Document:

Exhibit 10.22

MORTGAGE

RECORDATION REQUESTED BY:

GRANITE FALLS BANK

702 PRENTICE
STREET, PO BOX

8 GRANITE FALLS, MN 56241

WHEN RECORDED MAIL TO:

GRANITE FALLS BANK

702 PRENTICE
STREET, PO BOX

8 GRANITE FALLS, MN 56241

SEND TAX NOTICES TO:

HIGHWATER ETHANOL. LLC

205 MAIN STREET, PO BOX 96

LAMBERTON, MN 56152

	
   

  

THIS MORTGAGE dated March 13,
2007, is made and executed between HIGHWATER ETHANOL. LLC, A MINNESOTA LIMITED
LIABILITY COMPANY (referred to below as “Grantor”) and GRANITE FALLS BANK,
whose address is 702 PRENTICE STREET, PO BOX 8, GRANITE FALLS, MN 56241
(referred to below as “Lender”).

GRANT OF MORTGAGE. For valuable consideration, Grantor mortgages
and conveys to Lender all of Grantor’s right, title, and interest in and to the
following described real property, together with all existing or subsequently
erected or affixed buildings, improvements and fixtures; all easements, rights
of way, and appurtenances; all water, water rights, watercourses and ditch
rights (including stock in utilities with ditch or irrigation rights); and all
other rights, royalties, and profits relating to the real property, including
without limitation all minerals, oil, gas, geothermal and similar matters, (the
“Real Property”) located in REDWOOD County, State of Minnesota:

That part of the Southwest
Quarter (SW1/4) of Section Twenty-one (21), Township One Hundred Nine (109)
North, Range Thirty-seven (37) West, Redwood County, Minnesota, lying north of
the northerly right-of-way line of the Dakota, Minnesota & Eastern Railroad
EXCEPTING THEREFROM that part of Tract A described below: Tract A: The North
Half of the Southwest Quarter of Section 21, Township 109 North, Range 37 West,
Redwood County, Minnesota which lies northwesterly of “Line 1” described below,
and southerly of a line run parallel with an distant 50 feet southerly of “Line
2” described below, and easterly of the easterly right-of-way line of Township
Road T-190, as now located and established. “Line 1”: Beginning at the
intersection of the easterly right-of-way line of said township road with a
line run parallel with and distant 180 feet southerly of “Line 2” described
below; thence northeasterly to a point distant 50 feet southerly (measured at
right angles) of a point on said “Line 2”, distant 167.4 feet easterly of its
point of beginning, and there terminating. “Line 2”: Beginning at a point on
the west line of the Northwest Quarter of Section 21, distant 1.0 foot north of
the southwest corner thereof; thence run northeasterly at an angle of 92°05’00”
(as measured from south to east) from said west line for 1,521.8 feet; thence
deflect to the right at an angle of 01°03’00” for 1,100 feet and there
terminating. Together with that part of Tract A hereinbefore described, which
lies within a distance of 35 feet southerly of a line run parallel with and
distant 50 feet southerly of the following described line: Beginning at a point
on “Line 2” hereinbefore described, distant 484.4 feet westerly of its point of
termination; thence easterly on said “Line 2” for 484.4 feet and there
terminating; containing 0.57 acres more or less. Subject to township road
right-of-way over the westerly 33 feet of said Southwest Quarter; also subject
to Trunk Highway 14 right-of-way. All that part of the Southeast Quarter
(SE1/4) of Section Twenty-one (21), Township One Hundred Nine (109) North,
Range Thirty-seven (37) West, Redwood County, Minnesota, lying north of the
northerly right-of-way line of the Dakota, Minnesota & Eastern Railroad,
subject to Trunk Highway 14 right-of-way and EXCEPTING THEREFROM the following
described parcel: That part of Tract A described below: Tract A, The Northwest
Quarter of the Southeast Quarter of Section 21, Township 109 North, Range 37
West, Redwood County, Minnesota; which lies within a distance of 35 feet southerly
of the following described line: Beginning at a point on the westerly boundary
of said Tract A, distant 40 feet southerly of the northwest corner thereof;
thence run easterly for 345.6 feet along a line that intersects the easterly
boundary of the Southeast Quarter of said Section 21, distant 64.4 feet
southerly of the northeast corner thereof and there terminating; containing:
0.27 acre, more or less; together with all right of access, being the right of
ingress to and egress from that part of Tract A hereinbefore described not
acquired herein, to the above described strip; except that the abutting owner
shall retain the right of access to the westerly 34.7 feet of said Tract A.
together with all hereditaments and appurtenances belonging thereto. Subject to
mineral rights and utility easements of record, if any.

CROSS-COLLATERALIZATION. In addition to the Note, this Mortgage
secures all obligations, debts and liabilities, plus interest thereon, of
Grantor to Lender, or any  one or
more of them, as well as all claims by Lender against Grantor or any one or
more of them, whether now existing or hereafter arising, whether related or
unrelated to the purpose of the Note, whether voluntary or otherwise, whether
due or not due, direct or indirect, determined or undetermined, absolute or
contingent, liquidated or unliquidated, whether Grantor may be liable
individually or jointly with others, whether obligated as guarantor, surety,
accommodation party or otherwise, and whether recovery upon such amounts may be
or hereafter may become barred by any statute of limitations, and whether the
obligation to repay such amounts may be or hereafter may become otherwise
unenforceable.

Grantor presently assigns to
Lender all of Grantor’s right, title, and interest in and to all present and
future leases of the Property and all Rents from the Property. In addition,
Grantor grants to Lender a Uniform Commercial Code security interest in the
Personal Property and Rents.

THIS MORTGAGE, INCLUDING THE ASSIGNMENT OF RENTS AND THE
SECURITY INTEREST IN THE RENTS AND PERSONAL PROPERTY. IS GIVEN TO SECURE (A)
PAYMENT OF THE INDEBTEDNESS AND (B) PERFORMANCE OF ANY AND ALL OBLIGATIONS
UNDER THE NOTE AND THIS MORTGAGE. THIS MORTGAGE IS GIVEN AND ACCEPTED ON THE
FOLLOWING TERMS:

PAYMENT AND PERFORMANCE. Except as otherwise provided in this
Mortgage, Grantor shall pay to Lender all amounts secured by this Mortgage as
they become due and shall strictly perform all of Grantor’s obligations under
this Mortgage.

POSSESSION AND MAINTENANCE OF THE PROPERTY. Grantor agrees that Grantor’s possession and
use of the Property shall be governed by the following provisions:

Possession
and Use. Until the
occurrence of an Event of Default, Grantor may (1) remain in possession and
control of the Property; (2) use, operate or manage the Property; and (3)
collect the Rents from the Property.

Duty to
Maintain. Grantor
shall maintain the Property in tenantable condition and promptly perform all
repairs, replacements, and maintenance necessary to preserve its value.

