounts due from
any member, manager, employee or any person or entity related to or affiliated
with BORROWER and prepayments), plus the amount available to BORROWER for
drawing under the LONG TERM REVOLVING NOTES, less current liabilities.


 


1.55         “INTERCREDITOR
AGREEMENT” means that certain Intercreditor Agreement between FNBO, in its
capacity as ADMINISTRATIVE AGENT and COLLATERAL AGENT for the 


 


10

















 


BANKS and the BOND TRUSTEE relating to the
relative priorities of the liens and security interests in the collateral for
the LOANS and the BOND COLLATERAL.


 


SECTION 2 Amount and Terms of the LOANS.


 


2.1           CONSTRUCTION
LOAN.  To the extent of their
respective COMMITMENTS, each BANK agrees, on the terms and subject to the
conditions hereinafter set forth, to make, from time to time during the period
from the date of execution of this AGREEMENT to and including the CONSTRUCTION
LOAN TERMINATION DATE disbursements to BORROWER pursuant to that certain
Disbursing Agreement dated of even date with this AGREEMENT among
ADMINISTRATIVE AGENT, BORROWER, the TITLE COMPANY (as defined in Section 4.1.11
below) and Homestead Escrow and Exchange Company (the “DISBURSING AGREEMENT”),
in an aggregate principal amount not to exceed the amount of the CONSTRUCTION
LOAN for the sole purpose of paying approved construction costs of the
PROJECT.  If, prior to the COMPLETION
DATE, there is paid to ADMINISTRATIVE AGENT a third party payment (a grant
payment, for example), which is applied to the CONSTRUCTION LOAN, BANKS will
advance such amount, or a lesser sum, as in ADMINISTRATIVE AGENT’s reasonable
discretion is necessary to complete the PROJECT.  Approved construction costs are costs
actually incurred in connection with the construction of the PROJECT, which
shall include but not be limited to costs of PERMITS, licenses, labor,
supplies, materials, services, equipment, insurance premiums, real estate taxes
and interest on disbursements, and ADMINISTRATIVE AGENT-approved operating
costs of the PROJECT.  Construction costs
do not include the cost associated with payment of lost profits connected with
termination under Article 15 of the CONSTRUCTION CONTRACT.


 


2.2           The
CONSTRUCTION NOTES.  The obligation
of BORROWER to repay the CONSTRUCTION LOAN shall be evidenced by the
CONSTRUCTION NOTES.  Notwithstanding any
provisions of the CONSTRUCTION NOTES, interest shall be payable at the rate
provided  below only on such portions of
the CONSTRUCTION LOAN proceeds as actually have been disbursed pursuant to this
AGREEMENT and the DISBURSING AGREEMENT.


 


2.3           Interest on the
CONSTRUCTION LOAN.  Prior to the
CONSTRUCTION LOAN TERMINATION DATE, interest on the principal balance
outstanding on the CONSTRUCTION LOAN shall accrue at a rate equal to the
greater of (i) the one month LIBOR RATE plus 350 basis points or (ii) 4%.  The interest rate on the CONSTRUCTION LOAN
shall be set on the day of each advance under the CONSTRUCTION LOAN, and shall
adjust on the 1st day of every month thereafter to a rate equal to
the greater of (i) the one month LIBOR RATE plus 350 basis points or (ii) 4%.  If the an advance on the CONSTRUCTION LOAN
occurs on any day other than the first day of the month, then the one month
LIBOR RATE shall be that one month LIBOR RATE in effect on the day of the
advance.  After the CONSTRUCTION LOAN
TERMINATION DATE, whether by acceleration or otherwise, interest shall accrue
on the CONSTRUCTION LOAN at a rate equal to the one month LIBOR RATE plus nine
hundred fifty (950) basis points, adjusted as provided for above.


 


2.4           Repayment
of the CONSTRUCTION NOTES.  Interest
only shall be payable monthly on the CONSTRUCTION NOTES as more particularly
provided for in the CONSTRUCTION NOTES.  


 


11
















 


All outstanding principal and accrued but unpaid
interest shall be payable in full on the CONSTRUCTION LOAN TERMINATION DATE.


 


2.5         TERM
LOANS.  The existing balance on the
CONSTRUCTION LOAN, including any advance made to increase WORKING CAPITAL, as
of CONSTRUCTION LOAN TERMINATION DATE will be restated and said balance will be
paid by the TERM NOTES substantially in the forms attached hereto as Exhibits
B, C, and D, respectively, and are by this reference made a part hereof.  The TERM NOTES evidence the “TERM LOANS”.  The TERM NOTES shall be amortized on a ten (10) year
basis and repaid over a five (5) year term as follows:


 


On the eighth (8th) day of every month, commencing
one (1) month after the CONSTRUCTION LOAN TERMINATION DATE, BORROWER shall
pay to ADMINISTRATIVE AGENT, for the account of BANKS in accordance with their
respective COMMITMENTS in the FIXED RATE LOAN, the scheduled principal payments
shown in Schedule I, attached hereto and incorporated herein by reference.  In addition on the same day as the foregoing
principal payments are due, BORROWER shall pay accrued and unpaid interest on
the FIXED RATE LOAN.


 


In addition, on the eighth (8th) day of every month,
commencing one (1) month after the CONSTRUCTION LOAN TERMINATION DATE,
BORROWER shall pay to ADMINISTRATIVE AGENT, for the account of BANKS in
accordance with their respective COMMITMENTs in the LONG TERM REVOLVING LOAN
and VARIABLE RATE LOAN, the scheduled principal payments shown in Schedule II
attached hereto and incorporated herein by reference, plus accrued interest on
the LONG TERM REVOLVING LOAN and VARIABLE RATE LOAN.  Such principal payment shall be applied pro
rata to the principal balance of the VARIABLE RATE LOAN and LONG TERM REVOLVING
LOAN.  In addition on the same day as the
foregoing principal payments are due, BORROWER shall pay accrued and unpaid
interest on the VARIABLE RATE LOAN and LONG TERM REVOLVING LOAN.  After the LONG TERM REVOLVING LOAN has been
fully paid, such monthly principal payments shall be applied wholly to the
VARIABLE RATE NOTES.


 


In addition, on each REDUCTION DATE and EXCESS CASH
FLOW REDUCTION DATE, BORROWER shall pay and apply to the then outstanding
principal balance of the LONG TERM REVOLVING NOTES, if any, the amount
necessary to reduce the outstanding principal balance of the LONG TERM
REVOLVING NOTES so that they are within the MAXIMUM AVAILABILITY applicable on
each such REDUCTION DATE and EXCESS CASH FLOW REDUCTION DATE.


 


All unpaid principal and accrued interest under the
TERM LOANS shall be due and payable on the LOAN TERMINATION DATE applicable
thereto, if not sooner paid.


 


2.6         Interest
on the TERM LOANS.  Prior to the
applicable LOAN TERMINATION DATE, interest shall accrue on the TERM LOANS as
follows:


 


(a).          FIXED RATE NOTES. 
Interest on the principal balance outstanding on the FIXED RATE NOTES
shall accrue at a rate equal to the greater of (i) the one month LIBOR
RATE 


 


12

















 


plus 300 hundred basis
points or (ii) 4%.  The interest
rate on the FIXED RATE NOTES shall initially be set on the date of the FIXED
RATE NOTES, and shall adjust on the 1st day of every month
thereafter to a rate equal to the greater of (i) the one month LIBOR RATE
plus 300 basis points or (ii) 4%. 
If the date of the FIXED RATE NOTES is a day other than the first day of
the month, then the initial one month LIBOR RATE shall be that one month LIBOR
RATE in effect on the date of the FIXED RATE NOTES.  After the applicable LOAN TERMINATION DATE,
whether by acceleration or otherwise, interest shall accrue on the FIXED RATE
NOTES at a rate equal to the one month LIBOR RATE plus nine hundred (900) basis
points.


 


(b).          VARIABLE RATE NOTES. 
Subject to the incentive pricing provisions contained in Section 2.15
of this AGREEMENT and the minimum interest rate of 4%, interest on the
principal balance outstanding on the VARIABLE RATE NOTES shall accrue at a rate
equal to the greater of (i) the one month LIBOR RATE plus 350 basis points
or (ii) 4%.  The interest rate on
the VARIABLE RATE NOTES shall initially be set on the date of the VARIABLE RATE
NOTES, and shall adjust on the 1st day of every month thereafter to
a rate equal to the greater of (i) the one month LIBOR RATE plus 350 basis
points or (ii) 4%.  If the date of
the VARIABLE RATE NOTES is a day other than the first day of the month, then
the initial one month LIBOR RATE shall be that one month LIBOR RATE in effect
on the date of the VARIABLE RATE NOTES. 
After the applicable LOAN TERMINATION DATE, whether by acceleration or
otherwise, interest shall accrue on the VARIABLE RATE NOTES at a rate equal to
the one month LIBOR RATE plus nine hundred fifty (950) basis points.


 


(c).          LONG TERM REVOLVING NOTES. 
Subject to the incentive pricing provisions contained in Section 2.15
of this AGREEMENT and the minimum interest rate of 4%, interest on the
principal balance outstanding on the LONG TERM REVOLVING NOTES shall accrue at
a rate equal to the greater of (i) the one month LIBOR RATE plus 350 basis
points or (ii) 4%.  The interest
rate on the LONG TERM REVOLVING NOTES shall initially be set on the date of the
LONG TERM REVOLVING NOTES, and shall adjust on the 1st day of every
month thereafter to a rate equal to the greater of (i) the one month LIBOR
RATE plus 350 basis points or (ii) 4%. 
If the date of the LONG TERM REVOLVING NOTES is a day other than the
first day of the month, then the initial one month LIBOR RATE shall be that one
month LIBOR RATE in effect on the date of the LONG TERM REVOLVING NOTES.  After the applicable LOAN TERMINATION DATE,
whether by acceleration or otherwise, interest shall accrue on the LONG TERM
REVOLVING NOTES at a rate equal to the one month LIBOR RATE plus nine hundred
fifty (950) basis points.


 


2.7         LONG TERM REVOLVING NOTES.  Subject to the extent of their respective
COMMITMENTS in the LONG TERM REVOLVING LOAN, BANKS agree to lend $5,000,000.00
to BORROWER pursuant to this facility (reducing on each REDUCTION DATE by
$125,000.00 and reducing on each EXCESS CASH FLOW REDUCTION DATE by the amount
of EXCESS CASH FLOW PAYMENTS allocated to the principal balance of the LONG
TERM REVOLVING NOTES as provided for above). 
On the date of such LONG TERM REVOLVING NOTES, the LONG TERM REVOLVING
LOAN will be fully advanced. 
ADMINISTRATIVE AGENT will 


 


13

















 


credit
proceeds of this revolving loan (“LONG TERM REVOLVING LOAN”) to BORROWER’s
deposit account with COLLATERAL AGENT.


 


2.7.1        Subject to the terms
hereof and their respective COMMITMENT, BANKS will lend BORROWER, from time to
time until the LOAN TERMINATION DATE such sums as BORROWER may request by
reasonable same day notice to ADMINISTRATIVE AGENT, received by ADMINISTRATIVE
AGENT not later than 11:00 A.M. of such day, but which shall not exceed in
the aggregate principal amount at any one time outstanding, the MAXIMUM
AVAILABILITY in effect on the date of any requested advance.  BORROWER may borrow, repay without penalty or
premium and reborrow hereunder, from the date of this AGREEMENT until the LOAN
TERMINATION DATE, either the full amount of the MAXIMUM AVAILABILITY or any
lesser sum.


 


2.8         REVOLVING LOAN.  Subject to their respective COMMITMENTS in
the REVOLVING LOAN, BANKS agree to lend $5,000,000.00 to BORROWER pursuant to
this facility.  ADMINISTRATIVE AGENT will
credit proceeds of this revolving loan (“REVOLVING LOAN”) to BORROWER’s deposit
account with COLLATERAL AGENT.


 


2.8.1        Subject to the terms
hereof and their respective COMMITMENTS, BANKS will lend BORROWER, from time to
time until the LOAN TERMINATION DATE, such sums as BORROWER may request by
reasonable same day notice to ADMINISTRATIVE AGENT, received by ADMINISTRATIVE
AGENT not later than 11:00 A.M. of such day, but which shall not exceed in
the aggregate principal amount at any one time outstanding, the lesser of (i) $5,000,000.00  or (ii) the amount available under the BORROWING BASE
(the “REVOLVING LOAN COMMITMENT”). 
BORROWER may borrow, repay without penalty or premium and reborrow
hereunder, from the date of this AGREEMENT until the LOAN TERMINATION DATE,
either the full amount of the REVOLVING LOAN COMMITMENT or any lesser sum.  It is the intention of the parties that the
outstanding balance of the REVOLVING LOAN shall not exceed the BORROWING BASE,
as required in Section 6.1.9, and if at any time said balance exceeds the
BORROWING BASE, BORROWER shall forthwith pay ADMINISTRATIVE AGENT for
application to the REVOLVING LOAN sufficient funds to reduce the balance of the
REVOLVING LOAN until it is in compliance with this requirement.


 


2.9         THE REVOLVING NOTES.  The REVOLVING LOAN COMMITMENT shall be
evidenced by REVOLVING PROMISSORY NOTES having stated maturity on the LOAN
TERMINATION DATE applicable thereto, substantially in the form attached hereto
as Exhibit E.


 


2.10       INTEREST ON THE REVOLVING NOTES.  Prior to maturity and subject to the
incentive pricing provisions contained in Section 2.15 of this AGREEMENT
and the minimum interest rate of 4%, interest on the principal balance
outstanding on the REVOLVING NOTES shall accrue at a rate equal to the greater
of (i) the one month LIBOR RATE plus 350 hundred basis points and (ii) 4%.  The interest rate on the REVOLVING PROMISSORY
NOTES shall initially be set on the date of the REVOLVING PROMISSORY NOTES, and
shall adjust on the 1st day of every month thereafter to a rate
equal to the greater of (i) the one month LIBOR RATE plus 350 basis points
or (ii) 4%.  If 


 


14

















 


the date of the REVOLVING PROMISSORY NOTES is a day other than the
first day of the month, then the initial one month LIBOR RATE shall be that one
month LIBOR RATE in effect on the date of the REVOLVING PROMISSORY NOTES.  After the applicable LOAN TERMINATION DATE,
whether by acceleration or otherwise, interest shall accrue on the REVOLVING
NOTES at a rate equal to the one month LIBOR RATE plus nine hundred fifty (950)
basis points.  Interest on the REVOLVING
PROMISSORY NOTES shall be paid monthly, in arrears.


 


2.11       LETTERS OF CREDIT.  FNBO will issue its letters of credit at
BORROWER’s request, on BORROWER’s account, pursuant to FNBO’s customary
policies and with its standardized documents, in amounts outstanding at no time
exceeding $5,600,000 in the aggregate.


 


2.12       Payments
and Prepayments.  All principal,
interest and fees due under the OBLIGATIONS and the LOAN DOCUMENTS shall be
paid in immediately available funds as contracted in this AGREEMENT and no
later than the payment due dates set forth in this AGREEMENT or the applicable
NOTES (and with regards to fees, the due dates set forth in the periodic statements
mailed to BORROWER by ADMINISTRATIVE AGENT) or FEE LETTER.  Should a payment come due on a day other than
a BANKING DAY, then the payment shall be made no later than the next BANKING
DAY and interest shall continue to accrue during the extended period.


 


On the occasion of any prepayment of the
CONSTRUCTION NOTES or all TERM NOTES in full as a result of refinancing with a
lender other than FNBO, BORROWER will pay to ADMINISTRATIVE AGENT, for the
account of the BANKS in accordance with their respective COMMITMENTS, a
prepayment fee calculated as follows:  If
the prepayment occurs during the construction of the PROJECT or within the
first three (3) years of the TERM LOANS, a fee of two (2%) percent of the
original amount or exposure of the LOANS.


 


In the event that BORROWER pre-pays all of the FIXED
RATE NOTES, BORROWER shall pay ADMINISTRATIVE AGENT a breakage fee sufficient
to make BANKS whole for any expenses actually incurred by BANKS and/or
ADMINISTRATIVE AGENT related to breaking fixed interest rates or contracted
interest rates on the SWAP CONTRACT and any NEGATIVE TERMINATION VALUE of the
SWAP CONTRACT arising out of such prepayment, which ADMINISTRATIVE AGENT shall
apportion among the BANKS in accordance with their respective expenses actually
incurred; provided, however, that no payment of EXCESS CASH FLOW shall result
in any prepayment fee or interest breakage fee.


 


2.13       Fees.  BORROWER shall pay to ADMINISTRATIVE AGENT
the fees and other amounts described and provided for in that certain fee letter
of even date with this AGREEMENT between BORROWER and ADMINISTRATIVE AGENT (as
it may be amended or modified and in effect from time to time, the “FEE LETTER”)
in accordance with the terms of the FEE LETTER.


 


BORROWER agrees to pay ADMINISTRATIVE AGENT for the
account of BANKS in proportion to their respective COMMITMENTS in the REVOLVING
LOAN an unused commitment fee equal to 35 basis points of the average unused
portion of the REVOLVING LOAN COMMITMENT and unused portion of the LONG TERM
REVOLVING LOAN available at such time, calculated and payable on a quarterly
basis in arrears; provided, however, the unused commitment fees on same 


 


15

















 


shall not begin accruing or be payable by BORROWER
until the CONSTRUCTION LOAN TERMINATION DATE. 
BORROWER shall pay ADMINISTRATIVE AGENT commitment fees equal to 1.75%
per annum of issued and outstanding Letters of Credit issued at BORROWER’s
request and on BORROWER’s account with such fee payable quarterly, together
with such other fees as are consistent with FNBO’s then current International
Trade Services Fee Schedule.


 


2.14         Appraisal.  ADMINISTRATIVE AGENT will obtain, at BORROWER’s
expense, an appraisal of the PROJECT and PROPERTY providing values obtained by
use of the cost approach, the income approach and the replacement cost
approach.  If such appraisal shows that
the outstanding CONSTRUCTION LOAN amount at that time exceeds the value of the
PROJECT and PROPERTY as determined by the appraisal, using the replacement cost
approach, then BORROWER shall, within thirty (30) days of notice by
ADMINISTRATIVE AGENT and without penalty or premium, pay the difference between
the outstanding CONSTRUCTION LOAN amount and the amount disbursed under the
BOND INDENTURE and the appraised value amount of the PROJECT and PROPERTY as
determined by such appraisal, and no further advances shall be made on the
CONSTRUCTION LOAN thereafter until such time as the appraised value of the
PROJECT and PROPERTY exceeds the CONSTRUCTION LOAN amount and the amount
disbursed under the BOND INDENTURE.


 


2.15         Incentive
Pricing.  The interest rate
applicable to the REVOLVING LOAN, VARIABLE RATE NOTES and the LONG TERM
REVOLVING LOAN is subject to reduction commencing six months subsequent to
CONSTRUCTION LOAN TERMINATION DATE, based on the most recent interim financial
statements delivered by or on behalf of BORROWER to ADMINISTRATIVE AGENT;
provided, however, that in no event shall the interest rate be less than 4%.  In the event that BORROWER maintains the
following ratios, measured quarterly, the interest rate will be reduced
accordingly:


 


	
  If INDEBTEDNESS to NET WORTH is less than:

  	
   

  	
  Interest rate will be:

  
	
   

  	
   

  	
   

  
	
  1.25 : 1.00

  	
   

  	
  LIBOR plus 350 basis points

  
	
  1.05 : 1.00

  	
   

  	
  LIBOR plus 325 basis points

  
	
  0.85 : 1.00

  	
   

  	
  LIBOR plus 300 basis points

  
	
  0.65 : 1.00

  	
   

  	
  LIBOR plus 275 basis points

  



 


SECTION 3 Disbursement Procedures.


 


3.1           Submission
of DRAW REQUESTS.  BORROWER has
submitted to ADMINISTRATIVE AGENT, and BANKS have approved, the TOTAL PROJECT
COST STATEMENT.  Whenever BORROWER
desires a disbursement under the CONSTRUCTION LOAN, which shall be no more 


 


16

















 


often than three (3) times a month, unless
ADMINISTRATIVE AGENT agrees otherwise, BORROWER shall submit to ADMINISTRATIVE
AGENT a DRAW REQUEST, duly executed on behalf of BORROWER setting forth the
information requested therein. Each  DRAW
REQUEST shall be delivered to ADMINISTRATIVE AGENT at least ten (10) days
before the date the disbursement is desired. 
Upon receipt of each DRAW REQUEST, ADMINISTRATIVE AGENT shall promptly
notify BANKS of the amount each BANK is required to fund of such DRAW
REQUEST.  Not later than 11:00 a.m.
(Omaha, Nebraska time) on the applicable payment date each BANK will make
available to ADMINISTRATIVE AGENT in immediately available funds an amount
equal to such BANK’s pro rata share based on such BANK’s COMMITMENT of the
amount to be advanced to BORROWER pursuant to such DRAW REQUEST.  The failure of any BANK to fund its
COMMITMENTS shall not relieve any other BANK from funding its COMMITMENTS (it
being understood however that no BANK shall be responsible for the failure of
any other BANK to fund its COMMITMENTS). 
Unless the ADMINISTRATIVE AGENT shall have been notified by any BANK prior
to a proposed funding date of any advance on any LOAN that such BANK will not
make available to the ADMINISTRATIVE AGENT its portion of the borrowing
proposed to be made on such date, the ADMINISTRATIVE AGENT shall assume that
such BANK has made such amounts available to the ADMINISTRATIVE AGENT on such
date and the ADMINISTRATIVE AGENT in its sole discretion may, in reliance upon
such assumption, (but shall not be obligated to) make available to BORROWER a
corresponding amount.  If such
corresponding amount is not in fact made available to the ADMINISTRATIVE AGENT
by such BANK and the ADMINISTRATIVE AGENT has made such amount available to
BORROWER, the ADMINISTRATIVE AGENT shall be entitled to recover such
corresponding amount on demand from such DEFAULTING BANK and, if such
DEFAULTING BANK pays such amount (together with the interest noted below), then
the amount so paid shall constitute such DEFAULTING BANK’s loan included in
such borrowing.  If such DEFAULTING BANK
does not pay such corresponding amount forthwith upon the ADMINISTRATIVE AGENT’s
demand, the ADMINISTRATIVE AGENT shall be entitled to recover from such
DEFAULTING BANK interest on such corresponding amount in respect of each day
from the date such corresponding amount was made available by the
ADMINISTRATIVE AGENT to BORROWER to the date such corresponding amount is
recovered by the ADMINISTRATIVE AGENT, at an interest rate per annum equal to
the greater of the federal funds rate determined by the ADMINISTRATIVE AGENT
and a rate determined by the ADMINISTRATIVE AGENT in accordance with banking
industry rules on interbank compensation. 
Nothing herein shall be deemed to relieve any BANK from its obligation
to fulfill its COMMITMENTS hereunder or be deemed to be a release or waiver of
any other right or remedy the ADMINISTRATIVE AGENT and/or BORROWER may have at
law or in equity for a DEFAULTING BANK’S failure to fund its COMMITMENT.  In the event any BANK fails to fund any
portion of its respective COMMITMENT in a LOAN, then ADMINISTRATIVE AGENT will
take such actions as ADMINISTRATIVE AGENT deems reasonable in its discretion to
induce such DEFAULTING BANK to fund its COMMITMENT; provided, however, that no
such action by ADMINISTRATIVE AGENT 
shall be deemed to be a release or waiver of any rights or remedies
BORROWER may have against such DEFAULTING BANK for failure to fund such
DEFAULTING BANK’s COMMITMENT.


