Exhibit 10.4
This document prepared by
and
after recording return to:
Scott
Perrenoud
CADWELL
SANFORD DEII3BRT & GARRY, LLP
200 East 10th Street, Suite
200
Sioux Falls, South Dakota 57104
Telephone: 605-336-0828
MORTGAGE, SECURITY
AGREEMENT,
ASSIGNMENT OF LEASES AND
RENTS
AND FIXTURE FINANCING
STATEMENT
(CONSTRUCTION
MORTGAGE)
This Mortgage, Security Agreement, Assignment
of Leases and Rents and Fixture Financing Statement (this
“Mortgage”) is made as of September 21, 2007, by
Northern Lights Ethanol, LLC, a South Dakota limited liability
company (“Borrower”), having its principal offices at
Big Stone City, South Dakota, in favor of U.S. Bank National
Association, a national banking association (“Lender”),
having its principal offices at 141 North Main Avenue, Sioux Falls,
South Dakota.
R E
C I T A L S:
A.
Lender has lent, or conditionally agreed to lend, to Borrower the
principal sum of Four Million Three Hundred Thousand
and no/100 Dollars ($4,300,000.00) (the “2007 Term
Loan”), to be repaid with interest thereon, as evidenced by
that Promissory Note in such principal amount dated the same date
as this Mortgage (the “Note”, which term shall include
any amendment, modification, supplement, extension, renewal,
replacement or restatement thereof), which 2007 Term Loan is the
subject of a Amended and Restated Loan Agreement between Borrower
and Lender dated as of August 28, 2006 (the “Loan
Agreement”, which term shall include any amendment,
modification, supplement, extension, renewal, replacement or
restatement thereof). The Note, the Loan Agreement and any other
Loan Document (as defined in the Loan Agreement) each dated the
same date as this Mortgage, are hereby incorporated by reference,
and, together with this Mortgage, as any of the same may be
amended, modified, supplemented, extended, renewed, replaced or
restated, are sometimes collectively referred to herein as the
“Loan Documents.” The proceeds of the 2007 Term Loan
are to be used to finance construction of grain bins upon the Land,
as defined below.
B.
The obligations secured by this Mortgage (the
“Obligations”) are as follows:
(i)
the principal amount of $4,300,000.00 or so much thereof as may be
advanced by Lender under the Note and pursuant to the
Loan Agreement; plus
(ii)
interest on the amount advanced and unrepaid, at the interest rate
or rates provided in the Note; plus
(iii)
all other amounts payable by Borrower and all other agreements of
Borrower under the Loan Documents as the same now
exist or may hereafter be amended;
(iv)
all of Borrower’s other obligations of performance under the
Loan Agreement and the other Loan Documents;
(v)
all Borrower’s other obligations of payment and performance
secured by the Prior Mortgages (as defined below);
and
(vi)
all debts, liabilities and obligations of the Borrower to Lender
under any interest rate swap, cap, collar or floor
transaction entered into under any ISDA Master Agreement or other
agreement evidencing an interest rate swap, cap, collar or floor
transaction arrangement between Borrower and Lender, whether
presently or in the future existing, including any Schedule and
Confirmation entered into thereunder, all as amended, modified,
supplemented or amended from time-to-time.
C.
The Obligations shall mature on or before July 31, 2014 (the
“Maturity Date”).
D.
The maximum principal indebtedness secured hereby is Four Million
Three Hundred Thousand and no/l00 Dollars
($4,300,000.00), plus the amount of that Obligation described in
Recital B(vi), plus amounts which may be advanced by Lender in
protection of the Mortgaged Property or this Mortgage.
E.
Borrower holds a leasehold interest in land described in Exhibit A
under the terms and conditions of a Big Stone Plant
Property Lease with Big Stone-Grant Development and Transportation,
L.L.C., dated April 18, 2001 (the “Big Stone Plant Property
Lease”), which Lease has been filed for record in the Office
of the Register of Deeds, Grant County, South Dakota, on September
14, 2001, and recorded in Book 223 of Misc. on page 704, as
Document Number 199861.