Compliance
With Environmental Laws.
Grantor represents and warrants to Lender that: (1) During the period of
Grantor’s ownership of the Property, there has been no use, generation,
manufacture, storage, treatment, disposal, release or threatened release of any
Hazardous Substance by any person on, under, about or from the Property; (2)
Grantor has no knowledge of, or reason to believe that there has been, except
as previously disclosed to and acknowledged by Lender in writing, (a) any
breach or violation of any Environmental Laws, (b) any use, generation,
manufacture, storage, treatment, disposal, release or threatened release of any
Hazardous Substance on, under, about or from the Property by any prior owners
or occupants of the Property, or (c) any actual or threatened litigation or
claims of any kind by any person relating to such matters; and (3) Except as
previously disclosed to and acknowledged by Lender in writing, (a) neither
Grantor nor any tenant, contractor, agent or other authorized user of the
Property shall use, generate, manufacture, store, treat, dispose of or release
any Hazardous Substance on, under, about or from the Property; and (b) any such
activity shall be conducted in compliance with all applicable federal, state,
and local laws, regulations and ordinances, including without limitation all
Environmental Laws. Grantor authorizes Lender and its agents to enter upon the
Property to make such inspections and tests, at Grantor’s expense, as Lender
may deem appropriate to determine compliance of the Property with this section
of the Mortgage. Any inspections or tests made by Lender shall be for Lender’s
purposes only and shall not be construed to create any responsibility or
liability on the part of Lender to Grantor or to any other person. The
representations and warranties contained herein are based on Grantor’s due
diligence in investigating the Property for Hazardous Substances. Grantor
hereby (1) releases and waives any future claims against Lender for indemnity
or contribution in the event Grantor becomes liable for cleanup or other costs
under any such laws; and (2) agrees to indemnify and hold harmless Lender
against any and all claims, losses, liabilities, damages, penalties, and
expenses, including attorneys’ fees, consultants’ fees, and costs which Lender
may directly or indirectly sustain or suffer resulting from a breach of this
section of the Mortgage or as a consequence of any use, generation,
manufacture, storage, disposal, release or threatened release occurring prior
to Grantor’s ownership or interest in the Property, whether or not the same was
or should have been known to Grantor. The provisions of this section of the
Mortgage, including the obligation to indemnify, shall survive the payment of
the Indebtedness and the satisfaction and reconveyance of the lien of this
Mortgage and shall not be affected by Lender’s acquisition of any interest in
the Property, whether by foreclosure or otherwise.

Without otherwise limiting
Grantor’s covenants as provided herein, Grantor shall not without Lender’s
prior written consent, remove or permit the removal of sand, gravel or topsoil,
or engage in borrow pit operations, or use or permit the use of the Property as
a land fill or dump, or store, burn or bury or permit the storage, burning or
burying of any material or product which may result in contamination of the
Property or the groundwater or which may require the issuance of a permit by
the Environmental Protection Agency or any state or local government agency
governing the issuance of hazardous or toxic waste permits, or request or
permit a change in zoning or land use classification, or cut or remove or
suffer the cutting or removal of any trees or timber from the Property.

At its sole cost and expense,
Grantor shall comply with and shall cause all occupants of the Property to
comply with all Environmental Laws with respect to the disposal of industrial
refuse or waste, and/or the discharge, processing, manufacture, generation,
treatment, removal, transportation, storage and handling of Hazardous
Substances, and pay immediately when due the cost of removal of any such wastes
or substances from, and keep the Property free of any lien imposed pursuant to
such laws, rules, regulations and orders.

Grantor shall not install or
permit to be installed in or on the Property, friable asbestos or any substance
containing asbestos and deemed hazardous by federal, state or local laws,
rules, regulations or orders respecting such material. Grantor shall further
not install or permit the installation of any machinery, equipment or fixtures
containing polychlorinated biphemyls (PCBs) on or in the Property. With respect
to any such material or materials currently present in or on the Property,
Grantor shall promptly comply with all applicable Environmental Laws regarding
the safe removal thereof, at Grantor’s expense.

Grantor shall indemnify
Lender and hold Lender harmless from and against all loss, cost, damage and
expense (including, without limitation, attorneys’ fees and costs incurred in
the investigation, defense and settlement of claims) that Lender may incur as a
result of or in connection with the assertion against Lender of any claim
relating to the presence or removal of any Hazardous Substance, or compliance
with any Environmental Law. No notice from any governmental body has ever been
served upon Grantor or, to Grantor’s knowledge after due inquiry, upon any
prior owner of the Property, claiming a violation of or under any Environmental
Law or concerning the environmental state, condition or quality of the
Property, or the use thereof, or requiring or calling attention to the need for
any work, repairs, construction, removal, cleanup, alterations, demolition,
renovation or installation on, or in connection with, the Property in order to
comply with any Environmental Law; and upon receipt of any such notice, Grantor
shall take any and all steps, and shall perform any and all actions necessary
or appropriate to comply with the same, at Grantor’s expense. In the event
Grantor fails to do so, Lender may declare this Mortgage to be in default.

Nuisance,
Waste. Grantor shall
not cause, conduct or permit any nuisance nor commit, permit, or suffer any
stripping of or waste on or to the Property or any portion of the Property.
Without limiting the generality of the foregoing, Grantor will not remove, or
grant to any other party the right to remove, any timber, minerals (including
oil and gas), coal, clay, scoria, soil, gravel or rock products without
Lender’s prior written consent.

Removal of
Improvements. Grantor
shall not demolish or remove any Improvements from the Real Property without
Lender’s prior written consent. As a condition to the removal of any
Improvements, Lender may require Grantor to make arrangements satisfactory to
Lender to replace such Improvements with Improvements of at least equal value.

Lender’s
Right to Enter. Lender
and Lender’s agents and representatives may enter upon the Real Property at all
reasonable times to attend to Lender’s interests and to inspect the Real
Property for purposes of Grantor’s compliance with the terms and conditions of
this Mortgage.

Compliance
with Governmental Requirements. Grantor shall promptly comply with all laws, ordinances, and
regulations, now or hereafter in effect, of all governmental authorities
applicable to the use or occupancy of the Property, including without
limitation, the Americans With Disabilities Act. Grantor may contest in good
faith any such law, ordinance, or regulation and withhold compliance during any
proceeding, including appropriate appeals, so long as Grantor has notified
Lender in writing prior to doing so and so long as, in Lender’s sole opinion,
Lender’s interests in the Property are not jeopardized. Lender may require
Grantor to post adequate security or a surety bond, reasonably satisfactory to
Lender, to protect Lender’s interest.

Duty to
Protect. Grantor
agrees neither to abandon or leave unattended the Property. Grantor shall do
all other acts, in addition to those acts set forth above in this section,
which from the character and use of the Property are reasonably necessary to
protect and preserve the Property.

TAXES AND LIENS. The following provisions relating to the
taxes and liens on the Property are part of this Mortgage:

Payment. Grantor shall pay when due (and in all events
prior to delinquency) all taxes, payroll taxes, special taxes, assessments,
water charges and sewer service charges levied against or on account of the
Property, and shall pay when due all claims for work done on or for services
rendered or material furnished to the Property. Grantor shall maintain the
Property free of any liens having priority over or equal to the interest of
Lender under this Mortgage, except for those liens specifically agreed to in
writing by Lender, and except for the lien of taxes and assessments not due as
further specified in the Right to Contest paragraph.

Right to
Contest. Grantor may
withhold payment of any tax, assessment, or claim in connection with a good
faith dispute over the obligation to pay, so long as Lender’s interest in the
Property is not jeopardized. If a lien arises or is filed as a result of
nonpayment, Grantor shall within fifteen (15) days after the lien arises or, if
a lien is filed, within fifteen (15) days after Grantor has notice of the
filing, secure the discharge of the lien, or if requested by Lender, deposit
with Lender cash or a sufficient corporate surety bond or other security
satisfactory to Lender in an amount sufficient to discharge the lien plus any
costs and reasonable attorneys’ fees, or other charges that could accrue as a
result of a foreclosure or sale under the lien. In any contest, Grantor shall
defend itself and Lender and shall satisfy any adverse judgment before
enforcement against the Property. Grantor shall name Lender as an additional
obligee under any surety bond furnished in the contest proceedings.

Evidence of
Payment. Grantor shall
upon demand furnish to Lender satisfactory evidence of payment of the taxes or
assessments and shall authorize the appropriate governmental official to
deliver to Lender at any time a written statement of the taxes and assessments
against the Property.

