Document:

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.

 

2

 

(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

 

3

 

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,

 

4

 

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,

 

5

 

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.

 

7

 

(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,

 

8

 

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 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. Borrower
shall not accept any settlement of an insurance claim, the result of which
shall be a payment which is $100,000.00 or more less than the frill amount of
the claim, without the prior written consent of Lender.

 

Section
3.2  Use of Insurance Proceeds.  Lender shall make the net insurance proceeds received
by it (after reimbursement of Lender’s out-of pocket costs of collecting and
disbursing the same) available to Borrower to pay the cost of restoration,
repair and rebuilding of the Mortgaged Property, subject to the following
conditions:

 

(a)           There shall be no Event of Default in
existence at the time of any disbursement of  the insurance proceeds.

 

(b)           Lender shall have determined, in its
reasonable discretion, that the cost of  restoration, repair and rebuilding is and will be equal to or less than
the amount of insurance proceeds and other funds deposited by Borrower with
Lender.

 

(c)           Lender shall have determined, in its
reasonable discretion, that the restoration,  repair and rebuilding can be completed in
accordance, with plans and specifications approved by Lender (such approval not
to be unreasonably withheld), in accordance with codes and ordinances and in
accordance with the terms, and within the time requirements in order to prevent
termination, of the Big Stone Plant Property Lease; the Access and Rail
Agreement or any other Lease, and in any event not less than six (6) months
prior to the Maturity Date.

 

9

 

(d)           All funds shall be disbursed, at
Lender’s option, in accordance with Lender’s  customary disbursement procedures for
construction loans.

 

(e)           The Casualty shall have occurred more
than twelve (12) months prior to the  Maturity Date.  

 

If
any of these conditions shall not be satisfied, then Lender shall have the
right to use the insurance proceeds to prepay the 2007 Term Loan in accordance
with the Note. If any insurance proceeds shall remain after completion of the
restoration, repair and rebuilding of the Mortgaged Property, they shall be
disbursed to Borrower, or at the Lender’s discretion, used to prepay the 2007
Term Loan in accordance with the Note.

 

Section
3.3  Condemnation.  If any portion of the Mortgaged Property shall
be taken, condemned or acquired pursuant to exercise of the power of eminent
domain or threat thereof (a “Condemnation”), Borrower shall:

 

(a)           give immediate, notice thereof to
Lender, and send a copy of each document  received by Borrower in connection with the Condemnation to Lender
promptly after receipt; and

 

(b)           diligently pursue any negotiation and
prosecute any proceeding in connection with  the Condemnation at Borrower’s expense. If an
Event of Default shall be in existence, or if Borrower, in Lender’s reasonable
opinion, shall not be diligently negotiating or prosecuting the claim, Lender
is authorized, but not required, to negotiate and prosecute the claim and
appear at any hearing for itself and on behalf of Borrower and to compromise or
settle all compensation for the Condemnation. Lender shall not be liable to
Borrower for any failure by Lender to collect or to exercise diligence in
collecting any such compensation. Borrower shall not compromise or settle any
claim resulting from the Condemnation if such settlement shall result in
payment of One Hundred Thousand and No/100 Dollars ($100,000.00) or more less
than Lender’s reasonable estimate of the damages therefrom. All awards shall be
paid to Lender.

 

Section
3.4  Use of Condemnation Proceeds.  Lender shall make the net proceeds of
any Condemnation received by it (after reimbursement of Lender’s out-of-pocket
costs of collecting and disbursing the same) available to Borrower for
restoration, repair and rebuilding of the Mortgaged Property, subject to the
following conditions:

 

(a)           There shall be no Event of Default in
existence at the time of any disbursement of  the condemnation proceeds.

 

(b)           Lender shall have determined, in its
reasonable discretion, that the cost of  restoration, repair and rebuilding is and will be equal to or less than
the amount of condemnation proceeds and other funds deposited by Borrower with
Lender.

 

(c)           Lender shall have determined, in its
reasonable discretion, that the restoration,  repair and rebuilding can be completed in
accordance with plans and specifications approved by Lender (such approval not
to be unreasonably withheld), in accordance with codes and

 

10

 

ordinances
and in accordance with the terms, and within the time requirements in order to
prevent termination, of the Big Stone Plant Property Lease, the Access and Rail
Agreement or any other Lease, and in any event not less than six (6) months
prior to the Maturity Date.

 

(d)           All funds shall be disbursed, at
Lender’s option, in accordance with Lender’s  customary disbursement procedures for
construction loans.

 

(e)           The Condemnation shall have occurred
more than twelve (12) months prior to Maturity Date.

 

If
any of these conditions shall not be satisfied, then Lender shall have the
right to use the condemnation proceeds to prepay the 2007 Term Loan in
accordance with the Note. If any condemnation proceeds shall remain after
completion of the restoration, repair and rebuilding of the Mortgaged Property,
they shall be disbursed to Borrower, or at Lender’s discretion, used to prepay
the 2007 Term Loan in accordance with the Note.

 

ARTICLE IV

 

DEFAULTS AND REMEDIES

 

Section
4.1  Events of Default.  An Event of Default, as defined in the Loan
Agreement, shall constitute an Event of Default hereunder.

 

Section
4.2  Remedies.  Upon the occurrence of an Event of Default
described in the Loan Agreement, and upon the expiration of the applicable cure
period stated therein, if any, all of the Obligations shall be accelerated and
become immediately due and payable without notice or declaration to Borrower.
The Obligations shall be due and payable without presentment, demand or further
notice of any kind. Lender shall have the right to proceed to protect and
enforce its rights by one or more of the following remedies:

 

(a)           LENDER SHALL HAVE THE RIGHT TO BRING
Stiff either for damages, for  specific performance of any agreement contained in any Loan Document,
for the foreclosure of this
Mortgage, or for the enforcement of any other appropriate legal or equitable
remedy.

