EXHIBIT 10.10


 


INDUSTRIAL
WATER SUPPLY DEVELOPMENT AND DISTRIBUTION AGREEMENT


 


THIS INDUSTRIAL WATER SUPPLY DEVELOPMENT AND
DISTRIBUTION AGREEMENT (“Agreement”), is made this 27rd day of October, 2003,
between the CITY OF HERON LAKE, MINNESOTA, a Minnesota municipal corporation
(the “City”), JACKSON COUNTY, MINNESOTA, a Minnesota municipal corporation (the
“County”), GENERATION II ETHANOL, LLC, a Minnesota limited liability company (“Generation
II”) and MINNESOTA SOYBEAN PROCESSORS, a Minnesota cooperative corporation (“MNSP”)


 


WITNESSETH,


 


WHEREAS, MNSP is developing a soybean crushing facility for
the production of soy oil and may develop a soy diesel facility for production
of biodiesel fuel and certain other improvements in the City of Brewster,
Minnesota (collectively, the “MNSP Project”), all as more particularly
described in a Development Agreement between the Rural Development Financing
Authority of the Counties of Nobles and Jackson, Minnesota, and MNSP dated as
of December 1, 2002; and


 


WHEREAS, Generation II contemplates developing a biorefining
facility adjacent to the City, for the production of ethanol (“Generation II
Project”); and


 


WHEREAS, the MNSP Project and the Generation II Project will
both require untreated industrial water, which the City has agreed to supply,
upon the terms and conditions hereinafter set forth; and


 


WHEREAS, the City has agreed to construct, finance and
operate a system of water production wells and distribution pipelines and
related facilities to supply such untreated industrial water to both the
Generation II Project and the MNSP Project, all as hereinafter provided; and


 


WHEREAS, in order to facilitate MNSP’s desired timetable for
operation of the MNSP Project, the City commenced construction of an
approximately eleven (11) mile pipeline from the MNSP Project to a well to be
constructed on the Well Property (as hereinafter defined) pursuant to the terms
and conditions of that certain Repayment Agreement dated as of September 10,2003
by and among the City, the County and MNSP (the “Repayment Agreement”):


 


NOW,
THEREFORE, the
City, the County, Generation II and MNSP hereby agree as follows:


 


1.             Definitions.


 


1.1          Joint
powers Agreement: That certain Joint Powers Agreement between the City and the County
dated as of Oct. 27, 2003, pursuant to which the Trunk Pipeline Bonds (as
hereinafter defined) shall be issued, and the respective obligations of the
City and County with respect to the ownership and operation of the Trunk
Pipeline defined.


 

















 


1.2          Trunk
Pipeline: a pipeline, and associated facilities, to convey water from the Well
Facilities to the MNSP Project, including pumps and pumping stations, metering,
valves, controls, and other equipment, electrical installations, fencing and
security devices, pipes and piping, and all other personal property, equipment
and fixtures in connection therewith.


 


1.3          Trunk Pipeline Bonds:
An issue of taxable general obligation water revenue  bonds, issued by the County, pursuant to the
Joint Powers Agreement, in the principal amount of $1 ,670,000 (including, to
the extent determined by the County, any refunding bonds), to be used to
finance Trunk Pipeline Development Costs. The Joint Powers Agreement provides,
among other things, for the “guarantee” of payment of principal and interest on
the bonds by the County by the County’s levy of ad valorem taxes, for the
disbursement of proceeds thereof, for the collection of debt service thereon
from MNSP by the City, and for the deposit into a debt service reserve of one
year’s debt service by MNSP, to be credited against MNSP’s final debt service
payment. The City shall be entitled to all interest earnings on such deposit. A
preliminary breakdown of the proposed use of the proceeds of such bond issue
and tentative repayment schedule is attached hereto as Exhibit “C”.


 


1.4          Trunk
Pipeline Development Costs: All costs incurred by the City and the County to
design, construct, test and render operational the Trunk Pipeline including,
without limitation, costs to acquire temporary or permanent easements or
similar rights of way, the cost of acquisition of certain existing water rights
or related property interests of MNSP (more particularly described below),
engineering studies and investigations, design costs, feasibility costs,
environmental costs, costs of complying with all applicable laws, rules and
regulations, permits and  licenses
(including the cost of complying with any conditions attached to such permits
and licenses), all costs of contractors and subcontractors for labor and .
matena1s, fees of consultants, insurance premiums, as well as bond underwriters’
fees or discounts, all other costs of bond issuance, including bond counsel
fees, fees of counsel to the City and the County, and costs associated with
collateral for the obligations of MNSP hereunder.


 


1.5          Trunk Pipeline Operating Costs: All costs of maintenance, repair and
replacement of the Trunk Pipeline, and all components thereof, including
reasonable reserves for the repair or replacement of items of personal
property, fixtures or equipment that must be repaired or replaced on a periodic
basis, all costs of complying with all now existing or hereafter enacted laws, rules and
regulations and all costs of complying with all new or hereafter required
permits and licenses (including the cost of complying with any conditions
attached to such permits and licenses), as well as lease payments on a
Leasehold Parcel (as defined below) originally intended by MNSP for water well
development purposes, as described below, but excluding debt service on the
Trunk Pipeline Bonds and depreciation. Trunk Pipeline Operating Costs shall
include a ten percent (10%) administrative fee to the City .


 

















 


1.6          Water Revenue Bonds: One or more
issues (including, to the extent determined 
by the City, any refunding bonds) of the City of Heron Lake Taxable
General Obligation Water Supply Bonds, in the total cumulative amount of
approximately $735,000, to fund Well Facilities Development Costs. A
preliminary breakdown of the proposed use of the proceeds of such bond issue
and tentative repayment schedule is attached hereto as Exhibit “A”.


 


1.7          Well Facilities: Water wells and
associated facilities, including pumps and 
pumping stations, metering, valves, controls, and other equipment,
electrical installations, fencing and security devices, pipes and piping, and
all other personal property, equipment and fixtures or other improvements
constructed or to be constructed on the Well Property as part of the water well
system developed by the City hereunder.


 


1.8          Well
Facilities Development Costs: All costs incurred by the
City to acquire the Well Property and design, construct, test and render
operational the Well Facilities thereon, including, without limitation, land
purchase costs paid to Generation II or to third parties in connection with
acquisition of the Well Property, costs of all water rights in connection
therewith, costs of clearance of improvements therefrom, costs of engineering
studies and investigations, design costs, feasibility costs, environmental
remediation and other costs associated with the preparation of the Well
Property for the development of the Well Facilities thereon, costs of complying
with all laws, rules and regulations, permits and licenses (including the
cost of complying with any conditions attached to such permits and licenses),
all costs of contractors and subcontractors for labor and materials, fees of
consultants and engineers, insurance premiums, bond underwriters’ fees or
discounts and all other costs involved in bond issuance, including bond counsel
fees, as well as the fees of counsel to the City and the County.


