Document:

Exhibit 10.27

 

FORBEARANCE AND REPAYMENT AGREEMENT

 

This Forbearance and Repayment Agreement (hereinafter
referred to as the “Agreement”) is entered into as effective as of September 12,
2008, between and among Suntech America, Inc., and its affiliates (collectively,
“Suntech”), and Open Energy Corporation, and its affiliates (collectively, “OEC”
and, together with  Suntech,
collectively, the “Parties”)

 

RECITALS:

 

WHEREAS, Suntech has sold to OEC, and OEC has
purchased from Suntech, certain solar module products (the “Products”), and OEC
has inspected and accepted delivery of such Products in accordance with the
purchase orders and related documents between the Parties;

 

WHEREAS, OEC has failed to pay the purchase
price for the Products and such outstanding amounts currently equal
approximately $3,053,530.28 (the “Outstanding Payment Obligations”);

 

WHEREAS, subject to the terms and conditions
set forth in this Agreement, Suntech has agreed to forbear from taking any
enforcement action against OEC with respect to the Outstanding Payment
Obligations, provided that OEC fully and timely makes each of the payments
provided for under this Agreement and otherwise complies with the other terms
of this Agreement;

 

WHEREAS, it is now the intention of the
Parties to establish a payment plan for the Outstanding Payment Obligations and
to provide for the mutual release of the Parties upon the conditions more fully
set forth below.

 

1

 

AGREEMENT:

 

 

NOW, THEREFORE, in consideration of the
terms, covenants, conditions, and agreements set forth below, and in
satisfaction and settlement of the Outstanding Payment Obligations, Suntech and
OEC agree as follows:

 

1.             OEC
agrees to pay to Suntech the aggregate amount of  Three Million Fifty-Three Thousand Five
Hundred Thirty and 28/100 Dollars ($3,053,530.28), plus interest in an amount
of twelve percent (12%) per annum, or the highest amount legally allowable
under California law, if lower than 12% per annum, in accordance with the payment
schedule set forth on Exhibit A attached hereto, which payments
include accrued interest to the each payment date.

 

2.             A
failure to make full and timely payment by OEC in accordance with Exhibit A
shall be deemed a default under this Agreement, and such default shall be
deemed material in the event full payment is not made within five (5) business
days of the default (a “Payment Default”). 
Suntech shall have no obligation to notify OEC of any Payment Default.

 

3.             Upon
the occurrence of any Payment Default, Suntech, in its sole discretion, is
entitled to file suit in either the state or federal courts of the State of
California for breach of this Agreement, and to submit to the Court a Complaint
and/or a Stipulated Judgment in substantially the same form as attached hereto
as Exhibit B.   The total amount to be entered for the
Stipulated Judgment shall equal $3,053,530.28, plus applicable interest, less
any amounts previously paid by OEC under the terms of this Agreement.   Following the occurrence of any Payment
Default, in addition to the remedies provided herein, Suntech may pursue any
other remedy available to it under law or in equity.

 

4.             OEC
hereby consents to personal jurisdiction and venue of any court in the State of
California for this purpose.

 

5.             OEC
hereby further consents to entry of the Stipulated Judgment pursuant to the
terms and conditions of this Agreement, as more fully explained.

 

2

 

6.             If,
upon the occurrence of any Payment Default, Suntech desires to file suit and to
submit for entry and enforcement a Stipulated Judgment pursuant to the terms of
this Agreement, Suntech shall so notify OEC in writing in accordance with Paragraph
25 below.  At the time of said
notification, Suntech shall provide OEC with a copy of the Complaint and
Stipulated Judgment to be filed with the Court. 
OEC shall have five (5) business days to review the Complaint and/or
Stipulated Judgment and notify Suntech of any alleged factual misstatements
contained therein, but Suntech is not required to obtain OEC’s approval as to
form of the Complaint or Stipulated Judgment or accept any comments with
respect to which it in good faith disagrees.

 

7.             After
the review period referenced in Paragraph 6 hereof has expired, Suntech may
file the Complaint and Stipulated Judgment pursuant to the terms and conditions
of this Agreement.  The dollar amount to
be entered for the Stipulated Judgment shall be the result of subtracting the
amounts previously paid by OEC under this Agreement from the total amount due
and owing Suntech pursuant to the terms and conditions hereof.

 

8.             Effective
upon full payment by OEC in accordance with the terms and conditions of this
Agreement, Suntech for and on behalf of itself, its predecessors, affiliates,
partners, successors, assigns, agents, employees, representatives, and
attorneys, do, subject to the provisions herein, hereby fully and forever
remise, release, and discharge OEC and its predecessors, affiliates,
successors, shareholders, assigns, agents, employees, representatives, and
attorneys, of and from any and all claims, demands, agreements, contracts,
covenants, torts, actions, suits, causes of action, obligations, controversies,
debts, costs, expenses, accounts, damages, losses, and liabilities of whatever
kind or nature, in law, equity, or otherwise, whether known or unknown, which
against them Suntech had, may have had, or now have, or which any of Suntech’s
predecessors, affiliates, partners, successors, assigns, agents, employees, representatives,
or attorneys, hereafter can, shall, or may have, for or by reason of any
matter, cause, or thing whatsoever, up to and including the date hereof, which
may relate to or arise out 

 

3

 

of the events which are the subject of this Agreement and/or the Outstanding
Payment Obligations.  This release,
however, is not intended to be and shall not be construed as a release of the
rights, obligations, or duties of OEC under this Agreement or otherwise relating
to the Products.

