Exhibit
4.3


ESCROW AGREEMENT


THIS ESCROW
AGREEMENT (this “Agreement”)
is made this      day of                    ,
200  , by and between Highwater Ethanol, LLC a Minnesota limited
liability company (“Highwater Ethanol”) and Minnwest Bank of Redwood Falls,
Minnesota as escrow agent (the “Escrow Agent”).


W I T N E S
S E T H:


WHEREAS, Highwater Ethanol proposes to offer a minimum
of 4,500 and a maximum of 6,000 of its Membership Units (the “Units”) at a
price of $10,000 per Unit, in minimum blocks of one (1) Unit in an offering
registered with the Securities and Exchange Commission and in the states of
Florida, Georgia, Illinois, Iowa, Kansas, Louisiana, Minnesota, Missouri, South
Dakota, Wisconsin and possibly offered in other states pursuant to state securities
registration exemptions and under the provisions of the Securities Act of 1933,
as amended (the “Offering”);


WHEREAS, Highwater Ethanol will file a registration
statement to register the Units with the Securities and Exchange Commission,
the states of Florida, Georgia, Illinois, Iowa, Kansas, Louisiana, Minnesota,
Missouri, South Dakota, Wisconsin, and possibly other states;


WHEREAS, Highwater Ethanol will allow investors in the
Offering to deliver the purchase price of the subscribed Units in installments;
and


WHEREAS, Highwater Ethanol desires to comply with the
requirements of federal and state securities laws and regulations, and desires
to protect the investors in the Offering by providing, under the terms and
conditions herein set forth, for the return to subscribers of the money which
they may pay on account of purchases of Units in the Offering if the Minimum
Escrow Deposit (hereinafter defined) is not deposited with the Escrow Agent.


NOW,
THEREFORE, in
consideration of the mutual covenants herein contained and for other good and
valuable consideration, the receipt and sufficiency of which is acknowledged,
the parties agree as follows:


1.             Acceptance of Appointment.  Minnwest Bank of Redwood Falls, Minnesota
hereby agrees to act as Escrow Agent under this Agreement.  The Escrow Agent shall have no duty to
enforce any provision hereof requiring performance by any other party
hereunder.


2.             Establishment of Escrow Account.  An escrow account (the “Escrow Account”) is
hereby established with the Escrow Agent for the benefit of the investors in
the Offering.  Except as specifically
provided in this Agreement, the Escrow Account shall be created and maintained
subject to the customary rules and regulations of the Escrow Agent pertaining
to such accounts.


3.             Ownership of Escrow Account.  Until such time as the funds deposited in the
Escrow Account (the “Deposited Funds”) shall equal the Minimum Escrow Deposit
(as hereinafter defined), all funds deposited in the Escrow Account by
Highwater Ethanol shall not become the property of Highwater Ethanol or be
subject to the debts of Highwater Ethanol or any other person but shall be



 1
 






 



held by the Escrow Agent solely
for the benefit of the investors who have purchased Units in the Offering.


4.             Deposit of Proceeds.  All proceeds from sales of Units in the
Offering shall be delivered by Highwater Ethanol to the Escrow Agent, within
forty-eight hours of the receipt thereof from investors, endorsed (if
appropriate) to the order of the Escrow Agent, together with an appropriate
written statement setting forth name, address and social security number of
each person purchasing Units, the number of Units purchased, and the amount
paid by each such purchaser.  Any such
proceeds deposited with the Escrow Agent in the form of uncollected checks
shall be promptly presented by the Escrow Agent for collection through
customary banking and clearing house facilities.  As the proceeds of each sale are deposited
with the Escrow Agent, Highwater Ethanol shall reserve the number of Units confirmed
to the purchaser thereof in connection with such sale.  All such deposited proceeds are referred to
herein as the “Escrow Funds”.


5.             Investment
of Escrow Account.  The Escrow
Funds shall be credited by the Escrow Agent and recorded in the Escrow Account.  The Escrow Agent shall be permitted, and is
hereby authorized to deposit, transfer, hold and invest all funds received
under this Agreement, including principal and interest, in those investments
directed, in writing by Highwater Ethanol. 
The Escrow Agent is hereby authorized to invest Escrow Funds in the Federated
Treasury Obligations Money Market Mutual Fund for temporary investment
without written direction.  Any interest
received by the Escrow Agent with respect to the Escrow Funds shall be paid to
Highwater Ethanol, or the investors, as indicated elsewhere in this Agreement.


