Document:

Exhibit
10.17

3033 Campus Drive North, Suite 175,
Minneapolis, Minnesota  55441

Telephone: 763-551-1001

Facsimile: 763-551-2499

April 26, 2006

Mr. Brian Kletscher

Chairman Highwater Ethanol

30427 County Highway 10

Vesta, MN  56292

Subject:  Environmental Permitting Proposal for the Highwater Ethanol Plant at
Lamberton, MN

Dear Mr. Kletscher:

Thank you for the
opportunity to present the attached proposal for environmental review and
permitting services for the Highwater Ethanol Project near Lamberton, Minnesota.  Earth Tech staff is sensitive to the concerns
of energy producers and agribusiness in Minnesota through our environmental
work with dairy, swine, and poultry operations and commodity handling and
processing facilities.  Most importantly,
our staff has extensive experience preparing environmental review and
permitting documentation for ethanol facilities.

Earth Tech has
extensive experience with agency staff and rules to facilitate effective
permitting and priority service from state regulators.  The project team’s understanding of the
Minnesota regulatory system will provide Highwater Ethanol with a clearer basis
for decision-making and better project results. 
We bring:

·                                          Extensive
Minnesota, Midwestern, and agribusiness and power experience.

·                                          Staff
with up to 30 years of experience in permitting and environmental review with
the Minnesota Pollution Control Agency (MPCA), Environmental Quality Board
(EQB), and federal and local regulatory agencies, with many projects
specifically relating to ethanol and power projects.

·                                          Earth
Tech understands what to expect from regulators.  Earth Tech staff received the highest score
of all competing environmental consultants in a recent competency test on air
permitting regulations prepared by the MPCA.

This proposal
provides an outline of work tasks, approximate timelines, and estimates of the
level of effort required for each task.

In addition,
please find enclosed two signed copies of our Consulting Agreement and Notice
to Proceed.  Please sign and return one
copy to my attention and keep the second for your records.

 

[Earth Tech Logo]

In
closing, we would again like to express our appreciation for the opportunity to
present this proposal for environmental permitting services in support of your
ethanol project.  If you have any
questions, or require further clarification, please feel free to contact me at
(763) 551-2461 or Mike.Valentine@earthtech.com at your convenience.

Very
truly yours,

Earth
Tech, Inc.

	
  /s/ J. Michael Valentine

  	
   

  
	
   

  
	
  J. Michael
  Valentine

  
	
  Vice President

  

 

Enclosure

 2

Proposal to Permit Proposed Highwater Ethanol
Facility, Lamberton, MN

1.0          PROJECT
UNDERSTANDING

Highwater Ethanol
(Highwater) is proposing to construct a 75 million gallon per year (MGY) dry
mill ethanol plat at a site approximately one mile west of Lamberton, Minnesota
(Figure 1).

The proposed Scope of
Work presented below will allow Highwater to meet environmental review and
permitting requirements related to site development.  We have included the preparation of an
Environmental Assessment Worksheet (EAW), air permitting, and wastewater and
stormwater permitting in the current Scope of Work.  We have also attached a list of other typical
permits, plans, and approvals associated with the development of this type of facility
(Attachment 1).

In addition to the
proposed site development, environmental review documentation and permitting
will need to address changes in infrastructure that will be needed to
accommodate the proposed Facility.  We
assume that a rail spur and a gas pipeline interconnect will be required for
the proposed Facility.  Since we do not
currently know the specific location of the interconnection, we have included
an estimated one mile gas pipeline allowance to address this issue in our cost
proposal.  We understand that water
appropriation and well permitting will be completed by others.  This Scope of Work does not currently include
evaluation of any transmission interconnects.

2.0          PROPOSED
SCOPE OF WORK

Task
1 – Project Initiation Meeting/Site Review

Earth Tech will hold a
project initiation meeting with the Highwater Project Team (Project Team) to
review the scope of services and budget, agree upon overall project boundary
limits, coordinate roles and responsibilities, obtain project information,
establish project schedule and related data needs, and conduct a site review.