Notice of
Construction. Grantor
shall notify Lender at least fifteen (15) days before any work is commenced,
any services are furnished, or any materials are supplied to the Property, if
any mechanic’s lien, materialmen’s lien, or other lien could be asserted on  account of the work, services, or
materials. Grantor will upon request of Lender furnish to Lender advance
assurances satisfactory to Lender that Grantor can and will pay the cost of
such improvements.

PROPERTY DAMAGE INSURANCE. The following provisions relating to insuring
the Property are a part of this Mortgage:

Maintenance
of Insurance. Grantor
shall procure and maintain policies of fire insurance with standard extended
coverage endorsements on a replacement basis for the full insurable value
covering all Improvements on the Real Property in an amount sufficient to avoid
application of any coinsurance clause, and with a standard mortgagee clause in
favor of Lender. Grantor shall also procure and maintain comprehensive general
liability insurance in such coverage amounts as Lender may request with Lender
being named as additional insureds in such liability insurance policies.
Additionally, Grantor shall maintain such other insurance, including but not
limited to hazard, business interruption and boiler insurance as Lender may
require. Policies shall be written by such insurance companies and in such form
as may be reasonably acceptable to Lender. Grantor shall deliver to Lender
certificates of coverage from each insurer containing a stipulation that
coverage will not be cancelled or diminished without a minimum of fifteen (15)
days’ prior written notice to Lender and not containing any disclaimer of the
insurer’s liability for failure to give such notice. Each insurance policy also
shall include an endorsement providing that coverage in favor of Lender will
not be impaired in any way by any act, omission or default of Grantor or any
other person. Should the Real Property be located in an area designated by the
Director of the Federal Emergency Management Agency as a special flood hazard
area, Grantor agrees to obtain and maintain Federal Flood Insurance, if
available, for the full unpaid principal balance of the loan and any prior
liens on the property securing the loan, up to the maximum policy limits set
under the National Flood Insurance Program, or as otherwise required by Lender,
and to maintain such insurance for the term of the loan.

Application
of Proceeds. Grantor
shall promptly notify Lender of any loss or damage to the Property. Lender may
make proof of loss if Grantor fails to do so within fifteen (15) days of the
casualty. Whether or not Lender’s security is impaired, Lender may, at Lender’s
election, receive and retain the proceeds of any insurance and apply the
proceeds to the reduction of the Indebtedness, payment of any lien affecting
the Property, or the restoration and repair of the Property. If Lender elects
to apply the proceeds to restoration and repair, Grantor shall repair or
replace the damaged or destroyed Improvements in a manner satisfactory to
Lender. Lender shall, upon satisfactory proof of such expenditure, pay or
reimburse Grantor from the proceeds for the reasonable cost of repair or
restoration if Grantor is not in default under this Mortgage. Any proceeds
which have not been disbursed within 180 days after their receipt and which
Lender has not committed to the repair or restoration of the Property shall be
used first to pay any amount owing to Lender under this Mortgage, then to pay
accrued interest, and the remainder, if any, shall be applied to the principal
balance of the Indebtedness. If Lender holds any proceeds after payment in full
of the Indebtedness, such proceeds shall be paid to Grantor as Grantor’s
interests may appear.

Unexpired
Insurance at Sale. Any
unexpired insurance shall inure to the benefit of, and pass to, the purchaser
of the Property covered by this Mortgage at any trustee’s sale or other sale held
under the provisions of this Mortgage, or at any foreclosure sale of such
Property.

Grantor’s
Report on Insurance.
Upon request of Lender, however not more than once a year, Grantor shall
furnish to Lender a report on each existing policy of insurance showing: (1)
the name of the insurer; (21 the risks insured; (3) the amount of the policy;
(4) the property insured, the then current replacement value of such property,
and the manner of determining that value; and (5) the expiration date of the
policy. Grantor shall, upon request of Lender, have an independent appraiser
satisfactory to Lender determine the cash value replacement cost of the
Property.

LENDER’S EXPENDITURES. If any action or proceeding is commenced that
would materially affect Lender’s interest in the Property or if Grantor fails
to comply with any provision of this Mortgage or any Related Documents,
including but not limited to Grantor’s failure to discharge or pay when due any
amounts Grantor is required to discharge or pay under this Mortgage or any
Related Documents, Lender on Grantor’s behalf may (but shall not be obligated
to) take any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on the Property and paying all costs
for insuring, maintaining and preserving the Property. All such expenditures
incurred or paid by Lender for such purposes will then bear  interest at the rate charged under the
Note from the date incurred or paid by Lender to the date of repayment by
Grantor. All such expenses will become a part of the Indebtedness and, at
Lender’s option, will (A) be payable on demand; (B) be added to the balance of
the Note and be apportioned among and be payable with any Installment payments
to become due during either (1) the term of any applicable insurance policy; or
(2) the remaining term of the Note; or (C) be treated as a balloon payment
which will be due and payable at the Note’s maturity. The Mortgage also will
secure payment of these amounts. Such right shall be in addition to all other
rights and remedies to which Lender may be entitled upon Default.

WARRANTY; DEFENSE OF TITLE. The following provisions relating to
ownership of the Property are a part of this Mortgage:

Title. Grantor warrants that: (a) Grantor holds good
and marketable title of record to the Property in fee simple, free and clear of
all

liens and encumbrances other
than those set forth in the Real Property description or in any title insurance
policy, title report, or final title opinion issued in favor of, and accepted
by, Lender in connection with this Mortgage, and (b) Grantor has the full
right, power, and authority to execute and deliver this Mortgage to Lender.

Defense of
Title. Subject to the
exception in the paragraph above, Grantor warrants and will forever defend the
title to the Property against the lawful claims of all persons. In the event
any action or proceeding is commenced that questions Grantor’s title or the
interest of Lender under this Mortgage, Grantor shall defend the action at
Grantor’s expense. Grantor may be the nominal party in such proceeding, but
Lender shall be entitled to participate in the proceeding and to be represented
in the proceeding by counsel of Lender’s own choice, and Grantor will deliver,
or cause to be delivered, to Lender such Instruments as Lender may request from
time to time to permit such participation.

Compliance
With Laws. Grantor
warrants that the Property and Grantor’s use of the Property complies with all
existing applicable laws, ordinances, and regulations of governmental
authorities.

Survival of
Representations and Warranties. All representations, warranties, and agreements made by Grantor in this
Mortgage shall survive the execution and delivery of this Mortgage, shall be
continuing in nature, and shall remain in full force and effect until such time
as Grantor’s Indebtedness shall be paid in full.

CONDEMNATION. The following provisions relating to condemnation proceedings are a part
of this Mortgage:

Notice of
Proceedings. Grantor
shall immediately notify Lender in writing should all or any part of the
Property become subject to any condemnation or expropriation proceedings or
other similar proceedings, including without limitation, any condemnation,
confiscation, eminent domain, inverse condemnation or temporary requisition or
taking of the mortgaged Property, or any part or parts of the Property. Grantor
further agrees to promptly take such steps as may be necessary and proper within
Lender’s sole judgment and at Grantor’s expense, to defend any such
condemnation or expropriation proceedings end obtain the proceeds derived from
such proceedings. Grantor shall not agree to any settlement or compromise or
any condemnation or expropriation claim without Lender’s prior written consent.

Lender’s
Participation. Lender
may, at Lender’s sole option, elect to participate in any such condemnation or
expropriation proceedings and be represented by counsel of Lender’s choice.
Grantor agrees to provide Lender with such documentation as Lender may request
to permit Lender to so participate and to reimburse Lender for Lender’s costs
associated with Lender’s participation, including Lender’s reasonable
attorneys’ fees.