 

(b)           LENDER SHALL HAVE THE RIGHT TO SELL
THE MORTGAGED  PROPERTY AT
PUBLIC AUCTION AND CONVEY THE SAME TO THE PURCHASER IN FEE SIMPLE, as provided
by law, Borrower to remain liable for any deficiency. Said sale may be as one
tract or otherwise, at the sole option of Lender. In the event of any sale of
the Mortgaged Property pursuant to any judgment or decree of any court or at
public auction or otherwise in connection with the enforcement of any of the
terms of this Mortgage, Lender, its successors or assigns, may become the
purchaser, and for the purpose of making settlement for or payment of the
purchase price, shall be entitled to deliver over and use the Note and any
claims for interest accrued and unpaid thereon, together with all other sums,
with interest, advanced or secured hereby and unpaid hereunder, in order that
there may be credited as paid on the purchase price the total amount of the Obligations
then due, including

 

11

 

principal
and interest on the Note and all other sums, with interest, advanced or secured
hereby and unpaid hereunder or under any of the other Loan Documents.

 

(c)           LENDER SHALL HAVE THE RIGHT TO OBTAIN
THE APPOINTMENT OF  A
RECEIVER at any time after the occurrence of an Event of Default: Lender may
apply for the appointment of a receiver to the circuit court for the county
where the Mortgaged Property or any part thereof is located, by an action
separate from any foreclosure of this Mortgage pursuant to SDCL Chap. 21-21, or
as a part of the foreclosure action under SDCL Chap. 21-47 or SDCL Chap. 21-48
(it being agreed that the existence of a foreclosure pursuant to SDCL Chapter
21-47 or SDCL Chap. 21-48 is not a prerequisite to any action for a receiver
hereunder). Lender shall be entitled to the appointment of a receiver without
regard to waste, adequacy of the security or solvency of Borrower. The
receiver, who shall be an experienced property manager, shall collect (until
the Obligations are fully paid and satisfied and, in the case of a foreclosure
sale, during the entire redemption period) the Rents, and shall manage the
Mortgaged Property, execute Leases within or beyond the period of the
receivership if approved by the court and apply all rents, profits and other
income collected by him in the following order:

 

(i)            to the payment of all reasonable
fees of the receiver, if any, approved by the  court;

 

(ii)           to the repayment of tenant security
deposits, with interest thereon;

 

(iii)          to the payment when due of delinquent
or current real estate taxes or  special assessments with respect to the Mortgaged Property, or the
periodic escrow for the payment of the same;

 

(iv)          to the payment when due of premiums
for insurance of the type required by  this Mortgage, or the periodic escrow for the payment of the same;

 

(v)           to the payment of all expenses for
normal maintenance of the Mortgaged  Property; and

 

(vi)          the balance to Lender (a) if received
prior to the commencement of a  foreclosure, to be applied to the Obligations, in such order as Lender
may elect and (b) if received after the commencement of a foreclosure, to be
applied to the amount required to be paid to effect a reinstatement prior to
foreclosure sale, or, after a foreclosure sale to any deficiency and thereafter
to the amount required to be paid to effect a redemption, with any excess to be
paid to Borrower. Provided, that if this Mortgage is not reinstated nor the
Mortgaged Property redeemed as provided by applicable law, the entire amount paid
to Lender pursuant hereto shall be the property of Lender together with all or
any part of the Mortgaged Property acquired through foreclosure.

 

Lender
shall have the right, at any time and without limitation, to advance money to
the receiver to pay any part or all of the items which the receiver should
otherwise pay if cash were available from the Mortgaged Property and sums so
advanced, with interest at the

 

12

 

Default
Rate set forth in the Note, shall be secured hereby, or if advanced during the
period of redemption shall be part of the sum required to be paid to redeem
from the sale.

 

(d)           LENDER SHALL HAVE THE RIGHT TO
COLLECT THE RENTS from the  Mortgaged
Property and apply the same in the manner herein before provided with respect
to a receiver. For that purpose, Lender may enter and take possession of the
Mortgaged Property and manage and operate the same and take any action which,
in Lender’s Judgment, is necessary or proper to collect the Rents and to
conserve the value of the Mortgaged Property. Lender may also take possession
of and for these purposes use, any and all of the Personal Property. The
expense (including any receiver’s fees, attorneys’ fees, costs and agent’s
‘compensation) incurred pursuant to the powers herein contained shall be
secured by this Mortgage. Lender shall not be liable to account to Borrower for
any action taken pursuant hereto other than to account for any Rents actually
received by Lender. Enforcement hereof shall not cause Lender to be deemed a
mortgagee in possession unless Lender elects in writing to be a mortgagee in
possession.

 

(e)           LENDER SHALL HAVE THE RIGHT TO ENTER
AND TAKE POSSESSION of  the
Mortgaged Property and manage and operate the same in conformity with all applicable
laws and take any action which, in Lender’s judgment, is necessary or proper to
conserve the value of the Mortgaged Property.

 

(f)            LENDER SHALL HAVE ALL OF THE RIGHTS
AND REMEDIES PROVIDED  IN
THE UNIFORM COMMERCIAL CODE including the right to proceed under the Uniform
Commercial Code provisions governing default as to any Personal Property
separately from the real estate included within the Mortgaged Property, or to
proceed as to all of the Mortgaged Property in accordance with its rights and remedies
in respect of said real estate. If Lender should elect to proceed separately as
to such Personal Property, Borrower agrees to make such Personal Property
available to Lender at a place or places acceptable to Lender, and if any
notification of intended disposition of any of such Personal Property is
required by law, such notification shall be deemed reasonably and properly
given if given at least ten (10) days before such disposition in the manner
hereinafter provided.

 

(g)           LENDER SHALL HAVE THE RIGHT TO FILE
PROOF OF CLAIM and other  documents
as may be necessary or advisable in order to have its-claims allowed in any
receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceedings affecting Borrower, its creditors or
its property, for the entire amount due and payable by Borrower in respect of
the Obligations at the date of the institution of such proceedings, and for any
additional amounts which may become due and payable by Borrower after such date.

 

Each
remedy herein specifically given shall be in addition to every other right now
or hereafter given or existing at law or in equity, and each and every right
may be exercised from time to time and as often and in such order as may be
deemed expedient by Lender and the exercise or the beginning of the exercise of
one right shall not be deemed a waiver of the right to exercise at the same
time or thereafter any other right. Lender shall have all rights and remedies
available under the law in effect now and/or at the time such rights and
remedies are sought to be enforced, whether or not they are available under the
law in effect on the date hereof.