Anticipated
Timeframe:  Immediately
upon project initiation.

Task
2 – Environmental Assessment Worksheet

Task
2.1 Background Data Collection and Review

We have assumed that
suitable base mapping, including site topographic mapping and aerial
photography, are readily available from Highwater or other sources.  The following Geographic Information System
(GIS) mapping and background information will be collected and reviewed in
order to utilize the most current information in the environmental review and
permitting processes.

 1
 

·                  Mapping and data pertaining to
natural resources, and habitat and similar information including the Minnesota
Department of Natural Resources (DNR) Natural Heritage Database information
related to natural communities, sensitive species, and public lands

·                  National Wetland Inventory (NWI)
mapping

·                  Natural Resource Conservation Service
(NRCS) soil data and mapping

·                  Floodplain mapping

·                  Available land use mapping

·                  County data and mapping

·                  Minnesota Geologic Survey data and
mapping.

·                  County Well Index information

·                  Other pertinent studies and mapping
for the area.

·                  Area meteorological data for the air
permit

·                  Hydrologic and water quality data for
downstream waters

·                  Other
pertinent available data

Earth Tech will also
obtain information o the potential location of existing storage tanks and other
potentially contaminated sites at or in the vicinity of the site from the
MPCA.  The DNR online data does not
indicate that rare species are present at the proposed site.  As a result, we have assumed the consultation
with the DNR Natural Heritage Program and the USFWS will provide the necessary
information required to address natural resource, and rare, threatened and endangered
species issues.  As a result, we have not
included field work in our Scope of Work. 
We have assumed that consultation with State Historic Preservation
Office (SHPO) staff will provide the necessary information required to address
cultural resources.  If the SHPO
recommends that a cultural resource survey be conducted we will work with
Highwater to amend the Scope of Work and cost estimate to complete the required
survey using a subcontractor.  We will
use NWI information to address wetland issues. 
Since no NWI- mapped wetlands are shown or the proposed site, we have
assumed that no wetland delineations will be necessary for the proposed
expansion.

We have assumed that the
information from Minnesota Geologic Survey (MGS) publications and the County
Well Index (CWI) will provide the necessary information to address geologic and
hydrogeologic resources.  To the degree
possible within project schedule constraints, we will work with the party
responsible for the water appropriation permit application and well
installation to minimize the duplication of effort.

Anticipated
Timeframe: Approximately one month after project
initiation.

Task
2.1 EAW Preparation

An EAW is a document
prepared in worksheet format that is designed to assess the environmental
effects associated with a proposed project and determine if an EIS is
warranted.  Based on the information
provided, the following mandatory EAW category applies to the proposed
Highwater project:

 2
 

·                  Minn.
R. Ch. 4410.4300 Subp. 5B – The
construction or expansion of a facility for the production of alcohol fuels
that would produce five million or more gallons per year of alcohol.

·                  The
2004 Legislative Session modified the threshold for a mandatory EIS from 50 MGY
to 125 MGY for ethanol plants located outside of the seven County Metropolitan
Area.  Thus the project does not fall
within the mandatory EIS category.

According to the rules,
the MPCA will be the Responsible Governmental Unit (RGU) charged with the EAW
process.  Typically, the project proposer
(Highwater and their consultant) submits responses to the 31 EAW questions to
the MPCA.  The MPCA then reviews,
verifies, assesses the accuracy and completeness of the responses provided by
the project proposer, requests any additional information, and distributes the
draft EAW for a 30-day public review and comment period.  An EAW contains information pertaining to the
following major categories:

·                  Project proposer and location

·                  Procedural details including hot to
submit comments on the EAW

·                  Project description including methods
of construction, construction schedule, project characteristics and impacts,
project site description, land use, and physical features of the surrounding
area

·                  Resource projection measures that
have been incorporated into the project design

·                  Major issues sections identifying
potential environmental impacts and issues that may require further
investigation

·                  Known governmental permits,
approvals, reviews, or financing required and the status of any applications

·                  A
brief explanation of the need for the project and identification of those who
will benefit from the project

We have assumed that
Highwater and/or their Engineer will provide facility process, design, and
layout; transportation requirements; construction schedule; staffing levels;
and other information needed to complete the EAW.  We anticipate that agency coordination, a
site reconnaissance, and existing data will provide the information required to
address threatened, endangered, and special concern species; cultural
resources; wetlands; hydrology; and hydrogeology.  We have also assumed that MPCA and all public
notice costs for processing the EAW will be paid directly by Highwater.

