CoBANK, ACB

SECURITY AGREEMENT

 

            THIS SECURITY AGREEMENT is executed and delivered by U.S. Premium
Beef, LLC (the “Debtor”), a Delaware limited liability company, having its place
of business (or chief executive office if more than one place of business)
located at 12200 North Ambassador Drive, Kansas City, Missouri 64163, and with a
mailing address of P.O. Box 20103, Kansas City, MO 64195, to CoBANK, ACB (the
“Secured Party”), a federally chartered instrumentality of the United States,
whose mailing address is P.O. Box 5110, Denver, Colorado 80217.

 

SECTION 1.   GRANT OF SECURITY INTEREST.  For valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Debtor hereby
grants to the Secured Party a security interest in all of the personal property
of the Debtor, wherever located and whether now existing or hereafter acquired,
together with all accessions and additions thereto, and all products and
proceeds thereof, including:

 

accounts; inventory (including without limitation, returned or repossessed
goods); goods; as-extracted collateral; chattel paper; electronic chattel paper;
instruments; investment property (including, without limitation, certificated
and uncertificated securities, security entitlements, securities accounts,
commodity contracts, and commodity accounts); letters of credit;
letter-of-credit rights; documents; equipment; farm products; fixtures; general
intangibles (including, without limitation, payment intangibles, choses or
things in action, litigation rights and resulting judgments, goodwill, patents,
trademarks and other intellectual property, tax refunds, miscellaneous rights to
payment, investments and other interests in entities not included in the
definition of investment property (including, without limitation, all equities
and patronage rights in all cooperatives and all interests in partnerships and
joint ventures), margin accounts, computer programs, software, invoices, books,
records and other information relating to or arising out of the Debtor's
business); and, to the extent not covered by the above, all other personal
property of the Debtor of every type and description, including without
limitation, supporting obligations, interests or claims in or under any policy
of insurance, commercial tort claims, deposit accounts, money, and judgments
(the "Collateral").

 

Where applicable, all terms used herein shall have the same meaning as presently
and as hereafter defined in the Uniform Commercial Code (the "UCC").

 

            SECTION 2.   THE OBLIGATIONS.  The security interest granted
hereunder shall secure the payment of all indebtedness and the performance of
all obligations of the Debtor to the Secured Party of every type and
description, whether now existing or hereafter arising, fixed or contingent, as
primary obligor or as guarantor or surety, acquired directly or by assignment or
otherwise, liquidated or unliquidated, regardless of how they arise or by what
agreement or instrument they may be evidenced, including without limitation all
loans, advances and other extensions of credit and all covenants, agreements,
and provisions contained in all loan and other agreements between the parties
(the "Obligations").

 

            SECTION 3.   REPRESENTATIONS, WARRANTIES AND COVENANTS.  The Debtor
represents, warrants and covenants as follows:

 

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                        A.       Title to Collateral.  Except as permitted by
any other written agreement between the parties, and except for any security
interest in favor of the Secured Party, the Debtor has clear title to all
Collateral free of all adverse claims, interests, liens, or encumbrances. 
Without the prior written consent of the Secured Party, the Debtor shall not
create or permit the existence of any adverse claims, interests, liens, or other
encumbrances against any of the Collateral.  The Debtor shall provide prompt
written notice to the Secured Party of any future adverse claims, interests,
liens, or encumbrances against all Collateral, and shall defend diligently the
Debtor's and the Secured Party's interests in all Collateral.

 

                        B.       Validity of Security Agreement; Corporate
Authority.  This Security Agreement is the valid and binding obligation of the
Debtor, enforceable in accordance with its terms.  The Debtor has the corporate
power to execute, deliver and carry out the terms and provisions of this
Security Agreement and all related documents, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Security Agreement and all related documents.

 

                        C.       Location of the Debtor.  The Debtor's place of
business (or chief executive office if more than one place of business) is
located at the address shown above.  The Debtor’s state of incorporation or
formation is as shown above.

 

                        D.       Location of Fixtures.  All fixtures are now at
the location or locations specified on Schedule A attached hereto and made a
part hereof.

 

                        E.       Name, Identity, and Corporate Structure.  The
Debtor’s exact legal name is as set forth above.  Except as otherwise disclosed
to the Secured Party in writing, the Debtor has not within the past ten years
changed its name, identity or corporate structure through incorporation, merger,
consolidation, joint venture or otherwise.

 

                        F.       Change in Name, State of Debtor’s Location,
Location of Collateral, Etc.  Without giving at least thirty days' prior written
notice to the Secured Party, the Debtor shall not change its name, identity or
corporate structure, the location of its place of business (or chief executive
office if more than one place of business), its state of incorporation or
formation, or the location of the Collateral.

