Exhibit 10.29


 




	
  CONSTRUCTION AND TERM LOAN AGREEMENT

  
	
   

  
	
  by and among

  
	
   

  
	
  OTTER TAIL AG ENTERPRISES, LLC,

  
	
  a Minnesota limited liability company

  
	
   

  
	
   

  
	
  and

  
	
   

  
	
   

  
	
  MMCDC NEW MARKETS FUND II, LLC

  
	
  a Delaware limited liability company

  
	
   

  






 


dated


as of


March 30, 2007


 

















 


TABLE OF CONTENTS


 


	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE I. 

  	
  DEFINITIONS AND ACCOUNTING
  MATTERS

  	
   

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.01.

  	
  Certain
  Defined Terms

  	
  3

  
	
   

  	
   

  	
   

  
	
  Section 1.02.

  	
  Accounting
  Matters

  	
  18

  
	
   

  	
   

  	
   

  
	
  Section 1.03.

  	
  Construction

  	
  18

  
	
   

  	
   

  	
   

  
	
  ARTICLE II.

  	
  AMOUNTS
  AND TERMS OF THE LOANS

  	
  18

  
	
   

  	
   

  	
   

  
	
  Section 2.01.

  	
  Construction
  Loan

  	
  18

  
	
   

  	
   

  	
   

  
	
  Section 2.02.

  	
  Terms

  	
  18

  
	
   

  	
   

  	
   

  
	
  Section 2.03.

  	
  Proceeds
  of Collateral

  	
  18

  
	
   

  	
   

  	
   

  
	
  Section 2.04.

  	
  Maximum
  Amount Limitation

  	
  18

  
	
   

  	
   

  	
   

  
	
  Section 2.05.

  	
  Lender
  Records

  	
  19

  
	
   

  	
   

  	
   

  
	
  Section 2.06

  	
  Cut-Off
  Date

  	
  19

  
	
   

  	
   

  	
   

  
	
  Section 2.07

  	
  Withholding
  Taxes

  	
  20

  
	
   

  	
   

  	
   

  
	
  ARTICLE III.

  	
  CONDITIONS
  PRECEDENT

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section 3.01.

  	
  Conditions
  Precedent to Funding

  	
  20

  
	
   

  	
   

  	
   

  
	
  Section 3.02

  	
  Disbursement
  of Construction Loan

  	
  24

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV.

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 4.01

  	
  Representations
  and Warranties of the Borrower

  	
  27

  
	
   

  	
   

  	
   

  
	
  Section 4.02

  	
  New
  Markets Tax Credits

  	
  31

  
	
   

  	
   

  	
   

  
	
  Section 4.03.

  	
  Debarment
  Certificate

  	
  33

  
	
   

  	
   

  	
   

  
	
  ARTICLE V.

  	
  COVENANTS
  OF THE BORROWER

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 5.01.

  	
  Affirmative
  Covenants

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 5.02.

  	
  Negative
  Covenants

  	
  42

  
	
   

  	
   

  	
   

  
	
  Section 5.03

  	
  New
  Markets Tax Credits

  	
  45

  
	
   

  	
   

  	
   

  
	
  Section 5.04

  	
  Anti-Terrorism
  Laws

  	
  50

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI.

  	
  EVENTS
  OF DEFAULT AND REMEDIES

  	
  50

  
	
   

  	
   

  	
   

  
	
  Section 6.01.

  	
  Events
  of Default

  	
  50

  
	
   

  	
   

  	
   

  
	
  Section 6.02.

  	
  Remedies

  	
  53

  
	
   

  	
   

  	
   

  
	
  Section 6.03.

  	
  Remedies
  Cumulative

  	
  55

  
					



 


i

















 


	
  ARTICLE
  VII. MISCELLANEOUS

  	
   

  	
  55

  
	
   

  	
   

  	
   

  
	
  Section 7.01.

  	
  Amendments,
  etc

  	
  55 

  
	
   

  	
   

  	
   

  
	
  Section 7.02. 

  	
  Notices,
  etc

  	
  55

  
	
   

  	
   

  	
   

  
	
  Section 7.03. 

  	
  No
  Waiver; Remedies

  	
  57

  
	
   

  	
   

  	
   

  
	
  Section 7.04.

  	
  Costs,
  Expenses, Taxes and Origination Fee

  	
  57

  
	
   

  	
   

  	
   

  
	
  Section 7.05. 

  	
  Right of
  Set-off

  	
  58

  
	
   

  	
   

  	
   

  
	
  Section 7.06.

  	
  Severability of Provisions

  	
  58

  
	
   

  	
   

  	
   

  
	
  Section 7.07. 

  	
  Binding
  Effect; Successors and Assigns; Participations

  	
  58

  
	
   

  	
   

  	
   

  
	
  Section 7.08. 

  	
  Consent
  to Jurisdiction

  	
  59

  
	
   

  	
   

  	
   

  
	
  Section 7.09. 

  	
  Governing
  Law

  	
  59

  
	
   

  	
   

  	
   

  
	
  Section 7.10.

  	
  Execution
  in Counterparts

  	
  59

  
	
   

  	
   

  	
   

  
	
  Section 7.11. 

  	
  Survival

  	
  60

  
	
   

  	
   

  	
   

  
	
  Section 7.12. 

  	
  WAIVER OF
  JURY TRIAL

  	
  60

  
	
   

  	
   

  	
   

  
	
  Section 7.13. 

  	
  Entire
  Agreement,

  	
  60

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A
  

  	
  Compliance
  Certificate

  	
  62

  
	
   

  	
   

  	
   

  
	
  EXHIBIT B

  	
  Project
  Source and Use Statement

  	
  65

  
	
   

  	
   

  	
   

  
	
  EXHIBIT C
  

  	
  Form of
  Opinion Letter

  	
  66

  
	
   

  	
   

  	
   

  
	
  EXHIBIT D
  

  	
  Debarment
  Certificate

  	
  72

  
	
   

  	
   

  	
   

  
	
  EXHIBIT E
  

  	
  Financial
  Projections

  	
  75

  
	
   

  	
   

  	
   

  
	
  Schedule
  3.01(d)

  	
  Real
  Property

  	
  79

  
	
   

  	
   

  	
   

  
	
  Schedule
  4.01(a)

  	
  Description
  of Certain Transactions Related to the Borrowers’ Units

  	
  80

  
	
   

  	
   

  	
   

  
	
  Schedule
  4.01(f)

  	
  Description
  of Certain Threatened Actions, etc

  	
  81

  
	
   

  	
   

  	
   

  
	
  Schedule
  4.01(k)

  	
  Intentionally
  Omitted

  	
  82

  
	
   

  	
   

  	
   

  
	
  Schedule
  4.01(l)

  	
  Office
  Locations; Fictitious Names; Etc

  	
  83

  
	
   

  	
   

  	
   

  
	
  Schedule
  4.01(p)

  	
  Intellectual
  Property

  	
  84

  
	
   

  	
   

  	
   

  
	
  Schedule 4.01(t)

  	
  Environmental
  Compliance

  	
  85

  
	
   

  	
   

  	
   

  
	
  Schedule
  5.01(o)

  	
  Management

  	
  86

  
	
   

  	
   

  	
   

  
	
  Schedule
  5.02(a)

  	
  Description
  of Certain Liens; Lease Obligations, etc

  	
  87

  
	
   

  	
   

  	
   

  
	
  Schedule
  5.02(k)

  	
  Transactions
  with Affiliates

  	
  88

  
					



 


ii

















 


CONSTRUCTION
AND TERM LOAN AGREEMENT


 


THIS CONSTRUCTION AND TERM LOAN AGREEMENT (this “Agreement”), dated as of March 30,
2007 between MMCDC NEW MARKETS FUND II, LLC, a
Delaware limited liability company (the “Lender”)
and OTTER TAIL AG ENTERPRISES,
LLC, Minnesota limited liability company (the “Borrower”).


 


RECITALS


 


The
following recitals are a material part of this Agreement:


 


WHEREAS, Borrower is the owner of the property located at 24096 170th
Avenue, Fergus Falls, Minnesota 56537 legally described on Schedule 3.01(d) attached
hereto and hereby made a part hereof (the “Real
Property”);  and


 


WHEREAS, Borrower plans to build, equip and operate on the Real
Property a new nameplate 55 million gallon per year ethanol production
facility, as further defined below (the “Project”)  (the
Real Property and the Project are hereinafter at times referred to as the “Property”)  in an economic area
Borrower has found to be characterized by economic distress and inadequate
access to capital in order to have a catalytic effect on economic development
within the Project area and other low-income communities;


 


WHEREAS, Borrower is expected to constitute a “qualified active
low-income community business” (as that term is defined in Section 45D of
the Internal Revenue Code of 1986, as amended (the “Code”));
and


 


WHEREAS, U.S. Bancorp Community Development Corporation, a Minnesota
corporation (“USBCDC”), has made
an equity investment of $20,000,000 in Otter Tail Investment Fund, LLC (the “Fund”); and


 


WHEREAS, Minnesota’s Community Development Corporation, a Minnesota
nonprofit corporation (“MCDC”) will
provide a loan in the principal amount of $14,480,500 to the Fund (the “MCDC Fund Loan”), $14,228,000 of which shall be distributed to USBCDC as a return
of capital; and


 


WHEREAS, Midwest Minnesota Community Development Corporation, a
Minnesota nonprofit corporation (“MMCDC”), received
an $80,000,000 New Markets Tax Credit allocation (the “NMTC Allocation”) pursuant to that certain
New Markets Tax Credit Program Allocation Agreement, effective as of November 9,
2006, by and among MMCDC, Lender, certain other subsidiary allocatees of MMCDC,
and the Community Development Financial Institutions Fund of the United States
Treasury (the “CDFI Fund”); and


 


WHEREAS, MMCDC suballocated $20,000,000 of the NMTC Allocation to
Lender, and


 


1

















 


WHEREAS, the Fund has made an equity investment of $20,000,000 to
Lender, which is intended to constitute a “qualified equity investment” under Section 45D(b) of
the Code (the “Fund QEI”) and the
Fund shall make a non-QEI equity investment of $175,000 to Lender; and


 


WHEREAS, the proceeds of the Fund QEI and the non-QEI will be used as
follows:


 


(a)           To
pay approximately $1,000,000 of certain fees to MMCDC; and


 


(b)           To fund loans of up to $19,175,000 to
Borrower (collectively, the “Construction
Loan”), which shall be evidenced by two notes in the original
principal amounts of $ 14,480,500, and $4,694,500, respectively, and


 


WHEREAS, AgStar Financial Services, PCA (“AgStar”) will also provide a
construction loan to Borrower up to a principal amount of $35,000,000 (“AgStar Construction Loan”),  a
revolving term loan in the amount of $6,000,000 and a $4,000,000 revolving
credit line to Borrower for purposes of the acquisition, construction,
equipping and furnishing, operating and other permitted purposes in furtherance
of the Project (collectively, the “AgStar
Loans”) pursuant to that certain Master Loan Agreement dated as of March 28,
2007 and related supplements and loan documents (collectively, the “AgStar Loan Documents”); and


 


WHEREAS, additional financing subordinated to the Agstar Loans and the
Construction Loan will be provided from the proceeds of the $6,305,000 General
Obligation Tax Abatement Bonds, Series 2007 issued by Otter Tail County,
Minnesota (the “County”) and the
proceeds of the $20,000,000 Otter Tail County Subordinate Exempt Facility
Revenue Bonds (Otter Tail Ag Enterprises, LLC Ethanol Plant Project), Series 2007,
to finance a portion of the development of the Project (“Subordinate Financing”); and


 


WHEREAS, the members of Borrower have or will contribute equity subject
to the terms of this Agreement in an amount equal to the greater of (i) 35.4%
of Project Costs (defined below) or (ii) $44,600,000 to finance a portion
of the acquisition and construction of the Project (“Borrower’s Equity”);  and


 


WHEREAS, Lender has agreed to make the Construction Loan to Borrower
upon and subject to all of the terms, conditions, covenants and agreements of
this Agreement and the Loan Documents.


 


AGREEMENT


 


NOW, THEREFORE, in consideration of the
foregoing, intending to be legally bound hereby, and in consideration of Lender
making one or more loans to the Borrower, Lender and the Borrower agree as
follows:


 


2

















 


ARTICLE I.


 


DEFINITIONS AND ACCOUNTING MATTERS


 


Section 1.01. Certain Defined
Terms. All capitalized terms used in this Agreement shall have
the following meanings. Terms not otherwise defined in this Agreement shall
have the meanings attributed to such terms in the Uniform Commercial Code, as
amended from time to time. All references to dollar amounts shall mean amounts
in lawful money of the United States of America.


 


“Accountant’s Letter” means the letter dated March 30, 2007
from Christianson & Associates, PLLP attached hereto as Exhibit G.


 


“Advances” means the Loans provided the Borrower pursuant to
this Agreement.


 


“Affiliate” means, as to any Person, any other Person: (a) that
directly or indirectly, through one or more intermediaries, controls or is
controlled by, or is under common control with, such Person; (b) that
directly or indirectly beneficially owns or holds ten percent (10%) or more of
any class of voting membership interests (units) of such Person; or (c) ten
percent (10%) or more of the voting membership interests (units) of which is
directly or indirectly beneficially owned or held by the Person in question.
The term “control” means the possession, directly or indirectly, of the power
to direct or cause direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise; provided, however, in no event shall the
Lender or any Bank be deemed an Affiliate of the Borrower or any of their
subsidiaries.


 


“Agreement” means this Agreement, as this Agreement may be
amended, modified or supplemented from time to time, together with all exhibits
and schedules attached to or made a part of this Agreement from time to time.


 


“AgStar” has the meaning set forth in the Recitals.


 


“AgStar Construction Loan” has the meaning set forth in the
Recitals.


 


“AgStar Loans” has the meaning set forth in the Recitals.


 


“AgStar Loan Documents” has the meaning set forth in the
Recitals.


 


“AgStar Notice Date” has the meaning set forth in Section 6.01(t).


 


“Allowed Distributions” has the meaning specified in Section 5.02(b).


 


“Allocation Agreement” means the New Markets Tax Credit Program
Allocation Agreement entered into among the CDFI Fund, MMCDC, as the allocatee,
Lender, and other subsidiary allocatees effective as of November 9, 2006.


 


3

















 


“Anti-Terrorism Laws” shall mean all laws relating to terrorism
or money laundering, including, without limitation, the Executive Order and the
Bank Secrecy Act, as amended by the USA Patriot Act.


 


“Average Value” means the cost basis of Borrower’s owned
property and the reasonable value of its leased property.


 


“Borrower” means Otter Tail Ag Enterprises, LLC, a Minnesota
limited liability company.


 


“Borrower’s Equity” means funds equal to the greater of (i) 35.4%
of Project Costs or (ii) $44,600,000, subject to the terms of this
Agreement.


 


“Business Day” means any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized to close under the Laws of
the State of Minnesota, or are in fact closed in, the state where the Lender’s
Office is located.


 


“Capital Expenditures” means, for any period, the sum of all
amounts that would, in accordance with generally accepted accounting principles
consistently applied, be included as additions to property, plant and equipment
on a statement of cash flows for the Borrower during such period, with respect
to: (a) the acquisition, construction, improvement, replacement or
betterment of land, buildings, machinery, equipment or of any other fixed
assets or leaseholds; or (b) other capital expenditures and other uses
recorded as capital expenditures having substantially the same effect.


 


“CDE” shall mean a “certified community development entity” as
defined in Section 45D of the Code and regulations thereunder.


 


“Census Tract” means census tract #27111960900, which is a “low-income
community” as defined in Section 45D(e) of the Code and Treas. Reg. Section 1.45D-1.


 


“CDFI Fund” has the meaning set forth in the Recitals.


 


“CERCLA” means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.


 


“Closing Date” means March 30, 2007.


 


“Code” has the meaning set forth in the Recitals.


 


“Collateral” means and includes, without limitation, all
property and assets granted as collateral security for the Loans or other
indebtedness, in favor of the Lender, whether real or personal property,
whether granted directly or indirectly, whether granted now or in the future,
and whether granted in the form of a security interest, mortgage, assignment of
rents,


 


4

















 


deed of trust, assignment, pledge, chattel mortgage, chattel trust,
factor’s lien, equipment trust, conditional sale, trust receipt, lien, charge,
lien or title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever; whether created by
law, contract or otherwise; and excluding the Separate Collateral.


 


“Collectibles” means (a) any work of art; (b) any rug
or antique; (c) any metal or gem; (d) any stamp or coin; (e) any
alcoholic beverage; or (f) any other tangible personal property specified
by the IRS as collectibles, other than collectibles that are held primarily for
sale to customers in the ordinary course of business. Certain coins and bullion
are not Collectibles as provided in Section 408(m)(3) of the Code.


 


“Completion Date” means the earlier of (i) the first day of
the seventeenth (17th) month after the Closing Date, or (ii) the
date a Completion Certificate is issued for the Project executed by the
Borrower, Prime Contractor and Inspecting Engineer.


 


“Completion Certificate” means a certificate in form and
substance reasonably acceptable to Lender, executed by the Borrower, Prime
Contractor and Inspecting Engineer stating that the Project is completed and
that the processing equipment and fixtures are fully operational, and that the
Project has successfully completed performance testing and performs, with
permanent equipment, at 100% of the performance guarantees.


 


“Compliance Certificate” means a certificate of the Chief
Executive Officer, Chief Financial Officer, or any other officer reasonably
acceptable to the Lender, of the Borrower, substantially in the form attached
hereto as Exhibit A, setting forth the calculations of current
financial covenants and stating: (a) the Financial Statements are true and
correct and, other than the unaudited interim financial statements, have been
prepared in accordance with generally accepted accounting principles
consistently applied; (b) whether they have knowledge of the occurrence of
any Event of Default under this Agreement, and if so, stating in reasonable
detail the facts with respect thereto; and (c) reaffirm and ratify the
representations and warranties, as of the date of the certificate, contained in
this Agreement.


 


“Construction Advance” means any Advance for the payment of
Project Costs.


 


“Construction Contracts” means any and all material contracts,
written or oral, between the Borrower and any Contractor and any subcontractor
and between any of the foregoing and any other person or entity relating in any
way to the construction of the Project, including the performing of labor or
the furnishing of standard or specially fabricated materials in connection
therewith.


 


“Construction Loan” means the loans from the Lender to the
Borrower in the aggregate amount of $19,175,000 and pursuant to the terms and
conditions provided for in this Agreement.


 


5

















 


“Contractor” means and includes any person or entity, including,
without limitation, the Prime Contractor, engaged to work on or to furnish
labor, materials or supplies for the Project.


 


“County” has the meaning set forth in the Recitals.


 


“Current Portion of Long Term Debt” means that portion of Funded
Debt payable within one year from the date of such determination, determined in
accordance with generally accepted accounting principles, consistently applied.


 


“Cut-Off Date” shall mean February 7, 2008.


 


“Debt” means: (A) indebtedness for borrowed money or for
the deferred purchase price of property or services; (B) obligations as
lessee under leases which shall have been or should be, in accordance with generally
accepted accounting principles, recorded as capital leases; (C) obligations
under direct or indirect guaranties in respect of, and obligations (contingent
or otherwise) to purchase or otherwise acquire, or otherwise to assure a
creditor against loss in respect of, indebtedness or obligations of others of
the kinds referred to in clause (A) or (B) above or (E) through (G) below;
(D) liabilities in respect of unfunded vested benefits under plans covered
by Title IV of ERISA; (E) indebtedness in respect of mandatory redemption
or mandatory dividend rights on equity interests but excluding dividends
payable solely in additional equity interests; (F) all obligations of a
Person, contingent or otherwise, for the payment of money under any noncompete,
consulting or similar agreement entered into with the seller of a company or
its assets or any other similar arrangements providing for the deferred payment
of the purchase price for an acquisition permitted hereby or an acquisition
consummated prior to the date hereof; and (G) all obligations of a Person
under any Hedging Agreement.


 


“Default Rate” has the meaning set forth in the Notes.


 


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


 


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


 


“Disbursing Agreement” means the Disbursing Agreement dated March 30,
2007, executed by the Disbursing Agent, the Borrower, the Lender, the County,
the Trustee, and AgStar as the same may be from time to time amended, modified,
or supplemented from time to time.


 


“Distribution” means any dividend, distribution, payment, or
transfer of property by the Borrower to any member of the Borrower.


 


6

















 


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


 


“Environmental Laws” means all the laws listed in the definition
of “Hazardous Substance and any other local, state, or federal law or
regulation governing the material and disposal or release of Hazardous
Substance.


 


“EBITDA” means for any period, the total of the following each
calculated without duplication for the Borrower for such period: (i) net
income from operations; plus (ii) any provision for (or less any benefit
from) income taxes included in determining such net income; plus (iii) Interest
Expense deducted in determining such net income; plus (iv) amortization
and depreciation expense deducted in determining such net income.


 


“ERISA” means the Employee Retirement Income Security Act of
1974.


 


“Events of Default” has the meaning specified in Section 6.01.


 


“Executive Order” shall mean Executive Order No. 13224 on
Terrorist Financing, effective September 23, 2001, as amended from time to
time.


 


“Extraordinary Items” means items which are material and
significantly different from the Borrower’s typical business activities,
determined in accordance with generally accepted accounting principles,
consistently applied.


 


“Financial Projections” means the
financial projections, prepared by the Reznick Group, P.C.

and certified as of March    , 2007, and
attached hereto as Exhibit E.


 


“Fixed Charge Coverage Ratio” means the ratio of (EBITDA +/-
Extraordinary Items) divided by the sum of Current Portion of Long Term Debt +
Interest Expense + Dividends + Distributions + Tax Distributions + Maintenance
Capital Expenditures).


 


“Food Security Act” means the Food Security Act of 1985, 7
U.S.C. §1631, as amended, and the regulations promulgated thereunder.


 


“Fund” has the meaning set forth in the Recitals.


 


“Fund QEI” has the meaning set forth in the Recitals.


 


“Funded Debt” means the principal amount of all Debt of the
Borrower having a final maturity of more than one year from the date of origin
thereof (or which is renewable or extendible at the option of the obligor for a
period or periods more than one year from the date of origin) excluding,
however, the principal amount due under any line of credit used by


 


7

















 


Borrower for working capital purposes, all determined in accordance
with generally accepted accounting principles, consistently applied for the
period in question.


 


“GAAP” means generally accepted accounting principles,
consistently applied, except for any change in accounting practices to the
extent that, due to a promulgation of the Financial Accounting Standards Board
changing or implementing any new accounting standard, Borrower either (a) is
required to implement such change, or (b) for future periods will be
required to and for the current period may in accordance with generally
accepted accounting principles implement such change, for its financial
statements to be in conformity with generally accepted accounting principles
(any such change is hereinafter referred to as a “Required GAAP Change”);
provided that Borrower shall fully disclose in such financial statements any
such Required GAAP Change and the effects of the Required GAAP Change on
Borrower’s income, retained earnings or other accounts, as applicable.