 

9.             Effective
upon and in consideration of Suntech’s execution of this Agreement, OEC, for
and on behalf of itself and its predecessors, affiliates, successors,
shareholders, assigns, agents, employees, representatives, and attorneys
(collectively, “OEC Parties”), do hereby fully and forever remise, release, and
discharge Suntech, its predecessors, affiliates, successors, partners, assigns,
agents, employees, representatives, and attorneys, of and from any and all
claims, demands, agreements, contracts, covenants, torts, actions, suits,
causes of action, obligations, controversies, debts, costs, expenses, accounts,
damages, losses, and liabilities of whatever kind or nature, in law, equity, or
otherwise, whether known or unknown, which against them OEC had, may have had,
or now have, or which any of OEC’s predecessors, affiliates, successors,
shareholders, assigns, agents, employees, representatives, or attorneys,
hereafter can, shall, or may have, for or by reason of any matter, cause, or
thing whatsoever, up to and including the date hereof, which may relate to or
arise out of the events which are the subject of this Agreement and/or the
Outstanding Payment Obligations.  This
release, however, is not intended to be and shall not be construed as a release
of the rights, obligations, or duties of Suntech under this Agreement.  However, this release is not intended to be,
and shall not be construed to be a release of any rights of any OEC Party under
any Suntech warranty or in respect of any product liability claim relating to
the Products.

 

10.           The
Parties agree that each of them will keep confidential and not disclose the
terms of this Agreement and/or the amount of the settlement to any person,
corporation or other entity.  However,
the following disclosures shall not constitute a breach of the obligations
under this Paragraph:  (i) disclosure
which may be necessary to enforce the terms and conditions of this Agreement; (ii) disclosure
pursuant to a subpoena or specific court or agency order;

 

4

 

(iii) disclosure necessary to comply with the Internal Revenue
Code, state tax law or any other applicable law and any disclosure necessary
for OEC to comply with its reporting obligations under the Securities Exchange
Act of 1934, as amended; and (iv) any disclosure made after written
consent thereto is obtained from the other Parties (or from the other Parties’
attorney).  In the event a Party intends
or is compelled to make a disclosure for any of the foregoing reasons, the
disclosing Party shall give reasonable notice and opportunity to object to the
non-disclosing parties.

 

11.           The
Parties understand and agree that this Agreement is a compromise settlement of
disputed claims, and that neither the execution of this Agreement, nor the agreement
by any Party to the terms set forth herein, or the payment of any sums of
money, described herein, shall constitute or be construed as an admission of
wrongdoing or liability on the Party. 
Nor is one Party’s acceptance of a compromised amount of settlement
money from the other Party an admission of any lack of wrongdoing or liability
by that other Party.  Neither this
Agreement, nor any provision hereof, nor any statement of any Party, made in
negotiation towards this Agreement shall be admissible in any proceeding for
any purpose of showing wrongdoing or liability on the part of such Party.

 

12.           The
Parties hereto acknowledge that they have been advised by legal counsel and are
familiar with the provisions of California Civil Code § 1542, which is
expressly understood by each Party to provide as follows:

 

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.

 

The Parties are aware of said code section
and hereby expressly waive any and all rights they may have thereunder,
as well as under any other statute or common law principles of similar effect,
except as to the promises, covenants, and warranties contained herein which are
expressly 

 

5

 

identified as surviving the execution of this
Agreement.  This Agreement shall act as
release of all future claims that may arise from the above-mentioned events,
disputes, and litigation, whether such claims are currently known, unknown,
foreseen, or unforeseen.  The Parties
understand and acknowledge the significance and consequences of the specific waiver
of California Civil Code § 1542 above and hereby assume full
responsibility for any injuries, damages, losses, or liabilities they may
hereafter incur from the above-mentioned events, disputes, and litigation.

 

13.           Each
Party agrees to execute all documents referred to herein to carry out the
provisions of this Agreement, and any other documents which at any other time
may be reasonably necessary to carry out the terms of this Agreement.

 

14.           Each
Party represents and warrants that he or she or it has full power to enter into
this Agreement, and that the individual executing this Agreement on his, her,
or its behalf is fully empowered to bind him, her, or it and fully authorized
to enter into this Agreement.  Each Party
represents and warrants that he, she, or it has not assigned, encumbered, or in
any manner transferred all or any portions of the claims, causes of action, or
other matters released by her, him or it herein except as expressly set forth
herein.  Each Party acknowledges and
agrees that the warranties and representations made by each Party in this
Paragraph, and throughout this Agreement, are each an essential and material
term of this Agreement, without which the consideration given herein would not
have been given by any of them.

