Exhibit
10.2


 


TRINITY
INDUSTRIES LEASING COMPANY

RAILROAD CAR LEASE AGREEMENT


July BK
TJ


 


This Agreement dated as of the 1st day June, 2009 (this ‘Agreement”),
between Trinity Industries Leasing Company, a
Delaware corporation, with its principal office at 2525 Stemmons Freeway,
Dallas, Texas 75207 (“TILC”, and whether as principal on behalf of itself as
lessor or as agent for the lessor as contemplated in Article 30, the “Lessor”)
and Highwater Ethanol, LLC, a
Minnesota limited liability company, with its principal office at 24500 U.S.
Highway 14, Lamberton, Minnesota 56152


, as lessee (“Lessee”).


 


In consideration of the mutual terms and conditions
hereinafter set forth, the parties hereto hereby agree as follows:


 


ARTICLE 1




LEASE AGREEMENT


 


Lessor agrees to lease to Lessee and Lessee agrees
to lease from Lessor, on the terms and conditions set forth herein, the
railroad cars (herein collectively called the “cars” and separately a “car”)
set out and identified in the Rider or Riders hereto and such additional Riders
as may from time to time be executed by the parties incorporating the terms of
this Agreement. Each Rider shall set forth a brief description of the car or
cars covered thereby, including such facts as the number of cars, the
Association of American Railroads (“AAR”) or the United States Department of
Transportation (“DOT”) specifications, rent, the term throughout which the car
or cars shall remain in Lessee’s service and such other information as may be
agreed by the parties. Lessor and Lessee agree that each Rider hereto shall
constitute a separate lease which incorporates the terms of this Agreement. For
the purposes of this Agreement, “Lease” shall mean the lease transaction with
respect to a particular car or cars evidenced by the related Rider
incorporating the terms of this Agreement. All cars leased pursuant to a Rider
are subject to the terms of this Agreement and such additional terms as are set
forth in the Rider applicable thereto. Each Rider shall be severable from any
other cars or Riders relating to this Agreement and shall become a separate
Lease which is separately transferable for all purposes. It is the intent of
all parties to this Agreement to characterize this Agreement as a “true lease”
(as distinguished from a financing arrangement for the Lessee’s acquisition of
ownership of the subject cars).


 


ARTICLE 2


 


DELIVERY


 


Lessor agrees to deliver or cause to be delivered to
Lessee, each car being subjected to a Lease pursuant to a Rider and Lessee
agrees to accept such delivery and lease such cars under the related Lease
hereunder, in each case on the date and at the location specified in the
related Rider (and subject to any other delivery conditions or requirements
that may be so specified) it being understood the Lessee shall be responsible
for any losses caused to the Lessor for Lessee’s failure to accept delivery
where the cars so delivered meet the conditions and requirement 


 


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provided in this Agreement. Each car shall be deemed to be delivered to
the Lessee on the date upon which it is received or otherwise deemed delivered
pursuant to the related Rider, except that any car which is already in Lessee’s
service under a predecessor expiring agreement (other than this Agreement) or a
predecessor agreement being terminated in connection with the parties’ entering
into this Agreement shall be deemed delivered to Lessee hereunder immediately
upon the expiration or termination of such other agreement. Lessor shall be
excused from any agreement to deliver the subject cars, and Lessor shall not be
liable, for any causes beyond the reasonable control of Lessor (including, but
not limited to, delays caused by fire, labor difficulties, delays of carriers
and materials suppliers, governmental authority, late delivery by the
manufacturer of the cars or late delivery by a prior lessee) and, in the event
of a delay in such delivery, Lessor shall deliver the cars to Lessee as soon as
reasonably possible thereafter. Lessor shall also be excused from any agreement
to deliver the subject cars, and the Lessor shall have no resulting liability
to Lessee for failure to deliver, if prior to the delivery of the subject cars
there occurs a material adverse change in the condition (including but not
limited to the financial condition or prospects) of the Lessee (or any
guarantor or co-obligor of Lessee, if applicable) or any event which, in the
good faith judgment of the Lessor would reasonably be expected to result in
such a material adverse change.


 


ARTICLE 3


 


CONDITION
OF CARS - ACCEPTANCE


 


All cars delivered hereunder shall be in
satisfactory condition for movement in the normal interchange of rail traffic
and shall otherwise comply with the descriptions and specifications contained
in the applicable Rider. Lessee shall be solely responsible for determining
that cars are in proper condition for loading and shipment, except for those
responsibilities which, under applicable law, have been assumed by the
railroads. Lessee shall inspect the cars promptly after they are delivered and
shall notify Lessor in writing within five days after delivery of its rejection
of any car, and the specific reasons for such rejection, which shall be limited
to the failure of the cars so delivered to comply with the first sentence of
this Article 3. Failure by the Lessee to so notify Lessor of rejection of
any car within five days after delivery, or, if earlier, the successful loading
of such car, shall constitute acceptance of such car or cars, as the case may
be, by Lessee and shall be conclusive evidence of the fit and suitable
condition of such car or cars.


 


If Lessee fails to accept any cars as a result of
defects properly reported to Lessor, Lessor shall be provided such additional
time as is necessary to correct any such defects, except to the extent that the
parties may otherwise agree in writing at such time.


 


Lessee’s acceptance, however and whenever effected,
shall be deemed effective as of the delivery date of a particular car. Such
acceptance shall conclusively establish that such cars conform to the
applicable standards set forth in the Rider(s) and the Interchange Rules of
the AAR (the “Interchange Rules”).


