Exhibit 10.25


 


DISBURSING AGREEMENT


 


THIS DISBURSING AGREEMENT (this “Agreement”) is made and entered into as of March 28,
2007, by and among OTTER TAIL AG ENTERPRISES, LLC, a Minnesota limited
liability company (the “Borrower”),  AGSTAR
FINANCIAL SERVICES, PCA, a United States instrumentality (the “Lender”), MMCDC NEW MARKETS FUND II, LLC, a Delaware limited
liability company (the “CDC”), U.S.
BANK, NATIONAL ASSOCIATION, as Trustee for the holders of the $20,000,000.00
Otter Tail County, Minnesota, Subordinate Exempt Facility Revenue Bonds (Otter
Tail AG Enterprises, LLC Ethanol Plant Project) Series 2007 (the “Trustee”), and OTTER TAIL COUNTY, MINNESOTA, a political
subdivision of the State of Minnesota (the “County”),
and FIRST MINNESOTA TITLE & ABSTRACT, LLC, a Minnesota limited
liability company (the “Disbursing Agent” and
“Title Company”).  The
parties hereto are sometimes hereinafter referred to individually as a “Party” and collectively as the “Parties.”


 


In consideration of the mutual covenants and conditions contained
herein, the parties hereto agree as follows:


 


ARTICLE I


 


Definitions


 


Section 1.1 Defined Terms. Capitalized terms used in
this Agreement and not otherwise defined herein shall have the meanings
ascribed to them in that certain Master Loan Agreement dated as of March 28,
2007, by and between the Borrower and the Lender (as the same may be
supplemented, amended, restated or modified from time to time, the “AgStar Loan Agreement”). The following terms, when used in
this Agreement with initial capital letters shall have the following meanings
unless the context hereof clearly requires otherwise:


 


Abatement Bonds means the general obligation bonds to be
issued by the County to provide $5,000,000.00 for Equipment Costs, and such
additional amounts as may be necessary for reserves, capitalized interest and
issuance costs.


 


Abatement Bond Proceeds means the proceeds of the
Abatement Bonds available for the payment of Equipment Costs.


 


Advance means a disbursement to or for the benefit of the
Borrower pursuant to Article II of this Agreement.


 


Agreement means this Disbursing Agreement and any amendments,
supplements, extensions or modifications hereto.


 


AgStar Closing Date means the Closing Date
defined as such in the AgStar Loan Agreement.


 


AgStar Note means the Construction Note evidencing the
Construction Loan being made thereunder.


 


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Bond Documents means the Bond Documents as defined in the
ICA.


 


Bonds means the Abatement Bonds and the Solid Waste Facility
Bonds.


 


Bond Proceeds means the Abatement Bonds Proceeds and the
Solid Waste Facility Bond Proceeds available for the payment of Equipment
Costs.


 


Borrower’s Equity means funds equal to the greater of (i) 35.4%
of Project Costs, or (ii) $44,600,000.00 (the “Initial
Borrower’s Equity”), plus any additional funds as estimated or
determined by Lender or CDC to be necessary to fully pay Eligible Project Costs
required to complete the construction of the Project in accordance with the
approved Plans and Specifications.


 


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


 


CDC Closing Date means the date of closing of the CDC Loan
Agreement.


 


CDC Loan means the Construction Loan defined as such in the
CDC Loan Agreement.


 


CDC Loan Agreement means that certain
Construction and Term Loan Agreement dated as of March 30, 2007 by and
between Borrower and CDC.


 


CDC Loan Documents means the Loan Documents
defined as such in the CDC Loan Agreement.


 


CDC Notes means and includes, collectively, the Notes defined
as such in the CDC Loan Agreement.


 


Construction Contract(s) means and includes,
collectively, the Construction Contracts defined as such in the AgStar Loan
Agreement.


 


Contractors means and includes, collectively, the Contractors defined
as such in the AgStar Loan Agreement.


 


County means Otter Tail County, a political subdivision of
the State of Minnesota.


 


Disbursing Account means a deposit account
established by the Disbursing Agent with Security State Bank, Fergus Falls,
Minnesota for purposes of making all Advances under this Agreement.


 


Disbursing Agent means First Minnesota Title &
Abstract, LLC, a Minnesota limited liability company, its successors and
assigns.


 


Draw Request means a request for an Advance submitted by the Borrower
to the Lender, CDC, and the Disbursing Agent in accordance with the terms and
conditions of this Agreement.


 


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Eligible Project Costs means all Project Costs
that are not Equipment Costs.


 


Equipment Costs means all Equipment Costs as defined in the
Lease Agreement for which the Solid Waste Facility Bond Proceeds, and, to the
extent, if any, provided in the Lease, Abatement Bond Proceeds are being
provided to Borrower.


 


Event of Default means and includes: (i) any event
defined as such in any of  the AgStar
Loan Documents; (ii) any event defined as such in any of the CDC Loan
Documents; and (iii) any failure of Borrower to perform or observe any
term, covenant or agreement contained in this Agreement.


 


ICA means that certain Intercreditor Agreement dated as
of March 28, 2007 by and among the Lender, CDC, the County, and U.S. Bank
National Association as trustee for the holders of the Solid Waste Facility
Bonds.


 


Indebtedness means the principal of, interest on, and all other
amounts, payments, and premiums due under the AgStar Loan Agreement, CDC Loan
Agreement or secured by the AgStar Loan Documents, the CDC Loan Documents, or
otherwise.


 


Inspecting Engineer means BBI, Inc., a
Colorado corporation, and its successors and permitted assigns.


 


Lease Agreement means that certain Lease Agreement to be
entered into by and between the County and the Borrower, pursuant to which the
Solid Waste Facility Bond Proceeds and, to the extent provided therein,
Abatement Bond Proceeds are being disbursed to the Borrower for Equipment
Costs.


