Execution Version
SECURITY AGREEMENT
This Security Agreement dated as of the 19th day of June, 2007 (this
"Security Agreement"), by and between NEDAK Ethanol, LLC, a Nebraska limited
liability company, having an address of 00000 Xxxxxxxxx Xxxx - X.X. Xxx 000,
Xxxxxxxx, Xxxxxxxx 00000 ("Pledgor") and Arbor Bank, a Nebraska banking
corporation ("Pledgee").
RECITALS:
WHEREAS, Pledgee made a loan to Pledgor in the original principal
amount of $6,864,000.00 (the "Loan"), pursuant to that certain Loan Agreement of
even date herewith by and between Pledgee and Pledgor (the "Loan Agreement");
and
WHEREAS, the Loan will be disbursed to Pledgor in one or more advances
and is evidenced by that certain Promissory Note dated of even date herewith
from Pledgor to Pledgee ("Note"); and
WHEREAS, in order to induce Pledgee to make the Loan, Pledgor is
willing to enter into this Security Agreement and grant Pledgee a security
interest in the Series A Note and the Pledged Revenues (as hereinafter defined).
AGREEMENT
NOW THEREFORE, in consideration of the foregoing, and in order to
induce Pledgee to make the Loan and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, Pledgor does hereby
agree with Pledgee, as follows:
1. Definitions.
"Capitalized Interest Fund" shall have the meaning given that term in the
Loan Agreement.
"Chief Executive Office State" shall mean the State in which the Chief
Executive Offices of Pledgor are located.
"Code" shall mean the Uniform Commercial Code, as enacted in the State of
Nebraska, as amended.
"Collateral State" shall mean any State in which Collateral is issued
and/or held.
"Debt Service Reserve Fund" shall have the meaning given that term in the
Loan Agreement.
"Financing Statement" shall have the meaning given that term under the
Code.
"Insurance Proceeds" shall mean all the proceeds of any insurance policies
of Pledgor.
"Interest" shall have the meaning set forth in the Loan Agreement.
"Issuer" shall mean The City of Xxxxxxxx, Nebraska, as issuer of the Series
A Note.
"Loan Documents" shall mean the Loan Agreement and any and all ancillary
documents necessary to consummate the transactions contemplated thereby.
"Obligations" shall mean (a) the aggregate unpaid principal amount of, and
accrued Interest on, the Note; (b) all other fees and other amounts owing by
Pledgor to Pledgee under the Note; and (c) each and all of the representations,
warranties, covenants, obligations, liabilities, indemnities and duties of
Pledgor under the Loan Documents.
"Pledged Revenues" shall mean all revenues pledged by Issuer pursuant to
the Series A Note, which includes Pledged Tax Increment Revenues, PILOT Payments
and Liquidated Damages Amount, as such terms are defined in the Loan Agreement.
"Pledgor State" shall mean any State in which Pledgor is authorized or
licensed to conduct business.
"Series A Note" shall mean the Issuer's Tax Increment Revenue Note, Taxable
Series 2007A (NEDAK Ethanol, LLC Plant Project), dated the date of issuance and
delivery thereof, in the original principal amount of Six Million Eight Hundred
Sixty-Four Thousand Dollars ($6,864,000.00) with a debt service coverage ratio
of 1.20 to 1.00, and an initial interest rate of 9.5%, and a maturity date on or
before December 1, 2021.
"Senior Lender" shall mean Farm Credit Services of Grand Forks, FCLA, along
with its lending syndicate, or any successor lender under the Senior Credit
Facility.
"Senior Credit Facility" shall mean that certain Master Credit Agreement
between Borrower and Senior Lender dated as of February 14, 2007.
2. Grant of Security Interest. As security for the full payment and
performance of the Obligations when due, Pledgor hereby grants, assigns and
pledges, a continuing lien on and security interest in, and, as a part of such
grant, assignment and pledge, hereby transfers and assigns to Pledgee as
security, all of the following (the "Collateral") whether now owned or hereafter
acquired: (i) the Series A Note and all of Pledgor's right, title and interest
in and to the Series A Note; (ii) all Insurance Proceeds, subject, however, to
the right of Senior Lender pursuant to the Senior Credit Facility; (iii) all of
Pledgor's interest in all distributions to which Pledgor shall at any time be
entitled in respect of the Series A Note; (iv) all of Pledgor's right, title and
interest in and to the Pledged Revenues; (v) the Capitalized Interest Fund; (vi)
the Debt Service Reserve Fund; and (vii) to the extent not otherwise included,
all proceeds of any or all of the foregoing.