 


3.2           Amount
of DRAW REQUEST.  Each DRAW REQUEST
shall be limited to amounts equal to (i) the total of costs actually
incurred and paid or owing by BORROWER to the date of such 


 


17

















 


DRAW REQUEST for work performed or materials
incorporated in the PROJECT as described in the PLANS, plus (ii) the cost
of materials and equipment not incorporated in the PROJECT, but delivered to
and suitably stored at the PROJECT site, plus (iii) prepayments for
equipment when prepayment is required by the manufacturer or supplier or, with
ADMINISTRATIVE AGENT’s prior written approval, when such prepayment results in
a material financial benefit to BORROWER; plus (iv) any other hard or soft
costs which are consistent with the TOTAL PROJECT COST STATEMENT approved by
ADMINISTRATIVE AGENT, as modified or supplemented by any CONSTRUCTION VARIANCE
REPORT approved by ADMINISTRATIVE AGENT, for which a disbursement under the
CONSTRUCTION LOAN is available as demonstrated in the SOURCES AND USES OF
FUNDS; less, (v) prior disbursements for such costs and from the
CONSTRUCTION LOAN or BORROWER’s WORKING CAPITAL for such costs. Notwithstanding
anything herein to the contrary, no disbursements for materials stored at the
PROJECT site will be made by ADMINISTRATIVE AGENT unless BORROWER shall advise
ADMINISTRATIVE AGENT of its intention to store materials prior to their
delivery, and provide suitable security for such storage.  No advances on the CONSTRUCTION LOAN may be
repaid and re-advanced.


 


3.3           Other
Documents.  At the time of submission
of each DRAW REQUEST, BORROWER shall submit or cause to be submitted to
ADMINISTRATIVE AGENT the following:


 


3.3.1.       A written lien waiver from the
DESIGN-BUILDER or other general contractor and each SUBCONTRACTOR for work done
and materials supplied by it which were paid for pursuant to the next preceding
DRAW REQUEST with copies of all invoices supporting the DRAW REQUEST.


 


3.3.2.       A document from BORROWER and
DESIGN-BUILDER or other general contractor or SUBCONTRACTOR (as applicable),
and if applicable, the INDEPENDENT INSPECTOR, requesting and/or approving
payment of the relevant DRAW REQUEST.


 


3.3.3.       Such other supporting evidence as may be
reasonably requested by ADMINISTRATIVE AGENT to substantiate all payments which
are to be made out of the relevant DRAW REQUEST and/or to substantiate all
payments then made with respect to the PROJECT.


 


3.3.4.       Subject to the provisions of Section 3.4
below, if BORROWER desires to reallocate funds from one budget category to
another or modify, amend or supplement the TOTAL PROJECT COST STATEMENT, then
BORROWER shall submit to ADMINISTRATIVE AGENT for ADMINISTRATIVE AGENT’s  approval a CONSTRUCTION VARIANCE REPORT
showing the details of such reallocation, modification, amendment or
supplement.  ADMINISTRATIVE AGENT may
approve or disapprove of such CONSTRUCTION VARIANCE REPORT in ADMINISTRATIVE
AGENT’s discretion, but ADMINISTRATIVE AGENT’s approval shall not be
unreasonably withheld.


 


3.4           Cost
Over Runs.  BORROWER agrees that all
cost over runs on the PROJECT shall be paid solely by BORROWER and that
BORROWER shall deliver additional funds to ADMINISTRATIVE 


 


18

















 


AGENT in accordance with Section 3.6 of this
AGREEMENT to pay any cash required to fund cost over runs on the PROJECT.  Notwithstanding the foregoing, BORROWER shall
be entitled to apply any previously achieved savings in any completed category
of the TOTAL PROJECT COST STATEMENT to pay for any such cost over runs.  In addition, BORROWER may from time to time
request that the contingency fund line item in the TOTAL PROJECT COST STATEMENT
be reallocated to pay needed costs of the PROJECT.  Such requests shall be subject to
ADMINISTRATIVE AGENT’s written approval in its reasonable discretion, which
shall not be unreasonably withheld. 
Notwithstanding the foregoing, BORROWER shall be entitled to advances
from the contingency fund line item in the TOTAL PROJECT COST STATEMENT only so
long as at all times there are sufficient funds remaining from all sources
identified in the SOURCES AND USES OF FUNDS to complete the construction of the
PROJECT in accordance with the PLANS in the discretion of ADMINISTRATIVE AGENT.


 


3.5           Making
the Disbursements.  If on the date a
DRAW REQUEST is received by ADMINISTRATIVE AGENT, BORROWER has performed all of
its agreements and complied with all requirements therefore to be performed or
complied with hereunder and under the DISBURSING AGREEMENT, including
satisfaction of all applicable conditions precedent contained in Section 4
of this AGREEMENT and all of the BANKS have funded their pro rata share of such
DRAW REQUEST based on their respective COMMITMENTS, and, if required by
ADMINISTRATIVE AGENT, ADMINISTRATIVE AGENT has received a current report from
the INDEPENDENT INSPECTOR documenting material compliance with the PLANS for
those portions of the PROJECT indicated as completed in the DRAW REQUEST and
otherwise confirming the acceptability of the PROJECT work represented by the
DRAW REQUEST, ADMINISTRATIVE AGENT shall pay to the ESCROW COMPANY (as defined
in the DISBURSING AGREEMENT) for disbursement to BORROWER in accordance with
the DISBURSING AGREEMENT the amount of the requested disbursement; provided,
however, that a DEFAULTING BANK’s failure to fund its COMMITMENT amount of such
DRAW REQUEST shall not relieve any other BANK from its obligation to fund its
COMMITMENT amount of such DRAW REQUEST, and ADMINISTRATIVE AGENT will pay to
the ESCROW COMPANY the amount actually funded by the BANKS with respect to such
DRAW REQUEST and will not withhold funding due to a DEFAULTING BANK’s failure
to fund its share of such DRAW REQUEST.  Each
disbursement disbursed to BORROWER under the CONSTRUCTION LOAN shall bear
interest at the rate provided in the CONSTRUCTION NOTES evidencing the
disbursement from the date such disbursement is so disbursed to BORROWER or
deposited into BORROWER’s account.


 


3.6           Deposit
of Funds by BORROWER.  If the
ADMINISTRATIVE AGENT or INDEPENDENT INSPECTOR shall at any time in good faith
determine that the undisbursed amount of the CONSTRUCTION LOAN is less than the
amount required to pay all cash required to pay costs and expenses of any kind
which reasonably may be anticipated in connection with the completion of the
PROJECT after application of all funds received from BORROWER’s equity, the
BOND DEBT or other sources disclosed in the SOURCES AND USES OF FUNDS, and
ADMINISTRATIVE AGENT shall thereupon send written notice thereof to BORROWER
specifying the amount required to be deposited by BORROWER with the
ADMINISTRATIVE AGENT to provide sufficient funds to complete the PROJECT,
BORROWER agrees that it will, within forty-five (45) calendar days of receipt
of any such notice, deposit with the ADMINISTRATIVE AGENT, the amount of funds 


 


19

















 


specified in ADMINISTRATIVE AGENT’s notice. BORROWER
agrees that any such funds deposited with ADMINISTRATIVE AGENT may be disbursed
before any further disbursement of CONSTRUCTION LOAN proceeds from
ADMINISTRATIVE AGENT, to pay any and all costs and expenses of any kind in
connection with completion of the PROJECT.


 


3.7           Disbursements
Without Receipt of DRAW REQUEST. 
Notwithstanding anything herein to the contrary, ADMINISTRATIVE AGENT
shall have the irrevocable right at any time and from time to time to apply
funds which it agrees to disburse hereunder to pay interest on the CONSTRUCTION
LOAN as and when such interest becomes due, and to pay any and all of the
expenses of ADMINISTRATIVE AGENT related to the PROJECT and the CONSTRUCTION
LOAN, all without receipt of a DRAW REQUEST.


 


3.8           Miscellaneous
Procedures.  ADMINISTRATIVE AGENT may
establish additional procedures regarding disbursements as are reasonable to
assure the proceeds of the CONSTRUCTION LOAN are paid only to those persons and
entities entitled to the same, and that the liens securing the OBLIGATIONS are
in all cases first and paramount liens on the PROPERTY.


 


3.9           Appointment
of INDEPENDENT INSPECTOR.   No DRAW
REQUEST shall be honored after commencement of construction unless BORROWER has
acknowledged the appointment of an INDEPENDENT INSPECTOR.


 


SECTION 4 Conditions of Lending.


 


4.1           Conditions
Precedent to the Initial Disbursement. 
The obligation of BANKS to make the initial disbursement under the
CONSTRUCTION LOAN is subject to the condition precedent, unless waived by the
ADMINISTRATIVE AGENT, that BORROWER shall be in compliance with the conditions
set forth in Section 4.2 of this AGREEMENT and to the further condition
precedent that, unless waived by ADMINISTRATIVE AGENT in writing in the POST
CLOSING LETTER (as defined below in Section 8.13), ADMINISTRATIVE AGENT
shall have received on or before the CLOSING all of the following, each dated
(unless otherwise indicated) the day of CLOSING, in form and substance
satisfactory to ADMINISTRATIVE AGENT:


 


4.1.1        This AGREEMENT, and the CONSTRUCTION NOTES and REVOLVING
NOTES, duly executed on behalf of BORROWER and delivered to ADMINISTRATIVE
AGENT.


 


4.1.2        The MORTGAGE duly executed on behalf of BORROWER and in form
acceptable for recording in Redwood County and Cottonwood County, Minnesota.


 


4.1.3        The FEE LETTER duly executed by BORROWER and delivered to
ADMINISTRATIVE AGENT and BORROWER’s payment of all fees due at closing under
the FEE LETTER.


 


4.1.4        The SECURITY AGREEMENT, duly executed on behalf of BORROWER
and delivered to ADMINISTRATIVE AGENT.


 


20

















 


4.1.5        A financing statement or statements sufficient when filed to
perfect the security interests granted under the MORTGAGE, the SECURITY
AGREEMENT, and the other LOAN DOCUMENTS, to the extent such security interests
are capable of being perfected by filing, and a deposit account control
agreement in form and substance acceptable to the COLLATERAL AGENT to perfect
the BANKs’ security interest in any deposit accounts maintained by BORROWER
with financial institutions other than the COLLATERAL AGENT and a securities
control agreement to perfect any investment property held by a financial
intermediary, including, but not limited, to a control agreement with First
National Capital Markets, Inc. and a control agreement with any commodity
intermediary who maintains hedging accounts for BORROWER.


 


4.1.6        A copy of the PLANS, including the PLANS prepared by FAGEN
ENGINEERING certified by FAGEN ENGINEERING, DESIGN-BUILDER and BORROWER, a copy
of the plans for a dewatering system which addresses soil conditions and
shallow groundwater at the PROPERTY to the satisfaction of ADMINISTRATIVE AGENT
and the INSPECTING ARCHITECT and a survey of and plans for the construction of
the water wells, water lines, natural gas lines and other lines bringing utilities
to the PROJECT and a survey of the property covered by the WATER EASEMENTS.


 


4.1.7        The ASSIGNMENT OF CONSTRUCTION CONTRACT, duly executed by
BORROWER and consented to by the DESIGN-BUILDER and a copy of the CONSTRUCTION
CONTRACT, together with the General Conditions of Contract referred to therein,
if any, and an assignment of the general construction contract for the
administration building, water treatment facility, railroad spur and water and
natural gas lines and water wells consented to by the applicable general
contractor and a copy of such general contracts.


 


4.1.8        A TOTAL PROJECT COST STATEMENT of the PROJECT duly executed
by BORROWER, setting forth the anticipated total cost of the PROJECT’s
completion, and a CONSTRUCTION COST STATEMENT duly executed by the
DESIGN-BUILDER, setting forth its anticipated construction costs of the
PROJECT.


 


4.1.9        Three copies of an  ALTA/ACSM Land
Title Survey prepared in accordance with the current accuracy standards jointly
adopted by ALTA (American Land Title Association), ACSM (American Congress on
Surveying and Mapping) and NSPS (National Society of Professional Surveyors)
together with optional survey requirements #1 (monuments); #2 (vicinity map
showing the property surveyed in reference to nearby highway(s) or major
street intersections); #3 (flood zone designation); #4 (gross area of the
LAND); #6 (identify setbacks); #7 (identify exterior dimensions of all existing
and proposed buildings “As-Built”, including square footage of exterior
footprint of all buildings, gross floor area of all buildings); #8
(substantial, visible improvements); #11(b) (location of utilities); #13
(names of adjoining owners); #14 (distance to the nearest intersection); and
#15 changes or proposed changes in rights-of-way of streets and
sidewalks).  The survey shall show the
location of all easements and encroachments onto or from the PROPERTY that are
visible on the 


 


21

















 


PROPERTY, known to the
surveyor preparing the survey or of record, identifying easements of record by
recording data.  Such surveyor shall
certify there are no easements or encroachments upon the PROPERTY except as
shown on the survey.  In addition, an
ALTA/ACSM survey of the property located in the WATER EASEMENTS showing that no
gaps or gores exist from the well sites to the PROJECT site.  All such surveys shall be certified to
ADMINISTRATIVE AGENT and the TITLE COMPANY, with such certification otherwise
in form and substance acceptable to ADMINISTRATIVE AGENT.


 


4.1.10      An as built appraisal based upon the PLANS
to be performed by Natwick Associates Appraisal Services which shows the
as-completed value of the PROPERTY and PROJECT addressed to and otherwise
acceptable to ADMINISTRATIVE AGENT.


 


4.1.11                  A title binder, issued by
First American Title Insurance Company (the “TITLE COMPANY”) at BORROWER’s
expense, constituting a commitment by the TITLE COMPANY to issue a mortgagee’s
title policy in favor of COLLATERAL AGENT as mortgagee under the MORTGAGE and
an owner’s title policy to BORROWER if applicable, that will be free from all
standard exceptions, including mechanics’ liens and all other exceptions not
previously approved by AGENT and that will insure the MORTGAGE to be a valid
first lien on the PROPERTY.  Such loan
policy shall include additional rider coverage as may be reasonably requested
by AGENT, including, without limitation, the following ALTA endorsement  forms:


 


	
  ALTA
  Endorsement Form 3.1

  	
   

  	
  Zoning-Completed
  Structure

  
	
  ALTA
  Endorsement Form 6

  	
   

  	
  Variable
  Rate Mortgage

  
	
  ALTA
  Endorsement Form 8.1

  	
   

  	
  Environmental
  Protection

  
	
  ALTA
  Endorsement Form 9

  	
   

  	
  Restrictions,
  Encroachments, Minerals

  
	
  Usury

  	
   

  	
   

  
	
  ALTA
  Pending Disbursement Endorsement

  	
   

  	
  Mechanic’s
  Lien Coverage

  
	
  ALTA
  Endorsement Form 14

  	
   

  	
  Future
  Advance

  
	
  ALTA
  Endorsement Form 19

  	
   

  	
  Contiguity

  
	
  ALTA
  Endorsement Form 21

  	
   

  	
  Creditor’s
  Rights

  
	
  Access
  Endorsement

  	
   

  	
   

  
	
  Survey
  Endorsement

  	
   

  	
   

  



 


4.1.12      A soil report on the PROPERTY certified by
a registered engineer  including
structural design recommendations in form and substance satisfactory to  ADMINISTRATIVE AGENT. 
Such report shall include soil borings and geo-technical analyses.


 


4.1.13      A Phase I Environmental Report of the
PROPERTY, as well as any subsequent Environmental Site Assessments issued prior
to CLOSING, and such other environmental testing and due diligence as may be
reasonably required by ADMINISTRATIVE AGENT, all in form and content
satisfactory to ADMINISTRATIVE AGENT and establishing the environmental
condition of the PROPERTY as satisfactory to ADMINISTRATIVE AGENT.


 


22

















 


4.1.14      An
assignment of any License Agreements with ICM, INC., and ICM, INC.’s consent to
any such assignment.


 


4.1.15      Copies of all PERMITS from the applicable
regulatory agencies from whom a permit or license is required as of the then
current stage of the PROJECT.


 


4.1.16      Copies of documents from the appropriate
state, federal, city or county authority having jurisdiction over the PROPERTY
and the PROJECT that provide to the reasonable satisfaction of ADMINISTRATIVE
AGENT that the PROJECT when constructed in accordance with the PLANS will
comply in all material respects with all applicable ordinances, zoning,
subdivision, platting, environmental and land use requirements, without special
variance or exception, and such other evidence as ADMINISTRATIVE AGENT shall
reasonably request to establish that the PROJECT and the contemplated use
thereof are permitted by and comply in all material respects with all
applicable use or other restrictions and requirements in prior conveyances,
zoning ordinances, environmental laws and regulations, water shed district
regulations and all other applicable laws or regulations, and governmental
authorities having jurisdiction over the PROJECT.


 


4.1.17      Copies of certificates of insurance
demonstrating the types, levels, deductibles, endorsements and other coverage
parameter issues to the satisfaction of ADMINISTRATIVE AGENT for builder’s risk
insurance, commercial general liability, an umbrella policy, business
automobile liability insurance, environmental liability insurance, worker’s
compensation insurance, and permanent all risk property insurance thirty days
prior to completion of construction, all as required under Section 6.3 of
this AGREEMENT, with all such insurance in full force and effect and approved
by ADMINISTRATIVE AGENT, in the exercise of its reasonable discretion, and
naming ADMINISTRATIVE AGENT as an additional insured and loss payee together
with appropriate flood insurance, if the PROPERTY is in a flood hazard area.  Notwithstanding the foregoing, BORROWER is
not required to obtain worker’s compensation insurance until required by
applicable law.  In
addition, BORROWER shall provide to ADMINISTRATIVE AGENT proof of insurance for
business interruption/extra expense coverage for six months of operating
expenses, and also directors/officers errors and omissions coverage in a
minimum amount of $3,000,000.00.


 


4.1.18      A signed opinion of counsel for BORROWER,
addressed to AGENT but for the benefit of and reliance upon by the BANKS, in
form and substance acceptable to AGENT and AGENT’s counsel.


 


4.1.19      A Certificate of Authority or Secretary’s
Certificate executed by such person or persons authorized by BORROWER’s
organizational documents and/or agreements to do so, certifying the incumbency
and signatures of the officers or other persons authorized to execute the LOAN
DOCUMENTS to which it is a party, and authorizing the execution of the LOAN
DOCUMENTS to which it is a party and performance in accordance with their
terms.


 


23

















 


4.1.20      A recently certified copy of BORROWER’s
Operating Agreement, and any amendments thereto.


 


4.1.21      A recently certified copy of BORROWER’s
Articles of Organization and any amendments thereto.


 


4.1.22      A certificate of good standing for
BORROWER from the office of the Minnesota Secretary of State.


 


4.1.23      Proof of injection of equity capital into
BORROWER of no less than $48,030,000.00 including any grant funds actually
received and any funds actually received from tax increment financing or TIF
programs.


 


4.1.24      A copy of any MARKETING AND RISK
MANAGEMENT CONTRACTS, together with assignments in favor of BANK and consents
thereto in form satisfactory to COLLATERAL AGENT, as well as control agreements
reasonably requested by COLLATERAL AGENT, in 
form reasonably acceptable to COLLATERAL AGENT.


 


4.1.25  A copy of any existing contracts for BORROWER’s
natural gas, electricity, water service and all MARKETING AND RISK MANAGEMENT
CONTRACTS and assignments of such contracts along with the consent of  BORROWER’s vendors under such contracts, all
in form and substance acceptable to ADMINISTRATIVE AGENT.


 


4.1.26      Evidence satisfactory to ADMINISTRATIVE
AGENT that BORROWER has acquired marketable fee simple title to the PROPERTY
subject only to the Permitted Exceptions identified in the MORTGAGE.


 


4.1.27 
Documentation of the SWAP CONTRACTS in form satisfactory to
ADMINISTRATIVE AGENT.


 


4.1.28 
Copies of executed easements, licenses, consents and approvals from all
applicable parties and governmental authorities in recordable form and
otherwise satisfactory to ADMINISTRATIVE AGENT providing for the construction
and maintenance of water mains and natural gas lines extending from the water
treatment facility on the PROPERTY to the site of BORROWER’s wells and natural
gas source, to provide water and natural gas service to the PROJECT (the
foregoing easements, consents and approvals are collectively referred to in
this Agreement as the “WATER EASEMENTS”). 
The WATER EASEMENTS must be specifically insured in the owner’s and loan
title policy provided for in Section 4.1.11 above, subject only to such
exceptions and containing such endorsements as are required by ADMINISTRATIVE
AGENT.  In addition, BORROWER shall
comply with the terms set forth in the POST CLOSING LETTER with respect to the
WATER EASEMENTS and other matters relating to the foregoing water main and
natural gas lines.  BORROWER will
construct all such water mains and natural gas lines in accordance with the
applicable PLANS approved by ADMINISTRATIVE AGENT.


 


24
















 


4.1.29 
The obligations and INDEBTEDNESS of BORROWER to Granite Falls Bank
secured by the liens encumbering the PROPERTY and BORROWER’s assets have been
fully and indefeasibly paid in full and all such liens have been terminated and
released.


 


4.1.30 
The POST CLOSING LETTER duly executed by BORROWER and ADMINISTRATIVE
AGENT detailing BORROWER’s post-closing obligations.


 


4.1.31 
The DISBURSING AGREEMENT duly executed by each party thereto and in form
and substance acceptable to ADMINISTRATIVE AGENT.


 


4.1.32 
Federal Emergency Management Agency Standard Flood Hazard Determination
Certificates certifying, among other things, that none of the PROPERTY is
located within a flood hazard area.


 


4.1.33 
Copies of favorable UCC, tax, judgment, bankruptcy and fixture lien
search reports (or other evidence of the same satisfactory to COLLATERAL AGENT)
in all necessary or appropriate jurisdictions and under all legal and trade
names of BORROWER and all other parties requested by COLLATERAL AGENT,
indicating that there are no prior liens, security interests, charges or
encumbrances of any nature on any of the collateral for the LOANS other than as
approved by ADMINISTRATIVE AGENT.


 


4.1.34 
Lien releases from the DESIGN-BUILDER, all other general contractors,
subcontractors, material suppliers, laborers and other persons and entities who
have performed labor or supplied materials or services to the PROJECT prior to
the time of such advance.


