Exhibit 10.26


 


CONSTRUCTION
NOTE


 


	
  $35,000,000.00

  	
   

  	
  March 28, 2007

  



 


1.             FOR VALUE RECEIVED, OTTER TAIL AG ENTERPRlSES,
LLC, a Minnesota limited liability company (the “Borrower”),  hereby promises to
pay to the order of AGSTAR FINANCIAL
SERVICES, PCA (the “Lender”),  the
principal sum of Thirty-Five Million and No/100ths ($35,000,000.00) Dollars, or
so much thereof as may be advanced to, or for the benefit of, the Borrower and
be outstanding, with interest thereon, to be computed on each advance from the
date of its disbursement as set forth herein pursuant to that certain Master
Loan Agreement of even date herewith by and between the Lender and the Borrower
(as it may be amended, modified, supplemented, extended or restated from time
to time, the “MLA”),
and pursuant to that certain First Supplement to the Master Loan Agreement,
dated as of even date herewith, by and between the Lender and the Borrower (as
it may be amended, modified, supplemented, extended or restated from time to
time, the “First Supplement”), and
which remains unpaid, in lawful money of the United States and immediately
available funds. This Construction Note is issued pursuant to the terms and
provisions of the MLA and the First Supplement and is entitled to all of the
benefits provided for in the MLA and the First Supplement. All capitalized
terms used and not defined herein shall have the meanings assigned to them in
the MLA and the First Supplement.


 


2.             The outstanding principal balance of this Construction
Note shall bear interest at a variable rate determined by Lender to be 315
basis points above the LIBOR Rate in effect on the date of the first Advance
pursuant to this Construction Note. Notwithstanding the foregoing, the rate of
interest under this Construction Note may be adjusted by Lender pursuant to the
provisions of the MLA, the First Supplement and this Construction Note. On the
Conversion Date, part or all of the outstanding principal balance under this
Construction Note may, at Borrower’s option, be converted to a fixed rate of interest
pursuant to the terms and conditions of the MLA and the First Supplement.


 


3.             The “LIBOR Rate” (London
Interbank Offered Rate) means the rate (rounded upward to the nearest sixteenth
and adjusted for reserves required on Eurocurrency Liabilities (as hereinafter
defined) for banks subject to FRB Regulation D (as hereinafter defined) or
required by any other federal law or regulation), quoted by the British Bankers
Association (the “BBA”) at 11:00 a.m.
London time two Banking Days (as hereinafter defined) before the commencement
of the Interest Period for the offering of U.S. Dollar deposits in the London
interbank market for an Interest Period of one month, as published by Bloomberg
or another major information vendor listed on BBA’s official website. “Banking Day” shall mean a day on which
Lender is open for business, dealings in U.S. Dollar deposits are being carried
out in the London interbank market, and banks are open for business in New York
City and London, England “Eurocurrency
Liabilities” has the meaning as set forth in FRB Regulation D. “FRB Regulation D” means Regulation D as
promulgated by the Board of Governors of the Federal Reserve System, 12 C.F.R. Part 204,
as amended from time to time.


 


4.             The rate of interest due hereunder shall initially be
determined as of the date hereof and shall thereafter be adjusted, as and when,
the LIBOR Rate changes. All such adjustments to the rate of interest shall be
made and become effective as of the first day of the month following the date
of any change in the LIBOR Rate and shall remain in effect until and including
the day immediately preceding the next such adjustment (each such day
hereinafter being referred to as an “Adjustment


 

















 


Date”). All such
adjustments to said rate shall be made and become effective as of the
Adjustment Date, and said rate as adjusted shall remain in effect until and
including the day immediately preceding the next Adjustment Date. Interest
hereunder shall be computed on the basis of 
a year of three hundred sixty five (365) days, but charged for actual
days principal is outstanding.


 


5.             Advances may only be made under this Construction Note
until the Conversion Date after which no further advances may be made
hereunder. No amounts may be readvanced under this Construction Note. Any
principal repayment by the Borrower will reduce the Lender’s commitment on the
Construction Loan.


 


6.             Prior to the Conversion Date, all interest accrued under
this Construction Note shall be payable quarterly, on the first day of each
January, April, July and October (each such date, a “Quarterly Payment Date”), commencing on the first Quarterly
Payment Date following the date on which the first Advance is made hereunder,
and continuing on each Quarterly Payment Date thereafter until the Conversion
Date. On the Conversion Date, all outstanding accrued interest shall be paid in
full.


 


7.             On the Conversion Date, $6,000,000.00 of the outstanding
principal balance of this note shall be converted into the Term Revolving Note
pursuant to the MLA and Second Supplement to the MLA. The remaining outstanding
principal balance of this note shall be converted into a Term Loan pursuant to
the MLA, the First Supplement and this Construction Note.


 


8.             Subject to the provisions of Section 2.07 and 2.08
of the MLA and Section 8 and 12 of the First Supplement, the portion of
the Term Loan that has not been converted to a Fixed Rate Loan pursuant to Section 7(d) of
the First Supplement shall bear interest at a variable rate equal to the LIBOR
Rate plus 295 basis points.


 


9.             The Borrower shall have the option to convert an amount
not to exceed fifty percent (50%) of the outstanding principal balance of this
Note into a Fixed Rate Loan, as provided in Section 2.05 of the Loan
Agreement and Section 7(d) of the First Supplement, which shall bear
interest at a rate equal to 275 basis points in excess of a mutually agreeable
known fixed rate benchmark rate, which is in effect on the Conversion Date, or
such other rate of interest as agreed upon by the Lender and Borrower. Should
the Borrower elect such fixed rate option, such rate of interest shall not be
subject to any adjustments under Section 2.07 of the MLA.