 


1.9          Well
Facilities Operating Costs: All costs of City staff or
City employees or contractors associated with maintenance, repair, and
replacement of the Well Facilities and all costs of such maintenance, repair or
replacement, including reasonable reserves for the repair or replacement of
items of equipment that must be repaired or replaced on a periodic basis, all
costs of complying with all now existing or hereafter enacted laws, rules and
regulations and all costs of complying with all now or hereafter required
permits and licenses (including the cost of complying with any conditions
attached to such permits and licenses), but excluding debt service on the Water
Revenue Bonds and depreciation. Well Facilities Operating Costs shall include a
ten percent (10%) administrative fee to the City.


 


1.10        Well
Property: A parcel of approximately four (4) acres,
preliminarily depicted on Exhibit “B” attached hereto, which real property
shall be the site of the Well Facilities. The parties understand that the exact
configuration and location of the Well Property will reflect the requirements
of Minnesota governmental agencies, including the Minnesota Department of
Health and Minnesota Department of























 


Natural Resources having
jurisdiction of the development of water supplies, having regard for the need
for a well head protection area.


 


2.             City Issuance of Water Revenue
Bonds: City Acquisition of Well Property.


 


2.1          Not more than thirty (30) days after the
date hereof, the City shall use its best 
efforts to issue its Water Revenue Bonds, having such interest rate,
maturity and other provisions as the City, in its discretion, shall deem
appropriate.


 


2.2          Not more than forty-five (45) days after
the date hereof, the City shall use its best 
efforts to acquire fee title to the Well Property at a price per acre
not in excess of Ten Thousand Dollars ($10,000). In the event the City is
unable to acquire the Well Property for such price within such 45 day period,
the City shall condemn the Well Property, using the “quick take” procedure of
Minnesota Statutes, Section 117.042. Notwithstanding the $10,000 per acre
target price, all costs of acquiring the Well Property and all costs and
expenses of condemnation shall constitute Well Facilities Development Costs.


 


3.             Design, Construction by the City
of Well Facilities.


 


3.1          The City, or engineers retained by the
City, shall design the Well Facilities, with design review by DGR Consulting
Engineers, who shall be employed by and paid by MNSP to assure the
compatibility of the overall design and output of the Well Facilities with the
Trunk Pipeline. The parties acknowledge that it is their intent to cause the
Well Facilities to have a peak initial capacity of not less than 1,200 gallons
per minutes (gpm) of which 600 gpm shall be reserved for Generation II and 600
gpm shall be reserved for MNSP. MNSP shall cooperate fully in the City’s
efforts to obtain all necessary licenses, permits, governmental approvals and
consents for the construction of the Well Facilities. MNSP and Generation II
represent and warrant to the City and the County that they have engaged various
engineers, hydrologists and other experts to examine and analyze the capacity,
quality, feasibility, cost of construction and cost of operation of the Well
Facilities and that MNSP and Generation II are satisfied with the results of
such examination and analysis.


 


3.2          Promptly upon acquisition of title to the
Well Property, the City shall commence and diligently pursue construction of
the Well Facilities. The City and its contractors shall allow access to the
work to MNSP and its engineers, who shall actively monitor construction of the
Well Facilities in order to determine that the Well Facilities are being
constructed in accordance with the applicable construction contract and in
accordance with all laws, rules, regulations, licenses and permits.
Additionally, MNSP and its engineers shall attend preconstruction and
construction progress meetings.


 


3.3          The City shall use commercially reasonable efforts to
complete, test, and obtain  approval by
governmental agencies having jurisdiction by November 1,2003 


 





















 


(“Initial Completion Date”),
except that such Initial Completion Date shall be extended by events of Force
Majeure (as described in Section 17 hereof).


 


3.4          The City may construct the Well
Facilities in one or several phases, so long as the supply needs of Generation
II and MNSP are satisfied as set forth in Section 4.2 below. Generation II
shall be required to give at least six (6) months written’ notice to the
City in advance of its actual need of such capacity,


 


3.5          To the extent that any Well Facilities
Development Costs are not eligible for funding from the proceeds of the Water
Revenue Bonds, or in the event that the available proceeds from the Water
Revenue Bonds are insufficient to pay all Well Facilities Development Costs,
MNSP shall, upon written notice from the City, promptly pay such amounts to or
as directed by the City,


 


4.             Operation of Well Facilities:
Capacity Priorities of MNSP and Generation II: Payments by MNSP and Generation
II.


 


4.1          The City shall own and operate the Well
Facilities, which shall remain separate from the existing potable water well
and water supply and distribution system of the City. During the term of this
Agreement, no connection of the Well Facilities to the City’s present or future
potable water supply system shall be made without the prior written consent of
MNSP and Generation II.


 


4.2          Subject to Section 3.4 above,
Generation II shall have the right to the first 600 gpm of capacity available
from the Well Facilities. MNSP shall have the exclusive right to the next 600
gpm of available capacity. Until operation of the Generation II Project, MNSP
shall have the exclusive right to the first 600 gpm of capacity available from
the Well Facilities. The City may develop and sell any unused or surplus
capacity without restrictions other than the following:


 


4.2.1.       Any supply contract with a third party
shall be made on a secondary and interruptible basis, such that should the City
be unable to meet the capacity requirements of Generation II and/or MNSP
defined above, any water sales to secondary users must cease until sufficient
excess capacity has been restored; and


 


4.2.2.       During the term of this Agreement, the
City shall not enter into supply contracts to potable water users, including
Red Rock Rural Water or the Cities of Okabena and Brewster, or other cities,
without first securing the written approval of both Generation II and MNSP,
which approval may be withheld or conditioned by either of such entities, in
their discretion.


 


All amounts received the by the City from sale of such unused or excess
capacity may be used by the City without restriction (subject to the provisions
of Section 4.3.3 below).


 


4.3          Debt service on the Water Revenue Bonds,
including a five percent (5%) administrative fee payable to the City, shall be
allocated and paid in equal shares 


 





















 


by Generation II and MNSP
over the life of the Water Revenue Bonds on a monthly basis, regardless of
actual water usage by either party provided, that:


 


4.3.1.      Generation II’s payments under this Section 4.3
shall not commence until the General II Project first becomes operational. In
the event that the Generation II Project first becomes operational in a
calendar year following 2004, Generation II’s debt service payments shall be
increased by such amount as shall result in the same aggregate payment by
Generation II over the term of the Water Revenue Bonds remaining as of the year
in which the Generation II Project becomes operational, as Generation II would
have paid had the Generation II Project been operational in 2004. MNSP shall be
solely responsible for its one-half of the debt service payments on the Water Revenue
Bonds in all events.


 


4.3.2.      MNSP and the City (on the same percentage
basis as set forth in Section 4.3.4 hereof) shall be responsible for the
debt service payments on the Water Revenue Bonds that would be payable by
Generation II had the Generation II Project become operational in 2004 until
such time as the Generation II Project shall become operational and Generation
II commences making the payments required by Section 4.3.1. To the extent
that MNSP and the City have previously made payments on the Water Revenue Bonds
that Generation II would have made had the Generation II Project become
operational in 2004, the City shall refund to MNSP or keep (as appropriate)
such amounts as and when, and only to the extent, received from Generation II.