 


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ARTICLE 4


 


RENT


 


Lessee agrees to pay to Lessor for the use of each
car the monthly rent set forth in the Rider applicable to such car from the
date such car is delivered to Lessee, in accordance with Article 2, until
such car is returned to Lessor, as hereinafter provided in Article 17.
Rent shall be payable in U.S. Dollars and in advance on or before the first day
of each calendar month (provided, however, that the rent for each car for the
month in which it is delivered shall be prorated for the number of days,
including the day of delivery, remaining in such month at a daily rate based
upon a 365 day year and shall be payable on or before the first day of the next
succeeding month together with the rent for such month). Rent shall be paid to
Lessor by electronic funds transfer to Trinity
Leasing Customer Payment Account, Wilmington Trust Company, ABA # 031-100-092, Account # 2860-4998, or at
such other address as Lessor may specify by notice to Lessee. Except as set
forth in this Agreement (including without limitation, the provisions of Article 10)
or a related Rider rent shall be paid without deduction, abatement, set off or
counterclaim and without notice or demand.


 


Late Rent — If Lessee has not paid rent or other
amounts payable hereunder for a period of longer than ten (10) days,
Lessee shall pay Lessor, as additional rent, interest on such unpaid sum from
its due date to the date of payment by Lessee at the rate per annum equal to
three percentage points above the prime rate of JPMorgan Chase Bank (or its
successor). Any costs incurred by Lessor in collecting rent or any other sum of
money due under this Agreement wrongfully withheld by Lessee, including, but
not limited to, reasonable attorneys’ fees, will be paid by Lessee.


 


Holdover Rent — Until any car is returned to Lessor
in the condition required hereunder after an expiration or termination of the
related Lease, Lessee shall continue to pay rent for such car and to comply
with all other payment and other obligations under this Agreement as though
such expiration or other termination had not occurred. If sixty (60) days after
the expiration or other termination of the related Lease, Lessee has not
returned any car, Lessor may charge, and Lessee shall pay Lessor upon demand,
one hundred twenty-five (125%) of the rent for such car in effect immediately
prior to such expiration or termination of the Lease for such car. Nothing in
this Article 4 shall give Lessee the right to retain possession of any car
after the expiration or other termination of the Lease with respect to such
car.


 


ARTICLE 5


 


MILEAGE
ALLOWANCE


 


Lessor shall collect all mileage earned by the cars
during the lease term and shall credit to the rent of Lessee such mileage
earned by the cars while in the service of Lessee, as and when received from
the railroads according to, and subject to, all rules of the tariffs of
the railroads.


 


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ARTICLE 6


 


TERM


 


This Agreement shall be effective as dated and will
expire upon the completion of the leasing arrangement shown on the related
Rider(s) of the last car or cars covered under a Lease hereunder. The
Lease term, with respect to each car covered by a particular Rider, shall
commence on the first day of the succeeding month after the delivery of the
last car subject to the subject Lease, and shall terminate as specified in such
Rider, unless sooner terminated in accordance with the provisions of this
Agreement or such Rider.


 


ARTICLE 7


 


USE AND
POSSESSION


 


Throughout the continuance of this Agreement so long
as Lessee is not in default under this Agreement or any related Rider(s),
Lessee shall be entitled to possession of each car from the date the Lease term
commences as to such car. Lessee shall use each car only in the manner for
which it was designed and intended, and Lessee shall subject the cars only to normal
wear and tear. In addition, Lessee agrees that the cars shall at all times be
used: (a) in conformity with all Interchange Rules; (b) in compliance
with the terms and conditions of this Agreement and any related Rider(s); (c) in
compliance with the laws of each jurisdiction in which the same are operated
and in which the same may be located, and (d) predominantly in the
continental limits of the United States.


 


In the event any car is used outside of the
continental United States, for any reason whatsoever, Lessee shall assume full
responsibility for all costs, taxes, duties or other charges incidental to such
use including costs incurred in returning car to the continental United States.


 


Each car is limited to the number of total loaded
and empty miles per calendar year shown on the Rider and is subject to a
surcharge also shown on the Rider for all excess miles.


 


Lessee shall not exceed the weight limitations
prescribed for operation of cars in unrestricted interchange service as set
forth under Interchange Rule 70 without Lessor’s prior written consent.


 


ARTICLE 8


 


ADDITIONAL
CHARGES BY RAILROADS


 


Lessee agrees to use the cars, upon each railroad
over which cars shall move, in accordance with the then prevailing tariffs to
which each railroad shall be a party; and if the operation or movements of any
of the cars during the term hereof shall result in any charges being made
against Lessor by any such railroad, or AAR in the case of equalization of
mileage on tank cars operated on U.S. railroads, Lessee shall pay to Lessor the
amount of such charges within the period prescribed by and at the rate and
under the conditions of the then prevailing 


 


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tariffs. Lessee agrees to indemnify Lessor against any such charges,
and shall be liable for any switching, demurrage, track storage, detention or
special handling charges imposed on any car during the term hereof.


 


ARTICLE 9


 


LESSEE’S
RIGHT TO TRANSFER OR SUBLEASE


 


Lessee shall not encumber, grant a security interest
in, transfer, subcontract, sublease or assign any car or its interests and
obligations pursuant to this Agreement (any a “Restricted Transfer”), nor shall
a Restricted Transfer that occurs by operation of law or otherwise of Lessee’s
interest in the cars or this Agreement be effective against Lessor without
Lessor’s prior written consent. No Restricted Transfer of Lessee’s interest in
the cars or this Agreement shall relieve Lessee from any of its obligations to
Lessor under this Agreement. Any Restricted Transfer that is consented to by
Lessor which is entered into by Lessee shall contain language in form and
substance reasonably acceptable to Lessor which expressly makes such
encumbrance, transfer, sublease or assignment subject and subordinate to the
interests of Lessor and of any chattel mortgagee, assignee, trustee or other
holder of legal title to or security interest in the cars and/or the related
Lease (but in any case, in respect to such transfers by and transferees of
Lessor, subject to Article 23 hereof).