 


“Governmental Authority” means and includes any and all courts,
boards, agencies, commissions, offices, or authorities of any nature whatsoever
for any governmental unit (federal, state, county, district, municipality,
city, or otherwise) whether now or hereafter in existence.


 


“Gross Revenues” shall mean all revenues received by Borrower in
connection with the operation of the Project.


 


“Guaranty” shall mean that certain Unconditional Guaranty of
Construction Completion of even date herewith given by the Borrower to USBCDC
and the Fund, which Guaranty guarantees certain obligations of Borrower under
certain of the Loan Documents, and all modifications, amendments, restatements
and replacements thereof.


 


“Hazardous Substance” means any element, substance, compound, mixture,
waste, material, pollutant or contaminant (including, without limitation,
asbestos, any petroleum or petroleum derived waste or products, and raw
materials that include hazardous constituents); to the extent the foregoing
items are included under or regulated by any federal, state or local law, rule or
regulation pertaining to environmental matters, as now or hereafter enacted or
amended, including, without limitation, the Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980; the Federal Resource
Conservation and Recovery Act; the Federal Superfund Amendments and
Reauthorization Act of 1986; the Federal Toxic Substances Control Act; the
Federal Hazardous Material Transportation Act; the Federal Clean Air Act; the
Federal Water Pollution Control Act; together with any other federal, state or
local super lien or other statutes, rules or regulations, as now or
hereafter amended in any way pertaining to clean-up; disclosure; water
pollution control; air pollution control; regulation of solid waste; hazardous
waste management; storage tanks; regulation of environmentally sensitive areas;
regulation of drinking water; use of ground water, surface waters and wetlands;
hazardous and toxic substance reporting; environmental preservation or control;
indoor air quality issues, including asbestos, radon and tobacco smoke; and any
other laws, including case law, which might be deemed or referred to as
environmental common


 


8

















 


law (all such laws, rules and regulations being referred to
collectively as “Environmental Laws”) and any other
substances now or hereafter deemed hazardous or toxic, including but not
limited to, mold and other contaminants, regardless of whether the same are
regulated under any Environmental Law


 


“Income Taxes” means the applicable state, local or federal tax
on the net income of the Borrower.


 


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


 


“Intellectual Property” has the meaning specified in Section 4.01(p).


 


“Intercreditor Agreement” shall mean the Intercreditor Agreement
among Agstar, the Trustee, the County and Lender dated March 30, 2007.


 


“Interest Expense” means for any period, the total interest expense
of the Borrower calculated on a consolidated basis.


 


“Inventory” means all of the Borrower’s inventory, as such term
is defined in the UCC, whether now owned or hereafter acquired, whether
consisting of whole goods, spare parts or components, supplies or materials,
whether acquired, held or furnished for sale, for lease or under service
contracts or for manufacture or processing, and wherever located.


 


“Joint Collateral” means all of the Company’s (i) real
property, including all buildings and improvements located thereon; (ii) Equipment;
(iii) Fixtures; (iv) Letter-of-Credit Rights; and (v) software,
whether now existing or hereafter acquired, and the proceeds and products
thereof.


 


“Late Charge” has the meaning set forth in the Notes.


 


“Lender” means MMCDC New Markets Fund II, LLC, and its
successors and assigns.


 


“Letters of Credit” means those certain letters of credit to be
issued by AgStar pursuant to the terms and conditions of the AgStar Loan
Documents.


 


“Loan and Carrying Charges” means all commitment fees to the
Lender, brokerage fees, standby fees, interest charges, service fees, attorneys’
fees, contractors’ fees, developers’ fees, funding fees, title insurance fees
and charges, recording fees, registration taxes, real estate taxes, special assessments,
insurance premiums, and utility charges incurred by the Borrower in the
construction of the Project and issuance of the Notes, all costs incurred in
acquisition of the Real Property and any other costs incurred in the
development of the Project.


 


9

















 


“Loan Documents” means this Agreement, the Notes, the Security
Agreement, the Mortgage and all other agreements, documents, instruments, and
certificates of the Borrower delivered to, or in favor of, the Lender under
this Agreement or in connection herewith or therewith, including, without
limitation, all agreements, documents, instruments, and certificates delivered
in connection with the extension of Advances by the Lender.


 


“Loan Obligations” means all obligations, indebtedness, and
liabilities of the Borrower to the Lender, arising pursuant to any of the Loan
Documents, whether now existing or hereafter arising, whether direct, indirect,
related, unrelated, fixed, contingent, liquidated, unliquidated, joint,
several, or joint and several, including, without limitation, the obligation of
the Borrower to repay the Advances, interest on the Advances, and all fees,
costs, and expenses (including, without limitation, reasonable attorneys’ fees
and expenses) provided for in the Loan Documents.


 


“Loan/Loans” means and includes the MMCDC Senior Loan and the
MMCDC Subordinate Loan, and any other financial accommodations extended to the
Borrower by the Lender pursuant to the terms of this Agreement.


 


“Long Term Debt” means indebtedness that matures more than one
year after the date of determination thereof.


 


“Long Term Marketing Agreement” means any contract, agreement or
understanding of the Borrower having a term of one year or more after the date
of determination thereof relating to the sale of any raw materials, inventory,
products or by-products of the Borrower.


 


“Low-Income Community” includes pursuant to Section 45D(e) of
the Code, a population census tract if (a) the poverty rate for such tract
is at least twenty percent (20%), or (b) (i) in the case of a tract
not located within a metropolitan area, the median family income for such tract
does not exceed eighty percent (80%) of statewide median family income, or (ii) in
the case of a tract located within a metropolitan area, the median family
income for such tract does not exceed eighty percent (80%) of the greater of
statewide median family income or the metropolitan area median family income.


 


“Maintenance Capital Expenditures” means all Capital Expenditures
made in the ordinary course of business to maintain existing business
operations of the Borrower in any fiscal year, determined in accordance with
generally accepted accounting principles, consistently applied.


 


“Material Adverse Effect” means any set of circumstances or
events which: (i) has or could reasonably be expected to have any material
adverse effect upon the validity or enforceability of any Loan Documents or any
material term or condition contained therein; (ii) is or could reasonably
be expected to be material and adverse to the condition (financial or
otherwise), business assets, operations, or property of the Borrower; or (iii) materially
impairs or could


 


10

















 


reasonably be expected to materially impair the ability of the Borrower
to perform the obligations under the Loan Documents.


 


“Material Contract” means (i) any contract or any other
agreement, written or oral, of the Borrower or its Subsidiaries involving
monetary liability of or to any such person in an amount in excess of $500,000
per annum; and (ii) any other contract or agreement, written or oral, of
the Borrower or any of its Subsidiaries the failure to comply with which could
reasonably be expected to have a Material Adverse Effect on the Borrower or its
Subsidiaries; provided, however, that any contract or agreement which is
terminable by a party other than the Borrower or its Subsidiaries without cause
upon notice of 90 days or less shall not be considered a Material Contract.


 


“Maturity Date” means the date that is the first day of the
132nd month after the initial Advance under this Agreement.


 


“Maximum Rate” means the maximum nonusurious interest rate, if
any, at any time, or from time to time, that may be contracted for, taken,
reserved, charged or received under applicable state or federal laws.


 


“MCDC” has the meaning set forth in the Recitals.


 


“MCDC Fund Loan” has the meaning set forth in the Recitals.


 


“MMCDC” has the meaning set forth in the Recitals.


 


“MMCDC Senior Loan” means the loan made pursuant to this
Agreement and the MMCDC Senior Loan Note in the original principal amount of
$14,480,500.


 


“MMCDC Senior Loan Note” means that certain promissory note of
even date herewith executed and delivered to the Lender by the Borrower in the
amount of $14,480,500 and pursuant to the terms and conditions provided for in
this Agreement.


 


“MMCDC Subordinate Loan” means the loan made pursuant to this
Agreement and the MMCDC Subordinate Loan Note in the original principal amount
of $4,694,500.


 


“MMCDC Subordinate Loan Note” means that certain promissory note
of even date herewith executed and delivered to the Lender by the Borrower in
the amount of $4,694,500 and pursuant to the terms and conditions provided for
in this Agreement.


 


“Mortgage” means that certain Mortgage, Security Agreement and
Assignment of Rents and Leases of even date herewith, as amended, modified or
supplemented from time to time, pursuant to which a shared first priority lien
mortgage interest with AgStar pursuant to the terms and conditions of the
Intercreditor Agreement, shall be granted by the Borrower to the Lender in the
Real Property to secure payment to the Lender of the Loan Obligations.


 


11

















 


“Net Income” means net income as determined in accordance with
GAAP.


 


“New Markets Tax Credit” and “NMTC” shall mean the new
markets tax credit provided for in Section 45D of the Code.


 


“New Markets Tax Credit Compliance Fee” means the fee payable to
Lender pursuant to Section 7.04(d) of this Agreement.


 


“NMTC Allocation” has the meaning set forth in the Recitals.


 


“NMTC Control” shall mean “control” as defined in Treas. Reg. Section 1.45D-1(d)(6)(ii)(B) as
direct or indirect ownership (based on value) or control (based on voting or
management rights) of more than 50 percent of the entity. For purposes of this
definition, the term management rights means the power to influence the
management policies or investment decisions of the entity.


 


“NMTC Program Requirements” means collectively, the provisions
of Section 45D of the Code, the Allocation Agreement, the Treasury
Regulations, published rulings issued by the Internal Revenue Service, and
guidance, rules or procedures published by the CDFI Fund.


 


“NMTC Recapture Event” means recapture or disallowance of any
New Markets Tax Credits attributable to the QEI made by the Fund in Lender, but
only to the extent such recapture or disallowance is attributable to any of the
following: (a) Borrower ceasing to be a QALICB; (b) the redemption
(within the meaning of Treas. Reg. Section 1.45D-l(e)(3)(iii)) of any
portion of the QEI made by the Fund in Lender; (c) a failure to satisfy
the substantially-all requirement (within the meaning of Treas. Reg. Section 1.45D-l(c)(l)(ii),
(5)) with respect to the QEI made by the Fund in Lender; and (d) the
failure of any tenant under any lease to be classified as a Tenant Qualified
Business.


 


“NMTC Recapture Period” means the seven (7) year period
beginning on the date of the original issue of the first QEI made in Lender by
the Fund, and ending on the last day preceding the seventh anniversary of the
date of the last QEI made in Lender by the Fund.


 


“Nonqualified Financial Property” means debt, stock, partnership
interests, options, futures contracts, forward contracts, warrants, notional
principal contracts, annuities, and other similar property as described in
Treas. Reg. Section 1.45D-l(d)(4)(i)(E) and excludes reasonable
amounts of working capital held in cash, cash equivalents or debt instruments
with a term of 18 months or less, or accounts or notes receivable acquired in
the ordinary course of trade or business for services rendered or from the sale
of property. The proceeds of an equity investment or a loan by a CDE that will
be expended for construction of real property within 12 months after the date
the investment or loan is made are treated as a reasonable amount of working
capital.


 


12

















 


“Note/Notes” means and includes the MMCDC Senior Loan Note and
The MMCDC Subordinate Loan Note and all other promissory notes executed and
delivered to the Lender by the Borrower pursuant to the terms of this Agreement
as the same may be amended, modified, supplemented, extended or restated from
time to time.


 


“OFAC” shall mean the Office of Foreign Asset Control of the
U.S. Treasury Department.


 


“Ordinary Trade Payable Dispute” means trade accounts payable,
in an aggregate amount not in excess of $100,000 with respect to the Borrower,
and with respect to which: (a) there exists a bona fide dispute
between Borrower and the vendor; (b) the Borrower is contesting the same
in good faith by appropriate proceedings; and (c) the Borrower has
established appropriate reserves on its financial statements.


 


“Parity Lien” means the lien of AgStar in the Joint Collateral.


 


“Permitted Liens” shall have the meaning ascribed to the term in
Section 5.02.


 


“Person” means any individual, corporation, business trust,
association, company, partnership, joint venture, governmental authority, or
other entity.


 


“Personal Property” means all equipment, fixtures, improvements,
building supplies and materials and other personal property now or hereafter
attached to, located in, placed in or necessary to the use of the improvements
on the Real Property including, but without being limited to, all machinery,
fixtures, equipment, furnishings, and appliances, as well as all renewals,
replacements, additions, and substitutes thereof, and all products and proceeds
thereof, and including without limitation all inventory, farm products,
accounts, instruments, chattel paper, other rights to payment, money, deposit
accounts, commodity accounts, investment property, insurance proceeds and
general intangibles of the Borrower, whether now owned or hereafter acquired.


 


“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 all amendments and modifications
and supplements thereof approved by Lender.


 


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


 


“Prohibited Person” shall mean any of the following:


 


(a)           a person or entity that is listed in the Annex to, or is
otherwise subject to the provisions of, the Executive Order;


 


13

















 


(b)           a person or entity owned or controlled by, or acting for
or on behalf of, any person or entity that is listed in the Annex to, or is
otherwise subject to the provisions of, the Executive Order;


 


(c)           a person or entity with whom Lender is prohibited from
dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;


 


(d)           a person or entity who or that commits, threatens, or
conspires to commit or supports “terrorism,” as defined in the Executive Order;
or


 


(e)           a person or entity that is named as a “specially
designated national and blocked person” on the most current list published by
OFAC at its official web site or any replacement website or other replacement
official publication of such list.


 


“Project” means any and all buildings, structures, fixtures, and
other improvements made to the Real Property and other uses identified in the
Project Sources and Uses Statement as part of the acquisition and construction
of an ethanol production facility in Otter Tail County, Minnesota, for which
the Loans to Borrower are being made hereunder.


 


“Project Costs” means the total of all costs of acquiring the
Real Property and constructing the Project as identified in the Project Sources
and Uses Statement, together with all Loan and Carrying Charges.


 


“Project Sources and Uses Statement” means the statement
attached hereto as Exhibit B which identifies the sources and uses
of monies in a total amount of $126,857,970 related to the Project.


 


“Property” shall have the meaning set forth in the Recitals to
this Agreement.


 


“Qualified Active Low-Income Community Business” or “QALICB”
means as defined in Section 45D(d) of the Code and the Treasury
Regulations and Guidance, with respect to any taxable year, a Qualified
Business of which:


 


(a)           at least fifty percent (50%) of the total gross income of
the Qualified Business will be derived from the active conduct of its trade or
business within the Census Tract;


 


(b)           at least forty percent (40%) of the use of the tangible
property of the Qualified Business (whether owned or leased) will be within the
Census Tract (for purposes of this representation, the percentage of tangible
property owned or leased by the Qualified Business and used by the Qualified
Business during the taxable year in the Census Tract shall be determined based
on a fraction (i) the numerator of which is the Average Value of the
tangible property used by the Qualified Business within the Census Tract, and (ii) the
denominator of which is the Average Value of all of the tangible property owned
or leased by the Qualified Business and used by the Qualified Business during
the taxable year); provided,


 


14

















 


however, that for any taxable year in which the Qualified Business has
no employees, at least eighty-five percent (85%) of the use of the tangible
property of the Qualified Business (whether owned or leased) will be within the
Census Tract;


 


(c)           less than five percent (5%) of the average of the
unadjusted basis of the property of the Qualified Business is attributable to
Nonqualified Financial Property;


 


(d)           at least forty percent (40%) of the services performed for
the Qualified Business by its employees, if any, will be within the Census
Tract (for purposes of this representation, this percentage is determined based
on a fraction (the numerator of which is the total amount paid by the Qualified
Business for employee services performed in the Census Tract during the taxable
year, and the denominator of which is the total amount paid by the Qualified
Business for employee services during the taxable year); and


 


(e)           less than five percent (5%) of the aggregate unadjusted
basis of the Qualified Business’s property is attributable to Collectibles.


 


“Qualified Business” means as defined in Treas. Reg. Section 1.45D-1(d)(5),
any trade or business except (a) the rental of Residential Rental
Property; (b) any trade or business consisting predominantly of the
development or holding of intangibles for sale or license; (c) any trade
or business consisting of the operation of any private or commercial golf
course, country club, massage parlor, hot tub facility, suntan facility,
racetrack or other facility used for gambling, or any store the principal
business of which is the sale of alcoholic beverages for consumption off
premises; or (d) any trade or business the principal activity of which is
farming.


 


“Qualified Equity Investment” or “QEI” means as defined
in Section 45D(b) of the Code and the Treasury Regulations and
Guidance, any equity investment in Lender if (a) such investment is
acquired by the Fund at its original issue (directly or through an underwriter)
solely in exchange for cash; (b) substantially all of such cash is used by
Lender to make QLICIs; and (c) such investment is designated by Lender as
a “qualified equity investment.” “QLICI” means a “qualified low-income
community investment,” as such term is defined in Section 45D of the Code
and the Treasury Regulations and Guidance, made by a CDE, and includes:


 


(a)           any capital or equity investment in, or loan to, any
QALICB;


 


(b)           the purchase of certain loans from other qualified
community development entities (as described in Treas. Reg. Section 1.45D-1(d)(1)(ii));


 


(c)           “financial counseling and other services” (as defined in
Treas. Reg. Section 1.45D-l(d)(7)); and


 


15

















 


(d)           investments in or loans to other qualified community development
entities (as described in Treas. Reg. Section 1.45D-l(d)(l)(iv)).


 


“Real Property” means that real property located in Otter Tail
County, Minnesota, owned by the Borrower, upon which the Project is to be
constructed and which is described in Schedule 3.01(d).


 


“Residential Rental Property” means as defined in Section 168(e)(2)(A) of
the Code, any building or structure if eighty percent (80%) or more of the
gross rental income from such building or structure for the taxable year is
rental income from “dwelling units.” For such purpose, a “dwelling unit” means
a house or apartment used to provide living accommodations in a building or
structure, but does not include a unit in a hotel, motel, or other
establishment more than one half (1/2) of the units in which are used on a
transient basis. If any portion of the building or structure is occupied by the
taxpayer, the gross rental income for such building or structure includes the
rental value of the portion so occupied.


 


“SARA” means the Superfund Amendment and Reauthorizations Act of
1986, as amended.


 


“Security Agreement” means and includes, without limitation, any
agreements, promises, covenants, arrangements, understandings, or other
agreements, whether created by law, contract, or otherwise, which evidence,
govern, represent, or create a Security Interest, as the same has been and may
hereafter be amended or otherwise modified.


 


“Security Interest” means and includes without limitation any
type of collateral security, whether in the form of a lien, charge, mortgage,
assignment of rents, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt,
lien or title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever, whether created by
law, contract, or otherwise.


 


“Separate Collateral” means and includes all of the Borrower’s (i) Accounts,
(ii) Inventory, (iii) Chattel Paper, (iv) Instruments, (v) Deposit
Accounts and (vi) Payment Intangibles, whether now existing or hereafter
acquired, and the proceeds and products thereof (as such terms are defined in
the UCC) which are security solely with respect to the AgStar Loans.


 


“Subordinated Financing” has the meaning set forth in the
Recitals.


 


“Sworn Construction Statement” means a sworn construction
statement, sworn to by the Borrower and the Prime Contractor, and of a form and
substance acceptable to the Lender, a sample of which is attached hereto as Exhibit F.


 


“Tangible Net Worth” means the excess of total assets over total
liabilities, total assets and total liabilities each to be determined in
accordance with generally accepted accounting principles consistent with those
applied in the preparation of the financial statements referred


 


16

















 


to in Section 5.01(c) for the Borrower, excluding, however,
from the determination of total assets: (i) goodwill, organizational
expenses, research and development expenses, trademarks, trade names,
copyrights, patents, patent applications, licenses and rights in any thereof,
and other similar intangibles; (ii) treasury stock; (iii) securities
which are not readily marketable; (iv) cash held in a sinking or other
analogous fund established for the purpose of redemption, retirement or
prepayment of capital stock; (v) any write-up in the book value of any
asset resulting from a revaluation thereof subsequent to the Closing Date; (vi) amortized
start-up costs; and (vii) any items not included in clauses (i) through
(vi) above which are treated as intangibles in conformity with generally
accepted accounting principles.


 


“Tangible Owner’s Equity” means the Tangible Net Worth plus
Subordinated Debt divided by total assets, measured annually at the end of each
fiscal year, and expressed as a percentage.


 


“Tax Distributions” has the meaning specified in Section 5.02(b).


 


“Tenant Qualified Business” means any trade or business of a
tenant or subtenant of the Property except any trade or business consisting of
the operation of any private or commercial golf course, country club, massage
parlor, hot tub facility, suntan facility, race track or other facility used
for gambling, any store the principal business of which is the sale of
alcoholic beverages for consumption off premises, funeral establishment, pawn
shop, primarily pool or billiard establishment, shooting gallery, adult
bookstore or facility selling or displaying pornographic books, literature, or
videotapes (materials shall be considered “adult” or “pornographic” for such
purpose if the same are not available for sale or rental to children under 18
years old because they explicitly deal with or depict human sexuality), bingo
or similar games of chance, but lottery tickets and other items commonly sold
in retail establishments may be sold as an incidental part of the business, or
video game or amusement arcade, except as an incidental part of another primary
business.


 


“Trustee” shall mean the trustee appointed to act as “trustee”
pursuant to the Trust Indenture to be entered into by and between the County
and U.S. Bank National Association, providing for the issuance of the
$20,000,000 Otter Tail County Subordinate Exempt Facility Revenue Bonds (Otter
Tail Ag Enterprises, LLC Ethanol Plant Project), Series 2007.


 


“USA Patriot Act” shall mean the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001, Pub. L. No. 107 56, 115 Stat. 272 (2001), as
amended from time to time.


 


“USBCDC” has the meaning set forth in the Recitals.


 


“Working Capital” means current assets of the Borrower less the
sum of (i) current liabilities of the Borrower (ii) plus any unused
balance of the Term Revolving Loan (defined in the AgStar Loan Documents) as
determined in accordance with GAAP.


 


17

















 


Section 1.02. Accounting
Matters. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP, except as otherwise stated herein.
To enable the ready and consistent determination of compliance by the Borrower
with its obligations under this Agreement, the Borrower will not change the
manner in which either the last day of its fiscal year or the last days of the
first three fiscal quarters of its fiscal years is calculated.


 


Section 1.03. Construction.
Wherever herein the singular number is used, the same shall include the
plural where appropriate, and words of any gender shall include each other
gender where appropriate. The headings, captions or arrangements used in any of
the Loan Documents are, unless specified otherwise, for convenience only and
shall not be deemed to limit, amplify or modify the terms of the Loan
Documents, nor affect the meaning thereof.