 


4.3.3.      If MNSP or Generation II fails to make
any debt service payment required by this Agreement in any year, the City shall
cover any shortfall for such year from the net revenue received by the City
from the sale of any unused or surplus capacity from the Well Facilities solely
in such year. Any revenue remaining after covering any such shortfall for the
applicable year may be used by the City without restriction.


 


4.3.4.      To the extent Generation II fails to make
its share of debt service payments on the Water Revenue Bonds after it has
become obligated to do so under Section 4.3.1, or in the event that
Generation II is not obligated to make its share of debt service payments on
the Water Revenue Bonds because the Generation II Project has not become
operational, and in the further event that any net revenues received by the
City from the sale of unused or surplus capacity from the Well Facilities in
any applicable year are insufficient to cover such payments, the City shall, in
any calendar year, make payments of a percentage of the resulting shortfall in
debt service derived from a fraction, the numerator of which shall be the
volume (in gallons) of sales by the City of potable water (excluding all sales
of industrial water) during the prior calendar year and the denominator of
which shall be the total volume (in gallons) of water, both industrial
(untreated) water furnished under this Agreement or otherwise 


 

















 


to MNSP and sales by the
City of potable water to residential and other users of the City’s potable water
system during the same prior calendar year; and MNSP shall pay the balance of
any such shortfall.


 


4.3.5.      To the extent
either the City or MNSP has made unreimbursed shortfall payments pursuant to Section 4.3.4
above, they shall be reimbursed, in proportion to their respective payments,
out of future payments made by or collected from Generation II if and when
received.


 


4.4          All Well Facilities Operating Costs shall
be borne by MNSP and Generation II in each calendar year in proportion to the
volume of water taken by the MNSP Facility and the Generation II Facility,
respectively. Until such time as the Generation II Project becomes operational,
all Well Facilities Operating Costs shall be borne by MNSP. Sale of untreated
industrial water to third party users by the City shall not affect the
respective shares of Well Facilities Operating Costs payable by MNSP and
Generation II hereunder.


 


4.5          During the term of this Agreement, both
Generation II and MNSP shall purchase all of their respective untreated water
supply exclusively from the City, and shall refrain from developing alternate
water sources or purchasing water from any other party, except in the situation
that the Well Facilities and Well Property are not capable, or cease to be
capable, of producing water in the volumes contemplated by this Agreement.


 


4.6          Generation II and MNSP accept fully the
risk that the Well Facilities and Well Property may not become operational by November 1,
2003; and that the Well Facilities and Well Property may not be capable, or may
cease to be capable, of producing water in the volumes contemplated by this
Agreement. The City and County shall have no duty or responsibility to arrange
to supply water from any source other than the Well Facilities and Well
Property, and Generation II and  MNSP
shall make the payments required by this Section 4 whether or not water,
or sufficient quantities of water, are supplied.


 


5.             Design and Construction of Trunk
Pipeline; City and County Ownership; Payments by MNSP.


 


5.1          Not more than forty-five (45) days after
the date hereof, MNSP, either by itself or through its engineers, will submit
to the City and its engineers final plans for the Trunk Pipeline. Approval of
such plans for the Trunk Pipeline shall not be unreasonably withheld or delayed
by the City. MNSP shall cooperate fully in the City’s efforts to obtain all
necessary licenses, permits, governmental approvals and consents for the
construction of the Trunk Pipeline, including any necessary easements or
permits from landowners or governmental units, including the County.


 


5.2          The final routing of the Trunk Pipeline
shall be selected by MNSP, but MNSP shall, in selecting such route, accommodate
reasonable adjustments as necessary 


 





















 


to maximize the utility
of the trunk Pipeline to other potential users, and the reasonable requirements
of the County. MNSP represents and warrants to the City and the County that it
has engaged various engineers, hydrologists and other experts to examine and
analyze the capacity, quality; feasibility, cost of construction and cost of
operation of the Trunk Pipeline, and that MNSP is satisfied with the results of
such examination and analysis.


 


5.3          The parties acknowledge that construction
of the Trunk Pipeline has commenced, and construction and final testing of the
Trunk Pipeline to the MNSP facility shall be diligently pursued and the City
shall use commercially reasonable efforts to complete the Trunk Pipeline by November 1,
2003, except that such completion date shall be extended by events of Force
Majeure. To the extent that any Trunk Pipeline Development Costs are not
eligible for funding from the proceeds of the Trunk Pipeline Bonds, or in the
event that the available proceeds from the Trunk Pipeline Bonds are
insufficient to pay all Trunk Pipeline Development Costs, MNSP shall, upon
written notice from the City, promptly pay such amounts to or as directed by
the City.


 


5.4          During the term of this Agreement, the
Trunk Pipeline shall remain physically separate from, and shall not be
connected to, the existing potable water well and distribution system of the
City. MNSP shall make the following payments regardless of actual water use:


 


5.4.1.      All payments of debt service on the Trunk
Pipeline Bonds, as and when due thereunder, together with an administrative fee
payable to the City for remittance to the County of five percent (5%) of such
debt service on a monthly basis.


 


5.4.2.      All Trunk Pipeline Operating Costs as and
when required.


 


5.4.3.      All annual lease payments on the
Leasehold Parcel, described below.


 


5.4.4.      Concurrently with the execution of this
Agreement, an amount equal to one (1) year’s debt service on the Trunk
Pipeline Bonds, which shall be credited against the final debt service payment
due from MNSP on the Trunk Pipeline Bonds on the condition that MNSP has made
all payments required of it under this Agreement.


 


5.5          Under the Joint Powers Agreement, the
City and County will co-own the Trunk Pipeline.


 


5.6          MNSP accepts fully the risk that the Well
Facilities and Well Property may not be completed by November 1, 2003,
that the Well Facilities and Well Property may not be capable, or may cease to
be capable, of producing water in the volumes for MNSP contemplated by this
Agreement, and that the Trunk Pipeline carries no or inadequate quantities of
water for its needs. The City and County shall have no duty to arrange for the
Trunk Pipeline to carry water from any source other than the Well Facilities
and Well Property, and MNSP shall make the payments 


 

















 


required by this Section 5
whether or not water, or sufficient quantities of water are carried by the
Trunk Pipeline.


 


6.             City Acquisition of MNSP Water
Rights: Assignment of Lease Rights by MNSP to City.


 


6.1          MNSP has an option to acquire certain
property (the “Fee Parcel”) and the lessee’s interest in a lease of another
parcel (the “Leasehold Parcel”), such parcels being located in or adjacent to
the City of Brewster, and such options were acquired by MNSP for well
development purposes. The City shall acquire fee title to the Fee Parcel for
One Hundred Thousand Dollars ($100,000), such amount to be paid simultaneously
with the closing of the issuance of the Trunk Pipeline Bonds and the
availability of proceeds therefrom. The cost of acquisition of such parcel
shall be included in Trunk Pipeline Development Costs. Simultaneously with such
payment:


 


6.1.1.      MNSP shall exercise its current option on
the Fee Parcel and pay all costs thereof including the entire option/purchase
price required by said Option Agreement and convey the title so-acquired to the
City by Warranty Deed; and


 


6.1.2.      MNSP shall assign its lease rights on the
Leasehold Parcel to the City and shall simultaneously deliver to the City the
consent (if required) of the Lessor under said lease to the assignment.