 

13

 

Section
4.3  Expenses of Exercising Rights,
Powers and Remedies.  The reasonable
expenses (including any receiver’s fees, attorneys’ fees, appraisers’ fees,
environmental and/or consultants’ fees, costs incurred for documentary and
expert evidence, stenographers’ charges, publication costs, costs (which may be
estimated as to items to be expended after entry of the decree of foreclosure)
of procuring all abstracts of title, continuations of abstracts of title, title
searches and examinations, title insurance policies and commitments and
extensions therefor, Torrens duplicate certificates of title, UCC and chattel
lien searches, and similar data and assurances with respect to title as Lender
may deem reasonably necessary either to prosecute any foreclosure action or to
evidence to bidders at any sale which may be had pursuant to any foreclosure
decree the true condition of the title to or the value of the Mortgaged
Property, and agent’s compensation) incurred by Lender after the occurrence of
any Event of Default and/or in pursuing the rights, powers and remedies
contained in this Mortgage shall be immediately due and payable by Borrower,
with interest thereon from the date incurred at the Default Rate set forth in
the Note, and shall be added to the indebtedness secured by this Mortgage.

 

Section
4.4  Restoration of Position.  In case Lender shall have proceeded to enforce
any right under this Mortgage by foreclosure, sale, entry or otherwise, and
such proceedings shall have been discontinued or abandoned for any reason or
shall have been determined adversely, then, and in every such case, Borrower
and Lender shall be restored to their former positions and rights hereunder
with respect to the Mortgaged Property subject to the lien hereof,

 

Section
4.5  Marshaling.  Borrower, for itself and on behalf of all
persons, parties and entities which may claim under Borrower, hereby waives all
requirements of law relating to the marshaling of assets, if any, which would
be applicable in connection with the enforcement by Lender of its remedies for
an Event of Default hereunder, absent this waiver. Lender shall not be required
to sell or realize upon any portion of the Mortgaged Property before selling or
realizing upon any other portion thereof.

 

Section
4.6  Waivers.  No waiver of any provision hereof shall be
implied from the conduct of the parties. Any such waiver must be in writing and
must be signed by the party against which such waiver is sought to be enforced.
The waiver or release of any breach of the provisions set forth herein to be
kept and performed shall not be a waiver or release of any preceding or
subsequent breach of the same or any other provision. No receipt of partial
payment after acceleration of any of the Obligations shall waive the
acceleration. No payment by Borrower or receipt by Lender of a lesser amount
than the full amount secured hereby shall be deemed to be other than on account
of the sums due and payable hereunder, nor shall any endorsement or statement
on any check or any letter accompanying any check or payment be deemed an
accord and satisfaction, and Lender may accept any check or payment without
prejudice to Lender’s right to recover the balance of such sums or to pursue
any other remedy provided in this Mortgage. The consent by Lender to any matter
or event requiring such consent shall not constitute a waiver of the necessity
for such consent to any subsequent matter or event.

 

Section
4.7  Lender’s Right to Cure Defaults.  If Borrower shall fail to comply with
any of the terms of the Loan Documents with respect to the procuring of insurance,
the payment of taxes, assessments and other charges, the keeping of the
Mortgaged Property in repair, or any other term contained herein or in any of
the other Loan Documents, Lender may make advances to perform the

 

14

 

same
without releasing Borrower from any of the Obligations. Borrower agrees to
repay upon demand all sums so advanced and all sums expended by Lender in
connection with such performance, including without limitation attorneys’ fees,
with interest at the Default Rate set forth in the Note from the dates such
advances are made, and all sums so advanced and/or expenses incurred, with
interest, shall be secured hereby, but no such advance and/or incurring of
expense by Lender, shall be deemed to relieve Borrower from any default
hereunder or under any of the other Loan Documents, or to release Borrower from
any of the Obligations.

 

Section
4.8  Suits and Proceedings.  Lender shall have the power and authority,
upon prior notice to Borrower, to institute and maintain any suits and
proceedings as Lender may deem advisable to (i) prevent any impairment of the
Mortgaged Property by any act which may be unlawful or by any violation of this
Mortgage, (ii) preserve or protect its interest in the Mortgaged Property, or
(iii) restrain the enforcement of or compliance with any legislation or other
governmental enactment, rule or order that may be unconstitutional or otherwise
invalid, if, in the sole opinion of Lender, the enforcement of or compliance with
such enactment, rule or order might impair the security hereunder or be
prejudicial to Lender’s interest.

 

ARTICLE V

 

MISCELLANEOUS

 

Section
5.1  Binding Effect, Survival; Number;
Gender.  This Mortgage shall be
binding on and inure to the benefit of the parties hereto, and their respective
heirs, legal representatives, successors and assigns. All agreements,
representations and warranties contained herein or otherwise heretofore made by
Borrower to Lender shall survive the execution, delivery and foreclosure hereof
The singular of all terms used herein shall include the plural, the plural
shall include the singular, and the use of any gender herein shall include all
other genders, where the context so requires or permits.

 

Section
5.2  Severability.  The unenforceability or invalidity of any
provision of this Mortgage as to any person or circumstance shall not render
that provision unenforceable or invalid as to any other person or circumstance.

