Exhibit 10.7
SECURITY
AGREEMENT
THIS SECURITY
AGREEMENT , dated as of August 10, 2007, between
GREAT PLAINS ETHANOL, LLC, a South Dakota limited liability d/b/a
POET Biorefining – Chancellor company (“ Borrower ”), and AGCOUNTRY FARM
CREDIT SERVICES, FLCA (“ Lender ”).
Recitals:
A.
Borrower has entered into a Master Credit Agreement dated as of the
date hereof (as amended, restated, supplemented or otherwise
modified and in effect from time to time, the “ Credit Agreement ”) with Lender,
pursuant to which Lender, subject to the terms and conditions
contained therein, is to make loans to Borrower; and
B.
It is a condition precedent to Lender’s making any Loans to
Borrower that Borrower execute and deliver to Lender a security
agreement in substantially the form hereof; and
C.
Borrower wishes to grant security interests in favor of Lender as
herein provided.
Agreement:
In consideration of the promises herein
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower and Lender
agree as follows:
1.
Definitions . All capitalized terms which are not
defined herein have the meanings provided for in the Credit
Agreement. The term “ State ” as used herein means the
State of North Dakota. All terms defined in Article 9 of the
Uniform Commercial Code of the State and used herein shall have the
same meanings as specified therein. The term “ Event of Default ” as used herein
means any Event of Default described or listed in the Credit
Agreement, including the failure of Borrower to pay or perform any
of the Obligations as and when due to be paid or performed.
2.
Grant of Security Interest . Borrower hereby grants to
Lender, to secure the payment and performance in full of all of the
Obligations, a security interest in, and pledges and assigns to
Lender, the following properties, assets and rights of Borrower,
wherever located, whether now owned or hereafter acquired or
arising, and all proceeds (including casualty insurance proceeds)
and products thereof (all of the same being hereinafter called the
“ Collateral
”): all personal and fixture property of every kind and
nature including without limitation all goods (including inventory,
equipment and any accessions thereto), instruments (including
notes), documents, accounts (including health-care-insurance
receivables), chattel paper (whether tangible or electronic),
deposit accounts, letter-of-credit rights (whether or not the
letter of credit is evidenced by a writing), commercial tort
claims, securities and all other investment property, supporting
obligations, any other contract rights or rights to the payment of
money (including without limitation all United States Department of
Agriculture payments and
Commodity Credit Corporation payments such as
payments related to the bioenergy program described at 7 C.F.R.
Part 1424), including without limitation all Material Contracts,
insurance claims and proceeds, tort claims, and all general
intangibles including, without limitation, all payment intangibles,
patents, patent applications, trademarks, trademark applications,
trade names, copyrights, copyright applications, software,
engineering drawings, service marks, customer lists, goodwill, and
all licenses, permits, agreements of any kind or nature pursuant to
which Borrower possesses, uses or has authority to possess or use
property (whether tangible or intangible) of others or others
possess, use or have authority to possess or use property (whether
tangible or intangible) of Borrower, and all recorded data of any
kind or nature, regardless of the medium of recording including,
without limitation, all software, writings, plans, specifications
and schematics. Lender acknowledges that the attachment of its
security interest in any commercial tort claim as original
collateral is subject to Borrower’s compliance with
Section 4.07 .
3.
Authorization to File Financing Statements . Borrower
hereby irrevocably authorizes Lender at any time and from time to
time to file in any Uniform Commercial Code jurisdiction any
initial financing statements and amendments thereto that (a)
indicate the Collateral (i) as all assets of Borrower or words
of similar effect, regardless of whether any particular asset
comprised in the Collateral falls within the scope of Article 9 of
the Uniform Commercial Code of the State or such jurisdiction, or
(ii) as being of an equal or lesser scope or with greater detail,
and (b) contain any other information required by Article 9 of the
Uniform Commercial Code of the State or any other state for the
sufficiency or filing office acceptance of any financing statement
or amendment, including (i) whether Borrower is an organization,
the type of organization and any organization identification number
issued to Borrower and, (ii) in the case of a financing statement
filed as a fixture filing or indicating Collateral as as-extracted
collateral or timber to be cut, a sufficient description of real
property to which the Collateral relates. Borrower agrees to
furnish any such information to Lender promptly upon request.
Borrower also ratifies its authorization for Lender to have filed
in any Uniform Commercial Code jurisdiction any like initial
financing statements or amendments thereto if filed prior to the
date hereof.
4.