 


6.2          MNSP represents and warrants to the City
that: a) it has delivered to the City a true, correct and complete copy of the
lease for the Leasehold Parcel (hereinafter, the “Lease”); b) the Lease is in
full force and effect and all payments required by the Lease have been made
through the date hereof; and c) to the best of its knowledge, neither party to
the Lease is in default of any of its obligations thereunder.


 


6.3          MNSP may obtain additional sources of
water supply as a substitute for the Leasehold Parcel and, at its election, may
convey fee title to such additional source to the City, and City shall accept
the same, so long as the capacity of such substitute source is at least equal
to that of the Leasehold Parcel and the City does not assume any obligations
related to ownership of said land not contemplated by this Agreement, and upon
such conveyance, MNSP shall be relieved of liability for lease payments
included in Trunk Pipeline Operating Costs arising from the Lease on the
condition that MNSP procures for the City a release of the City from all
further responsibility for such Lease payments.


 


6.4          The City shall have the right to develop,
sell, lease or otherwise dispose of the Fee Parcel and the Leasehold Parcel in
its sole discretion at any time.


 

















 


7.             City Development of Water
Treatment Plant: MNSP to use City-Supplied Water: MNSP Water Treatment.


 


7.1          The parties anticipate that Generation II
may require water treatment facilities 
needed for the Generation II Project, and the City will work
cooperatively with Generation II to develop and design such treatment facility,
with the expectation that in the event such water treatment system is
developed, that all users thereof, including Generation II, will cover all
construction, financing, operation and maintenance costs thereof in a manner
comparable to the payments by MNSP and Generation II of the construction,
financing, operation and maintenance of the Well Facilities and Trunk Pipeline
hereunder.


 


7.2          In the event the water treatment facility
for Generation II is developed, the City 
will entertain a proposal for the City ownership and financing thereof,
and the possible use of tax increment financing, but nothing herein contained
shall bind the City to such public ownership, financing or use of tax
increment. Nothing herein shall affect any other obligations of the parties
hereto, and the development of the treatment plant shall not impact any
obligations of the parties under any previous financing or otherwise unless a
conversion of the entire water system from untreated to treated water is
developed, by mutual agreement of all parties hereto, in which event, MNSP,
Generation II and the City agree to negotiate in good faith the equitable share
of the costs, including design, development, construction, financing, operation
and maintenance of such system-wide treatment facility.


 


7.3          MNSP shall construct and maintain its own
water treatment and water storage facilities, at its sole cost and expense.


 


8.             City to Furnish Cost Data: Audit
Rights of MNSP and Generation II.


 


8.1          The City shall furnish MNSP (and
Generation II, upon completion of the Generation II Facility), not less often
than annually, detailed accounting records detailing the Water Facilities
Operating Costs, the debt service payments and the administrative fees required
by this Agreement, and shall furnish MNSP similarly detailed records showing
Trunk Pipeline Operating Costs.


 


8.2          Either MNSP or Generation II may, at its
expense, cause an audit of records related to Water Facilities Operating Costs,
Trunk Pipeline Operating Costs, debt service payments, administrative fees, or
any other costs borne by either MNSP or Generation II hereunder, such audit to
be performed by an independent certified public accountant, and in a manner
that is not disruptive to ordinary operations of the City. A copy of any report
of such auditor shall be furnished to the City.


 


9.             Default, Cure and Early
Termination.


 


9.1          If any party fails to comply with any of
the provisions of this Agreement, any other party may provide notice of default
by sending written notice of default to the defaulting party, with a copy to
all other parties. The notice of default shall begin a 90-day cure period. If
the defaulting party fails to cure the default before the expiration of the
cure period, any or all of the non-defaulting parties may 


 





















 


commence an action
against the defaulting party to recover damages suffered or incurred (subject,
however, to the limitations contained in Section 16 hereof) or to compel
the defaulting party’s performance of this Agreement in an appropriate
equitable proceeding. Subject to the provisions of Section 9.2 hereof, no
party to this Agreement shall have the right to terminate this Agreement on
account of the default by any other party.


 


9.2          Without limiting any other right or
remedy hereunder, in the event of a default by either MNSP or Generation n under this Agreement, the City or the
County may terminate or suspend water service to such defaulting party (and
sell such water as excess or unused water) unless and until such default is
cured to the reasonable satisfaction of the City or the County.


 


10.          Mortgage and Security Interest to the City and the County. MNSP shall, at its expense, provide the
City and the County a mortgage and security interest in the MNSP Project in an
amount sufficient to securitize payment of the Trunk Pipeline Bonds. The
mortgage and security interest shall be secondary to any interest held by MNSP’s
financing bank, and must be satisfactory to such bank.


 


11.          Representations and Warranties. MNSP and Generation II each represent
and warrant to  the City and the County
that: all licenses and permits necessary for construction of the Well
Facilities have been obtained and, if not held by the applicable contractor,
are assignable and have been assigned to the City or the County; to the best of
their knowledge, all property rights necessary for the construction of the Well
Facilities have been obtained and transferred to the City or the County; this
Agreement has been duly and validly authorized and executed by each of them;
this Agreement does not violate any provision of their respective articles,
bylaws, or any other document, instrument or agreement applicable to each of
them or their respective property; and this Agreement is fully enforceable
against each of them in accordance with its terms. MNSP further represents and
warrants to the City and the County that: all licenses and permits necessary
for construction of the Trunk Pipeline have been obtained and, if not held by
the applicable contractor, are assignable and have been assigned to the City or
the County; and, to the best of its knowledge, all property rights necessary
for the construction of the Trunk Pipeline have been obtained and transferred
to the City or the County.


 


12.          Acknowledgments. MNSP and Generation II each acknowledge
and agree that the City and the County have made no representations or
warranties of any type or kind: (a) that the Well Facilities and the Trunk
Pipeline can be constructed in accordance with applicable laws, rules,
regulations, licenses and permits; (b) that the contracts for
construction, and the applicable contractors are sufficient and capable to
construct the Well Facilities and the Trunk Pipeline to meet the needs of MNSP
and for Generation II; (c) with respect to costs of construction,
operation, maintenance and replacement of the Well Facilities and the Trunk
Pipeline; or (d) that the Well Facilities and the Trunk Pipeline or the
quantity or quality of water available by operation thereof, will meet the
needs of the MNSP Project or the Generation II Project, or will be available at
any particular date.