We have included the
submittal of electronic preliminary review copies of the draft EAW to the
Project Team for review and comment. After incorporating Project Team comments,
we will provide three hard copies and an electronic copy of the draft EAW to
the MPCA.  Since it is more conducive to
project schedule to provide the MPCA with all required copies of any color
figures, we have included up to 40 copies of the estimated 5 color figures for
EAW distribution.  We have assumed that
the MPCA will print black and white figures and text pages.

 3
 

Anticipated
Timeline: 
Approximately 2 to 4 months after receipt of project information from
Highwater to prepare proposer EAW responses for submittal to the MPCA and
approximately an additional 3 to 6 months for MPCA EAW preparation, Notice of
Availability, and Notice of Decision.

Task
3 – Air Permitting

For purposes of this
proposal, Earth Tech is assuming that the Highwater Ethanol facility will
include gasification equipment.  Based on
other facilities of similar size and throughput, Highwater Ethanol is assumed
to be a minor source of air pollutants with respect to Federal New Source
Review/Prevention of Significant Deterioration (NSR/PSD), as well as the Part
70 permitting program.  Therefore, this
proposal assumes that this project will not require a full PSD analysis (for
particulate matter, nitrogen oxides, and volatile organic compounds), which consists
of a Best Available Control Technology (BACT) determination, NSR/PSD air
dispersion modeling, an additional impacts analysis, or Part 70
permitting.  If it is determined that
Highwater Ethanol is a major source with respect to NSR/PSD and/or Part 70
permitting, additional analyses will be required.  Determination of applicability for these
permit requirements will depend primarily on estimation of air pollutant
emission rates.  Emission rates will be
evaluated by Earth Tech, in conjunction with the Project Team, when sufficient
process information is available to make acceptably accurate calculations.

The facility will need to
procure a permit that incorporates emissions limits determined by the permit
application process.  Earth Tech, with
input from the Project Team, will prepare a list of information needed to
complete the air permit application for the MPCA.  As much as possible, the information will be
based on the specific equipment that will be installed at the Highwater Ethanol
facility.  Earth Tech will use this
information to develop an emission inventory for the facility.  This will consist of a spreadsheet with
emissions calculations for approximately 70 emission units (both point sources
and fugitive sources).

Once the emissions
inventory has been compiled, Earth Tech will conduct a thorough review of the
Federal and State air permitting regulations to identify those that apply to
the proposed facility.  The draft permit
application will include all necessary MPCA application forms, as well as
explanatory text, to help clarify any issues of particular interest.  We have included the submittal of electronic
preliminary review copies of the draft permit application to the Project Team
for review and comment.  After
incorporating Project Team comments, we will provide three hard copies and an
electronic copy of the draft permit application to the MPCA.

The MPCA operating permit
rules require that the permit application include descriptions of the
monitoring, testing, record keeping, and reporting protocols that the facility
will follow to demonstrate compliance all applicable State and Federal
rules.  Earth Tech will propose a
compliance demonstration plan for consideration that is based on applications
and permits for other similar projects in Minnesota.  Earth Tech will incorporate Project 

 4
 

Team comments into the
final compliance demonstration plan, which will be documented on MPCA Form
CD-01 for inclusion in the permit application.

Earth Tech, in
conjunction with the Project Team, will review and comment on the draft permit
issued by the MPCA or accuracy, appropriateness, and to identify if additional
negotiations are required.  Once Earth
Tech and the Project Team has reviewed and commented on the draft permit from
the MPCA, a final permit application incorporating comments will be submitted
to MPCA.