 

                        G.      Further Assurances.  Upon the request of the
Secured Party, the Debtor shall do all acts and things as the Secured Party may
from time to time deem necessary or advisable to enable it to perfect, maintain,
and continue the perfection and priority of the security interest of the Secured
Party in the Collateral, or to facilitate the exercise by the Secured Party of
any rights or remedies granted to the Secured Party hereunder or provided by
law. Without limiting the foregoing, the Debtor agrees to execute, in form and
substance satisfactory to the Secured Party, such financing statements,
amendments thereto, supplemental agreements, assignments, notices of
assignments, and other instruments and documents as the Secured Party may from
time to time request.  In addition, in the event the Collateral or any part
thereof consists of instruments, documents, chattel paper, or money (whether or
not proceeds of the Collateral), the Debtor shall, upon the request of the
Secured Party, deliver possession thereof to the Secured Party (or to an agent
of the Secured Party retained for that purpose), together with any appropriate
endorsements and/or assignments.  Where Collateral is in the possession of a
third party, the Debtor will join with the Secured Party in notifying the third
party of the Secured Party’s security interest and obtaining an acknowledgment
from the third party that it is holding the Collateral for the benefit of the
Secured Party.  The Debtor will cooperate with the Secured Party in obtaining
control with respect to Collateral consisting of deposit accounts (that are not
held by the Secured Party as depositary institution), investment property,
letter-of-credit rights and electronic chattel paper.  The Secured Party shall
use reasonable care in the custody and preservation of such Collateral in its
possession, but shall not be required to take any steps necessary to preserve
rights against prior parties.  All costs and expenses incurred by the Secured
Party to establish, perfect, maintain, determine the priority of, or release the
security interest granted hereunder (including the cost of all filings,
recordings, and taxes thereon and the fees and expenses of any agent retained by
Secured Party) shall become part of the Obligations secured hereby and be paid
by the Debtor on demand.

 

 

 

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                        H.       Insurance.  The Debtor shall maintain such
property and casualty insurance with such insurance companies, in such amounts,
and covering such risks, as are at all times satisfactory to the Secured Party. 
All such policies shall provide for loss payable clauses or endorsements in form
and content acceptable to the Secured Party.  Upon the request of the Secured
Party, all policies (or such other proof of compliance with this Section as may
be satisfactory to the Secured Party) shall be delivered to the Secured Party. 
The Debtor shall pay all insurance premiums when due.  In the event of loss,
damage, or injury to any insured Collateral, the Secured Party shall have full
power to collect any and all insurance proceeds due under any of such policies,
and may, at its option, apply such proceeds to the payment of any of the
Obligations secured hereby, or may apply such proceeds to the repair or
replacement of such Collateral.

 

                        I.         Taxes, Levies, Etc.  The Debtor has paid and
shall continue to pay when due all taxes, levies, assessments, or other charges
which may become an enforceable lien against the Collateral.

 

                        J.        Disposition and Use of Collateral by the
Debtor.  Without the prior written consent of the Secured Party, the Debtor
shall not at any time sell, transfer, lease, abandon, or otherwise dispose of
any Collateral, except that, so long as the Debtor is not in default hereunder,
the Debtor may sell, transfer, lease, abandon, or otherwise dispose of equipment
and inventory in the ordinary course of Debtor’s business.  The Debtor shall not
use any of the Collateral in any manner which violates any statute, regulation,
ordinance, rule, decree, order, or insurance policy.

 

                        K.       Receivables.  The Debtor shall preserve,
enforce, and collect all accounts, chattel paper, electronic chattel paper,
instruments, documents and general intangibles, whether now owned or hereafter
acquired or arising (the "Receivables"), in a diligent fashion and, upon the
request of the Secured Party, the Debtor shall execute an agreement in form and
substance satisfactory to the Secured Party by which the Debtor shall direct all
account debtors and obligors on Receivables to make payment to a lock box
deposit account under the exclusive control of the Secured Party.

 

                        L.        Condition of Collateral.  All tangible
Collateral is now in good repair and condition and the Debtor shall at all times
hereafter, at its own expense, maintain all such Collateral in good repair and
condition.

 

                       M.      Condition of Books and Records.  The Debtor has
maintained and shall maintain complete, accurate and up‑to‑date books, records,
accounts, and other information relating to all Collateral in such form and in
such detail as may be satisfactory to the Secured Party, and shall allow the
Secured Party or its representatives at any reasonable time to examine and copy
such books, records, accounts, and other information.

 

                        N.       Right of Inspection.  At all reasonable times
upon the request of the Secured Party, the Debtor shall allow the Secured Party
or its representatives to visit any of the Debtor's properties or locations so
that the Secured Party or its representatives may confirm, inspect and appraise
any of the Collateral.

 

 

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            SECTION 4.   DEFAULT.  The breach of any of the Obligations secured
hereby, and/or the breach of any representation, warranty, covenant, or
agreement contained in this Security Agreement, shall constitute default
hereunder.

