PLEDGE AGREEMENT

 

THIS PLEDGE AGREEMENT is entered into this 2nd day of August, 2017 between
Granite Falls Energy, LLC, a Minnesota Limited Liability Company (hereinafter as
"Grantor"); and Project Hawkeye, L.L.C. (hereinafter as "Lender").

 

GRANT OF SECURITY INTEREST.  For valuable consideration, Grantor grants to
Lender a security interest in the Collateral to secure the indebtedness and
agrees that Lender shall have the rights stated in this Agreement with respect
to the Collateral, in addition to all other rights which Lender may have by law.

 

DEFINITIONS.  The following words shall have the following meanings when used in
this Agreement:

 

Agreement.  The word "Agreement" means this Pledge Agreement, as this Pledge
Agreement may be amended or modified from time to time, together with all
exhibits and schedules attached to this Pledge Agreement from time to time.

 

Collateral.  The word "Collateral" means the following specifically described
property, which Grantor has delivered or agrees to deliver (or cause to be
delivered) immediately to Lender, together with all Income and Proceeds as
described below:

 

The membership interests of Grantor in and to Ring-neck Energy & Feed, LLC (a
South Dakota ethanol facility) described on Schedule 1 hereto, including money
and other rights to payment to Grantor from Ring-neck Energy & Feed, LLC, and
all additions, replacements of and substitution for all or any part of Grantor’s
right, title and interest in and to Ring-neck Energy & Feed, LLC and all
products and proceeds (including but not limited to all insurance payments) of
or relating to the foregoing interests of Grantor in and to Ring-neck Energy &
Feed, LLC. 

 

Grantor.  The word "Grantor" means Granite Falls Energy, LLC, a Minnesota
Limited Liability Company.

 

Indebtedness: The word “Indebtedness” means the principal amount under the Note,
together with all interest thereon, and (b) the performance of all the
covenants, conditions and agreements contained in the Note.

 

Lender.  The word "Lender" means Project Hawkeye, L.L.C., its successors and
assigns.

 

Note.  The word "Note" means the Note dated August 2, 2017, in the principal
amount of $7,500,000.00 from Grantor to Lender, together with all renewals of,
extension of, modifications of, refinancings of, consolidations of and
substitutions.

 

Obligor.  The word "Obligor" means and includes without limitation any and all
persons or entities obligated to pay money or to perform some other act under
the Collateral.

1

--------------------------------------------------------------------------------

 

Proceeds.  The word “Proceeds” shall have such meaning as provided in Section
9-102 of the Uniform Commercial code as in effect from time to time in the State
of Minnesota.

 

Related Documents.  The words "Related Documents" means and include without
limitation all promissory notes, credit agreements, loan agreements, guaranties,
security agreements, mortgages, deeds of trust, and all other instruments,
agreements and documents, whether now or hereafter existing, executed in
connection with the Indebtedness.

 

GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE
COLLATERAL.  Grantor represents and warrants to Lender that:

 

Ownership.  Grantor is the lawful owner of the Collateral free and clear of all
security interests, liens, encumbrances and claims of others.

 

Right to Pledge.  Grantor has the full right, power and authority to enter into
this Agreement and to pledge the Collateral.

 

Binding Effect.  This Agreement is binding upon Grantor, as well as Grantor's
heirs, successors, representatives and assigns, and is legally enforceable in
accordance with its terms.

 

No Further Assignment.  Grantor has not, and will not, sell, assign, transfer,
encumber or otherwise dispose of any of Grantor's rights in the Collateral
except as provided in this Agreement.

 

No Defaults.  There are no defaults existing under the Collateral, and there are
no offsets or counterclaims to be same, Grantor will strictly and promptly
perform each of the terms, conditions, covenants and agreements contained in the
Collateral which are to be performed by Grantor, if any.

 

No Violation.  The execution and deliver of this Agreement will not violate any
law or agreement governing Grantor or to which Grantor is a party.

 

LENDER'S RIGHTS AND OBLIGATIONS WITH RESPECT TO COLLATERAL.  Lender may hold the
Collateral until all the indebtedness has been paid and satisfied and thereafter
may deliver the Collateral to any Grantor.  Lender shall have the following
rights in addition to all other rights it may have by law:

 

Maintenance and Protection of Collateral.  Lender may, but shall not be
obligated to, take such steps as it deems necessary or desirable to protect,
maintain, insure, store, or care for the Collateral, including payment of any
liens or claims against the Collateral.  Lender may charge any cost incurred in
so doing to Grantor.

 

Transactions with Others.  Lender may (a) extend time for payment or other
performance, (b) grant a renewal or change in terms of conditions, or (c)
compromise, compound or release any obligation, with any one or more Obligors,
endorsers, or Guarantors of the Indebtedness as Lender deems advisable, without
obtaining the prior written consent of Grantor, and no such act or failure to
act shall affect Lender’s rights against Grantor or the Collateral.