 


Legal Requirements means: (a) any and all
present and future judicial decisions, statutes, rulings, rules, regulations,
permits, certificates, or ordinances of any Governmental Authority in any way
applicable to the Borrower, or the Real Property, including the ownership, use,
occupancy, possession, operation, maintenance, alteration, repair, or
reconstruction thereof; (b) any and all Leases; and (c) any and all
leases and other contracts (written or oral) of any nature that relate, in any
way, to the Project and to which the Borrower may be bound, including without
limitation any contract pursuant to which the Borrower is granted a possessory
interest in the Real Property or the Project.


 


Lender means AgStar Financial Services, PCA, and its
successors and assigns.


 


Lender’s Advances means a disbursement of Construction Loan
proceeds made by the Lender against the AgStar Note, prior to the Conversion
Date, in accordance with the terms and conditions of the AgStar Loan Agreement
and this Disbursing Agreement.


 


Mortgages means and includes collectively, the Mortgage
defined as such in the AgStar Loan Agreement and the Mortgage defined as such
in the CDC Loan Agreement.


 


Notes means and includes, collectively, the AgStar Note
and CDC Notes.


 


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Plans and Specifications means the final plans and
specifications for the construction of the Project, to be prepared by the Prime
Contractor, and approved by the Lender and CDC, and all amendments and
modifications and supplements thereof approved by Lender and CDC.


 


Prime Contractor means Harris Mechanical Contracting Company,
a Minnesota corporation, and its successors and permitted assigns.


 


Project means and includes, collectively, the Project
defined as such in the AgStar Loan Agreement.


 


Project Sources and Uses Statement means the Project Sources
and Uses Statement as defined in the AgStar Loan Agreement.


 


Solid Waste Facility Bonds means the $20,000,000.00
Otter Tail County, Minnesota Subordinate Exempt Facility Revenue Bonds (Otter
Tail Ag Enterprises, LLC Ethanol Plant Project) Series 2007, to be issued
under the Trust Indenture.


 


Solid Waste Facility Bond Proceeds means those certain funds
to become available to the Borrower for payment or reimbursement of Equipment
Costs pursuant to the Lease Agreement and the Trust Indenture.


 


Subordinated Debt means the following Debt: (i) the Solid
Waste Facility Bonds; and (ii) the Abatement Bonds.


 


Tax Credit Funds means those certain funds in the aggregate
principal amount of $19,175,000.00, which are to be provided by CDC to the
Borrower pursuant to the CDC Loan Agreement.


 


Title Company means First Minnesota Title &
Abstract, LLC, a Minnesota limited liability company, its successors and
assigns.


 


Title Insurance means a mortgagee’s title insurance binder
or a title insurance policy, in form and substance reasonably satisfactory to
Lender and CDC and containing no exceptions (printed or otherwise) which are unacceptable
to Lender or CDC, issued by the Title Company, in an amount not less than in
the face amount of the Notes, insuring that Lender and CDC have a shared first
and prior lien on the Real Property and containing such endorsements as Lender
or CDC may reasonably require.


 


Trust Indenture means that certain Trust Indenture to be
entered into by and between Otter Tail County, Minnesota and U.S. Bank National
Association, providing for the issuance of the Solid Waste Facility Bonds.


 


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ARTICLE II.


Disbursement


 


Section 2.1  Disbursing Account.


 


a.                                       Disbursing
Agent shall establish the Disbursing Account for purposes of making all
Advances under this Agreement. Borrower’s Equity, Bond Proceeds designated for
disbursement hereunder rather than the Lease, the Tax Credit Funds, and the
proceeds of the Construction Loan shall be deposited in the Disbursing Account
on the terms and conditions set forth herein to be disbursed by Disbursing
Agent to or on behalf of the Borrower in payment or reimbursement of Eligible
Project Costs and Equipment Costs in accordance with this Agreement, except
that (i) monies expended by Borrower to cover Eligible Project Costs and
Equipment Costs incurred and paid prior to the Closing Date; and (ii) that
portion of Eligible Project Costs and Equipment Costs attributable to office
expenses, operating costs, organizational costs, financing costs, payroll,
payroll taxes, utilities, rolling stock, and other administrative and overhead
expenses need not be deposited into the Disbursing Account. The deposit of the
proceeds of the AgStar Note in the Disbursing Account shall constitute payment
by the Lender to the Borrower of AgStar Loan proceeds under the AgStar Note.
The deposit of the proceeds of the CDC Notes in the Disbursing Account shall
constitute payment by CDC to the Borrower of the proceeds of the CDC Loan under
the CDC Notes:


 


b.                                      Order of
disbursements:


 


(i)                                     Subject to the
terms and conditions hereof, the Disbursing Agent shall disburse all funds
deposited in the Disbursing Account, whether of Borrower’s Equity, Tax Credit
Funds or Lender’s Advances, for Eligible Project Costs in the following order:


 


(1)                                  Borrower’s
Equity, until exhausted;


 


(2)                                  Tax Credit
Funds, until exhausted; and


 


(3)                                  once Borrower’s
Equity and the Tax Credit Funds have been exhausted, the Lender’s Advances
alone shall be disbursed.


 


(ii)                                  Subject to the
terms and conditions hereof, concurrent with the disbursements made under Section 2.1(b)(i),
the Disbursing Agent shall disburse all Bond Proceeds deposited in the
Disbursing Account for Equipment Costs.


 


c.                                       Any balance
remaining in the Disbursing Account on the Completion Date after the payment of
Eligible Project Costs shall be disbursed by the Disbursing Agent to the Lender
and CDC. All proceeds of the AgStar Loan and the CDC Loan


 


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shall be returned to Lender and CDC in that proportion which the unpaid
principal amount of, and accrued interest then due and owing on the AgStar
Loan, on the date of such disbursement, bears to the unpaid principal amount of
and accrued interest then due and owing on the CDC Loan on the date of such
disbursement and shall be used by Lender to prepay the AgStar Note in
accordance with the terms of the AgStar Note and by CDC to prepay the CDC Loan
in accordance with the terms of the CDC Notes, which prepayment of principal
shall be exempt from prepayment premium or penalty; provided that any such
prepayment to CDC shall be subject to CDC’s prior written approval and at CDC’s
direction instead of prepayment such funds shall be disbursed to Borrower for
use in connection with the Project as approved by CDC.