 


4.1.35 
certified copies of all material consents, approvals, authorizations,
registrations and filings and orders required or advisable to be made or
obtained under any requirement of law or by any material contractual obligation
of BORROWER, in connection with the PROJECT or operation of BORROWER’s
business, including the production of ethanol and by-products thereof, and such
consents, approvals, authorizations, registrations, filings and orders must be
in full force and effect and all applicable waiting periods must have expired.


 


4.1.36 
The INTERCREDITOR AGREEMENT with the BOND TRUSTEE in form and substance
acceptable to ADMINISTRATIVE AGENT.


 


4.1.37 
Evidence satisfactory to ADMINISTRATIVE AGENT that the BOND DOCUMENTS
have been duly executed and delivered by all parties thereto and that BORROWER
may take advances on the BOND DEBT to fund and pay qualifying expenses of the
PROJECT and that the BOND DEBT is otherwise available to BORROWER to pay
qualifying expenses of the PROJECT. 
BANKS acknowledge and agree that disbursements of the BOND DEBT will be
used to fund and pay qualifying expenses of the PROJECT and other costs and
expenses provided for in the BOND DOCUMENTS, the BOND DEBT will not be fully
disbursed prior to BANKS’ obligation to fund advances on the 


 


25

















 


CONSTRUCTION LOAN and that the full funding
of the BOND DEBT is not a condition precedent to the initial advance on the
CONSTRUCTION LOAN.


 


4.2         Conditions
Precedent to All Disbursements on the CONSTRUCTION LOAN.  The obligation of BANKS to make any advances
under the CONSTRUCTION LOAN (including the initial disbursement) is subject to
the further conditions precedent that BORROWER shall remain in compliance with
the conditions precedent contained in Section 4.1 of this AGREEMENT and,
unless waived by ADMINISTRATIVE AGENT in writing in the POST CLOSING LETTER,
ADMINISTRATIVE AGENT shall have received on or before the submission of a DRAW
REQUEST for such advance all of the following in form and substance
satisfactory to ADMINISTRATIVE AGENT:


 


4.2.1 
The disbursement requirements of Section 3 of this AGREEMENT have
been satisfied and the DISBURSING AGREEMENT, in form and substance acceptable
to ADMINISTRATIVE AGENT, has been executed by each party thereto and delivered
to ADMINISTRATIVE AGENT.


 


4.2.2 
That the INDEPENDENT INSPECTOR, based upon on-site inspections of the
PROJECT, has reported to ADMINISTRATIVE AGENT that the portion of the PROJECT
completed as of the date of last inspection by the INDEPENDENT INSPECTOR has
been completed in accordance with the PLANS and that the PROJECT can be
completed by the CONSTRUCTION LOAN TERMINATION DATE in accordance with the
PLANS for the remaining funds available for construction of the PROJECT.


 


4.2.3 
The TITLE COMPANY shall have issued an endorsement to the loan policy of
title insurance reflecting the amount of all previous advances on the
CONSTRUCTION LOAN, insuring the continued priority of the MORTGAGE over
mechanics’ liens and similar liens and showing no exceptions to title other
than those previously approved by ADMINISTRATIVE AGENT and the TITLE COMPANY
will issue an endorsement insuring the requested advance on the CONSTRUCTION
LOAN upon compliance with the terms of the DISBURSING AGREEMENT.


 


4.2.4 
Construction of the PROJECT to the date of the request for the advance
has been completed in accordance with all applicable laws, rules, restrictions,
regulations and PERMITS, and BORROWER has complied with all applicable PERMITS
and such PERMITS remain valid and have not been challenged, terminated, revoked
or restricted, or modified, altered, restated or amended without the prior
written consent of ADMINISTRATIVE AGENT.


 


4.2.5 
BORROWER has delivered to ADMINISTRATIVE AGENT a fully executed Notice
to Proceed as referenced and defined in the CONSTRUCTION CONTRACT.  In addition, BORROWER, DESIGN-BUILDER and
each SUBCONTRACTOR have each materially complied with all of their respective
obligations under the CONSTRUCTION CONTRACT and other general contracts for the
construction of the railroad spur, administration building 


 


26

















 


and water mains and natural gas lines, and
the CONSTRUCTION CONTRACT and such other general contracts remain in full force
and effect.


 


4.2.6 
Evidence satisfactory to ADMINISTRATIVE AGENT that all then due installments
of general real estate taxes, special assessments and other levies against the
PROPERTY or the PROJECT have been paid in full.


 


4.2.7 
BORROWER has expended the equity referenced in Section 4.1.23 above
and any TIF and grant funds on the PROJECT in accordance with the SOURCES AND
USES OF FUNDS.


 


4.2.8  The representations and warranties contained
in Section 5 of this AGREEMENT are correct in all material respects on and
as of the date of such disbursement as though made on and as of such date,
except to the extent that such representations and warranties relate solely to
an earlier date and except to the extent of changes permitted under the terms
of this AGREEMENT.


 


4.2.9  No event has occurred and is continuing, or
would result from such disbursement, which constitutes an EVENT OF DEFAULT.


 


4.2.10  No determination shall have been made by
ADMINISTRATIVE AGENT or the INDEPENDENT INSPECTOR  in the exercise of their reasonable judgment
that the  undisbursed amount of the CONSTRUCTION
LOAN is less than the amount required to pay all costs and expenses of any kind
which reasonably may be anticipated in connection with the completion of the
PROJECT; or, if such a determination has been made and notice thereof sent to
BORROWER in accordance with this AGREEMENT, BORROWER shall have deposited the
necessary funds with ADMINISTRATIVE AGENT in accordance with the Section 3.6
of this AGREEMENT.


 


4.2.11  If required by ADMINISTRATIVE AGENT,
ADMINISTRATIVE AGENT shall be furnished with a statement from BORROWER and the DESIGN-BUILDER
or other general contractor, in form and substance satisfactory to
ADMINISTRATIVE AGENT, in the exercise of its reasonable discretion, setting
forth the names, addresses and amounts due or to become due, as well as the
amounts previously paid, to every SUBCONTRACTOR whose charges exceed
$20,000.00.


 


4.2.12  No PERMIT necessary for the construction of
the PROJECT shall have been revoked or the issuance thereof subjected to
challenge before any court or other governmental authority having or asserting
jurisdiction as to the PROJECT, and the construction of the PROJECT is in
compliance with applicable PERMITS.


 


4.2.13  The parties intend that the CONSTRUCTION LOAN
is available to fund up to $50,400,000.00 of the TOTAL PROJECT COST as shown in
the TOTAL PROJECT COST STATEMENT, including all other approved expenses as set
forth in the final version of the SOURCES AND USES OF FUNDS document furnished
to BANK by BORROWER prior to 


 


27

















 


CLOSING.  No advances or disbursements under the
CONSTRUCTION LOAN shall exceed such level, unless ADMINISTRATIVE AGENT consents
in writing to the same.


 


4.3         Conditions
Precedent to the Final Disbursements. 
The obligation of BANKS to make the final disbursement on the CONSTRUCTION
LOAN shall be subject to the condition precedent that BORROWER shall be in
compliance with all conditions set forth in Sections 4.1 and 4.2 of this
AGREEMENT and, further, that the following conditions shall have been satisfied
or waived by ADMINISTRATIVE AGENT on or prior to the CONSTRUCTION LOAN
TERMINATION DATE:


 


4.3.1        The PROJECT has been completed in material compliance with
the PLANS and ADMINISTRATIVE AGENT shall have received a certificate of
completion from the DESIGN-BUILDER, certifying that (i) work on the
PROJECT has been completed in material compliance with the PLANS and all labor,
services, materials and supplies used in such work have been indefeasibly paid
for and (ii) the completed PROJECT conforms in all material respects with
all applicable zoning, land use planning, building and environmental laws and
regulations of the governmental authorities having jurisdiction over the
PROJECT.


 


4.3.2        ADMINISTRATIVE AGENT has received satisfactory evidence that
all work requiring inspection by municipal or other governmental authorities
having jurisdiction has been duly inspected and approved by such authorities
and by the rating or inspection organization, bureau, corporation or office
having jurisdiction.


 


4.3.3        ADMINISTRATIVE AGENT shall have received a lien waiver from
each SUBCONTRACTOR whose charges exceed $20,000.00 and the DESIGN-BUILDER and
all other general contractors for all work done and for all materials furnished
by it for the PROJECT.


 


4.3.4        ADMINISTRATIVE AGENT has received an itemized list from
BORROWER of all material items of equipment and fixtures, which are at that
time subject to BANKS’ security interest.


 


4.3.5        BORROWER
has hired a plant operations manager or general manager acceptable to
ADMINISTRATIVE AGENT in the exercise of ADMINISTRATIVE AGENT’s reasonable
discretion.


 


4.3.6        BORROWER has duly executed and delivered to ADMINISTRATIVE
AGENT each TERM NOTE.


 


4.3.7        BORROWER shall have delivered to ADMINISTRATIVE AGENT an
as-built ALTA/ACSM survey showing all improvements constructed on the LAND and
otherwise meeting the requirements set out in Section 4.1.9 above.


 


4.3.8        Payment to ADMINISTRATIVE AGENT of all fees provided for in
the FEE LETTER which have not previously been paid or are not then due under
the terms of the FEE LETTER.


 


28

















 


4.3.9        BORROWER shall have delivered to ADMINISTRATIVE AGENT a
Certificate(s) of Insurance showing the coverages required under Section 6.3.4
of this Agreement.


 


4.4         No
Waiver.  The making of any
disbursement under the CONSTRUCTION LOAN prior to fulfillment of any condition
thereto shall not be construed as a waiver of such condition, and
ADMINISTRATIVE AGENT reserves the right to require fulfillment of any and all
such conditions prior to making any subsequent disbursements under the
CONSTRUCTION LOAN.


 


SECTION 5 Representations and Warranties.


 


To induce BANKS to enter into this AGREEMENT,
BORROWER makes the following representations and warranties and agrees that
each DRAW REQUEST and each request for an advance under the REVOLVING LOAN or
LONG TERM REVOLVING LOAN constitutes a reaffirmation of these representations
and warranties and that such representations and warranties shall survive until
all of the OBLIGATIONS are fully and finally paid:


 


5.1           Existence
and Power.  BORROWER is a limited
liability company duly organized and existing under the laws of the State of
Minnesota.  BORROWER has accomplished all
necessary actions required by a limited liability company under applicable law
to own the PROPERTY and construct the PROJECT, and to execute and deliver, and
to perform all of its obligations under the LOAN DOCUMENTS to which it is a
party.  There are no outstanding
subscriptions, options, warrants, calls or rights (including preemptive rights)
to acquire, and no outstanding securities or instruments convertible into,
EQUITY INTERESTS of BORROWER, except as set forth on Exhibit J attached
hereto and incorporated herein by reference.


 


5.2           Authorization
of Borrowing; No Conflict as to Law or Other Agreements.  The execution, delivery and performance by
BORROWER of the LOAN DOCUMENTS and the borrowings from time to time hereunder
have been duly authorized by all necessary limited liability company actions of
BORROWER and do not and will not (a) require any material consent or
approval, or authorization, by any GOVERNMENTAL AUTHORITY, domestic or foreign,
other than those obtained and in full force and effect, (b) violate, in
any material respect, any provision of any law, rule or regulation or of
any order, writ, injunction or decree presently in effect having applicability
to BORROWER, or violate any provision of the Articles of Organization or
operating agreement or any members’ agreement or similar agreement of BORROWER,
(c) result in a breach of or constitute a default beyond any applicable
cure period under any indenture or loan or credit agreement or any other
agreement, lease or instrument to which BORROWER is a party or by which it or
its properties may be bound or affected, or (d) other than liens in favor
of the COLLATERAL AGENT and the liens set forth in Section 6.4.1 below,
result in, or require, the creation or imposition of any mortgage, deed of
trust, pledge, lien, security interest or other charge or encumbrance of any
nature to or with any other creditor of BORROWER, in the aggregate exceeding
$100,000.00, upon or with respect to any of the properties now owned or
hereafter acquired by BORROWER.


 


5.3           Legal
Agreements.  The LOAN DOCUMENTS to
which it is a party constitute the legal, valid and binding obligations of
BORROWER enforceable against BORROWER in accordance with 


 


29

















 


their respective terms, and as to any LOAN DOCUMENTS
to which BORROWER is not a party, BORROWER has no knowledge that any such LOAN
DOCUMENTS do not constitute the legal, valid and binding obligations of the
parties thereto, enforceable against such parties in accordance with their
respective terms, except in each case (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors’ rights generally, and (b) as
limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies.


 


5.4         Licenses
and Permits.  BORROWER has all
necessary PERMITS required for construction and operation of the PROJECT except
those which are not required for the current stage of construction of the
PROJECT, or which cannot be obtained until completion of the PROJECT.  BORROWER will provide ADMINISTRATIVE AGENT
copies of all PERMITS as they are obtained and when required by the various
regulatory agencies.  BORROWER will
timely obtain and will retain all necessary PERMITS and licenses to operate its
businesses at the PROPERTY.  Other than
the PERMITS, no consent, permission, order, license, approval or authorization
of any GOVERNMENTAL AUTHORITY is necessary or desirable in connection with the
construction or operation of the PROJECT. 
BORROWER has complied with and will continue to comply with all of the
terms, conditions, limitations and restrictions contained in any PERMIT.


 


5.5           Construction
of the PROJECT.  The PROJECT will be
constructed in material compliance with the PLANS and the applicable PERMITS;
and will not encroach upon or overhang any easement or right-of-way on land not
constituting part of the PROPERTY. The PROJECT, both during construction and on
COMPLETION DATE, and the contemplated use thereof, will not violate in any
material respect, any applicable PERMIT, zoning or use statute, ordinance,
building code, rule or regulation, or any covenant or agreement of record.
BORROWER agrees that it will furnish from time to time such satisfactory
evidence with respect thereto as may be required by ADMINISTRATIVE AGENT.


 


5.6           Title
to the PROPERTY.  BORROWER has good
and marketable fee simple title to the PROPERTY as required pursuant to Section 4.1.26
above and has maintained good and marketable fee simple title to the PROPERTY,
subject to the limitations described in 4.1.11, above, and except to the extent
title is affected by the matters permitted under 6.4.1, below.  Except as created by the LOAN DOCUMENTS and
the liens set forth in Section 6.4.1 below, there is no lien, security
interest or other charge or encumbrance upon or with respect to any of the
assets, properties or income of BORROWER.


 


5.7           Financial
Condition.  BORROWER has furnished to
ADMINISTRATIVE AGENT its compiled cash flow projection of BORROWER for the
construction period and for the first five (5) years of operations, which
projections were prepared by Christianson & Associates and are dated January 1,
2007 (the “PROJECTIONS”).  To the
knowledge of BORROWER, the PROJECTIONS fairly present the projected financial
condition of BORROWER on the dates thereof, and were prepared in GAAP format
and on the basis of assumptions deemed reasonable by BORROWER. There has been
no material adverse change in the operations, properties or condition
(financial or otherwise) of BORROWER since the date of the PROJECTIONS and no
additional borrowings have been made by BORROWER other than the borrowing
contemplated hereby or approved by 


 


30

















 


ADMINISTRATIVE AGENT or INDEBTEDNESS secured by the
liens set forth in Section 6.4.1 below. 
No certificate or statement furnished to BANKS by or on behalf of
BORROWER in connection with the transactions contemplated hereby contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained therein or herein not
misleading.  To the best of the knowledge
of BORROWER, there is no fact or circumstance current or in the future (so far
as BORROWER now foresees) which is reasonably likely to have a MATERIAL ADVERSE
EFFECT which has not been set forth herein or in a certificate or statement
furnished to ADMINISTRATIVE AGENT by BORROWER.


 


5.8         Litigation.  There are no actions, suits or proceedings
pending or, to the knowledge of BORROWER, threatened against or affecting
BORROWER or the properties of BORROWER before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which, if determined adversely to BORROWER, would have a MATERIAL
ADVERSE EFFECT.


 


5.9           Taxes.  BORROWER has filed all federal, state and
local tax returns which to the knowledge of BORROWER are required to be filed,
and BORROWER has paid or caused to be paid to the respective taxing authorities
all taxes as shown on said returns or on any assessment received by it to the
extent such taxes have become due except those which BORROWER is contesting in
good faith and with respect to which adequate reserves have been set aside.


 


5.10         No
Default.  There is no event, which
is, or with notice or the lapse of time would be, an EVENT OF DEFAULT under
this AGREEMENT or any other LOAN DOCUMENT.


 


5.11         ERISA.  BORROWER is in compliance in all material
respects with the Employee Retirement Income Security Act of 1974, as amended,
and has received no notice to the contrary from the Internal Revenue Service,
the Department of Labor, the Pension Benefit Guaranty Corporation or any other
governmental entity or notice of any claims or pending claims under ERISA.


 


5.12         Environmental
Matters.  Except as set forth in the
Phase I Environmental Report referenced in Section 4.1.13 of this
AGREEMENT, BORROWER is in compliance in all material respects with all health
and  environmental laws applicable to
BORROWER and its operations and knows of no existing conditions or circumstances
that could materially interfere with such compliance in the future.  Except for PERMITS that cannot be obtained
until completion of the PROJECT or which are not required for the current stage
of construction of the PROJECT, BORROWER has obtained all PERMITS, and
approvals required by law for the operation of its business. BORROWER has not
identified any “recognized environmental conditions”, as that term is defined
by the American Society for Testing and Materials in its standards for
environmental due diligence, which could  subject
BORROWER to enforcement action if brought to the attention of appropriate
governmental authorities.


 


5.13         Necessary
Utilities, Etc.  BORROWER has made
suitable arrangements so that the PROJECT has all necessary electrical, natural
gas, water, storm and sewer facilities in place for the proper construction and
operation of its ethanol plant.  BORROWER
has made adequate provision 


 


31

















 


for all storage facilities, equipment and product
supplies, including corn, as specified by its engineers for the maximum output
and operation of the plant.


 


5.14       Securities
Regulation Compliance.  BORROWER has
complied with all applicable federal, state and local statutes, laws, codes,
regulations and ordinances applicable to the offering and sale of securities in
or of BORROWER.


 


SECTION 6 Additional Covenants of BORROWER.


 


6.1         Financial
Information and Reporting.  Except as
otherwise stated in this AGREEMENT, all financial information provided to ADMINISTRATIVE
AGENT shall be compiled using GAAP consistently applied. During the time period
that any amounts are outstanding under the OBLIGATIONS or this AGREEMENT or the
LOAN DOCUMENTS to which it is a party, unless ADMINISTRATIVE AGENT shall
otherwise agree in writing:


 


6.1.1        BORROWER shall provide ADMINISTRATIVE AGENT within 120 days
of BORROWER’s fiscal year end, BORROWER’s annual financial statements. The
statements must be audited with an unqualified opinion by a certified public
accountant reasonably acceptable to ADMINISTRATIVE AGENT, and must be
accompanied by a certificate of such accountants stating whether, in conducting
their audit, they have become aware of any EVENT OF DEFAULT, or of any event
which would, after the lapse of time or the giving of notice, or both,
constitute an EVENT OF DEFAULT, specifying the nature and duration of the
default.  Such audit statement shall be
accompanied by the accountants’ calculations of BORROWER’s compliance with the
covenants contained in Section 6.2 of this AGREEMENT as of the said fiscal
year end.


 


6.1.2        After the CONSTRUCTION LOAN TERMINATION DATE, BORROWER will
furnish to ADMINISTRATIVE AGENT within thirty (30) days after the end of each
calendar month monthly internally prepared financial statements consisting of a
balance sheet and income statement of BORROWER as of the end of such period,
and income statements and statements of changes in cash flow for such period
and year to date, prepared in accordance with GAAP, all in reasonable detail,
except for the absence of financial footnotes, and calculations of the
financial covenants set forth below.


 


6.1.3        For each quarter of each fiscal year ending after the
CONSTRUCTION LOAN TERMINATION DATE, BORROWER will deliver to ADMINISTRATIVE
AGENT, within thirty (30) days of each full fiscal quarter end, a certificate
in form reasonably acceptable to ADMINISTRATIVE AGENT that has been signed by
an authorized manager or officer of BORROWER, which: 1) certifies that the
statements required by Section 6.1.1 and 6.1.2 have been accurately
prepared in accordance with GAAP applied consistently (except for the absence
of financial footnotes to the statements furnished under Section 6.1.2 and
normal or customary year-end adjustments to the statements furnished under Section 6.1.2);
2) contains calculations of the financial covenants contained in Section 6.2
of this AGREEMENT and certifies compliance with such financial covenants, and
3) certifies that neither the authorized manager or officer nor BORROWER has
knowledge of any EVENT OF DEFAULT under 


 


32

















 


this AGREEMENT or the LOAN
DOCUMENTS, or of any event which would, after the lapse of time or the giving
of notice, or both, constitute an event of default under this AGREEMENT or the
other LOAN DOCUMENTS.


 


6.1.4        After CONSTRUCTION LOAN TERMINATION DATE, BORROWER will
deliver to ADMINISTRATIVE AGENT each month, within thirty (30) days of each
month end, a monthly Production Report, in form reasonably acceptable to
ADMINISTRATIVE AGENT, reporting for such month BORROWER’s Input and Output
amounts and costs of Corn Usage, DDGS Output, Ethanol Output, and if
applicable, CO2 Output.


 


6.1.5        BORROWER shall notify ADMINISTRATIVE AGENT of the existence
of any EVENT OF DEFAULT promptly after such EVENT OF DEFAULT becomes known to
any officer, director or general manager of BORROWER.


 


6.1.6        BORROWER shall authorize all federal, state and municipal
authorities to furnish reports of examinations, records and other information
relating to the condition and affairs of BORROWER and its ethanol plant, and
any information from reports, returns, files and records by such authorities
regarding BORROWER upon request to ADMINISTRATIVE AGENT.


 


6.1.7        BORROWER will give ADMINISTRATIVE AGENT prompt written notice
of any material violation as to any environmental matter by BORROWER of which
BORROWER obtains knowledge and, of the commencement of any judicial or
administrative proceeding adverse to BORROWER relating to health, safety or
environmental matters (i) in which an adverse determination or result
could result in the revocation of or have a MATERIAL ADVERSE EFFECT on any
PERMITS held by BORROWER which are material to the operations of BORROWER, and (ii) which
will or threatens to impose a material liability on BORROWER to any person or
party or which will require a material expenditure by BORROWER to cure any
alleged problem or violation.


 


6.1.8        BORROWER will give prompt notice to ADMINISTRATIVE AGENT of (i) any
litigation or proceeding in which it is a party if an adverse decision therein
would require it to pay more than $100,000.00 or deliver assets the value of
which exceeds such sum (whether or not the claim is considered to be covered by
insurance); and (ii) the institution of any other suit or proceeding
involving it that is reasonably likely to have a MATERIALLY ADVERSE EFFECT.


 


6.1.9        BORROWER shall provide monthly BORROWING BASE certificates in
form reasonably acceptable to ADMINISTRATIVE AGENT, calculating advance rates
under the REVOLVING LOAN pursuant to the BORROWING BASE beginning with the
certificate with respect to the fourth month following CONSTRUCTION LOAN
TERMINATION DATE or at the time of any request for an advance on the REVOLVING
LOAN.


