RDO EQUIPMENT CO
SECURITY AGREEMENT
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>SECURITY AGREEMENT
<TEXT>


                                                                    EXHIBIT 10.2


                               SECURITY AGREEMENT

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
<S>                                        <C>
Borrower: RDO Construction Equipment Co.   Lender: John Deere Construction Equipment
          RDO Agriculture Equipment Co.            Company, Deere Credit, Inc., and
                                                   John Deere Company, A Division of
                                                   Deere & Company (Collectively)
          2829 South University                    1415 28th Street
          Fargo, ND 58106-7160                     West Des Moines, IA 50265
-------------------------------------------------------------------------------------
</TABLE>


This Security Agreement is entered into on the 31st day of July, 2000 between
RDO Construction Equipment Co. and RDO Agriculture Equipment Co. (collectively
referred to below as "Borrower") and John Deere Construction Equipment, Inc.,
Deere Credit, Inc., and john Deere Company, A Division of Deere & Company
(referred to below collectively as "Lender"). For good and valuable
consideration, Borrower grants to Lender a security interest in the Collateral
to secure the indebtedness and agrees that Lender shall have the rights stated
in this Agreement with respect to the Collateral, in addition to all other
rights which Lender may have by law.

1.   DEFINITIONS.

     The following words shall have the following meanings when used in this
     Agreement. Terms not otherwise defined in this Agreement shall have the
     meaning attributed to such terms in the Uniform Commercial Code as
     currently enacted in the State of Iowa or in the Loan Agreement between
     Borrower and Lender which is executed contemporaneously with this
     Agreement.

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

     "Borrower" means RDO Construction Equipment Co. and RDO Agriculture
     Equipment Co., their successors and assigns.

     "Collateral" means the following described property of Borrower, whether
     now owned or hereafter acquired, whether now existing or hereafter arising,
     and wherever located:

          ALL WHOLEGOODS INVENTORY, INCLUDING PROCEEDS THEREOF (INCLUDING
          INSURANCE PROCEEDS), -

     In addition, the word "Collateral" includes all the following, whether now
     owned or hereafter acquired, whether now existing or hereafter arising, and
     wherever located:

     (a)  All attachments, accessions, accessories, tools, parts, supplies,
          increases, and additions to and all replacements and substitutions for
          any property described above.

     (b)  All products and proceeds of any of the property described in this
          Collateral definition.

     (c)  All accounts, general intangibles, instruments, rents, moneys,
          payments, and all other rights, arising out of a sale, lease, or other
          disposition of any of the property described in this Collateral
          section.

     (d)  All proceeds (including insurance proceeds) from the sale,
          destruction, loss, or other disposition of any of the property
          described in this Collateral section.

     (e)  All records and data relating to any of the property described in this
          Collateral section, whether in the form of a writing, photograph,
          microfilm, microfiche, or electronic media, together with all of
          Borrower's right, title, and interest in and to all computer software
          required to utilize, create, maintain, and process any such records or
          data on electronic media.


                                       42
<PAGE>


     "Indebtedness" means the indebtedness of the type described in the Loan
     Agreement, including all principal and interest, together with all other
     indebtedness and cost and expenses for which Borrower is responsible under
     this Agreement or under any of the related documents. In addition, the word
     "Indebtedness" includes all other obligations, debts and liabilities, plus
     interest thereon, of Borrower, to Lender, as well as all claims by Lender
     against Borrower, whether existing now or later; whether they are voluntary
     or involuntary, due or not due, direct or indirect, absolute or contingent,
     liquidated or unliquidated; whether Borrower may be liable individually or
     jointly with others; whether Borrower may be obligated as guarantor,
     surety, accommodation party or otherwise; whether recovery upon such
     indebtedness may be or hereafter may become barred by any statute of
     limitations; and whether such indebtedness may be or hereafter may become
     otherwise unenforceable.