Conduct of
Proceedings. If Grantor
fails to defend any such condemnation or expropriation proceedings to Lender’s
satisfaction, Lender may undertake the defense of such a proceeding for and on
behalf of Grantor. To this end, Grantor irrevocably appoints Lender as
Grantor’s agent and attorney-in-fact, such agency being coupled with an
interest, to bring, defend, adjudicate, settle, or otherwise compromise such
condemnation or expropriation claims; it being understood, however, that,
unless one or more Events of Default (other than the condemnation or
expropriation of the Property) then exists under this Mortgage, Lender will not
agree to any final settlement or compromise of any such condemnation or
expropriation claim without Grantor’s prior approval, which approval shall not
be unreasonably withheld.

Application
of Net Proceeds.
Lender shall have the right to receive all proceeds derived or to be derived
from the condemnation, expropriation, confiscation, eminent domain, inverse
condemnation, or any permanent or temporary requisition or taking of the
Property, or any part or parts of the Property (“condemnation proceeds”). In
the event that Grantor should receive any such condemnation proceeds, Grantor
agrees to immediately turn over and to pay such proceeds to Lender. All
condemnation proceeds, which are received by, or which are payable to either
Grantor or Lender, shall be applied, at Lender’s sole option and discretion,
and in such manner as Lender may determine (after payment of all reasonable
costs, expenses and attorneys’ fees necessarily paid or incurred by Grantor
and/or Lender), for the purpose of: (a) replacing or restoring the condemned,
expropriated, confiscated, or taken Property; or (b) reducing the then
outstanding balance of the Indebtedness, together with interest thereon, with
such payments being applied in the manner provided in this Mortgage. Lender’s
receipt of such condemnation proceeds and the application of such proceeds as
provided in this Mortgage shall not affect the lien of this Mortgage.

IMPOSITION OF TAXES, FEES AND CHARGES BY GOVERNMENTAL
AUTHORITIES. The
following provisions relating to governmental taxes, fees and charges are a
part of this Mortgage:

Current
Taxes, Fees and Charges.
Upon request by Lender, Grantor shall execute such documents in addition to
this Mortgage and take whatever other action is requested by Lender to perfect
and continue Lender’s lien on the Real Property. Grantor shall reimburse Lender
for all taxes, as described below, together with all expenses incurred in
recording, perfecting or continuing this Mortgage, including without limitation
all taxes, fees, documentary stamps, and other charges for recording or
registering this Mortgage.

Taxes. The following shall constitute taxes to which
this section applies: (1) a specific tax upon this type of Mortgage or upon all
or any part of the Indebtedness secured by this Mortgage; (2) a specific tax on
Grantor which Grantor is authorized or required to deduct from payments on the
Indebtedness secured by this type of Mortgage; (3) a tax on this type of
Mortgage chargeable against the Lender or the holder of the Note; and (4) a
specific tax on all or any portion of the Indebtedness or on payments of
principal and interest made by Grantor.

Subsequent
Taxes. If any tax to
which this section applies is enacted subsequent to the date of this Mortgage,
this event shall have the same effect as an Event of Default, and Lender may
exercise any or all of its available remedies for an Event of Default as
provided below unless Grantor either (1) pays the tax before it becomes
delinquent, or (2) contests the tax as provided above in the Taxes and Liens
section and deposits with Lender cash or a sufficient corporate surety bond or
other security satisfactory to Lender.

SECURITY AGREEMENT; FINANCING STATEMENTS. The following provisions relating to this
Mortgage as a security agreement are a part of this Mortgage:

Security
Agreement. This
instrument shall constitute a Security Agreement to the extent any of the
Property constitutes fixtures, and Lender shall have all of the rights of a
secured party under the Uniform Commercial Code as amended from time to time.

Security Interest. Upon request by Lender, Grantor shall take
whatever action is requested by Lender to perfect and continue Lender’s
security interest in the Rents and Personal Property. In addition to recording
this Mortgage in the real property records, Lender may, at any time and without
further authorization from Grantor, file executed counterparts, copies or
reproductions of this

Mortgage as a financing
statement. Grantor shall reimburse Lender for all expenses incurred in
perfecting or continuing this security interest. Upon default, Grantor shall
not remove, sever or detach the Personal Property from the Property. Upon
default, Grantor shall assemble any Personal Property not affixed to the
Property in a manner and at a place reasonably convenient to Grantor and Lender
and make it available to Lender within three (3) days after receipt of written
demand from Lender to the extent permitted by applicable law.

Addresses. The mailing addresses of Grantor (debtor) and
Lender (secured party) from which information concerning the security interest
granted by this Mortgage may be obtained (each as required by the Uniform
Commercial Code) are as stated on the first page of this Mortgage.

FURTHER ASSURANCES; ATTORNEY-IN-FACT. The following provisions relating to further
assurances and attorney-in-fact are a part of this Mortgage:

Further
Assurances. At any
time, and from time to time, upon request of Lender, Grantor will make, execute
and deliver, or will cause to be made, executed or delivered, to Lender or to
Lender’s designee, and when requested by Lender, cause to be filed, recorded,
refiled, or rerecorded, as the case may be, at such times and in such offices
and places as Lender may deem appropriate, any and all such mortgages, deeds of
trust, security deeds, security agreements, financing statements, continuation
statements, instruments of further assurance, certificates, and other documents
as may, in the sole opinion of Lender, be necessary or desirable in order to
effectuate, complete, perfect, continue, or preserve (1) Grantor’s obligations
under the Note, this Mortgage, and the Related Documents, and (2) the liens and
security interests created by this Mortgage as first and prior liens on the
Property, whether now owned or hereafter acquired by Grantor. Unless prohibited
by law or Lender agrees to the contrary in writing, Grantor shall reimburse
Lender for all costs and expenses incurred in connection with the matters
referred to in this paragraph.

Attorney-in-Fact. If Grantor fails to do any of the things
referred to in the preceding paragraph, Lender may do so for and in the name of
Grantor and at Grantor’s expense. For such purposes, Grantor hereby irrevocably
appoints Lender as Grantor’s attorney-in-fact for the purpose of making,
executing, delivering, filing, recording, and doing all other things as may be
necessary or desirable, in Lender’s sole opinion, to accomplish the matters
referred to in the preceding paragraph.

FULL PERFORMANCE. If Grantor pays all the Indebtedness when
due, and otherwise performs all the obligations imposed upon Grantor under this
Mortgage, Lender shall execute and deliver to Grantor a suitable satisfaction
of this Mortgage and suitable statements of termination of any financing
statement on file evidencing Lender’s security interest in the Rents and the
Personal Property. Grantor will pay, if permitted by applicable law, any
reasonable termination fee as determined by Lender from time to time.

EVENTS OF DEFAULT. Each of the following, at Lender’s option, shall constitute an Event of
Default under this Mortgage: Payment Default.
Grantor fails to make any payment when due under the Indebtedness.

Default on
Other Payments. Failure
of Grantor within the time required by this Mortgage to make any payment for
taxes or insurance, or any other payment necessary to prevent filing of or to
effect discharge of any lien.

Other
Defaults. Grantor
fails to comply with or to perform any other term, obligation, covenant or
condition contained in this Mortgage or in any of the Related Documents or to
comply with or to perform any term, obligation, covenant or condition contained
in any other agreement between Lender and Grantor.

Default in
Favor of Third Parties.
Should Grantor default under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any other
creditor or person that may materially affect any of Grantor’s property or
Grantor’s ability to repay the Indebtedness or Grantor’s ability to perform
Grantor’s obligations under this Mortgage or any related document.