 


d.                                      If as a result
of the occurrence of an Event of Default the Lender or CDC declares the unpaid
principal balance and accrued interest on the AgStar Note or CDC Notes
immediately due and payable, the Disbursing Agent may disburse to Lender and
CDC pursuant to the terms and conditions of the ICA and Lender and CDC may
apply all funds then on hand in the Disbursing Account to the immediate payment
of the Notes. Any such application shall reduce and discharge the amount then
due and payable on the Notes, and the Lender and CDC shall promptly notify the
Borrower of the amount so applied.


 


e.                                       The Disbursing
Agent shall maintain adequate records pertaining to Advances disbursed by it
and shall file an accounting thereof with the Lender, CDC, the Trustee, the
County, and the Borrower upon the liquidation and termination of the Disbursing
Account. Disbursing Agent shall provide Borrower with monthly statements
pertaining to the activity in the Disbursing Account in order that Borrower may
confirm the accuracy of the Disbursing Agent’s records.


 


Section 2.2  Disbursements from the Disbursing Account.
Disbursements from the Disbursing Account are conditioned upon the approval of
the Lender, CDC, and the Trustee which is conditioned, in turn, upon the
satisfaction of the terms and conditions contained in the AgStar Loan
Agreement, the CDC Loan Agreement, the Lease Agreement, and this Section 2.2,
except for those costs and expenses of the Borrower to Lender set form in Section 7.04
of the AgStar Loan Agreement and of the Borrower to CDC pursuant to Section 7.04
of the CDC Loan Agreement.


 


a.                                       No disbursement
shall be made from the Disbursing Account by the Disbursing Agent until the
Lender and CDC (i) receive satisfactory evidence that the Bonds have
been issued and that the Bond Proceeds are available for the payment of
Equipment Costs, and (ii) receive Title Insurance issued by the Title
Company:


 


(1)                                  showing that
marketable fee title to the Real Property is in the Borrower, subject only to
the Mortgages and other encumbrances specifically allowed in the Mortgages;


 


(2)                                  reflecting the
recording of the Mortgages;


 


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(3)                                  insuring the
Mortgages to be a shared first lien on the Real Property subject only to the
ICA and encumbrances approved by Lender and CDC;


 


(4)                                  naming the
Lender as the insured to the extent of its Loans and naming CDC as the insured
to the extent of the CDC Loan; and


 


(5)                                  containing only
such other matters as are acceptable to the Lender and CDC.


 


b.                                      To obtain draws
from the Disbursing Account, whether from Borrower’s Equity, Bond Proceeds, the
Tax Credit Funds or Lender’s Advances, the Borrower shall submit to the
Disbursing Agent, Lender, and CDC, written Draw Requests and Project Cost
certifications in form and substance satisfactory to the Lender, CDC, the
Trustee, and the Title Company:


 


(1)                                  specifying the
uses to which the proceeds of the draw will be put;


 


(2)                                  certifying such
amounts to be currently payable (excluding withholdings) for costs constituting
Eligible Project Costs; which costs are identified on the Eligible Project
Costs statement and with respect to which no prior Draw Request has been made;


 


(3)                                  certifying such
amounts to be currently payable (excluding withholdings) for costs constituting
Equipment Costs, which costs are identified on the Equipment Costs statement
and with respect to which no prior Draw Request has been made;


 


(4)                                  stating that no
Event of Default has occurred and is then continuing under the terms of the
AgStar Loan Agreement, CDC Loan Agreement, Notes, Mortgages or any of the
AgStar Loan Documents, CDC Loan Documents, or Bond Documents. Each Draw Request
(other than a request relating to payment of interest on the Notes or the costs
of issuance of the Notes) shall be accompanied by certifications of the
Borrower, and, if requested by Lender or CDC, the Prime Contractor or other
Contractor and/or the Inspecting Engineer, to the effect that:


 


(i)                                     The
construction work to be paid for has been completed in a workmanlike manner in
accordance with the Plans and Specifications;


 


(ii)                                  Materials are
in place or are being stored on the Real Property or in secure off-site storage
facilities permitted by a Construction Contract and work has been completed on
the Project, which materials and work have, in the aggregate, a value equal to
the total of: (a) the amount which has been disbursed in connection with
earlier Draw Requests; and (b) the amount which is to be disbursed with
the requested Advance; and


 


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(iii)                            The funds
remaining undisbursed in the Disbursing Account or available to Borrower
pursuant to the Notes or the terms of any Subordinated Debt or other loan
agreement are sufficient to fully complete the Project in accordance with the
Plans and Specifications and the Project Sources and Uses Statement.


 


c.                                       So long as at
least one-half of any Draw Request made under this Article II will be
funded by CDC, CDC will in its sole discretion make all determinations to
consent to or refuse the requested Advance.


 


So long as at least one-half of any Draw Request made under this Article II
will be funded by Borrower’s Equity, Bond Proceeds, and/or Lender’s Advances,
Lender will in its sole discretion make all determinations to consent to or
refuse the requested Advance.


 