Other Actions . Further to insure the attachment,
perfection and first priority of, and the ability of Lender to
enforce, Lender’s security interest in the Collateral,
Borrower agrees, in each case at Borrower’s own expense, to
take the following actions with respect to the following
Collateral:
4.01
Notes and Tangible Chattel Paper . If Borrower at any
time holds or acquires any notes or tangible chattel paper,
Borrower will forthwith endorse, assign and deliver the same to
Lender, accompanied by such instruments of transfer or assignment
duly executed in blank as Lender may from time to time
specify.
4.02
Deposit Accounts . For each deposit account that
Borrower at any time opens or maintains, Borrower will, at
Lender’s request and option, pursuant to an agreement in form
and substance satisfactory to Lender, either (a) cause the
depositary bank to agree to comply at any time with instructions
from Lender to such depositary bank directing the disposition of
funds from time to time credited to such deposit account, without
further consent of Borrower, or (b) arrange for Lender to become
the
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customer of the depositary bank with respect to
the deposit account, with Borrower being permitted, only with the
consent of Lender, to exercise rights to withdraw funds from such
deposit account. The provisions of this paragraph do not apply to
any deposit account for which Borrower, the depositary bank and
Lender have entered into a cash collateral agreement specially
negotiated among Borrower, the depositary bank and Lender for the
specific purpose set forth therein.
4.03
Investment Property . If Borrower at any time holds or
acquires any certificated securities, Borrower will forthwith
endorse, assign and deliver the same to Lender, accompanied by such
instruments of transfer or assignment duly executed in blank as
Lender may from time to time specify. If any securities now or
hereafter acquired by Borrower are uncertificated and are issued to
Borrower or its nominee directly by the issuer thereof, Borrower
will immediately notify Lender thereof and, at Lender’s
request and option, pursuant to an agreement in form and substance
satisfactory to Lender, either (a) cause the issuer to agree to
comply with instructions from Lender as to such securities, without
further consent of Borrower or such nominee, or (b) arrange for
Lender to become the registered owner of the securities. If any
securities, whether certificated or uncertificated, or other
investment property now or hereafter acquired by Borrower are held
by Borrower or its nominee through a securities intermediary or
commodity intermediary, Borrower will immediately notify Lender
thereof and, at Lender’s request and option, pursuant to an
agreement in form and substance satisfactory to Lender, either (i)
cause such securities intermediary or (as the case may be)
commodity intermediary to agree to comply with entitlement orders
or other instructions from Lender to such securities intermediary
as to such securities or other investment property, or (as the case
may be) to apply any value distributed on account of any commodity
contract as directed by Lender to such commodity intermediary, in
each case without further consent of Borrower or such nominee, or
(ii) in the case of financial assets or other investment property
held through a securities intermediary, arrange for Lender to
become the entitlement holder with respect to such investment
property, with Borrower being permitted, only with the consent of
Lender, to exercise rights to withdraw or otherwise deal with such
investment property. The provisions of this paragraph shall not
apply to any financial assets credited to a securities account for
which Lender is the securities intermediary.
4.04
Collateral in the Possession of a Bailee . If any goods
are at any time in the possession of a bailee, Borrower will
promptly notify Lender thereof and, if requested by Lender, will
promptly obtain an acknowledgment from the bailee, in form and
substance satisfactory to Lender, that the bailee holds such
Collateral for the benefit of Lender and will act upon the
instructions of Lender, without the further consent of
Borrower.
4.05
Electronic Chattel Paper and Transferable Records . If
Borrower at any time holds or acquires an interest in any
electronic chattel paper or any “transferable record,”
as that term is defined in Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act, or in Section 16 of
the Uniform Electronic Transactions Act as in effect in any
relevant jurisdiction, Borrower will promptly notify Lender thereof
and, at the request of Lender, will take such action as Lender
may
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reasonably request to vest control in Lender,
under Section 9-105 of the Uniform Commercial Code, of such
electronic chattel paper or control under Section 201 of the
Federal Electronic Signatures in Global and National Commerce Act
or, as the case may be, Section 16 of the Uniform Electronic
Transactions Act, as so in effect in such jurisdiction, of such
transferable record. Lender agrees with Borrower that Lender will
arrange, pursuant to procedures satisfactory to Lender and so long
as such procedures will not result in Lender’s loss of
control, for Borrower to make alterations to the electronic chattel
paper or transferable record permitted under UCC Section 9-105 or,
as the case may be, Section 201 of the Federal Electronic
Signatures in Global and National Commerce Act or Section 16 of the
Uniform Electronic Transactions Act for a party in control to make
without loss of control, unless an Event of Default has occurred
and is continuing or would occur after taking into account any
action by Borrower with respect to such electronic chattel paper or
transferable record.
