EXIT
FINANCING

    TERM
SHEET

    FOR

    


    OTTER
TAIL AG ENTERPRISES, LLC,

    AS DEBTOR
IN POSSESSION

    IN
BANKRUPTCY CASE NO. 09-61250

    UNITED
STATES BANKRUPTCY COURT, DISTRICT OF MINNESOTA

    


    OTTER
TAIL AG ENTERPRISES, LLC, a Minnesota limited liability company (the “Debtor”), hereby provides
MMCDC New Markets Fund II, LLC (“NMF”) with the following
proposal for the exit financing pursuant to the terms of a plan of
reorganization which is acceptable to Debtor.

    


    Reference
is made herein to the following NMF Notes and Loan Agreements (collectively, the
“NMF Loan
Agreements”):

    


    
      	
               
      

            	
              a.

            	
              Senior
      Loan Note dated March 30, 2007;

            


    

    


    
      	
               
      

            	
              b.

            	
              Subordinate
      Loan Note dated March 30, 2007;

            


    

    


    
      	
               
      

            	
              c.

            	
              Construction
      and Term Loan Agreement dated March 30,
2007.

            


    

    


    Unless
otherwise expressly defined herein, capitalized terms used herein shall have the
same meaning ascribed to them in the NMF Loan Agreements.  Terms and
conditions of the exit financing proposal are as follows:

    


    
      	
              Debtor:

            	
              Otter
      Tail Ag Enterprises, LLC, a Minnesota limited liability company, as Debtor
      in Possession in its Chapter 11 case in the United States Bankruptcy
      Court, District of Minnesota (the “Debtor’s Chapter 11
      Case”).

               

            
	
              Lender:

            	
              MMCDC
      New Markets Fund II, LLC, a Delaware limited liability
      company.

               

            
	
              Credit
      Facilities:

            	
              The
      existing NMF Loan Agreements will be reaffirmed in all respects except as
      otherwise set forth below in regards to payment of default
      interest.

               

            
	
              Closing
      Date:

            	
              A
      date not later than 10 Business Days following the entry of a confirmation
      order (the “Confirmation
      Order”) confirming the Debtor’s plan of reorganization (the “Plan”).

               

            
	
              Maturity
      Dates:

            	
              The
      maturity dates under the existing NMF Loan Agreements remain
      unchanged.

            


    


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    

    


    
      	
              Interest:

            	
              The
      accrual rates of interest under the existing NMF Loan Agreements remain
      unchanged.

               

            
	
              Amortization:

            	
              The
      amortizations under the existing NMF Loan Agreements remain
      unchanged.

               

            
	
              Security:

            	
              The
      mortgages and financing statements previously filed of record to secure
      the NMF Loan Agreements remain in effect and retain their prepetition
      status in terms of validity and priority as encumbrances against Debtor’s
      property. Nothing in the Plan shall be deemed to supersede or terminate
      the Amended and Restated Intercreditor Agreement amongst the Senior and
      subordinate lenders dated June 4, 2008.

               

            
	
              Accrued
      Default Interest:

               

               

               

              Debt
      Service Reserve Account

            	
              All
      default interest provided by the NMF Loan Agreements will be deferred
      until the present maturity dates in the NMF Loan
      Agreements.  Provided that the Debtor does not default in the
      performance of its obligations under the Loan Documents, NMF will waive
      such interest on the maturity dates in the NMF Agreements.

               

              The
      Debtor will establish at Confirmation and thereafter maintain a segregated
      deposit account, identified as the NMF Debt Reserve Account, which shall
      at all times have a balance equal to at least six months of interest due
      on the NMF Loans. The Debtor shall at least monthly provide NMF with
      evidence of compliance.  The deferred default interest shall
      become immediately due and payable upon failure to maintain the required
      minimum balance.  The Debtor and lending institution at which
      the deposit account is located will execute a Deposit Account Control
      Agreement in favor of NMF.

               

            
	
              Plan
      of Reorganization:

            	
              The
      Debtor shall file the Plan, which must be acceptable to AgStar and NMF
      (collectively the “Prepetition Lenders”),
      on or before February 28, 2010 (the “Plan
Date”).

