Document:

Exhibit 10.33

 

 

LEASE AGREEMENT

 

BETWEEN

 

OTTER TAIL COUNTY, MINNESOTA

 

AND

 

OTTER TAIL AG ENTERPRISES, LLC

 

$20,000,000

SUBORDINATE EXEMPT FACILITY REVENUE BONDS, SERIES 2007A

(OTTER TAIL AG ENTERPRISES, LLC ETHANOL PLANT PROJECT)

 

and

 

$6,010,000

GENERAL OBLIGATION TAX ABATEMENT BONDS, SERIES 2007B

AND SERIES 2007C

 

DATED AS OF: MAY 1, 2007

 

 

The
interest of the Otter Tail County, Minnesota in this Lease Agreement, except
for certain rights retained by the County pursuant to Section 4.6 hereof,
has been assigned to U.S. Bank National Association, St. Paul, Minnesota, as
Trustee.

 

	
   

  	
  This instrument was
  drafted by:

  
	
   

  	
  FAEGRE & BENSON
  LLP

  
	
   

  	
  2200 Wells Fargo Center

  
	
   

  	
  90 South Seventh Street

  
	
   

  	
  Minneapolis, Minnesota
  55402

  

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  I DEFINITIONS, EXHIBITS AND MISCELLANEOUS

  	
   

  	
   

  
	
   

  	
  Section
  1.1

  	
  Definitions

  	
   

  	
  2

  
	
   

  	
  Section 1.2

  	
  Exhibits

  	
   

  	
  10

  
	
   

  	
  Section 1.3

  	
  Company’s
  Acts

  	
   

  	
  10

  
	
   

  	
  Section 1.4

  	
  Rules
  of Interpretation

  	
   

  	
  10

  
	
  ARTICLE
  II REPRESENTATIONS OF COUNTY AND COMPANY

  	
   

  	
  11

  
	
   

  	
  Section
  2.1

  	
  Representations
  by the County

  	
   

  	
  11

  
	
   

  	
  Section 2.2

  	
  Representations
  by the Company

  	
   

  	
  12

  
	
  ARTICLE
  III COMPLETION OF PROJECT

  	
   

  	
  13

  
	
   

  	
  Section 3.1

  	
  Development,
  Acquisition and Installation of Equipment and Completion of Project by
  Company

  	
   

  	
  13

  
	
   

  	
  Section 3.2

  	
  Payment
  of Costs by Company

  	
   

  	
  14

  
	
   

  	
  Section 3.3

  	
  Authorization
  by County

  	
   

  	
  16

  
	
   

  	
  Section 3.4

  	
  Issuance
  of Bonds

  	
   

  	
  16

  
	
   

  	
  Section 3.5

  	
  Disbursements
  from Project Fund

  	
   

  	
  16

  
	
   

  	
  Section 3.6

  	
  Establishment
  of Completion Date and Use of Excess Proceeds

  	
   

  	
  18

  
	
   

  	
  Section 3.7

  	
  Warranties

  	
   

  	
  18

  
	
  ARTICLE
  IV USE, OCCUPANCY, BASIC PAYMENTS AND ADDITIONAL CHARGES

  	
   

  	
  20

  
	
   

  	
  Section 4.1

  	
  Possession
  and Use

  	
   

  	
  20

  
	
   

  	
  Section 4.2

  	
  Basic
  Payments

  	
   

  	
  20

  
	
   

  	
  Section 4.3

  	
  Additional
  Charges

  	
   

  	
  21

  
	
   

  	
  Section 4.4

  	
  Company’s
  Obligations Unconditional

  	
   

  	
  22

  
	
   

  	
  Section 4.5

  	
  Assignment
  of County’s Rights

  	
   

  	
  22

  
	
   

  	
  Section 4.6

  	
  Company’s
  remedies

  	
   

  	
  22

  
	
  ARTICLE
  V PROJECT COVENANTS

  	
   

  	
  23

  
	
   

  	
  Section 5.1

  	
  Project
  Operation and Maintenance

  	
   

  	
  23

  
	
   

  	
  Section 5.2

  	
  Transfer
  of Company’s Leasehold Interest in the Equipment

  	
   

  	
  23

  
	
   

  	
  Section 5.3

  	
  Alterations
  to the Equipment

  	
   

  	
  23

  
	
   

  	
  Section 5.4

  	
  Taxes
  and Other Governmental Charges

  	
   

  	
  23

  
	
   

  	
  Section 5.5

  	
  Insurance

  	
   

  	
  24

  
	
  ARTICLE
  VI DAMAGE AND DESTRUCTION  

  	
   

  	
  24

  
	
   

  	
  Section 6.1

  	
  Damage
  and Destruction

  	
   

  	
  24

  
	
  ARTICLE
  VII COMPANY’S COVENANTS

  	
   

  	
  24

  
	
   

  	
  Section 7.1

  	
  Covenant
  for the Benefit of the Trustee and the Bondholders

  	
   

  	
  24

  
	
   

  	
  Section 7.2

  	
  Inspection
  and Access

  	
   

  	
  25

  
	
   

  	
  Section 7.3

  	
  Certificate
  of Compliance and Other Reports

  	
   

  	
  25

  
	
   

  	
  Section 7.4

  	
  Indemnification

  	
   

  	
  25

  
	
   

  	
  Section 7.5

  	
  Existence;
  Maintenance of Business

  	
   

  	
  26

  
	
   

  	
  Section 7.6

  	
  Filing
  of Financing Statements

  	
   

  	
  27

  
	
   

  	
  Section 7.7

  	
  Assurance
  of Tax Exemption

  	
   

  	
  28

  
	
   

  	
  Section 7.8

  	
  Determination
  of Taxability

  	
   

  	
  30

  
	
   

  	
  Section 7.9

  	
  Surrender
  of Equipment; Holdover

  	
   

  	
  31

  
	
   

  	
  Section 7.10

  	
  Refinancing
  of Senior Loans

  	
   

  	
  31

  
							

 

 

	
   

  	
  Section 7.11

  	
  Additional Senior
  Secured Indebtedness

  	
   

  	
  31

  
	
   

  	
  Section 7.12

  	
  Business Subsidies Act

  	
   

  	
  32

  
	
  ARTICLE VIII COMPANY’S
  OPTIONS

  	
   

  	
  33

  
	
   

  	
  Section 8.1

  	
  Assignment and Sublease

  	
   

  	
  33 

  
	
   

  	
  Section 8.2

  	
  Prepayment

  	
   

  	
  33

  
	
   

  	
  Section 8.3

  	
  Direction of
  Investments

  	
   

  	
  33

  
	
   

  	
  Section 8.4

  	
  Termination of Lease
  Agreement and Option to Purchase

  	
   

  	
  33

  
	
  ARTICLE IX EVENTS OF
  DEFAULT AND REMEDIES.  

  	
   

  	
  35

  
	
   

  	
  Section 9.1

  	
  Events of Default

  	
   

  	
  35 

  
	
   

  	
  Section 9.2

  	
  Remedies

  	
   

  	
  36

  
	
   

  	
  Section 9.3

  	
  Disposition of Funds

  	
   

  	
  37

  
	
   

  	
  Section 9.4 

  	
  Nonexclusive Remedies

  	
   

  	
  37

  
	
   

  	
  Section 9.5

  	
  Attorneys’ Fees and
  Expenses

  	
   

  	
  37

  
	
   

  	
  Section 9.6

  	
  Effect of Waiver

  	
   

  	
  37

  
	
   

  	
  Section 9.7

  	
  Waiver of Stay or
  Extension

  	
   

  	
  38

  
	
   

  	
  Section 9.8

  	
  County May File Proofs
  of Claim

  	
   

  	
  38

  
	
   

  	
  Section 9.9

  	
  Restoration of
  Positions

  	
   

  	
  38

  
	
   

  	
  Section 9.10

  	
  Suits to Protect the
  Project

  	
   

  	
  38

  
	
   

  	
  Section 9.11

  	
  Performance by Third
  Parties

  	
   

  	
  39

  
	
   

  	
  Section 9.12

  	
  Exercise of the
  County’s Remedies by Trustee

  	
   

  	
  39

  
	
  ARTICLE X GENERAL

  	
   

  	
  39

  
	
   

  	
  Section 10.1 

  	
  Amounts remaining in
  Funds

  	
   

  	
  39

  
	
   

  	
  Section 10.2

  	
  Notices

  	
   

  	
  39 

  
	
   

  	
  Section 10.3

  	
  Binding Effect

  	
   

  	
  40

  
	
   

  	
  Section 10.4

  	
  Severability

  	
   

  	
  40

  
	
    

  	
  Section 10.5

  	
  Amendments, Changes,
  and Modifications 

  	
   

  	
  40

  
	
   

  	
  Section 10.6

  	
  Execution Counterparts

  	
   

  	
  40

  
	
   

  	
  Section 10.7

  	
  Required Approvals

  	
   

  	
  40

  
	
   

  	
  Section 10.8

  	
  Limitation on County
  Liability

  	
   

  	
  40

  
	
   

  	
  Section 10.9

  	
  Survivorship of
  Obligations

  	
   

  	
  41

  
	
    

  	
  Section 10.10

  	
  Administrative Fees,
  Attorneys’ Fees and Costs 

  	
   

  	
  41

  
	
   

  	
  Section 10.11

  	
  Release

  	
   

  	
  41

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
   

  	
   

  	
  A-l

  
	
  EXHIBIT B

  	
   

  	
   

  	
  B-l

  
	
  EXHIBIT C

  	
   

  	
   

  	
  C-l

  

 

 

LEASE AGREEMENT

 

THIS LEASE AGREEMENT (this “Lease”) is made and entered into as of the
first day of May, 2007, by and between the OTTER TAIL COUNTY, Minnesota, a
political subdivision of the State of Minnesota (the “County”), and OTTER TAIL
AG ENTERPRISES, LLC, a Minnesota limited liability company (the “Company”).

 

WHEREAS, the County and the Company, each in consideration of the
representations, covenants and agreements of the other as set forth herein,
mutually represent, covenant and agree as follows:

 

R E C I T A L S:

 

A.                                   The County is a duly
organized and existing political subdivision of the State of Minnesota, and is
authorized to issue its revenue bonds pursuant to the provisions of Minnesota Statutes,
Sections 469.152 to 469.1651, as amended, known as the Minnesota Industrial Development
Revenue Bonding Act (herein called the “Act”).

 

B.                                     The County is, under the
Act, authorized to issue and sell its revenue bonds for the purpose of
providing funds to finance projects, including real and personal property used
or useful in the disposal of solid wastes in connection with a revenue
producing enterprise as provided in Section 469.153, Subd. 2 (a) of
the Act.

 

C.                                     Pursuant to and in
accordance with the provisions of the Act, the County, has adopted a resolution
authorizing the issuance of its $20,000,000 Subordinate Exempt Facility Revenue
Bonds, Series 2007A (Otter Tail Ag Enterprises, LLC Ethanol Plant
Project), (the “Series 2007 Bonds”) for the purpose of financing the
development, acquisition, construction and equipping of solid waste facilities
as part of an ethanol plant in the County (as hereinafter further described the
“Project”) to be located on the premises described in Exhibit B hereto.

 

D.                                    The Series 2007 Bonds
shall be issued under and pursuant to the Trust Indenture, dated as of May 1,
2007 (the “Indenture”), between the County and U.S. Bank National Association,
as Trustee, pursuant to which the County shall pledge and assign to the Trustee
certain rights of the County hereunder, including lease payments to provide for
payment of the Series 2007 Bonds.

 

E.                                      To provide additional
financing for the Project the County has established a Tax Abatement Program
pursuant to Minnesota Statutes, Sections 469.1812 to 469.1815, and, to implement
the Program, has authorized the issuance and sale of $6,010,000 General
Obligation Tax Abatement Bonds, Series 2007B and Series 2007C (the “General
Obligation Bonds”) to provide additional financing for the Equipment described
below.

 

F.                                      The Company has agreed to
make lease payments to the County at the times and in the amounts sufficient to
pay the principal and interest on the General Obligation Bonds when due.

 

G.                                     In order to provide for the
payment of the principal of and interest on the Series 2007 Bonds, any
Additional Bonds issued hereunder and the General Obligation Bonds the

 

1

 

County proposes to lease the
Equipment (as defined herein) to the Company, and the Company desires to lease
and rent the Equipment (as defined herein) from the County upon the terms and
conditions in this Lease.

 

H.                                    The issuance,
sale and delivery of the Series 2007 Bonds and the execution and delivery
of this Lease and the Indenture have been in all respects duly and validly
authorized in accordance with the Act and the Resolution (as defined in the
Indenture).

 

WITNESSETH:

 

LEASING CLAUSE; SECURITY AGREEMENT

 

(a)                                  Lease of Equipment. The County
hereby leases to the Company and the Company leases from the County the
Equipment herein described, for a term commencing as of the date of this Lease
and extending to May 1, 2027 unless an Event of Default (as hereinafter
defined) has occurred and is continuing, or unless sooner terminated as herein
provided, without option of renewal except by mutual consent, and at the
rentals and upon the further terms and conditions set forth herein; and the
County and the Company, each in consideration of the representations, covenants
and agreements of the other as set forth herein, mutually represent, covenant
and agree as provided herein: Except as provided herein, this Lease is not
terminable by the County.

 

(b)                                 Delivery. The County
hereby appoints the Company as its agent for inspection and acceptance of each
Item of Equipment from the Contractors under the Construction Contracts. Each
delivery of an Item to the County under the Construction Contract shall be
deemed a delivery to the Company under this Lease at the location at which the
item is so delivered to the County after having previously been inspected by
the Company and approved for payment by or on behalf of the Senior Lenders.

 

(c)                                  Security Agreement.
Notwithstanding any provision of this Lease to the contrary, including certain
provisions required by the Code in order for the County to be deemed the owner
of the Equipment for purposes of Section 142 (a) of the Internal
Revenue Code, this Lease is intended to be and shall be construed as a security
agreement for purposes of the Uniform Commercial Code as in effect in the State
of Minnesota.

 

ARTICLE I

 

DEFINITIONS, EXHIBITS AND MISCELLANEOUS

 

Section 1.1                                      Definitions.

 

The terms used herein, unless the context
hereof shall require otherwise, shall have the following meanings, and any
other terms defined in Section 1.01 of the Indenture shall have the same
meanings when used herein as assigned them in the Indenture, unless the context
or use thereof indicates another or different meaning or intent.

 

“Abatement Bond Mortgage”
means the Mortgage, Security Agreement and Assignment of Rents and Leases of
even date herewith from the Company, as mortgager, to the County, as mortgagee,
and all supplements and amendments thereto.

 

2

 

“Act” means the Minnesota Municipal Industrial Development Act,
Minnesota Statutes, Sections 469.152 to 469.1651, as amended.

 

“Additional Bonds” means any Additional Bonds issued pursuant to the
terms and conditions of Section 2.09 of the Indenture.

 

“Additional Charges” means the payments required to be made by the
Company under Section 4.3 hereof.

 

“Additional Senior Secured Indebtedness” means any indebtedness of the
Company which is in addition to the indebtedness under the Senior Loans, which
additional indebtedness is or will be secured by a mortgage lien or other
security interest against all or part of the Plant, or any other asset of the
Company, having priority over the Mortgage.

 

“AgStar” means AgStar Financial Services, PCA, a federal
instrumentality.

 

“AgStar Facility Loan” means the portion of the AgStar Loan made for
the purpose of acquiring, constructing and equipping the Plant.

 

“AgStar Loan” means the loans from AgStar to the Company in the aggregate
authorized amount of $39,000,000 made under the AgStar Loan Documents, and any
refinance, extensions, renewals, modifications or substitutions thereof.

 

“AgStar Loan Agreement” means the Master Loan Agreement, First
Supplement, Second Supplement and Third Supplement, each dated March 28,
2007 between AgStar and the Company.

 

“AgStar Loan Documents” means the AgStar Loan Agreement, the AgStar
Notes, the AgStar Mortgage, the AgStar Security Agreement and amendments and
supplements thereto.

 

“AgStar Mortgage” means the Mortgage, Security Agreement and Assignment
of Rents and Leases dated March 28, 2007 from the Company to AgStar to
secure the AgStar Loan.

 

“AgStar Notes” means the Construction Note, Term Note, Term Revolving
Note and Revolving Line of Credit Note executed by the Company to evidence its
obligations under the AgStar Loan Documents, and any refinance, extensions,
renewals, modifications or substitutions thereof.

 

“AgStar Operating Loan” means the portion of the AgStar Loan made for
the purpose of financing general corporate and operating expenses of the
Company upon completion of the Plant.