     "Lender" collectively means John Deere Construction Equipment Company,
     Deere Credit, Inc., and John Deere Company, A Division of Deere & Company,
     their successors and assigns.

     "Loan Agreement" means the Loan Agreement being entered into between
     Borrower and Lender contemporaneously with this Agreement.

     "Related Documents" means and includes without limitation all promissory
     notes, credit agreements, loan agreements, guaranties, and all other
     instruments, agreements and documents, whether now or hereafter existing,
     executed in connection with the Indebtedness.

2.   OBLIGATIONS OF BORROWER.

     Borrower warrants and covenants to Lender as follows:

     A.   Perfection of Security Interest. Borrower agrees to execute such
          financing statements and to take whatever other actions are requested
          by Lender to perfect and continue Lender's security interest in the
          Collateral. Upon request of Lender, Borrower will deliver to Lender
          any and all of the documents evidencing or constituting the
          Collateral. Lender may to the extent permitted by law at any time, and
          without further authorization from Borrower, if permitted by law, file
          financing statements with respect to the Collateral, signed only by
          Lender. Borrower promptly will notify Lender before any change in
          Borrower's name. This is a continuing Agreement and will continue in
          effect even though all or any part of the indebtedness is paid in full
          and even though, for a period of time, Borrower may not be indebted to
          Lender.

     B.   No Violation. The execution and delivery of this Agreement will not
          violate any law applicable to Borrower or agreement governing Borrower
          or to which Borrower is a party, and its certificate or articles of
          incorporation and bylaws do not prohibit any terms or conditions of
          this Agreement.

     C.   Enforceability of Collateral. To the extent the Collateral consists of
          accounts, chattel paper, or general intangibles, the Collateral is
          enforceable in accordance with its terms, is genuine, and complies
          with applicable laws concerning form, content and manner of
          preparation and execution, and all persons appearing to be obligated
          on the Collateral have authority and capacity to contract and in fact
          are obligated as they appear to be on the Collateral.

     D.   Location of Collateral. Borrower, upon request of Lender, will deliver
          to Lender in a form satisfactory to Lender a schedule of real
          properties and Collateral locations relating to the Borrower's
          operations, including without limitation the following: (a) all real
          property owned or being purchased by Borrower; (b) all real property
          being rented or leased by Borrower; (c) all storage facilities owned,
          rented, leased, or being used by Borrower; and (d) all other
          properties where Collateral is or may be located. The schedule of real
          properties shall include for leased properties the legal identity of
          the landholder of such real property.


                                       43
<PAGE>


     E.   Removal of Collateral. Borrower shall keep the Collateral (or to the
          extent the Collateral consists of intangible property such as
          accounts, the records concerning the Collateral) at the Borrower's
          address shown above, or at such other locations as are acceptable to
          Lender. Except in the ordinary course of its business, including the
          sale, transfer, repair, rent or demonstrating of inventory, Borrower
          shall not remove the Collateral from its existing locations without
          the prior written consent of Lender.

     F.   Transactions Involving Collateral. Except for inventory sold, rented,
          leased, transferred or accounts collected in the ordinary course of
          Borrower's business, Borrower shall not sell, or otherwise dispose of
          the Collateral. If Borrower is not in default under this Agreement,
          the Borrower may sell, rent, lease, or transfer in the ordinary course
          of its business and only to buyers who qualify as a buyer in the
          ordinary course of business. A sale in the ordinary course of
          Borrower's business does not include a transfer in partial or total
          satisfaction of a debt or any bulk sale.

     G.   Title. Borrower represents and warrants to Lender that it holds good
          and marketable title to the Collateral. Borrower shall defend Lender's
          rights in the Collateral against the claims and demands of all other
          persons.

     H.   Collateral Schedules and Locations. As often as Lender shall
          reasonably require, and insofar as the Collateral consist of accounts
          and general intangibles, Borrower shall deliver to Lender schedules of
          such Collateral, including such information as Lender may reasonably
          require, including without limitation names and addresses of account
          debtors and aging of accounts and general intangibles. Insofar as the
          Collateral consist of inventory and equipment, Borrower shall deliver
          to Lender, as often as Lender shall reasonably require, such list,
          descriptions, and designations of such Collateral as Lender may
          reasonably require to identify the nature, extent, and location of
          such Collateral.