 

Section
5.3  Notices.  Any notice or other communication to any party
in connection with this Mortgage shall be in writing and shall be sent by
manual delivery, facsimile transmission, overnight courier or United States
mail (postage prepaid) addressed to such party at the address specified below,
or at such other address as such party shall have specified to the other party
hereto in writing. All periods of notice shall be measured from the date of
delivery thereof if manually delivered, from the date of sending thereof if
sent by telegram, telex or facsimile transmission, from the first Business Day
(as defined in the Loan Agreement) after the date of sending if sent by
overnight courier, or from four days after the date of mailing if mailed,
Notices shall be given to or made upon the respective parties hereto at their
respective addresses set forth below:

 

	
  If
  to Borrower:

  	
   

  	
  Northern
  Lights Ethanol, LLC

  
	
   

  	
   

  	
  48416
  144th Street

  
	
   

  	
   

  	
  Post
  Office Box 356

  
	
   

  	
   

  	
  Big
  Stone City, South Dakota 57216

  
	
   

  	
   

  	
  Attention:
  Delton Strasser, President

  
	
   

  	
   

  	
  Telecopy
  No.: (605) 862-7904

  

 

15

 

	
  If to Lender:

  	
   

  	
  U.S. Bank National Association

  
	
   

  	
   

  	
  141 North Main Avenue

  
	
   

  	
   

  	
  Post Office Box 5308

  
	
   

  	
   

  	
  Sioux Falls, South Dakota 57117

  
	
   

  	
   

  	
  Attention: Carl A. Johnson, Assistant Vice President

  
	
   

  	
   

  	
  Telecopy No.: (605) 333-3825

  

 

Either
party may change its address for notices by a notice given not less than five
(5) Business Days prior to the effective date of the change.

 

Section
5.4  Applicable
Law. This Mortgage and the other Loan Documents shall be construed
and enforceable in accordance with, and be governed by, the laws of the State
of South Dakota, without giving effect to conflict of laws or principles
thereof, but giving effect to federal laws of the United States applicable to
national banks. Whenever possible, each provision of this Mortgage and any other
statement, instrument or transaction contemplated hereby or relating hereto,
shall be interpreted in such manner as to be effective and valid under such
applicable law, but, if any provision of this Mortgage or any other statement,
instrument or transaction contemplated hereby or relating hereto shall be held
to be prohibited or invalid under such applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Mortgage or any other statement, instrument or transaction contemplated
hereby or relating hereto.

 

Section
5.5  Waiver of Jury Trial. Borrower
and Lender each irrevocably waives any and all right to trial by jury in any legal
proceeding arising out of or relating to this Mortgage or any of the other Loan
Documents or the transactions contemplated hereby or thereby.

 

Section
5.6  Effect. This Mortgage is in
addition and not in substitution for any other guarantees, covenants,
obligations or other rights now or hereafter held by Lender from any other
person or entity in connection with the Obligations.

 

Section
5.7  Assignability. Lender shall
have the right to assign this Mortgage, in whole or in part, or sell
participation interests herein, to any person obtaining an interest in the
Obligations.

 

Section
5.8  Headings; Recitals. Headings
of the Sections of this Mortgage are inserted for convenience only and shall
not be deemed to constitute a part hereof. The Recitals at the outset of this
Mortgage are incorporated herein as substantive provisions.

 

Section
5.9  Fixture Filing. This
instrument shall be deemed to be a Fixture Filing within the meaning of the
South Dakota Uniform Commercial Code, and for such purpose, the following
information is given:

 

16

 

	
  (a)

  	
  Name
  and address of Debtor:

  
	
   

  	
   

  
	
   

  	
   

  	
  Northern
  Lights Ethanol, LLC

  
	
   

  	
   

  	
  48416
  144th Street

  
	
   

  	
   

  	
  Post
  Office Box 356

  
	
   

  	
   

  	
  Big
  Stone City, South Dakota 57216

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Federal
  Tax ID. No,: 46-0460 145

  
	
   

  	
   

  
	
  (b)

  	
  Name
  and address of Secured Party:

  
	
   

  	
   

  
	
   

  	
   

  	
  U.S.
  Bank National Association

  
	
   

  	
   

  	
  141
  North Main Avenue

  
	
   

  	
   

  	
  Post
  Office Box 5308

  
	
   

  	
   

  	
  Sioux
  Falls, South Dakota 57117

  

 

(c)           Description
of the types (or items) of property covered by this Fixture Filing: All Debtor’s
fixtures and personal property as further set forth in granting clauses A
through E following the Recitals starting on the first page hereof.

 

(d)           Description
of real estate to which the collateral is attached or upon which it is or will
be located: See Exhibit A hereto.

 

Section
5.10  Construction Mortgage. This
Mortgage is a Construction Mortgage within the meaning of SDCL § 547A-9-334(h),
and secures an obligation incurred for the construction of improvements on
land.

 

Some
of the above-described collateral is or is to become fixtures upon the
above-described real estate, and this Fixture Filing is to be fled for record
in the public real estate records.

 

IN
WITNESS WHEREOF, Borrower has executed this Mortgage as of the date first
written above.

 

 

	
   

  	
   

  	
  NORTHERN
  LIGHTS ETHANOL, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Delton Strasser

  	
   

  
	
   

  	
   

  	
   

  	
  Name:
  Delton Strasser

  
	
   

  	
   

  	
   

  	
  Title:
  President

  

 

 

The
Company has no seal.

 

17

 

	
  STATE
  OF SOUTH DAKOTA)

  
	
   

  	
  :SS

  
	
  COUNTY
  OF MIINNEFIAHA)

  

 

On
this the 21st day of September, 2007, before me the undersigned officer,
personally appeared Delton Strasser, who acknowledged himself to be the
President of Northern Lights Ethanol, LLC, a limited liability company, and that
he, as President, being authorized so to do, executed the foregoing instrument
for the purposes therein contained, by signing the-name of the limited
liability company by himself as President.

 

IN
WITNESS WHEREOF, I hereunto set my hand and official seal.

 

 

	
   

  	
  /s/
  Christine K. Knaus

  	
   

  
	
   

  	
  Notary
  Public - South Dakota

  

 

 

My
Commission Expires: July 6, 2008

 

18

 

EXHIBIT A

 

(Legal Description of Land)

 

Section 11:

(1)
Parcel B in the SE1/4 of Section 11, Township 121 North, Range 47 West of the 5th
P.M., Grant County, South Dakota; and (2) nonexclusive easement over, upon and
across that portion of access road located in said SE1/4, as depicted on
Exhibit C attached, for driveway and ingress and egress purposes.