 


ARTICLE II


AMOUNTS AND TERMS OF THE LOANS


 


Section 2.01. Construction
Loan.  Subject to the terms and conditions of this Agreement and
in reliance upon the representations and warranties set forth in this
Agreement, the Lender has agreed to lend to Borrower and Borrower has agreed to
borrow from Lender an amount not to exceed $19,175,000 for Project Costs. Such
amount shall be loaned by Lender pursuant to the terms and conditions set forth
in this Agreement and the Notes. Amounts borrowed and repaid or prepaid may not
be re-borrowed. Advances under the Construction Loan may be used to fund the
payment of Project Costs, including closing costs and fees associated with the
Construction Loan. The Borrower agrees that the proceeds of the Construction
Loan are to be used only for the purposes set forth in this Agreement and the
Loan Documents.


 


Section 2.02. Terms. The
Default Rate, Late Charge, and terms of payment and prepayment are set forth in
the Notes and incorporated herein by reference.


 


Section 2.03. Proceeds of
Collateral. All proceeds received by the Lender from the sale or
other liquidation of the Collateral when an Event of Default exists shall first
be applied as payment of the accrued and unpaid fees and expenses of the Lender
hereunder, including, without limitation, under Section 7.04 and then to
all other unpaid or unreimbursed Loan Obligations (including reasonable
attorneys’ fees and expenses) owing to the Lender and then any remaining amount
of such proceeds shall be applied to the unpaid amounts of Loan Obligations,
until all the Loan Obligations have been paid and satisfied in full or cash
collateralized. After all the Loan Obligations (including without limitation,
all contingent Loan Obligations) have been paid and satisfied in full, and all
other obligations of the Lender to the Borrower otherwise satisfied, any
remaining proceeds of Collateral shall be delivered to the Person entitled
thereto as directed by the Borrower or as otherwise determined by applicable
law or applicable court order.


 


Section 2.04. Maximum Amount
Limitation. Anything in this Agreement, any Note, or the other
Loan Documents to the contrary notwithstanding, Borrower shall not be required
to pay unearned interest on any Note or any of the Loan Obligations, or ever be
required to pay interest on any Note or any of the Loan Obligations at a rate
in excess of the Maximum Rate, if any. If the


 


18

















 


effective
rate of interest which would otherwise be payable under this Agreement, any
Note or any of the other Loan Documents would exceed the Maximum Rate, if any,
then the rate of interest which would otherwise be contracted for, charged, or
received under this Agreement, any Note or any of the other Loan Documents
shall be reduced to the Maximum Rate, if any. If any unearned interest or
discount or property that is deemed to constitute interest (including, without
limitation, to the extent that any of the fees payable by Borrower for the Loan
Obligations to the Lender under this Agreement, any Note, or any of the other
Loan Documents are deemed to constitute interest) is contracted for, charged,
or received in excess of the Maximum Rate, if any, then such interest in excess
of the Maximum Rate shall be deemed a mistake and canceled, shall not be collected
or collectible, and if paid nonetheless, shall, at the option of the holder of
such Note, be either refunded to the Borrower, or credited on the principal of
such Note. It is further agreed that, without limitation of the foregoing and
to the extent permitted by applicable law, all calculations of the rate of
interest or discount contracted for, charged or received by the Lender under
the Notes, or under any of the Loan Documents, that are made for the purpose of
determining whether such rate exceeds the Maximum Rate applicable to the
Lender, if any, shall be made, to the extent permitted by applicable laws (now
or hereafter enacted), by amortizing, prorating and spreading during the period
of the full terms of the Advances evidenced by the Notes, and any renewals
thereof all interest at any time contracted for, charged or received by Lender
in connection therewith. This Section 2.04 shall control every other
provision of all agreements among the parties to this Agreement pertaining to
the transactions contemplated by or contained in the Loan Documents, and the
terms of this Section 2.04 shall be deemed to be incorporated in every
Loan Document and communication related thereto.


 


Section 2.05. Lender Records.
All Advances and all payments or prepayments made thereunder on account of
principal or interest may be evidenced by the Lender in accordance with its
usual practice in an account or accounts evidencing such Advances and all
payments or prepayments thereunder from time to time and the amounts of principal
and interest payable and paid from time to time thereunder; in any legal action
or proceeding in respect of the Notes, the entries made in such account or
accounts shall be prima facie evidence of the existence and amounts of
all Advances and all payments or prepayments made thereunder on account of
principal or interest. Lender shall provide monthly statements of such entries
to Borrower for the purpose of confirming the accuracy of such entries.


 


Section 2.06 Cut-Off Date.
All disbursements of the Construction Loan must be made on or before the
Cut-Off Date. If any portion of the Construction Loan has not been disbursed on
or before the Cut-Off Date, such portion shall be funded into a restricted
account of Borrower at US Bank National Association, which account shall be
pledged to Lender pursuant to a bank account pledge agreement and shall be
subject to a pledged account control agreement in favor of Lender and in form
and substance satisfactory to Lender in its sole discretion. The amount of the
Construction Loan that is funded into the account described in this Section 2.06
shall bear interest at the rate or rates set forth in the Notes. No funds may
be withdrawn from said account without the prior written approval of Lender
(which must countersign all checks drawn on said account) in accordance with
the Disbursing Agreement.


 


19

















 


Section 2.07 Withholding Taxes.
All payments by the Borrower of amounts payable under any Loan Document shall
be payable without deduction for or on account of any present or future taxes,
duties, or other charges levied or imposed by any governmental authority
through withholding or deductions with respect to any such payments (but
excluding any tax imposed on or measured by the net income or profit of the
Lender) (all such taxes, duties or other charges giving effect to the taxes
excluded pursuant to the foregoing parenthetical herein the “Non-Excluded Taxes”).
If any Non-Excluded Taxes are so levied or imposed, the Borrower shall make
additional payments in such amounts so that every net payment of amounts
payable by the Borrower under any Loan Document, after withholding or deduction
for or on account of any Non-Excluded Taxes, will be equal to the amount
provided for herein or therein; provided that the Borrower may withhold to the
extent required by law and shall have no obligation to pay such additional
amounts to the Lender to the extent that such Non-Excluded Taxes are United
States withholding taxes imposed (or branch profits taxes imposed in lieu
thereof) on amounts payable to the Lender, except to the extent that the Lender’s
assignor (if any) was entitled, at the time of assignment, to receive
additional amounts from the Borrowers with respect to such Non-Excluded Taxes
pursuant to this Section 2.07. The Borrower shall furnish promptly to the
Lender, as the case may be, official receipts evidencing any such withholding
or reduction.


 


ARTICLE III.


CONDITIONS PRECEDENT AND DISBURSEMENTS


 


Section 3.01. Conditions Precedent to
Funding. The obligations of the Lender to make any Advance, are
subject to the conditions precedent that the Lender shall have received the
following, in form and substance satisfactory to the Lender:


 


(a)           This
Agreement, duly executed by the Borrower and the Lender;


 


(b)           The
Notes duly executed by the Borrower;


 


(c)           The
Mortgage, fully executed and notarized, to secure the MMCDC Senior Loan
encumbering on a shared first lien basis the fee interest and/or leasehold
interest of the Borrower in the Real Property and the fixtures thereon
described in Schedule 3.01 (d);


 


(d)           A
Security Agreement duly executed by the Borrower and in a form as provided by
the Lender by which security agreement the Lender is granted a security
interest by the Borrower in the Collateral;


 


(e)           An
Environmental Indemnity Agreement, fully executed by the Borrower and in a form
as provided by the Lender;


 


(f)            A
copy of the Construction Contract(s) and a complete set of the Plans and
Specifications, together with copies of all permits and government approvals
relating to the construction and use of the Project;


 


20

















 


(g)           An
assignment of contract for each of the Construction Contracts and the Plans and
Specifications, duly executed by the Borrower and pursuant to which the
Borrower shall have assigned to the Lender all of the Borrower’s right, title
and interest in and to each such Construction Contract, and which assignment
shall have been consented to and certified in writing by the other party (ies) to each such
Construction Contract;


 


(h)           Copies
of all Material Contracts between Borrower and third parties used in the normal
operations of Borrower, including but not limited to management agreements,
marketing agreements, and corn delivery agreements;


 


(i)            Assignments
of the Material Contracts between Borrower, duly executed by the Borrower and
pursuant to which the Borrower shall have assigned to the Lender all of the
Borrower’s right, title and interest in and to each such contracts, and which
assignment shall have been consented to and certified in writing by the other
party(ies) to each such contract;


 


(j)            Financing
Statements in form and content satisfactory to the Lender and in proper form
under the Uniform Commercial Code of all jurisdictions as may be necessary or,
in the opinion of the Lender, desirable to perfect the security interests
created by the Security Agreement;


 


(k)           Copies
of UCC, tax and judgment lien search reports listing all financing statements
and other encumbrances which name the Borrower and which are filed in the
jurisdictions in which the Borrower is located, organized or maintains
collateral, together with copies of such financing statements (none of which,
except for the Parity Lien and Permitted Liens, shall cover the collateral
purported to be covered by the Security Agreement);


 


(1)           Evidence
that all other actions necessary or, in the opinion of the Lender, desirable to
enable the Lender to perfect and protect the Security Interests created or
contemplated by the Loan Documents have been taken;


 


(m)          An
ALTA mortgagee title insurance policy issued by a title insurance company
acceptable to Lender, with respect to the Real Property, assuring the Lender
that the Mortgage creates a valid and enforceable encumbrance on the Real
Property, free and clear of all defects and encumbrances except Permitted Liens
and containing: (i) a comprehensive endorsement (ALTA form 9); (ii) a
zoning endorsement (ALTA form 3.1) specifying an ethanol production facility as
a permitted use for all of the parcels included in the Real Property; and (iii) a
restrictions, encroachments, minerals-owners endorsement (ALTA Form 9.2)
and (iv) such endorsements as the Lender shall reasonably require. All
such title insurance policies shall be in form and substance reasonably
satisfactory to the Lender and shall provide for affirmative insurance and such
reinsurance as the Lender may reasonably request, all of the foregoing in form
and substance reasonably satisfactory to the Lender;


 


(n)           Maps
or plats of the Real Property certified to the Lender and the title insurance
company issuing the policy referred to in Subsection 3.01(m) (the “Title Insurance Company”) in a manner reasonably
satisfactory to each of the Lender and the Title Insurance Company, dated a
date


 


21

















 


reasonably satisfactory to
each of the Lender and the Title Insurance Company by an independent
professional licensed land surveyor, which maps or plats and the surveys on
which they are based shall be sufficient to delete any standard printed survey
exception contained in the applicable title policy and be made in accordance
with the Minimum Standard Detail Requirements for Land Title Surveys jointly
established and adopted by the American Land Title Association and the American
Congress on Surveying and Mapping in 1992, and, without limiting the generality
of the foregoing, there shall be surveyed and shown on such maps, plats or
surveys the following: (i) the locations on such sites of all the
buildings, structures and other improvements and the established building
setback lines; (ii) the lines of streets abutting the sites and width
thereof; (iii) all access and other easements appurtenant to the sites
necessary to use the sites; (iv) all roadways, paths, driveways,
easements, encroachments and overhanging projections and similar encumbrances
affecting the site, whether recorded, apparent from a physical inspection of
the sites or otherwise known to the surveyor; (v) any encroachments on any
adjoining property by the building structures and improvements on the sites;
and (vi) if the site is described as being on a filed map, a legend
relating the survey to said map;


 


(o)           Evidence
as to: (i) whether any portion of the Real Property is in an area
designated by the Federal Emergency Management Agency as having special flood
or mud slide hazards (a “Flood Hazard
Property”);  and (ii) if any portion of the
Real Property is a Flood Hazard Property: (A) whether the community in
which such Real Property is located is participating in the National Flood
Insurance Program; (B) the Borrower’s written acknowledgment of receipt of
written notification from the Lender (1) as to the fact that such Real
Property is a Flood Hazard Property and (2) as to whether the community in
which each such Flood Hazard Property is located is participating in the
National Flood Insurance Program; and (C) copies of insurance policies or
certificates of insurance of the Borrower evidencing flood insurance
satisfactory to the Lender and naming the Lender as sole loss payee on behalf
of the Lender;


 


(p)           Evidence
reasonably satisfactory to the Lender that the Real Property and the
contemplated use of the Real Property, are in compliance in all material
respects with all applicable zoning laws or ordinances and all applicable
Environmental Laws, including, but not limited to all concentrated animal
feedlot operations rules and regulations, erosion control ordinances,
storm drainage control laws, doing business and/or licensing laws, zoning laws
(the evidence submitted as to zoning should include the zoning designation made
for the Real Property, the permitted uses of the Real Property under such
zoning designation and zoning requirements as to parking, lot size, ingress, egress
and building setbacks) and laws regarding access and facilities for disabled
persons including, but not limited to, the Federal Architectural Barriers Act,
the Fair Housing Amendments Act of 1988, the Rehabilitation Act of 1973 and the
Americans with Disabilities Act of 1990;


 


(q)           A
certificate of the secretary of the Borrower together with true and correct
copies of the following: (i) the Articles of Organization of the Borrower,
including all amendments thereto, certified by the Office of the Secretary of
State of the state of its incorporation and dated within 30 days prior to the
date hereof; (ii) the Operating Agreement of the Borrower, including all
amendments thereto; (iii) the resolutions of the Board of Governors of the
Borrower authorizing the execution, delivery and performance of this Agreement,
the other Loan Documents, and all


 


22

















 


documentation executed and
delivered in connection therewith to which the Borrower is a party; (iv) certificates
of the appropriate government officials of the state of organization of the
Borrower as to its existence and good standing, and due qualification to do
business in such state, dated within 30 days prior to the date hereof; and (v) the
names of the officers of the Borrower authorized to sign this Agreement and the
other Loan Documents to be executed by each corporate Borrower, together with a
sample of the true signature of each such officer;


 


(r)            Legal
opinion of Pemberton, Sorlie, Rufer & Kershner, PLLP, legal counsel
for the Borrower, substantially in the form attached hereto as Exhibit C;


 


(s)           The
Intercreditor Agreement executed by all parties.


 


(t)            Evidence
that the costs and expenses (including, without limitation, reasonable attorney’s
fees) referred to in Section 7.04, to the extent incurred and invoiced,
shall have been paid in full;


 


(u)           The
results of the Lender’s inspection of the Collateral, and the Lender’s receipt
of an appraisal of the Collateral acceptable to Lender in its sole discretion;


 


(v)           Satisfactory
review by the Lender of any pending litigation relating to the Borrower;


 


(w)          A
Phase I Environmental Assessment in form and substance reasonably acceptable to
the Lender;


 


(x)            The
Borrower shall have ordered the Prime Contractor and other Contractors to begin
construction of the Project, and construction shall have commenced;


 


(y)           A
schedule, certified by Borrower as accurate and complete, setting forth: (i) the
necessary licenses, permits and consents required by applicable federal, state,
and local governmental entities required for the lawful construction and
operation of the Project; and (ii) the deadlines to obtain such licenses,
permits and consents so that the Completion Date occurs as scheduled;


 


(z)            Lender
shall have received in form and substance reasonably acceptable to Lender, an
agreement with an Inspecting Engineer of recognized standing and acceptable to
Lender, by which agreement such Inspecting Engineer agrees to assist Lender in
its inspection of the Project during construction, review and approve requests
for Advances on the Construction Loan on behalf of Lender, and provide such
additional services as Lender may reasonably require at the sole expense of
Borrower;


 


(aa)         The
Borrower shall have provided evidence of commitment to the Lender of its
Borrower’s Equity to the Project;


 


(bb)         Evidence
that the insurance required by the Loan Documents has been obtained by the
Borrower;


 


23
















 


(cc)          An
assignment of the Borrower’s business interruption insurance policy, duly
executed by the Borrower and pursuant to which the Borrower shall have assigned
to the Lender all of the Borrower’s right, title and interest in and to it’s
business interruption insurance policy, and which assignment shall have been
consented to and certified in writing by the other party(ies) to the insurance
policy; and,


 


Section 3.02       Disbursement of
Construction Loan.


 


(a)        Disbursing
Account. Disbursements of the Construction Loan will be made
by the Lender in the manner provided in the Disbursing Agreement. All
disbursements will be made by wire transferring such funds to the Disbursing
Account established pursuant to the Disbursing Agreement in the amount of each
Draw Request which is approved pursuant to the Disbursing Agreement. All
Construction Loan funds will be considered to have been advanced to and
received by the Borrower upon, and interest on such funds will be payable by
the Borrower from and after, their deposit in such deposit account. Unless
otherwise approved by Lender, the Loans will be advanced in no more than four
separate disbursements. Advances will be made from the proceeds of each of the
MMCDC Senior Loan Note and MMCDC Subordinate Loan Note pro rata based on the
maximum principal amount of each of the Notes.


 


(b)        Lender’s Application of Loan Proceeds. The
Lender may elect, upon ten (10) days’ notice to the Borrower, to use the
Construction Loan funds to pay, as and when due, any Construction Loan fees owing
to Lender, interest on the Construction Loan, release charges under prior
mortgages on the Property, and reasonable legal fees and disbursements of the
Lender’s attorneys which are payable by the Borrower, unless Borrower causes
such amount(s) to be paid within said ten (10) days. Such payments
may be made, at the option of the Lender, by debiting or charging the
Construction Loan funds in the amount of such payments, and if required by
Lender by transferring funds to the Disbursing Account and charging these fees
and costs against such funds.


 


(c)        Cost Information. All disbursements
will be based upon a detailed breakdown of the Project Costs as set forth in
the Sworn Construction Statement attached as Exhibit A to this Agreement.
In the event that the Borrower becomes aware of any change in the approved
Project Costs, which would increase the total cost in excess of $50,000 above
the amount shown on the attached Sworn Construction Statement, the Borrower
shall immediately notify the Lender in writing and promptly submit to the
Lender for its approval a revised Sworn Construction Statement. No further
disbursements need be made by the Disbursing Agent unless and until the revised
Sworn Construction Statement is approved. The Lender reserves the right to
approve or disapprove any revised Sworn Construction Statement in its
reasonable discretion.


 


(d)        Loan in Balance, Deposit of Funds by Borrower.
The Borrower shall keep the Loan in balance as provided in this Section. If
the Lender at any time reasonably determines that the amount of the undisbursed
Construction Loan proceeds and the proceeds of other project funding sources
will not be sufficient to fully pay for all costs required to complete the
construction of the


 


24

















 


Project
in accordance with the approved Plans and Specifications and for all Project
Costs to be incurred by the Borrower, whether such deficiency is attributable
to changes in the work of construction or in the Plans and Specifications or to
any other cause, the Lender may make written demand on the Borrower to deposit
in the Disbursing Account an amount equal to the amount of the shortage
reasonably determined by the Lender. The Borrower shall then deposit the
required funds within ten (10) days after the date of the Lender’s written
demand. No further disbursements shall be made by the Disbursing Agent until
those funds are deposited by the Borrower in the Disbursing Account. Whenever
the Lender has any such funds on deposit in the Disbursing Account, it shall
make all future advances for Project Costs from such funds before making any
further advances under the Loan.


 


(e)        Conditions Precedent to Construction Advances.
The Lender’s obligation to make Construction Advances under the Notes shall
be subject to the terms, conditions and covenants set forth in this Agreement,
including, without limitation, the following further conditions precedent:


 


(i)         Representations and Warranties. The representations
and warranties set forth in this Agreement are true and correct in all material
respects as of the date of the request for any Advance, except as disclosed in
writing to the Lender, to the same extent and with the same effect as if made
at and as of the date thereof;


 


(ii)        Draw Request. The Borrower has submitted to the Lender
and the Disbursing Agent a Draw Request for each such Construction Advance,
which such Draw Request shall comply with the requirements contained in this
Agreement and the Disbursing Agreement;


 


(iii)       Compliance With Disbursing Agreement. All of the terms
and conditions of the Disbursing Agreement have been satisfied with respect to
each such Construction Advance;


 


(iv)       Sworn Construction Statement. The Borrower shall
furnish to the Lender an updated Sworn Construction Statement setting forth the
Contractor(s) providing services or materials with respect to
specific portions of the construction of the Project and setting forth the
amounts actually incurred and paid, or to be incurred, in completing
construction of the Project. Such updated Sworn Construction Statement shall be
sworn to by the Borrower and the Prime Contractor to be a true, complete and
accurate account of all costs actually incurred and an accurate estimate of all
costs to be incurred in the future;


 


(v)        No Defaults. The Borrower is not in default under the
terms of this Agreement, the Loan Documents or any other agreement to which the
Borrower is a party and which relates to the construction of the Project;


 


(vi)       Loan in Balance. The Loan is in balance, as required by
the provisions of Section 3.02(d), above;


 


25

















 


(vii)      Government Action. No license, permit, permission or
authority necessary for the construction of the Project has been revoked or
challenged by or before any Governmental Authority;


 


(f)         Suspension of Construction. If the
Lender in reasonably good faith determines that any work or materials do not
conform to the approved Plans and Specifications or sound building practice, or
otherwise departs from any of the requirements of this Agreement, the Lender
may require the work to be stopped and withhold disbursements until the matter
is corrected. In such event, the Borrower will promptly correct the work to the
Lender’s reasonable satisfaction. Provided Lender’s actions were reasonable, in
good faith, and the work or materials did not conform to the approved Plans and
Specifications or sound building practice, no such action by the Lender will
affect the Borrower’s obligation to complete the Project on or before the
Completion Date.


 


(g)        Inspections. The Borrower and the
Inspecting Engineer shall be responsible for making inspections of the Project
during the course of construction and shall determine to their own satisfaction
that the work done or materials supplied by the Contractors to whom payment is
to be made out of each Advance has been properly done or supplied in accordance
with the applicable contracts with such Contractors. If any work done or
materials supplied by a Contractor are not reasonably satisfactory to the
Borrower or the Inspecting Engineer, the Borrower will immediately notify the
Lender in writing of such fact. It is expressly understood and agreed that the
Lender or its authorized representative may conduct such inspections of the
Project as it may deem necessary for the protection of the Lender’s interest,
and, specifically, an architectural or engineering firm acceptable to the
Lender may, at the option of the Lender and at the expense of the Borrower,
conduct such periodic inspections of the Project, prepare such written progress
reports during the period of construction, prepare such written reports upon
completion of the Project and sign such Draw Requests, as the Lender may
reasonably request, provided that no inspection shall unreasonably delay
progress on the Project. Any inspections which may be made of the Project by
the Lender or its representative will be made, and all certificates issued by
the Lender’s representative will be issued, solely for the benefit and protection
of the Lender, and that Borrower will not rely thereon. The Lender is under no
duty to supervise or inspect construction or examine any books and records. Any
inspection or examination by the Lender is for the sole purpose of protecting
the Lender’s security and preserving the Lender’s rights under this Agreement.
No default of the Borrower will be waived by any inspection by the Lender. In
no event will any inspection by the Lender be a representation that there has
been or will be compliance with the Plans or Specifications or that the
construction is free from defective materials or workmanship.


 


(h)        No Waiver. Any waiver by the Lender
of any condition of disbursement must be expressly made in writing. The making
of a disbursement prior to fulfillment of one or more conditions thereof shall
not be construed as a waiver of such conditions, and the Lender reserves the
right to require their fulfillment prior to making any subsequent
disbursements.