 

15.           Each
Party acknowledges and represents that, in effecting and executing this
Agreement, he, she, or it has received from legal counsel full legal advice as
to his, her, or its legal rights, or had the opportunity to do so, and that he,
she, or it has read all of this Agreement and fully understands its content and
legal effect.

 

6

 

16.           Each
Party acknowledges and agrees that no representation, statement, or promise not
expressly set forth herein has been made by or on behalf of any of the other
Parties hereto or by any of their agents, servants, employees, representatives,
or attorneys, and that no representations, statements, or promises that are not
expressly set forth herein have been made or relied on by any Party.  This Agreement constitutes a single
integrated contract.

 

17.           All
of the covenants, releases, and agreements herein contained in favor of the
persons or entities released are made for the express benefit of each and all
of said persons or entities, each of whom has the right to enforce such
provisions.

 

18.           If
any action or motion in law or equity, including an action for declaratory
relief, is brought to enforce or interpret provisions of this Agreement, the
prevailing Party shall be entitled to recover reasonable attorneys’ fees and
costs, which may be determined by the Court in said action or in any separate
action brought for that purpose, in addition to any other relief to which the
Party may be entitled.

 

19.           This
Agreement shall be binding upon and shall inure to the benefit of the Parties
hereto and their respective partners, successors, representatives, assigns,
employees, agents, attorneys, and parent, subsidiary, and affiliated
corporations.

 

20.           This
Agreement is made and entered into in the State of California and shall be
interpreted, applied, and enforced under and pursuant to the laws of the State
of California, and shall be enforceable in any state or federal court of the
State of California.

 

21.           In
interpreting the language of this Agreement, each Party to this Agreement shall
be treated as having drafted this Agreement after meaningful negotiations.  This Agreement may be modified only in a
writing signed by each Party.

 

22.           If
any material portion, provision, or part of this Agreement, other than the
mutual releases, is held, determined, or adjudicated to be invalid,
unenforceable, or void for any reason whatsoever, each such portion, provision,
or part shall be severed from the remaining portions, provisions, or parts of
this Agreement and shall not affect the validity or enforceability of such
remaining portions, provisions, or parts.

 

7

 

23.           The
Parties agree that this Agreement may be signed in counterparts, with Suntech
retaining the original signatures.

 

24.           The
Parties agree that the performance of this Agreement may be pleaded and/or used
as a full and complete defense to, and may be used as a basis for, an
injunction against any action, suit or other proceeding which may be instituted,
prosecuted, or attempted concerning a breach of this Agreement.

 

25.           By
consenting to a Stipulated Judgment in a form substantially the same as Exhibit
B pursuant to the terms and conditions of this Agreement, OEC understands and
agrees that it is hereby waiving any and all procedural and substantive
defenses to payment of the Outstanding Payment Obligations, including, but not
limited to, statutes of limitations, laches, product quality, quantity or
fitness for a particular use, breach of warranty, any offsets or other sums of
monies allegedly owing OEC in connection with the sale of the Products, venue,
forum non conveniens, personal and/or subject matter jurisdiction, whether at
law or in equity, and regardless of applicable law. The Parties agree and
understand that OEC’s waiver of these and any and all procedural and
substantive potential defenses to the Outstanding Payment Obligations is
knowing and voluntary after consultation with counsel, and was a material
inducement to Suntech’s consent to this Agreement.

 

26.           All
notices, requests and other communications to any Party hereunder shall be sent
by certified mail (return receipt not required), as follows:

 

A.    If
to Suntech:

 

	
   

  	
  To:

  	
  Legal Department

  
	
   

  	
  Suntech America

  
	
   

  	
  188 The Embarcadero

  
	
   

  	
  8th Flr.

  
	
   

  	
  San Francisco, CA 94105

  

 

With a copy to:

 

8

 

B.    If to OEC:

 

To:                              General
Counsel

514 Via de la Valle, Suite 200

Solana Beach, CA 92075

Facsimile: 858.794.8811

email: dsprinkle@openenergycorp.com

 

With a copy to: James Mercer III

 

Sheppard, Mullin, Richter & Hampton LLP

12275 El Camino Real, Suite 200

San Diego, CA 92130

Facsimile: 858.509.3691

Email:
jmercer@sheppardmullin.com

 

[Remainder
of page intentionally left blank.]

 

9

 

IN WITNESS WHEREOF, the Parties hereto have
executed this Agreement on September 12, 2008.

 

	
  Suntech America, Inc.

