Exhibit
10.11


OPTION
AGREEMENT


THIS OPTION AGREEMENT (the “Agreement”)
is made this 8th day
of August, 2006, by and between Highwater Ethanol, LLC a Minnesota limited
liability company (the “Buyer”) and David Geis and                           
Gies, husband and wife, and Steven Geis and Kathleen Gies, husband and wife
(the “Seller”).


WITNESSETH:


WHEREAS, Seller is the owner of
certain real property legally described on Exhibit “A” attached hereto (which
real property, together with all easements and other rights appurtenant
thereto, shall be defined herein as the “Property”);


WHEREAS, Buyer desires to
acquire an option to purchase the Premises (as defined in paragraph 1 hereof)
from Seller in accordance with the terms and conditions of this Agreement (the “Option”);
and


WHEREAS, the parties hereto
desire to set forth their agreement concerning the terms and conditions of such
Option.


NOW, THEREFORE, in consideration
of the foregoing, the mutual promises of the parties hereto and the mutual
benefits to be gained by the performance hereof, and for other valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:


1.                                      Grant
and Exercise of Option.  Buyer shall
have the option to purchase: i) Seller’s right, title and interest in and to at
least a six (6) acre and up to a twelve (12) acre portion of the Property,
consisting of one or more contiguous six (6) acre parcels to be more accurately
located and described following Buyer’s completion of well digging and water
exploration on the property; and ii) a permanent easement over such other
portions of the Property as may be necessary to accommodate the construction
and maintenance of a pipeline to transport water produced on the Premises to an
ethanol production facility proposed by Buyer at or near Lamberton, Minnesota,
and in and to any easements, hereditaments and other rights appurtenant thereto
in accordance with the terms and conditions of this Agreement (the “Premises”).  The parties acknowledge that the Premises
shall be contiguous with the township right-of-way touching the property.  The first six (6) tract shall begin at the
Southeast corner of the property and then 300 feet North and then a sufficient
number of feet West to make six (6) acres. 
If an additional six (6) acres is purchased it shall be correspondingly
300 feet in width, located along the township road, and contiguous with the
prior or first six (6) acres purchased. 
The measurement shall begin the middle of the road to determine the six
(6) acres for each tract.  The Premises
shall include any wells completed by Buyer under a contemporaneous License
Agreement between the parties hereto. 
This option shall continue in full force and effect for a period
commencing upon the date hereof and continuing until earlier of the date of
Buyer’s delivery to Seller of the “Option Notice” (as defined in Paragraph 8
hereof), or December 31, 2008, whichever occurs first.










 



2.                                      Purchase
Price.  The purchase price for the
Premises (the “Purchase Price”) shall be Seven Thousand and No/100 Dollars
($7,000.00) per purchased acre.  Said
acreage shall be described and depicted by a boundary survey to be completed at
the expense of the Buyer.  Said Purchase
Price, subject to adjustments and prorations as provided herein, shall be paid
as follows:


(a)                                  A
non-refundable deposit of One Thousand and No/100 Dollars ($1,000.00) (the “Option
Fee”) shall be paid to Seller upon execution of this Agreement and disbursed in
accordance with the terms hereof.  Except
as otherwise designated herein, the principal amount of the Option Fee shall be
credited against the Purchase Price payable at “Closing” (as the term is
defined in Paragraph 3 hereof);


(b)                                 The
balance of the Purchase Price, subject to prorations and adjustments as provided
herein, shall be payable by Buyer to Seller in cash or immediately available
funds at Closing.


3.                                      Closing
Date.  The closing (the “Closing”) of
this purchase and sale shall take place at a mutually agreeable location, on
the business day designated by Buyer in the Option Notice (as defined in
Paragraph 8 hereof), which day of Closing shall be defined herein as the “Date
of Closing”.


4.                                      Deliveries
by Seller at Closing.  If Buyer shall
have exercised its option in a timely manner and shall have performed all of
its obligations hereunder to the Date of Closing, then Seller shall, on the
Date of Closing, execute, where necessary, and deliver to Buyer the following:


(a)                                  A
general warranty deed in recordable form executed by Seller and conveying
marketable fee titled to the Premises to Buyer, free and clear of all
liabilities, liens, encroachments, encumbrances, easements, obligations,
charges and options of any kind whatsoever, except those disclosed by the
abstract or Commitment to be delivered pursuant to Paragraph 6 hereof;


(b)                                 An
easement, if requested by Buyer, in recordable form executed by Seller and
conveying a right of way over and across the Property, in a width to be
negotiated by the parties hereto, for the purpose of constructing, maintaining and
operating thereon a water pipeline as further described in Paragraph 1 hereof;


(c)                                  An
affidavit indicating that on the Date of Closing there are no outstanding,
unsatisfied judgments, tax liens or bankruptcies against or involving the
Seller, that there has been no skill, labor, or material furnished to the
Premises by Seller for which mechanics’ liens could be filed, and that there
are no other unrecorded interests in the Premises of



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any kind, including, but
not limited to, any leasehold interest in the Premises;


(d)                                 A
Well Certificate in the form required by Minn. Stat. § 103I.235, or a
designation on the deed that otherwise satisfies said statutory requirements;
and


(e)                                  Such
additional documents that are reasonable in form as shall reasonably be necessary
to carry out the intent of this Agreement.