6.             Termination of Escrow.  This
Agreement and the Escrow created hereunder shall be terminated as provided in
paragraph 7 hereof or as of the date in calendar year 2007 (the “Termination
Date”), which is one year and one day following the date in calendar year 2006
upon which the Securities and Exchange Commission authorizes the Offering (the “Offering’s
Effective Date”).  Highwater Ethanol
shall notify Escrow Agent of the Offering’s Effective Date within thirty (30)
days of the receipt of notice of the Offering’s Effective Date from the
Securities and Exchange Commission.


7.             Disposition of Escrow Funds.  The Escrow Agent shall have the following
duties and obligations under this Agreement:


A.            The
Escrow Agent shall send a written notice acknowledging the receipt of the
Deposited Funds every seven days to Highwater Ethanol.


B.            The
Escrow Agent shall give Highwater Ethanol prompt written notice when the
Deposited Funds equal $4,500,000 (exclusive of interest).  Following receipt of such notice, Highwater
Ethanol will advise the purchasers of Units to remit to the Escrow Agent the
balance of the purchase price within twenty (20) days.  Thereafter, Escrow Agent shall give Highwater
Ethanol written notice acknowledging the receipt of the Deposited Funds every
seven days.  The Escrow Agent shall give
Highwater Ethanol prompt written notice when the Deposited Funds total
$45,000,000 (exclusive of interest).



 2
 






 



C.            At
the time (and in the event) that: (i) the Deposited Funds shall, during the
term of this Agreement, equal $45,000,000 
in subscription proceeds (exclusive of interest) (the “Minimum Escrow
Deposit”);  (ii) the Escrow Agent
shall have received written confirmation from Highwater Ethanol that Highwater
Ethanol has obtained a written debt financing commitment for debt financing
ranging from a minimum
of $$48,320,000 to a
maximum of $63,320, depending on the amount necessary to fully
capitalize the project;  (iii) Highwater Ethanol has affirmatively
elected in writing to terminate this Agreement; (iv) Highwater Ethanol has
signed a definitive design build agreement with Fagen, Inc.; (v) Highwater
Ethanol has been issued the environmental permits necessary to construct the
ethanol plant (vi) the Escrow Agent
shall have provided to each state securities department in which Highwater
Ethanol has registered its securities for sale, as communicated to the Escrow
Agent by Highwater Ethanol, an affidavit stating that the foregoing requirements
(i), (ii), (iii), (iv) and (v) of this subsection 7C have been satisfied; and (vii) in each state in which consent is required, the state
securities commissioners have consented to release of the funds on deposit,
then this Agreement shall terminate, and the Escrow Agent shall promptly
disburse the funds on deposit, including interest, to Highwater Ethanol to be
used in accordance with the provisions set out in Highwater Ethanol’s
registration statement.  Highwater
Ethanol will deliver a copy of its registration statement to the Escrow Agent
upon execution of this Agreement.  The
Escrow Agent will have no responsibility to examine the registration statement
with regard to the Escrow Account or otherwise and the registration statement
shall contain a provision to such effect. 
Upon the making of such disbursement, the Escrow Agent shall be
completely discharged and released of any and all further responsibilities
hereunder.


D.            In
the event the Deposited Funds do not equal or exceed the Minimum Escrow Deposit
on or before the Termination Date or if Highwater Ethanol has not received a
written debt financing commitment as described herein on or before the
Termination Date, the Escrow Agent shall return to each of the purchasers of
the Units in the Offering, as promptly as possible after such Termination Date
and on the basis of its records pertaining to the Escrow Account:  (i) the sum which each purchaser initially
paid in on account of purchases of the Units in the Offering and (ii) each
purchaser’s portion of the total interest earned on the Escrow Account as of
the Termination Date, (iii) reduced by the transaction fees provided in
paragraph 10 hereof.  Computation of any
purchaser’s share of the net interest earned will be a weighted average based
on the proportion of such purchaser’s deposit in the Escrow Account from the
Offering to all such purchasers’ deposits held by the Escrow Agent and upon the
length of time in days such deposit was held in the Escrow Account as compared
to all such deposits.  All computations
with respect to each purchaser’s allocable share of net interest shall be made
by the Escrow Agent, which determinations shall be final and conclusive.  Any amount paid or payable to a purchaser
pursuant to this paragraph shall be deemed to be the property of such
purchaser, free and clear of any and all claims of Highwater Ethanol or its
agents or creditors; and the respective purchases of the Units made and entered
into in the Offering shall thereupon be deemed, ipso facto, to be cancelled without
any further liability of the purchasers or any of them to pay for the Units
purchased.  At such time as the Escrow
Agent shall have made all the payments called for in this paragraph, the Escrow
Agent shall be completely discharged and released of any and all further
responsibilities hereunder, and the Units reserved (as provided in paragraph 5)
shall be released from such reservation, except that Escrow Agent shall be
required to prepare and issue a single IRS Form 1099 to each investor in the
event that funds are returned to investors.