 


10.           Beginning on the first (1st) day of the month
following the month in which the Conversion Date occurs, and continuing on the
first (1st) day of each succeeding month thereafter until the
seventh month after the Conversion Date, the Borrower shall make monthly
payments of accrued interest under the Term Loan. Beginning on the first (1st)
day of the seventh month following the Conversion Date (the “Amortization Date”), and continuing on the first (1st)
day of each succeeding month thereafter until the Maturity Date, the Borrower
shall make equal monthly payments of principal and accrued interest in such
amounts as would be required to fully amortize the entire outstanding principal
balance of the Term Loan, together with accrued interest thereon, over a period
of 114 months from the Amortization Date. The outstanding principal balance,
together with all accrued interest, if not paid sooner, shall be due and
payable in full on the Maturity Date. Following the Conversion Date, and in
addition to all other payments of principal and interest


 


2

















 


required under the MLA, the Borrower shall
annually remit to Lender the Excess Cash Flow Payment pursuant to Section 11
of the First Supplement.


 


11.           The outstanding principal balance hereof, together with
all accrued interest, if not paid sooner, shall be due and payable in full on
the fifth (5th) annual anniversary of the Conversion Date (the “Maturity Date”).


 


12.           All payments and prepayments shall, at the option of the
Lender, be applied first to any costs of collection, second to any late
charges, third to accrued interest and the remainder thereof to principal.


 


13.           This Construction Note may be prepaid at any time, at the
option of the Borrower, either in whole or in part, subject to the obligations
of the Borrower to compensate the Lender for any loss, cost or expense as a
result of such prepayment as set forth in Section 2.10 of the MLA. This
Construction Note is subject to mandatory prepayment, at the option of the
Lender, as provided in the MLA.


 


14.           In addition to the rights and remedies set forth in the
MLA and the First Supplement: (i) upon the occurrence and during the
continuance of an Event of Default beyond any applicable cure period, if any,
at Lender’s option in each instance, the unpaid balances under this
Construction Note shall bear interest from the date of the Event of Default or
such later date as Lender shall elect at 2% per annum in excess of the rate(s) of
interest that would otherwise be in effect under the terms of this Construction
Note; (ii) after the Maturity Date, whether by reason of acceleration or
otherwise, the unpaid principal balance of this Construction Note (including
without limitation, principal, interest, fees and expenses) shall automatically
bear interest at 2% per annum in excess of the rate of interest that would
otherwise be in effect under this Construction Note. Interest payable at the
Default Rate shall be payable from time to time on demand or, if not sooner
demanded, on the last day of each calendar month.


 


15.           If the Borrower fails to make any payment to Lender within
ten (10) days of the due date thereof, the Borrower shall, in addition to
such amount, pay a late charge equal to five percent (5%) of the amount of such
payment.


 


16.           This Construction Note is secured by, among other
instruments, a Mortgage, Security Agreement and Financing Statement covering
various parcels of real property, fixtures, and personal property located in
Otter Tail County, Minnesota. In the event any such security is found to be
invalid for whatever reason, such invalidity shall constitute an event of
default hereunder. All of the agreements, conditions, covenants, provisions,
and stipulations contained in the Mortgage, or any instrument securing this
Construction Note are hereby made a part of this Construction Note to the same
extent and with the same force and effect as if they were fully set forth
herein. It is agreed that time is of the essence of this Construction Note.


 


17.           Upon the occurrence at any time of an Event of Default or
at any time thereafter, the outstanding principal balance hereof plus accrued
interest hereon plus all other amounts due hereunder shall, at the option of
the Lender, be immediately due and payable, without notice or demand and Lender
shall be entitled to exercise all remedies provided in this Construction Note,
the MLA, the First Supplement or any of the Loan Documents.


 


3

















 


18.           Upon the continuing occurrence of an Event of Default, the
Lender shall have the right to set off any and all amounts due hereunder by the
Borrower to the Lender against any indebtedness or obligation of the Lender to
the Borrower.


 


19.           The Borrower promises to pay all reasonable costs of
collection of this Construction Note, including, but not limited to, reasonable
attorneys’ fees paid or incurred by the Lender on account of such collection,
whether or not suit is filed with respect thereto and whether or not such costs
are paid or incurred, or to be paid or incurred, prior to or after the entry of
judgment.


 


20.           Demand, presentment, protest and notice of nonpayment and
dishonor of this Construction Note are hereby waived.


 


21.           This Construction Note shall be governed by and construed
in accordance with the laws of the State of Minnesota.


 


22.           The Borrower hereby irrevocably submits to the
jurisdiction of any Minnesota state court or federal court over any action or
proceeding arising out of or relating to this Note, the MLA and any instrument,
agreement or document related hereto or thereto, and the Borrower hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such Minnesota state or federal court. The Borrower
hereby irrevocably waives, to the fullest extent it may effectively do so, the
defense of an inconvenient forum to the maintenance of such action or
proceeding. Nothing in this Construction Note shall affect the right of the
Lender to bring any action or proceeding against the Borrower or its property
in the courts of any other jurisdiction to the extent permitted by law.


 


 


	
   

  	
  OTTER TAIL AG ENTERPRISES, LLC

  
	
   

  	
  a Minnesota limited liability company

  
	
   

  	
   

  
	
   

  	
  /s/ Jerry Larson

  	
   

  
	
   

  	
   

  	
  By: Jerry Larson

  
	
   

  	
   

  	
  Its: President

  
				



 


4