 

“AgStar Security Agreement” means the Security Agreement dated March 28,
2007 between the Company and AgStar to secure the AgStar Loan.

 

“Authorized Company Representative” means the CEO/General Manager or
President of the Company or any person at the time designated to act on behalf
of the Company by written certificate furnished to the County and the Trustee,
containing the specimen signature of such

 

3

 

person and signed on behalf
of the Company by any member. Such Certificate may designate an alternate or
alternates.

 

“Basic Payments” means the payments required to be made by the Company
under Section 4.2 hereof.

 

“Bond Counsel” means Independent nationally recognized bond counsel.

 

“Bond Fund” means the Bond Fund established under Section 5.01 of
the Indenture.

 

“Bond Resolution” means the resolution of the County adopted by the
County Board of Commissioners on April 24, 2007, authorizing the issuance
and sale of the General Obligation Bonds, as the same may be amended, modified
or supplemented by any amendments or modifications thereof.

 

“Bonds” means Series 2007 Bonds and any Additional Bonds issued
under a supplement to the Indenture.

 

“Capitalized Interest Account” means the account by that name
established within the Project Fund pursuant to the Indenture.

 

“Certificate” means a certification in writing required or permitted by
the provisions of this Lease or the Indenture signed and delivered to the
Trustee or other proper person or persons. If and to the extent required by the
provisions of Section 1.02 of the Indenture, each Certificate shall
include the statements provided for in said Section 1.02.

 

“Certified Resolution” means a copy of a resolution of the County Board
of Commissioners, certified by the County Coordinator to have been duly adopted
by said County Board and to be in full force and effect on the date of such
certification.

 

“Closing Date” means the date on which the Series 2007 Bonds are
delivered to the Original Purchaser thereof.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Company” means Otter Tail Ag Enterprises, LLC, a Minnesota limited
liability company, its successors and assigns.

 

“Construction Contract” means any and all contracts, written or oral,
between the Company and any Contractor or any subcontractor and between any of
the foregoing and any other person or entity relating in any way to the
development, acquisition or installation of the Equipment, or any part thereof,
including the performing of labor or the furnishing of standard or specially
fabricated materials in connection therewith, as amended from time to time.

 

“Construction Period” the period between the beginning of construction
of the Project, the date on which the Series 2007 Bonds are first
delivered to the Original Purchaser, or the date of issuance of the General
Obligation Bonds whichever is earlier, and the Completion Date.

 

4

 

“Contractors”
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 development, acquisition or installation of the Equipment, their
successors and assignees.

 

“County” means the Otter Tail County, a Minnesota municipal
corporation, its successors and assigns.

 

“County Board” or “Board” means the Otter Tail County Board of
Commissioners, or its successor as governing body of the County.

 

“Default” means default by the County in the performance or observance
of any of the covenants, agreements or conditions on its part contained in this
Lease, or in the Series 2007 Bonds and Additional Bonds outstanding
hereunder, exclusive of any notice or period of grace required for a default to
constitute an “event of default” as hereinafter provided.

 

“Determination of Taxability” means the issuance of a statutory notice
of deficiency by the Internal Revenue Service, or a ruling of the National
Office or any District Office, or a final decision by any court of competent
jurisdiction that interest on the Bonds is includible in the gross income of
the recipient under Section 103 and related Sections of the Internal
Revenue Code and regulations thereunder as in effect at the date of issuance of
the Series 2007 Bonds, for any reason other than a change of law or that
the Holder is a substantial user or a related person under Section 147(a),
provided that the period for a contest or appeal, if any, of such action,
ruling or decision has expired without any such appeal or contest having been
instituted, or, if instituted, such contest or appeal has been unsuccessfully
concluded.

 

“Disbursing Agreement” means the Disbursing Agreement dated March 28,
2007, entered into among the Company, the Trustee, the County, the Senior
Lenders and First Minnesota Title & Abstract, LLC, as disbursing
agent.

 

“EBITDA” means for any period, an amount determined in accordance with
GAAP, equal to (a) Net Income for such period, plus (b) to the extent
deducted in determining Net Income for such period, the sum of (1) interest
expense, (2) payments to the members of the Company in respect of
estimated tax amounts (payments of estimated tax amounts shall be deemed to
have been made in the tax fiscal quarter to which the applicable payment
related), (3) depreciation and amortization and (4) all other
non-cash charges, in each case for such period.

 

“Equipment” or “Items” means the equipment described in Exhibit A
hereto, and any additional equipment described in a Lease Supplement, together
with any and all accessories from time to time incorporated therein or
installed thereon.

 

“Item” or Item of Equipment” means any such item of equipment.

 

“Equipment Account” means the account by that name established within
the Project Fund pursuant to the Indenture.

 

“Equipment Costs” means the costs described in Section 3.2 hereof.

 

5

 

“Event of Default” means an Event of Default described in Section 9.1
of this Lease which has not been cured.

 

“Fair Market Value Purchase Price” means an amount be determined on the
basis of, and shall be equal in amount to, the value which would be agreed to
in an arm’s-length transaction between an informed and willing buyer (other
than a buyer currently in possession) and an informed and willing seller, under
no compulsion to buy or sell.

 

“General Obligation Bonds” means the General Obligation Tax Abatement
Bonds, Series 2007B, and Taxable General Obligation Tax Abatement Bonds, Series 2007C,
to be issued pursuant to the Bond Resolution.

 

“Guaranty” means the Guaranty dated as of May, 1, 2007 executed by the
Company to the Trustee to guaranty payment of the principal and interest on the
Bonds when due.

 

“Holder”, “Bondholder” or “owner” whenever employed herein with respect
to a Bond means the person in whose name such Bond shall be registered.

 

“Indenture” means the Trust Indenture between the County and U.S. Bank
National Association, as Trustee, dated as of May 1, 2007, under which the
Bonds are authorized to be issued, and including any amendments or supplements
thereto.

 

“Independent”, when used with reference to an attorney, engineer,
architect, certified public accountant, consultant or other professional
person, means a person who (i) is in fact independent, (ii) does not
have any material financial interest in the Company or the transaction to which
his Certificate or opinion relates (other than payment to be received for
professional services rendered), and (iii) is not connected with the
County or the Company as an officer, director or employee.

 

“Independent Counsel” means an Independent attorney duly admitted to
practice law before the highest court of any state.

 

“Independent Engineer” means an Independent engineer or engineering
firm or an Independent architect or architectural firm qualified to practice
the profession of engineering or architecture under the laws of Minnesota.

 

“Intercreditor Agreement” means the Intercreditor Agreement, dated as
of March 28, 2007, entered into among the Trustee, the Company, the County
and the Senior Lenders.

 

“Interest Payment Date” means, with respect to the Bonds, May 1
and November 1 of each year, commencing November 1, 2007.

 

“Internal Revenue Code” or “Code” means the Internal Revenue Code of
1986, as amended.

 

“Issuance Expense Account” means the account by that name established
within the Project Fund pursuant to the Indenture.

 

6

 

“Land” means the land and interests in land constituting the site of
the Plant as described in Exhibit A to the Mortgage, less any portion of
the Land released in accordance with the provisions of the Mortgage.

 

“Lease” means this Lease Agreement, between the County, as lessor, and
the Company, as lessee, as amended or supplemented from time to time, including
any renewals or extensions hereof.

 

“Lease Payments” means the payments made or to be made by the Company
pursuant to Section 4.2 and 4.3 of this Lease.

 

“Mortgages” means the Abatement Bond Mortgage and the Revenue Bond
Mortgage.

 

“Net Income” means, for any period, the net income (or loss) of Company
for such period determined in accordance with generally accepted accounting
principles, but excluding therefrom (to the extent otherwise included therein) (a) any
extraordinary gains or losses, (b) any gains attributable to write-ups of
assets, (c) any equity interest in the un-remitted earnings of any Person
that is not a subsidiary of the Company, and (d) any income (or loss) of
any Person accrued prior to the date it becomes a subsidiary of, or is merged
into or consolidated with, the Company on the date that such Person’s assets
are acquired by the Company.

 

“Net Proceeds” means, when used with respect to proceeds of insurance
or a condemnation award, moneys received or receivable by the Company, as
owner, or the Trustee, as secured party, of the Plant, less the cost of
recovery (including attorneys’ fees) of such moneys from the insuring company
or the condemning authority.

 

“NMF” means MMCDC New Markets Fund II, LLC, a Delaware limited
liability company.

 

“NMF Loan” means the loan from NMF to the Company in the aggregate
authorized amount of $19,175,000 made under the NMF Loan Documents, and any
refinance, extensions, renewals, modifications or substitutions thereof.

 

“NMF Loan Agreement” means the Construction and Term Loan Agreement,
dated March 30, 2007 between NMF and the Company.

 

“NMF Loan Documents” means the NMF Loan Agreement and supplements
thereto, the NMF Notes, the NMF Mortgage, the NMF Security Agreement and
amendments and supplements thereto.

 

“NMF Mortgage” means the Mortgage, Security Agreement and Assignment of
Rents and Leases dated March 30, 2007 from the Company to NMF to secure
the NMF Loan.

 

“NMF Notes” means the Senior Loan Note and the Subordinate Loan Note,
each dated March 30, 2007, executed by the Company to evidence its
obligations under the NMF Loan Documents, and any refinance, extensions,
renewals, modifications, or substitutions thereof.

 

7

 

“NMF
Security Agreement” means the Security Agreement dated March 30, 2007
between the Company and NMF to secure the NMF Loan.

 

“Opinion
of Counsel” means a written opinion of counsel (who need not be Independent
Counsel unless so specified) appointed by the Company or the County and
acceptable to the Trustee or appointed by the Trustee. If and to the extent
required by the provisions of Section 1.02 hereof, each Opinion of Counsel
shall include the statements provided for in said Section 1.02.

 

“Optional
Redemption Fund” means the Optional Redemption Fund established under Section 5.02
of this Indenture.

 

“Original
Purchaser” means Oppenheimer & Co., Inc.

 

“Outstanding”
or “outstanding” when used as of any particular time with reference to Bonds
means (subject to the provisions of Section 9.03 of the Indenture
pertaining to Bonds held by the County and the Company) all Bonds theretofore
authenticated and delivered by the Trustee under the Indenture except:   (i) Bonds
theretofore cancelled by the Trustee or surrendered to the Trustee for
cancellation; (ii) Bonds for the payment or redemption of which funds or
direct obligations of or obligations fully guaranteed by the United States of
America in the necessary amount shall have theretofore been deposited with the
Trustee (whether upon or prior to the maturity or the redemption date of such
Bonds), provided that if such Bonds are to be redeemed prior to the maturity
thereof, notice of such redemption shall have been given pursuant to Article III
of this Indenture, or provision satisfactory to the Trustee shall have been
made for the giving of such notice; and (iii) Bonds in lieu of or in
substitution for which other Bonds shall have been authenticated and delivered
by the Trustee pursuant to the terms of Section 2.07 of the Indenture
pertaining to replacement of Bonds.

 

“Permitted
Encumbrances” means, as of any particular time, (i) liens for ad valorem
taxes and special assessments not then delinquent, (ii) utility, access
and other easements and rights-of-way, mineral rights, restrictions and
exceptions that an Independent Engineer certifies will not interfere with or
impair the use of or operations being conducted in the Plant, (iii) such
minor defects, irregularities, encumbrances, easements, rights-of-way and
clouds on title as normally exist with respect to properties similar in
character to the Plant and as do not in the aggregate, in the opinion of
Independent Counsel, materially impair the property affected thereby for the
purposes for which it was acquired or is held by the Company, (iv) the
Mortgages, (v) any mortgage lien or security interest granted by Company
in connection with incurring Permitted Parity Indebtedness permitted under this
Lease, (vi) any mortgage lien superior to the lien of the Mortgages
granted by the Company in connection with the Senior Loans or Additional Senior
Secured Indebtedness, (vii) this Lease, and (viii) those additional
encumbrances identified in Exhibit B to the Mortgages or permitted under
the Senior Loan Documents.

 

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

 

“Plant”
means the 55 million gallon per year nameplate capacity ethanol production
facility to be constructed, equipped and operated on the Land by the Company,
as it may exist from time to time.

 

8

 

“Principal
Payment Dates” means, with respect to the Bonds, June 1 and December 1
of each year, commencing December 1, 2009.

 

“Project”
means the Project described in Exhibit C hereto.

 

“Project
Fund” means the Project Fund established under Section 4.02 of the
Indenture.

 

“Qualified
Investments” means investments authorized by the Act and described in Section 5.05
of the Indenture.

 

“Redeem”
or “redemption” means and includes “prepay” or “prepayment” as the case may be.

 

“Reserve
Fund” means the Reserve Fund established under Section 5.03 of the
Indenture.

 

“Reserve
Requirement” means an amount equal to $2,000,000, plus any amount required to
be deposited in the Reserve Fund in connection with the issuance of Additional
Bonds.

 

“Responsible
Officer” of any Trustee hereunder means and includes the Chairman of the board
of directors, the president, every vice president, every assistant vice
president, the cashier, every assistant cashier, every corporate trust officer,
and every officer and assistant officer of such trustee, other than those
specifically above mentioned, to whom any corporate trust matter is referred
because of his knowledge of, and familiarity with, a particular subject.

 

“Revenue
Bond Mortgage” means the Mortgage, Security Agreement and Assignment of Rents
and Leases of even date herewith from the Company, as mortgagor, to the
Trustee, as mortgagee, and all amendments and supplements thereto.

 

“Senior
Debt Service Coverage Ratio” means, for any period, the ratio of EBITDA to
interest expense and scheduled principal payments payable during such period in
respect of the Senior Loans and any Additional Senior Secured Indebtedness
existing at the time the calculation is made.

 

“Senior
Lenders” means AgStar and NMF, and their successors and assigns.

 

“Senior
Loans” means the AgStar Loan and the NMF Loan.

 

“Series 2007
Bonds” means the Otter Tail County Subordinate Exempt Facility Revenue Bonds, Series 2007A
(Otter Tail Ag Enterprises, LLC Ethanol Plant Project), authorized by the
Indenture and the Resolution, and described in Section 2.01 of the
Indenture.

 

“Sinking
Fund” means any Sinking Fund established under Section 3.08 of the
Indenture.

 

“Tax
Abatement Program” means the program of tax abatements pursuant to Minnesota
Statutes, Sections 469.1812 to 469.1815, approved by resolution of the County
Board adopted July 5, 2006.

 

9

 

“Total Debt Service Coverage Ratio” means, for any period, the ratio of
EBITDA to interest expense and scheduled principal payments payable during such
period in respect of the Senior Loan, any Additional Senior Secured
Indebtedness and any amounts owing under this Lease existing at the time the
calculation is made.

 

“Trustee” means the trustee at the time serving as such under the
Indenture.

 

“Trust Estate” means the interest of the County in the Lease assigned
under Granting Clause I of the Indenture; the revenues, moneys, investments,
contract rights, general intangibles and instruments and proceeds and products
and accessions thereof as set forth in Granting Clause II of this Indenture; and
additional property held by the Trustee pursuant to Granting Clause III of this
Indenture, including the interests of the Trustee under the Revenue Bond
Mortgage.

 

“Working Capital Expenses” means expenses which are working capital
expenditures within the meaning of Treas. Reg. § 1.150-1(b) except
expenses meeting the exceptions set forth in Treas. Reg. § 1.148-6(d) (3)(ii).

 

Section 1.2              Exhibits.

 

The following Exhibits are attached to and by
reference made a part of this Lease:

 

(1)                                  Exhibit A: the Equipment;

 

(2)                                  Exhibit B: location of
the Plant;

 

(3)                                  Exhibit C: description
of the Project.

 

Section 1.3              Company’s Acts.

 

Where
the Company is permitted or required to do or accomplish any act or thing
hereunder, the Company may cause the same to be done or accomplished by a third
party selected by the Company with the same force and effect as if done or
accomplished by the Company.

 

Section 1.4              Rules of
Interpretation.

 

(1)                                  This Lease shall be
interpreted in accordance with and governed by the laws of the State of
Minnesota.

 

(2)                                  The words “herein” and “hereof”
and “hereunder” and words of similar import, without reference to any
particular section or subdivision, refer to this Lease as a whole rather than
to any particular section or subdivision of this Lease.

 

(3)                                  References in this Lease to
any particular article, section or subdivision hereof are to the designated
article, section or subdivision of this Lease as originally executed.

 

(4)                                  All accounting terms not
otherwise defined herein have the meanings assigned to them in accordance with
generally accepted accounting principles; and all computations

 

10

 

provided for herein shall be
made in accordance with generally accepted accounting principles consistently applied
and applied on the same basis as in prior years.