F.
Borrower holds ingress and egress easements rights on certain land
and spur lines identified in Exhibit A under the
terms and conditions of an access and rail agreement dated April
18, 2001, granted by Otter Tail Corporation, f/k/a Otter Tail Power
Company; Montana- Dakota Utilities Co., a division of MDU Resources
Group, Inc., f/k/a Montana-Dakota Utilities Co.; and Northwestern
Public Service, a division of NorthWestern Corporation, f/k/a
Northwestern Public Service Company (collectively the “Big
Stone Plant Co-Owners”) (the “Access and Rail
Agreement”).
G.
(i)
Borrower earlier granted Lender a Mortgage, Security Agreement,
Assignment of Leases and Rents and Fixture Financing
Statement evidencing a loan in the principal amount of Thirty One
Million One Hundred Thousand Dollars ($31,100,000.00) from Lender
to Borrower, filed for record with the Register of Deeds of Grant
County, South Dakota, on September 14, 2001, at 1:25 P.M. and
recorded in Book 260 at Page 178.
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(ii)
Borrower earlier granted Lender an additional Mortgage-Collateral
Real Estate Mortgage; Security Agreement, Fixture
Filing and Assignment of Rents, as amended, filed for record with
the Register of Deeds of Grant County, South Dakota, on January 9,
2003, at 1:10 P.M., and recorded in Book 278 at Page 953.
(iii)
Mortgagor earlier granted Lender a Mortgage, Security Agreement,
Assignment of Leases and Rents and Fixture Financing Statement
(Construction Mortgage) evidencing a loan in the principal amount
of Thirty Three Million Dollars ($33,000,000.00) from Lender to
Mortgagor filed for record with the Register of Deeds, Grant
County, South Dakota, on August 31, 2006, at 4:00 P.M. and recorded
in Book 332 at Page 591, (the $31,100,000.00 Mortgage referenced
above, the $8,000,000.00 Collateral Real Estate Mortgage, and the
$33,000,000.00 Construction Mortgage are sometimes referred to
herein as “the Prior Mortgages”).
(iv)
Simultaneously with this Mortgage, Borrower granted Lender a
Mortgage - Collateral Real Estate Mortgage; Security
Agreement, Fixture Filing and Assignment of Rents expected to be
recorded approximately simultaneously with this Mortgage.
All the above
references to Mortgages are sometimes referred to herein as the
“Prior Mortgages”.
NOW, THEREFORE, Borrower, in consideration of
Lender making the 2007 Term Loan, and to secure the
2007 Term Loan and payment and performance of the Obligations,
hereby grants, bargains, sells, conveys and mortgages to Lender,
its successors and assigns, forever, with power of sale, and grants
to Lender, its successors and assigns, a security interest in, the
following, all of which is called the “Mortgaged
Property”:
A. LAND AND
IMPROVEMENTS
Borrower’s leasehold interest in and to
the land described in the Big Stone Plant Property Lease and the
Borrower’s easement rights and other rights in and to the
land described in the Access and Rail Agreement and all
hereditaments, easements and appurtenances thereto, whether now
existing or hereafter acquired by Borrower (collectively the
“Land”), and all improvements and structures thereon,
whether presently or in the future placed or located thereon (the
“Improvements”); and
B. FIXTURES AND PERSONAL
PROPERTY
All
fixtures (the “Fixtures”), and all machinery, equipment
and personal property (collectively the “Personal
Property”) now or hereafter located on, in or under the Land
and the Improvements, or usable in connection with the Land or the
Improvements, and which are owned by Borrower or in which Borrower
has an interest, including any construction mid building materials
stored on and to be included in the Improvements, plus any repairs,
replacements and betterments to any of the foregoing and the
proceeds and products thereof; and
C. LEASES AND
RENTS
All
rights of Borrower with respect to tenants or occupants now or
hereafter occupying any part of the Land or the Improvements, if
any, including all leases and licenses and rights in
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connection
therewith, whether oral or written (collectively the
“Leases”), and all rents, income, both from services
and occupation, royalties, revenues and payments, including
prepayments and security deposits (collectively the
“Rents”), which are now or hereafter due or to be paid
in connection with the Land, the Improvements, the Fixtures or the
Personal Property; and
D. GENERAL
INTANGIBLES
All
general intangibles of Borrower which relate to any of the Land,
the Improvements, the Fixtures, the Personal Property, the Leases
or the Rents, including proceeds of insurance and condemnation or
conveyance of the Land and the Improvements, accounts, trade names,
contract rights, accounts receivable and bank accounts;
and
E. AFTER ACQUIRED PROPERTY AND
PROCEEDS
All
after acquired property similar to the property herein described
and conveyed which may be subsequently acquired by Borrower and
used in connection with the Land; the Improvements, the Fixtures,
the Personal Property and other property; and all cash and non-cash
proceeds and products of all of the foregoing property.