 


26

















 


ARTICLE IV.


REPRESENTATIONS AND WARRANTIES


 


Section 4.01       Representations and
Warranties of the Borrower. 
The Borrower represents and warrants as follows:


 


(a)        Borrower. The Borrower is a limited
liability company duly organized and validly existing and in good standing
under the laws of the State of Minnesota and is qualified to do business in all
jurisdictions in which the nature of its business makes such qualification
necessary and where failure to so qualify would have a Material Adverse Effect
on its respective financial condition or operations. The Borrower has the power
and authority to own and operate its assets and to carry on its business and to
execute, deliver, and perform its obligations under the Loan Documents to which
it is or may become a party. There are no outstanding subscriptions, options,
warrants, calls, or rights (including preemptive rights) to acquire, except as
may be set forth in the Operating and Member Control Agreement of Borrower, and
no outstanding securities or instruments convertible into, membership interests
(units) of the Borrower, except for those transactions set forth on Schedule
4.01(a);


 


(b)        The Loan Documents. The execution,
delivery and performance by the Borrower of the Loan Documents are within the
Borrower’s powers, have been duly authorized by all necessary action, do not
contravene: (i) the articles of organization or operating agreements of
the Borrower; or (ii) any law or any contractual restriction binding on or
affecting the Borrower, and do not result in or require the creation of any
lien, security interest or other charge or encumbrance (other than pursuant to
the terms thereof) upon or with respect to any of its properties;


 


(c)        Governmental Approvals. No consent,
permission, authorization, order or license of any Governmental Authority or of
any party to any agreement to which the Borrower is a party or by which it or
any of its property may be bound or affected, is necessary in connection with
the construction of the Project, the execution, delivery, performance or
enforcement of the Loan Documents or the creation and perfection of the liens
and security interest granted thereby, except as such have been obtained and
are in full force and effect or which are required in connection with the
exercise of remedies hereunder and except as such that are not required for the
construction of the Project;


 


(d)        Enforceability. This Agreement is,
and each other Loan Document to which the Borrower is a party when delivered
will be, legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms, except as may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting the enforcement of creditor’s rights generally and by
general principles of equity;


 


(e)        Financial Condition and Operations.
The balance sheet of the Borrower, as of September 30, 2006, and, with
respect to the period ended September 30, 2006 the related statement of
cash flow of the Borrower for the fiscal period then ended, copies of which
have been furnished to the Lender, fairly present in all material respects the
financial condition of the Borrower as at such date, and the results of the
operations of the Borrower for the period ended on such dates and since
September 30, 2006, there has been no material adverse change in such
condition or operations;


 


27

















 


(f)         Litigation. Except as described on Schedule
4.01(f), there is no pending or threatened action or proceeding affecting
the Borrower or any of the transactions contemplated hereby before any court,
governmental agency or arbitrator, which may materially adversely affect the
financial condition or operations of the Borrower. As of the Closing Date,
there are no outstanding judgments against the Borrower;


 


(g)        Use of Proceeds of Advances, etc.
(i) No proceeds of the Loans will be used to acquire any security in any
transaction which is subject to Sections 13 and 14 of the Securities Exchange
Act of 1934 (provided, however, that this provision shall not prohibit Borrower
from investing in certain value added cooperatives for the purposes of carrying
out its overall business operations subject to compliance with the NMTC Program
Requirements and the Borrower’s NMTC covenants pursuant to this Agreement);
(ii) the Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal Reserve System);
and (iii) no proceeds of the Loans will be used to purchase or carry any
margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock;


 


(h)        Liens. Except as created by the
Loan Documents or in connection with the Subordinated Debt, and not including
the Parity Lien or the Permitted Liens, there is no lien, security interest or
other charge or encumbrance, and no other type of preferential arrangement,
upon or with respect to any of the properties or income of the Borrower, which
secures Debt of any Person, except as described in Schedule 5.02(a);


 


(i)         Taxes. The Borrower has filed or
caused to be filed all federal, state and local tax returns that are required
to be filed and has paid all other taxes, assessments, and governmental charges
or levies upon it and its property, income, profits and assets which are due
and payable, except where the payment of such tax, assessment, government
charge or levy is being contested in good faith and by appropriate proceedings
and adequate reserves in compliance with GAAP have been set aside on the
Borrower’s books therefore;


 


(j)         Solvency. As of and from and after
the date of this Agreement, the Borrower: (i) owns and will own assets the
fair saleable value of which are: (A) greater than the total amount of
liabilities (including contingent liabilities); and (B) greater than the
amount that will be required to pay the probable liabilities of its then
existing debts as they become absolute and matured considering all financing
alternatives and potential asset sales reasonably available to it;
(ii) has capital that is not unreasonably small in relation to its
business as presently conducted or any contemplated or undertaken transaction;
and (iii) does not intend to incur and does not believe that it will incur
debts beyond its ability to pay such debts as they become due;


 


(k)        Intentionally omitted;


 


(l)         Office Locations; Fictitious Names; Predecessor
Companies; Tax I.D. Number. The Borrower’s chief place of business,
its chief executive office, and its jurisdiction of


 


28

















 


organization
is located at the place identified for the Borrower on Schedule 4.01(l).
Within the last four months it has not had any other chief place of business,
chief executive office, or jurisdiction of organization. Schedule 4.01(l) also
sets forth all other places where the Borrower keeps its books and records and
all other locations where the Borrower has a place of business. The Borrower
does not do business nor has the Borrower done business during the period since
its organization under any trade-name or fictitious business name. The
Borrower’s United States Federal Income Tax ID Number and state organizational
identification number are identified on Schedule 4.01(l);


 


(m)       Title to Properties. The Borrower has
such title or leasehold interest in and to the Real Property owned or leased by
it as is necessary or desirable to the conduct of its business and valid and
legal title or leasehold interest in and to all of its Personal Property,
including those reflected on the financial statements of the Borrower
previously delivered to Lender, except those which have been disposed of by the
Borrower subsequent to the date of such delivered financial statements which
dispositions have been in the ordinary course of business or as otherwise
expressly permitted hereunder;


 


(n)        Disclosure. All material factual
information furnished by or on behalf of the Borrower in writing to the Lender
(including, without limitation, all factual information contained in the Loan
Documents) for purposes of or in connection with this Agreement, the other Loan
Documents or any transaction contemplated herein or therein is, and all other
such factual information hereafter furnished by or on behalf of the Borrower to
the Lender, will be true and accurate in all material respects on the date as
of which such information is dated or certified and not incomplete by omitting
to state any fact necessary to make such information not misleading in any
material respect at such time in light of the circumstances under which such
information was provided;


 


(o)        Operation of Business. The Borrower
possesses all licenses, permits, franchises, patents, copyrights, trademarks,
and tradenames, or rights thereto, necessary to conduct its business
substantially as now conducted and will obtain all such licenses, permits,
franchises, patents, copyrights, trademarks, and tradenames, or rights thereto
necessary to conduct its business as presently proposed to be conducted except
those that the failure to so possess could not reasonably be expected to have a
Material Adverse Effect on its financial condition or operations, and the
Borrower is not in violation of any valid rights of others with respect to any
of the foregoing except violations that could not reasonably be expected to
have such a Material Adverse Effect;


 


(p)        Intellectual Property. The Borrower
owns, or has the legal right to use, all patents, trademarks, tradenames,
copyrights, technology, know-how and processes necessary for it to conduct its
business as currently conducted and will own or obtain the legal right to use
all patents, trademarks, tradenames, copyrights, technology, know-how and
processes necessary for it to conduct its business as currently conducted
(collectively the “Intellectual Property”), except
for those the failure to own or have such legal right to use could not
reasonably be expected to have a Material Adverse Effect. As of the Closing
Date, set forth in Schedule 4.01 (p) is a list of
all Intellectual Property registered with the United States Copyright Office or
the United States Patent and Trademark Office and owned by the Borrower or that
the Borrower has the right to use. To the


 


29

















 


knowledge
of Borrower, except as provided in Schedule 4.01(p), no claim has been
asserted and is pending by any Person challenging or questioning the use of any
such Intellectual Property or the validity or effectiveness of any such
Intellectual Property, nor does the Borrower know of any such claim, and, to
the knowledge of the Borrower, the use of such Intellectual Property by the
Borrower does not infringe on the rights of any Person, except for such claims
and infringements that, in the aggregate, could not reasonably be expected to
have a Material Adverse Effect;


 


(q)        Employee Benefit Plans. The Borrower is in
compliance in all material respects with the applicable provisions of the
Employee Retirement Income Security Act of 1974, as amended, and the
regulations and published interpretations thereunder, the failure to comply
with which could have a Material Adverse Effect on the Borrower;


 


(r)         Investment Company Act. The Borrower is
not required to be registered as an “investment company” within the meaning of
the Investment Company Act of 1940, as amended;


 


(s)        Compliance with Laws. The Borrower is in
compliance in all material respects with all laws, rules, regulations,
ordinances, codes, orders, and the like, the failure to comply with which could
have a Material Adverse Effect on the Borrower;


 


(t)         Environmental Compliance. Borrower, except
as set forth in Schedule 4.01(t), is in material compliance with all
applicable Environmental Laws; and


 


(u)        Material Change. The Borrower has performed
all of its material obligations, other than those obligations for which
performance is not yet due, under all Material Contracts and, to the knowledge
of the Borrower, each other party thereto is in compliance with each such
Material Contract. Each such Material Contract is in full force and effect in
accordance with the terms thereof. The Borrower has made available a true and
complete copy of each such Material Contract for inspection by Lender.


 


(v)        Anti-Terrorism Laws. Borrower represents
and warrants to Lender that:


 


(i)         Borrower is not, to its knowledge, in violation of any
Anti-Terrorism Law.


 


(ii)        No action, proceeding, investigation, charge, claim, report,
or notice has been filed, commenced, or threatened against Borrower alleging
any violation of any Anti-Terrorism Law.


 


(iii)       Borrower has no knowledge or notice of any fact, event,
circumstance, situation, or condition which could reasonably be expected to
result in:


 


(a)        any
action, proceeding, investigation, charge, claim, report, or notice being
filed, commenced, or threatened against it alleging any violation of, or
failure to comply with, any Anti-Terrorism Law; or


 


30

















 


(b)        the
imposition of any civil or criminal penalty against Borrower for any failure to
so comply.


 


(iv)       Borrower is not a Prohibited Person. Borrower has provided
Lender with sufficient information (including names, addresses and, where
applicable, jurisdiction of formation or organization) to reasonably permit
Lender to verify this representation.


 


(v)        Borrower does not:


 


(a)        knowingly
conduct any business or engage in making or receiving any contribution of
funds, goods, or services to or for the benefit of any Prohibited Person;


 


(b)        knowingly
deal in, or otherwise engage in any transaction relating to, any property or
interests in property blocked under the Executive Order; or


 


(c)        knowingly
engage in or conspire to engage in any transaction that evades or avoids, or
has the purpose of evading or avoiding, or attempts to violate, any of the
prohibitions set forth in any Anti-Terrorism Law.


 


Section 4.02       New Markets Tax Credits. As of the
date hereof, Borrower hereby represents and warrants to Lender, as follows:


 


(a)        Borrower
is engaged solely in the ownership, development, operation and management of
the Property and does not hold any material assets unrelated to the Project.


 


(b)        With
respect to any draw pursuant to this Agreement, the Borrower reasonably expects
to (a) expend such draw on the construction of the Project within one
(1) year of such draw, or (b) reimburse itself for expenditures that
will have been previously made or will be made within one (1) year of such
draw;


 


(c)        With
respect to the current taxable year of Borrower, at least fifty percent (50%)
of the total gross income of Borrower is derived from the active conduct of its
trade or business within the Census Tract.


 


(d)        With
respect to the current taxable year of Borrower, at least forty percent (40%)
of the use of the tangible property of Borrower (whether owned or leased) is
within the Census Tract (for purposes of this representation, the percentage of
tangible property owned or leased by Borrower during the taxable year in the
Census Tract shall be determined based on a fraction (i) the numerator of
which is the Average Value of the tangible property used by Borrower within the
Census Tract, and (ii) the denominator of which is the Average Value of
all of the tangible property owned or leased by Borrower and used by Borrower
during the taxable year); provided, however, that if for the current taxable
year Borrower has no employees, at least eighty-five percent (85%) of the use
of the tangible property of Borrower (whether owned or leased) is within the


 


31

















 


Census Tract. Borrower has provided a true, correct and complete list
of tangible property owned or leased by Borrower and a description of where
such property is used by Borrower. If any property is used by the Borrower
outside of the Census Tract, Borrower has provided, the cost basis of all
property owned by Borrower and the estimated value of any leased property and
the basis of such estimate and the business hours of usage of Borrower’s
property within and without the Census Tract. Borrower shall retain records of
the foregoing throughout the NMTC Recapture Period.


 


(e)        With
respect to the current taxable year of Borrower, less than five percent (5%) of
the average of the unadjusted basis of the property of Borrower is attributable
to Nonqualified Financial Property. As of the date hereof, Borrower does not
hold any indebtedness of or equity interests in any other Person. Borrower has
provided to Lender a true, correct, and complete listing of any Nonqualified
Financial Property owned by Borrower, including therein, the unadjusted basis
of such property and shall maintain records thereof throughout the NMTC
Recapture Period.


 


(f)         With
respect to the current taxable year of Borrower, if Borrower has an employee
providing services, at least forty percent (40%) of the services performed for
Borrower by its employees (or an Affiliate’s employees, if applicable) is
within the Census Tract (for purposes of this representation, this percentage
is determined based on a fraction (the numerator of which is the total amount
paid by Borrower for employee services performed in the Census Tract during the
taxable year, and the denominator of which is the total amount paid by Borrower
for employee services during the taxable year). Borrower has provided a list of
employees providing services to the Borrower, including a general description
of services provided, and if applicable compensation paid for services rendered
within and without the Census Tract.


 


(g)        With
respect to the current taxable year of Borrower, less than five percent (5%) of
the aggregate unadjusted basis of Borrower’s property is attributable to
Collectibles.


 


(h)        The
Property is not used as Residential Rental Property. The trade or business of a
tenant or a subtenant shall consist solely of a Tenant Qualified Business.


 


(i)         With
respect to the current taxable year of Borrower, the Project constitutes a
Qualified Business.


 


(j)         No
part of the Project financing includes low-income housing tax credits.


 


(k)        The
Borrower is not an entity disregarded as separate from any other entity for
federal income tax purposes;


 


(1)        To
Borrower’s knowledge, there have been no irregularities or illegal acts that
would have a material effect on the transactions contemplated by this
Agreement, there has been no fraud involving management or employees who have
significant roles in the internal control structure of the Borrower; fraud
involving other employees that could have a material effect on the matter
described in this Section; or communications from the CDFI Fund or other
regulatory agencies


 


32

















 


concerning
noncompliance with, or deficiencies in, financial reporting practices that
could have a material effect on the matter described in this Section;


 


(m)       the
Borrower is not, and will not be, a bank, credit union or other financial
institution;


 


(n)        the
fair market value of the Project, after completion and stabilization, is not
expected to be less than the aggregate amount of all indebtedness secured by
the Project;


 


(o)        The
assumptions underlying the Financial Projections with respect to the financing,
construction and operations of the Project are reasonable in all material
respects; and


 


(p)        The
Borrower expects that the representations made under paragraphs
(a) through (o) of this Section 4.02 will continue to be
accurate during the entire term of this Agreement.


 


(q)        Future
Unlimited Law PC, counsel to Lender, is hereby permitted to rely on the
foregoing representations in the issuance of a federal income tax opinion to
USBCDC.


 


Section 4.03.      Debarment Certificate. Borrower
represents and warrants to Lender that neither Borrower nor any of its
principals (except as provided below with respect to members of the Borrower)
has been debarred, suspended, declared ineligible, or voluntarily excluded from
participation in a covered transaction by any Federal department or agency, as
such terms are defined in Executive Order 12549, nor is any such action pending
or proposed. Borrower shall, simultaneously with execution and delivery of this
Agreement, execute and deliver a certification regarding debarment, suspension,
ineligibility and voluntary exclusion in the form attached hereto as Exhibit D
to further evidence this representation and warranty. Borrower shall obtain
such certifications from other participants in the Project to the extent
reasonably required by Lender to maintain compliance with NMTC Program
Requirements. For purposes of this Section, the term “principals” has the
meaning set forth in 31 CFR §19.105 as follows: “Officer, director, owner,
partner, key employee, or other person within a participant with primary
management or supervisory responsibilities; or a person who has a critical
influence on or substantive control over a covered transaction, whether or not
employed by the participant. Persons who have a critical influence on or
substantive control over a covered transaction are: (1) Principal
investigator.” To Borrower’s actual knowledge none of its members has been
debarred, suspended, declared ineligible, or voluntarily excluded from
participation in a covered transaction by any Federal department or agency, as
such terms are defined in Executive Order 12549, nor is any such action pending
or proposed.


 


ARTICLE V.


COVENANTS
OF THE BORROWER


 


Section 5.01.      Affirmative Covenants. So long as any
Loan Obligations remain unpaid or the Lender shall have any commitment
hereunder, the Borrower shall, unless the Lender shall otherwise consent in
advance in writing:


 


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(a)        Compliance with Laws, etc. Comply
in all material respects with all applicable laws, rules, regulations and
orders, such compliance to include, without limitation, (i) all applicable
zoning and land use laws; (ii) all employee benefit and Environmental
Laws, and (iii) paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon its property
except to the extent contested in good faith;  


 


(b)        Visitation Rights; Field Examination. At any reasonable time and from
time to time, permit the Lender or representatives, to (i) examine and
make copies of and abstracts from the records and books of account of the
Borrower, and (ii) enter onto the property of the Borrower to conduct
unannounced field examinations and collateral inspections, with such frequency
as Lender in its sole reasonable discretion may deem appropriate, and
(iii) discuss the affairs, finances, and accounts of the Borrower with any
of Borrower’s officers or directors. Borrower consents to and authorizes Lender
to enter onto the property of Borrower for purposes of conducting the
examinations, inspections and discussions provided above. Lender and its
authorized representatives shall follow all safety procedures and protocols of
Borrower, as well as any confidentiality and non-disclosure procedures and
protocols of Borrower or to which the Borrower or the property are subject,
during any inspection and Lender shall take all necessary actions to ensure
that such inspections shall not interfere with the operations of the Borrower
at the property. Upon and during the occurrence of an Event of Default or in
the event that there are deemed by the Lender to be any material
inconsistencies and/or material noncompliance with respect to any financial or
other reporting on the part of the Borrower, any and all visits and inspections
deemed necessary or desirable on account of such Event of Default,
inconsistency and/or noncompliance shall be at the expense of the Borrower. In
addition to the foregoing, at any reasonable time and from time to time, the
Borrower also shall permit the Lender or representatives thereof, at the
expense of the Lender, to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, the Borrower, and
to discuss the affairs, finances and accounts of the Borrower with any of its
respective officers or directors;


 


(c)        Reporting Requirements. Furnish to the
Lender:


 


(i)         As soon as available, but in no event later than 90 days
after the end of each fiscal year of the Borrower occurring during the term
hereof, annual consolidated financial statements of the Borrower, prepared in
accordance with GAAP consistently applied and in a format that demonstrates any
accounting or formatting change that may be required by the various
jurisdictions in which the business of the Borrower is conducted (to the extent
not inconsistent with GAAP). Such financial statements shall: (i) be
audited by independent certified public accountants selected by the Borrower
and acceptable to Lender; (ii) be accompanied by a report of such
accountants containing an certified opinion, without qualification, thereon
reasonably acceptable to Lender; (iii) be prepared in reasonable detail,
and in comparative form; and (iv) include a balance sheet, a statement of
income, a statement of stockholders’, members’ or partner’s equity, a statement
of cash flows, and all notes and schedules relating thereto and any management
letter.


 


(ii)        Beginning with the first (1st) month following the
Completion Date, as soon as available and in any event within 30 days after the
end of each month, balance sheets of the


 


34

















 


Borrower
as of the end of such month and statement of income of the Borrower for the
period commencing at the end of the previous fiscal year and ending with the
end of such month, prepared in accordance with GAAP in all material respects
and certified by an authorized officer of the Borrower;


 


(iii)       As soon as available but in no event later than 30 days after
the end of each of the first three fiscal quarters of each fiscal year of the
Borrower occurring during the term hereof, unaudited quarterly consolidated
financial statements of the Borrower, in each case prepared in accordance with
GAAP in all material respects consistently applied (except for the omission of
footnotes and for the effect of normal year-end audit adjustments) and in a
format that demonstrates any accounting or formatting change that may be
required by various jurisdictions in which the business of the Borrower is
conducted (to the extent not inconsistent with GAAP). Each of such financial
statements shall (i) be prepared in reasonable detail and in comparative
form, including a comparison of actual performance to the budget for such
quarter and year-to-date, delivered to Lender under Subsection
5.01(c)(vi) below, and (ii) include a balance sheet, a statement of
income for such quarter and for the period year-to-date, and such other quarterly
statements as Lender may specifically request which quarterly statements shall
include any and all supplements thereto. Such quarterly statements shall be
certified by an authorized officer of the Borrower, and be accompanied by a
Compliance Certificate which: (A) states that no Event of Default, and no
event or condition that but for the passage of time, the giving of notice or
both would constitute an Event of Default, has occurred or is in existence; and
(B) shows in detail satisfactory to the Lender the calculation of, and the
Borrower’ compliance with, each of the covenants contained in Sections 5.01(d),
5.01(e), 5.01(f), and 5.01(g);


 


(iv)       promptly upon the Lender’s request therefor, copies of all
reports and notices which the Borrower or any of its subsidiaries files under
ERISA with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or which the Borrower or any its
subsidiary receives from such Corporation;


 


(v)        notwithstanding the foregoing Section 5.01(c)(iv),
provide to Lender within 30 days after it becomes aware of the occurrence of
any Reportable Event (as defined in Section 4043 of ERISA) applicable to
the Borrower or any of its Subsidiaries, a statement describing such Reportable
Event and the actions it proposes to take in response to such Reportable Event;


 


(vi)       by December 1 of each fiscal year of the Borrower, an
annual (with monthly break out) operating and capital assets budget of the
Borrower for the immediately succeeding fiscal year containing, among other
things, pro forma financial statements and forecasts for all planned lines of
business;


 


(vii)      as soon as available but in any event not more than 30 days
after the end of each month, production reports for the immediately preceding
calendar month setting forth corn inputs, ethanol output, DDGS, and natural gas
usage, together with such additional production information as requested by
Lender;


 


35

















 


(viii)     promptly, upon the occurrence of an Event
of Default or an event or condition that but for the passage of time or the
giving of notice or both would constitute an Event of Default, notice of such
Event of Default or event;


 


(ix)       promptly after the receipt thereof, a copy of any management
letters or written reports submitted to the Borrower by its independent
certified public accountants with respect to the business, financial condition
or operation of the Borrower;


 


(x)        promptly after the receipt thereof, a copy of any notice of
default under any Long-Term Marketing Agreement;


 


(xi)       promptly after transmittal or filing thereof by the Borrower,
copies of all proxy statements, notices and reports as it shall send to its
members and copies of all registration statements (without exhibits) and all
reports which it files with the Securities and Exchange Commission (or any
governmental body or agency succeeding to the functions of the Securities and
Exchange Commission), and promptly after the receipt thereof by the Borrower,
copies of all management letters or similar documents submitted to the Borrower
by independent certified public accountants in connection with each annual and
any interim audit of the accounts of the Borrower or of the Borrower and any of
its Subsidiaries.