 

Section 12:

(1)
Parcel A in the SW1/4 of Section 12, Township 121 North, Range 47 West of the
5th P.M., Grant County, South Dakota; and (2) nonexclusive easement over, upon
and across that portion of access road located in said SW1/4, as depicted on
Exhibit C attached, for driveway and ingress and egress purposes; and (3) a
portion of Easement No.1 for Northern Lights Railroad Spurline area in the
SW1/4 of said Section 12, as depicted on Exhibit A attached; and (4) Easement
No. 1 for Steam Pipe Rack and Fireline in the SW1/4 of said Section 12, as
depicted on Exhibit D; and (5) Easement No, 2 for RO-Water and Process Waste
Water Line in the SW1/4 of said Section 12, as depicted on Exhibit E; and (6)
Easement No. 4 for Meter Pit Location and Water Line in the S1/2 of said Section
12, as depicted on Exhibit G.

 

Section 13:

(1)
A portion of Easement No.1 for Northern Lights Railroad Spurline area in the
NW1/4 of Section 13, Township 121 North, Range 47 West of the 5th
P.M., Grant County, South Dakota, as depicted on Exhibit A attached; and (2)
Easement No. 2 for Northern Lights maintenance road area in said NW1/4, as also
depicted on Exhibit A attached; and (3) a nonexclusive easement for all rail
access to Big Stone Plant co-owner’s railroad spurline in the N1/2, as depicted
on Exhibit B attached; and (4) Easement No.3 for Sanitary Sewer Line in the
NWI/4 of said Section 13, depicted on Exhibit F.

 

Section
18:

A
portion of a nonexclusive easement for rail access to Big Stone Plant co-owners’
railroad spurline, as depicted on Exhibit B attached, on the following
described parcels in Section 18, Township 121 North, Range 46 West of the 5th
P.M., Grant County, South Dakota:

 

(1)
SE1/4SW1/4, except Burlington Northern Santa Fe railroad right-of-way; and the
Wl/2SE1/4 lying northerly of the present right-of way of Chicago, Milwaukee,
St. Paul and Pacific Railway Company; and that part of Outlot 47 (which is also
described as the NE1/4SE1/4, except Outlot 48), and including the abandoned
right-of-way of the Chicago, Milwaukee, St. Paul and Pacific Railroad Company,
all in Section 18, Township 121 North, Range 46 West of the 5th
P.M., Grant County, South Dakota, according to plat thereof on file and of
record in the office of the Register of Deeds of said county and state.

 

(2)
S1/2NWI/4; and the N1/2SW1/4, except railroad right-of-way; and except Hay’s
Outlot located in the NW1/4SW1/4 and the SW1/4NW1/4; and except a metes and
bounds tract of land described as follows: 
Commencing at the southwest corner of the NW1/4SW1/4, thence North 45
rods, thence East 16 rods, thence South 45 rods, thence West 16 rods to the
place of beginning (now known as

 

19

 

Lots
1,2, and 3, Replat of Lot C in NW1/4SW1/4 of 18-121-46), according to plat
thereof on file and of record in the office of the Register of Deeds of said
county and state.

 

(3)
N1/2NW1/4, except township road deeded at Deed Record 58, page 561, in Section
18, Township 121 North, Range 46 West of the 5th P.M., Grant County,
South Dakota. (Copy of Deed Record 58, page 561 attached).

 

(4)
The West 1613 feet of that part of the NE1/4 lying South of the highway known
as the Yellowstone Trail, passing in an easterly direction through said quarter
section, except the West 500 feet of the South 403 feet of the North 2351 feet
of the SW1/4NE1/4; and except that part deeded for cemetery purposes to St.
Charles Catholic Church, but including the abandoned railroad right-of-way of
the Chicago, Milwaukee, St. Paul and Pacific Railway Co., all in Section 18,
Township 121 North, Range 46 West of the 5th P.M., Grant County,
South Dakota, according to plat thereof on file and of record in the office of
the Register of Deeds of said county and state.

 

(5)
NE 1/4 lying North of the highway known as the Yellowstone Trail, except the
Cheese Company Outlot, in Section 18, Township 121 North, Range 46 West of the
5th P.M., Grant County, South Dakota, according to plat thereof on file and of
record in the office of the Register of Deeds of said county and state.

 

Section 7:

Easement
No. 4 for meter pit location and water line in the S1/2 of Section 7,
Township121 North, Range 6 West of the 5th P.M., Grant County, South Dakota, as
depicted on Exhibit G.

 

SOMETIMES
MORE GENERALLY DESCRIBED AS:

 

Parcel
A in the Southwest Quarter (SW1/4) of Section Twelve (12), Township One Hundred
Twenty-One (121) North, Range Forty-Seven (47) West of the Fifth Principal
Meridian, Grant County, South Dakota, according to the recorded pint thereof.

 

Parcel
B in the Southeast Quarter (SE1/4) of Section Eleven (11), Township One Hundred
Twenty-One (121) North, Range Forty-Seven (47) West of the Fifth Principal
Meridian, Grant County, South Dakota, according to the recorded plat thereof.

 

The
Borrower holds an ingress and egress easement rights on certain land and
railroad spur lines identified in the 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.; Northwestern Public Service, a division of
NorthWestern Corporation, f/k/a Northwestern Public Service Company and
Northern Lights Ethanol, LLC:

 

The
Southeast Quarter (SE1/4) of Section Eleven (11), Township One Hundred
Twenty-One North (121), Range Forth-Seven (47), West of the Fifth Principal
Meridian, Grant County, South Dakota;

 

20

 

The
Southwest Quarter (SW1/4) of Section Twelve (12), Township One Hundred
Twenty-One North (121), Range Forty-Seven (47) West of the Fifth Principal
Meridian, Grant County, South Dakota;

 

The
Northeast Quarter (NE1/4) and the Northwest Quarter (NW1/4) of Section Thirteen
(13), Township One Hundred Twenty-One (121) North, Range Forty-Seven (47) West
of the Fifth Principal Meridian, Grant County, South Dakota; and

 

The
Northwest Quarter (NW1/4), the Northeast Quarter (NE1/4) and that portion of
the Southeast Quarter (SE1/4) lying North of the Burlington Northern Sante Fe
Main line railroad Right of Way in Section Eighteen (18), Township One Hundred
Twenty-One (121) North, Range Forty-Six (46) West of the Fifth Principal
Meridian, Grant County, South Dakota.