TO
HAVE AND TO HOLD the same, and all estate therein, together with
all the rights, privileges and appurtenances thereunto belonging,
to the use and benefit of Lender, its successors and assigns,
forever.
PROVIDED NEVERTHELESS, should Borrower pay and
perform all the Obligations, then these presents will be of no
further force and effect, and this Mortgage shall be satisfied by
Lender, at the expense of Borrower.
This Mortgage also constitutes a security
agreement within the meaning of the Uniform Commercial Code as in
effect in the State of South Dakota (the “UCC”), with
respect to all property described herein as to which a security
interest may be granted and/or perfected pursuant to the UCC, and
is intended to afford Lender, to the fullest extent allowed by law,
the rights and remedies of a secured party under the
UCC.
BORROWER FURTHER agrees as follows:
ARTICLE I
AGREEMENTS
Section 1.1 Performance of Obligations;
Incorporation by Reference . Borrower shall pay and
perform the Obligations. Time is of the essence hereof, All of the
covenants, obligations, agreements, warranties and representations
of Borrower contained in the Loan Agreement and the other Loan
Documents and all of the terms and provisions thereof; are hereby
incorporated herein and made a part hereof by reference as if fully
set forth herein.
Section 1.2 Further Assurances.
If Lender requests, Borrower shall sign and deliver and cause
to be recorded as Lender shall direct any further mortgages,
instruments of further assurance,
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certificates
and other documents as Lender reasonably may consider necessary or
desirable in order to perfect; continue and preserve the
Obligations and Lender’s rights, title, estate, liens and
interests under the Loan Documents. Borrower further agrees to pay
to Lender, upon demand, all costs and expenses incurred by Lender
in connection with the preparation, execution, recording, filing
and refining of any such documents, including attorneys’ fees
and title insurance costs.
Section 1.3 Sale, Transfer,
Encumbrance. If Borrower sells, conveys, transfers or
otherwise disposes of, or encumbers, any part of its interest in
the Mortgaged Property, whether voluntarily, involuntarily or by
operation of law, without the prior written consent of Lender,
Lender shall have the option to declare the Obligations immediately
due and payable without notice. Included within the foregoing
actions requiring prior written consent of Lender are; (a) sale by
deed or contract for deed; (b) mortgaging or granting a lien on the
Mortgaged Property; (c) a transfer which changes the persons in
control of Borrower or which transfers more than 25% of the
beneficial interest in Borrower, except for transfers to Affiliates
as defined in the Loan Agreement; and (d) Borrower’s entry
into a Lease, Borrower shall give notice of any proposed action to
Lender at least thirty (30) days prior to taking such action.
Borrower shall pay all costs and expenses incurred by Lender in
evaluating any such action. Lender may condition such consent upon
modification of the Loan Documents or payment of fees. No such
action shall relieve Borrower from liability for the Obligations.
The consent by Lender to any action shall not constitute a waiver
of the necessity of such consent to any subsequent
action.