  	
   

  	
  Open Energy Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  APPROVED AS TO FORM:

  	
   

  	
  APPROVED AS TO FORM:

  
	
   

  	
   

  	
   

  
	
  BAKER & McKENZIE

  	
   

  	
  SHEPPARD, MULLIN, RICHTER &

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  HAMPTON, LLP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Christopher Van Gundy

  	
   

  	
  James Mercer III

  
	
  Attorneys for Suntech America, Inc

  	
   

  	
  Attorneys for Open Energy Corporation

  
									

 

10

 

EXHIBIT A

 

PAYMENT SCHEDULE

 

	
  Payment Date

  	
   

  	
  Amount of Payment (includes accrued interest)

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  September 19, 2008

  	
   

  	
  $1,000,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  January 15, 2009

  	
   

  	
  $500,000.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  February 15, 2009

  	
   

  	
  $297,558.18

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  March 15, 2009

  	
   

  	
  $297,558.18

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  April 15, 2009

  	
   

  	
  $297,558.18

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  May 15, 2009

  	
   

  	
  $297,558.18

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  June 15, 2009

  	
   

  	
  $297,558.18

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  July 15, 2009

  	
   

  	
  $297,558.18

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total:

  	
   

  	
  $3,285,349

  	
   

  

 

11

 

EXHIBIT B

 

Stipulated Judgment

 

12Exhibit
10.26

 

***Portions
omitted pursuant to a request for confidential treatment and filed separately
with

the Securities and Exchange Commission.***

 

 

CenterPoint Energy

 

Natural Gas Service Agreement

 

With

 

Highwater Ethanol, LLC

 

 

06/26/08

 

1

 

This Natural Gas Service
Agreement (“Agreement”) dated this 26th day of June, 2008, is by and
between CenterPoint Energy Resources Corp., d.b.a. CenterPoint Energy Minnesota
Gas (“CenterPoint Energy”) 800 LaSalle Plaza, Floor 14, Minneapolis, MN 55459-0038
and Highwater Ethanol, LLC (“Highwater”), 205 Main Street, Box 96, Lamberton,
MN 56152.

 

RECITALS

 

WHEREAS, Highwater is a large industrial natural
gas user who has shown that it can reasonably acquire alternatives to using
natural gas from CenterPoint Energy’s distribution system and obtain energy
supplies from other suppliers to its facility in Section 21 Lamberton
Township, Redwood, County, MN (“Highwater Facility”).

 

WHEREAS, CenterPoint Energy acknowledges
Highwater’s competitive alternatives at the Highwater Facility and agrees to
deliver all of the Highwater Facility’s natural gas requirements pursuant to
the terms of this Agreement for discounted delivery service under the then
applicable Large Volume Dual Fuel Sales Service Tariff, the Large Volume Dual
Fuel Transportation Service Tariff, the Market Rate Service Rider Tariff, the
Daily Balancing Service Rider Tariff, the Large Commercial/Industrial Credit
Policy Rider Tariff, or any applicable superseding Tariff, as filed with the
Minnesota Public Utilities Commission, all hereinafter collectively referred to
as (“Tariff(s)” or “Applicable Tariff(s)”).

 

NOW,
THEREFORE, in
consideration of the mutual covenants and agreements contained herein, the
parties agree as follows:

 

1.     Pipeline Construction and Service
Capabilities

 

1.1.      Subject to the provisions of this
Agreement, CenterPoint Energy will construct an approximately [*] mile, steel
Pipeline (“Pipeline”) from the Northern Natural Gas Company (“Northern”) Town
Border Station for Highwater (“Highwater TBS” or “TBS”) located on the Northern
interstate pipeline where it intersects with County Highway 6, in the northwest

 

*Portion omitted pursuant
to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 

2

 

corner of Section 23,
Lamberton Township, MN, to the Highwater Facility, terminating at Highwater’s
selected location up to two thousand (2,000) feet (based on pipe installed)
south and west of the intersection of Highwater Ethanol’s eastern property
border and Highway 14 (“Delivery Point”), including , telemetry, odorization
and pressure regulation.  Construction
will be completed by the later of April 1, 2009 or within 15 days of
Northern’s completion of the Highwater TBS. 
Highwater will be responsible for owning and operating any natural gas
service piping from the Delivery Point to the Highwater Facility.  The Pipeline will deliver its full
capabilities to Highwater, and is expected to be capable of delivering at least
[*] of natural gas at [*] pounds per square inch gauge (“psig”) regulated
delivery pressure (the “Service Capabilities”), provided Northern supplies [*]
and [*] psig delivery pressure or greater to the TBS.  The initial service capability will be
limited to [*] delivered at [*] psig at the Delivery Point because the initial
capability of the Highwater TBS, will be [*] delivered at [*] psig and as
further defined in Section 3.1 below.

 

1.2.      CenterPoint Energy is under no obligation
to deliver natural gas volumes or pressures exceeding the Service Capabilities
defined in Section 1.1.  Any request
in excess of these Service Capabilities will be subject to future negotiations.

 

2.     Purchase of Delivery Service

 

2.1.      Effective
upon signing, Highwater agrees that all of its natural gas requirements at the
Highwater Facility, up to the Service Capabilities limits of Section 1,
will be delivered through CenterPoint Energy’s Pipeline. Such gas will be supplied
by Highwater at the TBS for delivery by CenterPoint Energy under applicable
Transportation Service Tariffs, or purchased from CenterPoint Energy under
applicable Sales Service Tariffs.  During
the term of this Agreement, Highwater shall pay to CenterPoint Energy natural
gas delivery charges, as defined by the Applicable Tariffs, (“Delivery
Charges”) at the following rates:

 

2.1.1.              For all natural gas volumes delivered on the Pipeline
to the Delivery Point, Highwater agrees to pay Delivery Charges per DekaTherm
(“DT”) according to Table 1 below plus Trackers, as defined in Section 2.1.3
below (which are currently approximately $.045/DT).  CenterPoint Energy shall not be responsible
for costs of

 

*Portion omitted pursuant
to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 

3

 

gas,
interstate pipeline transmission costs, taxes, franchise fees or other charges
that may be imposed by others.  Highwater
shall also pay the monthly basic charge as set forth in the then Applicable
Tariff(s).

