Exhibit 10.4
This
document prepared by
and
after recording return to:
Scott
Perrenoud
CADWELL SANFORD DEIBERT
& 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
August 28, 2006, 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 Thirty Three Million and no/100 Dollars
($33,000,000.00) (the “Expansion Loan”), to be repaid
with interest thereon, as evidenced by Borrower’s Expansion
Construction Note (the “Note”, which term shall include
any amendment, modification, supplement, extension, renewal,
replacement or restatement thereof), which Expansion Loan is the
subject of a Amended and Restated Loan Agreement between Borrower
and Lender (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”.
B.
The obligations secured by this Mortgage (the
“Obligations”) are as follows:
(i)
the principal amount of $33,000,000.00 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, including the “Secured
Obligations,” as defined by the Collateral Real Estate
Mortgage (the “Second Mortgage”) and the
“Obligations,” as defined in the First Mortgage (as
such Mortgages are 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 August 31, 2014 (the
“Maturity Date”).
D.
The maximum principal indebtedness secured hereby is Thirty Three
Million and no/100 Dollars ($33,000,000.00), 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 railroad 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”).
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G.
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 (the “First Mortgage”).
H.
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 (the $31,100,000.00
Mortgage referenced above, and such Collateral Real Estate Mortgage
are sometimes referred to herein as “the Prior
Mortgages”).
NOW, THEREFORE,
Borrower, in consideration of Lender making the Expansion Loan, and
to secure the Expansion 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 and 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
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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,
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 complies 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
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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, 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 case 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
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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 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.
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(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.
(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:
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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 all 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 time 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, 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
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(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 Lender or as Lender shall direct. If an Event of
Default shall be in existence, or if Borrower shall fail to provide
notice to Lender of filing proof of loss, or if Borrower shall not
be diligently proceeding, in Lender’s reasonable opinion, to
collect such insurance proceeds, then Lender may, but is not
obligated to, make proof of loss, and is authorized, but is not
obligated, to settle any claim with respect thereto, and to collect
the proceeds thereof. Borro