 


6.1.10      BORROWER shall provide to ADMINISTRATIVE AGENT
monthly summaries of all grain hedging transactions, from the entity providing
BORROWER’s grain hedging 


 


33

















 


account(s), and from any
entity providing BORROWER with an ethanol or natural gas hedging account(s),
monthly summaries of all ethanol and natural gas hedging transactions.


 


6.1.11      BORROWER will provide ADMINISTRATIVE AGENT
with such other information as it may reasonably request.


 


6.1.12      BORROWER will deliver to ADMINISTRATIVE
AGENT, no later than thirty- (30) days prior to its fiscal year end, its
projected financial statements on a month by month basis for the ensuing fiscal
year, and a budget of BORROWER’s projected capital expenditures for the ensuing
fiscal year (“CAPEX BUDGET”).


 


6.2         Financial
Covenants.  At all times that any
amounts are outstanding under any OBLIGATION, or this AGREEMENT or the LOAN
DOCUMENTS to which BORROWER is a party, unless the REQUIRED BANKS shall
otherwise agree in writing, BORROWER agrees to comply with the financial
covenants described below, which shall be calculated using GAAP consistently
applied, except as they may be otherwise modified by the capitalized
definitions:


 


6.2.1        BORROWER shall maintain a FIXED CHARGE COVERAGE RATIO,
measured on a rolling four quarters trailing basis at the end of each full
fiscal quarter, of no less than 1.25:1.0, for all periods following the
CONSTRUCTION LOAN TERMINATION DATE; provided, however, the FIXED CHARGE
COVERAGE RATIO shall be measured as follows for the first three fiscal quarters
after the CONSTRUCTION LOAN TERMINATION DATE:


 


first fiscal quarter: on a rolling one quarter basis
at the end of the first fiscal quarter;


 


second fiscal quarter: on a rolling two quarter basis
at the end of the second fiscal quarter; and


 


third fiscal quarter: on a rolling three quarter basis
at the end of the third fiscal quarter.


 


The FIXED CHARGE COVERAGE RATIO shall be tested by ADMINISTRATIVE AGENT
quarterly on a fiscal quarter basis commencing at the end of the first full
fiscal quarter after the CONSTRUCTION LOAN TERMINATION DATE.


 


6.2.2        After the
CONSTRUCTION LOAN TERMINATION DATE, BORROWER shall
maintain NET WORTH of not less than $44,775,000.00.  The required minimum NET WORTH of BORROWER
shall be measured annually at the end of each fiscal year of BORROWER, and
shall increase each fiscal year commencing on or after the CONSTRUCTION
LOAN TERMINATION DATE by an amount equal to the
greater of (a) $250,000.00 or (b) the amount of undistributed
earnings accumulated during the fiscal year just ended (less any allowable
distributions attributable to the just ended fiscal year’s earnings).


 


34
















 


6.2.3        For each fiscal year
following the CONSTRUCTION LOAN TERMINATION DATE, BORROWER shall determine and
report to ADMINISTRATIVE AGENT, within 120 days after the end of each such
fiscal year, the amount of its EXCESS CASH FLOW for such ended fiscal year.  Within 120 days following the end of each
such fiscal year, BORROWER will pay to ADMINISTRATIVE AGENT fifty percent (50%)
of such EXCESS CASH FLOW calculated by BORROWER for such fiscal year.  In addition, effective on the 120th
day after the end of each fiscal year following the CONSTRUCTION LOAN
TERMINATION DATE (each such day, an “EXCESS CASH FLOW REDUCTION DATE”), the
MAXIMUM AVAILABILITY on the LONG TERM REVOLVING NOTES shall reduce by an amount
equal to fifty percent (50%) of the EXCESS CASH FLOW calculated as above.  If the reduction to the MAXIMUM AVAILABILITY
would cause BORROWER to be in default under any provision of this AGREEMENT,
the amount of reduction shall be limited to the amount of the reduction in the
MAXIMUM AVAILABILITY to allow BORROWER to remain in compliance under the terms
of this AGREEMENT.  By the payment due
date on the LONG TERM REVOLVING LOAN immediately following an EXCESS CASH FLOW
REDUCTION DATE or a REDUCTION DATE, BORROWER shall pay and apply to the then
outstanding principal balance on the LONG TERM REVOLVING NOTES, the amount
necessary to reduce the outstanding principal amount of the LONG TERM REVOLVING
LOAN so that it is within the MAXIMUM AVAILABILITY applicable after each EXCESS
CASH FLOW REDUCTION DATE or REDUCTION DATE, as applicable.  Such reduction payments shall not release
BORROWER from making any payment of principal or interest otherwise required by
this AGREEMENT or the LONG TERM REVOLVING NOTES.  BORROWER’s payment of EXCESS CASH FLOW
required in this Section shall be applied first to the outstanding
principal balance of the VARIABLE RATE LOAN, and after the VARIABLE RATE LOAN
is repaid in full, to the principal balance, if any, of the LONG TERM REVOLVING
LOAN.  If there is no outstanding balance
on the LONG TERM REVOLVING LOAN at the time such payment is due, BORROWER shall
not be required to pay to ADMINISTRATIVE AGENT EXCESS CASH FLOW at such
time.  Such annual payments of EXCESS
CASH FLOW shall not release BORROWER from making the monthly payment required
above on the VARIABLE RATE LOAN and LONG TERM REVOLVING LOAN or any other
payment required under this AGREEMENT or any other LOAN DOCUMENT.  No payment of EXCESS CASH FLOW during any
period when an EVENT OF DEFAULT does not exist shall trigger or obligate
BORROWER to pay to ADMINISTRATIVE AGENT any prepayment fees.


 


6.2.4        BORROWER shall
maintain the following minimum WORKING CAPITAL during the periods stated below,
measured continuously:


 


35

















 


	
  Period

  	
   

  	
  Minimum

  WORKING CAPITAL

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Beginning with the first day of the fourth month after the
  CONSTRUCTION LOAN TERMINATION DATE through the seventh month after the
  CONSTRUCTION LOAN TERMINATION DATE

  	
   

  	
  $

  	
  3,000,000.00

  	
   

  
	
  Beginning with the first day of the eighth month through the twelfth
  month after the CONSTRUCTION LOAN TERMINATION DATE

  	
   

  	
  $

  	
  4,500,000.00

  	
   

  
	
  Beginning with the first day of the thirteenth month after the
  CONSTRUCTION LOAN TERMINATION DATE until payment in full of the TERM LOANS

  	
   

  	
  $

  	
  6,000,000.00

  	
   

  



 


For the purpose of this
covenant, the amount of any available borrowing under LONG TERM REVOLVING LOAN
shall constitute an addition to WORKING CAPITAL.


 


6.2.5        After the CONSTRUCTION LOAN TERMINATION DATE, BORROWER must
maintain at all times a maximum LEVERAGE RATIO, measured quarterly, of no
greater than 1.65:1.00.  LEVERAGE RATIO
means the ratio of Total Liabilities to Tangible Book Equity, as determined in
accordance with GAAP.  Total Liabilities
means all INDEBTEDNESS less INDEBTEDNESS subordinated to the OBLIGATIONS.  Tangible Book Equity means NET WORTH plus
INDEBTEDNESS subordinated to the OBLIGATIONS less goodwill and other intangible
assets.


 


6.3           Affirmative
Covenants.  During the time period
that any amounts are outstanding under any OBLIGATION, this AGREEMENT or the
LOAN DOCUMENTS to which BORROWER is a party, unless the REQUIRED BANKS shall
otherwise agree in writing, BORROWER shall:


 


6.3.1        Diligently proceed with construction of the PROJECT in
material compliance with the PLANS and in accordance in all material respects
with all applicable laws and ordinances, and complete the PROJECT by the
COMPLETION DATE.


 


6.3.2        Use the proceeds of each of the disbursements under the
CONSTRUCTION LOAN solely for the purposes set forth in this AGREEMENT.


 


6.3.3        Use its best efforts to require the DESIGN-BUILDER, other
general contractors and each SUBCONTRACTOR to comply in all material respects
with all rules, regulations, ordinances and laws bearing on its conduct of work
on the PROJECT.


 


6.3.4        Provide and maintain at all times during the process of
building the PROJECT and, from time to time at the request of ADMINISTRATIVE
AGENT, furnish ADMINISTRATIVE AGENT with proof of payment of premiums on:


 


36

















 


(i)            Builders’ Risk completed value form insurance insuring
the PROJECT (and after completion of the PROJECT, a permanent All Risk property
policy of insurance with coverage equal to the replacement cost of the
facility, as well as casualty/umbrella (Commercial General Liability)
insurance) insuring the PROJECT, against all risks, including flood,
earthquake, and mechanical and electrical breakdown including testing to the
full value of the PROJECT (subject to reasonable loss deductible provisions).  BANKS’ interest shall be protected by naming
AGENT as additional insured on the liability policies and loss payee on the
property policies;


 


(ii)           Casualty (Commercial General Liability) &
Umbrella insurance (including products and completed operations, operations of
subcontractors, and contractual liability insurance) with coverage in the
amount of $2,000,000.00 in the form of either a $2,000,000.00 primary policy or
a $1,000,000.00 primary policy and a $1,000,000.00 Umbrella policy.  BANKS’ interest shall be protected by naming
AGENT as loss payee on all such policies;


 


(iii)          State worker’s compensation insurance, with statutory
limits, and Employer’s Liability coverage with coverage of no less than
$500,000.00;


 


(iv)          Business automobile liability insurance insuring all
vehicles on the site, including hired and non-owned liability with coverage in
the amount of $2,000,000.00 in the form of either a $2,000,000.00 primary
policy or a $1,000,000.00 primary policy and a $1,000,000.00 Umbrella
policy.  BANKS’ interest shall be
protected by naming AGENT as loss payee on all such policies;


 


(v)           Environmental coverage shall be
provided for clean up and removal once the Project becomes operational (unless
the condition precedent site survey and soil tests establish adverse findings
which may generate the need for environmental coverage prior to operation), but
only insofar as it is reasonably required by AGENT.  BANKS’ interest shall be protected by naming
AGENT as additional insured on the liability policies and loss payee on the
property policies;


 


(vi)          Directors/Officers
errors and omissions coverage of no less than $3,000,000.00; and


 


(vii)         By
the COMPLETION DATE, Business Interruption and Extra Expense insurance equal to
100% of the projected revenue loss during a potential interruption of
production of not less than six months.


 


The policies of insurance
required pursuant to clauses (i) and (ii) above shall be in form and
content satisfactory to AGENT and shall be placed with financially sound and
reputable insurers. The policy of insurance referred to in clause (i) above
shall contain an agreement of the insurer to give not less than thirty (30)
days’ advance written notice to AGENT in the event of cancellation of such
policy or change affecting the coverage there under. Acceptance of insurance
policies referred to above 


 


37

















 


shall not bar AGENT from
requiring additional insurance, which it reasonably deems necessary.


 


6.3.5        Assign to ADMINISTRATIVE AGENT, in form acceptable to
ADMINISTRATIVE AGENT, all equipment and systems warranties relating to the
PROJECT, together with all contracts for natural gas, electricity, water and
other utilities, grain procurement contracts, grain and ethanol hedging
contracts, as the same are obtained by BORROWER following CLOSING, together
with all consents from the vendors and other parties under such contracts.


 


6.3.6        Maintain accurate and complete books, accounts and records
pertaining to the PROPERTY and the PROJECT and its ongoing and continuing
operations in form and substance reasonably satisfactory to ADMINISTRATIVE
AGENT. BORROWER will permit ADMINISTRATIVE AGENT, at ADMINISTRATIVE AGENT’s
expense if ADMINISTRATIVE AGENT’s employees make the inspection, but at
BORROWER’s expense if ADMINISTRATIVE AGENT contracts with third parties at
reasonable expense to make the inspection and if an EVENT OF DEFAULT has
occurred, to examine upon reasonable notice and in a manner that does not
interfere with the PROJECT or BORROWER’s operations all books, records, contracts,
plans, drawings, PERMITS, bills and statements of account pertaining to the
PROJECT and to inspect upon reasonable notice all books and records pertaining
to its operations and to make extracts therefrom and copies thereof.


 


6.3.7        Cause to be paid to the proper authorities when due all
federal, state and local taxes, including taxes on the PROPERTY, required to be
paid or withheld by it except those which BORROWER is contesting in good faith
and with respect to which adequate reserves have been set aside.


 


6.3.8        Allow AGENT and AGENT’s representatives, at any time upon
reasonable notice, and at its expense, to conduct such inspections of the
PROJECT and BORROWER’s assets, books and records as AGENT may deem necessary
for the protection of BANKS’ interest. Provided, however, such inspections
shall occur during regular business hours, or such other time as BORROWER and
AGENT may agree, shall not occur more frequently than twice per fiscal year
unless there shall have occurred and be continuing an EVENT OF DEFAULT and
shall not unreasonably interfere with BORROWER’s business operations. Any such
inspections shall be made and any certificates issued are solely for the
benefit and protection of BANKS, and BORROWER shall not be entitled to rely
thereon.


 


6.3.9        Make all repairs, renewals or replacements necessary to keep
its plant, properties and equipment in good working condition.


 


6.3.10      Comply in all material respects with all
laws and regulations applicable to its form of organization, offering, sale and
regulation of securities, business, and the ownership of its property and the
ownership and operation of the PROJECT on the PROPERTY.


 


38

















 


6.3.11      Maintain and preserve all PERMITS,
licenses, rights, privileges, charters, franchises and easements (including but
not limited to the WATER EASEMENTS) that it are required to hold to construct
and operate the PROJECT and comply with the terms, conditions, limitations and
restrictions contained in such PERMITS, licenses, rights, privileges, charters,
franchises and easements (including but not limited to the WATER EASEMENTS).


 


6.3.12      Observe and comply with all laws, rules,
regulations and orders of any government or government agency relating to
health, safety, pollution, hazardous materials or other environmental matters
to the extent non-compliance could result in a material liability or otherwise
have a MATERIAL ADVERSE EFFECT on BORROWER or the operation of the PROJECT.


 


6.3.13      Maintain primary banking accounts (including
those accounts containing BORROWER’s equity capital) with the COLLATERAL AGENT,
other than as otherwise agreed by ADMINISTRATIVE AGENT.  AGENT agrees that BORROWER’s payroll and
other non-primary accounts may be maintained at local financial institutions on
the conditions that, (i) if required by AGENT, BORROWER, AGENT and such
local financial institution enter into a control agreement to perfect AGENT’s
security interest in such accounts, (ii) that deposits in such accounts do
not exceed at any time $250,000.00 and (iii) that BORROWER provide AGENT
with copies of the monthly statements relating to such deposit accounts.


 


6.3.14      BORROWER shall execute and deliver to
ADMINISTRATIVE AGENT no later than 90 days following CLOSING such SWAP
CONTRACTS as ADMINISTRATIVE AGENT shall require, in form satisfactory to
ADMINISTRATIVE AGENT.


 


6.3.15      BORROWER will notify ADMINISTRATIVE AGENT
of the existence of any MARKETING AND RISK MANAGEMENT CONTRACTS (not already
executed) before entering into the same. 
BORROWER agrees to promptly execute and deliver to the COLLATERAL AGENT
such collateral assignments and take such other actions as the COLLATERAL AGENT
requests to perfect BANKS’ security interest in BORROWER’s rights under such
MARKETING AND RISK MANAGEMENT CONTRACTS. 
In addition, BORROWER hereby collaterally assigns to ADMINISTRATIVE
AGENT all equipment and systems warranties relating to the PROJECT, all
operational, design and intellectual property licenses applicable to the
PROJECT, together with all utility contracts, and grain procurement contracts,
as the same are obtained by BORROWER from time to time, together with all
consents from the vendors and other parties under such contracts.


 


6.4           Negative Covenants. 
During the time period that any amounts are outstanding under any
OBLIGATION, or this AGREEMENT or the LOAN DOCUMENTS to which BORROWER is a
party, unless the REQUIRED BANKS shall otherwise agree in writing, BORROWER
shall not:


 


6.4.1        Permit any security interest or mortgage
or lien on the PROPERTY or PROJECT or other real or personal property BORROWER
owns now or in the future, or assign any interest that it may have in any
assets or subordinate any rights that it may have in any assets 


 


39

















 


now
or in the future, except: (i) liens, assignments, or subordinations in
favor of AGENT; (ii) liens describing the BOND COLLATERAL in the BOND
DOCUMENTS; (iii) liens for taxes or assessments or other governmental
charges not delinquent or which BORROWER is contesting in good faith and for
which, if required under GAAP or by ADMINISTRATIVE AGENT, BORROWER has reserved
against such taxes, assessments or governmental charges in an amount reasonably
satisfactory to ADMINISTRATIVE AGENT; (iv) liens which secure purchase money
indebtedness allowed under this AGREEMENT; (v) liens, pledges, or deposits
under workers’ compensation, unemployment insurance, Social Security, or
similar legislation, but only if any such lien is being contested by BORROWER
in good faith by appropriate proceedings which prevent foreclosure and has
established reserves which ADMINISTRATIVE AGENT reasonably deems sufficient to
satisfy such lien in the event of an adverse determination; and (vi) liens
created in favor of a hedging account entity and described in the control
agreements to which such hedging account entity, BORROWER and AGENT are party.


 


6.4.2        Agree or consent to any material changes in the PLANS, any
material changes in the terms and provisions of the CONSTRUCTION CONTRACT or,
to any one change order in an amount exceeding $250,000.00, or all change
orders when combined exceeding $500,000.00, or any material change to any other
contract identified in Section 4 of this AGREEMENT.


 


6.4.3        Incorporate in the PROJECT any materials, fixtures or property
that are subject to the claims of any other person, whether pursuant to
conditional sales contract, security agreement, lease, mortgage, except as
permitted under Section 6.4.1.


 


6.4.4        Lease, sell, transfer, convey, assign, or otherwise transfer
all or any material part of the interest of BORROWER in the PROJECT or the
PROPERTY.


 


6.4.5        Make any changes in BORROWER’S general manager for the
PROJECT without the prior written consent of ADMINISTRATIVE AGENT, which
consent shall not be unreasonably withheld.


 


6.4.6        Engage in any line of business materially different from that
presently engaged in by BORROWER.


 


6.4.7        Make any change to its organizational structure as a limited
liability company.


 


6.4.8        Make any material changes in its accounting procedures for
tax or other purposes.


 


6.4.9        Incur any INDEBTEDNESS except: (i) debt arising under
this AGREEMENT or another agreement with AGENT (including, but not limited to,
SWAP CONTRACTS and documentation relating to letters of credit); (ii) unsecured
trade credit incurred in the ordinary course of business; (iii) indebtedness
in existence on the date of this AGREEMENT and disclosed in advance to
ADMINISTRATIVE AGENT in writing and approved by ADMINISTRATIVE AGENT, (iv) the
BOND DEBT provided that the BOND 


 


40

















 


DOCUMENTS only permit
principal payments on such BOND DEBT to be made after the LOAN TERMINATION DATE
applicable to the TERM LOANS or such earlier time as the TERM LOANS have been
indefeasibly paid in full and (iv) indebtedness set forth on Schedule
6.4.9, attached hereto and by this reference made a part hereof, if any.  BORROWER shall not borrow other than pursuant
to this AGREEMENT or as otherwise permitted hereunder, without permission of
ADMINISTRATIVE AGENT.  Provided, however,
ADMINISTRATIVE AGENT consents to BORROWER in the ordinary course of its
business, borrowing up to $100,000.00 each year, without further permission
from ADMINISTRATIVE AGENT.


 


6.4.10      Consolidate, or merge or pool or syndicate
or otherwise combine with any other entity, or give any preferential treatment,
make any advance, directly or indirectly, by way of loan, gift, bonus, or
otherwise, to any entity directly or indirectly controlling or affiliated with
or controlled by BORROWER, or any other entity, or to any partner or employee
of BORROWER, or of any such entity.


 


6.4.11      After completion of the PROJECT, make, or
commit to make, capital expenditures (including  the
total amount of any capital leases, but excluding ADMINISTRATIVE AGENT approved
plant construction) in an aggregate amount exceeding $1,000,000.00 in any
single fiscal year, nor capital expenditures not included in a ADMINISTRATIVE
AGENT approved CAPEX BUDGET.


 


6.4.12      BORROWER
will not pay, declare or make, or agree to pay, declare or make, directly or
indirectly, any dividend or distribution on any class of its membership
interests, or make any payment on account of, or set apart assets for a sinking
or other analogous fund for, the purchase, redemption, retirement, defeasance
or other acquisition of, any membership interest, or any options, warrants, or
other rights to purchase any of the foregoing, whether now or hereafter
outstanding, or any payment in respect of INDEBTEDNESS, except for scheduled
interest payments on the BOND DEBT, whether or not subordinated to the
OBLIGATIONS, (each such dividend, distribution, set aside or payment, a “Restricted
Payment”), except, after the CONSTRUCTION LOAN TERMINATION DATE:


 


(a)           So
long as no EVENT OF DEFAULT has occurred and is continuing or would occur after
giving effect to the payment of the TAX DISTRIBUTION described in this
subsection, BORROWER may make TAX DISTRIBUTIONS to its members within thirty
(30) days prior to each June 15, September 15 and January 15,
each in an amount equal to one fourth (1⁄4) of the estimated income tax liability
to be incurred for such year by BORROWER’s members by reason of their
membership interest in BORROWER, based upon the most recent financial
information available to BORROWER.


 


(b)           BORROWER
may make a final TAX DISTRIBUTION to its members within thirty (30) days prior
to each April 15, so long as (a) no EVENT OF DEFAULT has occurred and
is continuing or would occur after giving effect to the payment of such final
TAX DISTRIBUTION described in this Section 6.4.12(b) and the
distributions permitted in Section 6.4.12(c), (b) BORROWER has
delivered to ADMINISTRATIVE AGENT 


 


41

















 


BORROWER’s annual audited financial
statements and compliance certificates as required in this AGREEMENT and (c) BORROWER
is in compliance with all of the financial and other covenants provided for in
this AGREEMENT and will remain so after giving effect to the payment of such
final TAX DISTRIBUTION described in this Section 6.4.12(b) and the
distributions permitted in Section 6.4.12(c), in an amount not to exceed
the positive difference between the total tax liability of BORROWER’s members
incurred by reason of their membership interest in BORROWER and the amounts
previously distributed to such members pursuant to Section 6.4.12(a),
provided, that if the difference between the total tax liability of BORROWER’s
members incurred by reason of their membership interest in BORROWER and the
amounts previously distributed to such members pursuant to Section 6.4.12(a) is
zero or a negative number, then no final TAX DISTRIBUTIONS may be made by
BORROWER under this Section 6.4.12(b).