3. Perfection of Security Interests.
(a) Pledgor authorizes Pledgee to file a Financing Statement
describing the Collateral.
(b) Pledgee shall receive, prior to the Closing of the Loan, an
official report from the Secretary of State of each Collateral State, Chief
Executive Office State and the Pledgor
State indicating that Pledgee's interest is prior to all other security
interest or other interests reflected in the report.
4. Perfection by Possession. Pledgor shall have possession of the Series A
Note.
5. Representations, Warranties and Covenants. Pledgor hereby covenants
with, and represents and warrants to, Pledgee as follows:
(a) Pledgor will defend Pledgee's right, title and interest in and to
the Collateral pledged by Pledgor pursuant hereto or in which it has
granted a security interest pursuant hereto against the claims and demands
of all other persons.
(b) Pledgor is the legal beneficiary of the Series A Note in which it
has granted a security interest pursuant hereto, free and clear of all
claims or security interests of every nature whatsoever, except such as are
created pursuant to this Security Agreement, and has the unqualified right
to pledge and grant a security interest in the same as herein provided
without the consent of any other person other than any such consent that
has been obtained.
(c) The Series A Note have been validly acquired by Pledgor and are
duly and validly pledged hereunder. All consents and approvals required for
the execution and delivery of this Security Agreement and the consummation
of the transactions contemplated by this Security Agreement have been
obtained.
6. Application of Collateral. All proceeds of any Collateral now or at any
time hereafter received or retained by Pledgee pursuant to the provisions of
this Security Agreement (including, without limitation, any proceeds from the
sale of all or any portion of the Series A Note, including all Pledged Revenues,
and all distributions received by Pledgee in respect of the Series A Note,
including the Pledged Revenues) shall be applied by Pledgee to the Obligations.
7. Remedies. If an Event of Default shall occur and then be continuing:
(a) Pledgee may exercise all of the rights and remedies of a secured
party under the Code.
(b) Pledgee shall also have the right to, at any time and from time to
time, (i) cause any or all of the Series A Note to be registered in or
transferred into the name of Pledgee or into the name of a nominee or
nominees, or designee or designees, of Pledgee; and/or (ii) sell, resell,
assign and deliver, in its sole discretion, any or all of the Series A Note
or any other collateral security for the Obligations and all right, title
and interest, claim and demand therein and right of redemption thereof, at
public or private sale, for cash, upon credit or for future delivery, and
in connection therewith Pledgee may grant options and may impose reasonable
conditions such as requiring any purchaser to represent that any
"securities" constituting any part of the collateral are being purchased
for investment only, Pledgor hereby waiving and releasing any and all
equity or right of redemption. If all or any of the Series A Note is sold
by Pledgee upon credit or for future delivery, Pledgee shall not be liable
for the failure of the purchaser to purchase or pay for the same and, in
the event of any such failure, Pledgee may resell such collateral.
(c) Pledgee may exercise, either by itself or by its nominee or
designee, in the name of Pledgor, all of the rights, powers and remedies
granted to Pledgee in Section 2 hereof in respect of the Series A Note and
may exercise and enforce all of Pledgee's rights and remedies hereunder and
under law.
8. Events of Default. An "Event of Default" shall mean each or any of the
following:
(a) if Pledgor fails to pay any payment of principal due under the
Note or the Loan Agreement, together with all accrued and unpaid Interest,
if any, which is due under the Note, or declared due and payable whether at
maturity or by acceleration; or
(b) if any Event of Default under the Note has occurred or is
occurring; or
(c) if any Event of Default under the Loan Documents has occurred or
is occurring; or
(d) if any Event of Default under this Security Agreement has occurred
or is occurring.
9. Waivers; Modifications. None of the terms and conditions of this
Security Agreement may be discharged, changed, waived, modified or varied in any
manner unless in a writing duly signed by the parties hereto.
10. Remedies Cumulative. All rights and remedies afforded to Pledgee by
reason of this Security Agreement are separate and cumulative remedies, and
shall be in addition to all other rights and remedies in favor of Pledgee
existing at law or in equity or otherwise. No one of such remedies, whether or
not exercised by Pledgee, shall be deemed to exclude, limit, or prejudice the
exercises of any other legal or equitable remedy or remedies available to
Pledgee.