False
Statements. Any
warranty, representation or statement made or furnished to Lender by Grantor or
on Grantor’s behalf, or made by Guarantor, or any other guarantor, endorser,
surety, or accommodation party, under this Mortgage or the Related Documents in
connection with the obtaining of the Indebtedness evidenced by the Note or any
security document directly or indirectly securing repayment of the Note is
false or misleading in any material respect, either now or at the time made or
furnished or becomes false or misleading at any time thereafter.

Defective
Collateralization.
This Mortgage or any of the Related Documents ceases to be in full force and
effect (including failure of any collateral document to create a valid and
perfected security interest or lien) at any time and for any reason.

Death or
Insolvency. The
dissolution of Grantor’s (regardless of whether election to continue is made),
any member withdraws from the limited liability company, or any other
termination of Grantor’s existence as a going business or the death of any
member, the insolvency of Grantor, the appointment of a receiver for any part
of Grantor’s property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Grantor.

Creditor or
Forfeiture Proceedings. Commencement
of foreclosure or forfeiture proceedings, whether by judicial proceeding,
self-help, repossession or any other method, by any creditor of Grantor or by
any governmental agency against any property securing the Indebtedness. This
includes a garnishment of any of Grantor’s accounts, including deposit
accounts, with Lender. However, this Event of Default shall not apply if there
is a good faith dispute by Grantor as to the validity or reasonableness of the
claim which is the basis of the creditor or forfeiture proceeding and if
Grantor gives Lender written notice of the creditor or forfeiture proceeding
and deposits with Lender monies or a surety bond for the creditor or forfeiture
proceeding, in an amount determined by Lender, in its sole discretion, as being
an adequate reserve or bond for the dispute.

Execution;
Attachment. Any
execution or attachment is levied against the Property, and such execution or
attachment is not set aside, discharged or stayed within thirty (30) days after
the same is levied.

Change in
Zoning or Public Restriction. Any change in any zoning ordinance or regulation or any other public
restriction is enacted, adopted or implemented, that limits or defines the uses
which may be made of the Property such that the present or Intended use of the
Property, as specified in the Related Documents, would be in violation of such
zoning ordinance or regulation or public restriction, as changed.

Default
Under Other Lien Documents. A default occurs under any other mortgage, deed of trust or security
agreement covering

all or any portion of the
Property.

Judgment. Unless adequately covered by insurance in the
opinion of Lender, the entry of a final judgment for the payment of money
involving more than ten thousand dollars ($10,000.00) against Grantor and the
failure by Grantor to discharge the same, or cause it to be discharged, or
bonded off to Lender’s satisfaction, within thirty (30) days from the data of
the order, decree or process under which or pursuant to which such judgment was
entered.

Breach of
Other Agreement. Any
breach by Grantor under the terms of any other agreement between Grantor and
Lender that is not remedied within any grace period provided therein, including
without limitation any agreement concerning any indebtedness or other
obligation of Grantor to Lender, whether existing now or later.

Events
Affecting Guarantor. Any
of the preceding events occurs with respect to any Guarantor, or any other
guarantor, endorser, surety, or accommodation party of any of the Indebtedness
or any Guarantor, or any other guarantor, endorser, surety, or accommodation
party dies or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness.

Adverse
Change. A material
adverse change occurs in Grantor’s financial condition, or Lender believes the
prospect of payment or performance of the Indebtedness is impaired.

Insecurity. Lender in good faith believes itself
insecure.

RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of an Event of Default
and at any time thereafter, Lender, at Lender’s option, may exercise any one or
more of the following rights and remedies, in addition to any other rights or
remedies provided by law:

Accelerate
Indebtedness. Lender
shall have the right at its option without notice to Grantor to declare the
entire Indebtedness immediately due and payable, including any prepayment
penalty which Grantor would be required to pay.

UCC
Remedies. With respect
to all or any part of the Personal Property, Lender shall have all the rights
and remedies of a secured party under the Uniform Commercial Code. If notice to
Grantor of the intended disposition of the Personal Property is required by law
in a particular instance, such notice shall be deemed commercially reasonable
if given to Grantor at least ten (10) calendar days prior to the date of
intended disposition. Grantor shall pay on demand all costs and expenses,
including but not limited to reasonable attorneys’ fees and legal expenses,
incurred by Lender in exercising these rights and remedies.

Appoint Receiver. Lender shall have the right to have a
receiver appointed to take possession of all or any part of the Property, with
the power to protect and preserve the Property, to operate the Property
preceding foreclosure or sale, and to collect the Rents from the Property and
apply the proceeds, over and above the cost of the receivership, against the
Indebtedness. The receiver may serve without bond if permitted by law. Lender’s
right to the appointment of a receiver shall exist whether or not the apparent value
of the Property exceeds the Indebtedness by a substantial amount. Employment by
Lender shall not disqualify a person from serving as a receiver.

Foreclosure
and Sale. Lender may,
and is hereby authorized and empowered to, foreclose this Mortgage by action or
advertisement pursuant to the statutes of the State of Minnesota providing for
such foreclosure. Power is expressly granted to Lender (1) to sell the Property
at public auction and to convey the Property, in fee simple, to the purchasers
at such sale, and (2) to pay, out of the proceeds of the sale, all of the
Indebtedness secured by this Mortgage, with interest, and all legal costs and
charges of the foreclosure including the maximum attorneys’ fees permitted by
law and Grantor agrees to pay all such costs, and charges and fees.

Other
Remedies. Lender shall
have all other rights and remedies provided in this Mortgage or the Note or
available at law or in equity.

Sale of the
Property. To the
extent permitted by applicable law, Grantor hereby waives any and all right to
have the Property marshalled. In exercising its rights and remedies, Lender
shall be free to sell all or any part of the Property together or separately,
in one sale or by separate sales. Lender shall be entitled to bid at any public
sale on all or any portion of the Property.

Notice of
Sale. Lender shall
give Grantor reasonable notice of the time and place of any public sale of the
Personal Property or of the time after which any private sale or other intended
disposition of the Personal Property is to be made. Reasonable notice shall
mean notice given at least ten (10) days before the time of the sale or
disposition. Any sale of the Personal Property may be made in conjunction with
any sale of the Real Property.

Election of
Remedies. Election by
Lender to pursue any remedy shall not exclude pursuit of any other remedy, and
an election to make expenditures or to take action to perform an obligation of
Grantor under this Mortgage, after Grantor’s failure to perform, shall not
affect Lender’s right to declare a default and exercise its remedies. Nothing
under this Mortgage or otherwise shall be construed so as to limit or restrict
the rights and remedies available to Lender following an Event of Default, or
in any way to limit or restrict the rights and ability of Lender to proceed
directly against Grantor and/or against any other co-maker, guarantor, surety
or endorser and/or to proceed against any other collateral directly or
indirectly securing the Indebtedness.

Attorneys’
Fees: Expenses. If
Lender institutes any suit or action to enforce any of the terms of this
Mortgage, Lender shall be entitled to recover such sum as the court may adjudge
reasonable as attorneys’ fees at trial and upon any appeal. Whether or not any
court action is involved, and to the extent not prohibited by law, all
reasonable expenses Lender incurs that In Lender’s opinion are necessary at any
time for the protection of its interest or the enforcement of its rights shall
become a part of the Indebtedness payable on demand and shall bear interest at
the Note rate from the date of the expenditure until repaid. Expenses covered
by this paragraph include, without limitation, however subject to any limits
under applicable law, Lender’s reasonable attorneys’ fees and Lender’s legal
expenses, whether or not there is a lawsuit, including reasonable attorneys’
fees and expenses for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services, the cost of searching records, obtaining
title reports (including foreclosure reports), surveyors’ reports, and
appraisal fees and title insurance, to the extent permitted by applicable law.
Grantor also will pay any court costs, in addition to all other sums provided
by law.