 


(c)           So
long as (a) no EVENT OF DEFAULT has occurred and is continuing or would
occur after giving effect to the payment of the distribution described in this Section 6.4.12(c) and
the year ending quarter TAX DISTRIBUTION described in Section 6.4.12(b), (b) BORROWER
has delivered to ADMINISTRATIVE AGENT BORROWER’s annual audited financial
statements and compliance certificates as required in this AGREEMENT and (c) BORROWER
is in compliance with all of the financial and other covenants provided for in
this AGREEMENT and will remain so after giving effect to the payment of such
distribution described in this Section 6.4.12(c) and the year ending
quarter TAX DISTRIBUTION described Section 6.4.12(b), BORROWER may make
one distribution of NET INCOME each fiscal year, less any TAX DISTRIBUTIONS
previously made pursuant to Sections 6.4.12(a) and 6.4.12(b), based upon
the NET INCOME of BORROWER for the immediately preceding fiscal year in an
amount not to exceed the percentage of BORROWER’s NET INCOME for such preceding
fiscal year determined as follows:


 


	
  If BORROWER’s LEVERAGE RATIO is:

  	
   

  	
  Allowable distributions 

  up to:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Greater than or equal to 1.00 : 1.00

  	
   

  	
  45

  	
  %

  
	
  Less
  than 1.00 : 1.00 but greater than 0.75 : 1.00

  	
   

  	
  55

  	
  %

  
	
  Less than 0.75 : 1.00

  	
   

  	
  65

  	
  %

  



 


Notwithstanding anything contained in this
Agreement to the contrary, in no event shall any distributions, including, but
not limited to TAX DISTRIBUTIONS, be made prior to BORROWER’s full payment and
satisfaction of all of BORROWER’S OBLIGATIONS which have accrued to the date of
payment of such distributions including TAX DISTRIBUTIONS.  Further, in no event shall any distributions
be made prior to BORROWER’s full payment of all of BORROWER’S OBLIGATIONS which
have accrued to the date of payment of such distributions, including the
application of EXCESS CASH FLOW as provided for in this AGREEMENT.  In no event shall total distributions for any
fiscal year permitted in Sections 6.4.12(a) – Section 6.4.12(c) exceed
the amounts calculated in the table above.


 


42

















 


Distributions in respect of
NET INCOME for the prior year may not be paid until after confirmation of NET
INCOME in BORROWER’s financial statements submitted pursuant to Section 5.01(a).


 


6.4.13      Assume, guarantee, endorse or otherwise
becoming contingently liable for any obligations of any other person, except
for those guaranties outstanding at the time of execution of this AGREEMENT and
disclosed to ADMINISTRATIVE AGENT in writing.


 


6.4.14      Make sales to or purchases from any
affiliate of BORROWER or extend credit or make payments for services rendered
by any affiliate of BORROWER, unless such sales or purchases are made or such
services are rendered in the ordinary course of business and on terms and
conditions at least as favorable to BORROWER as the terms and conditions which
would apply in a similar transaction with a person or party not an affiliate of
BORROWER.


 


6.4.15      Sell or dispose of all or substantially
all its assets.


 


6.4.16      Redeem, purchase, or retire any of its
membership interests or grant or issue, or purchase or retire for any
consideration, any warrant, right or option pertaining thereto, or permit any
redemption, retirement, or other acquisition by BORROWER of the ownership of
the outstanding membership interests of BORROWER; provided however, that
BORROWER may redeem, purchase or retire its membership interest with funds that
otherwise would be available for distribution pursuant to Section 6.4.12(iii) above.


 


6.4.17      BORROWER
will not make or consent to any changes in the PLANS or to any change orders or
become a party to any contract for the performance of any work related to the
PROJECT or for the supplying of any labor, materials or services for the
construction of improvements that would have the effect of increasing the costs
of the PROJECT more than $250,000.00 individually (or $500,000.00 in the aggregate
with previous such cost increases) above those set forth in the TOTAL PROJECT
COST STATEMENT, except in such amounts and upon such terms and with such
parties as are approved in writing by the REQUIRED LENDERS.  No approval by the REQUIRED LENDERS of any
contract or change order will make BANKS responsible for the adequacy, form or
content of such contract or change order. 
BORROWER will expeditiously complete and fully pay for the development
and construction of the PROJECT in a good and workmanlike manner and in
accordance with the contracts, subcontracts and PLANS submitted to
ADMINISTRATIVE AGENT and in compliance with all applicable PERMITS and the
requirements of all Governmental Authorities, and any covenants, conditions,
restrictions and reservations applicable thereto, so that the COMPLETION DATE
occurs when provided for in this AGREEMENT. 
BORROWER assumes full responsibility for the compliance of the PLANS and
the PROJECT with all requirements of all PERMITS, Governmental Authorities and
with sound building and engineering practices, and notwithstanding any
approvals by ADMINISTRATIVE AGENT or the REQUIRED LENDERS, as applicable,
AGENTS and BANKS have no obligation or responsibility whatsoever for the PLANS
or any other matter incident to the PROJECT or related to the construction
and/or operation of the PROJECT.  


 


43

















 


BORROWER will correct or cause to be
corrected (a) any defect in improvements related to the PROJECT, (b) any
departure from the PLANS, PERMITS or any requirements of any Governmental
Authorities, and (c) any encroachment by any part of any structure located
on the LAND on any building line, easement, property line or restricted
area.  BORROWER will cause all roads
necessary for the efficient operation of the PROJECT to be completed and
dedicated (if dedication thereof is required by any Governmental Authority),
the bearing capacity of the soil on the LAND to be made sufficient to support
all improvements thereon, and sufficient local utilities to be made available
to the PROJECT and installed at costs (if any) set out in the TOTAL PROJECT
COST STATEMENT or SWORN CONSTRUCTION COST STATEMENT, on or before the
COMPLETION DATE.  No work may be performed
pursuant to any change order or pending change order to the PLANS prior to
delivery thereof to ADMINISTRATIVE AGENT. 
BORROWER will not incorporate into the PROJECT any materials, fixtures,
equipment or property that are subject to the liens or claims of any other
Person however created or arising by operation of law except as permitted in
this AGREEMENT.


 


6.4.18 
Without the prior written consent of ADMINISTRATIVE AGENT, BORROWER will
not exercise any option BORROWER may have to call for redemption or otherwise
prepay all or any part of the BOND DEBT, or prepay any Basis Payments under the
BOND LEASE.


 


SECTION 7 EVENTS OF DEFAULT, Rights and
Remedies.


 


7.1                                 EVENTS OF
DEFAULT. Each of the following shall be an EVENT OF DEFAULT and give
ADMINISTRATIVE AGENT the right to exercise its remedies under this AGREEMENT:


 


7.1.1         BORROWER shall fail to pay when due any OBLIGATIONS or any
other installment of principal or interest or fee payable to BANKS.


 


7.1.2         BORROWER shall fail
to provide reports and other information and otherwise comply with the provisions
of Section 6.1 above when due.


 


7.1.3       BORROWER shall fail to
observe or perform any other obligation to be observed or performed by it
hereunder (other than BORROWER’s obligations under Sections 4, 6.1, 6.2, 6.3.2,
6.3.4, 6.3.8, 6.3.13 and Section 6.4 hereof) or under any of the LOAN
DOCUMENTS.


 


7.1.4       BORROWER shall fail to
pay any INDEBTEDNESS in an aggregate principal amount in excess of $100,000.00
due any third party, and such failure shall continue beyond any applicable
grace period, or BORROWER shall default under any material agreement binding
BORROWER, and such default shall continue beyond any applicable grace period.


 


7.1.5       Any financial
statement, representation, warranty, or certificate made or furnished by or
with respect to BORROWER to AGENT in connection with this AGREEMENT, or as an
inducement to BANKS to enter into this AGREEMENT, or in any separate statement
or document to be delivered to AGENT hereunder, shall be materially false,
incorrect, or 


 


44

















 


incomplete when made.


 


7.1.6       BORROWER shall admit
its inability to pay its debts as they mature or shall make an assignment for
the benefit of itself or any of its creditors.


 


7.1.7       Proceedings in
bankruptcy, or for reorganization of BORROWER, or for the readjustment of debt
under the Bankruptcy Code, as amended, or any part thereof, or under any other
laws, whether state or federal, for the relief of debtors, now or hereafter
existing, shall be commenced against or by BORROWER and, except with respect to
any such proceedings instituted by BORROWER, shall not be discharged within
sixty (60) days of their commencement.


 


7.1.8       A receiver or trustee
shall be appointed for BORROWER or for any substantial part of its respective
assets, or any proceedings shall be instituted for the dissolution or the full
or partial liquidation of BORROWER, and except with respect to any such
appointments requested or instituted by BORROWER, such receiver or trustee
shall not be discharged within sixty (60) days of his appointment, and except
with respect to any such proceedings instituted by BORROWER, such proceedings
shall not be discharged within sixty (60) days of their commencement, or
BORROWER shall discontinue business or materially change the nature of its
business.


 


7.1.9       BORROWER shall suffer
final judgments for payment of money aggregating in excess of $100,000.00 which
are not covered, without reservation, by insurance and shall not discharge the
same within a period of thirty (30) days unless, pending further proceedings,
execution has not been commenced or, if commenced, has been effectively stayed.


 


7.1.10     A judgment creditor of BORROWER shall
obtain possession of any of BANKS’ collateral by any means, including (without
implied limitation) attachment, levy, distraint, replevin, or self-help which
is reasonably likely to have a MATERIAL ADVERSE EFFECT.


 


7.1.11       The construction of the PROJECT is
abandoned or shall be unreasonably delayed or be discontinued for a period of
thirty (30) consecutive calendar days, in each instance for reasons other than
acts of God, fire, storm, adverse weather, strikes, blackouts, labor
difficulties, riots, inability to obtain materials, equipment or labor,
governmental restrictions or any similar cause not subject to BORROWER’s
control and other than a change in the DESIGN-BUILDER as provided in Section 7.1.14.


 


7.1.12
BORROWER at any time prior to the completion of the PROJECT, shall delay
construction or suffer construction to be delayed for any period of time, for
any reason whatsoever, so that the completion of the PROJECT in accordance with
the PLANS approved by ADMINISTRATIVE AGENT cannot be accomplished, in the
reasonable judgment of ADMINISTRATIVE AGENT, by the COMPLETION DATE.


 


45

















 


7.1.13       The PROJECT is materially damaged or
destroyed by fire or other casualty and the loss, in the reasonable judgment of
ADMINISTRATIVE AGENT, is not adequately covered by insurance actually collected
or in the process of collection.


 


7.1.14     Fagen, Inc. shall cease to be the
DESIGN-BUILDER and BORROWER has not replaced the DESIGN-BUILDER, within thirty
(30) days following the termination of the same with the replacement contractor
to the satisfaction of ADMINISTRATIVE AGENT, which ADMINISTRATIVE AGENT
approval shall not be unreasonably withheld, but which approval may include a
bonding requirement in the reasonable exercise of ADMINISTRATIVE AGENT’s
judgment.


 


7.1.15       Any entity described
in any MARKETING AND RISK MANAGEMENT CONTRACTS approved by ADMINISTRATIVE AGENT
ceases to be the marketing agent of BORROWER, and BORROWER has not within
thirty (30) days following termination of any of the foregoing obtained a
replacement to ADMINISTRATIVE AGENT’s satisfaction, which ADMINISTRATIVE AGENT
approval will not be unreasonably withheld.


 


7.1.16      BORROWER shall fail to
maintain a general manager acceptable to ADMINISTRATIVE AGENT, or if BORROWER
has not within thirty (30) days following a termination of any such person
obtained a replacement to ADMINISTRATIVE AGENT’s satisfaction, which
ADMINISTRATIVE AGENT approval shall not unreasonably be withheld.


 


7.1.17      The filing of any mechanics’,
construction, materialmens’ or similar liens upon the PROPERTY and/or against
the PROJECT which are not released or bonded against (in a manner satisfactory
to ADMINISTRATIVE AGENT) for a period in excess of ten (10) BANKING DAYS
after the filing date of such lien, unless such lien is being contested by
BORROWER in good faith by appropriate proceedings which prevent foreclosure and
has established reserves which ADMINISTRATIVE AGENT reasonably deems sufficient
to satisfy such lien in the event of an adverse determination.


 


7.1.18      If BORROWER defaults under, or suffers a
default to exist under, or fails to comply with, keep or perform its
obligations under, the CONSTRUCTION CONTRACT or any other contract relating to
the PROJECT to which BORROWER is a party, or the CONSTRUCTION CONTRACT or any
such other contract relating to the PROJECT is terminated without the prior written
consent of ADMINISTRATIVE AGENT, which consent shall not be unreasonably
withheld.


 


7.1.19      The occurrence of a material deviation or
change in the PLANS approved by ADMINISTRATIVE AGENT without the prior written
approval of ADMINISTRATIVE AGENT, which approval shall not be unreasonably
withheld.


 


7.1.20      BORROWER fails to timely comply with its
obligations contained in that certain POST CLOSING LETTER of even date herewith
between AGENT and BORROWER relating to BORROWER’s post-closing obligations.


 


46
















 


7.1.21      BORROWER defaults under any contract for
the provision of electricity, natural gas, water or water service or any other
utility, or any such contract is terminated, revoked, altered, amended or
restated without the prior written consent of ADMINISTRATIVE AGENT.


 


7.1.22      BORROWER defaults under any grain
procurement contract or any such contract is terminated, revoked, altered,
amended or restated without the prior written consent of ADMINISTRATIVE AGENT.


 


7.1.23      BORROWER fails to timely make any payment
required after an EXCESS CASH FLOW REDUCTION DATE or REDUCTION DATE to bring
the outstanding principal balance of the LONG TERM REVOLVING NOTE within the
MAXIMUM AVAILABILITY after each such EXCESS CASH FLOW REDUCTION DATE or
REDUCTION DATE.


 


7.1.24      Any WATER EASEMENT terminates, is removed
or BORROWER’s rights thereunder are materially adversely affected.


 


7.1.25      BORROWER fails to comply with the terms,
conditions, limitations and restrictions contained in any PERMIT, or any PERMIT
is revoked.


 


7.1.26      Any default or event of default occurs on
the BOND LEASE or any other BOND DOCUMENT and continues beyond any applicable
grace or notice and cure period, the BOND LEASE terminates for any reason, the
City exercises or attempts to exercise any remedies under the BOND LEASE, or
the proceeds of the BONDS become no longer available to pay qualifying expenses
on the PROJECT for any reason.


 


7.1.27      BORROWER fails to continuously operate the
PROJECT at or near its capacity as listed in the Performance Guarantee Criteria
portion of the CONSTRUCTION CONTRACT.


 


7.2           Rights
and Remedies.  If an EVENT OF DEFAULT
shall have occurred and be continuing, ADMINISTRATIVE AGENT may refrain from
making any further disbursements hereunder (but ADMINISTRATIVE AGENT may make
disbursements after the occurrence of such an EVENT OF DEFAULT without thereby
waiving its rights and remedies hereunder), and ADMINISTRATIVE AGENT may
exercise any or all of the following rights and remedies:


 


7.2.1        ADMINISTRATIVE AGENT may declare the OBLIGATIONS to be
terminated, whereupon the same shall forthwith terminate, and ADMINISTRATIVE
AGENT shall have no further obligation to make any advances thereunder.


 


7.2.2        ADMINISTRATIVE AGENT may declare the entire unpaid principal
amount of the OBLIGATIONS then outstanding, all interest accrued and unpaid
thereon, and all other amounts payable under this AGREEMENT to be forthwith due
and payable, whereupon the OBLIGATIONS, all such accrued interest and all such
amounts shall become and be 


 


47

















 


forthwith due and payable,
without presentment, demand, protest or further notice of any kind, all of
which are hereby expressly waived by BORROWER.


 


7.2.3        AGENT may exercise and enforce its rights and remedies under
any or all of the LOAN DOCUMENTS.


 


7.2.4        AGENT may enter upon the PROPERTY, if allowed under
applicable law, and take possession thereof, together with the PROJECT then in
the course of construction, and proceed either in its own name or in the name
of BORROWER, as the attorney-in-fact of BORROWER (which authority is coupled
with an interest and is irrevocable by BORROWER) to complete or cause to be
completed the PROJECT, at the cost and expense of BORROWER.  If ADMINISTRATIVE AGENT elects to complete or
cause to be completed the PROJECT, it may do so according to the PLANS or
according to such changes, alterations or modifications in and to the PLANS as
ADMINISTRATIVE AGENT may reasonably deem appropriate; and ADMINISTRATIVE AGENT
may enforce or cancel all contracts let by BORROWER relating to construction of
the PROJECT, and/or let other contracts which in ADMINISTRATIVE AGENT’s
reasonable judgment, ADMINISTRATIVE AGENT deems advisable; and BORROWER shall
forthwith turn over and duly assign to ADMINISTRATIVE AGENT, as ADMINISTRATIVE
AGENT may from time to time require, contracts not already assigned to AGENT
relating to construction of the PROJECT, blueprints, shop drawings, bonds,
building permits, bills and statements of accounts pertaining to the PROJECT, whether
paid or not, and any other instruments or records in the possession of BORROWER
pertaining to the PROJECT.  In addition,
ADMINISTRATIVE AGENT and its contractors and agents may utilize all or any part
of the labor, materials, equipment, fixtures and articles of personal property
contracted for by BORROWER, whether or not previously incorporated into the
PROJECT, and BANKS may pay, settle or compromise all bills or claims which may
become a lien against the PROPERTY and/or the PROJECT, or any portion thereof.  BORROWER shall be liable under this AGREEMENT
to pay to ADMINISTRATIVE AGENT, on demand, any amount or amounts reasonably
expended by BANKS in so completing the PROJECT, together with any reasonable
costs, charges, or expenses incident thereto or resulting therefrom, all of
which shall be secured by the LOAN DOCUMENTS. In the event that a proceeding is
instituted against BORROWER for recovery and reimbursement of any moneys
expended by BANKS in connection with the completion of the PROJECT, a statement
of such expenditures, verified by the affidavit of an officer of ADMINISTRATIVE
AGENT, shall be prima facie evidence of the amounts so expended and of the
appropriateness and advisability of such expenditures; and the burden of
proving to the contrary shall be upon BORROWER. ADMINISTRATIVE AGENT shall have
the right to apply any funds which it agrees to disburse hereunder to bring
about the completion of the PROJECT and to pay the costs thereof; and if such
money so agreed to be disbursed is insufficient, in the sole judgment of
ADMINISTRATIVE AGENT, to complete the PROJECT, BORROWER agrees to promptly
deliver and pay to ADMINISTRATIVE AGENT such sum or sums of money as
ADMINISTRATIVE AGENT may from time to time demand for the purpose of completing
the PROJECT or of paying any liability, charge or expense which may have been
incurred or assumed by ADMINISTRATIVE AGENT under or in performance of this
AGREEMENT, 


 


48

















 


or for the purpose of
completing the PROJECT. It is expressly understood and agreed that in no event
shall BANKS be obligated, or liable in any way to complete the PROJECT or to
pay for the costs of construction thereof beyond the amount of the CONSTRUCTION
LOAN.


 


7.2.5        The ADMINISTRATIVE AGENT is hereby authorized at any time,
and from time to time, without written notice to BORROWER (any such notice
being expressly waived by BORROWER) and without regard to the source of any
funds, to instruct AGENT to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the BANKS to or for the credit or the account
of BORROWER against any and all of the obligations of BORROWER now or hereafter
existing under this AGREEMENT or the LOANS or any other LOAN DOCUMENT,
irrespective of whether or not the ADMINISTRATIVE AGENT shall have made any
demand under this AGREEMENT or such other LOAN DOCUMENT and although such
obligations may be unmatured.  The
ADMINISTRATIVE AGENT agrees promptly to notify BORROWER after any such setoff
and the application thereof, however, the parties hereto agree that the failure
to give such notice shall in no way affect the validity of such setoff and the
application.  The rights of the AGENT and
the BANKS under this Section 7.2.5 are in addition to other rights and
remedies the AGENT and the BANKS may have.


 


7.2.6        AGENT may exercise
any other rights and remedies available to it by law, in equity or agreement.


 


SECTION 8
Miscellaneous.


 


8.1           Inspections.  In addition to the inspections provided for
under Section 6.3.8 of this AGREEMENT above, BORROWER, DESIGN-BUILDER and
the other general contractors on the PROJECT shall be responsible for making
inspections of the PROJECT during the course of construction and shall
determine to their own satisfaction that the work done or materials supplied by
the DESIGN-BUILDER or any general contractor or SUBCONTRACTOR to whom payment
is to be made out of each disbursement has been properly done or supplied in
accordance with the CONSTRUCTION CONTRACT. If any work done or materials
supplied by the DESIGN-BUILDER or any SUBCONTRACTOR are not satisfactory to
BORROWER and/or its DESIGN-BUILDER and the same is not remedied within fifteen
(15) days of the discovery thereof, BORROWER will immediately notify
ADMINISTRATIVE AGENT in writing of such fact. It is expressly understood and
agreed that ADMINISTRATIVE AGENT and the INDEPENDENT INSPECTOR or other party
designated by AGENT may conduct such inspections of the PROJECT, subject to the
limitations expressed in this AGREEMENT, as AGENT may deem necessary for the
protection of BANKS’ interest, and that any inspections which may be made of
the PROJECT by AGENT will be made, solely for the benefit and protection of AGENT
and the BANKS, and that BORROWER will not rely thereon.


 


8.2           Indemnification
by BORROWER.  BORROWER shall bear all
loss, expense (including reasonable attorneys’ fees) and damage in connection
with, and agrees to reimburse, indemnify, defend and hold harmless BANKS, their
respective agents, servants and employees from, all claims, 


 


49

















 


demands and judgments made or recovered against
BANKS, their respective agents, servants and employees, because of damages,
fines, fees, penalties or other charges, bodily injuries, including death at
any time resulting there from, and/or because of damages to property (including
loss of use) from any cause whatsoever, arising out of, incidental to, or in
connection with the construction of the PROJECT, the operation of the PROJECT,
permits applicable to the PROJECT (including, but not limited to, noncompliance
with such permits) and other matters relating to the PROJECT, whether or not
due to any act of omission or commission, including negligence of BORROWER or
the DESIGN-BUILDER or of its or their employees, servants or agents, other than
gross negligence or willful misconduct of BANKS or their respective
agents.  BORROWER’s liability hereunder
shall not be limited to the extent of insurance carried by or provided by
BORROWER or subject to any exclusion from coverage in any insurance
policy.  OBLIGATIONS of BORROWER under
this Section shall survive the payment of the CONSTRUCTION NOTES and the
TERM NOTES.  Notwithstanding the
foregoing, BORROWER’s liability hereunder shall terminate at such time as a
private or governmental plaintiff is barred by the applicable statute of
limitations from bringing a claim for the actions giving rise to any BANK’s
claim for indemnification hereunder.


 


8.3           No
Waiver; Cumulative Remedies.  No
failure or delay on the part of AGENT or BORROWER in exercising any right,
power or remedy under the LOAN DOCUMENTS shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, power or remedy
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy under the LOAN DOCUMENTS. The remedies provided in the
LOAN DOCUMENTS are cumulative and not exclusive of any remedies provided by law
or in equity.