 

















 


13.          Resolutions and Opinions. Concurrently with the execution of this
Agreement: a) MNSP and Generation II will each provide the City and the County
with resolutions of their governing body authorizing and approving the
execution of this Agreement, and a legal opinion of outside legal counsel
opining to such matters as the City and the County and their legal counsel
shall require; and b) MNSP will provide the City and the County with the
written consent of the City of Brewster to the provision of water by the City
to the MNSP Project.


 


14.          Unconditional Payments. The payment obligations of MNSP and
Generation II hereunder are absolute and unconditional, and shall not be
affected, excused or delayed for any reason whatsoever including, but not
limited to: (a) negligence, failure or omission by the City, the County or
any of their respective employees or representatives; (b) any default or
other failure of the applicable contractor to complete construction of the Well
Facilities and the Trunk Pipeline in a timely manner or in accordance with the
requirements of the applicable construction contract or applicable laws, rules,
regulations, licenses or permits; (c) any default or other failure of MNSP
or Generation II to make any payments or take any actions required by this
Agreement; or (d) the amount of water capable of being supplied by the
Well Property and Well Facilities.


 


15.          Modification: Interest: Attorney’s
Fees. This
Agreement can only be modified or amended, or any provision waived, by written
instrument duly executed by all parties. Any amounts not paid when due shall
bear interest at the rate of eight percent (8%) per annum until paid. In the event
that any party is required to commence legal action to enforce its rights under
this Agreement, and in the event that it is the prevailing party in such
action, it shall be entitled to recover its reasonable costs and expenses
(including legal fees).


 


16.          Limitation of Liability


 


16.1        IN NO EVENT SHALL THE CITY OR THE COUNTY
BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL, OR INDIRECT DAMAGES OF ANY
TYPE OR KIND, REGARDLESS OF WHETHER THEY HAVE BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES.


 


16.2        MNSP AND GENERATION II AGREE THAT THE
CITY AND THE COUNTY’S COLLECTIVE LIABILITY HEREUNDER FOR DAMAGES, REGARDLESS OF
THE FORM OF ACTION OR THEORY OF RECOVERY, SHALL NOT EXCEED THE DEBT
SERVICE PAYMENTS MADE BY MNSP AND GENERATION II HEREUNDER IN THE PRECEDING
TWELVE (12) MONTH PERIOD.


 


17.          Force Majeure


 


17.1        Any delay of any party to perform its
obligations hereunder shall be excused if, and to the extent that, it is caused
by an event or occurrence beyond the  reasonable control of the party and without its fault
or negligence, such as by way of example and not by way of limitation, acts of
God, actions by any 


 





















 


governmental authority
(whether valid or invalid), failure to obtain necessary licenses or permits,
fires, floods, windstorms, explosions, riots, natural disasters, wars,
sabotage, acts of terrorism, material shortages, or court injunction or order.
No such event or occurrence shall excuse or delay any obligation to pay amounts
due under this Agreement.


 


17.2        During the period of such delay or failure
to perform by a party, such party shall provide all other parties with prompt
written notice of such delay (including a description of the cause of the event
or circumstance, an estimate of the duration of the delay and a statement
regarding the remedial steps that are being undertaken to resume performance.)


 


18.          Assignment. This Agreement or any part of this
Agreement may not be assigned or transferred by any party without the prior
written consent of all other parties hereto. Any assignment or transfer without
such consent shall be null and void.


 


19.          Notices and Demands.


 


19.1        Except as otherwise expressly provided in
this Agreement, any notice, demand or other communication under this Agreement
by any party shall be sufficiently given or delivered if dispatched by
registered or certified mail, postage prepaid, return receipt requested, or
delivered personally as follows:


 


If to MNSP:


 


Minnesota. Soybean Processors 

Attn: Rodney Christianson P.O.

Box 100


 


Brewster, MN 56119-0100


 


If to Generation II:


 


Generation II Ethanol LLC 

34858 150th Street Brewster,

MN 56119


 


If to the City:


 


City of Heron Lake


 


P.O. Box 315, 312 10th
Street

Heron Lake, MN 56137-0315


 

















 


If to the County:


 


County of Jackson, Minnesota 

Attn: Robert C. O’Connor, Esq.

County Attorney, Jackson 

County Jackson County

Courthouse

405 4th Street, Suite 2D

Jackson, MN 56143-1588


 


or at such other address with respect to any party as such party may,
from time to time, designate in writing.


 


20.          Miscellaneous.


 


20.1        This Agreement shall have a term of
approximately fifteen (15) years and four (4) months to the February 1,
2019, final scheduled maturities of the Trunk Pipeline Bonds and Well
Facilities Bonds. Not later than the fourteenth (14th) anniversary of the date hereof, the
parties hereto shall commence negotiations in good faith and with reasonable
diligence to replace this Agreement with a further agreement or agreements on
the subjects set forth herein.


 


20.2        Minnesota law governs this Agreement.


 


20.3        This Agreement shall bind and apply to
the respective parties hereto and to their successors and permitted assigns.


 


20.4        This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersedes any and all prior negotiations, understandings and agreements,
oral or written, including the Repayment Agreement; provided, however, that the
provisions of Section 3 of the Repayment Agreement shall survive and
remain in full force and effect.


 


20.5        The headings in this Agreement are for the
convenience of the parties and shall not constitute a part of this Agreement.


 


20.6        This Agreement may be executed in
counterparts.


 

















 


IN WITNESS
WHEREOF, the
parties have executed this Industrial Water Supply and Development Agreement as
of the day and year first above-written.


 


	
   

  	
  CITY OF HERON LAKE, MINNESOTA, a Minnesota municipal
  corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   /s/ John Hay

  
	
   

  	
  Its Mayor

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Judy Haberman

  
	
   

  	
  Its City Clerk

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  COUNTY OF JACKSON, MINNESOTA, 

  a Minnesota municipal corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Robert J. Ferguson

  
	
   

  	
  Its

  	
  Board Chairman

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  And by

  	
   /s/ Janice Fransen

  
	
   

  	
  Its County Coordinator

  
	
   

  	
   

  	
   

  
	
   

  	
  Approved as to form and content:

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Robert O’Connor

  
	
   

  	
   

  	
  County
  Attorney

  
	
   

  	
   

  	
   

  
	
   

  	
  GENERATION II ETHANOL, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Robert Ferguson

  
	
   

  	
  Its

  	
   Board Chairman

  
	
   

  	
   

  	
   

  
	
   

  	
  MINNESOTA SOYBEAN PROCESSORS, 

  a Minnesota cooperative corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Rodney Christianson

  
	
   

  	
  Its

  	
   CEO

  
	
   

  	
   

  	
   

  
				

















 


EXHIBIT A


Water Revenue
Bonds


Use of Proceeds
and Repayment Schedule


 


City of Heron Lake,
Minnesota.