Section 1.4 Insurance.
Borrower shall obtain, maintain and keep in full force and
effect (and upon request of Lender shall furnish to Lender copies
of) policies of insurance as described in, and meeting the
requirements set forth in, Exhibit B attached hereto, and upon
request of Lender shall furnish to Lender proof of payment of all
premiums for such insurance. At least ten (10) days prior to the
termination of any such coverage, Borrower shall provide Lender
with evidence satisfactory to Lender that such coverage will be
renewed or replaced upon termination with insurance that compiles
with the provisions of this Section. Borrower, at its sole cost and
expense, from time to time when Lender shall so request, will
provide Lender with evidence, in a form acceptable to Lender, of
the full insurable replacement cost of the Mortgaged Property. All
property (including boiler and machinery) and. liability insurance
policies maintained by Borrower pursuant to this Section shall (i)
include effective waivers by the insurer of all claims for
insurance premiums against. Lender, and (ii) provide that any
losses shall be payable notwithstanding (a) any act of negligence
by Borrower or Lender, (b) any foreclosure or other proceedings or
notice of foreclosure sale relating to the Mortgaged Property, or
(c) any release from liability or waiver of subrogation rights
granted by the insured. All insurance policies maintained by
Borrower pursuant to the foregoing provisions shall respond on a
primary basis relative to any other insurance carried by Lender in
the event of loss. Insurance terms not otherwise defined herein
shall be interpreted consistent with insurance industry
usage.
Section 1.5 Taxes, Liens and
Claims . Utilities. Except as otherwise provided in the
Loan Agreement, Borrower, at least (5) days before any penalty
attaches thereto, shall pay and discharge, or cause to be paid -and
discharged, all taxes, assessments and governmental charges and
levies (collectively “Impositions”) imposed upon or
against the Mortgaged Property or the Rents, or upon or against the
Obligations, or upon or against the interest of Lender in the
Mortgaged Property or the Obligations, except Impositions measured
by the income of Lender. Borrower shall provide evidence of such
payment at Lender’s request; Except as otherwise provided in
the Loan Agreement,
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Borrower shall
keep the Mortgaged Property free and clear of all liens,
encumbrances, easements, covenants, conditions, restrictions and
reservations (collectively “Liens”) except those of the
Prior Mortgages and those listed on Exhibit A attached hereto (the
“Permitted Encumbrances”). Borrower shall pay or cause
to be paid when due all charges or fees for utilities and services
supplied to-the Mortgaged Property. Notwithstanding anything to the
contrary contained in this Section, Borrower shall not be required
to pay or discharge any Imposition or Lien so long as Borrower
shall in good faith, and after giving notice to Lender, contest the
same by appropriate legal proceedings. If Borrower contests any
Imposition or Lien against the Mortgaged Property, Borrower shall
provide such security to Lender as Lender shall reasonably require
against loss or impairment of Borrower’s ownership of or
Lender’s lien on the Mortgaged Property and shall in any
event pay such Imposition or Lien before loss or impairment
occurs.
Section 1.6 Escrow Payments.
If requested by Lender, Borrower shall deposit with Lender
monthly on the same date as payments are due under the Note the
amount reasonably estimated by Lender to be necessary to enable
Lender to pay, at least five (5) days before they become due, all
Impositions against the Mortgaged Property and the premiums upon
all insurance required hereby to be maintained with respect to the
Mortgaged Property. All funds so deposited shall secure the
Obligations. Such deposits shall be held by Lender, or its nominee,
in a non-interest bearing account and may be commingled with other
funds. Such deposits shall be used to pay such Impositions and
insurance premiums when due. Any excess sums so deposited shall be
retained by Lender and shall be applied to pay said items in the
future, unless the Obligations have been paid and performed in
full, in which ease all excess sums so paid shall be refunded to
Borrower. Upon the occurrence of an Event of Default, Lender may
apply any funds in said account against the Obligations in such
order as Lender may determine.