 

(5)                                  The Table of
Contents and titles of articles and sections herein are for convenience only
and are not a part of this Lease.

 

(6)                                  Unless the
context hereof clearly requires otherwise, the singular shall include the
plural and vice versa and the masculine shall include the feminine and vice
versa.

 

(7)                                  Articles,
sections, subsections and clauses mentioned by number only are those so
numbered which are contained in this Lease.

 

(8)                                  For purposes of
this Lease and the Indenture, a Petition in Bankruptcy shall be deemed
dismissed only if either (a) the petition is dismissed by order of a court
of competent jurisdiction and no further appeal rights exist from such order or
(b) the Company notifies the Trustee that such a dismissal has occurred.

 

(9)                                  Any opinion of
counsel required hereunder shall be a written opinion of such counsel.

 

(10)                            References to
the Bonds or General Obligation Bonds as “tax-exempt” or to the “tax-exempt
status of the Bonds or General Obligation Bonds” are to the exclusion of
interest from gross income pursuant to Section 103(a) of the Internal
Revenue Code of 1986, except during any period the Bonds or General Obligation
Bonds are held by a Substantial User or Related Person, irrespective of such
forms of taxation as the alternative minimum tax or branch profits tax on
foreign corporations, as is consistent with the approach taken in Section 59(i) of
the Code.

 

ARTICLE II

 

REPRESENTATIONS OF COUNTY AND COMPANY

 

Section 2.1                Representations
by the County.

 

The County makes the following representations and warranties as the
basis for its covenants herein:

 

(1)                                  The County is a duly
organized and existing political subdivision pursuant to the laws of the State
of Minnesota and is issuing the Series 2007 Bonds and the General
Obligation Bonds to finance the costs of the Project pursuant to the Act and to
implement the County’s Tax Abatement Program;

 

(2)                                  The issuance and sale of the
Series 2007 Bonds, the issuance and sale of the General Obligation Bonds,
the execution and delivery of this Lease and the Indenture, and the performance
of all covenants and agreements of the County contained in this Lease and the
Indenture have been duly authorized by a resolution of the governing body of the
County adopted at a meeting thereof duly called and held on April 24,
2007, by the affirmative vote of not less than a majority of its members;

 

11

 

(3)                                  There is not pending any
suit, action or proceeding against the County before or by any court,
arbitrator, administrative agency or other governmental authority which
materially and adversely affects the validity, as to the County, of this Lease
or the Indenture, any of its obligations hereunder or thereunder or any of the
transactions contemplated hereby or thereby;

 

(4)                                  No public official of the
County has either a direct or indirect financial interest in this Lease nor
will any public official either directly or indirectly benefit financially from
this Lease;

 

Section 2.2              Representations by the Company.

 

As
of the date hereof, the Company makes the following representations and
warranties as the basis for its covenants herein:

 

(1)                                  The Company is a limited
liability company validly formed under the laws of the State of Minnesota, is
duly authorized to conduct its business in the State of Minnesota, has power to
enter into this Lease and to use the Equipment for the purpose set forth in
this Lease and by proper action has authorized the execution and delivery of
this Lease and has approved the Indenture;

 

(2)                                  The execution and delivery
of this Lease, the consummation of the transactions contemplated thereby, and
the fulfillment of the terms and conditions thereof do not and will not
conflict with or result in a breach of any of the terms or conditions of the
Company’s Articles of Organization or Operating and Member Control Agreement,
any restriction or any agreement or instrument to which the Company is now a
party or by which it is bound or to which any property of the Company is
subject, and do not and will not constitute a default under any of the
foregoing, or be in violation of any order, decree, statute, rule or
regulation of any court or any state or federal regulatory body having
jurisdiction over the Company or its properties, including the Project, and do
not and will not result in the creation or imposition of any lien, charge or
encumbrance of any nature upon any of the property or assets of the Company
contrary to the terms of any instrument or agreement to which the Company is a
party or by which it is bound;

 

(3)                                  This Lease has been duly and
validly authorized, executed and delivered by the Company and is legal, valid
and binding obligation of the Company, enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, usury or other similar laws affecting the rights of
creditors generally, equitable principles relating to the availability of
remedies and principles of public or governmental policy limiting the
enforceability of the indemnification and contribution provisions;

 

(4)                                  All orders and approvals of
any court or governmental or regulatory agency or body required with respect to
the Company for the execution, delivery and performance by the Company of this
Lease as of the date hereof have been received and will be in effect prior to
the Closing Date, and, no further consent, approval, authorization or order of,
or registration with, any court or governmental or regulatory agency or body is
required with respect to the Company;

 

(5)                                  The Company has received an
executed counterpart of the Indenture and hereby consents to and approves of
the provisions thereof;

 

12

 

(6)                                  The information relating to
the Project and use of the proceeds of the Bonds furnished by the Company in
writing to Faegre & Benson LLP, as Bond Counsel, in connection with
the issuance of the Bonds, is true and correct in all material respects;

 

(7)                                  The Company does not, as of
the dates of issuance of the Series 2007 Bonds and General Obligation
Bonds, reasonably expect any use of moneys derived from the proceeds of the Series 2007
Bonds and the General Obligation Bonds or any investment or reinvestment
thereof or from the sale of the Project which would cause the Series 2007
Bonds and the General Obligation Bonds to be classified as “arbitrage bonds”
within the meaning of Section 148 of the Code;

 

(8)                                  The information provided by
and on behalf of the Company to Faegre &  Benson LLP for the purpose of establishing that Equipment
constitutes and will constitute solid waste disposal facilities within the
meaning of Section 142 (a) (6) of the Code is true and correct
(which Equipment consists of those Items described in Exhibit A hereto as
such Exhibit A is from time to time amended or supplemented in accordance
with Section 3.2), and the Company shall not consent to any changes in the
use of the Equipment in the Project which would adversely affect the
qualification of the Equipment as a “project” under the Act or adversely affect
the tax-exempt status of the Series 2007 Bonds or the General Obligation
Bonds;

 

(9)                                  The Company will cooperate
with the County in filing or causing to be filed with the United States
Department of Treasury the information required by Section 149(e) of
the Code;

 

(10)                            There is no litigation or
proceeding pending, or to the knowledge of the Company threatened, against the
Company which could adversely affect the validity of this Lease or the ability
of the Company to comply with its obligations under this Lease or the
Indenture; and

 

(11)                            To the best of Company’s
knowledge, no public official of the County has either a direct or indirect
financial interest in this Lease nor will any public official either directly
or indirectly benefit financially from this Lease.

 

Concurrently with the Closing Date, the
Company shall execute and deliver a certificate reaffirming the foregoing
representations, warranties and agreements as of the Closing Date.

 

ARTICLE III

 

COMPLETION OF PROJECT

 

Section 3.1                                      Development
Acquisition and Installation of Equipment and Completion of Project by Company.

 

In
connection with the acquisition and installation of the Equipment and
completion of the Project, the Company represents and covenants as follows:

 

(1)                                  Completion. The Company
will complete the development, acquisition and installation of the Equipment
and the Project as promptly as practicable with all reasonable dispatch in
accordance with the plans and specifications and in any event no later than August 1,

 

13

 

2008, except only as
completion may be delayed by strikes, riots or acts of God or the public enemy,
shortages of materials or supplies or any other reason beyond the reasonable
control of the Company, for which a reasonable extension of time of completion
shall be granted as determined by the Trustee, provided that if the Project is
not completed by that date there shall be no resulting liability on the part of
the County and no abatement or diminution in the payments required to be made
by the Company under Article IV hereof.

 

(2)                                  Insurance. The Company
will cause adequate insurance to be procured and maintained during construction
of the Project which insurance shall name the County as loss payee, as its
interest may appear.

 

(3)                                  Plan Changes. The Company
may make, authorize or permit changes or amendments in the components of the
Project or may determine not to complete any portion of the Project for which
Bond proceeds (and investment income thereon) are available, or may finance
such portion of the Project from any other source; provided, however, that Series 2007
Bond proceeds and General Obligation Bond Proceeds (and investment income
thereon) otherwise allocable to Equipment must be used either (i) to pay
the costs of other Items of Equipment, (ii) to pay the cost of other solid
waste disposal facilities qualifying under the Act and the Code, subject to the
provisions of this Section and with the approval of the County, or (iii) to
pay or redeem principal on the Series 2007 Bonds and General Obligation
Bonds in accordance with the provisions of this Lease, the Indenture and the
Bond Resolution, provided that in the case of (ii) or (iii), the Company
shall have received an Opinion of Bond Counsel to the effect that such
application will not affect the tax exempt status of interest on the Series 2007
Bonds and General Obligation Bonds. If the Company determines not to acquire
and install any item of Equipment or to fund such Equipment from any other
source, such portion of the Project shall no longer be deemed to be within the
meaning of the term “Equipment” for any purpose of this Lease or the Indenture.

 

Section 3.2              Payment of Costs by Company.

 

The
Company agrees that it will provide any and all money required for the prompt
and full payment of all sums required to complete the Project, including all of
the following items which the County agrees will be reimbursable from Bond
proceeds to the extent and in the manner provided in Sections 3.5 and 3.6 and
subject to the provisions of the Act:

 

(1)                                  the expenses incurred and to
be incurred in connection with the development, acquisition and installation of
the Equipment, including but not limited to the contract price of all labor,
services, materials, supplies and equipment furnished under any Construction
Contract for installation of the Equipment or otherwise incurred in connection
therewith, and all fees required for recording all financing statements and any
title documents relating to the Indenture;

 

(2)                                  the expense of preparation
of the plans and specifications for the Equipment, including utilities, and all
other facilities necessary or desirable in connection therewith, and all other
architectural, engineering and supervisory services incurred and to be incurred
in the planning, acquisition and installation of the Equipment;

 

(3)                                  All legal (including Bond
Counsel and counsel to the Company, County, Trustee and Original Purchaser),
abstractors’, financial and accounting fees and expenses, administrative and
rating agency fees (if any), printing and engraving costs and other expenses
incurred and to

 

14

 

be incurred on or before or
in connection with the Completion Date with respect to (i) the
establishment of ownership to the Equipment, (ii) the authorization, sale
and issuance of the Series 2007 Bonds and General Obligation Bonds, (iii) the
preparation of this Lease, the Indenture and all other documents necessary to the
Bond Closing or required by this Lease, the Indenture or the Bond Resolution;

 

(4)                                  premiums on all insurance
(including any title insurance) required to be taken out and maintained during
the period before the Completion Date;

 

(5)                                  all expenses incurred in
seeking to enforce any remedy against any Contractor, or any subcontractor or
any supplier with respect to any default under any contract with such person;

 

(6)                                  all recording fees and other
taxes, charges and assessments and license and registration fees of every
nature whatsoever incurred and to be incurred in connection with development,
acquisition or installation of the Equipment, including the financing thereof;

 

(7)                                  the cost of all other labor,
services, materials, supplies and equipment necessary to complete the
development, construction, acquisition and installation of the Equipment;

 

(8)                                  all fees and expenses of the
Trustee and Paying Agent under the Indenture or Bond Resolution that become due
on or before the Completion Date or in connection with the establishment of the
Completion Date;

 

(9)                                  all interest accruing on
money borrowed by the Company for temporary financing of Equipment Costs,
including interest accruing on the Series 2007 Bonds and General
Obligation Bonds during the development, acquisition and installation period
(which period for purposes of this subsection will be deemed to be and for the
Equipment or any portion thereof no later than the date on which the Project is
placed in service) and for six (6) months thereafter;

 

(10)                            All other expenses which
under generally accepted accounting principles constitute necessary capital
expenditures for the development, acquisition and installation of the Equipment
or issuance of the Series 2007 Bonds or General Obligation Bonds not
including working capital or expendable supplies (all of which are nevertheless
to be supplied by the Company from its own funds without reimbursement);

 

(11)                            all advances, payments and
expenditures made or to be made by the County, the Trustee, the Company and any
other person with respect to any of the foregoing expenses.

 

All Equipment Costs may be
paid or reimbursed from moneys available in the Project Fund to the extent and
in the manner permitted in Sections 3.5 and 3.6 hereof. If, however, such
moneys are insufficient to pay in full Equipment Costs payable therefrom or are
otherwise unavailable to pay any Equipment Costs, the Company shall
nevertheless promptly pay so much of such Costs as may be in excess of such
moneys available in the Project Fund. The Company shall not by reason of the
payment of such excess Costs be entitled to any reimbursement from the County
in excess of any moneys available therefore in the Project Fund or for any
abatement or diminution of the Basic Payments or Additional Charges.

 

15

 

Section 3.3              Authorization by County.

 

In
accordance with the Act, the Company is authorized by the County, and the
Company, pursuant to such authorization, agrees:

 

(1)                                  to acquire and install the
Equipment as provided in Section 3.1, upon the Land or in the Plant;

 

(2)                                  to make, execute,
acknowledge and deliver any contracts, orders, receipts, writings and
instructions, with any other persons, firms or corporations, and in general to
do all things which may be requisite or proper for acquiring and installing the
Equipment and establishing the County as the owner of the Equipment;

 

(3)                                  pursuant to the provisions
of this Lease, to pay all fees, costs and expenses incurred in the development,
acquisition, construction and installation of the Project from funds made
available therefore in accordance with this Lease or otherwise, subject to the
right to contest such fees, costs and expenses; and

 

(4)                                  so long as the Company is
not in default under any of the provisions of this Lease, to exercise all
authority hereby conferred, which is granted and conferred irrevocably to the
Completion Date and thereafter until all activities in connection with the
development, acquisition, construction and installation of the Project shall
have been completed.

 

Neither the authorization granted in this Section nor
any other provision of this Lease shall be construed as making the Company an
agent or joint venturer with the County.

 

Section 3.4              Issuance of Bonds.

 

The County has contracted for the sale of the
Series 2007 Bonds authorized by the Indenture, and the Company has and
does approve the terms of the Indenture. Forthwith upon execution of this Lease
and the Indenture, or as soon thereafter as practicable, the County will execute
the Series 2007 Bonds and cause them to be authenticated by the Trustee
and delivered to the Original Purchaser upon payment of the purchase price and
filing with the Trustee of the opinion of Bond Counsel as to the legality of
the Bonds and the furnishing of all other documents required by this Lease and
the Indenture to be furnished before delivery. The County will then cause the
proceeds of the Bonds to be transmitted to the Trustee, who is required by the
Indenture to deposit the same into the Project Fund and the Reserve Fund. The
County has also contracted for the sale of the General Obligations Bonds
pursuant to the Bond Resolution. The County shall cause $5,000,000 of the
proceeds of the General Obligation Bonds to be transmitted to the Trustee for
deposit in the Equipment Account of the Project Fund.

 

Section 3.5              Disbursements from Project Fund.

 

(1)                                  The County has in the
Indenture authorized and directed the Trustee to disburse the proceeds of the Series 2007
Bonds and a portion of the proceeds of the General Obligation Bonds from the
Project Fund upon the direction of the Company in accordance with the
Disbursing Agreement, in payment or reimbursement of all items of Cost
enumerated in Section 3.2 and certified in writing by the Company Representative
to be due and payable or to have been paid by the Company to the persons
entitled thereto.

 

16

 

(2)                                  In no event shall:

 

(a)                                  any Series 2007
Bond proceeds or General Obligation Bond proceeds be used to reimburse for the
payment of the acquisition of any property other than land (or an interest
therein) unless the first use of such property is pursuant to such acquisition;

 

(b)                                 twenty-five
percent (25%) or more of Series 2007 Bond proceeds or General Obligation
Bond proceeds be used to reimburse for the payment of the acquisition of land;

 

(c)                                  any Series 2007
Bond proceeds or General Obligation Bond proceeds, including earnings thereon,
be used to pay or reimburse for the payment of Working Capital Expenses;

 

(d)                                 any amounts be
disbursed from the Equipment Account until all conditions of the disbursements
of funds under the Disbursing Agreement have been satisfied; or

 

(e)                                  any amounts be
disbursed from the Equipment Account for payment or reimbursement for the cost
of any Item of Equipment in excess of the percentages of the Costs of such Item
which is eligible to be paid from the proceeds of Bonds or General Obligation
Bonds, as such percentage is listed in Exhibit A or as may otherwise be
approved by Bond Counsel.