 

[*]

 

2.1.2.              If
necessary, Delivery Charges shall be adjusted in the future so that they are
not less than the Minimum rate, nor greater than the Maximum rate, in CenterPoint
Energy’s Market Rate Service Rider Tariff (“Market Rate Tariff”), or its
superseding Tariff.  The current Minimum
rate is $.05/DT and the current Maximum rate is $.8040/DT.

 

2.1.3.              The
Minnesota Public Utilities Commission (“MPUC”), under MPUC Order, allows
specific cost recovery mechanisms in order to better match expenses and rate
recovery.  Under these mechanisms
(“Trackers”), the MPUC allows specific actual costs for utilities (e.g.,
Conservation Improvement Program expenses) to be deferred and sets an annual
value for those costs to be recovered in rates. 
The actual costs and the value recovered in rates are matched
(“Tracked”) in specific balance sheet accounts. 
Any mismatch of actual costs and rate recovery is trued-up at a later
date and the Trackers recovery rate can change from time-to-time.

 

2.2.        Beginning
upon Pipeline completion and through [*] (“First Year”), Highwater agrees to
purchase delivery of a minimum volume of [*] under Applicable Tariffs.  If by [*], Highwater has not purchased delivery
of the First Year minimum volume from CenterPoint Energy, Highwater shall pay
to CenterPoint Energy the difference between its actual delivery volume for
this period and the First Year minimum volume multiplied by the applicable
rate, less Trackers, as outlined in Section 2.1 of the Agreement.  Such payment shall not be used as a credit
for gas delivered in subsequent years.

 

Beginning
[*] and through [*] of each subsequent year (“Contract Year”), Highwater agrees
to purchase delivery of annual minimum volumes (“Minimum Volumes”) of [*] under
Applicable Tariffs during each Contract Year through the term of this
Agreement.  If by October 31 of each
Contract Year, Highwater has not purchased delivery of the Minimum Volumes from
CenterPoint Energy, Highwater shall pay to CenterPoint Energy the difference

 

*Portion omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 

4

 

between
its actual delivery volume for the Contract Year and the Minimum Volumes
multiplied by the applicable rate, less Trackers, as outlined in Section 2.1
of the Agreement.  Such payment shall not
be used as a credit for gas delivered in subsequent years.

 

3.     Firm Capacity

 

3.1.        Following
Highwater’s having satisfied its obligations under Section 5.2,
CenterPoint Energy will execute a binding Precedent Agreement with Northern and
participate in Northern’s forthcoming binding open season (“Open Season”) for
firm pipeline capacity for the purpose of executing with Northern, and
subsequently releasing to Highwater, a TFX Throughput Service Agreement and
associated Amendment (“Capacity Agreement”) with Northern for the purchase of
[*] DekaTherm/Day (DT/Day) of Northern TFX transportation capacity
(“Capacity”), with a receipt point of Welcome (Northern POI #1665), delivered
to the Highwater TBS at an hourly flow of up to [*] DT/hour, for each month of a
[*] year term beginning [*].  A copy of
the draft Precedent Agreement is attached for purposes of illustrating other
terms and conditions which may be included in the Capacity Agreement.  Highwater is responsible for securing all
pipeline capacity requirements upstream of Welcome for delivery under the
Capacity Agreement.  The pricing
components of the Capacity Agreement will be as follows:  1) [*] 
2)  In addition to the reservation
rates above, all of Northern’s other Tariffed charges shall apply including,
but not limited to the maximum commodity rate, all surcharges, Fuel use and
unaccounted for, and the Electric Compression Commodity Rate.

 

Following
execution of the Precedent Agreement, which will include an escape clause in
the event Northern’s Daily Rate would be greater than [*]/DT based on its
estimated construction costs, Northern will conduct a binding open season
(“Open Season”) for capacity.  Upon
conclusion of Northern’s Open Season, Northern will provide to CenterPoint
Energy a final estimate of the Daily Rate based on its construction costs
allocated to serving the Highwater TBS. 
CenterPoint Energy shall provide written notice to Highwater of such
reservation rate and, in the event that Northern’s estimated daily reservation
rate exceeds [*]/DT, Highwater shall have the right to provide CenterPoint
Energy with written notice, within 2 business days of CenterPoint Energy’s
notice of the estimated rate, directing CenterPoint Energy to escape

 

*Portion omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 

5

 

from
the Precedent Agreement with Northern. 
If Highwater directs CenterPoint Energy to escape from the Precedent
Agreement, then Highwater gives up its rights and obligations to accept the
release of this Capacity and either party may cancel this Agreement within 30
days by providing written notice to the other party.  The final Daily Rate shall be based upon
Northern’s actual construction costs allocated to serving the Highwater TBS
regardless of its previous Daily Rate estimate and shall be paid by Highwater
to Northern pursuant to the permanent release of the Capacity Agreement set
forth in Section 5.1.