5.                                      Deliveries
by Buyer at Closing.  If Seller shall
have performed all of its obligations hereunder to the Date of Closing, the
Buyer shall, on the Date of Closing, execute, where necessary, and deliver the following:


(a)                                  The
Purchase Price;


(b)                                 The
reasonable value of any crops growing on the Premises if Closing occurs
following planting but prior to harvest; and


(c)                                  Such
additional documents as shall reasonably be necessary to carry out the intent
of this Agreement.


At closing, Seller
shall pay the state deed tax payable upon recording the above warranty deed and
easement and Buyer shall pay the recording fees for the filing of said warranty
deed and easement.  Each party shall be
responsible for the payment of any attorneys’ fees that it may incur in this
transaction.  Any closer’s fee incurred
in the closing of this sale transaction shall be paid by Buyer.


6.                                      Title
Examination.  Within forty-five (45)
days after the date of the delivery by Buyer of an Option Notice, Seller, as
its sole cost and expense, shall deliver to buyer, for Buyer’s examination, an
updated abstract of title for the Premises. 
In the alternative, in lieu of providing the Abstract of Title, the
Seller may provide a commitment (the “Commitment”) for the issuance of an ALTA
owner’s policy of the insurance, with extended coverage issued by Title
Company, in the amount of the Purchase Price, committing to insure that Buyer
will have good and marketable title to the Premises and its appurtenances on
the Date of Closing free and clear of any liens and exceptions to title and
including relevant tax lien, special assessment, judgment and bankruptcy
searches.


In the event Buyer
does not timely receive the updated abstract or Commitment within the time
specified, Buyer may obtain such document, at Seller’s cost and expense.  Title to the Premises and its appurtenances
shall be subject to Buyer’s approval and all objections to the status of title
shall be delivered to Seller in writing within ten (10) business days
after receipt of the abstract or Commitment. 
Seller shall correct all such objections within sixty (60) days of
Seller’s receipt thereof, it being understood that marketable fee title and not
insurable title to the Premises an is appurtenances is to be conveyed by Seller
to Buyer; provided, in the event such objection cannot be corrected



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within said sixty
(60) day period, such period shall be extended to the ext3nt reasonably
necessary to complete such correction so long as Seller commences an effective
cure thereof within said sixty (60) day period and prosecutes such cure
diligently to completion.  If title to
the Premises and its appurtenances is not marketable and is not made so by
Seller within sixty (60) days of the delivery of said objections, or such
longer period as may be available to Seller hereunder, Buyer shall have the
option, in addition to other remedies available at law or in equity, to:


(a)                                  Declare
this Agreement null and void; or


(b)                                 Waive
any defect in title and, in such event, proceed to close the transaction
contemplated by this Agreement; provided, Buyer shall have the option, at
Closing, to pay directly any liens, mortgages, charges or similar encumbrances
against the Premises that are liquidated in amount, and Buyer may deduct the
amount so paid from the Purchase Price.


7.                                      Prorations.  Real estate taxes, if any, that are levied or
assessed against the Premises and that are currently payable in the year in
which Closing occurs shall be prorated as of the Date of Closing.  Seller shall pay the entirety of all special
assessments and deferred taxes, if any, that are levied against the Premises as
of the Date of Closing.


8.                                      Option
Notice.  Seller acknowledges that
Buyer and other third-parties are seeking, or will seek, at their sole expense,
various approvals from governmental or private authorities having jurisdiction
over the Premises necessary to develop the Premises and nearby properties as
desired by Buyer and such third-parties (collectively, the “Required Approvals”).  Upon Buyer or such third-parties’ receipt of
all Required Approvals, Buyer may provide Seller written notice to that effect
(the “Option Notice”).  The Option Notice
shall designate the Date of Closing; provided, however, the Date of Closing
shall occur within sixty (60) days of the date the Option Notice is delivered
to Seller. Upon the delivery of the Option Notice, Buyer shall be obligated to
close upon its purchase of the Premises in accordance with the terms
hereof.  Seller acknowledges that Buyer
has made no representation or warranty that an Option Notice will be delivered
by Seller hereunder.  Notwithstanding any
contrary provision herein, the event that, for whatever reason, Buyer fails to
deliver the Option Notice to Seller on or before December 31, 2008, this
Agreement shall be deemed expired and all of Buyer’s rights hereunder shall be
deemed waived and of no further force and effect.  In the event of any expiration or earlier
termination of this Agreement, either party shall, upon the request of the
other, execute and deliver an instrument that is reasonable in form and that
memorializes the occurrence and effect of such expiration or termination.