Within three (3) business days of receipt of a Draw Request and
certifications as are specified in Section 2.2(b), the Lender or CDC shall
notify the Borrower of its consent to or refusal of the requested Advance, and
if Lender or CDC have consented to the requested Advance, shall, thereafter: (i) credit
the Disbursing Account with sufficient immediately available funds to pay such
Draw Request in full, less applicable retainages and less amounts to be funded
from Bond Proceeds, and wire transfer said amount to the Disbursing Account for
disbursement, and (ii) notify the Trustee of the approval of a certified
Draw Request for Equipment Costs. So long as such any portion of a Draw Request
is to be funded by Bond Proceeds, the Trustee shall transfer by wire transfer
to the Disbursing Account for disbursement an amount equal the requested
Equipment Cost amount within two (2) business days of the submission of
the associated Draw Request and certifications. So long as such Draw Requests
are to be funded by Borrower’s Equity, the Borrower shall transfer by wire
transfer to the Disbursing Account for disbursement an amount equal to each
Draw Request within two (2) business days of the submission of its Draw
Request to the Disbursing Agent. The Disbursing Agent shall disburse funds to
the parties identified in the Draw Request pursuant to the terms of the Lender’s
or CDC’s consent of the Draw Request. The Parties assume no liability for the
accuracy of any certifications presented to it nor for any request for any
Advance by the Borrower in violation hereof or of any AgStar Loan Document, CDC
Loan Document or Bond Document. The Lender or CDC may retain five percent (5%)
from each Advance made pursuant to a Draw Request up to the point when fifty
percent (50%) of the work performed by Prime Contractor or any other Contractor
has been completed. All amounts retained by the Lender and by CDC shall be
advanced upon completion of the Project in accordance with the Construction
Contract with the Prime Contractor and other Contractors. Notwithstanding
anything to the contrary set forth herein, in the event that the Tax Credit
Funds have not been or are not anticipated to be fully advanced to Borrower by February 7,
2008 (the “Cut Off Date” as defined in the
CDC Loan Agreement), CDC may direct the disbursement of the balance of such
funds to an additional Disbursing


 


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Account which shall be in the name of Borrower, which account shall be
pledged to CDC pursuant to a bank account pledge agreement and shall be subject
to a pledged account control agreement in favor of CDC in form and substance
satisfactory to CDC in its sole discretion in accordance with Section 2.06
of the CDC Loan Agreement. No funds may be withdrawn from said account without
the prior written approval of CDC (which must countersign all checks drawn on
said account) and Lender, to the extent required, in accordance with this
Agreement.


 


d.                                      The Disbursing
Agent shall disburse all funds from the Disbursing Account in accordance with
this Agreement to the Contractor which is entitled thereto, as set forth in the
Draw Request. Each such Draw Request shall include a statement sworn to by the
Borrower, listing the names, addresses, and telephone numbers, the work, labor,
and/or materials to be supplied by, and the total estimated amounts to be paid
to the Prime Contractor and subcontractor, with respect to the Project.
Disbursing Agent shall receive a general lien waiver from all Contractors,
including the Prime Contractor, other Contractors covering all Advances made
hereunder and an express lien waiver from each supplier and subcontractor
having a contract with any Contractor with respect to the Project in excess of
Twenty-five Thousand ($25,000.00) dollars through the date of the immediately
preceding Advance to it hereunder, except for the final Advance, which shall be
paid only upon receipt of all lien waivers from Prime Contractor and other
Contractors and their subcontractors and suppliers; provided, however, that if
the Disbursing Agent shall, in its opinion, be unable to perform its
obligations hereunder, the Disbursing Agent shall have the right to refuse to
disburse the funds advanced to it. The Disbursing Agent shall not disburse any
Advance hereunder if there have been any changes in the status of title as set
forth in the Title Insurance which have not been consented to in writing by the
Lender and CDC, which consent shall not be unreasonably withheld. If any such
change has not been so consented to, the Borrower shall promptly and at its
sole cost and expense restore the status of title to that reflected in the
Title Insurance. The Title Company shall, in any event, promptly notify the
Lender and CDC of any change in the status of title to the Real Property or the
Project. To the extent any change in title is insured against by the Title
Company, the Borrower shall take all actions necessary to restore the status of
title to that reflected in the Title Insurance.


 


e.                                       The Draw
Requests, mechanics’ lien waivers, certificates, and any and all other
instruments or documents required to be delivered in connection with an Advance
shall be in form and substance reasonably satisfactory to the Lender and CDC.


 


f.                                         The Lender and
CDC shall not disburse any Advance hereunder unless the Title Company shall
insure the Lender and CDC against claims for mechanics’ liens against the
Project.


 


g.                                      All Advances
made out of the Disbursing Account shall be used exclusively for the Eligible
Project Costs and the Disbursing Agent shall not disburse any


 


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Advance for Equipment Costs until the Borrower delivers the
certifications required under Section 2.2(b).


 


Section 2.3  Conditions to Initial Advance.
Neither Lender nor CDC shall be obligated to consent to the initial Advance to
the Borrower unless and until:


 


a.                                       Lender and CDC
have received: (1) copies of the Plans and Specifications and all
Construction Contracts executed to date; (2) a certificate from the Prime
Contractor stating that the Plans and Specifications have been approved by the
Prime Contractor and satisfactorily provide for the construction of the
Project; (3) except as otherwise permitted or contemplated by the AgStar
Loan Agreement, copies of all authorizations and permits which are presently
procurable and required by any Legal Requirement for the construction and
proposed use of the Project; (4) an original current survey of the
Property showing the perimeter of the Real Property by courses and distances,
all easements and rights-of-way, the line of the streets abutting the Real
Property and the width thereof, any encroachments and the extent thereof in
feet and inches, the relation of the proposed Project by distances to the
perimeter of the Real Property and the proposed Project lines, all acceptable
to the Lender and CDC to modify the “area, boundaries, and encroachments”
exception to the maximum extent permissible by law; and (5) copies of the
policies of insurance required by the AgStar Loan Documents and the CDC Loan
Documents accompanied by evidence by the payment of the premiums therefor, or a
Certificate of Insurance executed by the insurer or its authorized agent.


 


b.                                      The AgStar Loan
Documents and CDC Loan Documents have been duly authorized, executed, and
recorded or filed in accordance with applicable Legal Requirements and original
counterparts thereof delivered to Lender and CDC, as applicable.


 


c.                                       The Title
Company has issued the commitment for Title Insurance.


 


d.                                      Borrower, and,
if requested by Lender or CDC, the Prime Contractor and Inspecting Engineer,
have executed, or caused to be executed, and delivered to Lender and CDC a Draw
Request in form and substance acceptable to Lender and CDC certifying in
acceptable detail the expenditures made or expenses incurred by the Borrower of
the type described in Section 2.2 of this Agreement, with such supporting
data as Lender or CDC may require, and that the amount requested represents
sums actually spent or indebtedness actually incurred.