 


8.4           Amendments,
Etc.  No amendment, modification,
termination or waiver of any provision of any of the LOAN DOCUMENTS or consent
to any departure by BORROWER therefrom shall be effective unless the same shall
be in writing and signed by the applicable AGENT and BORROWER, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No notice to or demand on BORROWER in any
case shall entitle BORROWER to any other or further notice or demand in similar
or other circumstances.


 


8.5           Addresses
for Notices, Etc.  Except as
otherwise expressly provided herein, all notices, requests, demands and other
communications provided for under the LOAN DOCUMENTS shall be in writing and
sent by first class certified mail, return receipt requested, recognized
overnight courier or telecopy (if by telecopy with a confirmation mailed within
two BUSINESS DAYS thereafter), to the applicable party at its address indicated
below:


 


	
  If to BORROWER:

  	
   

  	
  Highwater Ethanol, LLC

  	
   

  	
   

  
	
   

  	
   

  	
  205 North Main Street, P.O. Box 96

  	
   

  	
   

  
	
   

  	
   

  	
  Lamberton, Minnesota 56152

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: President

  	
   

  	
   

  
	
   

  	
   

  	
  Telecopy:

  	
  507-752-6162 

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  If to AGENT:

  	
   

  	
  First National Bank of Omaha

  	
   

  	
   

  
	
   

  	
   

  	
  1620
  Dodge St. STOP 1050

  	
   

  	
   

  
	
   

  	
   

  	
  Omaha, NE 68197-1050

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: Jeremy Reineke

  	
   

  	
   

  
	
   

  	
   

  	
  Telecopy: 402-633-3519

  	
   

  	
   

  
							



 


50

















 


or, as to each party, at such other address as shall
be designated by such party in a written notice to the other party complying as
to delivery with the terms of this Section. All such notices, requests, demands
and other communications shall, when mailed, be effective when deposited in the
mails or with an overnight courier, addressed as aforesaid, or, when
telecopied, is effective when confirmation of receipt is received, except that
notices or requests to AGENT pursuant to any of the provisions hereunder shall
not be effective until received by AGENT.


 


8.6           Time
of Essence.  Time is of the essence
in the performance of this AGREEMENT.


 


8.7           Execution
in Counterparts.  The LOAN DOCUMENTS
may be executed in any number of counterparts, each of which when so executed
and delivered shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same instrument.


 


8.8           Binding
Effect, Assignment.  The LOAN
DOCUMENTS to which they are parties shall be binding upon and inure to the
benefit of BORROWER and BANKS and their respective successors and assigns,
except that BORROWER shall not have the right to assign its rights thereunder
or any interest therein without the prior written consent of ADMINISTRATIVE
AGENT which consent shall not be unreasonably withheld.  Each BANK is extending its COMMITMENTS in the
LOANS for its own account, and no BANK may participate, subparticipate, assign
or otherwise transfer any of its COMMITMENTS or interests in the LOANS without
the prior written consent of ADMINISTRATIVE AGENT, which consent shall not be
unreasonably withheld, and ADMINISTRATIVE AGENT shall notify BORROWER of any such
participation, subparticipation, assignment or transfer.


 


8.9           Governing
Law.  The LOAN DOCUMENTS, to the
extent they do not otherwise provide, shall be governed by, and construed in
accordance with, the laws of the State of Nebraska, exclusive of its choice of
laws principles.


 


8.10         Severability
of Provisions.  Any provision of this
AGREEMENT, which is prohibited or unenforceable, shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof.


 


8.11         Headings.  Section headings in this AGREEMENT are
included herein for convenience of reference only and shall not constitute a
part of this AGREEMENT for any other purpose.


 


8.12         Integration.  This AGREEMENT supersedes, replaces and
terminates any prior oral offers, negotiations, understandings or agreements
and any commitment letters or similar writings relating to any of the matters
contemplated herein.


 


8.13         Post-Closing
Matters.  BORROWER, AGENT, and the
BANKS acknowledge that the closing of the LOANS provided for herein may occur
prior to the time BORROWER has delivered 


 


51

















 


to AGENT all of the items, documents, consents and
certifications required pursuant to the terms and provisions of this AGREEMENT.  In the event thereof, BORROWER agrees to
execute and deliver to AGENT at CLOSING a post closing letter in form and
substance acceptable to ADMINISTRATIVE AGENT (the “POST CLOSING LETTER”).  BORROWER acknowledges and agrees that,
notwithstanding any terms or provisions of this AGREEMENT to the contrary,
AGENT and the BANKS are not, and shall not be, required to make available or
fund any portion of the LOANS provided for in this AGREEMENT until each of the
items, documents, consents and certifications described in the POST CLOSING
LETTER have been delivered to ADMINISTRATIVE AGENT in form and content
reasonably acceptable to ADMINISTRATIVE AGENT.


 


SECTION 9 
AGENT


 


Section 9.1             Appointment
and Authority.


 


(a)  Each of the
BANKS (in its capacity as a BANK) hereby irrevocably appoints, designates and
authorizes AGENT to take such action on its behalf under the provisions of this
AGREEMENT and each other LOAN DOCUMENT and to exercise such powers and perform
such duties as are expressly delegated to AGENT by the terms of this AGREEMENT
or any other LOAN DOCUMENT, together with such actions as are reasonably
incidental thereto. The provisions of this Section 9 are solely for the benefit
of AGENT and the BANKS, and neither the BORROWER nor any other PERSON shall
have rights as a third party beneficiary of any of such provisions.


 


                (b)  Each
BANK hereby appoints FNBO as its ADMINISTRATIVE AGENT under and for purposes of
each LOAN DOCUMENT.  FNBO hereby accepts
this appointment and agrees to act as the ADMINISTRATIVE AGENT for the BANKS in
accordance with the terms of this AGREEMENT. 
Each BANK appoints and authorizes the ADMINISTRATIVE AGENT to act on
behalf of such BANK under each LOAN DOCUMENT and, in the absence of other
written instructions from the REQUIRED BANKS received from time to time by the
ADMINISTRATIVE AGENT (with respect to which the ADMINISTRATIVE AGENT agrees
that it will comply, except as otherwise provided in this Section 9.1 or
as otherwise advised by counsel), to exercise such powers hereunder and
thereunder as are specifically delegated to or required of the ADMINISTRATIVE
AGENT by the terms hereof and thereof, together with such powers as may be
reasonably incidental thereto. 
Notwithstanding any provision to the contrary contained elsewhere in any
LOAN DOCUMENT, the ADMINISTRATIVE AGENT shall not have any duties or
responsibilities, except those expressly set forth herein, nor shall the
ADMINISTRATIVE AGENT have or be deemed to have any fiduciary relationship with
any BANK, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into any LOAN DOCUMENT or otherwise
exist against the ADMINISTRATIVE AGENT. 
Without limiting the generality of the foregoing sentence, the use of
the term “agent” in this AGREEMENT or any other LOAN DOCUMENT with reference to
the ADMINISTRATIVE AGENT is not intended to connote any fiduciary or other
implied (or express) obligations arising under agency doctrine of any
applicable law.  Instead, such term is
used merely as a matter of market custom, and is intended to create or reflect
only an administrative relationship between independent contracting parties.


 


52

















 


(c)  Each BANK (in its capacity as a BANK) hereby
appoints FNBO as its COLLATERAL AGENT under and for purposes of each LOAN
DOCUMENT.  FNBO hereby accepts this
appointment and agrees to act as the COLLATERAL AGENT for the BANKS in
accordance with the terms of this AGREEMENT. 
Each of the BANKS hereby irrevocably appoints and authorizes the
COLLATERAL AGENT to act as the agent of such BANK for purposes of acquiring,
holding and enforcing any and all mortgages, deeds of trust, pledges, liens,
security interests or other charges or encumbrances of any nature on collateral
granted by BORROWER or other PERSON to the COLLATERAL AGENT in order to secure
any of the OBLIGATIONS, together with such powers and discretion as are
reasonably incidental thereto. In this connection the COLLATERAL AGENT, and any
co-agents, sub-agents and attorneys-in-fact appointed by the COLLATERAL AGENT,
as the case may be, pursuant to Section 9.5 for purposes of holding or
enforcing any mortgages, deeds of trust, pledges, liens, security interests or
other charges or encumbrances of any nature on any collateral (or any portion
thereof) granted under the LOAN DOCUMENTS, or for exercising any rights and
remedies thereunder at the direction of the COLLATERAL AGENT, as the case may
be, shall be entitled to the benefits of all provisions of this Section 9
as if set forth in full herein with respect thereto.  Notwithstanding any provision to the contrary
contained elsewhere in any LOAN DOCUMENT, the COLLATERAL AGENT shall not have
any duties or responsibilities, except those expressly set forth herein or in
the other LOAN DOCUMENTS, nor shall the COLLATERAL AGENT have or be deemed to
have any fiduciary relationship with any BANK, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into any LOAN DOCUMENT or otherwise exist against the COLLATERAL AGENT.  Without limiting the generality of the
foregoing sentence, the use of the term “agent” in this AGREEMENT or any other
LOAN DOCUMENT with reference to the COLLATERAL AGENT is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a matter
of market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.


 


(d)  Each BANK hereby appoints and authorizes the
COLLATERAL AGENT to act as depository for the COLLATERAL AGENT, on behalf of
the BANKS, and as the securities intermediary or bank with respect to any
securities accounts held with the COLLATERAL AGENT for the benefit of the
COLLATERAL AGENT, on behalf of the BANKS, with such powers as are expressly
delegated to the COLLATERAL AGENT by the terms of this AGREEMENT, together with
such other powers as are reasonably incidental thereto. The COLLATERAL AGENT
hereby accepts this appointment and agrees to act as the depository for the
COLLATERAL AGENT, on behalf of the BANKS, and as the securities intermediary or
bank with respect to securities accounts held with the COLLATERAL AGENT, for
the benefit of the COLLATERAL AGENT, on behalf of the BANKS, in accordance with
the terms of this AGREEMENT. 
Notwithstanding any provision to the contrary contained elsewhere in any
LOAN DOCUMENT, the COLLATERAL AGENT shall not have any duties or responsibilities,
except those expressly set forth herein, nor shall the COLLATERAL AGENT have or
be deemed to have any fiduciary relationship with any BANK, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into any LOAN DOCUMENT or otherwise exist against the COLLATERAL
AGENT.  Without limiting the generality
of the foregoing sentence, the use of the term “agent” in this AGREEMENT with
reference to the COLLATERAL AGENT is not intended to connote any fiduciary or
other implied (or express) obligations arising under agency doctrine of any
applicable law. Instead, such term is 


 


53

















 


used merely as a matter of market custom, and is intended to create or
reflect only an administrative relationship between independent contracting
parties.


 


Section 9.2             Rights
as a BANK.  Each Person serving as
AGENT hereunder or under any other LOAN DOCUMENT shall have the same rights and
powers in its capacity as a BANK as any other BANK and may exercise the same as
though it were not an AGENT.  Each such
Person and its affiliates may accept deposits from, lend money to, act as the
financial advisor or in any other advisory capacity for and generally engage in
any kind of business with BORROWER or affiliate thereof as if such Person were
not an AGENT hereunder and without any duty to account therefor to the BANKS or
any other AGENT.


 


Section 9.3             Exculpatory
Provisions.  No AGENT shall have any
duties or obligations except those expressly set forth herein and in the other
LOAN DOCUMENTS.  Without limiting the
generality of the foregoing, no AGENT shall:


 


(i)            be subject to any fiduciary or other
implied duties, regardless of whether an EVENT OF DEFAULT has occurred and is
continuing;


 


(ii)           have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby or by the other LOAN DOCUMENTS
that such AGENT is required to exercise as directed in writing by the REQUIRED
BANKS; provided that such AGENT shall not be
required to take any action that, in its opinion or the opinion of its counsel,
may expose the AGENT to liability or that is contrary to any LOAN DOCUMENT or
applicable law; or


 


(iii)          except as expressly set forth herein
and in the other LOAN DOCUMENTS, have any duty to disclose, nor shall any AGENT
be liable for any failure to disclose, any information relating to BORROWER or
any of its affiliates that is communicated to or obtained by the PERSON serving
as an AGENT or any of its affiliates in any capacity.


 


No AGENT shall be liable for any action taken or not
taken by it (i) with the prior written consent or at the request of the
REQUIRED BANKS (or such other number or percentage of the Lenders as may be
necessary, or as such AGENT may believe in good faith to be necessary, under
the circumstances as provided in Section 9) or (ii) in the absence of
its own gross negligence or willful misconduct. 
Each AGENT shall be deemed not to have knowledge of any EVENT OF DEFAULT
unless and until notice describing such EVENT OF DEFAULT is given to such AGENT
in writing by BORROWER.


 


No AGENT shall be responsible for or have any duty to ascertain or
inquire into (i) any statement, warranty or representation made in or in
connection with this AGREEMENT or any other LOAN DOCUMENT, (ii) the
contents of any certificate, report or other document delivered hereunder or
thereunder or in connection herewith or therewith, (iii) the performance
or observance of any of the covenants, agreements or other terms or conditions
set forth herein or therein or the occurrence or 


 


54

















 


continuance of any EVENT OF DEFAULT, (iv) the validity,
enforceability, effectiveness or genuineness of this AGREEMENT, any other LOAN
DOCUMENT or any other agreement, instrument or document, or the perfection or
priority of any mortgage, deed of trust, pledge, lien, security interest or
other charge or encumbrance of any nature created or purported to be created by
any LOAN DOCUMENT, or (v) the satisfaction of any condition set forth in
this AGREEMENT or any other LOAN DOCUMENT, other than to confirm receipt of
items expressly required to be delivered to any such AGENT.


 


9.4           Reliance by AGENT.  Each AGENT shall be entitled to rely upon,
and shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing
(including any electronic message, internet or intranet website posting or
other distribution) believed by it to be genuine and to have been signed, sent
or otherwise authenticated by the proper PERSON.  Each AGENT also may rely upon any statement
made to it orally or by telephone and believed by it to have been made by the
proper PERSON, and shall not incur any liability for relying thereon.  Each AGENT may consult with legal counsel
(who may be counsel for any of the Borrowers), independent accountants and
other experts selected by it, and shall not be liable for any action taken or
not taken by it in accordance with the advice of any such counsel, accountants
or experts.


 


9.5           Delegation of
Duties.  Each AGENT may perform any
and all of its duties and exercise any and all of its rights and powers
hereunder or under any other LOAN DOCUMENT by or through any one or more
sub-agents appointed by such AGENT.  Each
AGENT and any such sub-agent may perform any and all of its duties and exercise
its rights and powers by or through their respective affiliates or subsidiaries.  The exculpatory provisions of this Section 9
shall apply to any such sub-agent and to the affiliates and subsidiaries of
such AGENT and any such sub-agent, and shall apply to their respective
activities in connection with their acting as AGENT.


 


9.6           Resignation or
Removal of AGENT.  Any AGENT may
resign from the performance of all of its functions and duties hereunder and/or
under the other LOAN DOCUMENTS at any time by giving thirty (30) days’ prior notice to BORROWER and
the BANKS.  Any AGENT also may be removed
at any time by the REQUIRED BANKS upon thirty (30) days’ prior notice. Such
resignation or removal shall take effect upon the appointment of a successor
AGENT, in accordance with this Section 9.6.


 


Upon any notice of resignation by any AGENT or upon the removal of any
AGENT by the REQUIRED BANKS, the BANKS shall, so long as no EVENT OF DEFAULT
has occurred and is continuing, with the consent (not to be unreasonably
withheld or delayed) of BORROWER, appoint a successor to such AGENT hereunder
and under each other LOAN DOCUMENT who shall be a commercial bank having a
combined capital and surplus of at least Two Hundred Fifty Million and
No/100ths Dollars ($250,000,000.00).  If
no successor AGENT has been appointed by the BANKS within thirty (30) days
after the date such notice of resignation was given by such AGENT or the
REQUIRED BANKS elected to remove such AGENT, any BANK may petition any court of
competent jurisdiction for the appointment of a successor AGENT.  Such court may thereupon, after such notice,
if any, as it may deem proper, appoint a successor AGENT, as applicable, who
shall serve as such AGENT, hereunder and under each other LOAN DOCUMENT until
such time, if any, 


 


55

















 


as the BANKS appoint a successor AGENT, as provided above.  Upon the acceptance of a successor’s
appointment as an AGENT hereunder, such successor shall succeed to and become
vested with all of the rights, powers, privileges and duties of the retiring or
removed AGENT, and the retiring or removed AGENT shall be discharged from all
of its duties and obligations hereunder or under the other LOAN DOCUMENTS.  After the retirement or removal of any AGENT
hereunder and under the other LOAN DOCUMENTS, the provisions of this Section 9
shall continue in effect for the benefit of such retiring or removed AGENT, its
sub-agents and their respective affiliates and subsidiaries in respect of any
actions taken or omitted to be taken by any of them while the retiring AGENT
was acting as AGENT.


 


If a retiring or removed AGENT is the COLLATERAL AGENT, such COLLATERAL
AGENT will promptly transfer all of the deposit accounts and security accounts
of BORROWER relating to this AGREEMENT to the possession or control of the
successor COLLATERAL AGENT, and the COLLATERAL AGENT and BORROWER will execute
and deliver such notices, instructions and assignments as may be reasonably
necessary or desirable to transfer the rights of the COLLATERAL AGENT with
respect thereto to the successor COLLATERAL AGENT.


 


If a retiring or removed AGENT is the COLLATERAL AGENT, such COLLATERAL
AGENT will promptly transfer any collateral for the LOANS in the possession or
control of such COLLATERAL AGENT to the successor COLLATERAL AGENT, and the
COLLATERAL AGENT and BORROWER will execute and deliver such notices,
instructions and assignments as may be reasonably necessary or desirable to
transfer the rights of the COLLATERAL AGENT with respect to such collateral
property for the LOANS to the successor COLLATERAL AGENT.


 


9.7           No Amendment to
Duties of AGENT Without Consent.  No
AGENT shall be bound by any waiver, amendment, supplement or modification of
this AGREEMENT or any other LOAN DOCUMENT that affects its rights or duties
hereunder or thereunder unless such AGENT shall have given its prior written
consent, in its capacity as AGENT, thereto.


 


9.8           Non-Reliance on
AGENT and Other BANKS.  Each BANK
acknowledges that it has, independently and without reliance upon any AGENT or
any other BANK or any of their affiliates or subsidiaries and based on such
documents and information as it has deemed appropriate, made its own credit
analysis of the PROJECT and BORROWER and has made its own decision to enter
into this AGREEMENT and make the LOANS. 
Each BANK also acknowledges that it will, independently and without
reliance upon any AGENT or any other BANK or any of their affiliates or
subsidiaries and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this AGREEMENT, any other LOAN DOCUMENT or
any related agreement or any document furnished hereunder or thereunder.


 


9.9           COLLATERAL AGENT May File
Proofs of Claim.  In case of the
pendency of any bankruptcy or insolvency proceeding relative to BORROWER (including
any event described in Sections 7.1.6, 7.1.7 or 7.1.8 of this AGREEMENT, the
COLLATERAL AGENT (irrespective of whether the principal of any LOAN shall then
be due and payable as herein expressed or by declaration or otherwise and
irrespective of whether the COLLATERAL AGENT or any other 


 


56

















 


BANK shall have made any demand on BORROWER) shall be entitled and
empowered, but shall not be obligated to, by intervention in such proceeding or
otherwise:


 


9.9.1        to
file and prove a claim for the whole amount of the principal and interest owing
and unpaid in respect of the LOANS and all other OBLIGATIONS that are owing and
unpaid and to file such other documents as may be necessary or advisable in
order to have the claims of the BANKS (including any claim for the reasonable
compensation, expenses, disbursements and advances of the BANKS and their
respective agents and counsel and all other amounts due the BANKS under this
AGREEMENT or the other LOAN DOCUMENTS) allowed in such judicial proceeding;


 


9.9.2        to
collect and receive any monies or other property payable or deliverable on any
such claims and to distribute the same; and


 


9.9.3        any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar
official in any such judicial proceeding is hereby authorized by each BANK to
make such payments to the COLLATERAL AGENT and, in the event that the
COLLATERAL AGENT may consent to the making of such payments directly to the
BANKS, to pay to the COLLATERAL AGENT any amount due for the reasonable
compensation, expenses, disbursements and advances of the AGENT and their
respective agents and counsel, and any other amounts due the AGENT under this
AGREEMENT and the other LOAN DOCUMENTS.


 


9.10         Collateral Matters.  The BANKS irrevocably authorize the
COLLATERAL AGENT, upon the direction of the ADMINISTRATIVE AGENT, to release
any mortgage, deed of trust, pledge, lien, security interest or other charge or
encumbrance of any nature on any property granted to or held by the COLLATERAL
AGENT under any LOAN DOCUMENT upon BORROWER’s full and final satisfaction of
the OBLIGATIONS.  Upon request by the
COLLATERAL AGENT at any time, the BANKS will confirm in writing the COLLATERAL
AGENT’s authority to release its interest in particular types or items of
property pursuant to this Section 9.10. 
In each case as specified in this Section 9.10, the COLLATERAL
AGENT will, at BORROWER’s expense, execute and deliver to BORROWER such
documents as BORROWER may reasonably request to evidence the release of such
item of collateral from the assignment and security interest granted under the
LOAN DOCUMENTS in accordance with the terms of the LOANS DOCUMENTS and this Section 9.10.


 


Notwithstanding anything to the contrary in any LOAN DOCUMENT, the
powers conferred on the COLLATERAL AGENT under the LOAN DOCUMENTS are solely to
protect its interest (on behalf of the BANKS) in the collateral securing the
LOANS and shall not impose any duty upon it to exercise any such powers.  Except for the reasonable care of any such
collateral in its possession and the accounting for moneys actually received by
it under the LOAN DOCUMENTS, the COLLATERAL AGENT shall have no duty as to any
such collateral, or responsibility, for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any investment property constituting collateral, whether or
not the COLLATERAL AGENT has or is deemed to have knowledge of such matters, or
(ii) taking any necessary steps to preserve rights against prior parties
or any other rights pertaining to any such 


 


57

















 


collateral.  The COLLATERAL AGENT
shall be deemed to have exercised reasonable care in the custody and
preservation of any collateral in its possession if such collateral is accorded
treatment substantially equal to that which it accords its own property.


The COLLATERAL AGENT shall not be liable for interest on any money or
assets received by it.  Assets held in
trust by the COLLATERAL AGENT need not be segregated from other assets except
to the extent required by law.


 


Before the COLLATERAL AGENT acts or refrains from acting, it may
require a certificate of an appropriate officer of BORROWER at the expense of
BORROWER.  The COLLATERAL AGENT shall not
be liable for any action it takes or omits to take in good faith in reliance on
such officer’s certificate.