 

(3)                                  The Equipment
Costs described in Section 3.2, (3), (8) and (9) hereof may be
paid or reimbursed in full upon receipt by the Trustee of any statement of the
payee covering such expenses endorsed by the payee and approved by the Company
Representative, or, with respect to fees of Bond Counsel, the County’s counsel,
Company’s counsel, Trustee’s counsel, or other fees of the Trustee or County or
bond printing expenses, the County, with the reasonable consent of the Company
from the Issuance Expense Account and the Capitalized Interest Account. With
respect to all other Equipment Costs, each certificate of the Company
Representative shall be approved by or on behalf of the Senior Lenders and
contain the following additional information:

 

(a)                                  the amount and
nature of each item of Cost and the name and address of the payee, with the
payee’s statement and, if reimbursement is requested, evidence of payment
thereof attached, which evidence of payment may be either copies of a canceled
check, lien waiver, invoice marked paid by the payee or other evidence
satisfactory to the Trustee;

 

(b)                                 a statement
that the amount for which payment reimbursement is requested does not exceed
the amount properly allocable to the Equipment or the portion of the Cost
thereof listed in Exhibit A;

 

(c)                                  evidence
establishing that the County is, or upon acquisition and installation of the
Items of Equipment for which payment or reimbursement is requested will be, the
owner of such Items of Equipment;

 

(d)                                 a statement
that all other conditions set forth in the Section 3.5(2) and (3) have
been fully satisfied; and

 

17

 

(e)                                  a statement
that all Equipment Costs then and theretofore certified for payment or
reimbursement from bond proceeds in the Project Fund do not cause the average
maturity of the Series 2007 Bonds or General Obligation Bonds to exceed
one hundred twenty percent (120%) of the average reasonably expected economic
life of all of the facilities financed with the proceeds of the Series 2007
Bonds or General Obligation Bonds.

 

Section 3.6              Establishment of Completion Date and Use of
Excess Proceeds

 

(1)                                  The Completion Date shall be
that date on which the Trustee shall acknowledge receipt of the following
items, which the Company shall furnish to the Trustee no later than thirty (30)
days after completion of the Project:

 

(A)                              a certificate
signed by the Company Representative and stating that to its knowledge (i) the
development, acquisition and installation of the improvements, equipment and
all other facilities comprising the Project have been completed in substantial
conformity with the plans and specifications, (ii) the entire cost of the
Project has been paid and (iii) the Project conforms to all applicable
zoning (by special use permit or otherwise), planning and building regulations
and laws, and pollution control laws and regulations and is suitable and
sufficient for efficient operation of the Plant;

 

(B)                                an executed
copy of any supplement to this Lease necessary to specifically identify the
Equipment actually purchased from the proceeds of the Series 2007 Bonds
and General Obligation Bonds and installed in the Plant or on the Land.

 

(2)                                  On the Completion Date, any
balance remaining in the Project Fund, after disbursement has been made as
provided in Section 3.5 hereof, shall (A), to the extent allocable to the Series 2007
Bonds, be transferred from the Project Fund by the Trustee to the Bond Fund and
shall be used to redeem the largest possible principal amount of Bonds on the
earliest possible date that Bonds may be optionally redeemed by the Company in
accordance with Section 3.01 of the Indenture and (B), to the extent
allocable to the General Obligation Bonds, shall be transferred to the County.

 

Section 3.7              Warranties.

 

The
Company acknowledges that it has selected the Equipment based upon its own
judgment and without reliance on any statement or representation by the County.
THE COUNTY MAKES NO REPRESENTATION OR WARRANTY WITH RESPECT TO THE EQUIPMENT,
EXPRESS OR IMPLIED, AND SPECIFICALLY DISCLAIMS ANY REPRESENTATION OR WARRANTY
OF THE COUNTY, EXPRESS OR IMPLIED, AS TO (A) THE FITNESS FOR ANY
PARTICULAR PURPOSE AND MERCHANTABILITY OF ANY ITEM OF EQUIPMENT, (B) THE
DESIGN OR CONDITION OF, OR THE QUALITY OF THE MATERIAL OR WORKMANSHIP IN, THE
EQUIPMENT, (C) ANY LIABILITY FOR CONSEQUENTIAL DAMAGES ARISING OUT OF THE
USE OF OR THE INABILITY TO USE THE EQUIPMENT, AND (D) ANY OTHER MATTER
WHATSOEVER, IT BEING AGREED THAT ALL SUCH RISKS, AS BETWEEN THE COUNTY AND THE
COMPANY, ARE TO BE BORNE BY THE COMPANY. THE COMPANY ACKNOWLEDGES THAT THE
COUNTY DID NOT MANUFACTURE THE ITEMS AND THAT THE COMPANY ACCEPTS THE ITEMS
BASED UPON ITS OWN INDEPENDENT JUDGMENT AND

 

18

 

EXPRESSLY DISCLAIMS ANY
RELIANCE ON STATEMENTS MADE BY THE COUNTY OR ITS AGENTS.

 

COUNTY HEREBY ACKNOWLEDGES THAT ANY MANUFACTURER’S, INSTALLER’S,
DESIGNER’S, ENGINEER’S, CONTRACTOR’S AND/OR SELLER’S WARRANTIES ARE FOR THE
BENEFIT OF BOTH COUNTY AND COMPANY, NOTWITHSTANDING THE FOREGOING, AND PROVIDED
COMPANY IS NOT IN DEFAULT UNDER THIS LEASE, COUNTY SHALL MAKE AVAILABLE TO
COMPANY ALL WARRANTIES, GUARANTIES, AND INDEMNITEES WITH RESPECT TO EQUIPMENT.
The County hereby assigns to the Company all warranties, guaranties and indemnities,
express or implied, and similar rights which the County may have against any
designer, manufacturer, installer, seller, engineer, contractor or builder in
respect of any of the Equipment, including, but not limited to, any rights and
remedies existing under contract or pursuant to the uniform Commercial Code and
hereby appoints and constitutes the Company as its agent during the term of
this Lease to assert and enforce, from time to time, in the name and for the
account of the Company and the County, as their interests may appear, but in
all cases at the sole cost and expense of the Company, whatever claims and
rights the County may have as owner of the Equipment against the designer,
manufacturer, installer, seller, engineer, contractor or builder or any other
person in connection with the development, acquisition, construction,
installation or any other aspect of the Equipment or the Project; provided,
however, that if at any time an Event of Default shall have occurred and be
continuing, the County may assert and enforce such claims and rights at the
Company’s sole cost and expense. Company’s delivery to the County of an
acceptance certificate signed by the Company or delivery by the County or the
manufacturer to the County of an inspection or acceptance certificate the
Company’s representative gave to the manufacturer shall be conclusive evidence
as between the Company and the County only that all Items of Equipment
described therein are in all the foregoing respects satisfactory to the
Company; provided, however, that neither the manufacturer nor any
party other than the county, its successors and assigns may rely on the
foregoing. So long as no Event of Default has occurred and is continuing, the
County agrees, to the extent they are assignable, to assign to the Company,
without any recourse to the County, any warranty received by the County.

 

19

 

ARTICLE IV

 

USE, OCCUPANCY, BASIC PAYMENTS AND

ADDITIONAL CHARGES

 

Section 4.1              Possession and Use.

 

The Company shall have sole and exclusive possession, use and control
of the Equipment, subject-to the right of the County to enter the Land and the
Plant as contemplated in Article IX hereof for the purpose of inspection,
and covenants and agrees that it will not take any action other than pursuant
to Article IX hereof to prevent the Company from having quiet and
peaceable possession and enjoyment of the Project during the Term of this
Lease, and will, at the request and expense of the Company, cooperate with the
Company to secure such possession and enjoyment. The County agrees that it will
not make, do, execute or suffer any act or thing whereby its interest in any
property now or hereafter included as part of the Equipment shall or may be
impaired, charged or encumbered in any manner whatsoever; any impairment,
charge or encumbrance created in violation of this covenant shall be void and
of no effect, unless the Company and the Trustee shall have consented in
writing to its creation. The Company accepts possession of the Equipment on the
date of its acceptance thereof. Its right of possession shall continue until
the Term of this Lease expires or is terminated as provided herein. The Company
shall have the right to use and shall use the Equipment throughout the Term of
this Lease only as solid waste disposal facilities as contemplated by Section 142(a)(6) of
the Code and in conformity with the policies and purposes of the Act.

 

Section 4.2              Basic Payments.

 

Subject
to the Company’s right of prepayment granted in Section 8.2, the Company
agrees to pay or cause to be paid rent for the use of the Equipment as follows:

 

(1)                                  The Company shall pay or
cause to be paid to the Trustee for the account of the County an amount equal
to the aggregate principal amount of the Bonds Outstanding and, as interest on
its obligation to pay such amount, an amount equal to interest on the Bonds,
such amounts to be paid in installments commencing May 25, 2008, on the
25th day of each month, (A) as to interest, one-sixth of the amount of
interest payable on the next following Interest Payment Date, and (B) as
to principal, commencing November 25, 2009, in an amount equal to
one-sixth of the principal scheduled to become due on the next Principal
Payment Date, and in any event shall pay such amounts as may be necessary to
pay the principal, interest and redemption price of the Bonds when due, all in
order that the County can cause amounts to be deposited in the Bond Fund and
Sinking Fund for the payment of the principal of, premium, if any, and interest
on the Bonds, whether at maturity, upon redemption or otherwise; provided,
however, that the obligation of the Company to make any such payment hereunder
shall be reduced by the amount of any reduction under the Indenture of the
amount of the corresponding payment required to be made by the County
thereunder.

 

(2)                                  The Company shall pay or
cause to be paid to the County an amounts equal to the scheduled payments of
principal and interest on the General Obligation Bond, such amounts to be in
installments on February 25, 2008 and on the 25th day of each month
thereafter, (A) an

 

20

 

amount equal to one-sixth of the amount of interest payable on the
General Obligation Bonds on the following February 1 or August 1, as
applicable, and (B) on amount equal to one-twelfth of the principal due on
the following February 1, subject to a credit for amounts on deposit in
the Debt Service Account established under the Bond Resolution for the General
Obligation Bonds in excess of any amounts required to be maintained hereunder
and, on the final maturity date, a credit for the amounts on deposit in the
Reserve Account established under the Bond Resolution for the General
Obligation Bonds.

 

(3)                                  The Company shall provide
for the payment of the principal of the Bonds, upon maturity, redemption or
acceleration, and provide for payment of the interest on the Bonds to the
Trustee when due. The Company hereby authorizes and directs the Trustee to draw
moneys in accordance with the provisions of the Indenture to the extent
necessary to pay the principal of and interest on the Bonds when due. All
moneys drawn from the Capitalized Interest Account to pay the interest on the
Bonds shall be credited against the obligation of the Company to make Basic
Payments.

 

(3)                                  Upon the occurrence of a “Determination
of Taxability” the Company shall make the payment described in Section 7.8
hereof.

 

Section 4.3              Additional Charges.

 

The Company agrees to pay as additional rent, when due, each and all of
the following:

 

(1)                                  all Issuance Expenses of the
Bonds not paid or reimbursed from the issuance Expense Account;

 

(2)                                  to or upon the order of the
Trustee, when due, all fees of the Trustee for services rendered under the
Indenture and all fees and charges of the Paying Agent, registrars, legal
counsel, accountants, engineers, public agencies and others incurred in the
performance on request of the Trustee of services required under the Indenture
for which the Trustee and such other persons are entitled to payment or
reimbursement; provided that the Company may, without creating a default
hereunder, contest in good faith the necessity or reasonableness of any such
services, fees or expenses other than the Trustee’s fees for ordinary services
as set forth in the Indenture, Paying Agency fees and any fees or charges of
public agencies;

 

(3)                                  to the County, all expenses
including reasonable attorney’s fees directly incurred by the County to perform
its obligations or exercise its rights under this Lease, and all other
reasonable expenses incurred by the County in relation to the Project which are
not otherwise required to be paid by the Company under the terms of this Lease
and all indemnity payments required to be made under Section 7.4;

 

(4)                                  subject to the provisions of
Section 5.4 hereof, to the County Treasurer of Otter Tail County, and to
any other governmental official authorized by law to collect taxes levied on
the Land or Plant or the privilege of using the same, the full amount of all
such taxes, if any, when due and payable during the Term of this Lease; and

 

(5)                                  subject to the provisions of
Section 5.4 hereof, to each public or private person, firm or corporation
furnishing utility service or constructing or extending facilities for the

 

21

 

furnishing of such service
for the Project, when due and payable during the Term of this Lease, all fees,
charges and rentals for such service and facilities.

 

Section 4.4              Company’s Obligations Unconditional.

 

All Basic Payments and Additional Charges and all other payments
required of the Company hereunder shall be paid without notice or demand and
without setoff, counterclaim, or defense for any reason and without abatement
or deduction or defense. The Company will not suspend or discontinue any such
payments, and will perform and observe all of its other agreements in this
Lease, and, except as expressly permitted in Sections 7.8 and 8.4 hereof, will
not terminate this Lease for any cause, including but not limited to any acts
or circumstances that may constitute failure of consideration, destruction or
damage to the Plant, the Equipment or Company’s business, the taking of the
Plant, the Equipment or Company’s business by condemnation or otherwise, the
lawful prohibition of the Company’s use of the Plant, or Company’s business,
the interference with such use by any private person or corporation, the
invalidity or unenforceability or lack of due authorization or other infirmity
of this Lease, or lack of right, power or authority of the County to enter into
this Lease, eviction by paramount title, commercial frustration of purpose,
bankruptcy or insolvency of the County or the Trustee, change in the tax or
other laws or administrative rulings or actions of the United States of America
or of the State of Minnesota or any political subdivision thereof, or failure
of the County to perform and observe any agreement, whether express or implied
or any duty, liability or obligation arising out of or connected with this Lease,
or for any other cause whether similar or dissimilar to the foregoing, any
present or future law to the contrary notwithstanding, it being the intention
of the parties hereto that the Basic Payments and other amounts payable by the
Company hereunder shall be paid in full when due without any delay or
diminution whatever.

 

Section 4.5              Assignment of County’s Rights.

 

As security for the payment of the Bonds, the County will pledge the
amounts payable hereunder and assign, without recourse or liability, to the
Trustee, the County’s rights under this Lease, including the right to receive
payments hereunder (except the right to receive payments, if any, under
Sections 4.2(2), 4.3, 7.4 and 9.5 hereof) and hereby directs the Company to
make said payments directly to the Trustee. The Company herewith assents to
such assignment and will make payments under this Lease directly to the Trustee
without defense or setoff by reason of any dispute between the Company and the
Trustee.

 

Section 4.6              Company’s Remedies.

 

Nothing contained in this Article shall be construed to release
the County from the performance of any of its agreements herein, and if the
County should fail to perform any such agreements, the Company may institute
such action against the County as the Company may deem necessary to compel the
performance so long as such action for specific performance shall not violate
the Company’s agreements in Section 4.4 or diminish or delay the amounts
required to be paid by the Company pursuant to Section 4.2 or 4.3 of this
Lease. The Company acknowledges however and agrees that any pecuniary
obligation of the County created by or arising out of this Lease shall be
payable solely out of the proceeds derived from this Lease, the sale of the
Bonds, or other disposition of the Equipment upon a default by the Company or
otherwise.

 

22

 

ARTICLE V

 

PROJECT COVENANTS

 

Section 5.1              Project Operation and Maintenance.

 

The Company shall pay all expenses of the operation and maintenance of
the Equipment including, but without limitation, adequate insurance thereon and
insurance against all liability for injury to persons or property arising from
the operation thereof, and all taxes and special assessments levied upon or
with respect to the Equipment and payable during the Term of this Lease.

 

Section 5.2              Transfer of Company’s Leasehold Interest in
the Equipment.

 

Subject to Section 8.1, and except as permitted in the AgStar Loan
Documents and NMF Loan Documents, the Company shall not sublease, assign,
transfer, grant a security interest in or otherwise encumber its interests in
this Lease or any Equipment, in whole or part, without the consent of the
Trustee, which consent will not be unreasonably withheld or conditioned, except
for the Permitted Encumbrances; provided, the Company, so long as an Event of
Default has not occurred and is continuing, may sublease any items of Equipment
not needed for operation of the Plant subordinate to this Lease if the effect
thereof would be to impair the validity or cause the interest on the Bonds to
become includable in gross income for purposes of federal income taxation and
the Company shall remain liable for rental and other obligations under this
Lease.

 

Section 5.3              Alterations to the Equipment.

 

The Company shall have the right from time to time at its cost and
expense, to make additions, modifications, alterations, improvements and
changes (collectively referred to as “alterations”) in or to the Equipment, and
remove obsolete or worn out Equipment, provided such alterations or removal do
not impair the character of the Equipment as a “project” within the meaning of
the Act or cause the interest on the Series 2007 Bonds or General
Obligation Bonds to become includable in gross income for purposes of federal
income taxation. All alterations made by the Company to the Equipment shall
become the property of the County and remain part of the Equipment, but subject
to purchase by the Company under Section 8.4 hereof.