 

3.2.        The Capacity Agreement between
CenterPoint Energy and Northern will obligate Northern to construct the
Highwater TBS and modify its upstream pipeline system such that a maximum of
[*] DT/day or [*] DT/hour can be delivered at [*] PSIG on a firm basis
beginning [*] and the purchase of TFX capacity by CenterPoint Energy will
compensate Northern for construction of the Highwater TBS and related up-stream
pipeline modifications.  No additional
contribution will be required from CenterPoint Energy or Highwater to pay for
the Highwater TBS or upstream modifications. 
The Capacity Agreement will obligate Northern to construct the Highwater
TBS by [*], or as soon thereafter as is negotiable and practicable, and the
Highwater TBS will serve Highwater on an interruptible basis through [*].  [*]  If
CenterPoint Energy is unable to execute the Capacity Agreement with Northern
for this capacity within 30 days of Highwater’s having satisfied its
obligations under Section 5.2, either party may cancel this Agreement by
providing 30 days written notice to the other party.

 

3.2.1.              The
initial term of the Capacity Agreement will be [*] through [*]. [*]

 

4.     Term of the Agreement

 

4.1.        The initial
term of this Agreement is effective upon signing and will continue in effect
until October 21, 2019.  Thereafter,
Highwater may extend the term of the Agreement for an additional five (5) years
period, providing twelve (12) months prior written notice to CenterPoint
Energy.  Thereafter, this agreement shall
automatically renew and continue in force for consecutive terms of one (1) year
each, upon the same terms and conditions, until terminated by either party by
providing written notice to the other party not less than one (1) year
prior to the beginning of any Contract Year.

 

*Portion omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 

6

 

4.2.    [*]

 

5.     Responsibilities of Highwater

 

5.1.   Highwater
agrees to obtain credit approval from Northern by [*] to be able to accept, and
further agrees to accept, the permanent release of the Capacity Agreement, at
the rates and terms negotiated between CenterPoint Energy and Northern pursuant
to Section 3, within 7 days of CenterPoint Energy’s notice and no sooner
than [*].  Northern’s credit approval
will require a cash deposit (or other form of security acceptable to Northern)
of [*].  The deposit will be payable in
installments determined solely by Northern and preceding Northern’s
construction costs.  [*]

 

5.2.   [*]

 

5.3.   At least 30
days prior to Highwater’s taking service under the Large Volume Dual Fuel Sales
Service Tariff (“Sales Service”), Highwater agrees to provide current financial
information to CenterPoint Energy. 
[*]  Furthermore, Highwater agrees
to provide financial information to CenterPoint Energy upon request, and
CenterPoint Energy may use the financial information for the purpose of
securing Highwater’s obligations under this Agreement.

 

5.4.   In the event that Highwater desires to acquire any
additional natural gas delivery capacity during the term of the Agreement,
Highwater agrees to take deliveries through CenterPoint Energy’s Pipeline (to
the extent that it is capable) under this Agreement.

 

5.5.   In the event that Highwater desires to acquire any additional natural gas
delivery capacity beyond the initial capability of the Northern TBS, described
in Section 1.1, during the term of the Agreement, Highwater agrees to
acquire all additional natural gas capacity exclusively from Northern through
CenterPoint Energy and take deliveries through CenterPoint Energy’s Pipeline
under this Agreement.

 

5.6.   Highwater agrees
to provide an analog telephone line installed at the Highwater TBS for the
purposes of CenterPoint Energy’s meter reading for the duration of this
Agreement.

 

*Portion omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 

7

 

6.     Responsibilities of CenterPoint
Energy

 

6.1.   CenterPoint
Energy shall at its expense, construct and install the Pipeline in accordance
with the specifications set forth in this Agreement.

 

6.2.   CenterPoint Energy shall
own, operate, control, use and maintain the Pipeline in accordance with the
terms of this Agreement and all requirements of applicable federal, state and
local laws and ordinances, rules and regulations, and all duly promulgated
orders and other duly authorized actions of any governmental authority having
jurisdiction over the Pipeline or the activities of CenterPoint Energy
associated therewith.

 

6.3.   CenterPoint Energy shall
provide natural gas services, in accordance with the terms of this Agreement
and under its Applicable Tariffs to Highwater, for the term of this Agreement.

 

6.4.   Upon Highwater’s request,
CenterPoint Energy shall participate in the execution of an End-User Allocation
agreement between CenterPoint Energy, Highwater and Northern.