 


The COLLATERAL AGENT shall not be liable for any action that it takes
or omits to take in good faith that it reasonably believes to be authorized or
within its rights or powers under the LOAN DOCUMENTS.  The COLLATERAL AGENT shall not be bound to
make any investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, notice, request, direction,
consent, order, bond, debenture, or other paper or document, but the COLLATERAL
AGENT, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit and, if the COLLATERAL AGENT shall
determine to make such further inquiry or investigation, it shall be entitled,
upon reasonable notice to BORROWER, to examine the books, records and premises
of BORROWER, personally or by agent or attorney and to consult with the officers
and representatives of BORROWER, including BORROWER’s accountants and
attorneys.


 


The COLLATERAL AGENT shall be under no obligation to exercise any of
the rights or powers vested in it by the LOAN DOCUMENTS at the request, order
or direction of the BANKS unless such BANKS have offered to the COLLATERAL
AGENT security or indemnity reasonably satisfactory to the COLLATERAL AGENT
against the costs, expenses and liabilities that may be incurred by it in
compliance with such request, order or direction.  The COLLATERAL AGENT shall not be required to
give any bond or surety in respect of the performance of its powers and duties
under the LOAN DOCUMENTS.


 


The COLLATERAL AGENT may from time to time, at its option, perform any
act that BORROWER agrees hereunder or under any LOAN DOCUMENT to perform and
that BORROWER shall fail to perform after being requested in writing so to
perform (it being understood that no such request need be given after the
occurrence of an EVENT OF DEFAULT) and the COLLATERAL AGENT may from time to
time take any other action that the COLLATERAL AGENT reasonably deems necessary
for the maintenance, preservation or protection of any of the collateral for
the LOANS or of its security interest therein.


 


The COLLATERAL AGENT is authorized to endorse, in the name of BORROWER,
any item, howsoever received by the COLLATERAL AGENT, representing any payment
on or other proceeds of any of the collateral for the LOANS.


 


9.11         Indemnification.  Each
BANK other than AGENT jointly and severally agrees to indemnify AGENT (to the
extent not reimbursed by BORROWER), ratably according to the respective 


 


58

















 


COMMITMENTS of the BANKS, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against AGENT
acting as AGENT in any way relating to or arising out of this AGREEMENT or any
other LOAN DOCUMENT or any action taken or omitted by AGENT acting as the AGENT
under this AGREEMENT or any other LOAN DOCUMENT, provided
that no BANK shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from AGENT’s gross negligence or willful misconduct in
connection with AGENT acting as AGENT. 
Without limitation of the foregoing, each BANK jointly and severally
agrees to reimburse AGENT promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees) incurred by AGENT in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or otherwise)
of, or legal advice in respect of rights or responsibilities under, this
AGREEMENT or any other LOAN DOCUMENT to the extent that AGENT is not reimbursed
for such expenses by BORROWER.


 


A CREDIT AGREEMENT MUST BE IN WRITING TO BE ENFORCEABLE UNDER NEBRASKA
LAW.  TO PROTECT YOU (BORROWER) AND US
(LENDER) FROM ANY MISUNDERSTANDINGS OR DISAPPOINTMENTS, ANY CONTRACT, PROMISE,
UNDERTAKING, OR OFFER TO FOREBEAR REPAYMENT OF MONEY OR TO MAKE ANY OTHER
FINANCIAL ACCOMMODATION IN CONNECTION WITH THIS LOAN OF MONEY OR GRANT OR
EXTENSION OF CREDIT, OR ANY AMENDMENT OF, CANCELLATION OF, WAIVER OF, OR
SUBSTITUTION FOR ANY OR ALL OF THE TERMS OR PROVISIONS OF ANY INSTRUMENT OR
DOCUMENT EXECUTED IN CONNECTION WITH THIS LOAN OF MONEY OR GRANT OR EXTENSION
OF CREDIT, MUST BE IN WRITING TO BE EFFECTIVE.


 


[SIGNATURE PAGES FOLLOW]


 


59
















 


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


 


	
   

  	
  HIGHWATER ETHANOL, LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian Kletscher

  
	
   

  	
   

  	
  Brian Kletscher, President

  
	
   

  	
   

  	
   

  
	
   

  	
  FIRST NATIONAL BANK OF OMAHA, in 

  its capacity as a BANK, 

  ADMINISTRATIVE AGENT 

  and COLLATERAL AGENT

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeremy Reineke

  
	
   

  	
   

  	
  Jeremy Reineke, Second

  
	
   

  	
   

  	
  Vice President

  
				



 


60

















 


	
   

  	
  AGSTAR
  FINANCIAL SERVICES, PCA, as a

  
	
   

  	
  BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ron G. Monson

  
	
   

  	
  Name:

  	
  Ron
  G. Monson

  
	
   

  	
  Title:

  	
  VP

  



 

















 


	
   

  	
  UNITED
  FCS, as a BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Chris Petersen

  
	
   

  	
  Name:

  	
  Chris
  Petersen

  
	
   

  	
  Title:

  	
  VP – Wholesale Lending

  



 

















 


	
   

  	
  FIRST
  BANK & TRUST, as a BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Keith Eichacker

  
	
   

  	
  Name:

  	
  Keith
  Eichacker

  
	
   

  	
  Title:

  	
  SVP

  



 

















 


	
   

  	
  GRANITE
  FALLS BANK, as a BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Craig A. Bakkelund

  
	
   

  	
  Name:

  	
  Craig
  A. Bakkelund

  
	
   

  	
  Title:

  	
        Vice
  President

  



 

















 


	
   

  	
  HERITAGE
  BANK, as

  
	
   

  	
  a
  BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Don Mathews

  
	
   

  	
  Name:

  	
  Don
  Mathews

  
	
   

  	
  Title:

  	
       Vice
  President

  



 

















 


	
   

  	
  DEERE
  CREDIT, INC., as a BANK

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael P. Kuehn

  
	
   

  	
  Name:
      Michael P. Kuehn

  
	
   

  	
  Title:

  	
  Manager,
  AFS Johnston Credit Operations

  
				



 
















 


EXHIBIT A


Construction Note Form


 


CONSTRUCTION NOTE


 


	
  Note
  Date:

  	
   

  	
  April 24,
  2008

  	
   

  	
  $

  



Maturity Date:  February 26,
2010


 


FOR VALUE RECEIVED, HIGHWATER ETHANOL, LLC, a Minnesota limited
liability company (“BORROWER”), promises to pay to the order of FIRST NATIONAL
BANK OF OMAHA (“BANK”), at its principal office in Omaha, Nebraska or such
other address as BANK or holder may designate from time to time, the principal
sum of
                                              
Dollars
($                          ),
or the amount shown on BANK’s records to be outstanding, plus interest
(calculated on the basis of actual days elapsed in a 360-day year) accruing
each day on the unpaid principal balance at the annual interest rates defined
below. Absent manifest error, BANK’s records shall be conclusive evidence of
the principal and accrued interest owing hereunder.


 


This CONSTRUCTION NOTE is executed pursuant to a Construction Loan
Agreement (“LOAN AGREEMENT”) between BORROWER and BANKS dated of even date
herewith.  All capitalized terms not
otherwise defined in this CONSTRUCTION NOTE shall have the meanings provided in
the LOAN AGREEMENT.


 


INTEREST ACCRUAL.  Interest on the principal amount outstanding
on the CONSTRUCTION LOAN shall accrue at the rate provided for in the LOAN
AGREEMENT.  Interest shall be calculated
on the basis of a 360-day year, counting the actual number of days elapsed, and
will adjust monthly as described in the LOAN AGREEMENT.


 


REPAYMENT TERMS.  Until the CONSTRUCTION LOAN TERMINATION DATE
applicable to this CONSTRUCTION NOTE, interest only shall be payable monthly,
commencing June 8, 2008.  On the
CONSTRUCTION LOAN TERMINATION DATE applicable to this CONSTRUCTION NOTE, all
principal and accrued interest shall be due and payable.  The LOAN AGREEMENT describes the TERM NOTES
that may be used by BORROWER to pay this CONSTRUCTION NOTE.


 


PREPAYMENT.  The LOAN AGREEMENT contains provisions
regarding prepayment.


 


ADDITIONAL TERMS AND CONDITIONS. The LOAN AGREEMENT, and any amendments or
substitutions, contains additional terms and conditions, including default and
acceleration provisions, which are incorporated into this CONSTRUCTION NOTE by
reference.  BORROWER agrees to pay all
costs of collection, including reasonable attorneys’ fees and legal expenses
incurred by BANK if this CONSTRUCTION NOTE is not paid as provided above.  This CONSTRUCTION NOTE shall be governed by
the substantive laws of the State of Nebraska, exclusive of its choice of laws
principles.


 


WAIVER OF PRESENTMENT AND NOTICE OF DISHONOR.  BORROWER
and any other person who signs, guarantees or endorses this CONSTRUCTION NOTE,
to the extent allowed by law, hereby waives presentment, demand for payment,
notice of dishonor, protest, and any notice relating to the acceleration of the
maturity of this CONSTRUCTION NOTE.


 


[SIGNATURE PAGE FOLLOWS]


 

















 


Executed as of the Note Date first above written.


 


 


	
   

  	
  HIGHWATER ETHANOL, LLC, a Minnesota

  
	
   

  	
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  



 


2

















 


EXHIBIT B


Fixed Rate Note


 


FIXED
RATE NOTE


 


	
  Note Date:

  	
   

  	
  $

  



Maturity Date:


 


FOR VALUE RECEIVED,
HIGHWATER ETHANOL, LLC, a Minnesota limited liability company (“BORROWER”),
promises to pay to the order of FIRST NATIONAL BANK OF OMAHA (“AGENT”), at its
principal office or such other address as AGENT or holder may designate from
time to time, the principal sum of
                                                                        
Dollars
($                    ),
or the amount shown on AGENT’s records to be outstanding, plus interest
(calculated on the basis of actual days elapsed in a 360-day year) accruing
each day on the unpaid principal balance at the annual interest rates defined
below.  Absent manifest error, AGENT’s
records shall be conclusive evidence of the principal and accrued interest
owing hereunder.


 


This FIXED RATE NOTE is executed pursuant to a Construction Loan
Agreement between BORROWER and BANKS dated as of April 24, 2008, (the
Construction Loan Agreement, together with all amendments, modifications and
supplements thereto and all restatements and replacements thereof is called the
“AGREEMENT”).  All capitalized terms not
otherwise defined in this note shall have the meanings provided in the
AGREEMENT.


 


INTEREST ACCRUAL.  Interest on the principal amount outstanding
shall accrue at the rate provided for in the AGREEMENT, and adjusting as
provided for in the AGREEMENT.  Interest
shall be calculated on the basis of a 360-day year, counting the actual number
of days elapsed.


 


REPAYMENT TERMS.  Principal shall be
due and payable in the amounts and on the dates set forth in Schedule I
attached to the AGREEMENT, and incorporated herein by reference, and accrued
and unpaid interest shall be due and payable in arrears on the same dates that
principal installments are due.  Any
remaining principal balance, plus any accrued but unpaid interest, shall be
fully due and payable on
                                              ,
if not sooner paid.


 


PREPAYMENT.  This FIXED RATE NOTE may be prepaid in
accordance with the terms of the AGREEMENT and the payment of the fees, costs
and expenses provided for in the AGREEMENT.


 


ADDITIONAL TERMS AND CONDITIONS.  This FIXED RATE NOTE is executed pursuant to
the AGREEMENT.  The AGREEMENT, and any
amendments or substitutions thereof or thereto, contains additional terms and
conditions, including default and acceleration provisions, which are
incorporated into this FIXED RATE NOTE by reference.


 

















 


The aggregate unpaid principal amount hereof
plus interest shall become immediately due and payable without demand or
further action on the part of BANK upon the occurrence of an EVENT OF DEFAULT
as set forth under the AGREEMENT or any other LOAN DOCUMENT.  If the maturity date of this FIXED RATE NOTE
is accelerated as a consequence of an EVENT OF DEFAULT, then BANK shall have
all the rights and remedies provided for in the AGREEMENT, the other LOAN
DOCUMENTS or otherwise available at law or in equity.  The rights, powers, privileges, options and remedies
of BANK provided in the AGREEMENT, the other LOAN DOCUMENTS or otherwise
available at law or in equity shall be cumulative and concurrent, and may be
pursued singly, successively or together at the sole discretion of BANK, and
may be exercised as often as occasion therefor shall occur.  No delay or discontinuance in the exercise of
any right, power, privilege, option or remedy shall be deemed a waiver of such
right, power, privilege, option or remedy, nor shall the exercise of any right,
power, privilege, option or remedy be deemed an election of remedies or a
waiver of any other right, power, privilege, option or remedy.  Without limiting the generality of the
foregoing, BANK’s waiver of an EVENT OF DEFAULT shall not constitute a waiver
of acceleration in connection with any future EVENT OF DEFAULT.  BANK may rescind any acceleration of this
FIXED RATE NOTE without in any way waiving or affecting any acceleration of
this FIXED RATE NOTE in the future as a consequence of an EVENT OF DEFAULT.  BANK’s acceptance of partial payment or
partial performance shall not in any way affect or rescind any acceleration of
this FIXED RATE NOTE made by BANK.


 


Unless prohibited by law, BORROWER will pay
on demand all reasonable costs of collection, reasonable legal expenses and
reasonable attorneys’ fees and costs incurred or paid by BANK in collecting
and/or enforcing this FIXED RATE NOTE. 
Furthermore, BANK reserves the right to offset without notice all funds
held by BANK against debts owing to BANK by BORROWER.


 


WAIVER OF PRESENTMENT AND NOTICE OF DISHONOR.  BORROWER and any
other person who signs, guarantees or endorses this FIXED RATE NOTE, to the
extent allowed by law, hereby waives presentment, demand for payment, notice of
dishonor, protest, and any notice relating to the acceleration of the maturity
of this FIXED RATE NOTE.


 


[SIGNATURE PAGE FOLLOWS]


 


2

















 


Executed as of the Note Date first above
written.


 


 


	
   

  	
  HIGHWATER ETHANOL, LLC, a Minnesota

  
	
   

  	
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  



 


3

















 


EXHIBIT C


Variable Rate Note


 


VARIABLE
RATE NOTE


 


	
  Note Date:

  	
   

  	
  $

  



Maturity Date:


 


FOR VALUE RECEIVED,
HIGHWATER ETHANOL, LLC, a Minnesota limited liability company (“BORROWER”),
promises to pay to the order of FIRST NATIONAL BANK OF OMAHA (“BANK”), at its
principal office or such other address as BANK or holder may designate from
time to time, the principal sum of
                                
and 00/100 Dollars
($                              ),
or the amount shown on BANK’s records to be outstanding, plus interest
(calculated on the basis of actual days elapsed in a 360-day year) accruing
each day on the unpaid principal balance at the annual interest rates defined
below.  Absent manifest error, BANK’s
records shall be conclusive evidence of the principal and accrued interest
owing hereunder.


 


This VARIABLE RATE NOTE is executed pursuant to a Construction Loan
Agreement between BORROWER and BANK dated as of April 24, 2008, (the
Construction Loan Agreement, together with all amendments, modifications and
supplements thereto and all restatements and replacements thereof is called the
“AGREEMENT”).  All capitalized terms not
otherwise defined in this note shall have the meanings provided in the
AGREEMENT.


 


INTEREST ACCRUAL.  Interest on the principal amount outstanding
shall accrue at the rate provided for in the AGREEMENT, adjusted as provided
for in the AGREEMENT.  Interest shall be
calculated on the basis of a 360-day year, counting the actual number of days
elapsed.


 


INCENTIVE
PRICING.  The
interest rate applicable to this VARIABLE RATE NOTE is subject to reduction
after a date six months subsequent to the CONSTRUCTION LOAN TERMINATION DATE,
as provided for in Section 2.15 of the AGREEMENT.


 


REPAYMENT TERMS.  Interest and
principal shall be due and payable at the times, in the amounts and applied in
the manner provided for in Section 2.5 of the AGREEMENT.  Any remaining principal balance, plus any
accrued but unpaid interest, shall be fully due and payable on the Maturity
Date, if not sooner paid.


 


PREPAYMENT.  BORROWER may prepay this VARIABLE RATE NOTE
in full or in part at any time; provided, however, that any prepayment fees
provided for in the AGREEMENT shall be due at the time of any such prepayment.  Any prepayment may be applied in inverse
order of maturity or as BANK in its sole discretion may deem appropriate.  Such prepayment shall not excuse BORROWER
from making subsequent payments each quarter until the indebtedness is paid in
full.


 


ADDITIONAL TERMS AND CONDITIONS.  This VARIABLE RATE NOTE is executed 


 

















 


pursuant to the AGREEMENT.  The
AGREEMENT, and any amendments or substitutions thereof or thereto, contains
additional terms and conditions, including default and acceleration provisions,
which are incorporated into this VARIABLE RATE NOTE by reference.


 


The aggregate unpaid principal amount hereof
plus interest shall become immediately due and payable without demand or
further action on the part of BANK upon the occurrence of an EVENT OF DEFAULT
as set forth under the AGREEMENT or any other LOAN DOCUMENT.  If the maturity date of this VARIABLE RATE
NOTE is accelerated as a consequence of an EVENT OF DEFAULT, then BANK shall
have all the rights and remedies provided for in the AGREEMENT, the other LOAN DOCUMENTS
or otherwise available at law or in equity. 
The rights, powers, privileges, options and remedies of BANK provided in
the AGREEMENT, the other LOAN DOCUMENTS or otherwise available at law or in
equity shall be cumulative and concurrent, and may be pursued singly,
successively or together at the sole discretion of BANK, and may be exercised
as often as occasion therefor shall occur. 
No delay or discontinuance in the exercise of any right, power,
privilege, option or remedy shall be deemed a waiver of such right, power,
privilege, option or remedy, nor shall the exercise of any right, power,
privilege, option or remedy be deemed an election of remedies or a waiver of
any other right, power, privilege, option or remedy.  Without limiting the generality of the
foregoing, BANK’s waiver of an EVENT OF DEFAULT shall not constitute a waiver
of acceleration in connection with any future EVENT OF DEFAULT.  BANK may rescind any acceleration of this
VARIABLE RATE NOTE without in any way waiving or affecting any acceleration of
this VARIABLE RATE NOTE in the future as a consequence of an EVENT OF
DEFAULT.  BANK’s acceptance of partial
payment or partial performance shall not in any way affect or rescind any
acceleration of this VARIABLE RATE NOTE made by BANK.


 


Unless prohibited by law, BORROWER will pay
on demand all reasonable costs of collection, reasonable legal expenses and
reasonable attorneys’ fees and costs incurred or paid by BANK in collecting
and/or enforcing this VARIABLE RATE NOTE. 
Furthermore, BANK reserves the right to offset without notice all funds
held by BANK against debts owing to BANK by BORROWER.


 


WAIVER OF PRESENTMENT AND NOTICE OF
DISHONOR.  BORROWER
and any other person who signs, guarantees or endorses this VARIABLE RATE NOTE,
to the extent allowed by law, hereby waives presentment, demand for payment,
notice of dishonor, protest, and any notice relating to the acceleration of the
maturity of this VARIABLE RATE NOTE.


 


[SIGNATURE PAGE FOLLOWS]


 


2

















 


Executed as of the Note Date first above
written.


 


	
   

  	
  HIGHWATER ETHANOL, LLC, a Minnesota

  
	
   

  	
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  



 


3

















 


EXHIBIT D


Long Term Revolving Note


 


LONG
TERM REVOLVING NOTE


 


	
  Note Date:

  	
   

  	
  $

  



Maturity Date:


 


FOR VALUE RECEIVED,
HIGHWATER ETHANOL, LLC, a Minnesota limited liability company (“BORROWER”),
promises to pay to the order of FIRST NATIONAL BANK OF OMAHA (“BANK”), at its
principal office or such other address as BANK or holder may designate from
time to time, the principal sum of
                          
and 00/100 Dollars ($5,000,000.00) or the amount shown on BANK’s records to be
outstanding, plus interest (calculated on the basis of actual days elapsed in a
360-day year) accruing each day on the unpaid principal balance at the annual
interest rates defined below.  Absent
manifest error, BANK’s records shall be conclusive evidence of the principal
and accrued interest owing hereunder.


 


This LONG TERM REVOLVING NOTE is executed pursuant to a Construction
Loan Agreement between BORROWER and BANKS dated as of April 24, 2008, (the
Construction Loan Agreement, together with all amendments, modifications and
supplements thereto and all restatements and replacements thereof is called the
“AGREEMENT”).  All capitalized terms not
otherwise defined in this note shall have the meanings provided in the
AGREEMENT.


 


INTEREST ACCRUAL.  Interest on the principal amount outstanding
shall accrue at the rate provided for in the AGREEMENT, adjusted as provided
for in the AGREEMENT.  Interest shall be
calculated on the basis of a 360-day year, counting the actual number of days
elapsed.


 


REVOLVING FEATURE.  Subject to the MAXIMUM AVAILABILITY, BORROWER
may reborrow, on a revolving basis, that principal amount repaid on this LONG
TERM REVOLVING NOTE.  Pursuant to this
revolving loan feature BANK will lend BORROWER, from time to time until
maturity of this LONG TERM REVOLVING NOTE such sums as BORROWER may request by
reasonable same day notice to BANK, received by BANK not later than 11:00 A.M.
on Friday, or the next BANKING DAY thereafter, each week but which shall not
exceed in the aggregate principal amount at any one time outstanding, the
MAXIMUM AVAILABILITY then applicable to this LONG TERM REVOLVING NOTE.  BORROWER may borrow, repay and reborrow
hereunder, from the date of this LONG TERM REVOLVING NOTE until the maturity of
this LONG TERM REVOLVING NOTE, said amount or any lesser sum.


 


INCENTIVE
PRICING.  The
interest rate applicable to this LONG TERM REVOLVING NOTE is subject to
reduction after a date six months subsequent to CONSTRUCTION LOAN TERMINATION
DATE, as provided for in Section 2.15 of the AGREEMENT.


 

















 


REPAYMENT TERMS.  Interest and
principal shall be due and payable at the times, in the amounts and applied in
the manner provided for in Section 2.5 of the AGREEMENT.  Any remaining principal balance, plus any
accrued but unpaid interest, shall be fully due and payable on the Maturity
Date, if not sooner paid.  On each REDUCTION
DATE and EXCESS CASH FLOW REDUCTION DATE, BORROWER shall pay and apply to the
then outstanding principal balance of this LONG TERM REVOLVING NOTE the amount
necessary to reduce the outstanding principal balance of this LONG TERM
REVOLVING NOTE so that it is within the MAXIMUM AVAILABILITY applicable on each
such REDUCTION DATE and/or EXCESS CASH FLOW REDUCTION DATE.


 


PREPAYMENT.  BORROWER may prepay this LONG TERM REVOLVING
NOTE in full or in part at any time; provided, however, that any prepayment
fees provided for in the AGREEMENT shall be due at the time of any such
prepayment.  No payment applied to this
LONG TERM REVOLVING NOTE to bring the outstanding principal balance within the
MAXIMUM AVAILABILITY shall be the cause of a payment to BANK for interest rate
breakage fees or otherwise result in any prepayment fee.