 


e.                                       The Borrower
pays to Lender and CDC, or any other person or party entitled thereto, all fees
and costs then due and payable with reference to this Agreement and the subject
hereof, including any commitment or origination fee to be paid to the Lender as
provided in the AgStar Loan Agreement or fee letter, and commitment or
origination fee to be paid to CDC as provided in the CDC Loan Agreement or fee
letter.


 


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f.                                         A Sworn
Construction Statement has been prepared and executed by the Prime Contractor
and other Contractors and delivered to the Lender and CDC accompanied by
executed lien waivers and any other documents required by the Title Company for
all Eligible Project Costs paid by Borrower prior to the AgStar Closing Date
and/or the CDC Closing Date.


 


g.                                      A copy of the
building permit issued by the appropriate governmental entity for the Project
has been delivered to the Lender and CDC.


 


h.             Borrower has deposited with the Disbursing Agent the
Borrower’s Equity pursuant to Section 2.1 of this Agreement.


 


Section 2.4  Conditions to Subsequent Advances.
Neither the Lender nor CDC shall be obligated to consent to subsequent Advances
unless and until:


 


a.                                       The Borrower
shall have complied with all conditions precedent for Advances set forth in the
AgStar Loan Documents, the CDC Loan Documents and/or the Bond Documents.


 


b.                                      The Borrower
and, if requested by Lender or CDC, the Prime Contractor and Inspecting
Engineer, shall have executed, or caused to be executed, and delivered to
Lender and CDC a Draw Request as described in Section 2.3(d) above and provided
the data therein referred to.


 


c.                                       Lender and CDC
shall have received: (1) an endorsement (if permitted or required by
virtue of the form thereof) to the Title Insurance increasing the coverage
thereof to the full amount of the sum advanced and reflecting no changes in the
status of title or the Title Insurance since the previous Advance, or if such
endorsement cannot be obtained or if the Title Insurance is a binder, an abstractor’s
certificate or other evidence satisfactory to Lender and CDC from the Title
Company reflecting that there have been no such changes in the status of title
or the Title Insurance; (2) if requested by Lender or CDC, certificate
from the Prime Contractor that, in its opinion, the construction of the Project
theretofore performed has been in substantial accordance with the Plans and
Specifications; (3) at the request of Lender or CDC, lien waivers or release
from all contractors, subcontractors, laborers, and materialmen employed or
furnishing materials in connection with the construction of the Project as
specified in Section 2.2(d); and (4) such other certifications or evidence
of cost and completion as Lender or CDC may request.


 


d.                                      All amounts
deposited by the Borrower in the Disbursing Account from time to time, are
disbursed for Eligible Project Costs and/or Equipment Costs pursuant to the
terms and conditions of this Article II.


 


e.                                       In the case of
Draw Requests to be funded by Tax Credit Funds, unless and until Borrower’s
Equity has been fully disbursed.


 


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f.                                         In the case of
Draw Requests to be funded by Lender’s Advances, unless and until Borrower’s
Equity and the Tax Credit Funds have been fully disbursed.


 


Section 2.5  Right to Withhold Consent to Advance.
Notwithstanding anything to the contrary contained in or inferable from any of
the above, no Party shall be required to consent to any Advance hereunder if,
at the time of the requested Advance:


 


a.                                       Any Event of
Default exists.


 


b.                                      A requested
Advance made pursuant to a Draw Request, plus the sum of all previous Advances
or other sums disbursed by Lender under the AgStar Loan Documents and by CDC
under the CDC Loan Documents, exceed the face amount of the AgStar Note, the
CDC Notes and the Bonds.


 


c.                                       In the good
faith judgment of the Lender or CDC, the Project will not be completed in
substantial accordance with the Plans and Specifications and the Legal
Requirements and the other provisions of this Agreement, the CDC Loan Documents
or the AgStar Loan Documents.


 


d.                                      In the good faith
judgment of Lender or CDC, the sum of the unadvanced proceeds of the AgStar
Loan and the CDC Loan plus other sums held in the Disbursing Account for
Borrower, plus other funds available to pay the costs of constructing the
Project are insufficient to complete the Project in substantial accordance with
the Plans and Specifications, and this Agreement, the CDC Loan Documents or the
AgStar Loan Documents, unless and until the Borrower has deposited additional
funds into the Disbursing Account.


 


e.                                       The Project (or
any portion thereof) is demolished or substantially destroyed or condemnation
or similar type proceedings are commenced with reference thereto.


 


f.                                         Any change in
the status of title to the Real Property or the Project has occurred subsequent
to the date hereof without Lender’s and CDC’s prior written consent and which
materially and adversely affects the Project or the priority of the Mortgages.


 


g.                                      Any event has
occurred which has or could give rise to a lien claim having priority over the
Mortgages, which is not insured against by the Title Company or otherwise
permitted or contemplated by the Mortgages or the other AgStar Loan Documents,
the CDC Loan Documents or the Bond Documents.


 


h.                                      An order or
decree in any court of competent jurisdiction exists, which enjoins the
construction of the Project or enjoins or prohibits the Borrower, the Lender,
CDC, the Disbursing Agent or any of them from performing their respective
obligations under this Agreement.


 


i.                                          Any material
deviation exists in the work of construction from the Plans and Specifications
without the prior written consent of Lender and CDC, which


 


12

















 


consent shall not be unreasonably withheld, or it appears to the Lender
or CDC that there are material defects in the workmanship or materials used in
the Project.


 


j.                                          Any
encroachment exists which has occurred without the consent of Lender and CDC.


 


k.                                       The work of
construction has ceased prior to completion of the Project for a continuous
period of thirty (30) days, or more, for causes other than those beyond the
control of the Borrower or consented to in writing by Lender and CDC.


 


Section 2.6 Conditions for Benefit of the Parties. All
conditions precedent to a Party’s obligation to consent to Advances hereunder
are imposed solely and exclusively for such Party’s benefit, or for the mutual
benefit of the Party, where so indicated. No person or entity other than such
Party shall have standing to require satisfaction of such conditions, or be
entitled to assume that such Party will refuse to consent to Advances absent
strict compliance therewith, and any or all of such conditions may be freely
waived (in whole or in part) by such Party at any time or times.