 


(xii)      such other information respecting the condition or operations,
financial or otherwise, of the Borrower or any of its respective subsidiaries
as the Lender may from time to time reasonably request;


 


(xiii)     promptly after the commencement thereof,
notice of the commencement of all actions, suits, or proceedings before any
court, arbitrator, or government department, commission, board, bureau, agency,
or instrumentality affecting the Borrower or any of its subsidiaries which, if
determined adversely, could have a Material Adverse Effect on any of the
Borrower or its subsidiaries;


 


(xiv)     without limiting the provisions of Section 5.01(c)(xiii)
above, promptly after receipt thereof, notice of the receipt of all pleadings,
orders, complaints, indictments, or any other communication alleging a
condition that may require the Borrower or any of its subsidiaries to undertake
or to contribute to a cleanup or other response under all laws relating to
environmental protection, or which seek penalties, damages, injunctive relief,
or criminal sanctions related to alleged violations of such laws, or which
claim personal injury or property damage to any person as a result of
environmental factors or conditions;


 


(xx)       promptly after filing, receipt or becoming aware thereof, copies
of any filings or communications sent to and notices or other communications
received by the Borrower or any of its subsidiaries from any Governmental
Authority, including, without limitation, the Securities and Exchange
Commission, the FCC, the PUC, or any other state utility commission relating to
any material noncompliance by the Borrower or any of its subsidiaries with any
laws or with respect to


 


36

















 


any matter or proceeding the
effect of which, if adversely determined, could have a Material Adverse Effect
on any of the Borrower of its subsidiaries;


 


(xxi)      promptly after becoming aware thereof, notice of any matter
which has had or could have a Material Adverse Effect on the Borrower or its
subsidiaries.


 


(d)        Working Capital. Achieve Working
Capital of at least $5,000,000 at the Completion Date, and achieve and maintain
Working Capital of $7,000,000 no later than twelve (12) months after the
Completion Date, and continually thereafter;


 


(e)        Tangible Net Worth. On the Completion
Date, the Borrower’s Tangible Net Worth shall be not less than $43,000,000. At
the end of the first fiscal year after the Completion Date, and continually
thereafter, measured at the end of each fiscal year, the Borrower shall achieve
and maintain Tangible Net Worth in an amount equal to the lesser of:
(i) the Borrower’s Tangible Net Worth at the end of the immediately
preceding fiscal year plus $1,000,000; or (ii) the Borrower’s Tangible Net
Worth at the end of the immediately preceding fiscal year plus the Borrower’s
retained earnings at the end of the current fiscal year;


 


(f)         Tangible Owner’s Equity. Achieve and
maintain Tangible Owner’s Equity of at least 55% beginning at the end of the 12th
month following the Completion Date, and annually thereafter.


 


(g)        Fixed Charge Coverage Ratio. Maintain a
Fixed Charge Coverage Ratio of not less than 1.15 to 1.00, measured initially
at the end of the 12th month following the Completion Date and
maintained and measured at the end of each fiscal year thereafter.


 


(h)        Liens. There shall be no lien,
security interest or other charge or encumbrance, and no other type of
preferential arrangement, upon or with respect to any of the properties or
income of the Borrower, which secures Debt of any Person, except for the
security interests of the Security Agreement or except as described in Schedule
5.02(a) and Permitted Liens;


 


(i)         Landlord Waivers. Obtain and furnish to
the Lender as soon as available, waivers, acknowledgments and consents, duly
executed by each: (i) real property owner or landlord having an interest
in any of the real estate leased by the Borrower or in which any Collateral of
the Borrower is located or to be located (and if no Collateral of Borrower is
located at a parcel of property not owned or leased by a Borrower, no such
waivers, acknowledgments or consents will be required);


 


(j)         Insurance. Maintain insurance with
financially sound and reputable insurance companies in such amounts and
covering such risks as are usually carried by entities engaged in similar
businesses and owning similar properties in the same general areas in which the
Borrower operates, and make such increases in the type of amount or coverage as
Lender may reasonably request, provided that in any event the Borrower will
maintain and cause each of its subsidiaries to maintain workers’ compensation
insurance, property insurance and comprehensive


 


37

















 


general liability insurance reasonably satisfactory
to the Lender. The Borrower shall maintain, at a minimum, directors’ and
officers’ liability insurance, commercial liability insurance, business
interruption insurance, builder’s risk insurance, and general commercial
property insurance. All such policies insuring any collateral for the
Borrower’s obligations to Lender shall have lender or mortgagee loss payable
clauses or endorsements in form and substance reasonably acceptable to Lender.
Each insurance policy covering Collateral shall be in compliance with the
requirements of the Security Agreement in all material respects;


 


(k)        Property and Insurance Maintenance.
Maintain and preserve all of its property and each and every part and parcel
thereof that is necessary to or useful in the proper conduct of its business in
good repair, working order, and condition, ordinary wear and tear excepted, and
in compliance with all applicable laws, and make all alterations, replacements,
and improvements thereto as may from time to time be necessary in order to
ensure that its properties remain in good working order and condition and
compliance. The Borrower agrees that upon the occurrence and continuing
existence of an Event of Default, at Lender’s request, which request may not be
made more than once a year, the Borrower will furnish to Lender a report on the
condition of the Borrower’s and any of its subsidiaries’ property prepared by a
professional engineer satisfactory to Lender;


 


(1)        Keeping Books and Records. Maintain
and cause each of its subsidiaries to, maintain proper books of record and
account in which full, true, and correct entries in conformity with generally
accepted accounting principles shall be made of all dealings and transactions
in relation to its business and activities;


 


(m)       Food Security Act Compliance. If
the Borrower acquires any Collateral which may have constituted farm products
in the possession of the seller or supplier thereof, such Borrower shall, at
its own expense, use commercially reasonable efforts to take such steps to
insure that all Liens (except the liens granted pursuant hereto) in such
acquired Collateral are terminated or released, including, without limitation,
in the case of such farm products produced in a state which has established a
Central Filing System (as defined in the Food Security Act), registering with
the Secretary of State of such state (or such other party or office designated
by such state) and otherwise take such reasonable actions necessary, as
prescribed by the Food Security Act, to purchase farm products free of liens
(except the liens granted pursuant hereto); provided, however, that Borrower
may contest and need not obtain the release or termination of any lien asserted
by any creditor of any seller of such farm products, so long as it shall be
contesting the same by proper proceedings and maintain appropriate accruals and
reserves therefor in accordance with the generally accepted accounting
principles. Upon the Lender’s request made, the Borrower agrees to forward to
the Lender promptly after receipt copies of all notices of liens and master
lists of Effective Financing Statements delivered to the Borrower pursuant to
the Food Security Act, which notices and/or lists pertain to any of the
Collateral. Upon the Lender’s request, the Borrower agrees to provide the Lender
with the names of Persons who supply the Borrower with such farm products and
such other information as the Lender may reasonably request with respect to
such Persons;


 


38

















 


(n)        Intentionally omitted.


 


(o)        Management of Borrower. The Chief
Executive Officer and Plant Manager of the Borrower shall be maintained as set
forth on Schedule 5.01(o) hereto, unless the Borrower shall provide
Lender with written notice within ten (10) Business Days after of any such
change.


 


(p)        Compliance with Other Agreements.
Borrower will perform in all material respects all obligations and abide in all
material respects by all covenants and agreements contained in the following
agreements: (i) any and all Long Term Marketing Agreements; and
(ii) any other Material Contracts.


 


(q)        Intentionally omitted.


 


(r)         Additional Assurances. Make,
execute and deliver to Lender such promissory notes, mortgages, deeds of trust,
financing statements, control agreements, instruments, documents and other
agreements as Lender or its counsel may reasonably request to evidence and
secure the Loans and to perfect all Security Interests; and


 


(s)        Construction of Project. Borrower
shall:


 


(i)         diligently proceed with construction of the Project in accordance
with the Plans and Specifications and in accordance with all applicable laws
and ordinances and will complete the Project on or before the Completion Date;


 


(ii)        use the proceeds of all Advances solely to pay the Project
Costs as specified in the Project Sources and Uses Statement;


 


(iii)       use its reasonable efforts to require the
Contractor(s) to comply with all rules, regulations, ordinances and laws
relating to work on the Project;


 


(iv)       obtain the Lender’s prior written approval of any change in
the Plans and Specifications for the Project approved by the Lender which might
materially adversely affect the value of the Lender’s security, and has a cost
of $50,000 or greater. The Lender will have a reasonable time to evaluate any
requests for its approval of any changes referred to in this paragraph. The
Lender may approve or disapprove changes in its discretion, subject to the
foregoing provisions of this Section 5.01(r)(iv). If it reasonably appears
to the Lender that any change may increase the Project Costs, the Lender may
require the Borrower to deposit additional funds with the Lender pursuant to
the provisions of this Agreement in an amount sufficient to cover the increased
costs as a condition to giving its approval;


 


(v)        comply with and keep in effect all necessary permits and
approvals obtained from any Governmental Authority relating to the lawful
construction of the Project. The Borrower will comply with all applicable
existing and future laws, regulations, orders, and requirements of any
Governmental Authority, judicial, or legal authorities having jurisdiction over
the Real Property or Project, and with all recorded restrictions affecting the
Real Property;


 


39

















 


(vi)       furnish to the Lender from time to time on request by the
Lender, in a form reasonably acceptable to the Lender, correct lists of all
contractors and subcontractors employed in connection with construction of the
Project and true and correct copies of all executed contracts and subcontracts.
The Lender may contact any contractor or subcontractor to verify any facts
disclosed in the lists, Borrower must consent to the disclosure of such
information by the contractors and subcontractors to Lender or its agents upon
Lender’s request, and Borrower must assist Lender or its agents in obtaining
such information upon Lender’s request;


 


(vii)      upon completion of the Project, deliver to the Lender an
“as-built” survey of the Real Property which: (a) sets forth the location
and exterior lines and egress and other improvements completed on the Real
Property and demonstrates compliance with all applicable setback requirements;
(b) demonstrates that the Project is entirely within the exterior
boundaries of the Real Property and any building restriction lines and does not
encroach upon any easements or rights-of-way; and (c) contains such other
information as the Lender may reasonably request;


 


(viii)     not purchase any materials, equipment,
fixtures, or articles of personal property placed in the Project under any
security agreement or other agreement where the seller reserves or purports to
reserve title or the right of removal or repossession, or the right to consider
them personal property after their incorporation in the work of construction,
unless authorized by the Lender in writing;


 


(ix)       provide the Lender and its representatives with access to the
Real Property and the Project at any reasonable time and upon reasonable notice
to enter the Real Property and inspect the work or construction and all
materials, plans, specifications, and other matters relating to the
construction. The Lender will also have the right to, at any reasonable time
and upon reasonable notice, examine, copy, and audit the books, records,
accounting data, and other documents of the Borrower and its contractors
relating to the Real Property or construction of the Project;


 


(x)        pay and discharge all claims and liens for labor done and
materials and services furnished in connection with the construction of the
Project. The Borrower will have the right to contest in good faith any claim or
lien, provided that it does so diligently and without prejudice to the Lender
or the ability to obtain title insurance in the manner required by this
Agreement and the Disbursing Agreement. Upon the Lender’s request, the Borrower
will promptly provide a bond, cash deposit, or other security reasonably
satisfactory to the Lender to protect the Lender’s interest and security should
the contest be unsuccessful;


 


(xi)       at the Lender’s request and expense, post signs on the Real
Property for the purpose of identifying the Lender as the “Lender.” At the
request of the Lender, or the participating local community banks, the Borrower
will use its reasonable efforts to identify the Lender as the lender in
publicity concerning the Project;


 


40

















 


(xii)      maintain in force until full payment of the builder’s risk
insurance in such amounts, form, risk coverage, deductibles, insurer, loss
payable and cancellation provisions as reasonably required by the Lender. The
Lender’s approval, however, will not be a representation of the solvency of any
insurer or the sufficiency of any amount of insurance;


 


(xiii)     cooperate at all times with the Lender in
bringing about the timely completion of the Project, and resolve all disputes
arising during the work of construction in a manner which will allow work to
proceed expeditiously. With respect to such disputes, the Borrower will have
the right to contest in good faith claims resulting in disputes, provided that
it does so diligently and without prejudice to the Lender. Upon the Lender’s
request, the Borrower will promptly provide a bond, cash deposit, or other
security reasonably satisfactory to the Lender to protect the Lender’s interest
and security should the contest be unsuccessful;


 


(xiv)     pay the Lender’s and the Disbursing Agent’s reasonable
out-of-pocket costs and expenses incurred in connection with the making or
disbursement of the Loans or in the exercise of any of its rights or remedies
under this Agreement, including but not limited to title insurance and escrow
charges, disbursing agent fees, recording charges, and mortgage taxes,
reasonable legal fees and disbursements, and reasonable fees and costs for services
which are not customarily performed by the Lender’s salaried employees and are
not specifically covered by the fees charged to originate the Loan, if any. The
provision of this paragraph will survive the termination of this Agreement and
the repayment of the Loans;


 


(xv)      keep true and correct financial books and records on a cash
basis for the construction of the Project and maintain adequate reserves for
all contingencies. If required by the Lender, the Borrower will submit to the
Lender at such times as it reasonably requires (which will in no event be more
often than monthly) a statement which accurately shows the application of all
funds expended to date for construction of the Project and the source of those
funds as well as the Borrower’s reasonable estimate of the funds needed to
complete the Project and the source of those funds. The Borrower will promptly
supply the Lender with any financial statements or other information concerning
its affairs and properties as the Lender may reasonably request, and will
promptly notify the Lender of any material adverse change in its financial
condition or in the physical condition of the Property or Project;


 


(xvi)     comply with the requirements of any commitment or agreement
entered into by Borrower with any Governmental Authority to assist the
construction or financing of the Real Property and/or Project and with the
terms of all applicable laws, regulations, and requirements governing such
assistance;


 


(xvii)    indemnify and hold the Lender harmless from
and against all liabilities, claims, damages, reasonable costs, and reasonable
expenses (including but not limited to reasonable legal fees and disbursements)
arising out of or resulting from any defective workmanship or materials
occurring in the construction of the Project. Upon demand by the Lender, the
Borrower will defend any action or proceeding brought against the Lender
alleging any defective workmanship or materials, or the Lender may elect to
conduct its own defense at the reasonable expense of the


 


41

















 


Borrower.
The provisions of this paragraph will survive the termination of this Agreement
and the repayment of the Loans; and


 


(xviii) obtain and deliver
to the Lender copies of all necessary occupancy certificates relating to the
Project.


 


Section 5.02.      Negative Covenants. So long as any of
the Loan Obligations remain unpaid or the Lender shall have any commitment
hereunder, the Borrower will not, without the prior written consent of the
Lender:


 


(a)        Liens, etc. Create or suffer to exist,
or permit any of its subsidiaries to create or suffer to exist, any lien,
security interest or other charge or encumbrance, or any other type of
preferential arrangement, upon or with respect to any of its properties, whether
now owned or hereafter acquired, or assign, or permit any of its subsidiaries
to assign, any right to receive income, in each case to secure any Debt (as
defined below) of any Person, other than “Permitted Liens”:


 


(i)         those described on Schedule 5.02(a) hereto and
renewals and extensions on the same or substantially the same terms and
conditions and at no increase in the debt or obligation; or


 


(ii)        liens or security interests which are subject to an
intercreditor and subordination agreement in form and substance reasonably
acceptable to Lender in Lender’s sole discretion; or


 


(iii)       the liens or security interests of the Lender in the Security
Agreement, Mortgage or otherwise; or


 


(iv)       liens (other than liens relating to environmental liabilities
or ERISA) for taxes, assessments, or other governmental charges that are not
more than 30 days overdue or, if the execution thereof is stayed, which are
being contested in good faith by appropriate proceedings diligently pursued and
for which adequate reserves have been established; or


 


(v)        liens of warehousemen, carriers, landlords, mechanics,
materialmen, or other similar statutory or common law liens securing
obligations that are not yet due and are incurred in the ordinary course of
business or, if the execution thereof is stayed, which are being contested in
good faith by appropriate proceedings diligently pursued and for which adequate
reserves have been established in accordance with generally accepted accounting
principles; or


 


(vi)       liens resulting from good faith deposits to secure payments of
workmen’s compensation unemployment insurance, or other social security
programs or to secure the performance of tenders, leases, statutory
obligations, surety, customs and appeal bonds, bids or contracts (other than
for payment of Debt); or


 


42

















 


(vii)      any attachment or judgment lien not constituting an Event of
Default; or


 


(viii)     liens arising from filing UCC financing
statements regarding leases not prohibited by this Agreement; or


 


(ix)       customary offset rights of brokers and deposit banks arising
under the terms of securities account agreements and deposit agreements; or


 


(x)        any real estate easements and easements, covenants and
encumbrances that customarily do not affect the marketable title to real estate
or materially impair its use; or


 


(xi)       liens for purchase money security interest in equipment and
vehicles or any other property acquired or held in the ordinary course of
business not to exceed an aggregate amount of $100,000.


 


(b)        Distributions, etc. Declare or pay any
dividends, purchase or otherwise acquire for value any of its membership
interests (units) now or hereafter outstanding, or make any distribution of
assets to its stockholders, members or general partners as such, or permit any
of its subsidiaries to purchase or otherwise acquire for value any stock,
membership interest or partnership interest of the Borrower, provided, however,
the Borrower may: (i) declare and pay dividends or distributions payable
in membership interests (units); (ii) purchase or otherwise acquire shares
of the membership interests (units) of the Borrower with the proceeds received
from the issuance of new membership interests (units); (iii) pay
redemptions, dividends or distributions in an amount not to exceed, the
distributions allowed pursuant to the AgStar Loan Documents (“Allowed
Distributions”);  and
(iv) pay redemptions, dividends or distributions as may be required such
that the Borrower does not hold Nonqualified Financial Property in excess of
amounts permitted pursuant to the NMTC Program Requirements, provided, however, that immediately prior
to the proposed payment of any dividends or distributions permitted by this
Section 5.02(b), or after giving effect thereto, no Default or Event of
Default shall exist; or


 


(c)        Capital Expenditures. Except for costs
identified in the Project Costs and Uses Statement, make any investment in
fixed assets in the aggregate amount in excess of $500,000 during any fiscal
year during the term of this Agreement; or


 


(d)        Consolidation, Merger, Dissolution, Etc.  Directly
or indirectly, merge or consolidate with any other Person or permit any other
Person to merge into or with or consolidate with the Borrower or any of its
subsidiaries; or


 


(e)        Indebtedness, etc. Create, incur,
assume or suffer to exist any Debt or other indebtedness, liabilities or
obligations, whether matured or unmatured, liquidated or unliquidated, direct
or contingent, joint or several ,in excess of $50,000 in the aggregate annually
except: (i) the liabilities of the Borrower to the Lender hereunder;
(ii) trade accounts payable and accrued liabilities (other than Debt)
arising in the ordinary course of the Borrower’s business;
(iii) subordinated debt;


 


43

















 


and
(iv) the liabilities of the Borrower described on Schedule 5.02(a),
(iv) contracts or agreements other than Material Contracts arising in the
ordinary course of the Borrower’s business; or


 


(f)         Organization; Name; Chief Executive Office.
Change its state of organization, name or the location of its chief executive
office except that the principal office shall be moved to the plant site when
construction of the administration office is substantially complete; or


 


(g)        Loans, Guaranties, etc. Make any
loans or advances to (whether in cash, in-kind, or otherwise) any Person, or
directly or indirectly guaranty or otherwise assure a creditor against loss in
respect of any indebtedness, obligations or liabilities (contingent or
otherwise) of any Person; or


 


(h)        Subsidiaries; Affiliates.
Form or otherwise acquire any subsidiary or affiliated business, or
acquire the assets of or acquire any equity or ownership interest in any
Person; or


 


(i)         Transfer of Assets. Except as may
be permitted in this Agreement or other Loan Documents, sell, lease, assign,
transfer, or otherwise voluntarily dispose of any of its assets, or permit any
of its subsidiaries to sell, lease, assign, transfer, or otherwise voluntarily
dispose of any of its assets except: (i) dispositions of inventory in the
ordinary course of business; and (ii) dispositions of: (A) obsolete
or worn out equipment; (B) equipment or real property not necessary for
the operation of its business; or (C) equipment or real property which is
replaced with property of equivalent or greater value as the property which is
disposed;


 


(j)         Lines of Business. Engage in any
line or lines of business activity other than the production, distribution,
marketing and sale of ethanol and related by products;


 


(k)        Transactions with Affiliates.
Directly or indirectly enter into or permit to exist any transaction (including
the purchase, sale, lease or exchange of any property or the rendering of any
service) with any Affiliate or with any director, officer or employee of the
Borrower or any Affiliate, except (i) transactions listed on Schedule
5.02(k), (ii) transactions in the ordinary course of and pursuant to
the reasonable requirements of the business of the Borrower or any of its
subsidiaries and upon fair and reasonable terms which are fully disclosed to
Lender and are no less favorable to the Borrower or such subsidiary than would
be obtained in a comparable arm’s length transaction with a person or entity
that is not an Affiliate, and (iii) payment of compensation to directors,
officers and employees in the ordinary course of business for services actually
rendered in their capacities as directors, officers and employees, provided
such compensation is reasonable and comparable with compensation paid by
companies of like nature and similarly situated;


 


(l)         Management Fees and Compensation.
Except for those transactions permitted in Subdivision (k) directly preceding ,
directly or indirectly pay any management, consulting or other similar fees to any
person, except legal or consulting fees paid to persons or entities that are
not Affiliates of the Borrower or its subsidiaries for services actually
rendered and in amounts typically paid by entities engaged in the Borrower’s or
such subsidiary’s business; or


 


44

















 


(m)       Amendments to Organizational Documents.
Amend its operating agreement, member control agreement or any other
organizational documents in any material respect.


 


Section 5.03       New Markets Tax Credits.   As of the date hereof, Borrower hereby
covenants to Lender as follows:


 


(a)        Borrower
shall engage solely in the ownership, development, operation and management of
its ethanol production facility located on the Real Property and related activities,
including, without limitation, the marketing and sale of by-products, and no
other activity. Borrower shall not acquire any material assets unrelated to the
foregoing business activities, including but not limited to loans to or equity
investments in any other Person.