Section 1.7 Maintenance and Repair,
Compliance with Laws . Borrower shall cause the Mortgaged
Property to be operated, maintained and repaired in safe and good
repair, working order and condition, reasonable wear and tear
excepted; shall not commit or permit waste thereof; except as
provided in any Loan Document, shall not remove, demolish or
substantially alter the design or structural character of any
Improvements without the prior written consent of Lender; shall
complete or cause to be completed forthwith any Improvements which
are now or may hereafter be under construction upon the Land; shall
comply or cause compliance with all laws, statutes, ordinances and
codes, and governmental rules, regulations and requirements,
applicable to the Mortgaged Property or the manner of using or
operating the same; and with any covenants, conditions,
restrictions and reservations affecting the title to the Mortgaged
Property, and with the terms of all insurance policies relating to
the Mortgaged Property; and shall obtain and maintain in full force
and effect all consents, permits and licenses necessary for the use
and operation of the Mortgaged Property.
Section 1.8 Leases Under which Borrower is
Landlord.
(a)
Borrower shall not enter into, modify, amend, cancel or terminate
any Leases without Lender’s prior written
consent, and shall furnish to Lender, upon execution, a complete
and fully executed copy of each of the Leases.
(b)
Borrower shall, at its cost and expense, perform each obligation to
be performed by Borrower under each of the Leases;
not borrow against, pledge or further assign any rents or other
payments due thereunder; not permit the prepayment of any rents or
other payments due for more
6
than thirty
(30) days in advance; and not permit any Tenant to assign its Lease
or sublet the premises covered by its Lease, unless required to do
so by the terms thereof and then only if such assignment does not
work to relieve the Tenant of any liability for performance of its
obligations thereunder.
(c)
If any Tenant shall default under its Lease, Borrower shall, in the
ordinary course of business, exercise sound business
judgment with respect to such default, but may discount,
compromise, forgive or waive claims or discharge the Tenant from
its obligations under the Lease or terminate or accept a surrender
of the Lease.
(d)
If Borrower fails to perform any obligations of Borrower under any
Leases or if Lender becomes aware of or is notified
by any Tenant of a failure on the part of Borrower to so perform,
Lender may, but shall not be obligated to, without waiving or
releasing Borrower from any obligation in this Agreement or any of
the other Loan Documents, remedy such failure, and Borrower agrees
to repay upon demand all sums incurred by Lender in remedying any
such failure, together with interest thereon from the date incurred
at the Default Rate (as defined in the Note).
(e)
For purposes of this Section, the defined terms shall have the
meanings provided in this Mortgage, including the
following defined terms:
(i)
“ Lease ”: Any lease or other document or
agreement, written or oral, permitting any Person,
other than Borrower, to use or occupy any part of the Mortgaged
Property.
(ii)
“ Tenant ”: Any Person, other than Borrower,
using or occupying any part of the Mortgaged Property
pursuant to a Lease.
(f)
Nothing in this Section 1.8 constitutes consent by Lender to
Borrower entering into any Lease, and it is
acknowledged that Borrower’s entry into a Lease without the
Lender’s prior written consent is a violation of Section 1.3
of this Agreement.
Section 1.9 Indemnity.
Borrower shall indemnify Lender and its directors, officers,
agents and employees (collectively the “Indemnified
Parties”) against, and hold the Indemnified Parties harmless
from, all losses, damages, suits, claims, judgments, penalties,
fines, liabilities, costs and expenses by reason of, or on account
of, or in connection with the construction, reconstruction or
alteration of the Mortgaged Property, or any accident, injury,
death or damage to any person or property occurring in, on or about
the Mortgaged Property or any street, drive, sidewalk, curb or
passageway adjacent thereto. The indemnity contained in this
Section shall include costs of defense of any such claim asserted
against an Indemnified Party, including attorneys’ fees. The
indemnity contained in this Section shall survive payment and
performance of the Obligations and satisfaction and release of this
Mortgage and any foreclosure thereof or acquisition of title by
deed in lieu of foreclosure.