 

Section 5.4              Taxes and Other Governmental Charges.

 

The Company will make promptly all payments due during the term of this
Lease on taxes and special assessments lawfully levied upon or with respect to
the Land, the Plant and the Equipment, other charges lawfully made by any
governmental body for public improvements, taxes or governmental charges on any
property of the Company brought in or upon the Land or Plant, sales and other
excise taxes on products thereof, and any taxes levied upon or with respect to
income or profits from the operation of the Plant. With respect to governmental
charges that may lawfully be paid in installments over a period of years, with
or without interest, the Company shall be obligated to pay only such
installments and interest as are required to be paid during the term of this
Lease. The Company may, at its own expense, in good faith, contest any such
taxes and other charges and, in the event of such contest, may permit the items
so contested to remain unpaid during the period of the contest and any appeal
therefrom, provided that such contest does not affect the Company’s right to
operate the Plant and the Equipment.

 

23

 

Section 5.5      Insurance.

 

The Company shall procure
and maintain, or cause to be procured or maintained, continuously in effect
during the term of this Lease, policies of insurance with respect to the
Equipment insuring against such risks and in such amounts as are customary for
property comparable to those comprising the Equipment, including, specifically,
insurance against such hazards and in such amounts as reasonably may be
required by the Trustee and insurance against all liability for injury to persons
or property arising out of the operation of the Equipment. All policies shall
be written in the names of the Company and the County and shall show the County
as an additional insured.

 

All insurance required in this Section 5.5
shall be taken out and maintained with responsible insurance companies
authorized to do business in Minnesota and selected by the Company. The Company
will deposit with the Trustee policies evidencing all such insurance, or a
certificate or certificates of the respective insurers stating that such
insurance is in force and effect. Each policy of insurance herein required
shall contain a provision that the insurer shall not cancel, refuse to renew or
materially modify it without giving written notice to the County and the Trustee
at least thirty (30) days before the cancellation, non-renewal or modification
becomes effective. Before the expiration of any policy of insurance herein
required, the Company shall furnish the Trustee evidence satisfactory to the
Trustee that the policy has been renewed or replaced by another policy
conforming to the provisions of this Section 5.5. In lieu of separate
policies, the Company may maintain blanket policies having the coverage
required herein, in which event it shall deposit with the Trustee a certificate
or certificates of the respective insurers as to the amount of coverage in
force with respect to the Equipment.

 

ARTICLE VI

 

DAMAGE AND DESTRUCTION

 

Section 6.1      Damage
and Destruction.

 

If there are any Outstanding
Bonds or General Obligation Bonds when the Plant is damaged or destroyed by
fire or other casualty, the Company shall either restore the Plant or if Section 8.4
of this Lease is applicable, exercise its option to redeem all Bonds and
purchase the Equipment pursuant to said Section.

 

ARTICLE VII

 

COMPANY’S COVENANTS

 

Section 7.1      Covenant
for the Benefit of the Trustee and the Bondholders.

 

The Company recognizes the
authority of the County to assign its interest in and pledge monies receivable
under this Lease (other than certain payments required to be made to the County
under Sections 4.2(2), 4.3(3), 7.4 and 9.5 hereof) to the Trustee as security
for the payment of the principal of and interest and redemption premiums, if
any, on the Bonds, and the payment of all fees and expenses of the Trustee; and
hereby agrees to be bound by, and joins with the County in the grant of a
security interest to the Trustee in any rights and interest the Company may
have in sums held in the Funds described in Article VI pursuant to the
terms and

 

24

 

conditions of the Indenture to secure payment of the Bonds. Each of the
terms and provisions of this Lease is a covenant for the use and benefit of the
Trustee and the Holders of the Bonds, so long as any thereof shall remain
Outstanding; but upon payment in full of the General Obligation Bonds in
accordance with the Bond Resolution and the Bonds in accordance with Article IX
of the Indenture and of all fees and charges of the Trustee and Paying Agent,
all references in this Lease to the General Obligation Bonds, the Bonds, the
Holders thereof and the Trustee shall be ineffective, and neither the Trustee
nor the Holders of any of the General Obligation Bonds or Bonds shall
thereafter have any rights hereunder, save and except those that shall have
theretofore vested or that arise from provisions hereunder which survive
termination of this Lease.

 

Section 7.2      Inspection
and Access.

 

The Company agrees that the County, the Trustee and
their duly authorized agents shall have the right at all reasonable times to
examine and inspect the Equipment and all books and records of the Company
related thereto and for that purpose to enter upon the Land and Plant after
reasonable notice, and shall also have such right of access thereto as may be
reasonably necessary to cause the Equipment to be properly maintained in
accordance with Article V, subject to the Company’s confidentiality and
proprietary information handling and disclosure policies and practices, or
similar agreements to which the Company, the Equipment or the Plant are
subject.

 

Section 7.3      Certificate
of Compliance and Other Reports.

 

(1)         The
Company will at the request of the Trustee, and at the Company’s expense,
furnish to the Trustee, Original Purchaser and County at such times and in such
form as the Trustee may reasonably require a copy of reports containing such
information as is necessary to comply with any lawful reporting or continuing
registration requirements imposed by any agency of the State of Minnesota under
the Act, the Minnesota Blue Sky Laws or any other applicable state law as it
now exists or may hereafter be amended or any agency of any other state in
which the Bonds have been sold, or such information as necessary to comply with
federal securities law.

 

Section 7.4      Indemnification.

 

The Company, will, to the
fullest extent permitted by law, protect, indemnify and save the County and its
officers, agents, and employees and any person who controls the County within
the meaning of the Securities Act of 1933, harmless from and against all
liabilities, losses, damages, costs, expenses (including attorneys’ fees and
expenses of the County), taxes, causes of action, suits, claims, demands and
judgments of any nature arising during the term of this Lease from:

 

(1)          any injury to or death of any person or damage to property
in or upon the Project or growing out of or connected with the use, non-use,
condition or occupancy of the Project or any part thereof, including any and
all acts or operations relating to the development, acquisition or installation
of property or improvements. The foregoing indemnification obligations shall
not be limited in any way by any limitation on the amount or type of damages,
compensation or benefits payable by or for the Company, customers, suppliers or
affiliated organizations under any Workers’ Compensation Acts, Disability
Benefit Acts or other employee benefit acts;

 

25

 

(2)          violation of any agreement, provision or condition of this
Lease, the Bonds or the Indenture, or the General Obligation Bonds or Bond
Resolution except an intentional violation by the County;

 

(3)          violation by the Company of any contract, agreement or
restriction relating to the Project which shall have existed at the
commencement of the Term of this Lease or shall have been approved by the
Company;

 

(4)          violation by the Company of any law, ordinance, court order
or regulation affecting the Project or a part thereof or the ownership,
occupancy or use thereof; provided, that the Company shall have the right to
reasonably protest the finding of a violation so long as the County shall have
no liability during the time of such protest;

 

(5)          any statement or information relating to the expenditure of
the proceeds of the Bonds contained in the “Nonarbitrage Certificate” or
similar document furnished by the Company to the County which, at the time
made, is misleading, untrue or incorrect in any material respect; and

 

(6)          any untrue statement or alleged untrue statement of a
material fact contained in any offering material relating to the sale of the
Bonds (as from time to time amended or supplemented) or General Obligation
Bonds or arising out of or based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary in order to
make the statements therein not misleading, or failure to properly register or
otherwise qualify the sale of the Bonds or General Obligation Bonds or failure to
comply with any licensing or other law or regulation which would affect the
manner whereby or to whom the Bonds or General Obligation Bonds could be sold.

 

Promptly after receipt by the County or any such
other indemnified person, as the case may be, of notice of the commencement of
any action with respect to which indemnity may be sought against the Company
under this Section, such person will notify the Company in writing of the
commencement thereof, and, subject to the provisions hereinafter stated, the
Company shall assume the defense of such action (including the employment of
counsel, who shall be counsel reasonably satisfactory to the County, Trustee or
such other person as the case may be, and the payment of expenses). Insofar as
such action shall relate to any alleged liability with respect to which
indemnity may be sought against the Company, the County or any such other
indemnified person shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the Company unless the employment
of such Counsel has been specifically authorized by the Company. The Company
shall not be liable to indemnify any person for any settlement of any such
action effected without its consent.

 

The provisions of this Section 7.4 shall
survive the payment and discharge of the Bonds.

 

Section 7.5      Existence;
Maintenance of Business.

 

The Company shall:

 

(a)       continue to be a limited liability company subject to service
of process in the State and either organized under the laws of the State, or
organized under the laws of any

 

26

 

other state of the United States and duly qualified
to do business as a foreign corporation in the State;

 

(b)          not liquidate, wind up or dissolve or otherwise dispose of
all or substantially all of its property, business or assets; and

 

(c)           not consolidate with or merge into another corporation or
permit one or more corporations to consolidate with or merge into it. The
Company may, however, after the Completion Date, without violating the
foregoing, but upon thirty (30) days prior written notice to the County and the
Trustee, consolidate with or merge into another corporation or permit one or
more corporations to consolidate with or merge into it, or sell or otherwise
transfer all or substantially all of its property, business or assets to
another such corporation (and thereafter liquidate, wind up or dissolve or not,
as the Company may elect) if:

 

(i)            immediately after giving effect to such transaction, no
Event of Default, nor any event which, after notice or lapse of time or both,
would become an Event of Default, shall have happened and be continuing, and
the Company would not thereby be in default in the payment, performance or
observance of any payment, agreement, covenant or obligation under this Lease,
the Indenture or the Mortgage;

 

(ii)           either (A) the Company is the surviving, resulting or
transferee corporation, as the case may be, and, unless the Trustee shall
otherwise consent in writing, the resulting corporation has a net worth at
least equal to the net worth of the Company immediately prior to such merger or
consolidation, or (B) in the event that the Company is not the surviving,
resulting or transferee corporation:

 

(A)       such corporation is subject to service of
process in the State and either organized under the laws of the State, or
organized under the laws of any other state of the United States and duly
qualified to do business as a foreign corporation in the State;

 

(B)        such corporation assumes in writing all of
the obligations of the Company contained in this Lease and the Mortgage;

 

(C)        in the Opinion of Counsel, (y) such
corporation shall be bound by all of the terms applicable to the Company of
this Lease and the Mortgage and (z) such action does not legally impair
the security for the Holders of the Bonds afforded by the Mortgage; and

 

(D)       in the opinion of Bond Counsel, such action
will not cause the interest on the Bonds to cease to be excludable from gross
income for federal income tax purposes.

 

Section 7.6           Filing of Financing Statements.

 

The Company agrees that it
will, at its sole expense, file or cause to be filed any financing statements
and continuation statements required or if requested by the Trustee in writing
to perfect the security interest granted to the Trustee under the Indenture in
this Lease and the payments to be made hereunder granted.

 

27

 

Section 7.7       Assurance of Tax Exemption.

 

The Company covenants for
the benefit of the Holders of the Bonds and General Obligation Bonds and the
County that it (a) has not taken, and will not take or permit to be taken
on its behalf, any action which would adversely affect the tax-exempt status of
the Bonds or General Obligation Bonds and (b) will take, or require to be
taken, such actions as may, from time to time, be required under applicable law
or regulation to continue to cause the Bonds and the General Obligation Bonds
to be tax-exempt.

 

The Company acknowledges
that in the event of an examination by the Internal Revenue Service of the
exclusion of interest on the Bonds or General Obligation Bonds from the gross
income of the owners thereof for federal income tax purposes, the County may be
treated as the “taxpayer” in such examination and agrees that it will respond,
and will direct the County to respond, in a commercially reasonable manner to
any inquiries from the Internal Revenue Service in connection with such an
examination. The County covenants that it will cooperate with the Company, at
the Company’s expense and at its direction, in connection with such
examination.

 

In order to assure that the
interest on the Bonds and General Obligation Bonds shall at all times be free
from federal income taxation, the Company represents and covenants with the
County, Trustee and all Holders of the Bonds and General Obligation Bonds that
it will comply with the applicable provisions of Sections 103 and 141 through 150
of the Code as follows:

 

(1)            The
Company will not use (or permit to be used) the Equipment or use or invest (or
permit to be used or invested) the proceeds of the Bonds or General Obligation
Bonds or any other sums treated as “bond proceeds” under Section 148 of
the Code, including “investment proceeds,” “invested sinking funds” and “replacement
proceeds,” in such a manner as to cause the Bonds or General Obligation Bonds
to be classified as “arbitrage bonds” under Section 148 of the Code;

 

(2)            In
addition to the Bonds, no other obligations have been or are expected to be
issued under Section 103(a) of the Code for sale at substantially the
same time (within 15 days) as the Bonds are sold, pursuant to the same plan of
financing, including bonds for the same facility or related facilities, and
which are reasonably expected to be paid from substantially the same source of
funds, determined without regard to guarantees from unrelated parties, or to
otherwise become part of the same “issue of obligations” of the Bonds as
described in Treasury Regulations Section 1.150-(l)(c)(l), so as to impair
the exclusion from gross income under Section 103 of the Code of the
interest on the Bonds;

 

(3)            no
portion of the proceeds of the Bonds or General Obligation Bonds will be used (i) to
acquire or otherwise provide any private or commercial golf course, country
club, massage parlor, tennis club, skating facility (including roller skating,
skateboard and ice-skating), racquet sports facility (including any handball or
racquetball court), hot tub facility, suntan facility or racetrack, land (or
interest therein) to be used for farming purposes, and in no event will more
than twenty-five percent (25%) (or twenty-five percent (25%), or more in the
case of land) of the proceeds of the Bonds or General Obligation Bonds, be used
to acquire or otherwise provide a facility the primary purpose of which is
either retail food and beverage services, automobile sales or service, or the
provision of recreation or entertainment, or land, all within the meaning of

 

28

 

Sections 144 and 147 of the Code; or (ii) to provide any airplane,
skybox or other private luxury box, health club facility, facility primarily
used for gambling, or store the principal business of which is the sale of
alcoholic beverages for consumption off premises, all within the meaning of Section 144
of the Code;

 

(4)            the
average maturity of the Bonds and General Obligation Bonds does not exceed one
hundred twenty percent (120%) of the average reasonably expected economic life
of the Equipment;

 

(5)            the
Company shall provide the County at the Bond Closing with all information
required to satisfy the informational reporting requirements set forth in Section 149(e) of
the Code, including the information necessary to complete IRS Form 8038;

 

(6)            no
portion of the proceeds of the Bonds or General Obligation Bonds will be used
to acquire property to be leased to the government of the United States of
America or to any department, agency or instrumentality of the government of
the United States of America; and no moneys in the Bond Fund (or other fund
created under the Indenture) shall be invested in investments which cause the
Bonds or General Obligation Bonds to be federally guaranteed within the meaning
of Section 149(b) of the Code. If at any time the moneys in such
funds exceed, within the meaning of Section 149(b)(3)(B) of the Code,
(i) amounts invested for an initial temporary period until the moneys are
needed for the purpose for which the Bonds and General Obligation Bonds were
issued, (ii) investments of a bona fide debt service fund, and (iii) investments
of a reserve which meet the requirement of Section 148(d) of the
Code, such excess moneys shall be invested in only those Permitted Investments
or Government Obligations, as otherwise appropriate, which are (A) obligations
issued by the United States Treasury, (B) other investments permitted
under regulations, or (C) obligations which are (a) not issued by, or
guaranteed by, or insured by, the United States or any agency or
instrumentality thereof or (b) not federally insured deposits or accounts,
all within the meaning of Section 149(b)(3)(B) of the Code;

 

(7)            no
portion of the Bond or General Obligation Bond proceeds will be used for the
acquisition of any property (or any interest therein) unless (i) the first
use of such property is pursuant to such acquisition, other than land, or (ii) the
property is a building (and the equipment therefore) and rehabilitation
expenditures with respect to such building equal or exceed fifteen percent
(15%) of the portion of the cost of acquiring such building (and equipment)
financed with Bond or General Obligation Bond proceeds, or (iii) the
property is a structure other than a building and rehabilitation expenditures
with respect to such structure equal or exceed one hundred percent (100%) of
the portion of the cost of acquiring such facility financed with Bond or
General Obligation Bond proceeds, all within the meaning of Section 147(d) of
the Code;

 

(8)            it
will not use the proceeds of the Bonds or General Obligation Bonds in such a
manner as to cause the Bonds or General Obligation Bonds to be “arbitrage bonds”
within the meaning of Section 148 of the Code and applicable Treasury
Regulations; and to this end, the Company on behalf of the County shall pay to
the United States, as a rebate, an amount equal to the sum of (i) the
excess of (I) the aggregate amount earned on all nonpurpose obligations
(other than investments attributable to an excess described in this clause),
over (II) the amount which would have been earned if all nonpurpose
obligations were invested at a rate equal to the yield on the Bond or General
Obligation Bond, as the case may be, plus (ii) any income attributable to

 

29

 

the excess described in clause (1), at the times and in the amounts
required by Section 148 of the Code, all within the meaning of Section 148
of the Code. The Company and Trustee shall maintain records of the interest
rate borne by the Bonds and General Obligation Bonds and the investments of the
Project Fund and the Bond Fund and earnings thereon in adequate detail to
enable the Company to calculate the amount of any rebate required to be made to
the United States. The Company shall pay the rebate to the United States at
times and in installments which satisfy Section 148 of the Code and the
regulations, at least once every five years and within sixty (60) days after
the day on which the last of each of the series of Bonds and General Obligation
Bonds is redeemed. Calculations of the amount to be rebated shall be made at
least every five years, by Bond Counsel or an Independent Accountant selected
by the Company, and the County and Trustee shall be furnished with such
calculations within sixty (60) days of the time they are made. The records for
such calculations shall be retained until six (6) years after the
retirement of the Bonds and General Obligation Bonds. The rebate shall be
calculated as provided in the applicable Treasury Regulations, including taking
into account the gain or loss on the disposition of nonpurpose investments. The
Company shall acquire nonpurpose obligations at their fair market value;

 

(9)            at
least 85% of the spendable proceeds of both the Bonds and General Obligation
Bonds will be used to carry out the governmental purpose of the Bonds within
the 3-year period beginning on the date hereof; and

 

(10)          the
Company will not otherwise knowingly use Bond or General Obligation Bond
proceeds, including earnings thereon, or take, or permit or cause to be taken,
any action that would adversely affect the exemption from federal income
taxation of the interest on the Bonds or General Obligation Bonds, nor
otherwise omit to take or cause to be taken any action necessary to maintain
such tax exempt status; and, if it should take or permit, or omit to take or
cause to be taken, as appropriate, any such action, the Company shall take all
lawful actions necessary to rescind or correct such actions or omissions
promptly upon having knowledge thereof.