 

2

--------------------------------------------------------------------------------

 

All Collateral Secures Indebtedness.  All collateral shall be security for the
Indebtedness, whether the Collateral is located at one or more offices or
branches of Lender and whether or not the office or branch where the
Indebtedness is created is aware of or relies upon the Collateral.

 

Dividends.  Lender agrees that the Grantor may, unless an Event of Default shall
have occurred and be continuing, receive and retain all dividends and other
distributions with respect to the Collateral.

 

Power of Attorney.  Grantor irrevocably appoints Lender as Grantor's
attorney-in-fact, with full power of substitution, (a) to demand, collect,
receive, receipt for, sue and recover all Income and Proceeds and other sums of
money and other property which may now or hereafter become due, owing or payable
from the Obligors in accordance with the terms of the Collateral; (b) to
execute, sign and endorse any and all instruments, receipts, checks, drafts and
warrants issued in payment for the Collateral; (c) to settle or compromise any
and all claims arising under the Collateral, and in the place and stead of
Grantor, execute and deliver Grantor's release and a quittance for Grantor; (d)
to file any claim or claims or to take any action or institute or take part in
any proceedings, either in Lender's own name or in the name of Grantor, or
otherwise, which in the discretion of Lender may seem to be necessary or
advisable; and (e) to execute the Grantor's name and to deliver to the
Obligators on Grantor's behalf, at the time and in the manner specified by the
Collateral, any necessary instruments or documents.

 

Perfection of Security Interest.  Upon request of Lender, Grantor will deliver
to Lender any and all of the documents evidencing or constituting the
Collateral.  Grantor hereby appoints Lender as Grantor's irrevocable
attorney-in-fact for the purpose of executing any documents necessary to perfect
or to continue the security interest granted by this Agreement.

 

EXPENDITURES BY LENDER.  If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without limitation
all taxes, liens, security interests, encumbrances, and other claims, at any
time levied or placed on the Collateral.  Lender also may (but shall not be
obligated to) pay all costs for insuring, maintaining and preserving the
Collateral.  All such expenditures incurred or paid by Lender for such purposes
will then bear interest at the rate charged under the Note from the date
incurred or paid by Lender to the date of repayment by Grantor.  All such
expenses shall become a part of the Indebtedness and, at Lender's option, will
(a) be payable on demand, (b) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (i) the term of any applicable insurance policy or (ii) the
remaining term of the Note, or (c) be treated as a balloon payment which will be
due and payable at the Note's maturity.  This Agreement also will secure payment
of these amounts.  Such right shall be in addition to all other rights and
remedies to which Lender may be entitled upon the occurrence of an Event of
Default.

 

3

--------------------------------------------------------------------------------

 

LIMITATIONS ON OBLIGATIONS OF LENDER.  Lender shall use ordinary reasonable care
in the physical preservation and custody of the Collateral in Lender's
possession, but shall have no other obligation to protect the Collateral or its
value.  In particular, but without limitation, Lender shall have no
responsibility for (a) any depreciation in value of the Collateral or for the
collection or protection of any income and Proceeds from the Collateral, (b)
preservation  of rights against parties to the Collateral or against third
persons, (c) ascertaining any maturities, calls, conversion, exchanges, offers,
tenders, or similar matters relating to any of the Collateral, or (d) informing
Grantor about any of the above, whether or not Lender has or is deemed to have
knowledge of such matters.  Except as provided above, Lender shall have no
liability for depreciation or deterioration of the Collateral.

 

EVENTS OF DEFAULT.  Each of the following shall constitute an Event of Default
under this Agreement:

 

Default on Indebtedness.  Failure of Grantor to make any payment when due on the
indebtedness.

 

Other Defaults.  Failure of Grantor to comply with or to perform any other term,
obligation, covenant or condition contained in this Agreement or in any of the
Related Documents or in any other agreement between Lender and Grantor.  If any
default, other than a Default on Indebtedness, is curable and if Grantor has not
been given a prior notice of a breach of the same provision of this Agreement,
it may be cured (and no Event of Default will have occurred) if Grantor, after
Lender sends written notice demanding cure of such default, (a) cures the
default within fifteen (15) days; or (b), if the cure requires more than fifteen
(15) days, immediately initiates steps which Lender deems in Lender's sole
discretion to be sufficient to cure the default and thereafter continues and
completes all reasonable and necessary steps sufficient to produce compliance as
soon as reasonably practical.

 

False Statements.  Any warranty, representation or statement made or furnished
to Lender by or on behalf of Grantor under this Agreement is false or misleading
in any material respect, either now or at the time made or furnished.