4.06
Letter-of-Credit Rights . If Borrower is at any time a
beneficiary under a letter of credit now or hereafter issued in
favor of Borrower, Borrower will promptly notify Lender thereof
and, at the request and option of Lender, Borrower will, pursuant
to an agreement in form and substance satisfactory to Lender,
either (i) arrange for the issuer and any confirmer of such letter
of credit to consent to an assignment to Lender of the proceeds of
any drawing under the letter of credit or (ii) arrange for Lender
to become the transferee beneficiary of the letter of credit.
4.07
Commercial Tort Claims . If Borrower at any time holds
or acquires a commercial tort claim, Borrower will immediately
notify Lender in a writing signed by Borrower of the brief details
thereof and grant to Lender in such writing a security interest
therein and in the proceeds thereof, all upon the terms of this
Agreement, with such writing to be in form and substance
satisfactory to Lender.
4.08
Other Actions as to any and all Collateral . Borrower
further agrees to take any other action reasonably requested by
Lender to insure the attachment, perfection and first priority of,
and the ability of Lender to enforce, Lender’s security
interest in any and all of the Collateral including, without
limitation, (a) executing, delivering and, where appropriate,
filing financing statements and amendments relating thereto under
the Uniform Commercial Code, (b) causing Lender’s name to be
noted as secured party on any certificate of title for a titled
good if such notation is a condition to attachment, perfection or
priority of, or ability of Lender to enforce, Lender’s
security interest in such Collateral, (c) complying with any
provision of any statute, regulation or treaty of the United States
as to any Collateral if compliance with such provision is a
condition to attachment, perfection or priority of, or ability of
Lender to enforce, Lender’s security interest in such
Collateral, (d) obtaining governmental and other third party
consents and approvals, including without limitation any consent of
any licensor, lessor or other person obligated on Collateral, (e)
obtaining waivers from mortgagees and landlords in form and
substance satisfactory to Lender and (f) taking all actions
required by any earlier versions of the Uniform Commercial Code or
by other law, as applicable in any relevant Uniform Commercial Code
jurisdiction, or by other law as applicable in any foreign
jurisdiction.
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5.
Relation to Other Security Documents . The provisions of
this Agreement supplement the provisions of any real estate
mortgage or deed of trust granted by Borrower to Lender and
securing the payment or performance of any of the Obligations.
Nothing contained in any such real estate mortgage or deed of trust
derogates from any of the rights or remedies of Lender
hereunder.
6.
Representations and Warranties Concerning Borrower’s Legal
Status . Borrower represents and warrants to Lender as
follows: (a) Borrower’s exact legal name is that indicated on
the signature page hereof, (b) Borrower is a limited liability
company organized under the laws of the State of South Dakota, (c)
Borrower’s organizational identification number is DL003422,
(d) Borrower’s federal taxpayer identification number is
46-0459188 and (e) Borrower’s place of business, chief
executive office, as well as mailing address is
27716 – 462 nd Avenue, Chancellor, South
Dakota 57015. Borrower hereby certifies that the Taxpayer
Identification Number shown in this Section 6 is correct and
that Borrower is not subject to backup withholding either because
it is exempt, has not been notified that it is subject to backup
withholding due to failure of reporting interest or dividends, or
the Internal Revenue Service has notified it that it is no longer
subject to backup withholding. Borrower is a U.S. person (including
U.S. resident alien).
7.
Covenants Concerning Borrower’s Legal Status .
Borrower covenants with Lender as follows: (a) without
providing at least 30 days prior written notice to Lender, Borrower
will not change its name, its place of business or, if more than
one, chief executive office, or its mailing address or
organizational identification number if it has one, (b) if Borrower
does not have an organizational identification number and later
obtains one, Borrower will forthwith notify Lender of such
organizational identification number, and (c) Borrower will not
change its type of organization, jurisdiction of organization or
other legal structure.
8.
Representations and Warranties Concerning Collateral, Etc
. Borrower further represents and warrants to Lender as
follows: (a) Borrower is the owner of the Collateral, free
from any adverse lien, security interest or other encumbrance,
except for the security interest created by this Agreement and
other liens permitted by the Credit Agreement, (b) to the
extent that any of the Collateral constitutes, or is the proceeds
of, “farm products” as defined in
Section 9-102(a)(34) of the Uniform Commercial Code of the
State or any other relevant state, Borrower has taken all required
acts to ensure that Lender’s security interest in such
Collateral is first and prior, (c) none of the account debtors or
other persons obligated on any of the Collateral is a governmental
authority subject to the Federal Assignment of Claims Act or like
federal, state or local statute or rule in respect of such
Collateral, (d) Borrower holds no commercial tort claim except as
set forth on Schedule 8(d) , and (e) Borrower has at all
times operated its busin
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