This estimate also
includes a State level Air Emissions Risk Assessment (AERA).  This analysis is required for projects that
need an EAW.  This MPCA has developed
some tools to ease the AERA process for ethanol plants.  However, these tools are based on very
conservative assumptions, which result in erroneously high results.  In order to avoid these issues, Earth Tech,
Inc. will conduct a site-specific air dispersion modeling analysis for use in
the AERA process.  Earth Tech and the
Project Team will work together to produce model input parameters that
realistically characterize the facility and demonstrate compliance in the most
cost-effective manner.  Earth Tech will
prepare a draft modeling protocol document that will be submitted
electronically to the Project Team for review and comment.  After incorporating Project Team comments, we
will provide the draft modeling protocol to the MPCA for their approval prior
to completing the analysis.

Anticipated
Timeline: 
Approximately 2 to 3 months to prepare the air permit application.  Approximately 4 months from application
submittal for the MPCA to prepare the draft permit.  This will take place concurrently with the
EAW and wastewater permitting processes. 
The EAW process must be completed prior to the issuance of the final air
permit by the MPCA.

Task
4 – Wastewater and Storm Water Permit Applications

Permit applications will
be prepared for the process wastewater and storm water discharges from the facility.  General assumptions for this task are that a
regular wastewater permit would be required by MPCA (less than 1 MGD
discharge), that a Section 404 permit would not be needed and that this task
does not involve the design of wastewater facilities by Earth Tech.

Application forms will be
completed for the National Pollution Discharge Elimination System/State
Disposal System (NPDES/SDS) Process Water Permit including the NPDES/SDS permit
application, the permit application Appendix A, the Water Quality Transmittal
Form, and the Combined Project Application Form needed for the 401C
certification.  It is assumed that Earth
Tech will be provided basic information on the types and quantities of raw
materials to be consumed (average and maximum amounts), quantities of products
produced (average and maximum amounts), results of water quality testing
completed to date, chemical additives that are anticipated to be used,
anticipated non-contact cooling water discharges, anticipated wastewater
pretreatment system including expected discharge rate (average and maximum) and
flow chart, anticipated 

 5
 

pollutant concentrations
in wastewater discharges, anticipated sludge handling and disposal methods, and
Material Safety Data Sheets (MSDS) and product labels for chemicals to be used
in the operation.  Earth Tech will obtain
the information needed to complete the wastewater permit application forms at
the project initiation meeting and complete draft application forms.  It is also anticipated that Earth Tech will
use general wastewater data and information available in the public domain for
the ethanol industry.  Earth Tech will
then review the draft forms with Highwater personnel at a project meeting.  After receipt of comments from Highwater the
permit forms will be finalized and provided to Highwater for signatures and
submittal to MPCA and appropriate other agencies.  It is assumed Highwater will provide the
permit application fees.

Earth Tech will provide
support to Highwater during the permit review process.  Earth Tech will review the draft permit
developed by MPCA and provide recommendations to Highwater regarding permit
requirements.  It is assumed for this
project that Earth Tech will provide one written response to the draft permit
to be submitted to MPCA and will attend one public meeting during the review
process for the wastewater permit.

Earth Tech will prepare
an Industrial Storm Water Permit Application and associated Industrial Storm
Water Pollution Prevention Plan (SWPPP). 
The SWPPP will be based on the site plan and operation description
provided by Highwater.  A draft
application and Industrial SWPPP will be prepared for review and comment by
Highwater.  After receipt of comments by
Highwater, Earth Tech will finalize the application and Industrial SWPPP and
provide them to Highwater for signatures and submittal to MPCA.  It is assumed Highwater will provide the
permit application fee.