 

Defective Collateralization.  This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
documents to create a valid and perfected security interest or lien) at any time
and for any reason.

 

Insolvency.  The dissolution or termination of Grantor's existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any part
of Grantor's property, any assignment for the benefit of creditors, or the
commencement of any proceeding under any bankruptcy or insolvency laws by or
against Grantor.

 

Creditor or Forfeiture Proceedings.  Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help repossession or any other
method, by any creditor of Grantor or by any governmental agency against the
Collateral or any other collateral security the Indebtedness.  However, this
Event of Default shall not apply if there is a good faith dispute by Grantor as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Grantor gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion,

4

--------------------------------------------------------------------------------

 

as being an adequate reserve or bond for the dispute.

 

Insecurity.  Lender, in good faith, deems itself insecure.

 

RIGHTS AND REMEDIES ON DEFAULT.  If an Event of Default occurs under this
Agreement, at any time thereafter, Lender may exercise any one or more of the
following rights and remedies:

 

Accelerate Indebtedness.  Declare all indebtedness, including any prepayment
penalty which Grantor would be required to pay, immediately due and payable,
without notice of any kind to Grantor.

 

Collect the Collateral.  Collect any of the Collateral and, at Lender's option
and to the extent permitted by applicable law, retain possession of the
Collateral while suing on the Indebtedness.

 

Sell the Collateral.  Sell the Collateral, at Lender's discretion, as a unit or
in parcels, at one or more public or private sales.  Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, Lender shall give or mail to Grantor or any of
them, notice at least ten (10) days in advance of the time and place of any
public sale, or of the date after which any private sale may be made.  Grantor
agrees that any requirement of reasonable notice is satisfied if Lender mails
notice by ordinary mail addressed to Grantor, or any of the, at the last address
Grantor has given Lender in writing.  If a public sale is held, there shall be
sufficient compliance with all requirements or notice to the public by a single
publication in any newspaper of general circulation in the county where the
Collateral is located, setting forth the time and place of sale and a brief
description of the property to be sold.  Lender may be a purchaser at any public
sale.

 

Register Securities.  Register any securities included in the Collateral in
Lender's name and exercise any rights normally incident to the ownership of
securities.

 

Sell Securities.  Sell any securities included in the Collateral in the manner
consistent with applicable federal and state securities laws, notwithstanding
any other provision of this or any other agreement.  If, because of restrictions
under such laws, Lender is or believes it is unable to sell the securities in an
open market transaction, Grantor agrees that Lender shall have no obligation to
delay sale until the securities can be registered, and may make a private sale
to one or more persons or to a restricted group of persons even through such
sale may result in a price that is less favorable than might be obtained in an
open market transaction, and such a sale shall be considered commercially
reasonable.  If any securities held as Collateral are "restricted securities" as
defined in the Rules of the Securities and Exchange Commission (such as
Regulation D or Rule 144) or state securities departments under state "Blue Sky"
laws, or if Grantor is an affiliate of the issuer of the securities, Grantor
agrees that neither Borrower nor any member of the borrower's family and neither
Grantor nor any member of Grantor's family will sell or dispose of any
securities of such issuer without containing Lender's prior written consent.

 

5

--------------------------------------------------------------------------------

 

Foreclosure.  Maintain a judicial suit for foreclosure and sale of the
Collateral.

 

Transfer Title.  Effect transfer of title upon sale of all or part of the
Collateral.  For this purpose, Grantor irrevocably appoints Lender as its
attorney-in-fact to execute endorsements, assignments and instruments in the
name of Grantor and each of them (if more than one) as shall be necessary or
reasonable.

 

Other Rights and Remedies.  Have and exercise any or all of the rights and
remedies of a secured creditor under the provisions of the Uniform Commercial
Code, at law, in equity, or otherwise.

 

Application of Proceeds.  Apply any cash which is part of the Collateral, or
which is received from the collection or sale of the Collateral, to
reimbursement of any expenses, including any costs for registration of
securities, commissions incurred in connection with a sale, attorney fees as
provided below, and court costs, whether or not there is a lawsuit and including
any fees on appeal, incurred by Lender in connection with the collection and
sale of such collateral and to the payment of the indebtedness of Grantor to
Lender, with any excess funds to be paid to Grantor as the interests of Grantor
may appear.  Grantor agrees, to the extent permitted by law, to pay any
deficiency after application of the proceeds of the Collateral to the
Indebtedness.

 

Cumulative Remedies.  All of Lender's rights and remedies, whether evidenced by
this Agreement or by any other writing, shall be cumulative and may be exercised
singularly or concurrently.  Election by Lender to pursue any remedy shall not
exclude pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Grantor under this Agreement, after
Grantor's failure to perform, shall not affect Lender's right to declare a
default and to exercise its remedies.