11. Notices. Any demand, notice or other communication in connection with
this Security Agreement will be deemed to be made, given and received:
(a) if mailed by prepaid registered mail addressed as set forth below,
on the day following the day on which it was mailed, during a period of
uninterrupted mail service, whether or not the same be returned
undelivered;
(b) if delivered or sent by prepaid courier service to the address set
forth below, or personally served upon any director, officer, servant,
employee or partner of the Pledgor or Pledgee, at the time of such delivery
or service; or
(c) if sent prepaid by telefax or other similar means of electronic
communication, to the number set forth below or where the Pledgor or
Pledgee has such facilities to receive such communication, provided that a
copy thereof is sent on the same day by prepaid mail, at the time of such
sending.
Until further notice, notices under this Security Agreement shall be addressed
as follows:
If to Pledgee:
Arbor Bank
000 Xxxxxxx Xxx.
X.X. Xxx 000
Xxxxxxxx Xxxx, XX 00000-0000
Attention: Xxx Xxxxxx
Fax: 000.000.0000
If to Pledgor:
NEDAK Ethanol, LLC
00000 Xxxxxxxxx Xxxx - X.X. Xxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxx, President and General Manager
Phone: 000.000.0000
Fax: 000.000.0000
12. Binding Effect and Assignments. This Security Agreement shall be
binding upon and inure to the benefit of Pledgor and its successors and assigns.
This Security Agreement shall be binding upon and shall inure to the benefit of
Pledgee and its successors and assigns.
13. Severability. In case any one or more of the provisions contained in
this Security Agreement shall be found to be invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby, and this Security Agreement shall continue in full force and effect in
accordance with its remaining terms.
14. Further Assurances. Pledgor agrees to do such further acts and things
and to execute and deliver to Pledgee such additional conveyances, assignments,
agreements and instruments as Pledgee from time to time may reasonably require
or deem advisable to carry into effect this Security Agreement or to further
assure and confirm unto Pledgee its rights, powers and remedies hereunder.
15. Release. Pledgee agrees to release its security interest in the Series
A Note upon satisfaction of all of the following conditions precedent:
(a) that the documents to effect such release be prepared by counsel
for Pledgor; and
(b) that (i) the principal amount of the Note evidencing the Loan and
the other Obligations, shall have been fully paid and satisfied, and (ii)
accrued Interest on the Note evidencing the Loan and any costs, commitment
and other fees, expenses and other sums owing to Pledgee as provided in the
Note, shall have been fully paid; and
(c) that all costs, fees, expenses and other sums paid or incurred by
or on behalf of Pledgee in exercising any of its rights, powers, options,
privileges and remedies
hereunder, including, without limitation, reasonable attorneys' fees and
disbursements, shall have been fully paid.
If the Series A Note is so released, Pledgee, at the request and sole cost and
expense of Pledgor made at the time of any such release, will execute and
deliver to Pledgor a proper instrument or instruments acknowledging the
satisfaction and termination of this Security Agreement, and will duly assign,
transfer and deliver without recourse and without any representation or
warranty, express or implied (except that Pledgee shall represent that such
release has been and is duly authorized, that all necessary consents to the
execution and delivery thereof have been obtained and that it has not assigned
or encumbered the Collateral), to Pledgor such of the Series A Note as may be in
the possession of Pledgee and as has not theretofore been sold or otherwise
applied or released pursuant to this Security Agreement, together with any
moneys at the time held by Pledgee hereunder and not applied to the payment of
the Obligations.
16. Governing Law. This Security Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Nebraska
applicable to contracts entered into and to be performed entirely within such
State and without regard to the conflicts or choice of laws or rules of such
State.
17. Interpretation. All grammatical changes in gender, tense and number
required to give meaning to any provision herein shall be deemed to be made.
References to "this Agreement," "hereof," "herein," "hereto" and like references
are to this Security Agreement and not to any particular article, section or
other subdivision of this Security Agreement. The insertion of headings in this
Security Agreement is for convenience of reference only and will not affect the
construction or interpretation of this Security Agreement. Unless otherwise
specified herein, all statements of or reference to dollar amounts in this
Security Agreement will mean lawful money of the United States of America.
18. Counterparts. This Security Agreement may be executed in one or more
counterparts each of which shall be deemed and constitute an original and
binding agreement.
[signature page follows; remainder of page intentionally left blank]
[signature page to Security Agreement]
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Security Agreement as of the day and year first above written.
PLEDGOR
NEDAK ETHANOL, LLC,
a Nebraska limited liability company
as Borrower
By: /s/ Xxxxxx Xxxxxxxxx
Name: Xxxxxx Xxxxxxxxx
Its: President and General Manager
PLEDGEE
Arbor Bank,
a Nebraska banking corporation
By: /s/ Xxx X. Xxxxxx
Its: Omaha President