Earth Tech will also
prepare an Application for General Storm Water Permit for Construction Activity
based on the site plan and construction sequencing description provided by
Highwater.  An erosion control SWPPP will
be developed based on the anticipated needs of the site.  A draft application and Erosion Control SWPPP
will be prepared for review and comment by Highwater.  After receipt of comments by Highwater, Earth
Tech will finalize the application and Erosion Control SWPPP and provide them
to Highwater for signatures and submittal to MPCA.  It is assumed Highwater will provide the permit
application fees.  Completion of a Notice
of Termination is not included in this Scope of Work.

Anticipated
Timeline: 
Approximately two months from the receipt of project information from
Highwater to prepare permit applications. 
The MPCA may require four to six months to process, public notice, and
issue the wastewater permit.  Work on
this task will take place concurrently with the EAW and air permitting
tasks.  The EAW process must be completed
prior to issuance of permits for the project.

Task
5 – Other Permits and Modifications (if required)

A list of typical permits
and approvals for this type of project are included in Attachment 1.  We assume that the contractor will provide
all building permit applications required. 
We have assumed that no conditional use permits of zoning changes will
be required.

 6
 

Based on our experience
and knowledge of ethanol facilities, we believe no other environmental permits
related to project construction would be required.  The absence or presence of jurisdictional
wetlands/farmed wetlands and any additional requirements will be determined
based on further agency coordination and the site review.  If jurisdictional/farmed wetlands are present
at the facility wetland delineations will need to be undertaken based on the
1987 USACE Wetland Delineation Manual. 
Earth Tech will work with Highwater on an amended scope and budget to
address wetland delineations of required. 
The need for additional permits or plan revisions may be more clearly
identified based on the initial site reconnaissance, but are not included in
the current Scope of Work.  These permits
are dependent upon the presence or absence of jurisdictional wetlands,
sensitive resources, floodplain, etc.

3.0          COST
ESTIMATE

Our estimated cost
for the work identified is presented in the table below.

	
  COST ESTIMATE

  Highwater Ethanol Plant

  
	
  Task

  	
  Cost

  
	
  1 — Project Initiation
  Meet/Site Review

  	
  $5,140.00

  
	
  2 — Environmental
  Assessment Worksheet

  	
  $34,722.00

  
	
  3 — Air Permit

  	
  $27,855.50

  
	
  4 — Water/Wastewater
  Permits

  	
  $20,908.00

  
	
  5 — Other Permits and
  Approvals

  	
  AS 

  REQUIRED

  
	
  Total

  	
  $88,625.50

  

 

 7
 

FIGURES AND ATTACHMENTS

 8
 

Attachment 1

LIST
OF OTHER TYPICAL PERMITS, PLANS AND APPROVALS FOR SIMILAR FACILITIES

·                  Spill Prevention, Control, and Countermeasure
(SPCC) Plan

·                  Oil Pollution Prevention Act 90
Response Plan

·                  112(r) Risk Management Plan

·                  Above ground storage tank
registration for tanks over 110 gallons

·                  Above ground storage tank rule
requirements (Chap. 7151)

·                  Hazardous Waste Contingency Plan

·                  Minnesota Spill Response Plan

·                  Toxic Pollution Prevention Plan

·                  SARA Title III chemical notification,
planning and reporting

·                  Water Appropriation Permit may also
be required for dewatering if more than 10,000 gpd or one million gpy

·                  Small or Very Small Quantity
Hazardous Generator License

·                  Grading Permit

·                  Building Permit

·                  Tax Increment Financing, Stormwater
Utility, State Infrastructure, and other State funding may be applied to some
utility and access improvements

·                  Utility Permits

·                  Zoning Conditional Use Permits or
zoning changes

·                  Water treatment plan and
specification review

 9Exhibit
10.21

LOAN CLOSING; OPTION

AND

PURCHASE AGREEMENT

WHEREAS, Granite
Falls Bank (“Granite Falls Bank”) is willing to lend $800,000.00 to Highwater
Ethanol, LLC (“Highwater”) so that Highwater can purchase real estate from “Halter”
and “Imker” as further described on Exhibits “A” and “B” as attached hereto and
made a part hereof provided that:

A.                                   Granite
Falls Bank has a first mortgage on said real estate;

B.                                     Roland
“Ron” Fagen guarantees $400,000.00 of said loan pursuant to the Guaranty
attached hereto and made a part hereof as Exhibit “C”;

C.                                     Warren
Pankonin agrees pursuant to the terms contained herein to purchase said real
estate (in case Highwater defaults on said loan and Fagen, Inc. does not step
in and assume said loan and corresponding mortgage in full) for $402,500.00;

D.                                    Highwater
grants security in $55,000.00 cash in favor of Granite Falls Bank by placing a
hold on funds in Granite Falls Bank or, in the alternative, sufficient
Highwater Board Members (as solely determined by Granite Falls Bank) guarantee
$55,000.00 of the $800,000.00 loan as being made by Granite Falls Bank to Highwater.

WHEREAS, Granite
Falls Bank is requiring the terms of this Agreement in order to loan said
$800,000.00 to Highwater; and

WHEREAS, Roland
“Ron” Fagen is requiring the terms of this Agreement in 

order to proceed
to guarantee one-half of said loan; and

WHEREAS, Warren
Pankonin is interested in purchasing said real estate (in case a default
occurs) and therefore is willing to execute this Agreement.

NOW, THEREFORE,
the undersigned parties hereby agree and contract, intending to be legally
bound, as follows:

1.             Roland “Ron” Fagen BK W.P. J.S.
RF JVFagen, Inc. Guarantee. 
Roland “Ron” Fagen will guarantee one-half of the loan being made by
Granite Falls Bank to Highwater to purchase said real estate, provided that
said guarantee shall be capped at and limited to the principal amount of
$400,000.00 and shall be in the form as attached hereto and made a part hereof
as Exhibit “C”.

2.             Fagen Right to Purchase
Note/Mortgage.  In exchange for
providing said guarantee, Fagen, Inc. is hereby granted a first right to
purchase said note (the entire $800,000.00 loan) and the corresponding first
mortgage on said “Halter” and “Imker” real estate if Highwater defaults on said
loan as owed to Granite Falls Bank.  If
such a default occurs and if Fagen, Inc. elects to purchase said loan in its
entirety and receive an assignment of said note and mortgage on said real
estate, then any rights as held by Warren Pankonin as described herein shall
terminate and be of no further force or effect.

If there is a
default on the note and mortgage, Granite Falls Bank shall give written notice
to Fagen, Inc. and Fagen, Inc. shall have thirty (30) days after mailing of
said notice to purchase the note and mortgage by paying all amounts then owed
thereon

 2
 

and receiving an
assignment of the note, mortgage and any related documents.

3.             Conditions to Guarantee.  The guarantee from Roland “Ron” Fagen is
conditional on said loan being made by Granite Falls Bank to Highwater for the
purchase of said real estate, said real estate purchases closing with
marketable title received by Highwater (subject to the mortgage being granted
to Granite Falls Bank) and the full execution of this Agreement by all parties
hereto.

4.             Pankonin Conditional Option
Right.  If Highwater defaults on said
loan and provided that Fagen, Inc. does not purchase said loan in its entirety
and correspondingly receive an assignment of the note and the mortgage on said
real estate; then if and when Granite Falls Bank receives title to the real
estate (by voluntary conveyance or foreclosure), Granite Falls Bank shall offer
said real estate to Warren Pankonin and Warren Pankonin shall purchase said
real estate from Granite Falls Bank (once Granite Falls Bank receives title to
said property) by paying Granite Falls Bank $402,500.  If a sale by Granite Falls Bank to Warren
Pankonin occurs pursuant to the terms hereof, Granite Falls Bank shall pay all
delinquent taxes in full and shall pay all taxes due and payable in the year of
closing.  Granite Falls Bank shall not be
required to prepay any special assessments and Warren Pankonin agrees to pay
all real estate taxes due and payable in the year subsequent to the year of
closing and thereafter, including any remaining special assessments.