 


(b)        At
the direction of the Lender, the Borrower shall prepare and submit, as
appropriate, to the Secretary of the Treasury or the IRS (or any other
governmental authority designated for such purpose), on a timely basis, any and
all annual reports, information returns and other certifications and
information required to avoid any NMTC Recapture Event or the imposition of
penalties or interest on the Lender or any of its direct or indirect members
for failure to comply with the requirements of the Code or any other applicable
laws relating to the New Market Tax Credits;


 


(c)        With
respect to any draw of Loan proceeds pursuant to this Agreement, the Borrower
will reasonably expect to (a) expend such draw on the construction of the
Project within one (1) year of such draw, or (b) reimburse itself for
expenditures that will have been previously made or will be made within one
(1) year of such draw;


 


(d)        With
respect to the current taxable year and any taxable year during the term of the
Loans, at least fifty percent (50%) of the total gross income of Borrower will
be derived from the active conduct of its trade or business within the Census
Tract.


 


(e)        With
respect to the current taxable year and any taxable year during the term of the
Loans, at least forty percent (40%) of the use of the tangible property of
Borrower (whether owned or leased) will be within the Census Tract (for
purposes of this representation, the percentage of tangible property owned or
leased by Borrower during the taxable year in the Census Tract shall be
determined based on a fraction (i) the numerator of which is the Average
Value of the tangible property used by Borrower within the Census Tract, and
(ii) the denominator of which is the Average Value of all of the tangible
property owned or leased by Borrower and used by Borrower during the taxable
year); provided, however, that for any taxable year in which Borrower has no
employees, at least eighty-five percent (85%) of the use of the tangible
property of Borrower (whether owned or leased) will be within the Census Tract.
Borrower shall provide a true, correct and complete list of tangible property
owned or leased by Borrower and a description of where such property is used by
Borrower. If any property is used outside of the Census Tract, Borrower shall
provide, the cost basis of all property owned by Borrower and the estimated
value of any leased property and the basis of


 


45

















 


such
estimate and the business hours of usage of Borrower’s property within and
without the Census Tract. Borrower shall retain records of the foregoing
throughout the NMTC Recapture Period.


 


(f)         With
respect to the current taxable year and any taxable year during the term of the
Loans, less than five percent (5%) of the average of the unadjusted basis of
the property of Borrower shall be attributable to Nonqualified Financial
Property.


 


(i)          Borrower acknowledges that debt, stock, partnership
interests, options, futures contracts, forward contracts, warrants, notional
principal contracts, annuities, and other similar property constitute
Nonqualified Financial Property, excluding any such instruments that would
constitute reasonable amounts of working capital held in cash, cash
equivalents, or debt instruments with a term of 18 months or less.


 


(ii)         Borrower has represented that in the normal course of the
business of producing ethanol, the Borrower would enter into options, futures
contracts, forward contracts or other similar instruments solely in connection
with the purchase of corn, natural gas and other deliverables required for the
production of ethanol and in connection with the sale of ethanol. Borrower
covenants and agrees that until additional guidance is obtained satisfactory to
Borrower and Lender as agreed to in writing, Borrower shall acquire corn,
natural gas and other deliverables from an independent third party that may
acquire options, futures contracts, forward contracts or similar instruments to
preserve the price of such deliverables. Borrower covenants that the
corresponding assets acquired by Borrower from such independent third parties
to purchase or sell inventory plus any other Nonqualified Financial Property
owned by Borrower shall not exceed in the aggregate five percent (5%) of the
average unadjusted basis (as determined for federal income tax purposes) of
Borrower’s assets.


 


(iii)        Borrower represents, warrants and covenants that it shall
comply with the Accountant’s Letter attached hereto as Exhibit G
with respect to the reporting for federal income tax purposes of any such
contracts or similar instruments.


 


(iv)       Borrower shall provide to Lender a true, correct, and complete
listing of any Nonqualified Financial Property owned by Borrower and certified
by its accountants, including therein the unadjusted basis of such property,
and shall maintain records thereof throughout the NMTC Recapture Period at such
intervals as reasonably requested by Lender.


 


(v)        The Borrower shall promptly take such steps at the direction
of Lender to maintain compliance with the foregoing requirement, subject to
compliance with the AgStar Loan Documents, including but not limited to, (i)


 


46

















 


distributions of cash or other Nonqualified Financial Property to its
members; (ii) prepayments of the AgStar Loans and/or (iii) purchases
of other assets for use with respect to the Project which assets do not
constitute Nonqualified Financial Property as determined by Lender.


 


(g)        With
respect to the current taxable year and any taxable year during the term of the
Loans in which Borrower has an employee providing services, at least forty
percent (40%) of the services performed for Borrower by its employees will be
within the Census Tract (for purposes of this representation, this percentage
is determined based on a fraction (the numerator of which is the total amount
paid by Borrower for employee services performed in the Census Tract during the
taxable year, and the denominator of which is the total amount paid by Borrower
for employee services during the taxable year). Borrower shall provide a list
of employees providing services, including a general description of services
provided, and if applicable compensation paid for services rendered within and
without the Census Tract.


 


(h)        With
respect to the current taxable year and any taxable year during the term of the
Loans, less than five percent (5%) of the aggregate unadjusted basis of
Borrower’s property shall be attributable to Collectibles.


 


(i)         At
no time during the term of the Loans shall the Property be used as, or
converted into, Residential Rental Property; nor shall the Borrower engage in
the rental of residential property.


 


(j)         With
respect to the current taxable year and any taxable year during the term of the
Loans, the Project shall constitute a Qualified Business.


 


(k)        With
respect to the current taxable year and any taxable year during the term of the
Loans, the trade or business of a tenant or subtenant (if any) shall consist
solely of a Tenant Qualified Business.


 


(l)         With
respect to the current taxable year and with respect to future years, no part
of the Project financing shall include low-income housing tax credits.


 


(m)       The
Construction Loan shall be used solely with respect to the costs set forth on
the Budget unless otherwise approved by Lender, which costs relate solely to
the Project.


 


(n)        Borrower
is and shall be a partnership for federal income tax purposes and shall file
all returns consistent therewith.


 


(o)        As
of the date hereof, Borrower reasonably anticipates that it will complete
construction of the Project by May 1, 2008, the proceeds of the Loans will
be fully advanced by December 31, 2007, and the Project will generate
gross revenues by July 1, 2008.


 


47

















 


(p)        The
Borrower has reasonable grounds to believe that (i) the Property will have
significant residual value upon the maturity of the Borrower’s obligations with
respect to the Loans, and (ii) the fair market value of the Property will
exceed the principal balance of the Loans until maturity.


 


(q)        The
Borrower will treat the Loans as indebtedness for all purposes, and will not
take any positions contrary to such treatment; and


 


(r)         The
amount of reserves, receivables, assets and other items of working capital
shown on the Financial Projections as owned by the Borrower, are reasonable
based upon the Borrower’s reasonably anticipated costs of operating the
Project.


 


(s)        The
assumptions underlying the Financial Projections with respect to the
development and operation of the Project are reasonable in all material
respects.


 


(t)         Borrower
shall provide all information, reports and statements reasonably requested by
Lender for purposes of Lender’s reporting requirements pursuant to the Allocation
Agreement to monitor compliance with Section 45D of the Code, and to
measure the community benefit of the Construction Loan, including but not
limited to the following:


 


(i)         at closing of the Construction Loan, an estimate of the
number of construction jobs, if any, involved in the improvement of the
Property, including the jobs held by low-income persons or residents of
low-income communities as defined in Section 45D of the Code to the extent
the latter information is available, and a breakdown of the construction jobs
based upon wages;


 


(ii)        an estimate of the number of full-time equivalent jobs as of
the date hereof, and the projected full-time equivalent jobs to be created or
retained, and within forty-five (45) days of the close of each tax year, the
jobs actually created or retained as a result of the financing, including an
estimate of the number of permanent jobs held by low-income persons or
residents of low-income communities as defined in Section 45D of the Code
to the extent the latter information is available, and a breakdown of such jobs
based on wages;


 


(iii)       the number of square feet of space being improved with the
proceeds of the Construction Loan; and


 


(iv)       at closing of the Construction Loan, the projected annual
gross revenues of Borrower as of its fiscal year ending prior to the
Construction Loan, and within forty-five (45) days of the close of each tax
year, the annual gross revenues of Borrower for each preceding tax year.


 


(u)        Borrower
shall promptly notify Lender of any noncompliance with this Section 5.03.


 


48
















 


(v)          Borrower agrees to cooperate with Lender by providing such
other incidental information as may be reasonably requested by Lender for
purposes of its communications and publicity regarding the Construction Loan,
provided that the failure of Borrower to provide information under this
subsection shall not result in the imposition of any penalties on Borrower or
an Event of Default hereunder.


 


(w)          Borrower agrees it will not, without Lender’s prior written
consent, enter into any lease, and in no event shall any leases, amendments or
subleases be entered into that would adversely affect Lender’s compliance with
the New Markets Tax Credit covenants contained in this Section 5.03.


 


(x)            Borrower shall provide such information and sign such
documents as are necessary for Lender and the Fund to make timely, accurate and
complete submissions of (i) federal and state income tax returns,
(ii) reports to governmental agencies, and (iii) any other reports
required to be delivered to Lender and the Fund or their members.


 


(y)           Borrower shall not permit a change in control or ownership
of interests in Borrower which would result in USBCDC or Lender having NMTC
Control of Borrower.


 


(z)            Borrower shall promptly supply Lender with any reports,
records, statements, documents or other information reasonably requested by
Lender in connection with responding to any request by the CDFI Fund and the US
Department of Treasury, including any request pursuant to Section 6.3 of
the Allocation Agreement (e.g., financial and activity reports, records,
statements, documents and other information for purposes of ensuring compliance
with this Section 5.03) as may be required to comply with the New Markets
Tax Credit requirements, and shall promptly cooperate with the Lender to enable
Lender to comply with all of the requirements of the Allocation Agreement.


 


(aa)          Borrower shall collaborate with Lender with respect to the
response to be made to any 90-day notice of noncompliance and ability to cure
the provisions of this Section 5.03 provided by the CDFI Fund to Lender
pursuant to Section 8.6 of the Allocation Agreement.


 


(bb)          Borrower shall cooperate with Lender in seeking any waiver
or extension sought by Lender with respect to a NMTC Recapture Event
(regardless of whether or not Borrower has violated any covenants provided
herein or failed to act as directed by Lender), pursuant to Treas. Reg.
Section 1.45D-l(e)(5) and Rev. Proc. 2005-1, 2005-1 I.R.B. 1.


 


(cc)           Borrower
shall not by its action or inaction cause a NMTC Recapture Event.


 


(dd)          Borrower
shall provide Lender with a semi-annual certification by June 1 and
December 1 of each year to confirm compliance with the representations set
forth in (a) through (m) above.


 


49

















 


(ee)       Future
Unlimited Law PC is permitted to rely on the Borrower’s covenants contained
herein in connection with the issuance of a federal income tax opinion to
USBCDC.


 


(ff)        In
the event the reports or information provided for in this Section 5.03 are
not provided within the time period(s) specified herein due to matters
within the reasonable control of Borrower, at Lender’s discretion, the Borrower
shall be obligated to pay to Lender the sum of $150 per day, as liquidated
damages, for each day from the date three (3) business days after written
notice has been provided to the Borrower until the date upon which such reports
or information is (are) provided.


 


Section 5.04       Anti-Terrorism Laws.  Borrower covenants
and agrees with Lender as follows:


 


(a)          Borrower shall not:


 


(i)          knowingly
conduct any business or engage in making or receiving any contribution of
funds, goods, or services to or for the benefit of any Prohibited Person;


 


(ii)         knowingly
deal in, or otherwise engage in any transaction relating to, any property or interests
in property blocked pursuant to the Executive Order or any other Anti-Terrorism
Law; or


 


(iii)        knowingly
engage in, or conspire to engage in, any transaction that evades or avoids, or
has the purpose of evading or avoiding, or attempts to violate, any of the
prohibitions set forth in any Anti-Terrorism Law.


 


(b)          Borrower agrees to deliver to Lender promptly (but in any
event within ten (10) calendar days of Lender’s written request) any
certification or other evidence requested from time to time by Lender in its
reasonable discretion, confirming Borrower’s compliance with the foregoing covenants.


 


ARTICLE VI.


EVENTS OF
DEFAULT AND REMEDIES


 


Section 6.01.      Events of Default.  Each
of the following events shall be an “Event of
Default”:


 


(a)         The
Borrower shall fail to pay any installments of principal or interest, fees,
expenses, charges or other amounts payable hereunder or under the other Loan
Documents or to make any deposit of funds required under this Agreement when
due or within ten (10) days of its due date; or


 


(b)         Any
representation or warranty made by the Borrower, or any of its officers or
directors under or in connection with any Loan Document shall prove to have
been incorrect in any material respect when made; or


 


50

















 


(c)         The
Borrower shall fail to perform or observe any term, covenant or agreement
contained in Sections 5.01(d), (e), (f) or (g) or
Section 50.3 or take any action as prohibited by Section 5.02; or


 


(d)         The
Borrower shall fail to deliver the financial statements or Compliance
Certificate under Section 5.01(c) within 5 days of the date due; or


 


(e)         The
Borrower shall fail to perform or observe any term, covenant or agreement
contained in any Loan Document (other than those listed in clauses
(a) through (b) of this Section 6.01) on its part to be
performed or observed (other than the covenants to pay the Loan Obligations)
and any such failure shall remain unremedied for thirty (30) days after written
notice thereof shall have been given to the Borrower by the Lender, provided,
however, that no Event of Default shall be deemed to exist if, within said
thirty (30) day period, Borrower have commenced appropriate action to remedy
such failure and shall diligently and continuously pursue such action until
such cure is completed, unless such cure is or cannot be completed within
thirty (30) days after written notice shall have been given; or


 


(f)          The
Borrower shall fail to pay any indebtedness in an amount in excess of $250,000
(either in any individual case or in the aggregate) excluding indebtedness
evidenced by the Notes and excluding Ordinary Trade Payable Disputes, or any
interest or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such indebtedness; or any other default under any
agreement or instrument relating to any such indebtedness, or any other event,
shall occur and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such default or
event is to accelerate, or to permit the acceleration of, the maturity of such
indebtedness (excluding Ordinary Trade Payable Disputes); or any such
indebtedness shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), prior to the stated
maturity thereof (excluding Ordinary Trade Payable Disputes); or


 


(g)         The
Borrower shall generally not pay its debts as such debts become due, or shall
admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors; or any proceeding shall be
instituted by or against the Borrower seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee or other similar official for it or for any substantial part of its
property, and, in the case of any such proceeding instituted against it (but
not instituted by it) either such proceeding shall remain undismissed or
unstayed for a period of sixty (60) days or any of the actions sought in such
proceeding (including, without limitation, the entry of an order for relief
against it or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its property) shall
occur; or the Borrower shall take any corporate action to authorize any of the
actions set forth above in this subsection; or


 


51

















 


(h)         Any
one or more uninsured judgment(s) or order(s) for the payment of money in
excess of $100,0000 in the aggregate shall be rendered against the Borrower and
either: (i) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order; or (ii) there shall be any period of
10 consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect; or


 


(i)          Any
provision of any Loan Document shall for any reason cease to be valid and
binding on the Borrower or the Borrower shall so state in writing; or


 


(j)          The
Mortgage or the Security Agreement shall for any reason, except to the extent
permitted by the terms thereof, cease to create a valid lien, encumbrance or
security interest in any of the property purported to be covered thereby; or


 


(k)         The
termination of any Long Term Marketing Agreement prior to its stated expiration
date, unless such Long Term Marketing Agreement is replaced by another Long
Term Marketing Agreement acceptable to the Lender, within sixty (60) days of
the termination of such Long Term Marketing Agreement; or


 


(1)                            The Borrower
shall dissolve, merge, consolidate with other Persons, or suspend or
discontinue doing business; or


 


(m)        Construction
of the Project is halted or abandoned prior to completion for any period of
thirty (30) consecutive days for any cause which is not beyond the reasonable
control of the Borrower, its contractors and subcontractors; or


 


(n)         The
construction of the Project shall be delayed for any reason and for such period
that, in the reasonable judgment of the Lender, the Project will not be
completed by the Completion Date. If such delay is curable and if Borrower has
not been given a notice of a similar breach within the preceding twelve (12)
months, it may be cured (and no Event of Default will have occurred) if
Borrower cures the failure within thirty (30) days, which shall include advancing
the progress of the Project to the point that, in the reasonable judgment of
the Lender, the Project will be completed by the Completion Date; or


 


(o)         Any
event, change or condition not referred to elsewhere in this Section 6.01
should occur which results in a Material Adverse Effect on the Borrower, any
subsidiary or any guarantor of the Borrower’s obligations hereunder; or


 


(p)         Any
guarantee, suretyship, subordination agreement, maintenance agreement, or other
agreement furnished in connection with the Borrower’s obligations hereunder and
under any Note shall, at any time, cease to be in full force and effect, or
shall be revoked or declared null and void, or the validity or enforceability
thereof shall be contested by the guarantor, surety or other maker thereof, or
the guarantor shall deny any further liability or obligations thereunder, or
shall fail to perform its obligations thereunder, or any representation or
warranty set forth therein shall be


 


52

















 


breached, or the guarantor shall breach or be in default under the
terms of any other agreement with Lender (including any loan agreement or
security agreement); or


 


(q)         The
loss, suspension or revocation of, or failure to renew, any material franchise,
license, certificate, permit, authorization, approval or the like now held or
hereafter acquired by the Borrower or any of its subsidiaries, if such loss,
suspension, revocation or failure to renew could reasonably be expected to have
a Material Adverse Effect on the Borrower or (ii) any regulatory or
Governmental Authority replaces the management of the Borrower or any of its
subsidiaries or assumes control over the Borrower or such subsidiary; or


 


(r)          The
Borrower should breach or be in default under a Material Contract in any
material respect, including any material breach or default, or any termination
shall have occurred, or any other event which would permit any party other than
the Borrower to cause a termination, or any Material Contract shall have ceased
for any reason to be in full force and effect prior to its stated or optional
expiration date, and any such failure shall remain unremedied for thirty (30)
days after written notice thereof shall have been given to the Borrower by the
Lender, provided, however, that no Event of Default shall be deemed to exist
if, within said thirty (30) day period, Borrower has commenced appropriate
action to remedy such failure and shall diligently and continuously pursue such
action until such cure is completed, unless such cure is or cannot be completed
within thirty (30) days after written notice shall have been given; or


 


(s)         The
Borrower should terminate, change, amend or restate, without the Lender’s prior
consent any Material Contract, or any material Construction Contract, except as
may be otherwise permitted by this Agreement or other Loan Document; or


 


(t)          Before
AgStar has advanced the AgStar Construction Loan in full, if AgStar provides
written notice to Borrower that no further advances will be made of AgStar
Construction Loan proceeds pursuant to the Disbursing Agreement, the Master
Loan Agreement or the First Supplement to the Master Loan Agreement
(Construction and Term Loan); and (i) Borrower fails to obtain replacement
financing reasonably acceptable to Lender in the amount of the AgStar
Construction Loan that has not been advanced to Borrower within thirty (30)
days of receipt of the written notice from AgStar (“AgStar Notice Date”); or
(ii) Borrower fails to pay to Lender the outstanding Loan Obligations in
immediately available funds within sixty (60) days of the AgStar Notice Date.


 


(u)         The
occurrence or existence of an Event of Default (defined as such therein) under
any of the AgStar Loan Documents;


 


(v)         The
occurrence or existence of a default or an event of default under any of the
documents or agreements executed by Borrower in connection with the Subordinate
Financing


 


Section 6.02.  Remedies  Upon
the occurrence of an Event of Default and at any time while such Event of
Default is continuing, the Lender:


 


53

















 


(a)         may
accelerate the due date of the unpaid principal balance of the Notes, all
accrued but unpaid interest thereon and all other amounts payable under this
Agreement making such amounts immediately due and payable, whereupon the Notes,
all such interest and all such amounts shall become and be forthwith
immediately due and payable, without presentment, notice of intent to
accelerate or notice of acceleration, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower; provided, however, that in the event of an
actual or deemed entry of an order for relief with respect to the Borrower
under the Federal Bankruptcy Code, the Notes, all such interest and all such
amounts shall automatically become due and payable, without presentment,
demand, protest or any notice of any kind, all of which are hereby expressly
waived by the Borrower; and provided further that with respect to an Event of
Default pursuant to Section 6.02(t), Borrower shall have sixty (60) days
from the AgStar Notice Date to


 


(b)         may
withhold or direct the Disbursing Agent to withhold any one or more Advances in
its discretion, and terminate the Lender’s obligations, if any, under this
Agreement to make any Advances whereupon the commitment and obligations of the
Lender to extend credit or to make Advances hereunder shall terminate, and no
disbursement of Loan funds by the Lender will cure any default of the Borrower,
unless the Lender agrees otherwise in writing;


 


(c)         may,
by notice to the Borrower, obtain the appointment of a receiver to take
possession of all Collateral of the Borrower, including, but not limited to all
personal property, including all fixtures and equipment leased, occupied or
used by any of the Borrower. Borrower hereby irrevocably consents to the
appointment of such receiver and agrees to cooperate and assist any such
receiver as reasonably requested to facilitate the transfer of possession of
the Collateral to such receiver and to provide such receiver access to all
books, records, information and documents as requested by such receiver;


 


(d)         in
its discretion, enter the Real Property and take any and all actions necessary
in its judgment to complete construction of the Project, including but not
limited to making changes in Plans and Specifications, work or materials, and
entering into, modifying, or terminating any contractual arrangements, subject
to the Lender’s right at any time to discontinue any work without liability. If
the Lender elects to complete the Project, it will not assume any liability to
the Borrower or any other person for completing the Project or for the manner
or quality of construction of the Project, and the Borrower expressly waives any
such liability. The Borrower irrevocably appoints the Lender as its
attorney-in-fact, with full power of substitution, to complete the Project in
the Borrower’s name, or the Lender may elect to complete construction in its
own name. In any event, all sums expended by the Lender in completing
construction will be considered to have been disbursed to the Borrower and will
be secured by the Mortgage and any other instruments or documents securing the
Loans, and any such sums that cause the principal amount of the Loans to exceed
the face amount of the Notes will be considered to be an additional loan to the
Borrower bearing interest at the rate provided in the Notes and will be secured
by the Mortgage and any other instrument or documents securing the Loans. The
Lender will not have any obligation under the Plans and Specifications prepared
for the Project, any studies, data, and drawings with respect thereto prepared
by or for Borrower, or the contracts and agreements relating to the Plans and
Specifications, or the aforesaid studies, data, and drawings, or to the
construction of the Project unless it expressly


 


54

















 


hereafter agrees in writing. The Lender will have the right to exercise
any rights of the Borrower under those contracts and agreements or with respect
to such Plans and Specifications, studies, data, and drawings upon any default
by the Borrower under this Agreement, and shall have such other rights and
remedies with respect thereto as are afforded a secured creditor under
applicable law;


 


(e)         in
its discretion, with respect to an Event of Default pursuant to
Section 6.02(t), direct Borrower to sell the Project pursuant to terms
acceptable to Lender, the proceeds of which sale shall be applied promptly to
pay the outstanding Loan Obligations, together with such additional funds as
may be required to pay the outstanding Loan Obligations in full; and


 


(f)          may
exercise all other rights and remedies afforded to the Lender under the Loan
Documents or by applicable law or equity.