 

(11)          the
Company hereby makes an irrevocable election (binding on it and any successors
in interest in this Lease) not to claim any depreciation or investment credit
with respect to the Equipment financed with the proceeds of the Series 2007
Bonds.

 

Section 7.8       Determination of Taxability.

 

(1)            Promptly
after the occurrence of a Determination of Taxability, the Company shall give
written notice to the County and Trustee of the Determination of Taxability and
the Company shall provide to the Trustee in immediately available funds, an
amount which when added to the amounts on deposit in the Funds, will equal the
principal amount of all the Unpaid Bonds plus accrued interest thereon to the
redemption date, plus a premium equal to three percent (3.00%) percent of the
outstanding Bonds, and the Bonds shall be redeemed pursuant to Article III
of the Indenture.

 

(2)            Upon
a Determination of Taxability the Company shall also pay to the Trustee an
amount equal to the Paying Agent’s and Trustee’s fees, accrued and to accrue
until final payment and redemption of the Bonds, and all other advances, fees,
costs and expenses reasonably incurred by the Trustee, the County and the
Paying Agent, including Bond Counsel and legal fees.

 

30

 

(3)            If
this Lease has not been terminated and the Equipment repurchased by the Company
under Section 8.4 prior to the redemption date for the Bonds, this Lease
shall be terminated on said redemption date and the closing for the termination
of this Lease shall be completed otherwise as provided for termination of this
Lease upon exercise of the Company’s options under Section 8.4.

 

(4)            Neither
the Company nor any Holder shall be required to contest or appeal any notice of
deficiency, ruling, decision or legislative enactment which may give rise to a
Determination of Taxability; and the expenses of any such contest or appeal
shall be paid by the party initiating the contest or appeal.

 

Section 7.9       Surrender of Equipment: Holdover.

 

Except as otherwise provided in this Lease, at the
expiration or earlier termination of the Term of this Lease the Company will
surrender possession of the Equipment to the County peaceably and promptly and
in as good condition as at the commencement of the Term of this Lease, loss by
fire or other casualty to the extent covered by insurance and ordinary wear,
tear and obsolescence only excepted.

 

Section 7.10     Refinancing of Senior Loans.

 

The Company may not enter into any amendment of the
AgStar Loan Agreement or NMF Loan Agreement, or refinance all or any portion of
the Senior Loans, unless, immediately after such amendment or refinancing (1) the
outstanding principal amount of such indebtedness does not exceed the principal
amount outstanding with respect to the Senior Loan immediately prior to the
date of such amendment or refinancing and (2) the debt service schedule
payable with respect to the amended or refinanced indebtedness does not require
greater periodic installments of principal than the periodic installments of
principal which would have been payable with respect to the Senior Loans,
absent any such amendment or refinancing.

 

Section 7.11     Additional Senior Secured Indebtedness.

 

The Company may not incur
Additional Senior Secured Indebtedness unless the Company first delivers to the
Trustee the written certification of an independent public accountant stating
that either (A) during the two years immediately preceding the date on
which the Additional Senior Secured Indebtedness will be incurred, the Senior
Debt Service Coverage Ratio, calculated as though the proposed Additional
Senior Secured Indebtedness had been outstanding during such period, would not
have been less than 1.50 to 1 and the Total Debt Service Coverage Ratio,
calculated as though the proposed Additional Senior Secured Indebtedness had
been outstanding during such period, would not have been less than 1.20 to 1 or
(B) that for the five years immediately succeeding the date on which the
Additional Senior Secured Indebtedness will be incurred, the Senior Debt
Service Coverage Ratio, taking into account the Additional Senior Secured
Indebtedness to be incurred, is expected to be not less than 1.50 to 1 and the
Total Debt Service Coverage Ratio, taking into account the Additional Senior
Secured Indebtedness to be incurred, is expected to be not less than 1.25 to 1.
Upon receipt of (A) of the foregoing certification, and (B) an
Opinion of Counsel provided by Bond Counsel stating that (i) all
conditions to the incurrence of Additional Senior Secured Indebtedness, as set
forth in this Lease, have been satisfied and (ii) neither the incurrence
of Additional Senior Secured Indebtedness nor the subordination of this Lease
and the Bonds to

 

31

 

such
Additional Senior Secured Indebtedness will adversely affect the tax-exempt
status of interest on the Bonds, the Trustee shall execute a subordination
agreement in favor of the lender providing the Additional Senior Secured
Indebtedness, substantially in the form of the Intercreditor Agreement. In no
event may the total principal amount of all outstanding Additional Senior
Secured Indebtedness exceed $15,000,000, less the amount, if any, of Additional
Bonds issued for completion or expansion of the Project. This Lease does not
prohibit the incurrence by the Company of unsecured indebtedness or secured
indebtedness junior to the Mortgages or liens securing Senior Secured
Indebtedness if such indebtedness is permitted by the AgStar Loan Documents and
NMF Loan Documents.

 

Section 7.12     Business Subsidies Act.

 

(1)            In order to satisfy the provisions of Minnesota Statutes,
Sections 116J.993 to 116J.995 (the “Business Subsidies Act”), the Company
acknowledges and agrees that the amount of the “Business Subsidy” granted to
the Company under this Lease is the amount of the Bonds, and General Obligation
Bonds and that the Business Subsidy is needed because the Project is not
sufficiently feasible for the Company to undertake without the Business
Subsidy. The public purpose of the Business Subsidy is to develop new jobs
within the County and to develop an ethanol production facility in the County.
The Company agrees that it will meet the following goals (the “Goals”): It will
create at least 25 full-time equivalent jobs in connection with the development
of the Plant at a wage of at least $8.30 per hour within two years from the “Benefit
Date”, which is the earlier of date the Project is completed or placed in
service.

 

(2)            If the Goals are not met, the Company agrees to repay all
or a part of the Business Subsidy to the County, plus interest (“Interest”) set
at the implicit price deflator defined in Minnesota Statutes, Section 275.70,
Subdivision 2, accruing from and after the Benefit Date, compounded
semiannually. If the Goals are met in part, the Company will repay a portion of
the Business Subsidy (plus Interest) determined by multiplying the Business
Subsidy by a fraction, the numerator of which is the number of jobs in the
Goals which were not created at the wage level set forth above and the
denominator of which is 25 (i.e. number of jobs set forth in the Goals).

 

(3)            The Company agrees to (i) report its progress on
achieving the Goals to the County until the later of the date the Goals are met
or two years from the Benefit Date, or, if the Goals are not met, until the
date the Business Subsidy is repaid, (ii) include in the report the
information required in Minnesota Statutes, Section 116A.994, Subdivision
7 on forms developed by the Minnesota Department of Employment and Economic
Development, and (iii) send completed reports to the County. The Company
agrees to file these reports no later than December 1 of each year
commencing December 1, 2008, and within 30 days after the deadline for
meeting the Goals. The County agrees that if it does not receive the reports,
it will mail the Company a warning within one week of the required filing date.
If within 14 days of the post marked date of the warning the reports are not
made, the Company agrees to pay to the County a penalty of $100 for each
subsequent day until the report is filed up to a maximum of $1,000, provided
that the delay is due to causes within the control of the Company

 

(4)            The Company agrees to continue operations of the Project
for at least five (5) years after the Benefit Date.

 

(5)            There
is no parent corporation of the Company.

 

32

 

ARTICLE VIII

 

COMPANY’S OPTIONS

 

Section 8.1       Assignment and Sublease.

 

The Company may assign its
rights and obligations under this Lease and, as an incident thereto, sublease
its interest in the Project without prior consent of the County or the Trustee,
but subject to the provisions of Section 5.2 and 7.5 hereof. The County
consents to the assignment of this Lease to the Senior Lenders as security for
the Senior Loans.

 

Section 8.2       Prepayment.

 

(1)            The
Company shall have the option to direct the Trustee to call for redemption and
prepayment of the Outstanding Bonds in whole or in part as provided in Section 3.01
of the Indenture. The Bonds to be redeemed shall be redeemed at a price equal
to their principal amount plus accrued interest as set forth in Section 3.01
of the Indenture. In the event the Bonds are called for redemption in whole or
in part, a Basic Payment shall be made by the Company as provided in Section 4.2
hereof on said Redemption Date.

 

(2)            If,
after the Company exercises its option to redeem all Bonds, no Bonds remain
Outstanding, the Indenture is discharged, and the Company has satisfied all of
its obligations hereunder, the Company may exercise its option to purchase the
Equipment under Section 8.4 hereof.

 

(3)            The
Company shall have the option to prepay the Basic Payments due the County under
Section 4.2(3) hereof in whole or in part, which prepayments shall be
made by payment to the County Treasurer.

 

Section 8.3       Direction of Investments.

 

Except during the
continuance of an Event of Default, the Company shall have the right during the
Term of this Lease to direct the Trustee to invest or reinvest all monies held
for the credit of Funds established by Article VI of the Indenture, in
such securities as are authorized by law, for such funds, subject, however, to
the further conditions of Article VIII of the Indenture.

 

Section 8.4       Termination of Lease Agreement and Option to Purchase.

 

Except during the
continuance of an Event of Default, the Company shall have the option at the
expiration of this Lease and upon earlier termination of this Lease to purchase
the Equipment for the Fair Market Value Purchase Price, subject to the
following conditions:

 

(1)           such option may be exercised only if all Bonds and General
Obligation Bonds shall have matured or will mature or be subject to redemption
in accordance with their terms on their then next succeeding Interest Payment
Date or if provision is otherwise made for payment of all Bonds and General
Obligation Bonds in such manner that the Indenture will be discharged under Article VII
thereof on or before the date of termination and the obligations of the Company
with respect to the General Obligation Bonds have been paid or defeased;

 

33

 

(2)           the Company shall give written notice to the County and to
the Trustee of its intention to exercise the option, stating therein a
termination date not less one hundred twenty (120) nor more than one hundred
fifty (150) days after the date the notice is mailed, but in no event prior to
the date on which all Outstanding Bonds shall be deemed discharged under Article X
of the Indenture and the Company’s Basic Payment obligations with respect to
the General Obligation Bonds have been paid or defeased; and the Company shall
make arrangements satisfactory to the Trustee for the giving of any notice
required for redemption of all of the Outstanding Bonds on the date on which
the Bonds are to be redeemed;

 

(3)           if on or before ninety (90) days prior to the expiration
date of the Lease Term, the County and the Company are unable to agree upon the
Fair Market Value Purchase Price of the Equipment, such value shall be
determined in accordance with the foregoing definition by a qualified
independent Appraiser. The term “Appraiser” shall mean any independent
appraiser mutually agreed upon by the County and the Company or if no such
mutual agreement is reached within fifteen (15) days after the beginning of
such 90-day period, two independent appraisers, one chosen by the County and
one chosen by the Company, or, if such appraisers cannot agree on the amount of
such value within forty-five (45) days after the beginning of such 90-day
period, an independent appraiser to be chosen by the American Arbitration
Association promptly thereafter. The Appraiser shall be instructed to make such
determination within a period of thirty (30) days following appointment, and
shall promptly communicate such determination in writing to the County and the
Company. The determination so made shall be conclusively binding upon both the
County and the Company. The Company shall each pay the expenses of the
Appraiser.

 

(4)           If necessary, a Basic Payment shall be made by the Company
as provided in Section 4.2 hereof on the Redemption Date;

 

(5)           the Company shall pay to the Trustee on or prior to the
termination date, an amount equal to the Trustee’s and Paying Agent’s fees and
expenses under the Indenture, accrued and to accrue until final payment and
redemption of the Bonds and all other advances, fees, costs and expenses
reasonably incurred and to be incurred on or before the termination date by the
Trustee and Paying Agent under the Indenture and by the County under this
Lease.

 

At the closing, which shall
be held at the principal office of the Trustee, or such other place as the
parties may mutually select, the County shall convey to the Company all of its
right, title and interest in and to the Equipment, subject to:

 

(A)           those liens and encumbrances, if any, to which the
property was subject when conveyed to the County;

 

(B)            those liens and encumbrances, if any, created, permitted
or acquiesced in by the Company, or to the creation of which the County did not
consent;

 

(C)            those liens and encumbrances, if any, resulting from the
failure of the Company to perform or observe any of its agreements in this
Lease; and

 

(D)            the lien of unpaid installments of taxes, if any, levied
against the Equipment and not yet due and payable.

 

34

 

The County shall convey all
of its right, title and interest in and to the Equipment by bill of sale, which
bill of sale shall be delivered upon payment by the Company to the County of
the purchase price specified above and payment of all obligations with respect
to the Indenture and the Bonds. The Company shall pay all costs and expenses of
the preparation of the deed and bill of sale and the delivery thereof and all
taxes and charges payable in connection with the conveyance.

 

The Company shall take the
Equipment subject to all applicable laws or ordinances, rules or
regulations of governmental authority.

 

On conveyance of the County’s
interest in the Equipment and payment therefore as provided in this Section 8.4,
the County will deliver a release of the leasehold estate created by this
Lease, and all further obligations of the Company hereunder, except under Section 7.4,
7.7, 7.8, 10.8 and 10.11 shall thereupon terminate, and, if the same has not
been previously released, the County will cause the Trustee to deliver a
release of the Indenture; provided, however, that the Company shall also remain
obligated to pay or reimburse the County and Trustee for the payment of all
other fees, costs and expenses unaccounted for in any sum paid in accordance
with subsection (4) above and reasonably incurred before or subsequent to
such closing in connection with the Bonds.

 

ARTICLE IX

 

EVENTS OF DEFAULT AND REMEDIES

 

Section 9.1       Events of Default.