 


 


	
  $735,000

  	
   

  	
  FINAL

  
	
  TAXABLE GO Water Supply
  Bonds, Series 2003B

  	
   

  



 


	
  Uses of Funds

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Well Construction & Related Contracts

  	
   

  	
   

  	
   

  	
  473,778

  	
   

  
	
  Contingencies

  	
   

  	
   

  	
   

  	
  11,844

  	
   

  
	
  Engineering & surveying

  	
   

  	
   

  	
   

  	
  39,902

  	
   

  
	
  Land and water rights acquisition

  	
   

  	
   

  	
   

  	
  140,000

  	
   

  
	
  Legal

  	
   

  	
   

  	
   

  	
  14,213

  	
   

  
	
  Administration (including feasibility study)

  	
   

  	
   

  	
   

  	
  15,000

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
  694,737

  	
   

  
	
  Underwriter’s Discount Allowance

  	
   

  	
  1.5000

  	
  %

  	
  11,025

  	
   

  
	
  Fiscal Fee

  	
   

  	
   

  	
   

  	
  8,000

  	
   

  
	
  Bond Counsel

  	
   

  	
   

  	
   

  	
  3,500

  	
   

  
	
  Pay Agent/Registrar

  	
   

  	
   

  	
   

  	
  400

  	
   

  
	
  Printing & Misc

  	
   

  	
   

  	
   

  	
  1,000

  	
   

  
	
  Rating Agency Fee

  	
   

  	
   

  	
   

  	
  —

  	
   

  
	
  Capitalized Interest

  	
   

  	
   

  	
   

  	
  15,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  733,662

  	
   

  
	
  Sources of Funds

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Bond Issue

  	
   

  	
   

  	
   

  	
  735,000

  	
   

  
	
  Cash Contribution

  	
   

  	
   

  	
   

  	
  —

  	
   

  
	
  Construction Fund Earnings (excess proceeds)

  	
   

  	
   

  	
   

  	
  (1,338

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
  733,662

  	
   

  



 


	
  Bond Details

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Set Sale Date

  	
   

  	
  9/10/2003

  	
   

  
	
  Sale Date

  	
   

  	
  9/30/2003

  	
   

  
	
  Dated Date

  	
   

  	
  10/1/2003

  	
   

  
	
  Closing Date

  	
   

  	
  10/14/2003

  	
   

  
	
  1st Interest Payment

  	
   

  	
  8/1/2004

  	
   

  
	
  Proceeds spent by

  	
   

  	
  12/31/2003

  	
   

  
	
   

  	
   

  	
  to Dated Date

  	
   

  
	
  Purchase Price

  	
   

  	
  723,975.00

  	
   

  
	
  Net Interest Cost

  	
   

  	
  423,300.00

  	
   

  
	
  Net Effective Rate

  	
   

  	
  5.4514

  	
  %

  
	
  Average Coupon

  	
   

  	
  5.309

  	
  %

  
	
  Average Life

  	
   

  	
  10.5646

  	
   

  
	
  Call Option

  	
   

  	
  2/1/2009

  	
   

  
	
  Purchaser

  	
   

  	
  Northland Securities

  	
   

  
	
  Bond Counsel

  	
   

  	
  Briggs & Morgan, P.A.

  	
   

  
	
  Pay Agent

  	
   

  	
  US Bank, N.A.

  	
   

  
	
  Tax Status

  	
   

  	
  Taxable

  	
   

  
	
  Continuing Disclosure Election

  	
   

  	
  None

  	
   

  



 


Payment Schedule & Cashflow


 


	
  Payments Schedule

  	
   

  	
  Pledged Revenues

  	
   

  	
  Account Balances

  	
   

  
	
  12-Month

  Period ending

  	
   

  	
  Principal

  	
   

  	
  Rate

  	
   

  	
  Interest

  	
   

  	
  Payment

  Total

  	
   

  	
  plus 5%

  Coverage

  	
   

  	
  MnSP

  Payments*

  	
   

  	
  Gen II

  Payments**

  	
   

  	
  Surplus

  (deficit)

  	
   

  	
  Account

  Balance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10/1/2003

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
  Reserve Fund and Accrued
  Interest>

  	
   

  	
  16,358

  	
   

  
	
  2/1/2004

  	
   

  	
  —

  	
   

  	
  0.000

  	
  %

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  12,917

  	
   

  	
  —

  	
   

  	
  12,917

  	
   

  	
  29,275

  	
   

  
	
  2/1/2005

  	
   

  	
  —

  	
   

  	
  0.000

  	
  %

  	
  50,150

  	
   

  	
  50,150

  	
   

  	
  52,658

  	
   

  	
  38,750

  	
   

  	
  —

  	
   

  	
  (19,908

  	
  )

  	
  15,367

  	
   

  
	
  2/1/2006

  	
   

  	
  —

  	
   

  	
  0.000

  	
  %

  	
  37,613

  	
   

  	
  37,613

  	
   

  	
  39,493

  	
   

  	
  38,750

  	
   

  	
  —

  	
   

  	
  (743

  	
  )

  	
  14,624

  	
   

  
	
  2/1/2007

  	
   

  	
  —

  	
   

  	
  0.000

  	
  %

  	
  37,613

  	
   

  	
  37,613

  	
   

  	
  39,493

  	
   

  	
  38,750

  	
   

  	
  —

  	
   

  	
  (743

  	
  )

  	
  13,881

  	
   

  
	
  2/1/2008

  	
   

  	
  40,000

  	
   

  	
  3.500

  	
  %

  	
  37,613

  	
   

  	
  77,613

  	
   

  	
  81,493

  	
   

  	
  38,750

  	
   

  	
  49,514

  	
   

  	
  6,771

  	
   

  	
  20,652

  	
   

  
	
  2/1/2009

  	
   

  	
  50,000

  	
   

  	
  4.000

  	
  %

  	
  36,213

  	
   

  	
  86,213

  	
   

  	
  90,523

  	
   

  	
  38,750

  	
   

  	
  49,514

  	
   

  	
  (2,259

  	
  )

  	
  18,393

  	
   

  
	
  2/1/2010

  	
   

  	
  50,000

  	
   

  	
  4.500

  	
  %

  	
  34,213

  	
   

  	
  84,213

  	
   

  	
  88,423

  	
   

  	
  38,750

  	
   

  	
  49,514

  	
   

  	
  (159

  	
  )

  	
  18,233

  	
   

  
	
  2/1/2011

  	
   

  	
  50,000

  	
   

  	
  4.750

  	
  %

  	
  31,963

  	
   

  	
  81,963

  	
   

  	
  86,061

  	
   

  	
  38,750

  	
   

  	
  49,514

  	
   

  	
  2,203

  	
   

  	
  20,437

  	
   

  
	
  2/1/2012

  	
   

  	
  55,000

  	
   

  	
  5.000

  	
  %

  	
  29,588

  	
   

  	
  84,588

  	
   

  	
  88,817

  	
   

  	
  38,750

  	
   

  	
  49,514

  	
   

  	
  (553

  	
  )

  	
  19,884

  	
   

  
	
  2/1/2013

  	
   

  	
  55,000

  	
   

  	
  5.100

  	
  %

  	
  26,838

  	
   

  	
  81,838

  	
   

  	
  86,929

  	
   

  	
  38,750

  	
   

  	
  49,514

  	
   