 


Section 6.03.  Remedies Cumulative.  Each and
every power or remedy herein specifically given shall be in addition to every
other power or remedy, existing or implied, given now or hereafter existing at
law or in equity, and each and every power and remedy herein specifically given
or otherwise so existing may be exercised from time to time and as often and in
such order as may be deemed expedient by Lender, and the exercise or the
beginning of the exercise of one power or remedy shall not be deemed a waiver
of the right to exercise at the same time or thereafter any other power or
remedy. No delay or omission of Lender in the exercise of any right or power
accruing hereunder shall impair any such right or power or be construed to be a
waiver of any default or acquiescence therein.


 


ARTICLE
VII. 


MISCELLANEOUS


 


Section 7.01.  Amendments, etc.  No
amendment or waiver of any provision of any Loan Document to which the Borrower
is a party, nor any consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be agreed or consented to by
the Lender and the Borrower, and each such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.


 


Section 7.02.  Notices, etc.  All
notices and other communications provided for under any Loan Document shall be
in writing and mailed, faxed, or delivered at the addresses set forth below, or
at such other address as such party may specify by written notice to the other
parties hereto:


 


	
   

  	
  If
  to the Borrower:

  	
  Otter
  Tail Ag Enterprises, LLC

  
	
   

  	
   

  	
  1220
  North Tower Road

  
	
   

  	
   

  	
  Suite 201

  
	
   

  	
   

  	
  Fergus
  Falls, MN 56537

  
	
   

  	
   

  	
  Attn:
  Chief Executive Officer and President

  
	
   

  	
   

  	
   

  
	
   

  	
  With
  a copy to:

  	
  Pemberton,
  Sorlie, Rufer & Kershner, PLLP

  
	
   

  	
   

  	
  110
  North Mill Street

  



 


55

















 


	
   

  	
   

  	
  P.O. Box
  866

  
	
   

  	
   

  	
  Fergus
  Falls, MN 56538-0866

  
	
   

  	
   

  	
  Attn:
  Kent Mattson

  
	
   

  	
   

  	
   

  
	
   

  	
  If
  to the Lender:

  	
  MMCDC
  New Markets Fund II, LLC

  
	
   

  	
   

  	
  119
  Graystone Plaza

  
	
   

  	
   

  	
  (P.O. Box
  623)

  
	
   

  	
   

  	
  Detroit
  Lakes, Minnesota 56501

  
	
   

  	
   

  	
  Attention:
  Arlen Kangas

  
	
   

  	
   

  	
  Telephone:
  (218) 847-3191

  
	
   

  	
   

  	
  Facsimile:
  (218) 844-3192

  
	
   

  	
   

  	
   

  
	
   

  	
  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

  
	
   

  	
   

  	
   

  
	
   

  	
  And
  to:

  	
  U.S.
  Bancorp Community Development Corporation

  
	
   

  	
   

  	
  1307
  Washington Avenue, Suite 300

  
	
   

  	
   

  	
  St.
  Louis, Missouri 63103

  
	
   

  	
   

  	
  Attention:
  Director of Asset Mgmt.

  
	
   

  	
   

  	
  Telephone:
  (314) 335-2600

  
	
   

  	
   

  	
  Facsimile:
  (314) 335-2601

  
	
   

  	
   

  	
   

  
	
   

  	
  With
  a copy to:

  	
  Husch &
  Eppenberger, LLC

  
	
   

  	
   

  	
  190
  Carondelet Plaza, Suite 600

  
	
   

  	
   

  	
  St.
  Louis, Missouri 63105

  
	
   

  	
   

  	
  Attention:
  Edward J. Lieberman

  
	
   

  	
   

  	
  Telephone:
  (314) 480-1500

  
	
   

  	
   

  	
  Facsimile:
  (314) 480-1505

  
	
   

  	
   

  	
   

  
	
   

  	
  And
  to:

  	
  Minnesota’s
  Community Development Corporation

  
	
   

  	
   

  	
  109
  S Grove Ave

  
	
   

  	
   

  	
  PO
  Box 509

  
	
   

  	
   

  	
  Park
  Rapids, MN 56470

  
	
   

  	
   

  	
  Attention:
  Robert Crep

  
	
   

  	
   

  	
  Telephone:
  (218) 732-3677

  
	
   

  	
   

  	
  Facsimile:
  (218) 732-8985

  
	
   

  	
   

  	
   

  
	
   

  	
  With
  a copy to:

  	
  Gislason &
  Hunter, LLP

  
	
   

  	
   

  	
  2700
  S. Broadway

  
	
   

  	
   

  	
  New
  Ulm, MN 56073

  



 


56

















 


	
   

  	
   

  	
  Attention:
  C. Thomas Wilson 

  
	
   

  	
   

  	
  Telephone:
  (507) 354-3111 

  
	
   

  	
   

  	
  Facsimile:
  (507) 354-8447

  



 


All such notices and communications shall have been
duly given and shall be effective: (a) when delivered; (b) when
transmitted via facsimile to the number set forth above; (c) the Business
Day following the day on which the same has been delivered prepaid (or pursuant
to an invoice arrangement) to a reputable national overnight air courier
service; or (d) the third Business Day following the day on which the same
is sent by certified or registered mail, postage prepaid. Any confirmation sent
by the Lender to the Borrower of any borrowing under this Agreement shall, in
the absence of manifest error, be conclusive and binding for all purposes.


 


Section 7.03.  No Waiver; Remedies.  No
failure on the part of the Lender to exercise, and no delay in exercising, any
right under any Loan Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any right under any Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The
remedies provided in the Loan Documents are cumulative and not exclusive of any
remedies provided by law.


 


Section 7.04.  Costs,
Expenses, Taxes and Origination Fee.


 


(a)      The
Borrower agrees, jointly and severally, to pay on demand all reasonable costs
and expenses in connection with the preparation, execution, delivery, filing,
recording and administration of the Loan Documents and the other documents to be
delivered under the Loan Documents, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Lender (who may
be in-house counsel), and local counsel who may be retained by said counsel,
with respect thereto and with respect to advising the Lender as to its
respective rights and responsibilities under the Loan Documents, and all costs
and expenses (including reasonable counsel fees and expenses) for the Lender in
connection with the filing of the Financing Statements and the enforcement of
the Loan Documents and the other documents to be delivered under the Loan
Documents, including, without limitation, in the context of any bankruptcy
proceedings. In addition, the Borrower agrees to pay on demand the expenses
described in Section 5.01(b). In addition, the Borrower shall pay any and
all stamp and other taxes and fees payable or determined to be payable in
connection with the execution, delivery, filing and recording of the Loan
Documents and the other documents to be delivered under the Loan Documents, and
agrees to save the Lender harmless from and against any and all liabilities
with respect to or resulting from any delay in paying or omission to pay such
taxes and fees.


 


(b)      If,
due to payments made by the Borrower or due to acceleration of the maturity of
the Advances pursuant to Section 6.01 or due to any other reason, the
Lender receives payments of principal of any Loan other than on the date due
pursuant to the Notes, the Borrower shall pay to the Lender on demand any
amounts required to compensate the Lender for any additional losses, costs or
expenses which it may incur as a result of such payment, including, without
limitation, any loss (including loss of anticipated profits), cost or expense
incurred by reason of the


 


57

















 


liquidation
or reemployment of deposits or other funds acquired by the Lender to fund or
maintain such Loan.


 


(c)      Borrower
shall pay Lender on the Closing Date an origination fee in the amount of
$75,008 in immediately available funds.


 


(d)      Borrower
shall pay quarterly in arrears commencing July 1, 2007 a New Markets Tax Credit
Compliance Fee in the annual amount of $100,000 to Lender to the extent such fee
plus the operating expenses for the applicable quarter set forth in the
Financial Projections exceeds the interest due and payable pursuant to the
MMCDC Subordinate Loan in consideration for services rendered in maintaining
compliance with New Markets Tax Credit requirements.


 


Section 7.05.  Right of Set-off.  The
Lender is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, upon the continuing occurrence of an Event of Default
to set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by the Lender to or for the credit or the account of the Borrower against any
and all of the Loan Obligations, irrespective of whether or not the Lender
shall have made any demand under such Loan Document and although deposits,
indebtedness or such obligations may be unmatured or contingent. The Lender
agrees promptly to notify the Borrower after any such set-off and application,
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Lender under this
Section 7.05 are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Lender may have.


 


Section 7.06.  Severability of Provisions.  Any
provision of this Agreement or of any other Loan Document which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.


 


Section 7.07.  Binding
Effect; Successors and Assigns; Participations.


 


(a)     This
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Lender and their respective successors and assigns, except that the Borrower
shall not have the right to assign or otherwise transfer its rights hereunder
or any interest herein without the prior written consent of the Lender. Upon
the request of Borrower, Lender shall provide copies of all invoices for costs
and expenses to be reimbursed by Borrower under this Agreement or under any of
the Loan Documents.


 


(b)     Borrower
agrees and consents to Lender’s sale or transfer, whether now or later, of one
or more participation interests in the Loans to one or more purchasers, whether
related or unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any
information or knowledge Lender may have about Borrower or about any other
matter relating to the Loans, and Borrower hereby waives any rights to privacy
it


 


58

















 


may have with respect to such matters; provided,
however, that any information received by any such purchaser or potential
purchaser under this provision which concerns the personal, financial or other
affairs of the Borrower shall be received and kept by the purchaser or potential
purchaser in full confidence and will not be revealed to any other persons,
firms or organizations nor used for any purpose whatsoever other than for
determining whether or not to participate in the Loans and in accord with the
rights of Lender if a participation interest is acquired. Borrower additionally
waives any and all notices of sale of participation interests, as well as all
notices of any repurchase of such participation interest. Borrower also agrees
that the purchasers of any such participation interests will be considered as
the absolute owners of such interests in the Loans and will have all the rights
granted under the participation agreement or agreements governing the sale of
such participation interests. Borrower further waives all rights of offset or
counterclaim that it may have now or later against Lender or against any
purchaser of such a participation interest arising out of or by virtue of the
participation and unconditionally agrees that either Lender or such purchaser
may enforce Borrower’s obligation under the Loans irrespective of the failure
or insolvency of any holder of any interests in the Loans. Borrower further
agrees that the purchaser of any such participation interests may enforce its
interests irrespective of any personal claims or defenses that Borrower may
have against Lender.


 


Section 7.08.  Consent to Jurisdiction.


 


(a)       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 Agreement, the Note 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 court 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. The Borrower irrevocably
consents to the service of copies of the summons and complaint and any other
process which may be served in any such action or proceeding by the mailing of
copies of such process to Borrower at its address specified in
Section 7.02. The Borrower agrees that a final judgment in any such action
or proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.


 


(b)       Nothing
in this Section 7.08 shall affect the right of the Lender to serve legal
process in any other manner permitted by law or affect the right of the Lender
to bring any action or proceeding against the Borrower or its property in the
courts of other jurisdictions.


 


Section 7.09.  Governing Law.  THIS
AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF MINNESOTA.


 


Section 7.10.  Execution in Counterparts.  This
Agreement may be executed in any number of counterparts and on telecopy
counterparts, each of which when so executed shall be


 


59

















 


deemed to be an original and all of which when taken
together shall constitute but one and the same agreement.


 


Section 7.11.  Survival.  All covenants,
agreements, representations and warranties made by the Borrower in the Loan
Documents and in the certificates or other instruments delivered in connection
with or pursuant to this Agreement or any other Loan Document shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of the Loan Documents and the making of any
Advances, regardless of any investigation made by any such other party or on
its behalf and notwithstanding that Lender may have had notice or knowledge of
any Event of Default or incorrect representation or warranty at the time any
credit is extended hereunder, and shall continue in full force and effect as
long as any Loan Obligations are outstanding and unpaid and so long as the
Lender has any unexpired commitments under this Agreement or the Loan
Documents. The expense reimbursement, additional cost, capital adequacy and
indemnification provisions of this Agreement shall survive and remain in full
force and effect regardless of the consummation of the transactions
contemplated hereby, the repayment of the Loan Obligations or the termination
of this Agreement or any provision hereof.


 


Section 7.12.  WAIVER OF JURY TRIAL.  THE
BORROWER AND THE LENDER HEREBY IRREVOCABLY WAIVE ALL RIGHTS TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO ANY LOAN
DOCUMENT TO WHICH IT IS A PARTY OR ANY INSTRUMENT OR DOCUMENT DELIVERED
THEREUNDER.


 


Section 7.13.  Entire
Agreement.  THIS AGREEMENT, THE NOTES, AND THE OTHER
LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE
PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES
THERETO.


 


{SIGNATURE PAGE TO FOLLOW}


 


60

















 


IN WITNESS WHEREOF, the parties hereto have caused
this Construction and Term Loan Agreement to be executed by their respective
officers and duly authorized, as of the date first above written.


 


BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
CONSTRUCTION AND TERM LOAN AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS
AGREEMENT IS DATED AS OF THE DATE FIRST ABOVE STATED.


 


BORROWER:


 


OTTER TAIL AG ENTERPRISES, LLC


a Minnesota limited liability company


 


	
   

  	
  By:
  

  
	
   

  	
  /s/
  Jerry Larson

  	
   

  
	
   

  	
  Jerry
  Larson, President

  



 


 


LENDER:


MMCDC NEW MARKETS FUND II, LLC,


a Delaware limited liability company 


By: Midwest Minnesota Community Development 


Corporation, a Minnesota nonprofit corporation, its 


managing member


 


	
   

  	
  By:

  
	
   

  	
  /s/Arlen Kangas

  	
   

  
	
   

  	
  Arlen
  Kangas, President

  



 


61

















 


EXHIBIT A


COMPLIANCE
CERTIFICATE


 


TO:       MMCDC
New Markets Fund II, LLC (the “Lender”)


 


Pursuant to that certain
Construction and Term Loan Agreement dated as of March 30, 2007, by and
between Otter Tail Ag Enterprises, LLC, a Minnesota limited liability company
(the “Borrower”),  and
the Lender, and any amendments thereto and extensions thereof (the “Loan Agreement”),  the undersigned
hereby represents, warrants and certifies to the Lender as follows:


 


1.                                   The financial
statement(s) attached hereto are complete and correct in all material respects
and fairly present the financial condition of the Borrower as of the date of
said financial statement(s) and the result of its business operations for
the period covered thereby;


 


2.                                   Repeats and
reaffirms to the Lender each and all of the representations and warranties made
by the Borrower in the Loan Agreement and the agreements referred to therein or
related thereto, and represents and warrants to the Lender that each and all of
said warranties and representations are true and correct as of the date hereof,
except as disclosed in writing to the Lender;


 


3.                                   No Event of
Default (as that term is defined in the Loan Agreement), and no event which
with the giving of notice or the passage of time or both would constitute an
Event of Default, has occurred and is continuing as of the date hereof; and


 


4.                                   All the
calculations set forth below are made pursuant to the terms of the Loan
Agreement and are true and accurate as of the date of the attached financial
statements:


 


1.             Section 5.01(d) – Working Capital.


(tested annually)


 


(a)           Required Working Capital (@
Completion Date $5,000,000)


(twelve months after Completion Date $7,000,000,
annually thereafter)


 


	
  (a)    Current
  Assets 

  	
   

  	
   

  	
  $

  	
   

  
	
  (b)    Current
  Liabilities

  	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Line
  (a) less line (b)

  	
   

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  In
  Compliance

  	
   

  	
  Yes   o

  	
   

  	
  No   o

  



 


62

















 


2.             Section 5.01(e) –
Tangible Net Worth.


(tested annually)


 


	
  (a)

  	
  Required Tangible Net
  Worth($43,000,000 at Completion Date)

                                                  (annually
  thereafter, increases based on covenant)

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
   

  
	
  (b)

  	
  Actual Tangible Net Worth

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (1)

  	
  Total Assets

  	
  $

  	
   

  
	
   

  	
  (2)

  	
  Less Intangible Assets (per definition)

  	
  $

  	
   

  
	
   

  	
  (3)

  	
  Total Tangible Assets       

  	
  $

  	
   

  
	
   

  	
  (4)

  	
  Total Liabilities

  	
  $

  	
   

  
	
   

  	
  (5)

  	
  Tangible Net Worth

  	
  $

  	
   

  
	
   

  	
  (line (4) minus line
  (5))

  	
   

  	
   

  



 


	
  In
  Compliance

  	
   

  	
  Yes

  	
  o

  	
  No

  	
  o

  



 


3.             Section 5.01(f) –
Owner Equity Ratio


(55% twelve months after the
Completion Date and annually thereafter)


 


	
  (a)

  	
   

  	
  Tangible Net Worth

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  (b)

  	
   

  	
  Subordinated Debt

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  (c)

  	
   

  	
  Total of Lines (a)and (b)

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  (d)

  	
   

  	
  Total Assets

  	
   

  	
   

  	
  $

  	
   

  	
   

  
	
  (e)

  	
   

  	
  Owner Equity Ratio

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (line (c)divided by line
  (d))

  	
   

  	
   

  	
   

  	
   

  	
  %

  	
   

  
									



 


	
  In
  Compliance

  	
   

  	
  Yes

  	
  o

  	
  No

  	
  o

  



 


4.             Section 5.01(g) –
Fixed Charge Ratio


(tested annually beginning twelve months after the Completion Date, and
maintained and measured at the end of each fiscal year thereafter.)


 


	
  (a)

  	
   

  	
  EBITDA

  	
  $

  	
   

  	
   

  
	
  (b)

  	
   

  	
  Extraordinary Items

  	
  $

  	
   

  	
   

  
	
  (c)

  	
   

  	
  Numerator (sum of lines (a)and
  (b))

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (d)

  	
   

  	
  Current Portion of Long
  Term Debt

  	
  $

  	
   

  	
   

  
	
  (e)

  	
   

  	
  Interest Expense

  	
  $

  	
   

  	
   

  
	
  (f)

  	
   

  	
  Dividends

  	
  $

  	
   

  	
   

  



 


63

















 


	
  (g)

  	
  Tax Distributions  

  	
  $

  	
   

  	
   

  
	
  (h)

  	
  Maintenance Capital Expenditures

  	
  $

  	
   

  	
   

  
	
  (i)

  	
  Denominator (sum of lines (d) through (h))

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Ratio of line (c) to (i)

  	
   

  	
  to
  1.00

  	
   

  
						



 


Required Ratio of 1.15 to 1.00


 


	
  In
  Compliance

  	
  Yes

  	
  o

  	
  No

  	
  o

  



 


IN
WITNESS WHEREOF, the undersigned has signed and delivered this Certificate to
the Lender as of
the            day
of                                ,               .


 


BORROWER:


 


OTTER TAIL
AG ENTERPRISES, LLC,


a Minnesota limited
liability company


 


	
   

  	
  By

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
						



 


64

















 


EXHIBIT B


PROJECT SOURCE AND USE STATEMENT


 


See
Attached Sources and Uses Statement dated                                        .


 


65

















 


EXHIBIT C 


FORM OF
OPINION LETTER


 


March 30, 2007


 


MMCDC New Markets Fund II, LLC 


119 Graystone Plaza 


Detroit Lakes, MN 56501


 


Future Unlimited Law PC


P. O. Box 2776


Yelm, Washington 98597


 


Re:      Construction and Term Loan Agreement Dated
as of March 30, 2007 by and between Otter Tail Ag Enterprises, LLC and
MMCDC New Markets Fund II, LLC


 


Ladies and Gentlemen:


 


We have acted as counsel to Otter Tail Ag Enterprises, LLC, a Minnesota
limited liability company (the “Company”),  in
connection with the negotiation of the Construction and Term Loan Agreement
(the “Loan Agreement”)  by
and between the Company and MMCDC New Markets Fund II, LLC (the “Lender” or “you”)  dated as of the date hereof and the
consummation of the transactions described therein. This letter is furnished to
satisfy a condition set forth in Section 3.01(r) of the Loan
Agreement. All capitalized terms used in this letter that are not otherwise
defined herein have the meanings assigned to them in the Loan Agreement unless
the context requires otherwise.


 


In our capacity as counsel to the Company, and for purposes of this
opinion, we have examined the following documents:


 


(i)                          the Loan
Agreement;


 


(ii)                       the MMCDC
Senior Loan Note;


 


(iii)                    the MMCDC
Subordinate Loan Note;


 


(iv)                   the Security
Agreement;


 


(v)                      the Mortgage;


 


(vi)                   the Disbursing
Agreement;


 


(vii)                the
Intercreditor Agreement;


 


(viii)             the Guaranty
Agreement


 


66

















 


(ix)                    the Articles of Organization
and Operating and Member Control Agreement, each as amended, of the Company;


 


(x)                        the records of
proceedings and actions of the members and Board of Governors of the Company
with respect to the transactions between you and the Company contemplated by
the Loan Agreement; and


 


(xi)                    such other documents,
agreements and materials as we have deemed necessary and appropriate to render
the opinions set forth in this letter, subject to the limitations, assumptions
and qualifications noted below.


 


The documents listed as items (i) through
(viii) above are dated as of the first date written above and are
collectively referred to herein as the “Loan Documents.” In addition, we have
examined and relied upon representations and warranties as to matters of fact
(other than facts constituting conclusions of law) contained in and made
pursuant to the Loan Documents.


 


In addition, we have examined such other resolutions, documents,
certificates and records and have made such investigations of law and fact as
we have deemed necessary or appropriate to enable us to render the opinions
expressed herein.


 


In reaching the opinions set forth below, we have assumed, and have not
independently verified, the genuineness of all signatures on all documents, the
legal capacity and competency for all purposes relevant hereto of all natural
persons, the authenticity of all documents submitted to us as originals, the
conformity to the authentic originals of all documents submitted to us as
copies, the correctness, completeness and accuracy of all facts set forth in
all representations, warranties and certificates referred to or identified in
this opinion, and that there are no documents, agreements or understandings to
which the Lender is a party between the Lender, on the one hand, and the
Company on the other hand, other than the Loan Documents, which would have an
effect on the opinions set forth below. In examining documents executed by
parties other than the Company, we have assumed that such parties had the
requisite power, right and authority (corporate or otherwise) to execute,
deliver and perform all of their respective obligations thereunder and have
also assumed the due authorization by all requisite corporate action and execution
and delivery of such documents by such parties, and the validity, legality and
binding effect of those documents on those parties. As to questions of fact
material to our opinions, we have relied upon the representations and
warranties made in the Loan Documents and upon certificates of officers or
other representatives of the Company and of public officials (“Certificates”). We have not independently or through third
parties verified such representations and warranties or Certificates, or made
any independent investigation as to the existence of agreements, instruments or
other documents, orders, judgments or decrees by which the Company or any of
its properties or assets may be bound.