 

MISCELLANEOUS PROVISIONS.  The following miscellaneous provisions are a part of
this Agreement:

Amendments.  This Agreement, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement.  No alteration of or amendment to this Agreement shall
be effective unless given in writing and signed by the party or parties sought
to be charged or bound by the alteration or amendment.

 

Applicable Law.  This Agreement has been delivered to Lender and accepted by
Lender in the State of Minnesota.  If there is a lawsuit, Grantor agrees upon
Lender's require to submit to the jurisdiction of the courts of Lyon County, the
State of Minnesota.  This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.

 

Attorneys' Fees; Expenses.  Grantor agrees to pay upon demand all of Lender's
costs and expenses, including attorney's fees and Lender's legal expenses,
incurred in connection with the enforcement of this Agreement.  Lender may pay
someone else to help enforce this Agreement, and Grantor shall pay the costs and
expenses of such enforcement.  Costs and expenses include Lender's Attorneys'
fees and legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (and including efforts to
modify or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services.  Grantor also shall pay all court costs and
such additional fees as may be directed by the court.

6

--------------------------------------------------------------------------------

 

Statutory Rights Not Waived.  Notwithstanding any other provision of this
Agreement, Grantor does not waive or agree to forego any of Grantor's statutory
rights unless the waiver of such a right is expressly authorized by law.

 

Caption Headings.  Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.

 

Multiple Parties.  All obligations of Grantor under this Agreement shall be
joint and several, and all references to Grantor shall mean each and every
Grantor.  This means that each of the persons signing below is responsible for
all obligations in this Agreement.

 

Notices. All notices required to be given under this Agreement shall be given in
writing and shall be effective when actually delivered or when deposited with a
nationally recognized overnight courier or deposited in the United States mail,
first class, postage prepaid, addressed to the party to whom the notice is to be
given at the address shown above.  Any party may change its address for notices
under this Agreement by giving applicable law, if there is more than one
Grantor, notice to the Grantor will constitute notice to all Grantors.  For
notice purposes, Grantor agrees to keep Lender informed at all times of
Grantor's current address(es).

 

Severability.  If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances.  If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or validity;
however, if the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.

 

Successor Interests.  Subject to the limitations set forth above on transfer of
the Collateral, this Agreement shall be binding upon and inure to the benefit of
the parties, their successors and assigns.

 

Waiver.  Lender shall not be deemed to have waived any rights under this
Agreement unless such wavier is given in writing and signed by Lender.  No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right.  A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement.  No prior waiver by lender, nor any course of dealing between
Lender and Grantor, shall constitute a waiver of any of Lender's rights or of a
any of Grantor's obligations as to any future transactions.  Whenever the
Consent of Lender is required under this Agreement, the granting of such consent
by Lender in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may be
granted or withheld in the sole discretion of Lender.

 

7

--------------------------------------------------------------------------------

 

This Pledge Agreement is being granted to secure that certain nonrecourse
Promissory Note of identical date. All terms and conditions of this Pledge
Agreement shall be construed in light of the nonrecourse nature of said
Promissory Note and the security granted hereby shall be limited only to
Grantor’s right, title and interest in and to assets and proceeds from Ring-neck
Energy & Feed, LLC corresponding to Grantor’s ownership of 1,500 membership
units in and to Ring-neck Energy & Feed, LLC.  This Pledge Agreement does not
grant any security or collateral in any other assets of Grantor, but grants
security and collateral only in Grantor’s right, title and interest (membership
units) as held in Ring-neck Energy & Feed, LLC and any proceeds or amount due
from Ring-neck Energy & Feed, LLC to Grantor. 

 

Moreover, this Pledge Agreement does not grant any right to claim amounts direct
from Grantor or assert claims for monetary payment from Grantor.  Any and all
claims related to this Pledge Agreement, whether for payment on said Promissory
Note, attorneys’ fees or other costs of collection, shall be limited to claims
against Grantor’s interest in and to and right of payments from Ring-neck Energy
& Feed, LLC.

 

This Pledge Agreement is intended to grant a purchase money security
interest.  However, Lender is entitled to request a subordination regarding the
1,500 membership units in Ring-neck Energy & Feed, LLC from any prior
outstanding security interest granted by Grantor. 

 

 

 

 

EACH GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS PLEDGE
AGREEMENT, AND EACH GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED
AUGUST 2, 2017.

 

 

8

--------------------------------------------------------------------------------

 

Dated:  August 2, 2017 

 

GRANITE FALLS ENERGY, LLC

 

 

 

By: /s/ Steve A. Christensen

     

Its:  GM/CEO

 

 

PROJECT HAWKEYE, L.L.C.

 

 

 

By: /s/ Ron Fagen

     

Its:  Managing Member

 

 

9

--------------------------------------------------------------------------------