  	
  2,335

  	
   

  	
  22,218

  	
   

  
	
  2/1/2014

  	
   

  	
  60,000

  	
   

  	
  5.200

  	
  %

  	
  24,033

  	
   

  	
  84,033

  	
   

  	
  88,234

  	
   

  	
  38,750

  	
   

  	
  49,514

  	
   

  	
  30

  	
   

  	
  22,248

  	
   

  
	
  2/1/2015

  	
   

  	
  65,000

  	
   

  	
  5.300

  	
  %

  	
  20,913

  	
   

  	
  85,913

  	
   

  	
  90,208

  	
   

  	
  38,750

  	
   

  	
  49,514

  	
   

  	
  (1,944

  	
  )

  	
  20,304

  	
   

  
	
  2/1/2016

  	
   

  	
  70,000

  	
   

  	
  5.400

  	
  %

  	
  17,468

  	
   

  	
  87,468

  	
   

  	
  91,841

  	
   

  	
  38,750

  	
   

  	
  49,514

  	
   

  	
  (3,577

  	
  )

  	
  16,727

  	
   

  
	
  2/1/2017

  	
   

  	
  75,000

  	
   

  	
  5.600

  	
  %

  	
  13,688

  	
   

  	
  88,688

  	
   

  	
  93,122

  	
   

  	
  38,750

  	
   

  	
  49,514

  	
   

  	
  (4,858

  	
  )

  	
  11,869

  	
   

  
	
  2/1/2018

  	
   

  	
  80,000

  	
  (1)

  	
  5.750

  	
  %

  	
  9,488

  	
   

  	
  89,488

  	
   

  	
  93,962

  	
   

  	
  38,750

  	
   

  	
  49,514

  	
   

  	
  (5,698

  	
  )

  	
  6,171

  	
   

  
	
  2/1/2019

  	
   

  	
  85,000

  	
  (1)

  	
  5.750

  	
  %

  	
  4,888

  	
   

  	
  89,888

  	
   

  	
  94,382

  	
   

  	
  38,750

  	
   

  	
  49,514

  	
   

  	
  (6,118

  	
  )

  	
  53

  	
   

  
	
   

  	
   

  	
  735,000

  	
   

  	
   

  	
   

  	
  412,275

  	
   

  	
  1,147,275

  	
   

  	
  1,204,639

  	
   

  	
  594,167 

  	
   

  	
  594,167 

  	
   

  	
  (16,305

  	
  )

  	
   

  	
   

  



 






* MnSP monthly payments commence
Nov 1, 2003.


** Gen II monthly payments
commence no later than 2/1/2007.


 
















 


EXHIBIT
B


 


WELL
PROPERTY


 


That part of the Southwest Quarter (SWI/4) (i.e. also being known as
part of Lot 5, State· Subdivision of the SWI/4 16-104-37), of Section Sixteen
(16), Township One Hundred Four (104) North, Range Thirty-seven (37) West,
Jackson County, Minnesota, described as follows: Commencing at an existing iron
monument at the southwest comer of the SWI/4 of said Section 16; thence
north 00 degrees 37 minutes 05 seconds east, bearings based on Jackson County
Coordinate System, along the west line of said SWI/4, a distance of 869.00 feet
to the POINT OF BEGINNING; thence continuing north 00 degrees 37 minutes 05
seconds east, along said west line, a distance of 400.00 feet; thence north 89
degrees 22 minutes 55 seconds east a distance of 412.00 feet; thence south 00
degrees 37 minutes 05 seconds west, parallel with the west line of said SWI/4,
a distance of 400.00 feet; thence north 89 degrees 22 minutes 55 seconds west a
distance of 412.00 feet to the point of beginning, containing 3.78 acres.


 
















 


EXHIBIT C


Trunk Pipeline
Bonds


Use of Proceeds
and Repayment Schedule


 


	
  Jackson County,
  Minnesota

  	
  FINAL

  
	
   

  	
   

  
	
  $1,670,000

  	
  Cronin &
  Co., Inc.

  
	
  TAXABLE GO Water
  Revenue Bonds, Series 2003A (Heron Lake Water Project)

  	
   

  



 


	
  Uses of Funds

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pipe Construction Bld., Carstensen

  	
   

  	
   

  	
   

  	
  1,300,000

  	
   

  
	
  Construction contingency

  	
   

  	
   

  	
   

  	
  100,000

  	
   

  
	
  Engineering

  	
   

  	
   

  	
   

  	
  78,000

  	
   

  
	
  West Well Field Acquisition

  	
   

  	
   

  	
   

  	
  100,000

  	
   

  
	
  Legal Fees

  	
   

  	
   

  	
   

  	
  39,000

  	
   

  
	
  City Administration

  	
   

  	
   

  	
   

  	
  12,500

  	
   

  
	
  County Administration

  	
   

  	
   

  	
   

  	
  5,000

  	
   

  
	
  Total

  	
   

  	
   

  	
   

  	
  1,634,500

  	
   

  
	
  Underwriter’s Discount Allowance (1.5%)

  	
   

  	
  0.911

  	
  %

  	
  15,208

  	
   

  
	
  Fiscal Fee

  	
   

  	
   

  	
   

  	
  9,500

  	
   

  
	
  Bond Counsel

  	
   

  	
   

  	
   

  	
  5,000

  	
   

  
	
  Pay Agent/Registrar

  	
   

  	
   

  	
   

  	
  400

  	
   

  
	
  Printing & Misc

  	
   

  	
   

  	
   

  	
  1,500

  	
   

  
	
  Rating Agency Fee

  	
   

  	
   

  	
   

  	
  5,300

  	
   

  
	
  Debt Service Reserve

  	
   

  	
   

  	
   

  	
  160,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  1,831,408

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Sources of Funds

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Bond Issue

  	
   

  	
   

  	
   

  	
  1,670,000

  	
   

  
	
  Prepayment from MnSP

  	
   

  	
   

  	
   

  	
  160,000

  	
   

  
	
  Construction Fund Earnings (excess proceeds)

  	
   

  	
   

  	
   

  	
  1,408

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  1,831,408

  	
   

  



 


	
  Bond Details

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Set Sale Date

  	
   

  	
  9/23/2003

  	
   

  
	
  Sale Date

  	
   

  	
  10/14/2003

  	
   

  
	
  Dated Date

  	
   

  	
  10/1/2003

  	
   

  
	
  Closing Date

  	
   

  	
  10/27/2003

  	
   

  
	
  1st Interest Payment

  	
   

  	
  8/1/2004

  	
   

  
	
  Proceeds spent by

  	
   

  	
  6/1/2004

  	
   

  
	
   

  	
   

  	
  to Dated Date

  	
   

  
	
  Purchase Price

  	
   

  	
  1,654,792.30

  	
   

  
	
  Net Interest Cost

  	
   

  	
  810,422.70

  	
   

  
	
  Net Effective Rate

  	
   

  	
  5.2722

  	
  %

  
	
  Average Coupon

  	
   

  	
  5.173

  	
  %

  
	
  Average Life

  	
   

  	
  9.2046

  	
   

  
	
  Call Option

  	
   

  	
  2/1/2009

  	
   

  
	
  Purchaser

  	
   

  	
  Cronin & Co., Inc.