 


ARTICLE III.


General Terms and Conditions


 


Section 3.1  Fees. All reasonable costs and
expenses required to satisfy any provision of this Agreement, including without
limitation documentary taxes and recording, brokerage, attorneys’, surveyors’,
accountants’, engineers’ and inspectors’ fees and Title Insurance premiums
shall be paid by the Borrower. Upon Borrower’s request, Lender and CDC shall
provide to Borrower invoices for all costs and expenses to be reimbursed by
Borrower under this Agreement. No portion of any such costs and expenses shall
be, in any way and to any extent, credited against any portion of the
Indebtedness.


 


Section 3.2  Instruments,
Policies Proceedings, and Parties. All instruments and policies of
insurance to be executed and/or delivered to Lender and/or CDC, and all
proceedings to be taken in connection with this Agreement and/or the AgStar
Loan, and/or the CDC Loan, and/or the Bond Documents provided for herein, and
all persons or parties responsible in any way for the construction of the
Project or any obligation to be performed hereunder, shall be subject to the
acceptance of Lender and CDC as to form, substance, coverage, and identity,
which acceptance shall not be unreasonably withheld, conditioned or delayed.
Immediately upon request of Lender or CDC, the Borrower will execute,
acknowledge, and deliver to Lender and CDC such further instruments and do such
further acts as Lender or CDC may reasonably deem  necessary to carry out more effectively the
purpose of this Agreement, or to subject to the liens and security interests of
the AgStar Loan Documents or the CDC Loan Documents any property intended by
the terms thereof to be covered thereby, including specifically but without
limitation, any renewals, additions, substitutions, replacements, betterments,
or appurtenances to the Project.


 


Section 3.3  Waiver. Any failure by any Party to
insist, or election by a Party not to insist, upon the Borrower’s strict
performance of any of the terms, provisions, or conditions of the AgStar Loan
Documents, the CDC Loan Documents or the Bond Documents shall not be


 


13

















 


deemed
to be a waiver of the same or of any other term, provision, or condition
thereof, and each Party shall have the right at any time thereafter to insist
upon strict performance by Borrower of any and all of the same. Specifically,
no advance of any proceeds of the AgStar Loan, the CDC Loan, the Abatement
Bonds or the Solid Waste Facility Bonds hereunder absent Borrower’s strict
compliance with this Agreement shall, in any way, preclude any Party from
thereafter declaring such failure to comply to be an Event of Default.


 


Section 3.4 Written Amendment or Waiver. This
Agreement may not be amended, waived, discharged, or terminated except through
a writing executed by the Party against whom enforcement of the amendment,
waiver, discharge, or termination is sought.


 


Section 3.5  Applicable Law and Severability. This
Agreement has been executed under and shall be construed and enforced in
accordance with the laws of the State of Minnesota. This Agreement and all of
the AgStar Loan Documents and the CDC Loan Documents are intended to be
performed in accordance with, and to the extent permitted by, all applicable
law. If any provision hereof or if any of the other AgStar Loan Documents, CDC
Loan Documents, or Bond Documents, or the application thereof to any person or
circumstances shall, for any reason and to any extent, be invalid or
unenforceable, neither the application of such provision to any other person or
circumstance nor the remainder of the instrument in which such provision is
contained shall be affected thereby, but rather shall be enforced to the
greatest extent permitted by law.


 


Section 3.6  Exercise of Rights or Remedies. All
rights, remedies, and recourse afforded the Parties hereto in the AgStar Loan
Agreement, the CDC Loan Agreement, the First Supplement, the Notes, the
Mortgages, the Lease Agreement, or otherwise available at law or in equity,
including specifically those granted by the Uniform Commercial Code in effect
in the State of Minnesota are incorporated herein by references and: (a) shall
be deemed cumulative and concurrent; (b) may be pursued separately,
successively, or concurrently against Borrower or anyone else obligated
hereunder or against the Real Property or against any one or more party, at the
sole discretion of each Party subject to the ICA; (c) may be exercised as
often as the occasion therefore shall arise, it being understood by the
Borrower that the exercise, failure to exercise or election not to exercise any
of the same shall in no event be construed as a waiver of same or of any other
right, remedy, or recourse available to any Party; and (d) are intended to
be and shall be nonexclusive.


 


Section 3.7  Assignment. This Agreement shall be
binding upon the Parties hereto and their respective successors, legal
representatives, and assigns; provided, however, that the Borrower may not
assign, transfer, or in any way hypothecate: (i) its interests in the
AgStar Loan Documents or the Real Property (or any portion thereof) without
Lender’s prior written consent (except as provided in the AgStar Loan
Documents); or (ii) its interests in the CDC Loan Documents or the Real
Property (or any portion thereof) without CDC’s prior written consent.


 


Section 3.8  Notices. All notices or other
communications required or permitted to be given under this Agreement shall be
in writing and shall be considered properly given if mailed by first class
United States mail, postage prepaid, or by delivering the same in person to the
intended addressee and mailed to Minnesota’s Community Development Corporation
(MCDC) and its counsel. Mailed notices shall be effective upon deposit in the
mail. Notice given in any


 


14

















 


other
manner shall be effective only if and when received by the addressee.  For purposes of notice, the addresses of the
Parties shall be as follows:


 


	
  If
  to the Borrower:

  	
   

  	
  Otter
  Tail Ag Enterprises, LLC

  1220
  North Tower Road

  Suite 201

  Fergus
  Falls, MN 56537

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Pemberton,
  Sorlie, Rufer & Kershner, PLLP

  
	
   

  	
   

  	
  110
  North Mill Street

  
	
   

  	
   

  	
  P.O. Box
  866

  
	
   

  	
   

  	
  Fergus
  Falls, MN 56538-0866

  
	
   

  	
   

  	
   

  
	
  If
  to the County:

  	
   

  	
  Otter
  Tail County

  520
  West Fir Avenue

  Fergus
  Falls, MN 56537

  
	
   

  	
   

  	
   

  
	
  If
  to Trustee:

  	
   