 


Notwithstanding the foregoing paragraph, Lessee
shall have the right to sublease any car for single trips to its customers or
suppliers; provided, however, notwithstanding any such sublease, Lessee
shall continue to remain liable to Lessor for the fulfillment of Lessee’s
obligations and liabilities under the related Lease; provided, further,
Lessor shall have the right, at any time, to withdraw the privilege of
subleasing hereinabove granted to Lessee.


 


Notwithstanding any other rights provided Lessor in
this Agreement, Lessee agrees to indemnify Lessor and hold Lessor harmless from
any loss, cost or expense, including attorneys’ fees, incurred as a result of
or with respect to any Restricted Transfer.


 


ARTICLE 10


 


MAINTENANCE
RESPONSIBILITY


 


Lessor agrees to maintain the cars in good condition
and repair according to the Interchange Rules. Lessee agrees to notify Lessor
promptly when any car is damaged or in need of repair, and to forward such cars
and any other cars subject to this Agreement to shops as directed by Lessor for
repairs and/or periodic maintenance and inspections. No maintenance, alteration
or repair to any of the cars shall be made or authorized by Lessee without
Lessor’s prior written consent, except (i) Lessee shall, at its expense,
replace any removable part (dome covers, hatch covers, outlet caps, etc.) if
lost, stolen or broken and (ii) as otherwise provided in this Agreement
(including, but not limited to the following two paragraphs relating to certain
repairs on tank cars and hopper cars, respectively). Replacement or repair by
Lessee of any parts, equipment and/or accessories on any of the cars shall be
with parts, equipment and/or accessories that are of like kind and of at least
equal quality to those being replaced or repaired, unless 


 


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otherwise agreed in writing by Lessor. Lessee shall be responsible for
all losses and damages caused by Lessee’s failure to use parts, equipment
and/or accessories that are not of like kind and of at least equal quality to
those being replaced or repaired. For the avoidance of doubt, title of all
replacement parts or repaired parts shall be immediately vested in Lessor.


 


On tank cars, Lessee agrees that it will assume the
responsibility for the maintenance and replacement of angle valves and check
valves and, if such cars are so equipped, thermometer wells, gauging devices,
regulator valves, safety heads and top unloading valves.


 


On hopper cars, Lessee will be responsible for
inspection and cleaning of the operating mechanisms of the outlets, hatches and
special fittings. Further, any damage to such outlets, hatches, special
fittings or the operating mechanisms will be repaired for the account of the
Lessee.


 


For all cars requiring maintenance or repair, Lessee
shall be solely responsible for all costs associated with the removal, disposal
and cleaning of commodities from the cars.


 


When a car is placed in a private shop for
maintenance or repair, the rent shall cease on the date of arrival in the shop,
except in the case where a car arrives without advance notice of defects from
Lessee, in which case rent will cease on communication of such notice of
defects to Lessor from Lessee, and shall be reinstated on the date that the car
is forwarded from the shop or on the date that the car is ready to leave the
shop, awaiting disposition instructions from Lessee. If any repairs are
required as a result of the misuse by or negligence of Lessee or its consignee,
agent or sublessee or while on a railroad that does not subscribe to, or fails
to meet its responsibility under the Interchange Rules, or while on any private
siding or track or any private or industrial railroad, the rent shall continue
during the repair period, and Lessee agrees to pay Lessor for the cost of such
repairs.


 


ARTICLE 11


 


LOSS OR
DESTRUCTION


 


If any of the cars shall be completely destroyed, or
if the physical condition of any car shall become such that the car cannot be
operated in railroad service, as determined by the parties, then Lessor may, at
its option, cancel the related Lease as to such car as of the date on which
such event occurred, or may substitute another car within a reasonable period
of time. Lessee shall notify Lessor of the occurrence of any such event within two
(2) days of such event. In the event of such substitution, the substituted
car shall be held pursuant to all the terms and conditions of the related Lease
as was the car for which it substituted. Without limiting the foregoing, Lessee
agrees that if a car is lost or destroyed or is in such physical condition that
it cannot be operated in railroad service by reason of misuse or negligence of
Lessee or its consignee, agent or sublessee or while on a railroad that does
not subscribe to the Interchange Rules or while on any private siding or
track or any private or industrial railroad, Lessee will pay Lessor, in cash,
the settlement value of such car as determined by Rule #107 of the
Interchange Rules within ten (10) days following a request by Lessor
for such payment. Lessor and Lessee shall cooperate with and assist each other
in any reasonable manner requested, but without 


 


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affecting their respective obligations under this Article or Article 20,
to establish proper claims against parties responsible for the loss of,
destruction of or damage to the cars.


 


ARTICLE 12


 


LOSS OF
COMMODITY


 


Lessor shall not be liable for any loss of, or
damage to, commodities or any part thereof, loaded or shipped in the cars however
such loss or damage shall be caused or shall result. Lessee agrees to assume
responsibility for, to indemnify Lessor against, and to save it harmless from
any such loss or damage or claim therefor.


 


ARTICLE 13


 


DAMAGE TO
CAR BY COMMODITY


 


Notwithstanding the exception for normal wear and
tear in Article 17, if during the term of any Rider any of the Cars or any
components or appurtenances thereto shall be unduly and materially damaged,
destroyed or depreciated in value or condition due to the corrosive or other
damaging effect of any substance carried therein or thereon (whether or not
such damage was foreseeable), Lessee will reimburse Lessor promptly for such
damage, loss or expense suffered by Lessor as a consequence thereof and no
abatement of rent shall occur during the period in which repairs are performed.


 


ARTICLE 14


 


ALTERATION
AND LETTERING


 


Lessee will preserve the cars in good condition and
will not in any way alter the physical structure of the cars without the
advance approval, in writing, of the Lessor. Lessee shall place no lettering or
marking of any kind upon the cars without Lessor’s prior written consent; provided,
however, that Lessee may cause said cars to be stenciled, boarded, or
placarded with letters not to exceed two inches (2”) in height to indicate to
whom the cars are leased and with commodity stencils per Interchange Rules or
DOT specifications.