Warren Pankonin
acknowledges that if Fagen, Inc. purchases said loan and

 3
 

receives assignment of
said note and mortgage that he shall have no rights to purchase said real
estate.

If Highwater
defaults on said note and mortgage and Fagen, Inc. does not elect to purchase
said note and mortgage, then if and when Granite Falls Bank obtains marketable
title to said real estate — Granite Falls Bank shall give written notice to
Warren Pankonin and the real estate sale and purchase provided by this
paragraph 4 shall close thirty (30) days after said notice was mailed.

5.             Modification.  This Agreement can only be modified by a
subsequent written agreement executed by all parties hereto.

6.             Binding.  This Agreement shall bind the undersigned,
their heirs, successors and assigns.

7.             Agreement to
Execute Documents and Perform Other Acts. 
All parties agree to execute and deliver all documents and perform all
other acts that may be reasonably necessary to fulfill the provisions of this
Agreement.

8.             Governing Law.  This Agreement shall be construed in
accordance with and governed by the laws of the State of Minnesota.  Jurisdiction and venue of any such claims or
disputes shall be in the state courts of Yellow Medicine County, Minnesota.

9.             Notices Under This Agreement.  If any notice, request, demand
or other communication is required or otherwise given under this
Agreement (hereinafter referred to as “Notices”), such Notices shall be deemed
to have been given when personally

 4
 

served on the
party to whom notice is required to be given, or, if mailed by first class
mail, registered or certified postage prepaid and properly addressed with the
address of the party, such Notice shall be deemed given the day after such
mailing.

10.           Multiple Identical
Counterparts and Facsimile Signatures. 
This Agreement may be executed in multiple identical counterparts, which
shall be construed as one and the same Agreement. Furthermore, facsimile
or email signatures on this Agreement are deemed to be originals and legally
binding.

Dated
this    13    day of    March
              ,
2007.

	
  HIGHWATER ETHANOL, LLC

  	
   

  	
  FAGEN, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Brian
  Kletscher

  	
   

  	
  By:

  	
  /s/ Ron Fagen

  	
   

  
	
   

  	
   

  
	
   

  	
  Its:

  	
  President

  	
   

  	
   

  	
  Its:

  	
  CEO and
  President

  	
   

  
										

 

 

	
  By:

  	
  /s/ John
  Schueller

  	
   

  	
   

  	
  /s/ Ron Fagen

  	
   

  
	
   

  	
   

  	
  Roland “Ron”
  Fagen

  
	
   

  	
  Its:

  	
  Vice-President

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  GRANITE FALLS BANK

  
										

 

	
  

  	
  /s/ Warren
  Pankonin

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Warren Pankonin

  	
   

  	
  By:

  	
  /s/ John C. Virnig

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
  President

  	
   

  
										

 

 5

Exhibit A

LEGAL DESCRIPTION

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.

Exhibit B

LEGAL DESCRIPTION

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.

Exhibit C

GUARANTY

Granite
Falls, MN

(City)          (State)

March
13 ,2007

For good and Valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and to induce Granite
Falls Bank (herein, with its participants, successors and assigns, called “Lender”),
at its option, at any time or from time to time to make loans or extend other
accommodations to or for the account of Highwater Ethanol, LLC (herein called “Borrower”)
or to engage in any other transactions with Borrower, the Undersigned hereby
absolutely and unconditionally guarantees to Lender the full and prompt payment
when due, whether at maturity or earlier by reason of acceleration or
otherwise, of the debts, liabilities and obligations described as follows:

A.      If this [
] is checked, the Undersigned guarantees to Lender the payment and performance
of the debt, liability or obligation of Borrower to Lender evidenced by or
arising out of the following:   and any extensions, renewals or replacements
thereof (herein after referred to as the “Indebtedness”).