 

Any one or more of the following events is an Event
of Default under this Lease, and the term “Event of Default,” wherever used
herein, means any one of the following events, whatever the reason for such default
and whether it shall be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body:

 

(1)         if the Company shall fail to pay or cause to be paid any
Basic Payments due under this Lease;

 

(2)         if an Act of Bankruptcy occurs;

 

(3)         if the Company shall fail to pay any Additional Charges on
or before the date that the payment is due (subject to any right to contest the
amount of Additional Charges set forth in Section 4.3 hereof), and shall
continue to be in arrears for thirty (30) days after mailing of a notice to it
by the County or the Trustee that said Additional Charges have not been
received on the due date;

 

(4)         if the Company shall fail to observe and perform or shall
breach any other covenant, condition or agreement on its part under this Lease
for a period of sixty (60) days after mailing of a notice to it by the County
or the Trustee, specifying such default or breach and requesting that it be
remedied; provided that such default may be waived by the Holders of not less
than 51% of the principal amount of the Outstanding Bonds; and further provided
that if the failure stated in the notice cannot be corrected within sixty (60)
days, the County and Trustee

 

35

 

will not unreasonably withhold their consent to an extension of such
time if corrective action is instituted by the Company with sixty (60) days and
is diligently pursued until such failure is corrected;

 

(5)         if the Company shall be dissolved or liquidated (other than
when a new entity assumes the obligations of the Company under the conditions
permitting such action contained in Section 7.5); or

 

(6)         if any representation or warranty made by the Company
herein, or by an officer or representative of the Company in any document or
certificate furnished the Trustee, the County or any Original Purchaser in
connection herewith or therewith or pursuant hereto or thereto, shall prove at
any time to be, in any material respect, incorrect or misleading as of the date
made.

 

(7)         if an event of default shall have occurred and be continuing
under the Mortgages or the AgStar Loan Agreement.

 

Section 9.2       Remedies.

 

(1)         Whenever any Event of Default specified in Section 9.1(1) or
(2) hereof shall have happened and be subsisting the Trustee shall declare
all the Basic Payments payable for the remainder of the Term of this Lease (an
amount equal to that necessary to pay in full all Outstanding Bonds and the
interest thereon assuming acceleration of the Bonds under the Indenture and to
pay all other indebtedness thereunder plus amount equal to the outstanding
principal amount of the General Obligation Bonds and accrued interest) to be immediately
due and payable whereupon the same shall become immediately due and payable by
the Company;

 

(2)         Whenever any Event of Default shall have happened and be
subsisting, any one or more of the following remedial steps may also be taken
to the extent permitted by law:

 

(A)            the Trustee or the County may take whatever action at law
or in equity may appear necessary or appropriate to collect all sums then due
and thereafter to become due, or to enforce performance and observance of any
obligation, agreement, covenant, representation or warranty of the Company,
under this Lease, or any related instrument; or to otherwise compensate the
County, Trustee or Bondholders for any damages on account of such Event of
Default;

 

(B)            the County (without the prior written consent of the
Trustee if the Trustee is not enforcing the County’s right in a manner to
protect the County or is otherwise taking action that brings adverse
consequences to the County) may take whatever action at law or in equity may
appear necessary or appropriate to enforce its rights of indemnification under Section 7.4
and to collect all sums then due and thereafter to become due to the County
under Section 4.3, 7.4, 9.5, 10.8 and 10.11 of this Lease. Notwithstanding
the foregoing, the County is not precluded from exercising any of its rights
reserved to it as set forth in this Section, even if the Trustee is exercising
the rights of the County hereunder;

 

(C)            the County may enter the Plant and take possession of the
Equipment without termination of this Lease, and use its best efforts to
sublease the Equipment for the account of the Company, holding the Company
liable for the difference in the rent

 

36

 

and other amounts payable by the subleasee and the
rents and other amounts payable by the Company hereunder;

 

(D)            the County may terminate this Lease, exclude the Company
from possession of the Equipment, and use its best efforts to lease the
Equipment to another for the account of the Company, holding the Company liable
for the difference between the rentals received and the Basic Payments which
would have been receivable hereunder;

 

(E)            the County may require the Company to furnish copies of
all books and records of the Company pertaining to the Project; and

 

(F)            the County may exercise any remedies available to a
secured party under the Minnesota Uniform Commercial Code.

 

(G)            the County or Trustee may exercise any remedies available
under the Mortgages, the Guaranty or the Intercreditor Agreement.

 

Section 9.3       Disposition of Funds.

 

Any amounts collected
pursuant to action taken under Section 9.2 (other than sums collected for
the County on account of its rights to indemnification and certain direct
payments to be made to the County under Sections 4.3, 7.4 and 9.5, which shall
be paid directly to the County) shall be applied in accordance with the
provisions of the Indenture.

 

Section 9.4       Nonexclusive Remedies.

 

No remedy herein conferred upon or reserved to the
County or Trustee is intended to be exclusive of any other available remedy or
remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given under this Lease or now or hereafter
existing at law or in equity or by statute. No delay or omission to exercise
any right or power accruing upon any Event of Default shall impair any such
right or power or shall be construed to be a waiver thereof, but any such right
and power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle the County (or the Trustee) to exercise any
remedy reserved to it in this Article, it shall not be necessary to give any
notice, other than such notice as may be herein expressly required or be
required by law.

 

Section 9.5       Attorneys’ Fees and Expenses.

 

If an Event of Default shall
exist under this Lease and the County or the Trustee should employ attorneys or
incur other expenses for the collection of any amounts due hereunder, or the
enforcement of performance of any obligation or agreement on the part of the
Company, the Company will upon demand pay to the County or the Trustee the
reasonable fees of such attorneys and such other expenses so incurred.

 

Section 9.6       Effect of Waiver.

 

In the event any agreement
contained in this Lease should be breached by either party and thereafter
waived by the other party, such waiver shall be limited to the particular
breach so waived and shall not be deemed to waive any other breach hereunder.

 

37

 

Section 9.7       Waiver of Stay or Extension.

 

The Company covenants (to
the extent that it may lawfully do so) that it will not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any appraisement, valuation, stay, or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Lease; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of
any power herein granted to the County or the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.

 

Section 9.8       County May File Proofs of Claim.

 

In case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to the Company or the
property of the Company, the Trustee or the County with the prior consent of
the Trustee shall be entitled and empowered, by intervention in such proceeding
or otherwise,

 

(1)            to file and prove a claim and to file such other papers
or documents as may be necessary or advisable in order to have the claims of
the County and the Trustee (for themselves and on behalf of Bondholders)
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the County and Trustee, their agents and counsel) allowed in
such judicial proceeding, and

 

(2)            to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same.

 

Section 9.9       Restoration of Positions.

 

If the County or the Trustee have instituted any
proceeding to enforce any right or remedy under this Lease, and such proceeding
has been discontinued or abandoned for any reason, or has been determined
adversely to the County or the Trustee then, and in every such case, the
Company and the County shall, subject to any determination in the proceeding,
be restored to the positions they held prior to commencement of such
proceedings, and thereafter all rights and remedies of the County shall
continue as though no such proceeding had been instituted.

 

Section 9.10     Suits to Protect the Project.

 

If the Company shall fail to
do so after thirty (30) days prior written notice from the County or the
Trustee, the County shall have power to institute and to maintain such
proceedings as it may deem expedient to prevent any impairment of the Project
or any portion thereof, by any acts which may be unlawful or in violation of
this Lease, and such suits and proceedings as the County may deem expedient to
protect its interests in the Project or any portion thereof, including power to
institute and maintain proceedings to restrain the enforcement of or compliance
with any governmental enactment, rule or order that may be
unconstitutional or otherwise invalid, if the enforcement of, or compliance
with, such enactment, rule or order would impair or adversely affect the
Project or be prejudicial to the interests of the Bondholders.

 

38

 

Section 9.11     Performance by Third Parties.

 

The County may permit third
parties to perform any and all acts or take such action as may be necessary for
and on behalf of the Company to cure any Event of Default hereunder. The
acceptance by the County or the Trustee of any such performance by third
parties shall not in any way diminish or absolve the Company of primary
liability hereunder.

 

Section 9.12     Exercise of the County’s Remedies by Trustee.

 

Whenever any Event of
Default shall have happened and be subsisting the Trustee may, but except as
otherwise provided in the Indenture shall not be obliged to, exercise any or
all of the rights of the County under this Article IX.

 

ARTICLE X

 

GENERAL

 

Section 10.1     Amounts Remaining in Funds.

 

Except during the continuance of an Event of
Default, any amounts remaining in the Funds created under Article VI of
the Indenture upon expiration or earlier termination of this Lease, as provided
herein, and after adequate provision has been made for payment in full of the
Bonds, in accordance with Article IX of the Indenture, any Additional
Charges payable to the Trustee and the County, including Paying Agent’s fees
and expenses, and all other amounts required to be paid under this Lease and
the Indenture shall forthwith be paid to the Company by the Trustee.

 

Section 10.2     Notices.

 

All notices, certificates or
other communications hereunder shall be in writing (except as otherwise
expressly provided herein) and shall be sufficiently given and shall be deemed
given when mailed by registered or certified mail or commercially expedited
delivery service, with proper address as indicated below. The County, the
Company and the Trustee may, by written notice given by each of them to the
others, designate any address or addresses to which notices, certificates or
other communications to them shall be sent when required as contemplated by
this Lease. Until otherwise provided by the respective parties, all notices,
certificates and communications to each of them shall be addressed as follows:

 

	
  To
  the County:

  	
  Otter
  Tail County

  
	
   

  	
  500
  Fir Avenue West

  
	
   

  	
  Fergus
  Falls, Minnesota 56537

  
	
   

  	
  Attn:
  County Coordinator

  
	
   

  	
   

  
	
  To
  the Company:

  	
  Otter
  Tail Ag Enterprises, LLC

  
	
   

  	
  1220
  North Tower Road

  
	
   

  	
  Fergus
  Falls, Minnesota 56537

  
	
   

  	
  Attn:
  CEO and President

  

 

39

 

	
  With
  a copy to:

  	
  Pemberton,
  Sorlie, Rufer & Kershner, PLLP

  
	
   

  	
  110
  North Mill Street

  
	
   

  	
  P.O. Box
  866

  
	
   

  	
  Fergus
  Falls, MN 56538-0866

  
	
   

  	
  Attn:
  Kent Mattson

  
	
   

  	
   

  
	
  To
  the Trustee:

  	
  U.S.
  Bank National Association

  
	
   

  	
  60
  Livingston Avenue

  
	
   

  	
  St.
  Paul, Minnesota 55107-2292

  

 

Section 10.3     Binding Effect.

 

This Lease shall inure to
the benefit of and shall be binding upon the County and the Company and their
respective successors and assigns.

 

Section 10.4     Severability.

 

In the event any provisions of this Lease shall be
held invalid or unenforceable by any court of competent jurisdiction, such
holding shall not invalidate or render unenforceable any other provision
hereof. If any term or provision of this Lease or the application thereof to
any provision of this Lease or the application thereof to any person or
circumstances shall to any extent be invalid and unenforceable, the remainder
of this Lease, or the application of such term or provision to person or
circumstances other than those as to which it is invalid or unenforceable,
shall not be affected thereby, and each term and provision of this Lease shall
be valid and shall be enforced to the extent permitted by law.

 

Section 10.5     Amendments, Changes, and Modifications.

 

Except as otherwise provided in this Lease or in the
Indenture, subsequent to the issuance of the Bonds and before the lien of the
Indenture is satisfied and discharged in accordance with its terms, this Lease
may not be effectively amended, changed, modified, altered or terminated
without the written consent of the Trustee, Company and County.

 

Section 10.6     Execution Counterparts.

 

This Lease may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.

 

Section 10.7     Required Approvals.

 

Consents and approvals required by this Lease to be
obtained from the Company, the County or the Trustee shall be in writing and
shall not be unreasonably withheld or delayed.

 

Section 10.8     Limitation on County Liability.

 

It is understood and agreed by the Company and the
Holders that no covenant, provision or agreement of the County herein or in the
Bonds or in any other document executed by the County in connection with the
issuance, sale and delivery of the Bonds, or any obligation herein

 

40

 

or therein imposed upon the County or breach thereof, shall give rise
to a pecuniary liability of the County or a charge against its general credit
or taxing powers or shall obligate the County financially in any way except
with respect to this Lease and the application of revenues therefrom and the
proceeds of the Bonds. No failure of the County to comply with any term,
condition, covenant or agreement herein or therein shall subject the County to
liability for any claim for damages, costs or other financial or pecuniary
charges except to the extent that the same can be paid or recovered from this
Lease or revenues therefrom or proceeds of the Bonds. No execution on any
claim, demand, cause of action or judgment shall be levied upon or collected
from the general credit, general funds or taxing powers of the County. In
making the agreements, provisions and covenants set forth herein, the County
has not obligated itself except with respect to this Lease and the application
of revenues hereunder as hereinabove provided. The Bonds constitute special
obligations of the County, payable solely from the revenues pledged to the
payment thereof pursuant to this Lease and the Indenture, and do not now and
shall never constitute an indebtedness or a loan of the credit of the County,
the State of Minnesota or any political subdivision thereof or a charge against
general taxing powers within the meaning of any constitutional or statutory
provision whatsoever. It is further understood and agreed by the Company and
the Holders that the County shall incur no pecuniary liability hereunder and
shall not be liable for any expenses related hereto. If, notwithstanding the
provisions of this Section, the County incurs any expense, or suffers any
losses, claims or damages or incurs any liabilities, the Company will indemnify
and hold harmless the County from the same and will reimburse the County for
any legal or other expenses incurred by the County in relation thereto, and
this covenant to indemnify, hold harmless and reimburse the County shall
survive delivery of and payment for the Bonds.

 

Section 10.9     Survivorship of Obligations.

 

All obligations of the Company under Sections 7.4,
7.7, 7.8, 10.8 and 10.11 hereof shall survive payment of the Bonds or earlier
termination of this Lease under Section 7.8, 8.2 or 8.4 hereof.

 

Section 10.10   Administrative Fees, Attorneys’ Fees and Costs.

 

The Company shall reimburse the County, upon demand,
for all costs and expenses, including without limitation attorneys’ fees, paid
or incurred by the County in connection with (i) the discussion,
negotiation, preparation, approval, execution and delivery of the Bonds, the
Indenture, this Lease, and the documents and instruments related hereto or
thereto; (ii) any amendments or modifications to any of the foregoing
documents, instruments or agreements and the discussion, negotiation,
preparation, approval, execution and delivery of any and all documents
necessary or desirable to effect such amendments or modifications; (iii) the
servicing and administration of the loan during the term hereof or thereafter;
and (iv) the enforcement by the County during the term hereof or
thereafter of any of the rights or remedies of the County hereunder or under
the foregoing documents, or any document, instrument or agreement related
hereto or thereto, including, without limitation, costs and expenses of
collection in the Event of Default, whether or not suit is filed with respect
thereto.

 

Section l0.11    Release.

 

The Company hereby
acknowledges and agrees that the County shall not be liable to the Company
except for failure to perform its obligations hereunder, or the Indenture, or
the

 

41

 

documents
and transactions related hereto or thereto or contemplated hereby or thereby,
and hereby releases and discharges the County from any liability, for any and
all losses, costs, expenses (including attorneys’ fees), damages, judgments,
claims and causes of action, paid, incurred or sustained by the Company as a
result of or relating to any action, or failure or refusal to act, on the part
of the County or any other party with respect to the Bonds, the Indenture, this
Lease, or the documents and transactions related hereto or thereto or
contemplated hereby or thereby, including, without limitation, the exercise by
the Trustee or any third party of any of its rights or remedies pursuant to any
of such documents.

 

[The balance of this page intentionally
left blank.]

 

42

 

IN WITNESS WHEREOF, the County and the Company have
caused this Lease to be executed by their duly authorized officers.