 


ARTICLE 15


 


LININGS AND
COATINGS


 


The application, maintenance and removal of interior
protective linings and coatings in cars so equipped is to be at the expense of
the Lessee unless otherwise specified on the related Rider. Commodity or
mechanical damage to such linings or coatings shall be for the account of the
Lessee and no abatement of rent shall occur during the period in which repairs
are performed.


 


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ARTICLE 16


 


INTERIOR
PREPARATION FOR COMMODITIES


 


Subsequent to Lessee acceptance, any cleaning or
special preparation of the interior of cars to make them suitable for the
shipment of commodities by or for Lessee during the term of the related Lease
shall be done at Lessee’s expense unless otherwise agreed.


 


ARTICLE 17


 


RETURN OF
CARS - CLEANING


 


At the expiration of the Lease term as provided in
the Riders, Lessee shall, at its expense, return the cars to Lessor at the
location and to the agent selected by the Lessor empty, clean and free from
residue, and in the same good condition as the cars were in when delivered,
except for normal wear and tear. At the expiration, should car cleaning be
required, the Lessee shall bear the full cost of cleaning and rent shall
continue until the car is clean.


 


ARTICLE 18


 


MODIFICATIONS


 


Lessor and Lessee agree that if, at any time after
the effective date of any Rider, changes in car design or equipment are
required by the AAR, DOT, Federal Railroad Administration (“FRA”) or any other
governmental authority, Lessor may, at its option, perform all modifications so
ordered and that the cost of those modifications shall be reflected in an
increase in the monthly rent per car according to the base monthly rent
escalation formula shown on the Rider for that car.


 


ARTICLE 19


 


USE OF CARS
ON CERTAIN ROADS UNDER AAR CIRCULAR OT - 5


 


Lessee is responsible for obtaining all consents or
authority to use the cars on any railroad. Upon the written request of Lessee
(which request shall name the railroads involved) Lessor shall use reasonable
efforts to obtain from each named railroad consents or authority to place the
cars in service under provisions issued by such railroad or the AAR, including,
without limitation, the provisions of AAR Circular OT-5 as promulgated by the
AAR and all supplements thereto and reissues thereof. Lessee shall furnish to
Lessor such information as is necessary to apply for and obtain such consents
or authority. Lessor, however, shall not be liable for failure to obtain such
consents or authority for any reason whatsoever and this Agreement shall remain
in full force and effect notwithstanding any failure of Lessor or Lessee to
obtain such consents or authority.


 


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ARTICLE 20


 


INDEMNIFICATIONS


 


Lessee shall defend (if such defense is tendered to
Lessee), indemnify and hold Lessor, on an after-tax basis, harmless from and
against, and does hereby release Lessor from, all claims, suits, liabilities,
losses, damages, costs and expenses, including attorney’s fees, in any way
arising out of, or resulting from, the condition, storage, use, loss of use,
maintenance or operation of the cars, the inaccuracy of any representation or
warranty of the Lessee, the Lessee’s failure to comply with the obligations
under any Lease, liability arising from any present or future applicable law, rule or
regulation, including without limitation, common law and environmental law,
related to the release, removal, discharge or disposition, whether intentional
or unintentional of any materials from or placed in any car, or any other cause
whatsoever except to the extent the same results from Lessor’s gross negligence
or willful misconduct, or except to the extent a railroad has assumed full responsibility
and satisfies such responsibility.


 


ARTICLE 21


 


TAXES AND
LIENS


 


Lessor shall be liable for and pay all federal,
state, provincial or other governmental property taxes assessed or levied
against the cars, except that (i) Lessee shall be liable for and pay such
taxes when cars bear reporting marks and numbers other than Lessor’s and (ii) Lessee
shall be liable at all times for and shall pay or reimburse Lessor for the
payment of any sales, use, leasing, operation, excise, gross receipts and other
taxes with respect to the cars, together with any penalties, fines or interest
thereon, and all duties, imposts, taxes, investment tax credit reductions and
similar charges arising out of the use of cars outside the continental United
States.


 


Lessee acknowledges and agrees that by the execution
of this Agreement and related Riders it does not obtain, and by payments and
performance hereunder it does not, and will not, have or obtain any title to
the cars or any property right or interest therein, legal or equitable, except
solely as Lessee hereunder and subject to all of the terms hereof. Lessee shall
keep the cars free from any liens or encumbrances created by or through Lessee
(except as contemplated in respect of Restricted Transfers consented to by the Lessor
as described in Article 9).


 


ARTICLE 22


 


DEFAULT AND
REMEDIES


 


If Lessee (i) defaults in the payment of any
sum of money to be paid under any Lease or under this Agreement and such
default continues for a period of five (5) days after written notice to
Lessee of such default, (ii) fails to perform any covenant or condition
required to be performed by Lessee under this Agreement (including, without
limitation, failure to accept delivery as required under Article 3 and
failure to comply with assurance requirements under Article 28) and such
failure shall not be remedied within ten (10) days after written notice to
Lessee of such failure, (iii) makes any representation or warranty that
was incorrect when made 


 


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or (iv) shall dissolve, make or commit any act of bankruptcy or if
any proceeding under any bankruptcy or insolvency statute or any laws relating
to relief of debtors is commenced by Lessee or if any such proceeding is
commenced against Lessee and same shall not have been removed within thirty
(30) days of the date of the filing thereof or if a receiver, trustee or
liquidator is appointed for Lessee or for all or a substantial part of Lessee’s
assets with Lessee’s consent or, if without Lessee’s consent, the same shall
not have been removed within thirty (30) days of the date of the appointment
thereof or if an order, judgment or decree is entered by a court of competent
jurisdiction and continues unpaid and in effect for any period of thirty (30)
consecutive days without a stay of execution or if a writ of attachment or
execution is levied on any car and is not discharged within ten (10) days
thereafter (any of the foregoing, an “Event of Default”) then, in addition to
any other rights of Lessor provided in this Agreement, Lessor may exercise one
or more of the following remedies with respect to the cars leased under any
Lease entered into under this Agreement:


 


1.                                      Immediately
terminate any and all Leases and Lessee’s rights hereunder or under any related
Rider(s); provided, however, in the event of termination, Lessee shall
remain liable for all unpaid rent charges and any other amounts due under any
Lease or Leases, this Agreement and any related Rider(s);


 


2.                                      Require Lessee
to return the cars to Lessor at Lessee’s expense, and if Lessee fails to so
comply, Lessor may take possession of such cars without demand or notice and
without court order or legal process and remove the cars from Lessee’s service.
Lessee hereby waives any damages occasioned by such taking of possession,
whether or not Lessee was in default at the time possession was taken, so long
as Lessor reasonably believes that Lessee was in default at such time. Lessee
acknowledges that it may have a right to notice of possession from Lessor and
the taking of possession pursuant to a court order or other legal process
obtained by Lessor. Lessee, however, knowingly waives any right to such notice
of possession from Lessor and the taking of such possession without the Lessor’s
obtaining a court order or other legal process;


 


3.                                      Lease the cars
to such persons, at such rent, and for such period of time as Lessor shall
elect. Lessor shall apply the proceeds from such leasing, less all costs and
expenses incurred in the recovery, repair, storage and renting of such cars,
toward the payment of Lessee’s obligations hereunder. Lessee shall remain
liable for any deficiency, which, at Lessor’s option, shall be paid monthly as
suffered or immediately, or at the end of the lease term as damages for Lessee’s
default;


 


4.                                      Bring legal
action to recover all rent charges or other amounts then accrued or thereafter
accruing from Lessee to Lessor under any provision hereunder or any related
Rider(s);


 


5.                                      Pursue any
other remedy which Lessor may have.


 


Each remedy is cumulative and may be enforced
separately or concurrently. The exercise of any remedy is in the Lessor’s
discretion, and any failure or delay by Lessor to exercise any 


 


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particular remedy shall not affect Lessee’s rent or holdover rent
obligations hereunder. In the event of default, in addition to Late Rent and
Holdover Rent as provided in Article 4, Lessee shall pay to Lessor upon
demand all costs and expenses, including attorneys’ fee expended by Lessor in
the enforcement of its rights and remedies hereunder, and Lessee shall pay
interest on any amount owing to Lessor from the time such amount becomes due
hereunder at a rate per annum equal to three percentage points above the prime
rate of JPMorgan Chase Bank (or its successor), such rate to be reduced,
however, to the extent it exceeds the maximum rate permitted by applicable law.
In addition, Lessee shall, without expense to Lessor, assist Lessor in
repossessing the cars and shall, for a reasonable time, if required, furnish
suitable trackage space for the storage of the cars.


 


If Lessee fails to perform any of its obligations
hereunder, Lessor, at Lessee’s expense, and without waiving any rights it may
have against Lessee for such nonperformance, may itself render such
performance. Lessee shall reimburse Lessor on demand for all sums so paid by
Lessor on Lessee’s behalf, together with interest at a rate equal to three
percentage points above the prime rate of JPMorgan Chase Bank (or its
successor), such rate to be reduced, however, to the extent it exceeds the
maximum rate permitted by applicable law.


 


In addition, in respect of any Event of Default by
Lessee hereunder, Lessor shall be entitled to any and all rights and remedies
inuring to the benefit of a lessor upon a default by the lessee as provided in Article 2A
of the Uniform Commercial Code in effect in the applicable jurisdiction.


 


ARTICLE 23


 


LESSOR’S
RIGHT TO ASSIGN, SUBORDINATION


 


All right, title and interest of Lessor in respect
of any or all Leases hereunder may be assigned, pledged, mortgaged, leased,
transferred, delegated or otherwise disposed of, either in whole or in part,
and/or Lessor may assign, pledge, mortgage, lease, transfer or otherwise
dispose of title to the cars, with or without notice to Lessee. In the event of
any such assignment, pledge, mortgage, lease, transfer, delegation or other
disposition, the Lease or Leases so assigned and all related rights of Lessee
hereunder or those of any person, firm or corporation who claims or who may
hereafter claim any rights in this Agreement under or through such Lease or
Leases or Lessee, are hereby made subject and subordinate to the terms,
covenants and conditions of any assignment, pledge, mortgage, lease, or other
agreements covering the cars heretofore or hereafter created and entered into
by Lessor, its successors or assigns and to all of the rights of any such
assignee, pledgee, mortgagee, lessor, transferee or other holder of legal title
to or security interest in the cars. Notwithstanding the foregoing, during the
term of such Lease or Leases so assigned no such assignee, pledgee, mortgagee,
lessor, transferee or other holder of legal title to or security interest in
the cars shall interfere with the quiet use, possession and enjoyment of the
related cars by Lessee provided that no event of default or termination event
(however described) shall have occurred under this Agreement or the related
Lease. At the request of Lessor or any assignee, pledgee, mortgagee, lessor,
transferee or other holder of the legal title to or security interest in the
cars, Lessee shall, at Lessor’s expense, (i) letter or mark the cars to
identify the legal owner of the cars and, if applicable, place on each side of
each car, in 


 


11

















 


letters not less than one inch in height, the words “Ownership Subject
to a Security Lease Filed with the Surface Transportation Board” or other
appropriate words reasonably requested and (ii) evidence its
acknowledgement of any assignment, pledge, mortgage, lease, transfer or other
disposition by Lessor by executing an acknowledgement letter in form and
substance satisfactory to Lessor and its assignee, pledgee, mortgagee, lessor
or other holder of legal title to or security interest in the cars. Lessee
agrees that no claim or defense which Lessee may have against Lessor shall be
asserted or enforced against any assignee, pledgee, mortgagee, lessor or other
holder of legal title to or security interest in the cars; provided, that
Lessee’s right to quiet enjoyment not disturbed due to action by any such
party.