 

21

 

EXHIBIT B

 

(Insurance Requirements)

 

I.              PROPERTY INSURANCE

 

As
to Improvements while under construction:

 

An
ORIGINAL (or evidence acceptable to Lender of) Builder’s Risk “All-Risk”,
Completed Value (Non-Reporting) Form POLICY naming Borrower as an insured, and
covering the interests of all contractors (of all tiers) in the Project,
reflecting coverage of 100% of the insurable replacement cost, and written by a
carrier approved by Lender with a current A.M. Best Company rating of at least
A:VII (which is authorized to do business in the State of South Dakota), that
includes:

 

Lender’s
Loss Payable Endorsement naming U.S. Bank National Association as Mortgagee 30-day
notice to Lender in the event of cancellation or non-renewal by either party or
material adverse change

 

Replacement
Cost Measure of Recovery

 

Coverage
for Foundations, Off-site (Unscheduled and Temporary Locations), Transit,
Testing, Flood, Earthquake, Collapse, and Boiler and Machinery/Mechanical and
Electrical Breakdown, in such amounts as Lender and Borrower mutually agree is
appropriate

 

Coverage
for indirect loss exposures (customarily referred to as “soft cost” exposures),
“Contingent Liability from Operation of Building Laws” coverage, “Demolition
Costs” coverage, “Increased Cost of Construction” coverage, with such
additional limits for such coverages as Lender may reasonably require

 

Policy
to permit partial occupancy

 

No
insurer subrogation action or recovery against any party whose interests are
covered under the policy

 

Deductible
not to exceed $25,000

 

Coverage
to become effective upon the date that concrete is first poured, or the start
of any shipment of materials, machinery or equipment to the site, whichever is
earlier, and to remain in effect until replaced by the permanent All Risk
Property Insurance described below, or until such other time as may be mutually
agreed upon by Lender and Borrower.

 

22

 

                As to completed Improvements:

 

An
ORIGINAL (or evidence acceptable to Lender of) Special Form (or so-called All
Risk) Hazard Insurance POLICY naming Borrower as an insured, reflecting
coverage of 100% of the replacement cost, and written by a carrier approved by
Lender with a current A.M. Best Company rating of at least A:Vll (which is
authorized to do business in the State of South Dakota), that includes:

 

•              Lender’s Loss Payable Endorsement naming U.S.
Bank National Association as Mortgagee

•              30-day notice to Lender in the event of
cancellation or non-renewal by either party or material adverse change

•              Replacement Cost Measure or Recovery

•              Stipulated Value/Agreed Amount Endorsement
(No Coinsurance)

•              Boiler and Machinery Coverage (including
business income, extra expense coverage)

 

One
(1) year’s business interruption, leasehold interest and/or rent loss insurance
in an amount acceptable to Lender

 

Extra
expense coverage in an amount acceptable to Lender

 

“Contingent
Liability from Operation of Building Laws” coverage, “Demolition Costs”
coverage, “Increased Cost of Construction” coverage, and “Increased Time to
Rebuild” Coverage, with such additional limits for such coverages as Lender may
reasonably require

 

Deductible
not to exceed $25,000

 

II.            LIABILITY
INSURANCE

 

An
ORIGINAL (or evidence acceptable to Lender of) Commercial General Liability
Insurance POLICY (Insurance Services Offices policy form title) naming Borrower
as an insured, providing coverage on an “occurrence” rather than a “claims made”
basis, and written by a carrier approved by Lender with a current A.M. Best
Company rating of at least A:VIJ (which is authorized to do business in the
State of South Dakota), that includes:

 

Combined
general liability policy limit of at least $2,000,000.00 each occurrence,
applying to liability for Bodily Injury, Personal Injury and Property Damage,
which combined limit may be satisfied by the limit afforded under the
Commercial General Liability Policy, or by such Policy in combination with the
limits afforded by an Umbrella or Excess Liability Policy (or policies);
provided, that the coverage afforded under any such Umbrella or Excess Liability
Policy is at least as broad in all material respects as that afforded by the
underlying Commercial General Liability Policy

 

Coverage
for Bodily Injury, Property Damage, Personal Injury, Contractual Liability,
Independent Contractors and Products-Completed Operations Liability Automobile
Liability insurance covering liability for Bodily Injury and Property Damage
arising out of the ownership, use, maintenance or operation-of all owned,
nonowned and

 

23

 

hired
automobiles and other motor vehicles utilized by Borrower in connection with
the Project, which coverage may be provided under a separate policy Deductible
not to exceed $25,000 Additional Insured Endorsement naming U.S. Bank National
Association and a Severability of Interest provision 30-day notice to Lender in
the event of cancellation or non-renewal by either party or material adverse
change

 

III.           WORKER’S
COMPENSATION

 

An
ORIGINAL CERTIFICATE of Worker’s Compensation coverage in the statutory amount,
naming Borrower as an insured, written by a carrier approved by Lender, at such
time as Borrower has employees.

 

24

 

EXHIBIT C

 

Permitted Encumbrances

 

1.             An easement for the purpose of granting the
right to have a Pollution Control Project located on the subject property and
to have ingress and egress on and over such lands, as set forth in Easement
Agreement between Montana-Dakota Utilities, Northwestern Public Service
Company, and Otter Tail Power Company and Grant County, South Dakota, dated
February 1, 1974, and recorded in Miscellaneous Record 159, page 169, on 2/6/74
as Document Number 149365.

 

2.             A non-exclusive easement for the purpose of
granting the right to have transmission lines located on the subject property
and to have ingress to and egress from said lines, as set forth in Easement
Agreement between Montana-Dakota Utilities, Northwestern Public Service
Company, and Otter Tail Power Company and Cooperative Power Association, dated
July 1, 1976, and recorded in Miscellaneous Record 161, page 845, on 8/6/76 as
Document Number 154178.

 

3.             Any rights claimed as set forth in Bill of
Sale and Assignment of Easements between Offer Tall Power Company and
Cooperative Power Association, dated July 1, 1976, and recorded in
Miscellaneous Record 161, page 855, on 8/6/76 as Document Number 154179.