 


ADDITIONAL TERMS AND CONDITIONS.  This LONG TERM REVOLVING NOTE is executed
pursuant to the AGREEMENT.  The
AGREEMENT, and any amendments or substitutions thereof or thereto, contains
additional terms and conditions, including default and acceleration provisions,
which are incorporated into this LONG TERM REVOLVING NOTE by reference.


 


The aggregate unpaid principal amount hereof
plus interest shall become immediately due and payable without demand or
further action on the part of BANK upon the occurrence of an EVENT OF DEFAULT
as set forth under the AGREEMENT or any other LOAN DOCUMENT.  If the maturity date of this LONG TERM
REVOLVING NOTE is accelerated as a consequence of an EVENT OF DEFAULT, then
BANK shall have all the rights and remedies provided for in the AGREEMENT, the
other LOAN DOCUMENTS or otherwise available at law or in equity.  The rights, powers, privileges, options and
remedies of BANK provided in the AGREEMENT, the other LOAN DOCUMENTS or
otherwise available at law or in equity shall be cumulative and concurrent, and
may be pursued singly, successively or together at the sole discretion of BANK,
and may be exercised as often as occasion therefor shall occur.  No delay or discontinuance in the exercise of
any right, power, privilege, option or remedy shall be deemed a waiver of such
right, power, privilege, option or remedy, nor shall the exercise of any right,
power, privilege, option or remedy be deemed an election of remedies or a
waiver of any other right, power, privilege, option or remedy.  Without limiting the generality of the
foregoing, BANK’s waiver of an EVENT OF DEFAULT shall not constitute a waiver
of acceleration in connection with any future EVENT OF DEFAULT.  BANK may rescind any acceleration of this
LONG TERM REVOLVING NOTE without in any way waiving or affecting any
acceleration of this LONG TERM REVOLVING NOTE in the future as a consequence of
an EVENT OF DEFAULT.  BANK’s acceptance
of partial payment or partial performance shall not in any way affect or
rescind any acceleration of this LONG TERM REVOLVING NOTE made by BANK.


 


2

















 


Unless prohibited by law, BORROWER will pay
on demand all reasonable costs of collection, reasonable legal expenses and
reasonable attorneys’ fees and costs incurred or paid by BANK in collecting
and/or enforcing this LONG TERM REVOLVING NOTE. 
Furthermore, BANK reserves the right to offset without notice all funds
held by BANK against debts owing to BANK by BORROWER.


 


WAIVER OF PRESENTMENT AND NOTICE OF
DISHONOR.  BORROWER
and any other person who signs, guarantees or endorses this LONG TERM REVOLVING
NOTE, to the extent allowed by law, hereby waives presentment, demand for
payment, notice of dishonor, protest, and any notice relating to the
acceleration of the maturity of this LONG TERM REVOLVING NOTE.


 


[SIGNATURE PAGE FOLLOWS]


 


3

















 


Executed as of the Note Date first above
written.


 


 


	
   

  	
  HIGHWATER ETHANOL, LLC, a Minnesota

  
	
   

  	
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  



 


4
















 


EXHIBIT E


Revolving Promissory Note


 


REVOLVING PROMISSORY NOTE


 


	
  Omaha, Nebraska

  	
   

  	
  $

  



Note Date: 
April 24, 2008


Maturity Date:  April 24, 2009


 


On or before April 24, 2009, HIGHWATER
ETHANOL, LLC (“BORROWER”), promises to pay to the order of FIRST NATIONAL BANK
OF OMAHA (“BANK”) at its headquarters in Omaha, Nebraska the principal sum
hereof, which shall be
                          
and no/100 Dollars
($                                  )
or so much thereof as may have been advanced by BANK and shown on the records
of BANK to be outstanding under this REVOLVING PROMISSORY NOTE and the
AGREEMENT (as defined below).  Interest
on the principal balance from time to time outstanding will accrue at the rate
provided for in the AGREEMENT, adjusting as provided for in the AGREEMENT.  Interest shall be calculated on the basis of
a 360-day year, counting the actual number of days elapsed.  Interest on the REVOLVING LOAN shall be
payable monthly, in arrears.


 


The interest rate applicable to this
REVOLVING NOTE is subject to reduction after a date six months subsequent to
the CONSTRUCTION LOAN TERMINATION DATE, as provided for in Section 2.15 of
the AGREEMENT.


 


This REVOLVING PROMISSORY NOTE is executed
pursuant to that certain Construction Loan Agreement dated April 24, 2008
between BANKS and BORROWER (the Construction Loan Agreement, together with all
amendments, modifications and supplements thereto and all restatements and
replacements thereof is called the (“AGREEMENT”).  The AGREEMENT, and any amendments or substitutions
thereof or thereto, contains additional terms and conditions, including default
and acceleration provisions, which are incorporated into this REVOLVING
PROMISSORY NOTE by reference.  All
capitalized terms not otherwise defined herein shall have the same meanings as
set forth in the AGREEMENT.


 


The aggregate unpaid principal amount hereof
plus interest shall become immediately due and payable without demand or
further action on the part of BANK upon the occurrence of an EVENT OF DEFAULT
as set forth under the AGREEMENT or any other LOAN DOCUMENT.  If the maturity date of this REVOLVING
PROMISSORY NOTE is accelerated as a consequence of an EVENT OF DEFAULT, then
BANK shall have all the rights and remedies provided for in the AGREEMENT, the
other LOAN DOCUMENTS or otherwise available at law or in equity.  The rights, powers, privileges, options and
remedies of BANK provided in the AGREEMENT, the other LOAN DOCUMENTS or
otherwise available at law or in equity shall be cumulative and concurrent, and
may be pursued singly, successively or together at the sole discretion of BANK,
and may be exercised as often as occasion therefor shall occur.  No delay or discontinuance in the exercise of
any right, power, privilege, option or remedy shall be deemed a waiver of such
right, power, privilege, 


 

















 


option or remedy, nor shall the exercise of
any right, power, privilege, option or remedy be deemed an election of remedies
or a waiver of any other right, power, privilege, option or remedy.  Without limiting the generality of the
foregoing, BANK’s waiver of an EVENT OF DEFAULT shall not constitute a waiver
of acceleration in connection with any future EVENT OF DEFAULT.  BANK may rescind any acceleration of this
REVOLVING PROMISSORY NOTE without in any way waiving or affecting any
acceleration of this REVOLVING PROMISSORY NOTE in the future as a consequence
of an EVENT OF DEFAULT.  BANK’s
acceptance of partial payment or partial performance shall not in any way
affect or rescind any acceleration of this REVOLVING PROMISSORY NOTE made by
BANK.


 


Unless prohibited by law, BORROWER will pay
on demand all reasonable costs of collection, reasonable legal expenses and
reasonable attorneys’ fees and costs incurred or paid by BANK in collecting
and/or enforcing this REVOLVING PROMISSORY NOTE.  Furthermore, BANK reserves the right to
offset without notice all funds held by BANK against debts owing to BANK by
BORROWER.


 


All makers and endorsers hereby waive
presentment, demand, protest and notice of dishonor, consent to any number of extensions
and renewals for any period without notice; and consent to any substitution,
exchange or release of collateral, and to the addition or releases of any other
party primarily or secondarily liable.


 


[SIGNATURE PAGE FOLLOWS]


 


2

















 


Executed as of the Note Date set forth above.


 


	
   

  	
  HIGHWATER ETHANOL, LLC, a Minnesota

  
	
   

  	
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Title:

  	
   

  



 


3

















 


EXHIBIT F


Real Estate
Description


 


PARCEL I (PROJECT
SITE)


 


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


 


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


 


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


 


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


 


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


 


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


 


AND ALSO


 


PARCEL II (PROJECT
SITE)


 


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


 


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


 

















 


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


 


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


 


Containing 0.27 acres, more or less.


 


AND ALSO


 


PARCEL III
(LAMBERTON ECONOMIC DEVELOPMENT AUTHORITY PARCEL)


 


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


 


2

















 


AND ALSO


 


PARCEL IV (ERICKSON
WELL SITE PARCEL)


 


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


 


AND ALSO


 


PARCEL V (GEIS WELL
SITE PARCEL)


 


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


 


3

















 


EXHIBIT G


Total
Project Cost Statement


 
















 


EXHIBIT H


BANKS’ COMMITMENTS


 


	
  BANK

  	
   

  	
  CONSTRUCTION

  LOAN/TERM LOAN

  COMMITMENT

  AMOUNT

  	
   

  	
  REVOLVING LOAN

  COMMITMENT

  AMOUNT

  	
   

  	
  TOTAL

  COMMITMENT,

  CONSTRUCTION

  LOAN/ TERM

  LOANS AND

  REVOLVING

  LOANS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AgStar Financial Services, PCA

  	
   

  	
  $

  	
  10,000,000.00

  	
   

  	
  N/A

  	
   

  	
  $

  	
  10,000,000.00

  	
   

  
	
  United FCS

  	
   

  	
  $

  	
  2,000,000.00

  	
   

  	
  N/A

  	
   

  	
  $

  	
  2,000,000.00

  	
   

  
	
  First Bank & Trust

  	
   

  	
  $

  	
  9,000,000.00

  	
   

  	
  $

  	
  1,000,000.00

  	
   

  	
  $

  	
  10,000,000.00

  	
   

  
	
  Granite Falls Bank

  	
   

  	
  $

  	
  500,000.00

  	
   

  	
  N/A

  	
   

  	
  $

  	
  500,000.00

  	
   

  
	
  Heritage Bank

  	
   

  	
  $

  	
  1,000,000.00

  	
   

  	
  N/A

  	
   

  	
  $

  	
  1,000,000.00

  	
   

  
	
  Deere Credit, Inc.

  	
   

  	
  $

  	
  13,646,000.00

  	
   

  	
  $

  	
  1,354,000.00

  	
   

  	
  $

  	
  15,000,000.00

  	
   

  
	
  First National Bank of Omaha

  	
   

  	
  $

  	
  14,254,000.00

  	
   

  	
  $

  	
  2,646,000.00

  	
   

  	
  $

  	
  16,900,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Totals

  	
   

  	
  $

  	
  50,400,000.00

  	
   

  	
  $

  	
  5,000,000.00

  	
   

  	
  $

  	
  55,400,000.00

  	
   

  



 

















 


EXHIBIT I


PERMITS


 


1.                                       Construction
Air Permit – NSPS Source


 


2.                                       Above Ground
Storage Tank Permit


 


3.                                       National
Pollution Discharge Elimination System Permit, consisting of:


·                                          Storm Water
Pollution Prevention Plan for Construction


·                                          NPDES/SDS
General Permit for Discharge


·                                          Storm Water
Pollution Prevention Plan for Industrial


·                                          Discharge of
Process, Non-contact Water (cooling water)


·                                          Industrial
Wastewater Treatment Pond Permit


·                                          NPDES/SDS
General Permit MNG420000 (Minnesota River Basin General Phosphorous Permit
Phase I)


 


4.                                       Building
Permits


·                                          State


·                                          County


·                                          Mechanical


·                                          Electrical


·                                          Structures


 


5.                                       Fire Protection
Permit


 


6.                                       Septic Tank and
Drain Field Permit


 


7.                                       Railroad
Permit/Approval


 


8.                                       Approval for
Access to County Road/Highway Access Permit


 


9.                                       Water Permits


·                                          Water Appropriations
Permit


·                                          Potable Water


 


10.                                 Water Treatment
Discharge Permit from the State of Minnesota


 


11.                                 Tobacco Trade
Bureau Permit


 


12.                                 Archeological
Survey


 


13.                                 Risk Management
Plan


 


14.                                 Spill
Prevention, Control and Countermeasure Plan


 

















 


15.           Operations
Permit


 


16.                                   Section 401
Water Quality Certification of USACE Section 10 Permit


 


17.                                   DNR Water
Appropriations Permit


 


18.                                   DNR General
Permit 97-0005 for Temporary Water Appropriation (if required)


 


19.                                   DNR Utility
Crossing License


 


20.                                   US Army Corps
of Engineers Section 10 Rivers and Harbors Act Permit for Work in
Navigable Waters


 


21.                                   MN DOT Utility
Permit on Trunk Highway 14 Right of Way


 


22.                                   SHPO
Concurrence on Findings of Cultural Resource Impacts


 


23.                                   Cottonwood
County Conditional Use Permit of a High Capacity Well


 


24.                                   Cottonwood
County Utility Permit


 


25.                                   Redwood County
Utility Permit


 


2

















 


EXHIBIT J


OUTSTANDING EQUITY
INTERESTS


 


Subscription Agreements in connection with the
following:


 


Highwater Ethanol, LLC Private Placement
Memorandum dated on or about April 1, 2008


 

















 


SCHEDULE “I”
TO CONSTRUCTION LOAN AGREEMENT


 


AMORTIZATION
SCHEDULE FIXED RATE LOAN – U.S. RULE (NO 

COMPOUNDING), 360 DAY YEAR


 


	
   

  	
   

  	
  Principal Payment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  $

  	
  144,906.00

  	
   

  
	
  2

  	
   

  	
  $

  	
  144,906.00

  	
   

  
	
  3

  	
   

  	
  $

  	
  144,906.00

  	
   

  
	
  4

  	
   

  	
  $

  	
  144,906.00

  	
   

  
	
  5

  	
   

  	
  $

  	
  144,906.00

  	
   

  
	
  6

  	
   

  	
  $

  	
  144,906.00

  	
   

  
	
  7

  	
   

  	
  $

  	
  144,906.00

  	
   

  
	
  8

  	
   

  	
  $

  	
  144,906.00

  	
   

  
	
  9

  	
   

  	
  $

  	
  144,906.00

  	
   

  
	
  10

  	
   

  	
  $

  	
  144,906.00

  	
   

  
	
  11

  	
   

  	
  $

  	
  144,906.00

  	
   

  
	
  12

  	
   

  	
  $

  	
  144,906.00

  	
   

  
	
  13

  	
   

  	
  $

  	
  156,506.00

  	
   

  
	
  14

  	
   

  	
  $

  	
  156,506.00

  	
   

  
	
  15

  	
   

  	
  $

  	
  156,506.00

  	
   

  
	
  16

  	
   

  	
  $

  	
  156,506.00

  	
   

  
	
  17

  	
   

  	
  $

  	
  156,506.00

  	
   

  
	
  18

  	
   

  	
  $

  	
  156,506.00

  	
   

  
	
  19

  	
   

  	
  $

  	
  156,506.00

  	
   

  
	
  20

  	
   

  	
  $

  	
  156,506.00

  	
   

  
	
  21

  	
   

  	
  $

  	
  156,506.00

  	
   

  
	
  22

  	
   

  	
  $

  	
  156,506.00

  	
   

  
	
  23

  	
   

  	
  $

  	
  156,506.00

  	
   

  
	
  24

  	
   

  	
  $

  	
  156,506.00

  	
   

  
	
  25

  	
   

  	
  $

  	
  168,671.00

  	
   

  
	
  26

  	
   

  	
  $

  	
  168,671.00

  	
   

  
	
  27

  	
   

  	
  $

  	
  168,671.00

  	
   

  
	
  28

  	
   

  	
  $

  	
  168,671.00

  	
   

  
	
  29

  	
   

  	
  $

  	
  168,671.00

  	
   

  
	
  30

  	
   

  	
  $

  	
  168,671.00

  	
   

  
	
  31

  	
   

  	
  $

  	
  168,671.00

  	
   

  
	
  32

  	
   

  	
  $

  	
  168,671.00

  	
   

  
	
  33

  	
   

  	
  $

  	
  168,671.00

  	
   

  
	
  34

  	
   

  	
  $

  	
  168,671.00

  	
   

  
	
  35

  	
   

  	
  $

  	
  168,671.00

  	
   

  
	
  36

  	
   

  	
  $

  	
  168,671.00

  	
   

  
	
  37

  	
   

  	
  $

  	
  182,538.00

  	
   

  
	
  38

  	
   

  	
  $

  	
  182,538.00

  	
   

  
	
  39

  	
   

  	
  $

  	
  182,538.00

  	
   

  
	
  40

  	
   

  	
  $

  	
  182,538.00

  	
   

  
	
  41

  	
   

  	
  $

  	
  182,538.00

  	
   

  
	
  42

  	
   

  	
  $

  	
  182,538.00

  	
   

  
	
  43

  	
   

  	
  $

  	
  182,538.00

  	
   

  



 

















 


	
  44

  	
   

  	
  $

  	
  182,538.00

  	
   

  
	
  45

  	
   

  	
  $

  	
  182,538.00

  	
   

  
	
  46

  	
   

  	
  $

  	
  182,538.00

  	
   

  
	
  47

  	
   

  	
  $

  	
  182,538.00

  	
   

  
	
  48

  	
   

  	
  $

  	
  182,538.00

  	
   

  
	
  49

  	
   

  	
  $

  	
  196,679.00

  	
   

  
	
  50

  	
   

  	
  $

  	
  196,679.00

  	
   

  
	
  51

  	
   

  	
  $

  	
  196,679.00

  	
   

  
	
  52

  	
   

  	
  $

  	
  196,679.00

  	
   

  
	
  53

  	
   

  	
  $

  	
  196,679.00

  	
   

  
	
  54

  	
   

  	
  $

  	
  196,679.00

  	
   

  
	
  55

  	
   

  	
  $

  	
  196,679.00

  	
   

  
	
  56

  	
   

  	
  $

  	
  196,679.00

  	
   

  
	
  57

  	
   

  	
  $

  	
  196,679.00

  	
   

  
	
  58

  	
   

  	
  $

  	
  196,679.00

  	
   

  
	
  59

  	
   

  	
  $

  	
  196,679.00

  	
   

  
	
  60

  	
   

  	
  $15,205,079.00 or the outstanding principal balance
  plus accrued and unpaid interest

  	
   

  



 


2

















 


SCHEDULE “II”
TO CONSTRUCTION LOAN AGREEMENT


 


AMORTIZATION
SCHEDULE VARIABLE RATE LOAN and LONG TERM 

REVOLVING LOAN– U.S. RULE (NO COMPOUNDING), 360 DAY YEAR


 


	
   

  	
   

  	
  Principal Payment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1

  	
   

  	
  $

  	
  146,922.57

  	
   

  
	
  2

  	
   

  	
  $

  	
  142,908.19

  	
   

  
	
  3

  	
   

  	
  $

  	
  148,613.25

  	
   

  
	
  4

  	
   

  	
  $

  	
  144,665.41

  	
   

  
	
  5

  	
   

  	
  $

  	
  145,537.42

  	
   

  
	
  6

  	
   

  	
  $

  	
  151,173.01

  	
   

  
	
  7

  	
   

  	
  $

  	
  147,325.93

  	
   

  
	
  8

  	
   

  	
  $

  	
  152,914.25

  	
   

  
	
  9

  	
   

  	
  $

  	
  149,135.71

  	
   

  
	
  10

  	
   

  	
  $

  	
  150,034.67

  	
   

  
	
  11

  	
   

  	
  $

  	
  164,776.16

  	
   

  
	
  12

  	
   

  	
  $

  	
  151,932.28

  	
   

  
	
  13

  	
   

  	
  $

  	
  157,398.88

  	
   

  
	
  14

  	
   

  	
  $

  	
  153,796.86

  	
   

  
	
  15

  	
   

  	
  $

  	
  159,214.19

  	
   

  
	
  16

  	
   

  	
  $

  	
  155,683.62

  	
   

  
	
  17

  	
   

  	
  $

  	
  156,622.04

  	
   

  
	
  18

  	
   

  	
  $

  	
  161,964.72

  	
   

  
	
  19

  	
   

  	
  $

  	
  158,542.41

  	
   

  
	
  20

  	
   

  	
  $

  	
  163,834.35

  	
   

  
	
  21

  	
   

  	
  $

  	
  160,485.63

  	
   

  
	
  22

  	
   

  	
  $

  	
  161,453.00

  	
   

  
	
  23

  	
   

  	
  $

  	
  175,151.66

  	
   

  
	
  24

  	
   

  	
  $

  	
  163,481.98

  	
   

  
	
  25

  	
   

  	
  $

  	
  168,643.38

  	
   

  
	
  26

  	
   

  	
  $

  	
  165,483.96

  	
   

  
	
  27

  	
   

  	
  $

  	
  170,592.46

  	
   

  
	
  28

  	
   

  	
  $

  	
  167,509.75

  	
   

  
	
  29

  	
   

  	
  $

  	
  168,519.46

  	
   

  
	
  30

  	
   

  	
  $

  	
  173,547.75

  	
   

  
	
  31

  	
   

  	
  $

  	
  170,581.37

  	
   

  
	
  32

  	
   

  	
  $

  	
  175,555.17

  	
   

  
	
  33

  	
   

  	
  $

  	
  172,667.80

  	
   

  
	
  34

  	
   

  	
  $

  	
  173,708.60

  	
   

  
	
  35

  	
   

  	
  $

  	
  186,287.96

  	
   

  
	
  36

  	
   

  	
  $

  	
  175,878.58

  	
   

  
	
  37

  	
   

  	
  $

  	
  180,712.41

  	
   

  
	
  38

  	
   

  	
  $

  	
  178,028.03

  	
   

  
	
  39

  	
   

  	
  $

  	
  182,805.07

  	
   

  
	
  40

  	
   

  	
  $

  	
  180,203.06

  	
   

  
	
  41

  	
   

  	
  $

  	
  181,289.28

  	
   

  
	
  42

  	
   

  	
  $

  	
  185,980.13

  	
   

  
	
  43

  	
   

  	
  $

  	
  183,503.10

  	
   

  



 

















 


	
  44

  	
   

  	
  $

  	
  188,135.45

  	
   

  
	
  45

  	
   

  	
  $

  	
  185,743.25

  	
   

  
	
  46

  	
   

  	
  $

  	
  186,862.87

  	
   

  
	
  47

  	
   

  	
  $

  	
  194,823.65

  	
   

  
	
  48

  	
   

  	
  $

  	
  189,163.59

  	
   

  
	
  49

  	
   

  	
  $

  	
  193,646.37

  	
   

  
	
  50

  	
   

  	
  $

  	
  191,471.09

  	
   

  
	
  51

  	
   

  	
  $

  	
  195,892.89

  	
   

  
	
  52

  	
   

  	
  $

  	
  193,806.03

  	
   

  
	
  53

  	
   

  	
  $

  	
  194,974.25

  	
   

  
	
  54

  	
   

  	
  $

  	
  199,303.48

  	
   

  
	
  55

  	
   

  	
  $

  	
  197,350.87

  	
   

  
	
  56

  	
   

  	
  $

  	
  201,617.30

  	
   

  
	
  57

  	
   

  	
  $

  	
  199,755.76

  	
   

  
	
  58

  	
   

  	
  $

  	
  200,959.84

  	
   

  
	
  59

  	
   

  	
  $

  	
  211,050.35

  	
   

  
	
  60

  	
   

  	
  $14,806,934.10 or the outstanding principal balance
  plus all accrued and unpaid interest

  	
   

  



 


2