  	
  U.S.
  Bank National Association

  
	
   

  	
   

  	
  as
  trustee for the holders of the $20,000,000

  
	
   

  	
   

  	
  Otter
  Tail County, Minnesota Subordinate

  
	
   

  	
   

  	
  Exempt
  Facility Revenue Bonds (Otter Tail

  
	
   

  	
   

  	
  Ag
  Enterprises, LLC Ethanol Plant Project)

  
	
   

  	
   

  	
  Series 2007

  
	
   

  	
   

  	
  60
  Livingston Avenue

  
	
   

  	
   

  	
  St.
  Paul, Minnesota 55107

  
	
   

  	
   

  	
   

  
	
  If
  to CDC:

  	
   

  	
  Midwest
  Minnesota Community

  
	
   

  	
   

  	
  Development
  Corporation

  
	
   

  	
   

  	
  119
  Graystone Plaza PO Box 623

  
	
   

  	
   

  	
  Detroit
  Lakes, MN 56502

  
	
   

  	
   

  	
  Attention:
  Julia Nelmark

  
	
   

  	
   

  	
  Phone:
  218-844-7019

  
	
   

  	
   

  	
  Fax:
  218-844-6345

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Future
  Unlimited Law PC

  P.O. Box
  2776

  Yelm,
  Washington 98597

  Attention:
  Ruth Sparrow

  Telephone:
  (360) 458-1720

  Facsimile:
  (360)458-2509

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Gislason &
  Hunter, LLP

  2700
  S. Broadway

  New Ulm, MN 56073

  Telephone:
  (507) 354-3111

  Facsimile:
  (507) 354-8447

  Attention:
  C. Thomas Wilson

  



 


15

















 


	
  If
  to the Title Company:

  	
   

  	
  First
  Minnesota Title & Abstract, LLC

  
	
   

  	
   

  	
  101
  E. Lincoln Avenue

  
	
   

  	
   

  	
  Fergus
  Falls, MN 56537

  
	
   

  	
   

  	
  Telephone:
  (218) 998-4880

  
	
   

  	
   

  	
  Facsimile:
  (218) 998-4881

  
	
   

  	
   

  	
  Attention:
  Brenda Daniels

  
	
   

  	
   

  	
   

  
	
  If
  to the Lender:

  	
   

  	
  AgStar
  Financial Services, PCA

  
	
   

  	
   

  	
  1921
  Premier Drive

  
	
   

  	
   

  	
  PO
  Box 4249

  
	
   

  	
   

  	
  Mankato,
  MN 56002-4249

  
	
   

  	
   

  	
  Facsimile:
  (507) 344-5088

  
	
   

  	
   

  	
  Attention:
  Ron Monson

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Gray
  Plant Mooty

  
	
   

  	
   

  	
  1010
  West St. Germain, Suite 600

  
	
   

  	
   

  	
  St.
  Cloud, MN 56301

  
	
   

  	
   

  	
  Telephone:
  (320) 22-4414

  
	
   

  	
   

  	
  Facsimile:
  (320) 252-4482

  
	
   

  	
   

  	
  Attention:
  Phillip L. Kunkel

  



 


provided,
however, that any Party shall have the right to change its address for notice
hereunder to any other location within the United States by giving thirty (30)
days’ prior written notice to all other parties at the addresses set forth
hereinabove.


 


Section 3.9  Exculpation.
None of the Lender, CDC, the Trustee nor the Title Company, nor any of their
respective officers, directors or employees shall be liable for any action
taken or omitted by them, except for its or their own negligence, bad faith or
willful misconduct; nor shall it or they be liable or responsible for the
validity, enforceability, or sufficiency of any document furnished to them
pursuant to Article II hereof, nor shall they be responsible for any
representations or statement made in any of those documents. The Lender, CDC
and the Trustee shall be entitled to rely upon advice of counsel concerning
legal matters and upon any document or notice delivered to it hereunder which
it believes to be genuine or to have been presented by a proper person. Any
disbursements by the Lender, CDC, or Trustee of any Advance shall not be deemed
to be an approval by it of any work performed on the Project or any materials
furnished with respect thereto or a representation by it that the unused
portion of the AgStar Loan, the CDC Loan, and Bond Proceeds is sufficient to
pay remaining Project Costs.


 


Section 3.10  Effectiveness of Agreement.
Notwithstanding the execution and delivery of this Agreement by the County and
the Trustee, neither the County or the Trustee shall be bound by the terms and
conditions of this Agreement unless and until the Abatement Bonds and the Solid
Waste Facility Bonds have been sold and the Bond Documents executed and
delivered to the County and Trustee, respectively.


 


16

















 


IN WITNESS WHEREOF, the Borrower, the Lender, the County, the Trustee,
CDC, the Title Company and the Disbursing Agent have caused this Agreement to
be executed as of the date first above written.


 


[SIGNATURES ON FOLLOWING PAGES]


 


17

















 


SIGNATURE PAGE FOR


DISBURSING AGREEMENT


BY AND AMONG:


 


OTTER TAIL AG ENTERPRISES, LLC,


MMCDC NEW MARKETS FUND II, LLC,


U.S. BANK, NATIONAL ASSOCIATION, as Trustee for the holders of the
$20,000,000.00


Otter Tail County, Minnesota, Subordinate Exempt Facility Revenue Bonds
(Otter Tail AG


Enterprises, LLC Ethanol Plant Project) Series 2007,


OTTER TAIL COUNTY, MINNESOTA,


FIRST MINNESOTA TITLE & ABSTRACT, LLC,


AND


AGSTAR FINANCIAL SERVICES, PCA


 


DATED: as of March 28, 2007


 


 


	
   

  	
  BORROWER:

  
	
   

  	
  OTTER TAIL AG ENTERPRISES, LLC,

  
	
   

  	
  a
  Minnesota limited liability company

  
	
   

  	
   

  
	
   

  	
  /s/ Jerry Larson

  	
   

  
	
   

  	
  By Jerry Larson

  
	
   

  	
  Its President

  



 


18

















 