 

25Exhibit
10.1

 

INCREMENTAL FACILITY AMENDMENT AND AMENDMENT
No. 1,  dated as of August 8, 2007 (this “Amendment”),
to the AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 21, 2006
(as amended, supplemented or otherwise modified from time to time, the “Credit
Agreement”), among MAC-GRAY CORPORATION (the “Parent Borrower”), MAC-GRAY
SERVICES, INC. (“Services”), INTIRION CORPORATION (together with
Services and the Parent Borrower, the “Borrowers”), the lenders (the “Lenders”)
from time to time party thereto, JPMORGAN CHASE BANK, N.A., as Administrative
Agent, KEYBANK NATIONAL ASSOCIATION, as Syndication Agent, and HSBC BANK USA,
N.A., WACHOVIA BANK NATIONAL ASSOCIATION and BANK NORTH, N.A., as
Co-Documentation Agents.

 

WHEREAS,
pursuant to the Credit Agreement, the Lenders have agreed to extend credit to
the Borrowers on the terms and subject to the conditions set forth therein;

 

WHEREAS,
pursuant to Schedule 2.20 of the Credit Agreement, the Borrowers have
requested, and the Lenders (such term, and each other capitalized term used but
not defined herein have the meaning assigned to them in the Credit Agreement,
as amended hereby) have agreed to provide, an aggregate of $20,000,000 in
additional Revolving Commitment, subject to the terms and conditions set forth
herein; and

 

WHEREAS, the
Borrowers have requested that the Lenders amend certain provisions of the
Credit Agreement as set forth in this Amendment and the Lenders whose
signatures appear below are willing to amend such provisions of the Credit Agreement
on the terms and subject to the conditions set forth herein.

 

NOW,
THEREFORE, in consideration of the mutual agreements herein contained and other
good and valuable consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto hereby agree as follows:

 

SECTION 1. Commitment Increase 
Subject to terms and conditions set forth herein, each Lender agrees
that from and after the Incremental Amendment Effective Date, its Revolving
Commitment shall be increased to the Commitment Increase Amount set forth and
opposite such Increasing Lender’s name in Schedule 2.01. As of the Incremental
Amendment Effective Date, the aggregate amount of the Lenders’ Revolving
Commitments is $85,000,000.

 

SECTION 2. Amendments to Section 1.01. (a)  The definition of the term “Consolidated
EBITDA” in Section 1.01 of the Credit Agreement is hereby amended by (i)
deleting the text “and” at the end of clause (a)(iv) and substituting the
text “,” therefor and (ii) by inserting the text “and (vi) non-cash
expenses resulting from the grant of stock options or other equity-related
compensation to any director, officer, employee or

 

 

consultant of the
Parent Borrower or any Subsidiary pursuant to a written plan or agreement
approved by the board of directors of the Parent Borrower” immediately
following the comma appearing at the end of clause (v).

 

(b)  The
definition of the term “Revolving Commitment” in Section 1.01 of the
Credit Agreement is hereby amended by deleting the last sentence thereof and replacing
it with the text “As of the Incremental Amendment Effective Date, the aggregate
amount of the Lenders’ Revolving Commitment is $85,000,000.”

 

(c)  The
following term shall be added to Section 1.01 in appropriate alpha order:

 

“Incremental Amendment Effective Date” means [date], 2007.

 

SECTION 3. Amendment of Section 6.04. Section 6.04(b) of the
Credit Agreement is hereby amended by deleting the text “$40,000,000” and
“$80,000,000” therein and substituting therefor the text “$60,000,000” and
“$120,000,000”, respectively.

 

SECTION 4. Representations and Warranties. Each of the Loan Parties
represents and warrants to the Administrative Agent and to each of the Lenders
that:

 

(a)  This Amendment has been duly authorized,
executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against such Loan Party in accordance with its terms.

 

(b)  After giving effect to this Amendment, the
representations and warranties of the Parent Borrower and the Subsidiaries in
the Loan Documents (i) to the extent any such representation or warranty is
modified or qualified based on the terms “materially” or “material” or by
reference to the term “Material Adverse Effect”, are true and correct in all
respects and (ii) to the extent such representation or warranty is not so
modified or qualified, are true and correct in all material respects, in each
case, on and as of the date hereof with the same effect as if made on and as of
the date hereof, except to the extent such representations and warranties
expressly relate to an earlier date.

 

(c)  Immediately after giving effect to this
Amendment, no Default has occurred and is continuing.

 

SECTION 5. Amendment Fee. In consideration of the
agreements of the Lenders contained herein, the Borrowers agree to pay to each
Lender that delivers an executed counterpart of this Amendment by 5:00 p.m.,
New York City time, on August 8, 2007, an amendment fee (the “Amendment Fee”)
in an amount equal to 0.10% of the amount of such Lenders Commitment Increase
Amount (as defined below), provided
that such Amendment Fee shall not be payable unless and until this Amendment
becomes effective as provided in Section 6 below and upon such
effectiveness such Amendment Fee shall be payable immediately.

 

2

 

SECTION 6. Conditions to Effectiveness.  This Amendment shall
become effective as of August 8, 2007 (the “Incremental Amendment Effective
Date”), when (a) the Administrative Agent shall have received
counterparts of this Amendment that, when taken together, bear the signatures
of the Parent Borrower; the Subsidiaries, and each Lender, (b) the
representations and warranties set forth in Section 4  hereof are true and correct and the
Administrative Agent shall have received a certificate to such effect executed
by the CFO of Parent Borrower and (c) all fees and expenses submitted to
the Parent Borrower and the Subsidiaries and required to be paid or reimbursed
by the Parent Borrower and the Subsidiaries under or in connection with this
Amendment or the Credit Agreement (including (i) the Amendment Fee
specified in Section 5 above, (ii) all reasonable invoiced fees,
charges and disbursements of Cravath, Swaine & Moore LLP, counsel
to the Administrative Agent, and (iii) all other reasonable fees and
expenses of the Administrative Agent due and owing as of the date first above
written) have been paid or reimbursed by the Parent Borrower.