 3
 






 



8.             Agreement with Escrow Agent.  To induce Escrow Agent to act hereunder, it
is agreed by Highwater Ethanol that:


A.            The
sole duty of the Escrow Agent, other than as herein specified, shall be to
receive the Escrow Funds and hold them subject to release, in accordance
herewith, and the Escrow Agent shall be under no duty to determine whether
Highwater Ethanol is complying with the requirements of this Agreement in
tendering to the Escrow Agent said proceeds of the sale of said Units.  The Escrow Agent may conclusively rely upon
and shall be protected in acting upon any statement, certificate, notice,
request, consent, order or other document believed by it to be genuine and to
have been signed or presented by the proper party or parties.  The Escrow Agent shall have no duty or
liability to verify any such statement, certificate, notice, request, consent,
order or other document, and its sole responsibility shall be to act only as expressly
set forth in this Agreement.  The Escrow
Agent shall be under no obligation to institute or defend any action, suit or
proceeding in connection with this Agreement unless first indemnified to its
satisfaction.  The Escrow Agent may
consult counsel in respect of any question arising under this Agreement and the
Escrow Agent shall not be liable for any action taken or omitted in good faith
upon advice of such counsel.


B.            Highwater
Ethanol hereby indemnifies and holds harmless the Escrow Agent from and against
any and all loss, liability, cost, damage and expense, including, without
limitation, reasonable counsel fees, which the Escrow Agent may suffer or incur
by reason of any action, claim or proceeding brought against the Escrow Agent
arising out of or relating in any way to this Agreement or any transaction to
which this Agreement relates unless such action, claim or proceeding is the
result of the gross negligence or willful misconduct of the Escrow Agent.


9.             Resignation and Removal of Escrow Agent Successors.  The Escrow Agent may resign upon thirty (30)
days advance written notice to Highwater Ethanol.  If a successor Escrow Agent is not appointed
within the 30-day period following such notice, Escrow Agent may petition any
court of competent jurisdiction to name a successor Escrow Agent.  Any commercial banking institution or trust
company with which Escrow Agent may merge or consolidate, and any commercial
banking institution or trust company to which Escrow Agent transfers all or
substantially all of its corporate trust business shall be the successor Escrow
Agent without further act.


10.           Fees and Expenses of Escrow Agent.  Highwater Ethanol agrees to pay the Escrow
Agent the fees specified in the Escrow Agent’s fee schedule attached hereto as
Exhibit A, in the manner set forth therein, unless otherwise agreed to by the
parties in writing.  The parties further
agree that Highwater Ethanol shall be solely responsible for the payment of
such fees and the Escrow Agent shall not seek payment of the fees from
investors or apply any principal deposited by investors in the escrow account
or interest on the escrow account against such fees.  The fee agreed upon  herein is intended as full consideration for
the Escrow Agent’s services as contemplated by this Agreement; provided,
however, that in the event the Escrow Agent renders any material service
not contemplated in this Agreement or there is any assignment of interest in
the subject matter of this Agreement, or any material modification hereof; or
if any material controversy arises hereunder, or the Escrow Agent is made a
party to any litigation pertaining to this Agreement, or the subject matter
hereof, then the



 4
 






 



Escrow Agent shall be reasonably
compensated for such extraordinary services and reimbursed for all costs and
expenses, including reasonable attorney’s fees, occasioned by any delay,
controversy, litigation or event, and the same shall be recoverable from
Highwater Ethanol, but not from the escrow account.


11.           Notices.  All
notices, requests, demands, and other communications under this Agreement shall
be in writing and shall be deemed to have been duly given (a) on the date of
service if served personally on the party to whom notice is to be given, (b) on
the day of transmission if sent by facsimile transmission to the facsimile number
given below, and telephonic confirmation of receipt is obtained promptly after
completion of transmission, (c) on the next day on which such deliveries are
made in Lamberton, Minnesota, when delivery is to Federal Express or similar
overnight courier or the Express Mail service maintained by the United States
Postal Service, or (d) on the fifth day after mailing, if mailed to the party
to whom notice is to be given, by first class mail, registered or certified,
postage prepaid, and properly addressed, return receipt requested, to the party
as follows:


	
  

  	
  If to Escrow Agent:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Minnwest Bank of
  Redwood Falls, Minnesota

  	
   

  	
   

  
	
   

  	
  1275 East Bridge, P.O. Box 439

  	
   

  	
   

  
	
   

  	
  Redwood Falls, MN 56283

  	
   