B.   The
undersigned guarantees to Lender the payment and performance of each and every                               

(If left blank, unlimited as to type of loan) debt, liability and obligation of
every type and description which Borrower may now or at any time hereafter owe
to Lender (whether such debt, liability or obligation now exists or is hereafter
created or incurred, and whether it is or may be direct or indirect, due or to
become due, absolute or contingent, primary or second­ary, liquidated or
unliguidated, or joint, several, or joint and several; all such debts,
liabilities, and obligations being hereinafter collectively referred to as the “Indebtedness”).

The Undersigned further acknowledges and
agrees with Lender that:

1.  No act or thing need occur to establish the liability of the
Undersigned hereunder, and no act or thing, except full payment and discharge
of all indebtedness, shall in any way exonerate the Undersigned or modify,
reduce, limit or release the liability of the Undersigned hereunder.

2.  This is an absolute,
unconditional and continuing guaranty of payment of the Indebtedness and shall
continue to be in force and be binding upon the Undersigned, whether or not all
Indebtedness is paid in full, until this guaranty is revoked by written notice
actually received by the Lender, and such revocation shall not be effective as
to Indebtedness existing or committed for at the time of actual receipt of such
notice by the Lender, or as
to any renewals, extensions and
refinancings thereof. If there be more than one Undersigned, such revocation shall be effective only as to the one so revoking. The death or incompetence
of the Undersigned shall not revoke this guaranty, except upon actual receipt
of written notice thereof by Lender and then only as to the decedent or the
Incompetent and only prospectively as to future transactions, as herein set
forth.

3.  If the Undersigned shall be
dissolved, shall die, or shall be or become insolvent (however defined) or
revoke this guaranty, then the Lender shall have the right to declare
immediately due and payable, and the Undersigned will forthwith pay to the
Lender, the full amount of all Indebtedness, whether due and payable or
unmatured. If the Undersigned voluntarily commences or there is commenced
involuntarily against the Undersigned a case  under the United States Bankruptcy Code, the
full amount of all Indebtedness, whether due and payable or unrnatured, shall
be immediately due and payable without demand or notice thereof.

4.  The liability of the
Undersigned hereunder shall be limited to a principal amount of $400,000.00 (if
unlimited or if no amount is stated, the Undersigned shall be liable for all
Indebtedness, without any limitation as to amount), plus accrued interest
thereon and all attorneys’ fees, collection costs and enforcement expenses
referable thereto. Indebtedness may be created and continued in any amount,
whether or not in excess of such principal amount, without affecting or
impairing the liability of the Undersigned hereunder. The Lender may apply any
sums received by or available to Lender on account of the Indebtedness from Borrower
or any other person (except the Undersigned), from their properties, out of any
collateral security or from any other source to payment of the excess. Such
application of receipts shall not reduce, affect or impair the liability of the Undersigned hereunder. If the liability of
the Undersigned is limited to a stated amount pursuant to this paragraph 4, any
payment, made by
the Undersigned under this guaranty shall be effective to reduce or discharge
such liability only if accompanied by a written transmittal document, received
by the Lender advising the Lender that such payment is made under this guaranty
for such purpose.

5.  The Undersigned will not
exercise or enforce any right of contribution, reimbursement, recourse or
subrogation available to the Undersigned against any person liable to payment
of the Indebtedness, or as to any collateral security therefor, unless and
until all of the Indebtedness shall have been fully paid and discharged.

6.   The Undersigned will pay or
reimburse Lender for all costs and expenses (including reasonable attorneys’
fees and legal expenses) incurred by Lender in connection with the protection,
defense or enforcement of this guaranty in any litigation or bankruptcy or
insolvency proceedings.

This
guaranty includes the additional provisions on the reverse side hereof, all of
which are made a part hereof. This guaranty is [XX] unsecured;
[  ] secured by a security agreement or
mortgage dated                               
and recorded on        at the
_______________________ County Recorder’s Office as Document No.                        .

IN
WITNESS WHEREOF, this guaranty has been duly executed by the Undersigned the
day and year first above written.

	
  

  	
  Roland J. Fagen

  	
   

  
	
   

  	
   

  	
   

  
	
  

  	
  /s/ Roland J. Fagen

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