 

7.     Applicable Law and Regulation

 

7.1.     This Agreement will
be construed in accordance with the laws of the State of Minnesota.  However, notwithstanding any of the terms or
conditions of the Agreement, the applicable Tariff(s) shall govern.  Further, any portion of this Agreement shall
not continue in effect if such continuance would violate any applicable
statute, regulation or other jurisdictional authority; the remainder of this
Agreement shall continue in effect unchanged. 
In addition, CenterPoint Energy may, at its discretion, terminate this
Agreement by providing six (6) month written notice to Highwater under any
of the following conditions:  1) If
current regulatory treatment is modified to limit recovery of revenue
deficiencies attributable to flexible tariffs; or 2) If subsequent regulatory
action requires CenterPoint Energy to collect, or imputes for ratemaking
purposes, a rate higher than provided under this Agreement.  Further, Highwater may, at its discretion,
terminate this Agreement by providing six (6) month written notice to
CenterPoint Energy if subsequent regulatory action requires CenterPoint Energy
to collect a rate higher than provided under this Agreement.  The terms and conditions of this Agreement
will remain in effect during the six (6) month notice period.

 

8

 

8.     Pipeline Purchase Rights of Highwater

 

8.1.          In the event that the Agreement
is terminated under Section 4.2, Highwater may purchase the Pipeline.  The Pipeline purchase price shall be
CenterPoint Energy’s [*] and is payable in cash.  Minnesota Regulatory Authorities set
CenterPoint Energy’s depreciation rate, which is [*].  Highwater and CenterPoint Energy agree to
negotiate in good faith a mutually agreeable Purchase Agreement for the
purchase of the Pipeline at the price set forth in this Section.  CenterPoint Energy’s sale of the Pipeline is
subject to any applicable regulatory approvals.

 

8.2.          Once purchased by Highwater, the
Pipeline may be used only for Highwater’s natural gas consumption, and may not
be used to provide natural gas delivery service to any other entity which is
legally distinct from Highwater.

 

8.3.          If, following the acquisition of
the Pipeline by Highwater under this Section, Highwater receives a bona fide
offer (the “Offer”) from a third party to purchase the Pipeline and Highwater
desires to sell the Pipeline to such third party, Highwater shall provide
written notice (the “Notice”) of the terms of the Offer to CenterPoint
Energy.  CenterPoint Energy shall have
the right, exercisable by providing written notice to Highwater within 15 days
following delivery by Highwater of the Notice, to acquire the Pipeline on the
same terms as set forth in the Offer.  
If CenterPoint Energy elects not to exercise its right to acquire the
Pipeline, or does not deliver to Highwater written notice of its intent to
acquire the Pipeline within the period specified in this Section, Highwater may
complete the sale of the Pipeline to a third party according to terms
substantially similar to those set forth in the Offer.

 

9.     Events of Default by Highwater

 

9.1.      The occurrence of any of the following shall constitute an “Event of
Default” by Highwater:

 

9.1.1.              Any
representation or warranty furnished by Highwater in this Agreement is false or
misleading in any material respect when made; or

 

9.1.2.              Any payment
required is not paid when due;

 

9.1.3.              Highwater
fails to perform any of its required duties or obligations contemplated by this
Agreement and no specific remedy is articulated; or

 

*Portion omitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.

 

9

 

9.1.4.              An order for
relief shall be entered in any Federal bankruptcy proceeding in which Highwater
is the debtor; bankruptcy, receivership, insolvency, reorganization, relief,
dissolution, liquidation or similar proceedings shall be instituted by or
against Highwater or all or any part of its property under the Federal
Bankruptcy Code or any other law of the United States or any state of competent
jurisdiction, or Highwater makes an assignment for the benefit of creditors.

 

10.  Events of Default by CenterPoint
Energy

 

10.1.    The
following events or conditions shall constitute an “Event of Default” by
CenterPoint Energy:

 

10.1.1.            Any
representation or warranty furnished by CenterPoint Energy in this Agreement is
false or misleading in any material respect when made; or

 

10.1.2.            CenterPoint
Energy fails to perform any of its required duties or obligations contemplated
by this Agreement and no specific remedy is articulated; or

 

10.1.3.            An order for
relief shall be entered in any Federal bankruptcy proceeding in which
CenterPoint Energy is the debtor; bankruptcy, receivership, insolvency,
reorganization, relief, dissolution, liquidation or similar proceedings shall
be instituted by or against CenterPoint Energy or all or any part of its
property under the Federal Bankruptcy Code or any other law of the United
States or any state of competent jurisdiction, or CenterPoint Energy makes an
assignment for the benefit of creditors.

 

11.  Remedies of CenterPoint Energy

 

11.1.    In case of an Event of Default by Highwater not cured after 30 days’
prior written notice, CenterPoint Energy shall have the right to:

 

11.1.1.            Suspend
operation until Highwater shall cure such default;

 

11.1.2.            Exercise all
remedies available at law or at equity or other appropriate proceedings
including bringing an action or actions from time to time for recovery of
amounts due and unpaid by Highwater, and/or for damages which shall include all
costs and expenses reasonably incurred in the exercise of any remedy (including
reasonable 

 

10

 

attorneys’
fees), and/or specific performance; and

 

11.1.3.            Terminate
this Agreement by delivering to Highwater a written notice of termination.  No waiver of any default shall be construed
as a waiver of any subsequent default and the failure to exercise any right or
remedy hereunder shall not waive the right to exercise such right or remedy
thereafter.