     I.   Maintenance and Inspection of Collateral. Borrower shall maintain all
          tangible Collateral in good condition and repair. Borrower will not
          commit or permit damage to or destruction of the Collateral or any
          part of the Collateral. Lender and its designated representatives and
          agents shall have the right at all reasonable times to examine,
          inspect, and audit the collateral wherever located. Borrower shall
          immediately notify Lender of all cases involving the return,
          rejection, repossession, loss or material damage of or to any
          Collateral ; of any request for credit or adjustment or of any other
          dispute arising with respect to the Collateral; and generally of all
          happenings and events affecting the Collateral or the value or the
          amount of the Collateral.

     J.   Taxes, Assessments and Liens. Borrower will pay when due all taxes,
          assessments and liens upon the Collateral, its use or operation, upon
          this Agreement, upon any promissory note or loan agreement evidencing
          the indebtedness, or upon any other Related Documents. Borrower may
          withhold any such payment or may elect to contest any lien if Borrower
          is in good faith conducting an appropriate proceeding to contest the
          obligation to pay and so long as the Lender's interest in the
          Collateral is not jeopardized in Lender's sole opinion. If the
          Collateral is subject to a lien which is not discharged within fifteen
          (15) days, Borrower shall deposit with Lender cash, a sufficient
          corporate surety bond or other security satisfactory to Lender in an
          amount adequate to provide for the discharge of the lien plus any
          interest, cost or other charges that could accrue as a result of
          foreclosure or sale of the Collateral. In any contest Borrower shall
          defend itself and Lender and shall satisfy any final adverse judgment
          before enforcement against the Collateral. Borrower shall name Lender
          as an additional obligee under any surety bond furnished in the
          contest proceedings.

     K.   Compliance with Government Requirements. Borrower shall comply
          promptly with all laws, ordinances, rules and regulations of all
          governmental authorities, now or hereafter in effect, applicable to
          the ownership, production, disposition, or use of the Collateral.
          Borrower may contest in good faith any such law, ordinance or
          regulation and withhold compliance during any proceeding, including
          appropriate appeals, so long as Lender's interest in the Collateral,
          in Lender's opinion is not jeopardized.

     L.   Maintenance of Insurance. Borrower shall at all times keep the
          Collateral insured against all risk of loss, damage or destruction for
          its full insurable value with Lender listed as loss payee.


                                       44
<PAGE>


          Borrower shall also at all times maintain comprehensive general
          liability insurance with a minimum combined limit of liability
          insurance for both bodily injury and property damage of no less than
          $1,000,000. Borrower may choose the individual through whom insurance
          is obtained, but the insurance must be acceptable to Lender. Such
          insurance will provide that it may not be canceled by Borrower without
          the consent of Lender and may not be canceled by the insurer without
          at least ten (10) days written notice to Lender. Borrower agrees to
          provide Lender with evidence of the paid-up insurance policy that
          Borrower has on the Collateral as of the date of this Agreement and at
          least 30 days before the renewal date of the insurance. If Borrower
          fails to provide evidence of paid-up insurance, Borrower agrees to
          reimburse Lender for the cost of any insurance purchased by Lender
          until the date such evidence is provided by Borrower. In addition, if
          permitted by law, Borrower agrees to pay a reasonable administrative
          fee to Lender for obtaining and canceling such insurance. If Borrower
          defaults under this Agreement, Borrower gives Lender permission to
          cancel any insurance on the Collateral and, if allowed by law, to
          apply any premium refunds to Borrowers indebtedness owed to Lender
          with any excess returned to the Borrower. Any proceeds payable to
          Borrower from insurance by reason of loss, damage, or destruction of
          the Collateral may be applied to Borrowers indebtedness to Lender or
          to replacement of the Collateral, at Lender's sole discretion.
          Borrower understands and agrees that Lender may consider the
          indebtedness in default if Borrower fails to keep the Collateral
          properly insured. If this happens, Lender may, but is not obligated
          to, buy insurance to protect the Collateral.