 


ARTICLE 24


 


DISCLAIMER
OF WARRANTIES


 


LESSOR MAKES NO WARRANTIES OR REPRESENTATIONS,
EXPRESS OR IMPLIED, AS TO THE CONDITION, MERCHANTABILITY, FITNESS FOR
PARTICULAR PURPOSE OR ANY OTHER MATTER CONCERNING THE CARS. LESSOR SHALL NOT
HAVE ANY RESPONSIBILITY TO LESSEE FOR ANY INCIDENTAL, INDIRECT OR CONSEQUENTIAL
DAMAGES OF ANY NATURE, INCLUDING BUT NOT LIMITED TO INTERRUPTION OF SERVICE,
LOSS OF BUSINESS OR ANTICIPATED PROFITS. Lessee shall be solely responsible for
determining that the specifications and design of any car are appropriate for
the commodities loaded therein. During the period of any lease hereunder in
which Lessee renders faithful performance of its obligations, Lessor hereby
assigns to Lessee any factory or dealer warranty, whether express or implied,
or other legal right Lessor may have against the manufacturer in connection
with defects in the cars covered by this Agreement.


 


ARTICLE 25


 


RIGHT OF
INSPECTION AND NOTICES


 


Lessor, or its assignee, shall, at any reasonable
time and without interfering with Lessee’s operations, have the right to
inspect the cars by its authorized representative wherever they may be located
for the purpose of determining compliance by Lessee with its obligations
hereunder. Lessee shall use its best effort to obtain permission, if necessary,
for Lessor or its representative to enter upon any premises where the cars may
be located.


 


Lessee shall notify Lessor, in writing, within three
(3) days after any attachment, lien (including any tax and mechanics’
liens) or other judicial process attaches to the cars.


 


ARTICLE 26


 


ADMINISTRATION
OF LEASE


 


Lessee agrees to make available to Lessor
information concerning the movement of the cars reasonably required for the
efficient administration of this Agreement.


 


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Lessee agrees to cooperate with Lessor for the
purpose of complying with any reasonable requirements of any lender, the
Surface Transportation Board, the Registrar General of Canada pursuant to
Sections 104 or 105 of the Canada Transportation Act, or the provisions of Article 9
of the Uniform Commercial Code or equivalent Canadian personal property
security legislation provided such cooperation does not materially affect the
rights or liabilities of Lessee hereunder.


 


ARTICLE 27


 


FINANCIAL
STATEMENTS


 


Lessee will make available to Lessor within one
hundred twenty (120) days after the end of each fiscal year of the Lessee a
complete financial statement package of the Lessee, for such fiscal year ended
period, including but not limited to, balance sheet, income statement, cash
flow statement, and all schedules, notes, and disclosures made a part of such
financial statement package. The financial statements shall be prepared in
accordance with Generally Accepted Accounting Principles (“GAAP”), all in
reasonable detail and certified by public accountants of recognized standing.
If Lessee files a Form 10-K with the U.S. Securities and Exchange Commission
(SEC), the filing of such Form 10-K with the SEC within one hundred twenty
(120) days after the end of such fiscal year will satisfy the requirements set
forth above. In addition, upon request of the Lessor and with reasonable prior
notice, Lessee shall make quarterly unaudited financial reports available to
Lessor (if so requested by Lessor, as soon as available and in any case not
later than ninety (90) days after the end of each of the first three fiscal
quarters of the Lessor).


 


ARTICLE 28


 


INSURANCE


 


Lessee shall maintain at all times on the cars, at
its expense, commercial general liability insurance and umbrella/excess
insurance (covering bodily injury, property damage and pollution exposures,
including, but not limited to, contractual liability and products liability)
against such risks, in such form as shall be satisfactory to Lessor and with
such insurer(s) as shall be rated A-:VII or better by A.M. Best. The
requirement for pollution liability insurance may be satisfied by scheduling a
self-insured retention to an umbrella/excess policy affording pollution
liability insurance. The commercial general liability insurance policy or
self-insured retention and umbrella or excess insurance policies shall have a
combined limit of not less than $3,000,000 per occurrence, and the policies
shall be endorsed to name Lessor, Lessor’s subsidiaries and Lessor’s assignees
as additional insureds as their interest may appear.


 


Prior to the initial delivery date of cars under
this Agreement and from time to time thereafter, Lessee shall furnish to Lessor
an original certificate demonstrating that insurance coverage as required by
this Agreement and any related Rider(s) is in effect; provided,
however, that Lessor shall be under no duty to ascertain the existence or
adequacy of such insurance. The insurance maintained by Lessee shall be primary
without any right of contribution from insurance which may be maintained by
Lessor. The obligations of Lessee under this Article shall be independent
of all other terms under this Agreement and shall in no event relieve Lessee
from


 


13

















 


any indemnity obligation hereunder. The Lessee shall procure an
agreement from the insurer that the insurer shall give the Lessor at least thirty
(30) days prior written notice (at the address for notice to Lessor set forth
herein) of any alteration in or cancellation of the terms of such policies.


 


ARTICLE 29


 


RECIPROCAL
REPRESENTATIONS AND WARRANTIES


 


Lessee hereby makes to Lessor as representations and
warranties of Lessee the statements set forth in Paragraphs 1 through 6 set
forth below in this Article 29, which representations and warranties are (i) made
as of the date of this Agreement and as of the date of any related Rider, and (ii) are
made only to the actual knowledge of Lessee without further inquiry. Lessor
hereby makes to Lessee as representations and warranties of Lessor the
statements set forth in Paragraphs 1 through 6 set forth below in this Article 29,
which representations and warranties are (i) made as of the date of this
Agreement and as of the date of any related Rider, and (ii) are made only
to the actual knowledge of Lessor without further inquiry. As used in such
Paragraphs I through 6, “it” refers to the entity making the statement in
question.