 

12.  Remedies of Highwater

 

12.1.   In case of an Event of Default by CenterPoint Energy,
which has not been cured after 30 days written notice, Highwater shall have the
right to:

 

12.1.1.            Terminate
this Agreement by delivering to CenterPoint Energy a written notice of
termination.  No waiver of any default
shall be construed as a waiver of any subsequent default and the failure to
exercise any right or remedy hereunder shall not waive the right to exercise
such right or remedy thereafter.

 

12.1.2.            Exercise all
remedies available at law or at equity or other appropriate proceedings
including bringing an action or actions from time to time for recovery of
amounts due and unpaid by CenterPoint Energy, and/or for damages which shall
include all costs and expenses reasonably incurred in the exercise of any
remedy (including reasonable attorneys’ fees), and/or specific performance.

 

13.  Force Majeure

 

13.1.    If either party shall be unable to carry out any of its obligations under
this Agreement due to circumstances beyond its reasonable control, including
acts of God, governmental or judicial authority, inability to acquire private
third party easements, insurrections, riots, labor disputes, labor or material
shortages, fires, explosions, floods, third party negligence, or other events
beyond its reasonable control, this Agreement shall remain in effect but the
affected party’s obligations shall be suspended until the uncontrollable event
terminates.

 

14.  Waiver of Liability

 

14.1.   Highwater will indemnify, defend and hold CenterPoint Energy harmless
from all claims for damages, including any special, incidental, or
consequential damages, resulting from Highwater’ use of natural gas service or
any interruption of natural gas service, except as

 

11

 

provided in Section 4.2.

 

15.  Notices

 

15.1.   Except as otherwise specifically provided for in this Agreement, all
notices or other communications required or permitted hereunder will be in
writing:

 

	
  If to CenterPoint Energy:

  	
   

  	
  If to Highwater:

  
	
   

  	
   

  	
   

  
	
  Director,
  Marketing & Sales

  	
   

  	
  General Manager

  
	
  CenterPoint Energy

  	
   

  	
  205 Main Street

  
	
  P.O. Box 59038

  	
   

  	
  Box 96

  
	
  Minneapolis, MN 55459 –
  0038

  	
   

  	
  Lamberton, MN 56152

  

 

16.  Assignment and Succession

 

16.1.   Either party may
transfer or assign any part of its rights and obligations herein to any party,
provided that prior written approval of the other party (which shall not be
unreasonably withheld) is obtained and that any assignee or transferee agrees
to honor the terms of this Agreement. 
CenterPoint Energy may also assign or pledge the accounts receivable
from Highwater under this Agreement to its lender(s) and such lender(s) shall
not become obligated hereunder as a result of such assignment or pledge.  The parties agree that this contract will
bind the successor of either party.

 

17.  Representations and Warranties

 

17.1.    Each party warrants and represents to the other that:

 

17.1.1.            It has all
requisite power and authority to execute and deliver this Agreement and perform
its obligations hereunder;

 

17.1.2.            Its
execution, delivery, and performance of this Agreement have been duly
authorized by, or are in accordance with, its organizational instruments; this
Agreement has been duly executed and delivered for the respective party by the
signatories so authorized; and this Agreement constitutes its legal, valid and binding
obligation;

 

12

 

17.1.3.            Its
execution, delivery, and performance of this Agreement will not result in a
breach or violation of, or constitute a default under, any agreement, lease or
instrument to which it is a party or by which it or its properties may be bound
or affected; and

 

17.1.4.            It has not
received any notice, nor to the best of its knowledge is there pending or
threatened notice, of any violation of any applicable laws, ordinances,
regulations, rules, decrees, awards, permits or orders which may have a
material effect on its ability to perform hereunder.

 

18.  Confidentiality

 

18.1.   Except as required
to secure Highwater’s obligations under this Agreement, or required by law or
regulatory requirement, Highwater, its agents or assigns, and CenterPoint
Energy shall keep the terms of this Agreement confidential and shall not
disclose them to anyone, including other affiliated companies or entities,
without the written consent of the other party. 
To the extent disclosure is required to secure Highwater’s obligations
under this Agreement, or required by law or regulatory requirement, Highwater
and CenterPoint Energy agree to limit disclosure to the extent permissible and
to attempt to maintain the confidentiality of the Agreement as to other
parties.

 

19.  Entire Agreement

 

19.1.   This Agreement, including the Applicable Tariffs shall constitute the
entire Agreement between the parties and no amendment shall be effective except
by a writing signed by both parties. 
Copies of the currently Applicable Tariffs are attached hereto.

 

IN WITNESS WHEREOF, the
undersigned have executed this Agreement as of the 26th day of June 2008.

 

	
  CenterPoint
  Energy Resources Corp., d.b.a.

  	
   

  	
  Highwater
  Ethanol, LLC

  
	
  CenterPoint Energy Minnesota
  Gas

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/
  David Baker

  	
   

  	
  /s/
  Brian Kletscher

  
	
  David Baker

  	
   

  	
  Brian Kletscher

  
	
  Regional Vice President

  	
   

  	
  President

  
	
  Gas Operations,
  Minnesota

  	
   

  	
   

  

 

13

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