Section 1.10 Big Stone Plant Property
Lease: Access and Rail Agreement.
(a)
Borrower shall not modify, amend, cancel or terminate the Big Stone
Plant Property Lease or the Access and Rail Agreement
without Lender’s prior written consent.
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(b)
Borrower shall, at its cost and expense, timely perform each
obligation to be performed by Borrower under the Big
Stone Plant Property Lease and the Access and Rail Agreement.
(c)
If Borrower fails to timely perform any obligations of Borrower
under the Big Stone Plant Property Lease, the Access
and Rail Agreement or if Lender becomes aware of or is notified by
Big Stone-Grant Industrial Development and Transportation, L.L.C.,
the Big Stone Plant Co-Owners or any other party of a failure on
the part of Borrower to so perform, Lender may, but shall not be
obligated to, without waiving or releasing Borrower from any
obligation in this Agreement or any of the other Loan Documents,
remedy such failure, and Borrower agrees to repay, upon demand all
sums incurred by Lender in remedying any such failure, together
with interest thereon from the date incurred at the Default Rate
(as defined in the Note).
ARTICLE II
REPRESENTATIONS AND
WARRANTIES
Borrower makes the following representations
and warranties:
Section 2.1 Ownership, Liens, Compliance
with Laws. Borrower owns the Mortgaged Property free from
all Liens, except those of the Prior Mortgages and the Permitted
Encumbrances. All applicable zoning, environmental, land use,
subdivision, building, fire, safety and health laws, statutes,
ordinances, codes, rules, regulations and requirements affecting
the Mortgaged Property permit the current use and occupancy
thereof, and Borrower has obtained all consents, permits and
licenses required for such use. Borrower has examined and is
familiar with all applicable Covenants, conditions, restrictions
and reservations, and with all applicable laws, statutes,
ordinances, codes and governmental rules, regulations and
requirements affecting the Mortgaged Property, and the Mortgaged
Property complies with ail of the foregoing.
Section 2.2 Use . The Mortgaged
Property is not homestead property nor is it agricultural property
or in agricultural use.
Section 2.3 Utilities, Services.
The Mortgaged Property is serviced by all, necessary public
utilities, and all such utilities are operational and have
sufficient capacity.
Section 2.4 Access Agreement.
The Access and Rail Agreement is in full force and effect,
and has not been amended, modified, terminated or cancelled, and
there is no default by Borrower thereunder, nor any statement .of
facts or circumstances which, with the giving of notice or the
lapse of time or both, would constitute a default by Borrower
thereunder or entitle the Big Stone Plant Co-Owners to terminate
the Access and Rail Agreement; nor has Borrower received or given
any notice of default or termination.
Section 2.5 Big Stone Plant Property
Lease . The Lease is in full force and effect, and has
not been amended, modified, terminated or cancelled, and there is
no default by Borrower thereunder, nor any statement of facts or
circumstances which, with the giving of notice or the lapse of lime
or both, would constitute a default by Borrower thereunder or
entitle Big Stone- Grant Industrial Development and Transportation,
L.L.C. to terminate the Big Stone Plant Property Lease,
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nor has
Borrower received or given any notice of default or termination.
Borrower has provided Lender a true and correct copy of the Big
Stone Plant Property Lease and the Access and Rail
Agreement.
ARTICLE III
CASUALTY;
CONDEMNATION
Section 3.1 Casualty, Repair Proof of
Loss. If any portion of the Mortgaged Property shall be
damaged or destroyed by any cause (a “Casualty”),
Borrower shall:
(a)
give immediate notice to the Lender; and
(b)
promptly commence and diligently pursue to completion (in
accordance with plans and specifications approved by
Lender) the restoration, repair and rebuilding of the Mortgaged
Property as nearly as possible to its value, condition and
character immediately prior to the Casualty; and
(c)
if the Casualty is covered by insurance, immediately make proof of
loss and collect all insurance proceeds, all such
proceeds to be payable to Lend
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