 


In
basing the opinions and other matters set forth herein on phrases such as “best
of our knowledge,” “our knowledge,” or “known to us,” such phrases signify
that, in the course of our representation of the Company in matters with
respect to which we have been engaged by the Company to give substantive
attention as counsel, no information has come to our attention that would give
us actual


 


67

















 


conscious
knowledge that any such opinion or other matters are not accurate or that any
of the foregoing Certificates and other matters on which we have relied are not
accurate and complete. Except as otherwise stated herein, we have undertaken no
independent investigation or verification of such matters. The phrases “best of
our knowledge,” “our knowledge,” “known to us” and similar language used herein
are intended to be limited to the knowledge of the lawyers currently employed
by our firm who have performed substantive legal services related to the Loan
Documents and have specific knowledge of the substance of this opinion.


 


Based
on our review of the foregoing, and subject to the assumptions, qualifications
and limitations set forth herein, it is our opinion that:


 


1.            The
Company is a limited liability company duly organized, validly existing, and in
good standing under the laws of the State of Minnesota.


 


2.            The
Company has the power to enter into and perform its obligations under the Loan
Documents.


 


3.            The
Company has taken all necessary company action to authorize the execution,
delivery, and performance by the Company of the Loan Documents, and the
consummation by the Company of the transactions set forth in the Loan
Documents.


 


4.            The
Loan Documents have been duly and validly executed and delivered by the Company
and constitute legal, valid, binding, and enforceable obligations of the
Company.


 


5.            The
execution and delivery by the Company of the Loan Documents do not, and the
consummation by the Company of the transactions contemplated by the Loan
Documents and the compliance by the Company with the provisions of the Loan Documents
do not, (a) conflict with or result in a breach of any provision of the
Company’s Articles of Organization, or Operating and Member Control Agreement,
(b) to our knowledge, conflict with or result in a material violation of
any applicable state or federal law or regulation, (c) to our knowledge,
conflict with any order, judgment, or decree to which the Company is a party or
subject or by which any of its properties or assets are bound, or (d) to
our knowledge, conflict with any Material Contract to which the Company is a
party or by which the Company or any of its properties or assets are bound.


 


6.            To
our knowledge, except as expressly disclosed in the Loan Documents, there are
no actions, suits or proceedings pending or threatened in writing against or
affecting the Company before any court or arbitrator or by or before any
administrative agency or government authority, which, if adversely determined,
would constitute an material adverse effect on the Company; provided, however,
this letter may not be construed to have given a guarantee that any judgment or
judgments rendered against the Company in one or more of these proceedings for
which there is insurance coverage would not exceed such policy limits or might
not fall outside the risks covered by such insurance.


 


68

















 


The
foregoing opinions are subject to the following qualifications (in addition to
the qualifications, exceptions, limitations and assumptions specified above):


 


A.           Our opinions as
they relate to the legality, validity, binding effect and/or enforceability of
the Loan Documents are subject to the limitations that might result from
bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent or
preferential transfer, fraudulent conveyance, and other state and federal laws
relating to or affecting the rights or remedies of creditors generally, now or
hereafter, in effect.


 


B.            Our opinions as
they relate to the legality, validity, binding effect and/or enforceability of
the Loan Documents are subject to the qualification that the availability of
the remedies of specific performance or injunctive relief, or any other
equitable remedy, is subject to the discretion of the court before which a
proceeding therefor may be brought, equitable defenses and the application of
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law), including without limitation,
concepts of materiality, reasonableness, good faith, fair dealing and other
similar doctrines affecting the enforcement of agreements generally.


 


C.            Except as
expressly stated herein, no opinion is expressed or implied as to the truth,
accuracy or completeness of any of the representations, warranties or other
statements of the Company or any other person contained in any of the Loan
Documents or in any exhibit, schedule or attachment thereto.


 


D.           We express or
imply no opinion as to what actions the parties to the Loan Documents are
required to or may take or fail to take on or after the date hereof which, if
taken or not taken, would affect or impair the legality, validity, binding
effect and/or enforceability of the Loan Documents or the rights and remedies
of the parties thereunder.


 


E.            With respect to
the legality, validity, binding effect and enforceability of the remedies
available to the Lender under the Uniform Commercial Code in force in the State
of Minnesota (“UCC”), we have assumed that the Lender will enforce such
remedies in accordance with the UCC and under such circumstances and in a
manner in which it is commercially reasonable to do so. In addition, because a
claimant bears the burden of proof required to support its claim, our opinion
assumes that you will undertake the effort and expense necessary to present
your claims in the prosecution of any remedy accorded you under the Loan
Documents.


 


F.            We express or
imply no opinion as to the creation, attachment, perfection or priority of any
security interest, mortgage or other lien which the Lender may claim in any
real or personal property of the Company under any of the Loan Documents or
otherwise.


 


G.            Our opinions as
they relate to the legality, validity, binding effect and/or enforceability of
the Loan Documents are subject to the limitations arising from state and
federal court decisions involving statutes, public policy and/or principles of
equity holding that (i) purported waivers of notice, remedies (or the
delay in, omission of, or enforcement thereof) or the benefits of


 


69

















 


statutory provisions or constitutional or common law rights and broadly
or vaguely stated provisions waiving rights or waivers of unknown future rights
or duties imposed by law are or may be void or unenforceable, (ii) under certain
circumstances, provisions declaring that the failure to exercise or delay in
exercising rights or remedies will not operate as a waiver of any such right or
remedy are invalid, (iii) provisions declaring that the documents may only
be amended or waived in writing may be unenforceable to the extent that an oral
agreement or an implied agreement by trade practice or course of conduct has
been created modifying one or more provisions of the Loan Documents,
(iv) the enforcement of public policy is of a paramount public interest
which may prohibit enforcement of certain contractual provisions; (v) the
indemnification and exculpation provisions of the Loan Documents may be
unenforceable to the extent that the enforcement of such provisions is determined
to be against public policy; and (vi) certain other provisions in the Loan
Documents, including, without limitation, self-help provisions, provisions that
purport to establish evidentiary standards, provisions requiring the payment of
a late payment or repayment charge, fee, reinvestment charge, premium or
penalty, however denominated, are or may be unenforceable in whole or in part.


 


H.           Since it is necessary for the Lender to elect its proper
remedy in certain instances, no opinion is expressed or implied that any
cumulative remedy provision contained in any of the Loan Documents is valid or
enforceable.


 


I.             No opinion is expressed or implied as to the legality,
validity, binding effect or enforceability of (i) any power of attorney
granted to the Lender in any of the Loan Documents, or (ii) any document,
certificate, agreement or instrument executed or delivered by the Lender
pursuant thereto.


 


J.             In giving this opinion, we advise you that a Minnesota
court may not strictly enforce certain covenants contained in the Loan
Documents or allow acceleration of the maturity of the indebtedness evidenced
by the Notes if it concludes that such enforcement or acceleration would be
unreasonable under the then existing circumstances. We do believe, however,
that subject to the limitations expressed elsewhere in this opinion,
enforcement or acceleration would be available if an Event of Default occurs as
a result of a material breach of a material covenant contained in the Loan
Documents.


 


K.             Certain
rights, remedies, waivers and indemnities contained in the Loan Documents, in
addition to those specifically enumerated above, may be limited or rendered
ineffective by applicable Minnesota laws or judicial decisions governing such
provisions, but such laws and judicial decisions do not render the Loan
Documents invalid as a whole, and there exist, in the Loan Documents or
pursuant to applicable law, legally adequate remedies for a realization of the
principal benefits intended to be provided by the Loan Documents.


 


In addition to the
qualifications set forth above, the opinions set forth herein are also subject
to the following qualifications:


 


L.             We are members of the Bar of the State of Minnesota. The
opinions expressed herein are limited to matters of Minnesota and federal law
in effect as of the date of this letter. We express


 


70

















 


no opinion with respect to the laws of any other
jurisdiction, or laws created or amended after the date hereof. For purposes of
this opinion we have assumed that the internal laws (as opposed to the choice
of law rules) of the State of Minnesota and applicable federal law would apply
and have rendered our opinion on that basis. To the extent that the law of
another jurisdiction applies, we have assumed that the law of that jurisdiction
would be the same as Minnesota law. We render no opinion as to the
enforceability of any choice of law provision.


 


M.           We express no opinion with respect to title to any
property, nor do we express any opinion with respect to the existence of
encumbrances upon any property or the attachment, validity, perfection or
priority of any liens or security interests.


 


N.            Except as explicitly addressed in the numbered opinions
above, no opinion is expressed herein as to any of the topics listed under
Section 19 “Specific Legal Issues” of the Third-Party Legal Opinion
Report, published in 1991 by the Section of Business Law of the American
Bar Association.


 


This
opinion is limited to the specific legal issues addressed herein and shall be
strictly and narrowly construed, and no opinion is implied or may be inferred
beyond the matters expressly set forth herein. Our opinion is rendered to you
solely for your benefit in connection with consummation of the transactions set
forth in the Loan Documents and may not be quoted in whole or in part, filed
publicly or delivered to, or relied upon by any other person without our prior
written consent. Our opinion is based upon the state of facts and the law
existing and in effect on the date hereof, and we assume no obligation to
revise, supplement or update this opinion in any respect at any time subsequent
to the date hereof in order to account for any change in the law (whether or
not hereinafter enacted or adopted) or future facts, events or circumstances
affecting any of the transactions contemplated by any of the Loan Documents.


 


Very truly yours,


 


Pemberton, Sorlie, Rufer,
and Kershner, PLLP 


 


by Kent D. Mattson, for the
Firm


 


71

















 


EXHIBIT D


 


CERTIFICATION
REGARDING DEBARMENT, SUSPENSION,


INELIGIBILITY
AND VOLUNTARY EXCLUSION


 


LOWER TIER COVERED TRANSACTIONS


 


INSTRUCTIONS FOR CERTIFICATION


 


1.                                      By signing and
submitting this proposal, the prospective lower tier participant is providing
the certification set out below.


 


2.                                      The
certification in this clause is a material representation of fact upon which
reliance was placed when this transaction was entered into. If it is later
determined that the prospective lower tier participant knowingly rendered an
erroneous certification, in addition to other remedies available to the Federal
Government the department or agency with which this transaction originated may
pursue available remedies, including suspension and/or debarment.


 


3.                                      The prospective
lower tier participant shall provide immediate written notice to the person to
which this proposal is submitted if at any time the prospective lower tier
participant learns that its certification was erroneous when submitted or had
become erroneous by reason of changed circumstances.


 


4.                                      The terms
covered transaction, debarred, suspended, ineligible, lower tier covered
transactions, participant, person, primary covered transaction, principal,
proposal, and voluntarily excluded, as used in this clause, have the meaning
set out in the Definitions and Coverage sections of rules implementing
Executive Order 12549. You may contact the person to which this proposal is
submitted for assistance in obtaining a copy of those regulations.


 


5.                                      The prospective
lower tier participant agrees by submitting this proposal that, should the
proposed covered transaction be entered into, it shall not knowingly enter into
any lower tier covered transaction with a person who is proposed for debarment
under 48 CFR part 9, subpart 9.4, debarred, suspended, declared ineligible, or
voluntarily excluded from participation in this covered transaction, unless
authorized by the department or agency with which this transaction originated.


 


6.                                      The prospective
lower tier participant further agrees by submitting this proposal that it will
include this clause titled “Certification Regarding Debarment, Suspension,
Ineligibility and Voluntary Exclusion Lower Tier Covered Transaction,” without
modification, in all lower tier covered transactions and in all solicitations
for lower tier covered transactions.


 


7.                                      A participant
in a covered transaction may rely upon a certification of a prospective


 


72

















 


participant in a lower tier covered transaction that it is not proposed
for debarment under 48 CFR part 9, subpart 9.4, debarred, suspended,
ineligible, or voluntarily excluded from covered transactions, unless it knows
that the certification is erroneous. A participant may decide the method and
frequency by which it determines the eligibility of its principals. Each
participant may, but is not required to, check the List of Parties excluded
from Federal Procurement and Nonprocurement Programs.


 


8.                                      Nothing
contained in the foregoing shall be construed to require establishment of a system
of records in order to render in good faith the certification required by this
clause. The knowledge and information of a participant is not required to
exceed that which is normally possessed by a prudent person in the ordinary
course of business dealings.


 


9.                                      Except for
transactions authorized under paragraph 5 of these instructions, if a
participant in a covered transaction knowingly enters into a lower tier
coverage transaction with a person who is proposed for debarment under 48 CFR
part 9, subpart 9.4, suspended, debarred, ineligible, or voluntarily excluded
from participation in this transaction, in addition to other remedies available
to the Federal Government, the department or agency with which this transaction
originated may pursue available remedies, including suspension and/or
debarment.


 


73
















 


CERTIFICATION
REGARDING DEPARTMENT, SUSPENSION, INELIGIBILITY AND


VOLUNTARY EXCLUSION — 


LOWER TIER COVERED TRANSACTIONS


 


	
  (1)

  	
   

  	
  The
  prospective lower tier participant certifies, by submission of this proposal,
  that neither it nor its principals is presently debarred, suspended, proposed
  for debarment, declared ineligible, or voluntarily excluded from
  participation in this transaction by any Federal department or agency.

  
	
   

  	
   

  	
   

  
	
  (2)

  	
   

  	
  Where the
  prospective lower tier participant is unable to certify to any of the
  statements in this certification, such prospective participant shall attach
  an explanation to this proposal.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Explanation: Notwithstanding anything to the contrary set forth
  above, the certification in (1) above is hereby modified to state that
  to Borrower’s actual knowledge none of its members has been debarred,
  suspended, declared ineligible, or voluntarily excluded from participation in
  this transaction by any Federal department or agency.

  



 


Otter Tail Ag Enterprises, LLC,


a Minnesota limited liability company


 


	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Its:

  	
   

  	
   

  
	
  Dated as of March 30, 2007

  
				



 


74

















 


EXHIBIT
E


FINANCIAL
PROJECTIONS


 


75

















 


EXHIBIT
F 


SWORN
CONSTRUCTION STATEMENT


 


SWORN CONSTRUCTION
STATEMENT


 


OWNER:
PROPERTY AT:


 


IMPORTANT NOTICE: This statement must be complete as
to names of all persons and companies furnishing labor and/or material on the
premises herein. Any increase in cost, from changes in construction or otherwise,
must be forthwith reported to the DISBURSING AGENT with additional deposits to
cover such increase in cost.


 


	
   

  	
  ITEMS

  	
   

  	
  FURNISH BY

  	
   

  	
  TOTAL COST

  	
   

  	
  AMT PAID

  	
   

  	
  BALANCE

  	
   

  
	
  1

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  18

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  19

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  20

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  21

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  22

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  23

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  24

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  25

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  26

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  27

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  28

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  29

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  30

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  31

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  32

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  33

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  34

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


76

















 


	
  35

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  36

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  37

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  38

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  39

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  40

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  41

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  42

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  43

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  44

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  45

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  46

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  47

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  48

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  49

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  50

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  SUBTOTAL

  	
   

  	
  0

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


	
   

  	
   

  	
  STATE OF

  	
  )

  	
   

  	
   

  	
   

  	
   

  
	
  > 

  	
   

  	
   

  	
   

  	
  SS.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  COUNTY OF

  	
  )

  	
   

  	
   

  	
   

  	
   

  



 


The undersigned being first duly sworn, each for himself, as Prime
Contractor and Borrower, deposes and says that the foregoing are the names of
all parties having contracts or subcontracts for specified portions of the work
on said property and building or material entering into the construction
thereof, and the amounts due and to become due to each of said parties, that
the items mentioned include all labor and material required to complete said
buildings according to plans and specifications, that there are no other
contracts outstanding; and that there is not due or to become due to any person
for material, labor or other work of any kind done upon said building other
than as above stated.


 


The undersigned further deposes and says that no increase in the cost of
construction will be made under any circumstances without furnishing
information on same to the DISBURSING AGENT with additional deposits to cover
such increase; that, in the event of any such increase, no orders or claims
will be made to said company until such information and additional deposits
shall have been completed; that the purpose of said statement is to induce said
company to pay out the proceeds of a loan of $19,175,000.00 secured by a first
lien mortgage on said property; and that, upon payment of the specific unpaid
items listed herein, the undersigned Prime Contractor hereby agrees to waive
all claims of priority to said mortgage and both parties herein will save said
company harmless as to any claims of priority of lien for any labor or
material, furnished or to be furnished, for completion of construction


	
   

  	
   

  
	
  Prime
  Contractor

  	
   

  
			



 


	
   

  	
   

  
	
  OTTER
  TAIL AG ENTERPRISES, LLC

  



 


The foregoing instrument was acknowledged
before me this        day of                          ,
20               .


 


 


	
  by

  	
   

  	
   

  
	
  NOTARY
  STAMP:

  



 


Signature of Notary Public


 


77

















 


EXHIBIT G


ACCOUNTANT’S
LETTER


 


78

















 


Schedule
3.01(d)


Real
Property


 


LEGAL
DESCRIPTION


 


All that part of the W1/2 of Section 20,
Township 133 North, Range 43 West of the Fifth Principal Meridian, situate in
the County of Otter Tail and the State of Minnesota, lying South of the
Railroad Right-of-Way, EXCEPT the following described tracts of land:


 


1.                                 The
tract described as follows: That part of the SW1/4 of Section 20, Township
133, Range 43, described as follows: Commencing at the Southwest corner of said
Section 20; thence on an assumed bearing of East along the South line of
said Section 20 a distance of 312.35 feet to the point of beginning of the
land to be described; thence North 00°08’29” East a distance of 318.00 feet;
thence on a bearing of East a distance of 180.00 feet; thence South 00°08’29”
West a distance of 318.00 feet to said South line of Section 20; thence on
a bearing West along said South line of Section 20, a distance of 180.00
feet to the point of beginning.


 


2.                                 All
that part of the following-described tract: The E1/2 of W1/2 of
Section 20, Township 133, Range 43, except railroad right of way; which
lies Easterly of a line run parallel with and distant 100.00 feet westerly of
the following-described line: Beginning at a point on the North line of said
Section 20, distant 99.15 feet East of the North Quarter corner thereof;
thence run southerly to a point on the South line of said Section 20,
96.10 feet East of the South Quarter corner thereof, and there terminating;
together with all that part of the above-described tract adjoining and westerly
of the above-described strip and easterly of the following-described line: From
a point on the above-described line, distant 1,077.80 feet North of the South
line of said Section 20, run westerly at right angles with said
above-described line for 100.0 feet to the point of beginning of the line to be
described; thence run southwesterly to a point which is distant 110.0 feet
westerly (measured at right angles) from a point on the above-described line,
distant 977.80 feet North of the South line of Section 20 (when measured
along the above-described line); thence run southerly and parallel with said
above-described line to the northeasterly boundary line of the railroad running
in a southeasterly and northwesterly direction over and across the
above-described tract; in addition to the existing highway; together with all
right of access, being the right of ingress to and egress from all that portion
of the above-described tract, not acquired herein, to Trunk Highway
No. 392.


 


79

















 


Schedule
4.01(a)


Description
of Certain Transactions Related to the Borrowers’ Units


 


Provided the Company’s Plant Manager meets
the standard requirements of qualifying to be a member of the Company, as a
one-time signing bonus, he will receive a profit’s interest on 5,000
Class A member units of the Company at a zero basis, with ownership of
said units to vest at 20% per year as follows (the “Vesting Dates”), provided
the Plant Manager remains employed with the Company on any Vesting Date.:


 


January 1, 2007 – 1,000 Units Vest 


January 1, 2008 – 1,000 Units Vest 


January 1, 2009 – 1,000 Units Vest 


January 1, 2010 – 1,000 Units Vest 


January 1, 2011 – 1,000 Units Vest


 


Provided the Company’s CEO meets the standard
requirements of qualifying to be a member of the Company, as a one-time signing
bonus, he will receive a profit’s interest on 12,500 Class A member units
of the Company at a zero basis, with ownership of said units to vest at 20% per
year as follows (the “Vesting Dates”), provided the CEO remains employed with
the Company on any Vesting Date.:


 


January 1, 2007 – 2,500 Units Vest 


January 1, 2008 – 2,500 Units Vest 


January 1, 2009 – 2,500 Units Vest 


January 1, 2010 – 2,500 Units Vest 


January 1, 2011 – 2,500 Units Vest


 


The Prime Contractor agreed to reduce its construction contract price
by $500,000 in exchange for 250,000 Class A units of the Company valued at
$2 per unit. The Company will hold the right of first refusal for repurchase.
The agreement is reflected in the current pricing under the Prime Contractor’s
contract.


 


80

















 


Schedule
4.01(f)


Description
of Certain Threatened Actions, etc.


 


None.


 


81

















 


Schedule
4.01(k)


Intentionally
omitted


 


82

















 


Schedule 4.01(l)


Office
Locations; Fictitious Names; Etc.


 


	
  Temporary
  Offices

  	
   

  	
  1220
  North Tower Road

  
	
   

  	
   

  	
  Suite 201
  

  
	
   

  	
   

  	
  Fergus
  Falls, MN 56537

  
	
   

  	
   

  	
   

  
	
  Plant
  Site

  	
   

  	
  24096
  170th Avenue,

  
	
   

  	
   

  	
  Fergus
  Falls, MN 56537

  
	
   

  	
   

  	
   

  
	
  No
  Fictitious Names

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EIN

  	
   

  	
  41-2171784

  
	
  State
  Organizational Number

  	
   

  	
  1211144-2

  



 


83

















 


Schedule
4.01(p)


Intellectual
Property


 


None.


 


84

















 


Schedule
4.01(t)


Environmental
Compliance


 


No
known exceptions.


 


85

















 


Schedule 5.01(o)


Management


 


The current management of the Borrower is as follows:


 


President: Jerry Larson


Plant Manager: Gunner Greene


Chief Executive Officer: Kelly Longtin


 


86

















 


Schedule
5.02(a)


Description
of Certain Liens, Lease Obligations, etc.


 


None, except for protective UCC filings of KID Leasing for computer
hardware and software and printer and related equipment leased to the Company.


 


87

















 


Schedule
5.02(k)


Transactions
with Affiliates


 


Corn Procurement Contract and Arrangements
with CHS Inc. (Member of Company)


 


Electric Power Purchase Contract and Arrangements with Ottertail Power
Corporation (Member of Company)


 


88