               

              At
      a minimum, the Plan shall not be deemed acceptable to the Prepetition
      Lenders unless:

                

              ·      The
      Plan provides for and treats the Prepetition Lenders as  fully
      secured creditors;

              ·      The
      Plan provides for the financing set forth in this Term Sheet;

              ·      The
      Confirmation Order and the Plan provide that the assets of Debtor will be
      free from any and all subordinate mortgages, liens, and encumbrances,
      including any lessor’s interests, except as may be accepted by the
      Prepetition Lenders.

            


    

     

    
      
         


      

      
        
        

        
          

        

      

      
         


      

    

    


    
      
        
          	
                  Conditions
      Precedent To Closing:

                   

                   

                   

                   

                   

                   

                   

                   

                   

                   

                   

                   

                	
                  Entry
      of the Confirmation Order confirming the Plan which is satisfactory to the
      Prepetition Lenders on or before May 1, 2010;

                   

                  Payment
      to NMF of all accrued regular interest in the estimated amount of $495,073
      (amount as of January 4, 2010);

                   

                  NMF’s
      receipt of subscription letters, acceptable to NMF (collectively, the
      “Subscription
      Letters”), (a) in an amount not less than $6,000,000.00 on or
      before January 15, 2010; and (b) in an aggregate amount not less than
      $12,000,000.00 on or before the Plan Date

                   
      

                  Confirmation
      of equity contributions pursuant to the Subscription Letters to the
      reorganized Debtor of at least $12,000,000;

                   
      

                  Delivery
      of a risk management plan reasonably acceptable to NMF including a
      designated risk management officer;

                   
      

                  Compliance
      with all conditions precedent required by AgStar including payment of all
      interest and default charges due;

                   
      

                  If
      not expressly provided in the Confirmation Order, execution of an
      agreement with U.S. Bank, as Indenture Trustee (the “Trustee”), and Otter
      Tail County (the “County”) regarding the
      resolution of the outstanding bond debt and the release of all liens,
      security interests or lessor interests in any of the assets of the Debtor;
      and

                   
      

                  Compliance
      with all conditions precedent set forth in the Loan
    Documents.

                
	 	 
	      
                  Sale
      of Ethanol Facility:

                	      
                  If
      no Plan acceptable to the Prepetition Lenders is filed by the Plan Date,
      the Debtor shall file, within ten (10) Business Days thereafter, a motion
      to sell the Debtor’s assets, including the ethanol production facility,
      free and clear of interests, liens, encumbrances and claims pursuant to
      Bankruptcy Code § 363(b) and (f).  Such motion must be
      accompanied by sales procedures acceptable to NMF, including that any such
      sale shall close not later than May 1, 2010.

                    

                  
                    Within
      ten (10) Business Days of filing such motion, the Debtor shall engage a
      financial advisor (the “Financial Advisor”) reasonably acceptable to the
      Prepetition Lenders to manage the sale of the ethanol
      facility.

                  

                


        

      

    


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    

    


    
      	
              Expenses:

            	
              The
      Debtor shall reimburse NMF for all reasonable costs and expenses,
      including legal fees, consultant fees, appraisal fees, financial advisor
      fees, and other similar fees, costs and expenses in connection with the
      negotiation, documentation, execution, syndication and delivery of the
      Loans and the Debtor’s Chapter 11
Case.

            


    


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    

    


    SIGNATURE
PAGE TO

    EXIT
FINANCING

    TERM
SHEET

    FOR

    OTTER
TAIL AG ENTERPRISES, LLC,

    AS DEBTOR
IN POSSESSION

    IN
BANKRUPTCY CASE NO. 09-61250

    UNITED
STATES BANKRUPTCY COURT, DISTRICT OF MINNESOTA

    


    This Term
Sheet is accepted this 1st day

    of
February 2010 by:

    


    
      
        	
                DEBTOR:

              
	 
      
	
                OTTER
      TAIL AG ENTERPRISES, LLC

              
	
                a
      Minnesota limited liability company

              
	 
      
	
                By 

              	
                /s/ Anthony J Hicks

              
	 
      	
                Name:
      Anthony J Hicks

              
	 
      	
                Title:  Chief
      Executive Officer

              


      

    

    


    
      
        	
                This
      Term Sheet is accepted this 3rd day

              
	
                of
      February 2010 by:

              
	 
      
	
                MMCDC
      NEW MARKETS FUND II, LLC

              
	 
      
	   
      	
                /s/ Arlen
Kangas

              


      

    

    
      
        	
                By: 

              	
                Arlen Kangas

              
	
                Its:

              	
                President