 


1.                                      It is a
corporation, limited liability company or limited partnership duly incorporated
or organized, validly existing, and in good standing under the laws of its
state of incorporation or organization as identified in the preamble of this
Agreement and is either duly qualified to do business and is in good standing
in such other jurisdictions in which the business and activities of Lessee, or
Lessor as the case may be, require such qualification or its failure to so
qualify in such other jurisdiction will not have a material adverse impact on
this Agreement.


 


2.                                      It has full
power to enter into this Agreement and any related Rider.


 


3.                                      This Agreement
and any related Rider has been duly authorized, executed and delivered by it and
constitutes a valid, legal and binding agreement, enforceable in accordance
with the terms and conditions set forth in this Agreement and any related
Rider, subject to bankruptcy and other creditor’s rights laws and the
principles of equity.


 


4.                                      It is not
required to obtain any approval from any governmental or public body or
authority with respect to the entering into and performance by it of this
Agreement and any related Rider, except for any approvals that may be required
in connection with the actual operation of the cars.


 


5.                                      The entering
into and performance by it of this Agreement and any related Rider will not
conflict with, or result in a breach of, the terms, conditions or provision of
any law or any regulations, order, injunction, permit, franchise or decree of
any court or governmental instrumentality by which it is bound or to which it
is subject.


 


6.                                      The entering
into and performance by it of this Agreement and any related Rider


 


14

















 


will not conflict with, or
result in a breach of, the terms, conditions or provisions of any indenture,
agreement or other instrument to which it is a party or by which it or any of
its property is bound.


 


ARTICLE 30


 


TILC
CAPACITY


 


The parties hereto acknowledge and agree that TILC
in executing an individual Rider incorporating the terms of this Agreement
(thereby entering into an individual and separate Lease of the subject cars as
described in Article I above) may execute such Rider (and, together with
this Agreement, enter into such Lease of the subject cars) in either of the
following capacities:


 


1.                                      If TILC is the
owner of the subject cars at the time they are placed into service under the
Agreement, TILC executes the related Rider and enters into such Lease in its
individual capacity as the car owner for its own account.


 


2.                                      If TILC is not
the owner of the subject cars at the time they are placed into service under
the Agreement, then TILC executes the related Rider and enters into such Lease
as manager for the benefit of the relevant car owner, pursuant to contractual
authority delegated by the car owner to TILC (as manager) to encumber and bind
the subject cars and car owner under such Lease.


 


In the event TILC enters into the Agreement or a
related Rider in the capacity of manager as aforesaid, TILC in its individual
capacity represents and warrants to the Lessee, and agrees with the Lessee that
(i) the party for whom TILC acts as manager is contractually bound and
liable as Lessor to the same extent as if it signed this Agreement or a related
Rider directly, (ii) TILC is obligated in its capacity as manager to
perform the Lessor’s obligations to the Lessee under the Agreement, and (iii) if
TILC (a) fails to perform the Lessor’s obligations while serving as manager,
or (b) is removed or terminated as manager and the car owner for whose
benefit TILC has been acting as manager breaches or otherwise fails to perform
(or cause to be performed) the Lessor’s obligations to the Lessee in accordance
with this Agreement, then in either such case TILC agrees that it is directly
liable to the Lessee for any resulting damages and costs, to the same extent
that TILC would have been had TILC been the actual car owner executing this
Agreement or a related Rider as Lessor.


 


ARTICLE 31


 


MISCELLANEOUS


 


This Agreement and the related Riders, together with
any and all exhibits attached hereto, constitutes the entire agreement between
Lessor and Lessee, and it shall not be amended, altered or changed except by
written agreement signed by the parties hereto. No waiver of any provision of
this Agreement or a related Rider or consent to any departure by Lessee
therefrom shall be effective unless the same shall be in writing, signed by
both parties and then such waiver of


 


15

















 


consent shall be effective only in the specific instance and for the
purpose for which it was given.


 


1.                                       Governing Law


 


This Agreement and related Riders shall be
interpreted under and performance shall be governed by the laws of the State of
Texas.


 


2.                                       Conflict with
Interchange Rules


 


In the event the Interchange Rules conflict
with any provision of this Agreement and any related Rider, this Agreement or
the Rider shall govern.


 


3.                                       Exhibits


 


All exhibits attached hereto are incorporated herein
by this reference.


 


4.                                       Payments


 


All payments to be made under this Agreement shall
be made at the addresses set forth in Article 32.


 


5.                                       Severability


 


If any term or provision of this Agreement or the
application thereof shall, to any extent, be invalid or unenforceable, such
invalidity or unenforceability shall not affect or render invalid or
unenforceable any other provision of this Agreement, and this Agreement shall
be valid and enforced to the fullest extent permitted by law.


 


6.                                       Headings


 


The headings that have been used to designate the
various Sections and Articles hereof are solely for convenience in reading and
ease of reference and shall not be construed in any event or manner as
interpretative or limiting the interpretation of the same.


 


7.                                       Survival


 


All indemnities contained in this Agreement shall
survive the termination hereof. In addition, the obligation to pay any
deficiency, as well as the obligation for any and all other payments by Lessee
to Lessor hereunder shall survive the termination of this Agreement or the
lease contained herein.


 


8.                                       Restrictions on
Assignability by Lessee


 


Lessee has reviewed the provisions of Article 9
of this Agreement prohibiting or


 


16

















 


restricting the assignment or other transfer of its
interests in this Agreement or the cars leased to it and is bound by such
provisions as set forth in this Agreement. Lessee agrees that said provisions
are made “conspicuous” by this paragraph.