 

	
   

  	
  OTTER
  TAIL COUNTY, MINNESOTA

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  By

  	
   /s/ Dennis Mosher

  	
   

  
	
   

  	
   

  	
  Its
  Board Chair

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
  By

  	
   /s/ Larry Krohn

  	
   

  
	
   

  	
   

  	
  Its
  County Coordinator

  
						

 

 

Lease
Agreement dated as of May 1, 2007, between Otter Tail County, Minnesota
and Otter Tail Ag Enterprises, LLC

 

43

 

	
   

  	
  OTTER
  TAIL AG ENTERPRISES, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Jerry Larson 

  	
   

  
	
   

  	
   

  	
  Jerry
  Larson 

  
	
   

  	
   

  	
  Its
  President

  

 

 

Lease
Agreement dated as of May 1, 2007, between Otter Tail County, Minnesota
and Otter Tail Ag Enterprises, LLC

 

44

 

EXHIBIT A

 

Description of
Equipment

 

	
   

  	
   

  	
  PERCENTAGE

  	
   

  
	
   

  	
   

  	
  ALLOCABLE
  TO SOLID

  	
   

  
	
  EQUIPMENT DESCRIPTION

  	
   

  	
  WASTE
  FACILITIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EVAPORATOR EQUIPMENT

  	
   

  	
   

  	
   

  
	
  Evaporator
  Pumps

  	
   

  	
   

  	
   

  
	
  PC-4501 1st Effect Evap. Pump #1

  	
   

  	
  100

  	
  %

  
	
  PC-4502 2st Effect Evap. Pump #1

  	
   

  	
  100

  	
  %

  
	
  PC-4503 3st Effect Evap. Pump #1

  	
   

  	
  100

  	
  %

  
	
  PC-4504 Evaporator Condensate Pump #1

  	
   

  	
  100

  	
  %

  
	
  PC04505 Evaporator Vacuum Eductor Pump #1

  	
   

  	
  100

  	
  %

  
	
  PC-4506 Syrup Transfer Pump #1

  	
   

  	
  100

  	
  %

  
	
  PC-4507 1st Effect Forward Feed Pump #1

  	
   

  	
  100

  	
  %

  
	
  PC-5101 Thin Stillage Transfer Pump

  	
   

  	
  100

  	
  %

  
	
  PC-5102 Whole Stillage Pump

  	
   

  	
  100

  	
  %

  
	
  PC-5103 Thin Stillage Pump

  	
   

  	
  100

  	
  %

  
	
  PC-5104 Syrup Pump #1

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Evaporator
  Heat Exchangers

  	
   

  	
   

  	
   

  
	
  E-4505 Evaporator Vacuum Cooler #1

  	
   

  	
  100

  	
  %

  
	
  E-4501 1st Effect Evaporator #1

  	
   

  	
  100

  	
  %

  
	
  E-4502 2nd Effect Evaporator #1

  	
   

  	
  100

  	
  %

  
	
  E-4503 3rd Effect Evaporator #1

  	
   

  	
  100

  	
  %

  
	
  E-4504 Evaporator Condenser #1

  	
   

  	
  100

  	
  %

  
	
  E-7601 Process Condensate Heater

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Evaporator
  Tanks

  	
   

  	
   

  	
   

  
	
  TK-5102 Whole Stillage Collection Tank

  	
   

  	
  100

  	
  %

  
	
  TK-5103 Thin Stillage Tank

  	
   

  	
  100

  	
  %

  
	
  TK-5104 Syurp Tank

  	
   

  	
  100

  	
  %

  
	
  TK-7601 Process Condensate Tank

  	
   

  	
  100

  	
  %

  
	
  VS-4503 3rd Effect Condensate Separator #1

  	
   

  	
  100

  	
  %

  
	
  VS-4504 Evap. Condensate Receiver #1

  	
   

  	
  100

  	
  %

  
	
  VS-4505 Evaporator Vacuum Receiver #1

  	
   

  	
  100

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Evaporator
  Misc

  	
   

  	
   

  	
   

  
	
  VE-4505 Evaporator Vacuum Eductor

  	
   

  	
  100

  	
  %

  
	
  ST-4506 Evaporator Condensate Strainer #1

  	
   

  	
  100

  	
  %

  
	
  DD&E Building

  	
   

  	
  29

  	
  %

  
	
  Mechanical Piping Material

  	
   

  	
  30

  	
  %

  
	
  Michanical Piping Labor

  	
   

  	
  30

  	
  %

  
	
  Mechanical Equipment Material

  	
   

  	
  30

  	
  %

  
	
  Mechanical Equipment Install Labor

  	
   

  	
  30

  	
  %

  
	
  Instrumentation Install Labor

  	
   

  	
  30

  	
  %

  
	
  Instrumentation Equipment

  	
   

  	
  13

  	
  %

  
	
  Insulation

  	
   

  	
  13

  	
  %

  

 

A-1

 

	
  CENTRIFUGE

  	
   

  	
   

  	
   

  
	
  CF-5101
  Centrifuge #1

  	
   

  	
  100

  	
  %

  
	
  CF-5102
  Centrifuge #2

  	
   

  	
  100

  	
  %

  
	
  CF-5103
  Centrifuge #3

  	
   

  	
  100

  	
  %

  
	
  CF-5104
  Centrifuge #4

  	
   

  	
  100

  	
  %

  
	
  TK-5101 Thin
  Spillage Collection Tank

  	
   

  	
  100

  	
  %

  
	
  Y-5101 Wetcake
  Feed Conveyor #1

  	
   

  	
  100

  	
  %

  
	
  Y-5201 Wetcake
  Dump Conveyor #1

  	
   

  	
  100

  	
  %

  
	
  Z-5101
  Centrifuge Cooler

  	
   

  	
  100

  	
  %

  
	
  BL-5101
  Centrifuge Blower

  	
   

  	
  100

  	
  %

  
	
  Instrumentation
  Equipment

  	
   

  	
  5

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  DRYER
  and THERMAL OXIDIZER

  	
   

  	
   

  	
   

  
	
  DR-5201 Dryer
  Package #1

  	
   

  	
  83

  	
  %

  
	
  Z-5201 Thermal
  Oxidezer (RTO)#1

  	
   

  	
  83

  	
  %

  
	
  Y-5202 DDGS
  Loadout Conveyor #1

  	
   

  	
  83

  	
  %

  
	
  Y-5203 50% DDGS
  Discharge Conveyor

  	
   

  	
  83

  	
  %

  
	
  Y-5301 DDGS
  Transfer Conveyor #1

  	
   

  	
  83

  	
  %

  
	
  M-5201
  Pre-Mixing Screw Conveyor #1

  	
   

  	
  83

  	
  %

  
	
  M-5211
  Pre-Mixing Screw Conveyor #2

  	
   

  	
  83

  	
  %

  
	
  DDGS Loading
  System

  	
   

  	
  83

  	
  %

  
	
  DDGS Building

  	
   

  	
  83

  	
  %

  
	
  H,V & A/C

  	
   

  	
  83

  	
  %

  
	
  DDGS
  Handling & Load out

  	
   

  	
  83

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  COOLING
  TOWERS (Cooling Water for Evaporation)

  	
   

  	
   

  	
   

  
	
  CT-7101 Cooling
  Tower Package

  	
   

  	
  29

  	
  %

  
	
  PC-7101A Cooling
  Water Pump #1

  	
   

  	
  29

  	
  %

  
	
  PC-7101B Cooling
  Water Pump #2

  	
   

  	
  29

  	
  %

  
	
  PC-7101C Cooling
  Water Pump #3

  	
   

  	
  29

  	
  %

  
	
  PC-7101D Cooling
  Water Pump #4

  	
   

  	
  29

  	
  %

  
	
  PC-7101E Cooling
  Water Pump #5

  	
   

  	
  29

  	
  %

  
	
  Cooling Water
  Piping Material

  	
   

  	
  29

  	
  %

  
	
  Cooling Water
  Piping Labor

  	
   

  	
  29

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  BOILERS
  (Steam for Evaporation)

  	
   

  	
   

  	
   

  
	
  Z-7201A Boiler
  Package

  	
   

  	
  32

  	
  %

  
	
  Z-7201B Boiler
  Package

  	
   

  	
  32

  	
  %

  
	
  Z-7302 Boiler
  Water Treatment

  	
   

  	
  32

  	
  %

  
	
  Z-7202 Deaerator

  	
   

  	
  32

  	
  %

  
	
  Z-7203 Blowdown
  Separator

  	
   

  	
  32

  	
  %

  
	
  Boiler Building

  	
   

  	
  32

  	
  %

  
	
  Mechanical
  Piping Material

  	
   

  	
  32

  	
  %

  
	
  Mechanical
  Piping /Boiler Install Labor

  	
   

  	
  32

  	
  %

  
	
  Boiler
  Instrumentation Labor

  	
   

  	
  32

  	
  %

  
	
  H,V & A/C

  	
   

  	
  32

  	
  %

  

 

A-2

 

EXHIBIT B

 

Location of the Plant

 

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 El/2 of Wl/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.

 

B-1

 

24096 170th Avenue

Fergus Falls, Minnesota

 

B-2

 

EXHIBIT C

 

Description of Project

 

The acquisition, purchase and installation of solid
waste disposal facilities (including centrifuge, dryer, evaporator and related
equipment) in connection with construction of a 55 million gallon nameplate
capacity ethanol production facility, to be owned by the County and operated by
the Company, including the Equipment and site improvements necessary or
desirable for such purposes.

 

C-1Exhibit 10.34

 

BILL OF
SALE

 

This Bill of Sale dated as
of May 1, 2007 from OTTER TAIL AG ENTERPRISES, LLC, a Minnesota limited
liability company (the “Company”) to OTTER TAIL COUNTY, Minnesota, a political
subdivision of the State of Minnesota (the “County”).

 

RECITALS

 

A.           The Company desires to transfer its interest in and County
desires to acquire the Assets (as defined below) for and in consideration of (i) the
financing provided by of the County’s Subordinate Exempt Facility Revenue
Bonds, Series 2007A (Otter Tail Ag Enterprises, LLC Ethanol Plant Project)
and its General Obligation Tax Abatement Bonds, Series 2007B and Series 2007C,
(ii) the execution and delivery of that certain Lease Agreement, dated as
of May 1, 2007 (the “Lease Agreement”), between the County and the
Company, and (iii) other good and valuable consideration.

 

B.           All capitalized terms used herein and not otherwise
defined have the meanings ascribed to them in the Lease Agreement.

 

C.           This
Bill of Sale conveys an after-acquired interest.

 

AGREEMENT

 

NOW, THEREFORE, in
consideration of the premises and for other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto agree as follows:

 

SECTION 1: SALE OF ASSETS

 

Company does hereby BARGAIN, SELL ASSIGN AND
TRANSFER unto the County, its successors and assigns, all its estate, right,
title and interest in and to the buildings and all materials, supplies,
equipment, apparatus and other items of personal property now owned or
hereafter acquired by the Company which are described in Exhibit A, and
all replacements and substitutions thereof (the “Assets”). The Assets are
located or to be located on the Land legally described in Exhibit B.

 

TO HAVE AND TO HOLD all the
said property described herein unto the County, its successors and assigns, to
its own use and benefit forever.

 

SECTION 2: TITLE

 

Company agrees that it is
the owner of the Assets, that the Assets are free from all encumbrances (except
the Lease and Permitted Encumbrances as defined in the Lease Agreement) and
that the Company has the right to sell and convey the Company’s interest in the
Assets to the County. The Company agrees to warrant and defend the sale of the
Assets to the County against any and all person(s) who claim title to any
of the Assets, subject only to the Lease and Permitted Encumbrances. This Bill
of Sale shall bind the Company and benefit the County and its successors and
assigns.

 

 

SECTION 3: LESSOR LIENS

 

The Company warrants that it
is conveying title to the Assets to the County free and clear of all liens
except those permitted under the terms of the Lease Agreement.

 

SECTION 4: NO WARRANTIES

 

The foregoing sale, transfer, conveyance and
assignment of the Assets is made “as is,” where is, with all faults, without
any warranties, express or implied, including but not limited to warranties of
fitness, merchantability or fitness for a particular purpose, and without any
recourse to the Company for any reason whatsoever, except as provided in
Sections 2 and 3 hereof.

 

SECTION 5: ASSIGNMENT OF
WARRANTIES

 

The Company hereby bargains,
sells, assigns, transfers and sets over to and for the benefit of the County
all right, title and interest of the Company, if any, in, to and under any and
all contracts to which the Company is a party relating to the procurement,
design, manufacture, construction, installation or testing of the Assets (the “Facility
Contracts”) including, without limitation, all claims for damages arising under
the representations, indemnities, warranties, guarantees and agreements made to
or for the benefit of the Company by the parties (other than the Company) to
the Facility Contracts (other than the Company, the “Facility Contractors”),
and the right to compel performance of the terms of the Facility Contracts. The
Company agrees at the request of the County and at the County’s expense, to use
commercially reasonable efforts to preserve and protect the County’s rights
under any warranty, covenant or representation made by each Facility Contractor
with respect to the Assets.

 

SECTION 6: MISCELLANEOUS

 

This Bill of Sale shall be governed by and
construed and interpreted in accordance with the laws of the State of
Minnesota. The terms and provisions of the Bill of Sale shall be binding upon
and inure to the benefit of the respective parties hereto, and their respective
successors and assigns.

 

This Bill of Sale may be
executed in multiple counterparts, each of which shall constitute an original
and all of which together shall constitute one and the same instrument.

 

2

 

IN WITNESS WHEREOF, the
County and the Company have caused this Bill of Sale to be executed by their
duly authorized officers.

 

	
   

  	
  OTTER
  TAIL COUNTY, MINNESOTA

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  Dennis Mosher

  	
   

  
	
   

  	
  Its Board Chair

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
  Larry Krohn

  	
   

  
	
   

  	
  Its County/Coordinator

  

 

 

Bill
of Sale dated as of May 1, 2007, between Otter Tail County, Minnesota and
Otter Tail Ag Enterprises, LLC

 

3

 

	
   

  	
  OTTER
  TAIL AG ENTERPRISES, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Jerry Larson

  	
   

  
	
   

  	
   

  	
  Jerry
  Larson

  
	
   

  	
   

  	
  Its
  President

  
					

 

 

Bill of Sale dated as of May 1, 2007, between Otter Tail County,
Minnesota and Otter Tail Ag Enterprises, LLC

 

4

 

EXHIBIT
A

 

Description
of Equipment

 

EQUIPMENT DESCRIPTION

 

EVAPORATOR
EQUIPMENT

Evaporator
Pumps

PC-4501 1st Effect Evap.
Pump #1

PC-4502 2st Effect Evap.
Pump #1

PC-4503 3st Effect Evap.
Pump #1

PC-4504 Evaporator
Condensate Pump #1

PC04505 Evaporator Vacuum
Eductor Pump #1

PC-4506 Syrup Transfer
Pump #1

PC-4507 1st Effect
Forward Feed Pump #1

PC-5101 Thin Stillage
Transfer Pump

PC-5102 Whole Stillage
Pump

PC-5103 Thin Stillage
Pump

PC-5104 Syrup Pump #1

 

Evaporator
Heat Exchangers

E-4505 Evaporator Vacuum
Cooler #1

E-4501 1st Effect
Evaporator #1

E-4502 2nd Effect
Evaporator #1

E-4503 3rd Effect
Evaporator #1

E-4504 Evaporator
Condenser #1

E-7601 Process Condensate
Heater

 

Evaporator
Tanks

TK-5102 Whole Stillage
Collection Tank

TK-5103 Thin Stillage
Tank

TK-5104 Syrup Tank

TK-7601 Process Condensate
Tank

VS-4503 3rd Effect
Condensate Separator #1

VS-4504 Evaporator
Condensate Receiver #1

VS-4505 Evaporator Vacuum
Receiver #1

 

Evaporator
Misc

VE-4505 Evaporator Vacuum
Eductor

ST-4506 Evaporator
Condensate Strainer #1

DD&E Building

Mechanical Piping
Material

Mechanical Piping Labor

Mechanical Equipment
Material

Mechanical Equipment
Install Labor

Instrumentation Install
Labor

Instrumentation Equipment

Insulation

 

A-1

 

CENTRIFUGE

CF-5101 Centrifuge #1

CF-5102 Centrifuge #2

CF-5103 Centrifuge #3

CF-5104 Centrifuge #4

TK-5101 Thin Spillage
Collection Tank

Y-5101 Wetcake Feed
Conveyor #1

Y-5201 Wetcake Dump
Conveyor #1

Z-5101 Centrifuge Cooler

BL-5101 Centrifuge Blower

Instrumentation Equipment

 

DRYER
and THERMAL OXIDIZER

DR-5201 Dryer Package #1

Z-5201 Thermal Oxidezer
(RTO) #1

Y-5202 DDGS Loadout
Conveyor #1

Y-5203 50% DDGS Discharge
Conveyor

Y-5301 DDGS Transfer
Conveyor #1

M-5201 Pre-Mixing Screw
Conveyor #1

M-5211 Pre-Mixing Screw
Conveyor #2

DDGS Loading System

DDGS Building

H,V & A/C

DDGS Handling &
Load out

 

CT-7101 Cooling Tower
Package

PC-7101A Cooling Water
Pump #1

PC-7101B Cooling Water
Pump #2

PC-7101C Cooling Water
Pump #3

PC-7101D Cooling Water
Pump #4

PC-7101E Cooling Water
Pump #5

Cooling Water Piping
Material

Cooling Water Piping
Labor

 

BOILERS
(Steam for Evaporation)

Z-7201A Boiler Package

Z-7201B Boiler Package

Z-7302 Boiler Water
Treatment

Z-7202 Deaerator

Z-7203 Blowdown Separator

Boiler Building

Mechanical Piping
Material

Mechanical Piping /Boiler
Install Labor

Boiler Instrumentation
Labor

H,V & A/C

 

A-2

 

EXHIBIT B

 

Location of the Plant

 

All that part of the Wl/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 El/2 of Wl/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.

 

B-3

 

24096
170th Avenue

Fergus
Falls, Minnesota

 

B-4

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