 

SECTION 7. Credit Agreement.
Except as expressly set forth herein, this Amendment (a) shall not by
implication or otherwise limit, impair, constitute a waiver of or otherwise
affect the rights and remedies of the Lenders, the Administrative Agent or the
Borrowers under the Credit Agreement or any other Loan Document and
(b) shall not alter, modify, amend or in any way affect any of the terms,
conditions, obligations, covenants or agreements contained in the Credit
Agreement or any other Loan Document, all of which are ratified and affirmed in
all respects and shall continue in full force and effect. Nothing herein shall
be deemed to entitle the Borrowers to a consent to, or a waiver, amendment,
modification or other change of, any of the terms, conditions, obligations,
covenants or agreements contained in the Credit Agreement or any other Loan Document
in similar or different circumstances. After the date hereof, any reference in
the Loan Documents to the Credit Agreement shall mean the Credit Agreement as
modified hereby.

 

SECTION 8. Applicable Law;
Waiver of Jury Trial. (A) THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

(B)  EACH
PARTY HERETO HEREBY AGREES AS SET FORTH IN SECTION 9.09(b), (c) and (d),
SECTION 9.10 OF THE CREDIT AGREEMENT AS IF SUCH SECTION WERE SET FORTH IN
FULL HEREIN.

 

SECTION 9. Counterparts. This Amendment may be executed
in two or more counterparts, each of which shall constitute an original but all
of which when taken together shall constitute but one agreement. Delivery of an
executed signature page to this Amendment by facsimile transmission or email
transmission in pdf format shall be effective as delivery of a manually signed
counterpart of this Amendment.

 

SECTION 10. Headings. The Section headings used
herein are for convenience of reference only, are not part of this Amendment
and are not to affect the construction of, or to be taken into consideration in
interpreting, this Amendment.

 

3

 

[Signature pages follow]

 

IN WITNESS
WHEREOF, the parties hereto have caused this Amendment to be duly executed by
their respective authorized officers as of the day and year first written
above.

 

 

	
   

  	
  MAC-GRAY CORPORATION,

  
	
   

  	
  by

  
	
   

  	
   

  	
  /s/ Michael J. Shea

  	
   

  
	
   

  	
   

  	
    Name:

  	
  Michael J. Shea

  
	
   

  	
   

  	
    Title:

  	
  Executive Vice President &

  Chief Financial Officer

  
					

 

 

	
   

  	
  MAC-GRAY SERVICES, INC.,

  
	
   

  	
  by

  
	
   

  	
   

  	
  /s/ Michael J. Shea

  	
   

  
	
   

  	
   

  	
    Name:

  	
  Michael J. Shea

  
	
   

  	
   

  	
    Title:

  	
  Executive Vice President &

  Chief Financial Officer

  
					

 

 

	
   

  	
  INTIRION CORPORATION,

  
	
   

  	
  by

  
	
   

  	
   

  	
  /s/ Michael J. Shea

  	
   

  
	
   

  	
   

  	
    Name:

  	
  Michael J. Shea

  
	
   

  	
   

  	
    Title:

  	
  Executive Vice President &

  Chief Financial Officer

  
					

 

 

	
   

  	
  JPMORGAN CHASE BANK, N.A.,

  individually and as Administrative Agent,

  
	
   

  	
  by

  
	
   

  	
   

  	
  /s/ Peter M. Killea

  	
   

  
	
   

  	
   

  	
    Name:

  	
  Peter M. Killea

  
	
   

  	
   

  	
    Title:

  	
  Vice President

  
					

 

4

 

	
   

  	
  KEYBANK NATIONAL ASSOCIATION,

  individually and as Syndication Agent,

  
	
   

  	
  by

  
	
   

  	
   

  	
  /s/ Mitchell B. Feldman

  	
   

  
	
   

  	
   

  	
    Name:

  	
  Mitchell B. Feldman

  
	
   

  	
   

  	
    Title:

  	
  Senior Vice President

  
					

 

 

	
   

  	
  HSBC BANK USA, N.A., individually and

  as Co-Documentation Agent,

  
	
   

  	
  by

  
	
   

  	
   

  	
  /s/ Kenneth V. McGraime

  	
   

  
	
   

  	
   

  	
    Name:

  	
  Kenneth V. McGraime

  
	
   

  	
   

  	
    Title:

  	
  Senior Vice President,

  Commercial Executive

  
					

 

 

	
   

  	
  WACHOVIA BANK, NATIONAL

  ASSOCIATION, individually and as

  Co-Documentation Agent,

  
	
   

  	
  by

  
	
   

  	
   

  	
  /s/ Dean Gorton

  	
   

  
	
   

  	
   

  	
    Name:

  	
  Dean Gorton

  
	
   

  	
   

  	
    Title:

  	
  Vice President

  
					

 

 

	
   

  	
  TDBANKNORTH, N.A., individually and

  as Co-Documentation Agent,

  
	
   

  	
  by

  
	
   

  	
   

  	
  /s/ Jeffrey R. Westling

  	
   

  
	
   

  	
   

  	
    Name:

  	
  Jeffrey R. Westling

  
	
   

  	
   

  	
    Title:

  	
  Senior Vice President

  
					

 

5

 

	
   

  	
  LASALLE BANK, N.A.,

  
	
   

  	
  by

  
	
   

  	
   

  	
  /s/ Nancy W. Lanzoni

  	
   

  
	
   

  	
   

  	
    Name:

  	
  Nancy W. Lanzoni

  
	
   

  	
   

  	
    Title:

  	
  First Vice President

  
					

 

 

	
   

  	
  EASTERN BANK,

  
	
   

  	
  by

  
	
   

  	
   

  	
  /s/ Joseph V. Leary

  	
   

  
	
   

  	
   

  	
    Name:

  	
  Joseph V. Leary

  
	
   

  	
   

  	
    Title:

  	
  Senior Vice President

  
					

 

 

	
   

  	
  SOVEREIGN BANK,

  
	
   

  	
  by

  
	
   

  	
   

  	
  /s/ Penny Garver

  	
   

  
	
   

  	
   

  	
    Name:

  	
  Penny Garver

  
	
   

  	
   

  	
    Title:

  	
  Senior Vice President

  
					

 

6

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