 


9.                                       Conflicts between
Riders and this Agreement


 


In the event any provision of any Rider modifies or
conflicts with any provision of this Agreement, the provisions of such Rider
shall govern as to the Lease transaction evidenced by such Rider.


 


ARTICLE 32


 


ADDRESSING
OF NOTICES


 


Any notice required or permitted hereunder shall be
in writing and shall be delivered to the respective (parties hereto by (i) overnight
courier delivery, (ii) facsimile transmission (with follow-up mail
confirming as described in clause (iii)), or (iii) deposit in the United
States mail as a certified or registered matter, return receipt requested,
postage prepaid, and addressed to the respective parties as follows, unless
otherwise advised in writing.


 


	
  Lessee to Lessor:

  	
  Lessor to Lessee:

  
	
   

  	
   

  	
   

  
	
  TO:

  	
  Trinity Industries Leasing Company

  	
  Highwater Ethanol, LLC

  
	
   

  	
  2525 Stemmons Freeway

  	
  24500 U.S. Highway 14

  
	
   

  	
  Dallas, Texas 75207

  	
  Lamberton, MN 56152

  
	
   

  	
  Facsimile: 214-589-7402

  	
   

  



 


	
  ATTENTION:

  	
  Thomas C. Jardine

  	
  ATTENTION: Brian Kletsher

  
	
   

  	
  Vice President

  	
   

  	
  Chief Executive Officer

  
	
   

  	
  Portfolio Management

  	
   

  



 


17

















 


IN WITNESS WHEREOF, the parties hereto have caused
this instrument to be executed and delivered as of the 16th day of April,
2009


 


	
   

  	
  LESSOR: TRINITY INDUSTRIES LEASING
  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Thomas C. Jardine

  
	
   

  	
   

  	
  Thomas C. Jardine

  
	
   

  	
   

  	
  Vice President, Portfolio Management

  
	
   

  	
   

  
	
   

  	
  LESSEE: HIGHWATER ETHANOL, LLC

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Brian Kletsher

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  CEO

  



 


18

















 


RIDER ONE (1) TO
R 1LROAD CAR LEASE AGREEMENT


July  BK TJ


Effective this 1st day of June, 2009, this
Rider shall become a part of the Railroad Car Lease Agreement between Trinity Industries Leasing Company, Lessor,
and Highwater Ethanol, LLC, Lessee,
dated July 1, 2009, and the cars described herein shall be leased to
Lessee, subject to the terms and conditions in said Railroad Car Lease
Agreement, during the term and for the rent shown below:


 


	
  Number

  of

  Cars

  	
   

  	
  Type and Description

  	
   

  	
  Base

  Monthly

  Rent

  (Per Car)

  
	
  50

  	
   

  	
  6,351 cubic foot capacity used covered hopper cars. Car marks and
  numbers to be confirmed by Exhibit A which will be forwarded to Customer
  within thirty (30) days of delivery of the final car hereunder.

  	
   

  	
  $

  	
  425.00

  



 


Delivery —FOB Lamberton, Minnesota


 


Impact Damage - Impact damage resulting from striking the
car with hammers, lances, sledges, or other such mechanical devices shall not
be considered normal wear and tear to the extent such damage results in (a) cracks,
punctures, or tears of the steel sheet, or (b) dents to the steel sheet
exceeding one inch (1”) in depth, or (c) penetration of the exterior paint
film exposing the steel sheet to the elements; all of the preceding enumerated
items shall collectively be defined as “Lessee Responsibility Damage”. Lessee
Responsibility Damage shall be repaired at Lessee’s expense by means of
straightening dents, welding any cracks, patching punctures or tears, and spot
painting any repaired or exposed surfaces.


 


Escalation of Base Monthly Rent:


 


1.               Modifications - In accordance
with Article 18 of Railroad Car Lease Agreement, any change in car design
required by the AAR, DOT, FRA or other governmental authority during the term
of this lease will cause the monthly rent to increase for each car on the month
following its modification as follows:


 


A.          For a modification with a
useful life equal to the car itself, monthly car rent will increase by a
monthly rate of $1.75 per car for each $100 of Lessor’s cost incurred in the
course of making such modification.


 


B.            For a modification with a
useful life less than that of the car, monthly car rent will increase to equal
the cost of such modification, including the implicit cost of money at 10% per
annum, divided by the number of months of estimated remaining life of the
modification.


 


2.
                                   High Mileage -
In accordance with Article 7, in the event that a car travels more than
30,000 miles (empty and loaded) in any calendar year, the Lessee shall pay the
Lessor $0.03 per mile for each mile over 30,000 traveled by such car.


 


1

















 


Separate Lease - Lessor and Lessee agree that this Rider
shall constitute a separate lease which incorporates the terms of the above
referenced Railroad Car Lease Agreement. This Rider shall be severable from any
other cars or riders relating to the above referenced Railroad Car Lease
Agreement and shall become a separate lease which is separately transferable
for all purposes.


 


Term - The minimum term for the cars leased hereunder
shall be sixty (60) months, and the cars shall continue under lease thereafter
for successive one (1) month terms, at the same rate and under the same
conditions, unless notice, in writing, requesting cancellation shall be given
by either party to the other at least thirty (30) days prior to expiration of
the initial term or any successive term for cars covered by this Rider.
Thereafter, this Rider shall terminate automatically upon the date of release
of the last car covered by this Rider.


 


	
  TRINITY INDUSTRIES LEASING COMPANY

  	
  HIGHWATER ETHANOL, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  /s/ Thomas C. Jardine

  	
   

  	
  By:

  	
  /s/ Brian Kletscher

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Vice President, Portfolio Management

  	
   

  	
  Title: 

  	
  CEO

  



 


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