  	
   

  
	
  Bond Counsel

  	
   

  	
  Tony Stemberger, Briggs & Morgan

  	
   

  
	
  Pay Agent

  	
   

  	
  US Bank, N.A.

  	
   

  
	
  Tax Status

  	
   

  	
  Taxable

  	
   

  
	
  Continuing Disclosure Election

  	
   

  	
  Limited, on request

  	
   

  



 


Payment Schedule & Cashflow


 


	
  Payment Schedule

  	
   

  	
  Pledged Revenues

  	
   

  	
  Account Balances

  	
   

  
	
  12-Month

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Payment

  	
   

  	
  plus 5%

  	
   

  	
  MnSP

  	
   

  	
  0.00%

  	
   

  	
  Surplus

  	
   

  	
  Account

  	
   

  
	
  Period ending

  	
   

  	
  Principal

  	
   

  	
  Rate

  	
   

  	
  Interest

  	
   

  	
  Total

  	
   

  	
  Coverage

  	
   

  	
  Payments*

  	
   

  	
  Interest

  	
   

  	
  (deficit)

  	
   

  	
  Balance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10/1/2003

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Accrued Interest>>

  	
   

  	
  5,836

  	
   

  
	
  2/1/2004

  	
   

  	
  —

  	
   

  	
  0.000

  	
  %

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  42,339

  	
   

  	
  —

  	
   

  	
  42,339

  	
   

  	
  48,174

  	
   

  
	
  2/1/2005

  	
   

  	
  85,000

  	
   

  	
  3.500

  	
  %

  	
  107,740

  	
   

  	
  192,740

  	
   

  	
  202,377

  	
   

  	
  169,354

  	
   

  	
  —

  	
   

  	
  (33,023

  	
  )

  	
  15,151

  	
   

  
	
  2/1/2006

  	
   

  	
  85,000

  	
   

  	
  3.500

  	
  %

  	
  77,830

  	
   

  	
  162,830

  	
   

  	
  170,972

  	
   

  	
  169,354

  	
   

  	
  —

  	
   

  	
  (1,618

  	
  )

  	
  13,534

  	
   

  
	
  2/1/2007

  	
   

  	
  85,000

  	
   

  	
  3.500

  	
  %

  	
  74,855

  	
   

  	
  159,855

  	
   

  	
  167,848

  	
   

  	
  169,354

  	
   

  	
  —

  	
   

  	
  1,506

  	
   

  	
  15,040

  	
   

  
	
  2/1/2008

  	
   

  	
  90,000

  	
   

  	
  4.000

  	
  %

  	
  71,880

  	
   

  	
  161,880

  	
   

  	
  169,974

  	
   

  	
  169,354

  	
   

  	
  —

  	
   

  	
  (620

  	
  )

  	
  14,420

  	
   

  
	
  2/1/2009

  	
   

  	
  95,000

  	
   

  	
  4.200

  	
  %

  	
  68,280

  	
   

  	
  163,280

  	
   

  	
  171,444

  	
   

  	
  169,354

  	
   

  	
  —

  	
   

  	
  (2,090

  	
  )

  	
  12,330

  	
   

  
	
  2/1/2010

  	
   

  	
  95,000

  	
   

  	
  4.200

  	
  %

  	
  64,290

  	
   

  	
  159,290

  	
   

  	
  167,255

  	
   

  	
  169,354

  	
   

  	
  —

  	
   

  	
  2,100

  	
   

  	
  14,430

  	
   

  
	
  2/1/2011

  	
   

  	
  100,000

  	
   

  	
  4.700

  	
  %

  	
  60,300

  	
   

  	
  160,300

  	
   

  	
  168,315

  	
   

  	
  169,354

  	
   

  	
  —

  	
   

  	
  1,039

  	
   

  	
  15,469

  	
   

  
	
  2/1/2012

  	
   

  	
  105,000

  	
   

  	
  5.000

  	
  %

  	
  55,600

  	
   

  	
  160,600

  	
   

  	
  168,630

  	
   

  	
  169,354

  	
   

  	
  —

  	
   

  	
  724

  	
   

  	
  16,193

  	
   

  
	
  2/1/2013

  	
   

  	
  110,000

  	
   

  	
  5.100

  	
  %

  	
  50,350

  	
   

  	
  160,350

  	
   

  	
  168,368

  	
   

  	
  169,354

  	
   

  	
  —

  	
   

  	
  987

  	
   

  	
  17,179

  	
   

  
	
  2/1/2014

  	
   

  	
  120,000

  	
   

  	
  5.200

  	
  %

  	
  44,740

  	
   

  	
  164,740

  	
   

  	
  172,977

  	
   

  	
  169,354

  	
   

  	
  —

  	
   

  	
  (3,623

  	
  )

  	
  13,556

  	
   

  
	
  2/1/2015

  	
   

  	
  125,000

  	
  (1)

  	
  5.500

  	
  %

  	
  38,500

  	
   

  	
  163,500

  	
   

  	
  171,675

  	
   

  	
  169,354

  	
   

  	
  —

  	
   

  	
  (2,321

  	
  )

  	
  11,235

  	
   

  
	
  2/1/2016

  	
   

  	
  135,000

  	
  (1)

  	
  5.500

  	
  %

  	
  31,625

  	
   

  	
  166,625

  	
   

  	
  174,556

  	
   

  	
  169,354

  	
   

  	
  —

  	
   

  	
  (5,602

  	
  )

  	
  5,633

  	
   

  
	
  2/1/2017

  	
   

  	
  140,000

  	
  (1)

  	
  5.500

  	
  %

  	
  24,200

  	
   

  	
  164,200

  	
   

  	
  172,410

  	
   

  	
  169,354

  	
   

  	
  —

  	
   

  	
  (3,056

  	
  )

  	
  2,577

  	
   

  
	
  2/1/2018

  	
   

  	
  145,000

  	
  (1)

  	
  5.500

  	
  %

  	
  16,500

  	
   

  	
  161,500

  	
   

  	
  169,575

  	
   

  	
  169,354

  	
   

  	
  —

  	
   

  	
  (221

  	
  )

  	
  2,356

  	
   

  
	
  2/1/2019

  	
   

  	
  155,000

  	
  (1)

  	
  5.500

  	
  %

  	
  8,525

  	
   

  	
  163,525

  	
   

  	
  171,701

  	
   

  	
  169,354

  	
   

  	
  —

  	
   

  	
  (2,347

  	
  )

  	
  9

  	
   

  
	
   

  	
   

  	
  1,670,000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  2,465,015

  	
   

  	
  2,588,47?

  	
   

  	
  2,582,649

  	
   

  	
   

  	
   

  	
  (5,827

  	
  )

  	
   

  	
   

  



 






* Paid monthly to City of Heron Lake starting
November 1, 2003.