SIGNATURE PAGE FOR


DISBURSING AGREEMENT


BY AND AMONG:


 


OTTER TAIL AG ENTERPRISES, LLC,


MMCDC NEW MARKETS FUND II, LLC,


U.S. BANK, NATIONAL ASSOCIATION, as Trustee for the holders of the
$20,000,000.00


Otter Tail County, Minnesota, Subordinate Exempt Facility Revenue Bonds
(Otter Tail AG


Enterprises, LLC Ethanol Plant Project) Series 2007,


OTTER TAIL COUNTY, MINNESOTA,


FIRST MINNESOTA TITLE & ABSTRACT, LLC,


AND


AGSTAR FINANCIAL SERVICES, PCA


 


DATED: as of March 28, 2007


 


 


	
   

  	
  CDC:

  
	
   

  	
  MMCDC
  NEW MARKETS FUND II, LLC

  
	
   

  	
  a
  Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  
	
   

  	
  Its

  



 


19

















 


SIGNATURE PAGE FOR


DISBURSING AGREEMENT


BY AND AMONG:


 


OTTER TAIL AG ENTERPRISES, LLC,


MMCDC NEW MARKETS FUND II, LLC,


U.S. BANK, NATIONAL ASSOCIATION, as Trustee for the holders of the
$20,000,000.00


Otter Tail County, Minnesota, Subordinate Exempt Facility Revenue Bonds
(Otter Tail AG


Enterprises, LLC Ethanol Plant Project) Series 2007,


OTTER TAIL COUNTY, MINNESOTA,


FIRST MINNESOTA TITLE & ABSTRACT, LLC,


AND


AGSTAR FINANCIAL SERVICES, PCA


 


DATED: as of March 28, 2007


 


 


	
   

  	
  TRUSTEE:

  
	
   

  	
  U.S.
  BANK, NATIONAL ASSOCIATION, as

  
	
   

  	
  Trustee
  for the holders of the $20,000,000.00

  
	
   

  	
  Otter
  Tail County, Minnesota, Subordinate

  
	
   

  	
  Exempt
  Facility Revenue Bonds (Otter Tail

  
	
   

  	
  AG
  Enterprises, LLC Ethanol Plant Project) Series 2007

  
	
   

  	
   

  
	
   

  	
  /s/
  Joanne Fischer

  	
   

  
	
   

  	
  By
  Joanne Fischer

  
	
   

  	
  Its
  Vice President

  



 


20

















 


SIGNATURE PAGE FOR


DISBURSING AGREEMENT


BY AND AMONG:


 


OTTER TAIL AG ENTERPRISES, LLC,


MMCDC NEW MARKETS FUND II, LLC,


U.S. BANK, NATIONAL ASSOCIATION, as Trustee for the holders of the
$20,000,000.00


Otter Tail County, Minnesota, Subordinate Exempt Facility Revenue Bonds
(Otter Tail AG


Enterprises, LLC Ethanol Plant Project) Series 2007,


OTTER TAIL COUNTY, MINNESOTA,


FIRST MINNESOTA TITLE & ABSTRACT, LLC,


AND


AGSTAR FINANCIAL SERVICES, PCA


 


DATED: as of March 30, 2007


 


	
   

  	
  COUNTY:

  
	
   

  	
  OTTER TAIL COUNTY, a political
  subdivision

  
	
   

  	
  of
  the State of Minnesota

  
	
   

  	
   

  
	
   

  	
  /s/
  Dennis Mosher

  	
   

  
	
   

  	
  By

  
	
   

  	
  Its
  Board Chair

  
	
   

  	
   

  
	
   

  	
  /s/
  Larry Krohn

  	
   

  
	
   

  	
  And
  by

  
	
   

  	
  Its
  County Coordinator

  
				



 


21

















 


SIGNATURE PAGE FOR


DISBURSING AGREEMENT


BY AND AMONG:


 


OTTER TAIL AG ENTERPRISES, LLC,


MMCDC NEW MARKETS FUND II, LLC,


U.S. BANK, NATIONAL ASSOCIATION, as Trustee for the holders of the
$20,000,000.00


Otter Tail County, Minnesota, Subordinate Exempt Facility Revenue Bonds
(Otter Tail AG


Enterprises, LLC Ethanol Plant Project) Series 2007,


OTTER TAIL COUNTY, MINNESOTA,


FIRST MINNESOTA TITLE & ABSTRACT, LLC,


AND


AGSTAR FINANCIAL SERVICES, PCA


 


DATED: as of March 30, 2007


 


 


	
   

  	
  DISBURSING AGENT/TITLE COMPANY:

  
	
   

  	
  FIRST MINNESOTA TITLE & ABSTRACT, LLC,

  
	
   

  	
  a
  Minnesota limited liability company

  
	
   

  	
   

  
	
   

  	
  /s/
  Brenda K Daniels

  	
   

  
	
   

  	
  By

  
	
   

  	
  Its
  President

  



 


22

















 


SIGNATURE PAGE FOR


DISBURSING AGREEMENT


BY AND AMONG:


 


OTTER TAIL AG ENTERPRISES, LLC,


MMCDC NEW MARKETS FUND II, LLC,


U.S. BANK, NATIONAL ASSOCIATION, as Trustee for the holders of the
$20,000,000.00


Otter Tail County, Minnesota, Subordinate Exempt Facility Revenue Bonds
(Otter Tail AG


Enterprises, LLC Ethanol Plant Project) Series 2007,


OTTER TAIL COUNTY, MINNESOTA,


FIRST MINNESOTA TITLE & ABSTRACT, LLC,


AND


AGSTAR FINANCIAL SERVICES, PCA


 


DATED: as of March 28, 2007


 


 


	
   

  	
  LENDER:

  
	
   

  	
  AGSTAR
  FINANCIAL SERVICES, PCA,

  
	
   

  	
  a
  United States instrumentality

  
	
   

  	
   

  
	
   

  	
  /s/
  Ronnie Monson

  	
   

  
	
   

  	
  By
  Ronnie Monson

  
	
   

  	
  Its
  Vice President

  



 


23