9.                                      Assignment.  Seller acknowledges that Buyer may not be the
party that will be developing this Premises, and that Buyer may assign its
rights under this contract to a third party. 
The parties acknowledge and agree that Buyer shall have the right to
sell, assign and transfer this Option, and all rights, title and interests
created herein, without Seller’s prior approval.  Buyer shall provide copies of any and all
documentation to Seller contemporaneous with any such assignment.



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10.                               Seller’s
Option to Rent Back Tillable Acres. 
If Buyer rents out any tillable acres that is purchases hereby, Seller
shall have the first right to rent such at $50 per tillable acre.


11.                               Miscellaneous.


(a)                                  Notices.  Any notice required herein shall be deemed
effective if it is personally delivered, delivered prepaid to a
nationally-recognized overnight air courier for overnight delivery, to Seller
or Buyer at the following addresses:


To Seller:                                              David
and                   Geis


To
Buyer:                                           Highwater
Ethanol, LLC


c/o
Kevin Stroup


300
O’Connell Street


Marshall, MN  56258


Either party may designate an additional or another
address upon giving notice to the other party pursuant to this paragraph.  Notice given in any manner other than as
stated herein, shall be deemed effective only upon receipt by the party to whom
such notice is given.


(b)                                 Interpretation.  This Agreement constitutes the entire
understanding between the parties.  It
may be amended or modified only in a writing signed by Seller and Buyer.  This Agreement shall be governed by and
construed in accordance with the laws of the State of Minnesota.


(c)                                  Waivers.  Neither the extension of time nor payment of
any sum of money to be paid hereunder nor any waiver by Seller of its right to
declare this Agreement forfeited by reasons of any breach hereof, shall in any
manner affect the right of Seller to terminate this Agreement because of a
subsequent default.  No extension of time
or waiver shall be effective unless given in writing signed by Seller.


(d)                                 Additional
Documents.  After the Closing, each
of the parties, without further consideration, agrees to execute such
additional documents as may reasonably be necessary to carry out the purposes
and intent of this Agreement and to fulfill the obligations of the respective
parties hereunder.  Upon the expiration
or earlier termination of this Agreement and upon Sellers written request
therefore, Buyer shall execute and deliver to Seller a quit claim deed to the
Premises or other instrument that is



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reasonable in form and
that memorializes the occurrence and effect of any such expiration or
termination.


(e)                                  Commissions.  Seller hereby warrants to Buyer and Buyer
hereby warrants to Seller that no broker, agent or finder has been retained by
either party and that no broker’s commissions, finder’s fees or like charges
have been incurred in connection with this transaction.


(f)                                    Headings.  The headings in this Agreement are inserted
for convenience only and shall not constitute a part hereof.


(g)                                 Parties.  This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.


(h)                                 Survival.  The covenants contained herein shall survive
Closing of this transaction.


(i)                                     Use
of Premises.  To the extent permitted
by applicable law, and without waiving the provisions of Minn. Stat. Chapter
466, Buyer hereby agrees to indemnify and hold Seller and the Premises harmless
from and against any and all liens, losses, claims, causes of action,
liabilities and costs of defense incurred by Seller arising out of the actions
of Buyer, its agents, employees, contractors o invitees upon the Premises prior
to closing, except to the extent caused by the negligence or willful misconduct
of Seller or its agents, employees or contractors.


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


12.                               REPAIR
TILE.  Buyer shall repair any tile
damage by its exercise of this option (or the corresponding License Agreement)
and/or use of this property.


13.                               USE
OF FIELD ROAD.  Seller shall have the
right to use the field road for access to their remaining property.  Seller shall also be granted a permanent
easement for ingress and egress across any property sold hereby as access to
Seller’s remaining property, subject to the limitation that such use shall not
affect any wells or the use thereof as placed on said property by Buyer.


THIS OPTION AGREEMENT has been
executed and delivered as of the date first above written.



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  SELLER:

  	
   

  	
  BUYERS:

  
	
   

  	
   

  	
  Highwater Ethanol, LLC

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ David Geis

  	
   

  	
  By:

  	
   

  	
  /s/ Brian
  Kletscher

  
	
   

  	
   

  	
  David Geis

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its: 

  	
  President

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
  /s/ Warren
  Pankonin

  
	
   

  	
   

  	
   

  	
   Geis

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  Director

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Steven Geis

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Steven Geis

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Kathleen
  Geis

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Geis

  	
   

  	
   

  	
   

  	
   

  
										




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EXHIBIT “A”


Legal
Description of Premises


The Southwest Quarter
(SW1/4) of Section 29, Township 109 North, Range 37 West, Redwood County,
Minnesota.



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