NOTICES. Any notice required to be given under this Mortgage, including without
limitation any notice of default and any notice of sale shall be given in
writing, and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise

required by law), when deposited with a nationally recognized overnight
courier, or, if mailed, when deposited in the United States mail, as first
class, certified or registered mail postage prepaid, directed to the addresses
shown near the beginning of this Mortgage. All copies of notices of foreclosure
from the holder of any lien which has priority over this Mortgage shall be sent
to Lender’s address, as shown near the beginning of this Mortgage. Any party may
change its address for notices under this Mortgage by giving formal written
notice to the other parties, specifying that the purpose of the notice is to
change the party’s address. For notice purposes, Grantor agrees to keep Lender
informed at all times of Grantor’s current address. Unless otherwise provided
or required by law, if there is more than one Grantor, any notice given by
Lender to any Grantor is deemed to be notice given to all Grantors.

READVANCE
CLAUSE. It is
understood that the Indebtedness secured by this Mortgage may be rewritten or
reduced and later additional advances made and secured hereby up to the
principal amount of $800,000.00. To the extent that occurs, the parties intend
that the later additional advances will be “readvances” as that term is used in
Minnesota Statutes Section 287.05. However, nothing herein contained shall
imply an obligation on the part of the lender to make any additional advances.
Grantor consents and agrees that Lender may, at its sole discretion, automatically
advance on the said Mortgage Note and secured hereby to reduce any
obligation(s) of Grantor to Lender.

MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a
part of this Mortgage:

Amendments. This Mortgage, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Mortgage. No alteration of or amendment to this
Mortgage shall be effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or amendment.

Annual
Reports. If the
Property is used for purposes other than Grantor’s residence, Grantor shall
furnish to Lender, upon request, a certified statement of net operating income
received from the Property during Grantor’s previous fiscal year in such form
and detail as Lender shall require. “Net operating income” shall mean all cash
receipts from the Property less all cash expenditures made in connection with
the operation of the Property.

Caption
Headings. Caption
headings in this Mortgage are for convenience purposes only and are not to be
used to interpret or define the provisions of this Mortgage.

Grantor’s
Copy of Documents.
Lender agrees to provide Grantor with a conformed copy of both the Note and
this Mortgage at the time they are executed or within a reasonable time after
request.

Choice of
Venue. If there is a
lawsuit, Grantor agrees upon Lender’s request to submit to the jurisdiction of
the courts of YELLOW MEDICINE County, State of Minnesota.

No Waiver by
Lender. Lender shall
not be deemed to have waived any rights under this Mortgage unless such waiver
is given in writing and signed by Lender. No delay or omission on the part of
Lender in exercising any right shall operate as a waiver of such right or any
other right. A waiver by Lender of a provision of this Mortgage shall not
prejudice or constitute a waiver of Lender’s right otherwise to demand strict
compliance with that provision or any other provision of this Mortgage. No
prior waiver by Lender, nor any course of dealing between Lender and Grantor,
shall constitute a waiver of any of Lender’s rights or of any of Grantor’s
obligations as to any future transactions. Whenever the consent of Lender is
required under this Mortgage, the granting of such consent by Lender in any
instance shall not constitute continuing consent to subsequent instances where
such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.

Severability.
If a court of competent
jurisdiction finds any provision of this Mortgage to be illegal, invalid, or
unenforceable as to any circumstance, that finding shall not make the offending
provision illegal, invalid, or unenforceable as to any other circumstance. If
feasible, the offending provision shall be considered modified so that it
becomes legal, valid and enforceable. If the offending provision cannot be so
modified, it shall be considered deleted from this Mortgage. Unless otherwise
required by law, the illegality, invalidity, or unenforceability of any
provision of this Mortgage shall not affect the legality, validity or
enforceability of any other provision of this Mortgage.

Non-Liability
of Lender. The
relationship between Grantor and Lender created by this Mortgage is strictly a
debtor and creditor relationship and not fiduciary in nature, nor is the
relationship to be construed as creating any partnership or joint venture
between Lender and Grantor. Grantor is exercising Grantor’s own judgement with
respect to Grantor’s business. All information supplied to Lender is for
Lender’s protection only and no other party is entitled to rely on such
information. There is no duty for Lender to review, inspect, supervise or
inform Grantor of any matter with respect to Grantor’s business. Lender and
Grantor intend that Lender may reasonably rely on all information supplied by
Grantor to Lender, together with all representations and warranties given by
Grantor to Lender, without investigation or confirmation by Lender and that any
investigation or failure to investigate will not diminish Lender’s right to so
rely.

Merger. There shall be no merger of the interest or
estate created by this Mortgage with any other interest or estate in the
Property at any time held by or for the benefit of Lender in any capacity,
without the written consent of Lender.

Sole
Discretion of Lender.
Whenever Lender’s consent or approval is required under this Mortgage, the
decision as to whether or not to consent or approve shall be in the sole and
exclusive discretion of Lender and Lender’s decision shall be final and
conclusive.

Successors
and Assigns. Subject
to any limitations stated in this Mortgage on transfer of Grantor’s interest,
this Mortgage shall be binding upon and inure to the benefit of the parties,
their successors and assigns. If ownership of the Property becomes vested in a
person other than Grantor, Lender, without notice to Grantor, may deal with
Grantor’s successors with reference to this Mortgage and the Indebtedness by
way of forbearance or extension without releasing Grantor from the obligations
of this Mortgage or liability under the Indebtedness.

Time is of
the Essence. Time is
of the essence in the performance of this Mortgage.

DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Mortgage. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money
of the United States of America. Words and terms used in the singular shall
include the plural, and the plural shall include the singular, as the context
may require. Words and terms not otherwise defined in this Mortgage shall have
the meanings attributed to such terms in the Uniform Commercial Code:

Borrower. The word “Borrower” means HIGHWATER ETHANOL,
LLC and includes all co-signers and co-makers signing the Note

and all their successors and
assigns.

Default. The word “Default” means the Default set
forth in this Mortgage in the section titled “Default”.

Environmental
Laws. The words “Environmental
Laws” mean any and all state, federal and local statutes, regulations and
ordinances relating to the protection of human health or the environment,
including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et
seq. (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, Pub.
L. No. 99-499 (“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901, et seq., or other applicable state or federal laws, rules, or
regulations adopted pursuant thereto or common law, and shall also include
pollutants, contaminants, polychlorinated biphenyls, asbestos, urea formaldehyde,
petroleum and petroleum products, and agricultural chemicals.

Event of
Default. The words
“Event of Default” mean individually, collectively, and interchangeably any of
the events of default set forth in this Mortgage in the events of default section
of this Mortgage.

Grantor. The word “Grantor” means HIGHWATER ETHANOL,
LLC.

Guarantor. The word “Guarantor” means any guarantor,
surety, or accommodation party of any or all of the Indebtedness, and, in each
case, the successors, assigns, heirs, personal representatives, executors and
administrators of any guarantor, surety, or accommodation party.

Guaranty. The word “Guaranty” means the guaranty from
Guarantor, or any other guarantor, endorser, surety, or accommodation party to
Lender, including without limitation a guaranty of all or part of the Note.

Hazardous
Substances. The words
“Hazardous Substances” mean materials that, because of their quantity,
concentration or physical, chemical or infectious characteristics, may cause or
pose a present or potential hazard to human health or the environment when
improperly used, treated, stored, disposed of, generated, manufactured,
transported or otherwise handled. The words “Hazardous Substances” are used in
their very broadest sense and Include without limitation any and all hazardous
or toxic substances, materials or waste as defined by or listed under the
Environmental Laws. The term “Hazardous Substances” also includes, without
limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.