  	
   

  
	
   

  	
  Attn:

  	
   

  	
     

  	 

	
   

  	
  Fax: (507) 637-8377

  	
   

  	
   

  
	
   

  	
  Phone: (507) 637-5343

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  If to Highwater
  Ethanol:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Highwater Ethanol, LLC

  	
   

  	
   

  
	
   

  	
  205 S. Main Street, PO Box 96

  	
   

  	
   

  
	
   

  	
  Lamberton, Minnesota 56152

  	
   

  	
   

  
	
   

  	
  Attn: Brian Kletscher, Chairman of the Board and
  President

  	
   

  	
   

  
	
   

  	
  Fax: (507) 762-3376

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  with a required
  copy to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Brown, Winick, Graves, Gross, Baskerville and
  Schoenebaum, P.L.C.

  	
   

  	
   

  
	
   

  	
  666 Grand Avenue, Suite 2000

  	
   

  	
   

  
	
   

  	
  Des Moines, IA 50309

  	
   

  	
   

  
	
   

  	
  Attention: Harold N. Schneebeck

  	
   

  	
   

  
	
   

  	
  Fax: (515) 323-8509

  	
   

  	
   

  
							



 


12.           Governing Law. 
This Agreement shall be construed, performed, and enforced in accordance
with, and governed by, the internal laws of the State of Minnesota, without
giving effect to the principles of conflict of laws thereof.


13.           Successors and Assigns.  Except as otherwise provided in this
Agreement, no party hereto shall assign this Agreement or any rights or
obligations hereunder without the prior written



 5
 






 



consent to the other parties
hereto and any such attempted assignment without such prior written consent shall
be void and of no force and effect.  This
Agreement shall inure to the benefit of and shall be binding upon the
successors and permitted assigns of the parties hereto.


14.           Severability. 
In the event that any part of this Agreement is declared by any court or
other judicial or administrative body to be null, void, or unenforceable, said
provision shall survive to the extent it is not so declared, and all of the
other provisions of this Agreement shall remain in full force and effect.


15.           Further Assurances. 
Each of the parties shall execute such documents and other papers and
take such further actions, as may be reasonably required or desirable to carry
out the provisions hereof and the transactions contemplated hereby.


16.           Amendments. 
This Agreement may be amended or modified, and any of the terms,
covenants, representations, warranties, or conditions hereof may be waived,
only by a written instrument executed by the parties hereto, or in the case of
a waiver, by the party waiving compliance. 
Any waiver by any party of any condition, or of the breach of any
provision, term, covenant, representation, or warranty contained in the
Agreement, in any one or more instances, shall not be deemed to be nor
construed as further or continuing waiver of any such conditions, or of the
breach of any other provision, term, covenant, representation, or warranty of
this Agreement.


17.           Entire Agreement. 
This Agreement contains the entire understanding among the parties
hereto with respect to the escrow contemplated hereby and supersedes and
replaces all prior and contemporaneous agreements and understandings, oral or
written, with regard to such escrow.


18.           Section Headings. 
The section headings in this Agreement are for reference purposes only
and shall not affect the meaning or interpretation of this Agreement.


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


IN WITNESS WHEREOF, the parties
hereto have hereunto affixed their signatures as of the day and year first
written above.


	
  HIGHWATER ETHANOL:

  	
   

  	
   

  	
  ESCROW AGENT

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  HIGHWATER
  ETHANOL, LLC

  	
   

  	
   

  	
  MINNWEST BANK OF REDWOOD FALLS, MINNESOTA

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  	
     

  
	
  Brian Kletscher,

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Chairman of the
  Board and President

  	
   

  	
   

  	
  Printed Name:

  	
     

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  	
   

  
											



 



 6














 


 


Exhibit
A


Minnwest
Bank of Redwood Falls, Minnesota

Escrow Agent Fee Schedule


Escrow Agreement

Highwater Ethanol, LLC


	
  Administration

  	
  $

  	
     

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Transaction Fees

  	
   

  	
   

  	
   

  
	
  Subscriber

  	
  $

  	
     

  	
   

  
	
  Disbursement/Each

  	
  $

  	
     

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  1099 Filing

  	
  $

  	
     

  	
   

  
	
  Subscriber/Filing

  	
  $

  	
     

  	
   

  



 


All out of pocket
costs and expenses, including postage, supplies, long distance telephone
charges, wires and reasonable attorney’s fees will be in addition hereto.


We reserve the
right to revise fees, including establishing new minimums, as necessitated by
changing economic conditions.


All fees are
charged in arrears and are quoted on an annualized basis; however we reserve
the right to bill in advance, or on a more frequent basis.


 



 7