     M.   Debtor's Right To Possession and To Collect Accounts. Until default
          and except as otherwise provided below with respect to accounts,
          Borrower may have possession of the tangible property and beneficial
          use of all the Collateral and may use it in any lawful manner not
          inconsistent with this Agreement or Related Documents. Until otherwise
          notified by Lender, Borrower may collect any of the Collateral
          consisting of accounts. At any time and even though no Event of
          Default exist, Lender may exercise its right to collect the accounts
          and to notify account debtors to make payments directly to Lender for
          application to the Indebtedness. If the Lender at any time has
          possession of any Collateral, whether before or after an Event of
          Default, Lender shall be deemed to have exercised reasonable care in
          the custody and preservation of the Collateral if Lender takes such
          action for that purpose as Borrower shall request or as Lender, in its
          sole discretion, shall deem appropriate under the circumstances, but
          failure to honor any request by Borrower shall not of itself be deemed
          to be a failure to exercise reasonable care. Lender shall not be
          required to take any steps necessary to preserve any rights in the
          Collateral against prior parties, nor to protect, preserve or maintain
          any security interest given to secure the Indebtedness.

     N.   Expenditures by Lender. If not discharged or paid when due, Lender may
          (but shall not be obligated to) discharge or pay any amounts required
          to be discharged or paid by the Borrower under this Agreement,
          including without limitation all taxes, liens, security interest,
          encumbrances, and other claims, at any time levied or placed on the
          Collateral. Lender also may (but shall not be obligated to) pay all
          cost for insuring, maintaining and preserving the Collateral. All such
          expenditures incurred or paid by Lender for such purposes will then
          bear interest at the rate charged under the Loan Agreement from the
          date incurred or paid by the Lender to the date of repayment by
          Borrower. All such expenses shall become a part of the Indebtedness
          and, at Lender's option, will (a) be payable on demand, (b) be added
          to the balance of the Indebtedness and be payable with any installment
          payments becoming due. This Agreement will also secure payment of
          these amounts. Such right shall be in addition to all other rights and
          remedies to which Lender may be entitled upon the occurrence of an
          Event of Default.

     O.   Events of Default and Remedies. Any Event of Default which is
          described in the Loan Agreement shall also constitute an Event of
          Default under this Agreement. In addition to the remedies available to
          secured parties at law, or in equity, Lender shall be entitled to
          avail itself of all of the remedies described in the Loan Agreement
          and the Related Documents.

     P.   Miscellaneous Provisions. The following miscellaneous provisions are a
          part of this Agreement:

          1.   This Agreement, together with the Loan Agreement and any Related
               Documents, constitute the entire understanding and agreement of
               the parties as to the matters set forth in this Agreement. No
               alteration of or amendment to this Agreement shall be effective
               unless given


                                       45
<PAGE>


               in writing and signed by the party or parties sought to be
               charged or bound by the alteration or amendment.

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

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

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

          5.   Any disputes arising out of this Security Agreement shall be
               subject to the arbitration provisions contained in Section 24 of
               the Loan Agreement.

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS SECURITY AGREEMENT,
AND BORROWER AGREES TO ITS TERMS.


BORROWER:

RDO Construction Equipment Co.

By:     /s/ Thomas K. Espel
       -----------------------------------

Title:  Treasurer/CFO
       -----------------------------------

Date:   8/7/00
       -------

RDO Agriculture Equipment Co.

By:     /s/ Thomas K. Espel
       -----------------------------------

Title:  Treasurer/CFO
       -----------------------------------

Date:   8/7/00
       -------


                                       46

</TEXT>
</DOCUMENT>