Improvements. The word “Improvements” means all existing
and future improvements, buildings, structures, mobile homes affixed on the
Real Property, facilities, additions, replacements and other construction on
the Real Property.

Indebtedness. The word “Indebtedness” means all principal,
interest, and other amounts, costs and expenses payable under the Note or
Related Documents, together with all renewals of, extensions of, modifications
of, consolidations of and substitutions for the Note or Related Documents and
any amounts expended or advanced by Lender to discharge Grantor’s obligations
or expenses incurred by Lender to enforce Grantor’s obligations under this
Mortgage, together with interest on such amounts as provided in this Mortgage.
Specifically, without limitation, Indebtedness includes all amounts that may be
indirectly secured by the Cross-Collateralization provision of this Mortgage.

Lender. The word “Lender” means GRANITE FALLS BANK,
its successors and assigns. Mortgage.
The word “Mortgage” means this Mortgage between Grantor and Lender.

Note. The word “Note” means the promissory note
dated March 13, 2007, in the original
principal amount of $800,000.00 from Grantor to Lender, together
with all renewals of, extensions of, modifications of, refinancings of,
consolidations of, and substitutions for the promissory note or agreement. The
maturity date of the Note is March 13, 2008.

Personal
Property. The words
“Personal Property” mean all equipment, fixtures, and other articles of
personal property now or hereafter owned by Grantor, and now or hereafter
attached or affixed to the Real Property; together with all accessions, parts,
and additions to, all replacements of, and all substitutions for, any of such
property; and together with all proceeds (including without limitation all
insurance proceeds and refunds of premiums) from any sale or other disposition
of the Property.

Property. The word “Property” means collectively the
Real Property and the Personal Property.

Real
Property. The words
“Real Property” mean the real property, interests and rights, as further
described in this Mortgage.

Related
Documents. The words
“Related Documents” mean all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, security deeds, collateral mortgages, and all other
instruments, agreements and documents, whether now or hereafter existing,
executed in connection with the Indebtedness.

Rents. The word “Rents” means all present and future
rents, revenues, income, issues, royalties, profits, and other benefits derived
from the Property.

GRANTOR
ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS MORTGAGE, AND GRANTOR
AGREES TO ITS TERMS. GRANTOR:

HIGHWATER ETHANOL, LLC

	
  By:

  	
  /s/ Brian Kletscher

  	
   

  
	
   

  	
  BRIAN KLETSCHER, PRESIDENT of HIGHWATER ETHANOL,
  LLC

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ John Scheller

  	
   

  
	
   

  	
  JOHN
  SCHELLER, VICE PRESIDENT of HIGHWATER ETHANOL, LLC

  	
   

  
	
   

  	
   

  
	
   

  

This Mortgage was drafted by:

CRAIG A. BAKKELUND, VICE

PRESIDENT GRANITE FALLS BANK

702 PRENTICE
STREET, PO BOX 8 GRANITE FALLS, MN 66241

	
  

  
	
   

  

 

LIMITED LIABILITY COMPANY ACKNOWLEDGMENT

	
  STATE OF

  	
  Minnesota

  	
   

  	
  )

  	
  [SEAL JOHN C. VIRNIG]

  
	
   

  	
   

  	
  )SS

  	
  [NOTARY PUBLIC — MINNESOTA]

  
	
  COUNTY OF

  	
  Yellow Medicine

  	
   

  	
  )

  	
  [MY COMMISSION EXPIRES JAN. 31. 2010]

  
							

 

On
this 13 day of  March              ,
2007      , before me, the undersigned
Notary Public, personally appeared BRIAN
KLETSCHER, PRESIDENT; JOHN SCHELLER, VICE PRESIDENT of HIGHWATER
ETHANOL, LLC, and known to me to be members or designated agents of the limited
liability company that executed the Mortgage and acknowledged the Mortgage to
be the free and voluntary act and deed of the limited liability company, by
authority of statute, its articles of organization or its operating agreement,
for the uses and purposes therein mentioned, and on oath stated that they are
authorized to execute this Mortgage and in fact executed the Mortgage on behalf
of the limited liability company.

	
  By

  	
  /s/ John C. Virnig

  	
   

  	
  Residing at

  	
  Granit
  Falls, MN

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Notary
  Public in and for the State of

  	
  Minnesota

  	
   

  	
  My commission expires

  	
  Jan.
  31, 2010Exhibit
10.23

PROMISSORY NOTE

	
  Principal

  	
  Loan Date

  	
  Maturity

  	
  Loan No.

  	
  Call/Coll

  	
  Account

  	
  Officer

  	
  Initials

  
	
  $800,000.00

  	
  03-13-2007

  	
  03-13-2008

  	
   

  	
  26

  	
   

  	
   

  	
   

  
	
  References in the shaded area are for Lender’s
  use only and do not limit the applicability of this document to any
  particular loan or item.

  Any
  item above containing “***” has been omitted due to text length limitations.

  

 

	
  Borrower:

  	
  HIGHWATER ETHANOL. LLC (TIN: 20-4798531)

  	
  Lender:

  	
  GRANITE FALLS BANK

  
	
   

  	
  205 MAIN STREET, PO BOX 96

  	
   

  	
  702 PRENTICE STREET, PO BOX 8

  
	
   

  	
  LAMBERTON, MN 56152

  	
   

  	
  GRANITE FALLS, MN 56241

  
	
   

  	
   

  	
   

  	
  (320) 564-2111

  

 

	
   

  	
   

  	
   

  
	
  Principal Amount: $800.000.00

  	
  Interest Rate: 7.500%

  	
  Date of Note: March 13, 2007

  

 

PROMISE TO PAY. HIGHWATER ETHANOL. LLC (“Borrower”)
promises to pay to GRANITE FALLS BANK (“Lender”), or order, in lawful money of the United
States of America, the principal amount of Eight Hundred Thousand & 00/100
Dollars ($800,000.00), together with interest at the rate of
7.500% per annum on the unpaid principal balance from March 13, 2007, until
paid in full. The interest rate may change under the terms and conditions of the “INTEREST
AFTER DEFAULT” section.

PAYMENT.
Borrower will pay this loan in full immediately upon Lender’s demand. If no
demand is made, Borrower will pay this loan in one principal
payment of $800,000.00 plus interest on March 13, 2008. This payment due on
March 13, 2008, will be for all principal and all accrued
interest not yet paid. In addition, Borrower will pay regular quarterly
payments of all accrued unpaid interest due as of each payment date,
beginning July 1, 2007, with all subsequent interest payments
to be due on the same day of each quarter after that. Unless otherwise agreed or
required by applicable law, payments will be applied first to any accrued
unpaid interest; then to principal; and then to any unpaid collection
costs. The annual interest rate for this Note is computed on a 365/360
basis; that is, by applying the ratio of the annual interest rate over a
year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. Borrower will pay Lender at Lender’s address shown above
or at such other place as Lender may designate in writing.

PREPAYMENT. Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower’s obligation to continue to make payments under the payment schedule.
Rather, early payments will reduce the principal balance due. Borrower agrees
not to send Lender payments marked “paid in full”, “without recourse”, or similar language. If
Borrower sends such a payment, Lender may accept it without losing any of
Lender’s rights under this Note, and Borrower will remain obligated to pay any further
amount owed to Lender. All written communications concerning disputed amounts,
including any
check or other payment instrument that indicates that the payment constitutes “payment
in full” of the amount owed or that is tendered with other conditions or
limitations or as full satisfaction of a disputed amount must be mailed or
delivered to: GRANITE FALLS BANK, 702 PRENTICE STREET, PO BOX 8 GRANITE FALLS, MN 66241.

INTEREST
AFTER DEFAULT. Upon default, including failure to pay upon final
maturity, the interest rate on this Note shall be increased by 3.000 percentage points.
However, in no event will the interest rate exceed the maximum interest rate
limitations under applicable law.

DEFAULT. Each of the following
shall constitute an event of default (“Event of Default”) under this Note: 

Payment
Default. Borrower fails to make any payment when due under this Note.

Other
Defaults. Borrower fails to comply with or to perform any other term, obligation,
covenant or condition contained in this Note or in any of the related
documents or to comply with or to perform any term, obligation, covenant or
condition contained in any other agreement between Lender and Borrower.

Default
in Favor of Third Parties. Borrower or any Grantor defaults under any loan,
extension of credit, security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower’s property or Borrower’s ability to repay this Note or perform
Borrower’s obligations under this Note or any of the related documents.

False Statements. Any warranty, representation or statement made or
furnished to Lender by Borrower or on Borrower’s behalf under this Note or the related
documents is false or misleading in any material respect, either now or at the
time made or furnished or becomes false or misleading at any time thereafter.

Death or Insolvency. The dissolution of Borrower (regardless of whether
election to continue is made), any member withdraws from Borrower, or any other
termination of Borrower’s existence as a going business or the death of any
member, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower’s property, any assignment for the benefit of creditors, any type
of creditor workout, or the
commencement of any proceeding under any bankruptcy or insolvency laws by or
against Borrower.

Creditor or Forfeiture  Proceedings.
Commencement of foreclosure or forfeiture proceedings, whether by
judicial proceeding, self-help, repossession
or any other method, by any creditor of Borrower or by any governmental agency
against any collateral securing the loan. This includes a garnishment of any of Borrower’s accounts, including
deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by
Borrower as to the validity or reasonableness of the claim which is the basis
of the creditor or forfeiture proceeding and if Borrower gives Lender written
notice of the creditor or forfeiture proceeding and deposits with Lender monies
or a surety bond for the creditor or
forfeiture proceeding, in an amount determined by Lender, in its sole
discretion, as being an adequate reserve or bond for the dispute.

Events
Affecting Guarantor. Any of the preceding events occurs with respect to any
guarantor, endorser, surety, or accommodation party of any of the
indebtedness or any guarantor, endorser, surety, or accommodation party dies or
becomes incompetent, or revokes or disputes
the validity of, or liability under, any guaranty of the indebtedness evidenced
by this Note.

Adverse Change. A material adverse change occurs in Borrower’s
financial condition, or Lender believes the prospect of payment or performance of this Note is impaired.

Insecurity. Lender in good faith
believes itself insecure.

LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid
principal balance under this Note and all accrued unpaid interest immediately due, and then Borrower will pay
that amount.

ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay
someone else to help collect this Note if Borrower does not pay. Borrower will
pay Lender that amount. This
includes, subject to any limits under applicable law, Lender’s reasonable
attorneys’ fees and Lender’s legal expenses, whether
or not there is a lawsuit, including reasonable attorneys’ fees, expenses for
bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and
appeals. If not prohibited by applicable law, Borrower also will pay any court
costs, in addition to all other sums provided by law.

JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by either Lender or Borrower against the
other.

CHOICE
OF VENUE. If there is a lawsuit, Borrower agrees upon Lender’s request to submit
to the jurisdiction of the courts of YELLOW MEDICINE County, State of Minnesota.

RIGHT
OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of
setoff in all Borrower’s accounts with Lender (whether checking, savings, or
some other account). This includes all accounts Borrower holds jointly with
someone else and all accounts Borrower may open in the future. However, this does not include
any IRA or Keogh accounts, or any trust accounts for which setoff would be
prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law, to
charge or setoff all sums owing on the indebtedness against any and all such accounts,
and, at Lender’s option, to administratively freeze all such accounts to allow
Lender to protect Lender’s charge and setoff rights provided in this paragraph.

COLLATERAL. Borrower acknowledges
this Note is secured by the following collateral: A mortgage to lender on real
property of even date herewith
and other security instruments now existing or hereafter arising.

LOAN
PURPOSE. PURCHASE 115
ACRES.

READVANCE CLAUSE. It is understood that the Indebtedness
evidenced by this Note may be rewritten or reduced and later additional
advances made up to the principal amount of
$800,000.00. To the extent that occurs, the parties intend that the later
additional advances will be “readvances”
as that term is used in Minnesota Statutes Section 287.05. However, nothing
herein contained shall imply an obligation on the

 

	
  

  

part of
the lender to make any additional advances. Borrower consents and agrees that
Lender may, at its sole discretion, automatically advance on this Note and
secured by the said Mortgage of even date and secured by any other collateral
granted to lender to reduce any obligation(s)
of Borrower to Lender.

SUCCESSOR
INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower’s
heirs, personal representatives, successors
and assigns, and shall inure to the benefit of Lender and its successors and
assigns.

NOTIFY  US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES. Please notify
us if we report any inaccurate information about your account(s) to a consumer reporting
agency. Your written notice describing the specific inaccuracy(ies) should be
sent to us at the following
address: GRANITE FALLS BANK 702 PRENTICE STREET, PO BOX 8 GRANITE FALLS, MN
56241,

GENERAL
PROVISIONS. This Note is payable on demand. The inclusion of specific default
provisions or rights of Lender shall not preclude Lender’s right to declare
payment of this Note on its demand. If any part of this Note cannot be
enforced, this fact will not affect the rest of the Note. Lender may delay or
forgo enforcing any of its rights or remedies under this Note without losing
them. In addition, Lender shall have all the rights and remedies provided in the related
documents or available at law, in equity, or otherwise. Except as may be
prohibited by applicable law, all of Lender’s rights and remedies shall be
cumulative and may be exercised singularly or concurrently. Election by Lender
to pursue any remedy
shall not exclude pursuit of any other remedy, and an election to make
expenditures or to take action to perform an obligation of Borrower shall not affect
Lender’s right to declare a default and to exercise its rights and remedies.
Borrower and any other person who signs, guarantees or endorses this Note, to the extent
allowed by law, waive presentment, demand for payment, and notice of dishonor.
Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender’s security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other then the party with whom the modification is made. The obligations under this Note are joint and
several.

SECTION DISCLOSURE. To the
extent not preempted by federal law, this loan is made under Minnesota
Statutes, Section 334.01.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES
RECEIPT OF A COMPLETED COPY OF
THIS PROMISSORY NOTE. 

BORROWER:

HIGHWATER ETHANOL. LLC

	
  

  	
  By:

  	
  /s/ Brian
  Kletscher

  	
   

  	
  By:

  	
  /s/ John
  Scheller

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  BRIAN KLETSCHER, PRESIDENT of HIGHWATER ETHANOL. LLC

  	
   

  	
   JOHN SCHELLER, VICE PRESIDENT of HIGHWATER

   ETHANOL. LLC

  
								

 

LENDER:

 

GRANITE FALLS BANK

	
  

  	
  X

  	
  /s/ Craig A.
  Bakkelund

  	
   

  
	
   

  	
  Authorized Signer

  
	
   

  	
   

  
	
  LASER PRO
  Landlep. Ver. 6.31.00.004 Cup. Harland Finencial 9e1u1icem Ins. 1907, 1007.
  AN Rights Reserved.

  	
  G.F111.1.1.1020.PC TR 12909 PR 12

  
					

 

 2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00120-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00120-of-00352.parquet"}]]