 

            SECTION 5.   RIGHTS AND REMEDIES.  Upon the Debtor's default and at
any time thereafter, the Secured Party may declare all Obligations to be
immediately due and payable and may exercise any and all rights and remedies of
the Secured Party in the enforcement of its security interest under the UCC,
this Security Agreement, or any other applicable law.  Without limiting the
foregoing:

 

                        A.        Disposition of Collateral.  The Secured Party
may sell, lease, or otherwise dispose of all or any part of the Collateral, in
its then present condition or following any commercially reasonable preparation
or processing thereof, whether by public or private sale or at any brokers'
board, in lots or in bulk, for cash, on credit or otherwise, with or without
representations or warranties, and upon such other terms as may be acceptable to
the Secured Party, and the Secured Party may purchase at any public sale.  At
any time when advance notice of sale is required, the Debtor agrees that ten
days' prior written notice shall be reasonable.  In connection with the
foregoing, the Secured Party may:

 

                                    1.      require the Debtor to assemble the
Collateral and all records pertaining thereto and make such Collateral and
records available to the Secured Party at a place to be designated by the
Secured Party which is reasonably convenient to both parties;

 

                                    2.      enter the premises of the Debtor or
premises under the Debtor's control and take possession of the Collateral;

 

                                    3.      without charge, use or occupy the
premises of the Debtor or premises under the Debtor's control, including without
limitation, warehouse and other storage facilities;

 

                                    4.      without charge, use any patent,
trademark, tradename, or other intellectual property or technical process used
by the Debtor in connection with any of the Collateral; and

 

                                    5.      rely conclusively upon the advice or
instructions of any one or more brokers or other experts selected by the Secured
Party to determine the method or manner of disposition of any of the Collateral
and, in such event, any disposition of the Collateral by the Secured Party in
accordance with such advice or instructions shall be deemed to be commercially
reasonable.

 

                        B.        Collection of Receivables.  The Secured Party
may, but shall not be obligated to, take all actions reasonable or necessary to
preserve, enforce or collect the Receivables, including without limitation, the
right to notify account debtors and obligors on Receivables to make direct
payment to the Secured Party, to permit any extension, compromise, or settlement
of any of the Receivables for less than face value, or to sue on any Receivable,
all without prior notice to the Debtor.

 

                        C.        Proceeds.  The Secured Party may collect and
apply all proceeds of the Collateral, and may endorse the name of the Debtor in
favor of the Secured Party on any and all checks, drafts, money orders, notes,
acceptances, or other instruments of the same or a different nature,
constituting, evidencing, or relating to the Collateral.  The Secured Party may
receive and open all mail addressed to the Debtor and remove therefrom any cash
or non‑cash items of payment constituting proceeds of the Collateral.

 

 

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                        D.        Insurance Adjustments.  The Secured Party may
adjust, settle, and cancel any and all insurance covering any Collateral,
endorse the name of the Debtor on any and all checks or drafts drawn by any
insurer, whether representing payment for a loss or a return of unearned
premium, and execute any and all proofs of claim and other documents or
instruments of every kind required by any insurer in connection with any payment
by such insurer.

 

The net proceeds of any disposition of the Collateral may be applied by the
Secured Party, after deducting its reasonable expenses incurred in such
disposition, to the payment in whole or in part of the Obligations in such order
as the Secured Party may elect, with the remainder, if any, to be returned to
Secured Party.  The enumeration of the foregoing rights and remedies is not
intended to be exhaustive, and the exercise of any right and/or remedy shall not
preclude the exercise of any other rights or remedies, all of which are
cumulative and non‑exclusive.

 

            SECTION 6.   OTHER PROVISIONS.

 

                        A.        Amendment, Modification, and Waiver.  Without
the prior written consent of the Secured Party, no amendment, modification, or
waiver of, or consent to any departure by the Debtor from, any provision
hereunder shall be effective.  Any such amendment, modification, waiver, or
consent shall be effective only in the specific instance and for the specific
purpose for which given.  No delay or failure by the Secured Party to exercise
any remedy hereunder shall be deemed a waiver thereof or of any other remedy
hereunder.  A waiver on any one occasion shall not be construed as a bar to or
waiver of any remedy on any subsequent occasion.

 

                        B.        Costs and Attorneys’ Fees.  Except as
prohibited by law, if at any time the Secured Party employs counsel in
connection with the creation, perfection, preservation, or release of the
Secured Party's security interest in the Collateral or the enforcement of any of
the Secured Party's rights or remedies hereunder, all of the Secured Party's
reasonable attorneys’ fees arising from such services and all expenses, costs,
or charges relating thereto shall become part of the Obligations secured hereby
and be paid by the Debtor on demand.

 

                        C.        No Obligation to Make Loans.  Nothing
contained herein or in any financing statement or other document executed or
filed in connection herewith shall be construed to obligate the Secured Party to
make any loans or advances to the Debtor, whether pursuant to a commitment or
otherwise.

 

                        D.        Revival of Obligations.  To the extent the
Debtor or any third party makes a payment or payments to the Secured Party or
the Secured Party enforces its security interest or exercises any right of
setoff, and such payment or payments or the proceeds thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, and/or
required to be repaid to a trustee, receiver, or any other party under any
bankruptcy, insolvency or other law or in equity, then, to the extent of such
recovery, the Obligations or any part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment or payments had not been made, or such enforcement or setoff had not
occurred.

 

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                        E.        Performance by the Secured Party.  In the
event the Debtor shall at any time fail to pay or perform punctually any of its
duties hereunder, the Secured Party may, at its option and without notice to or
demand upon the Debtor, without obligation and without waiving or diminishing
any of its other rights or remedies hereunder, fully perform or discharge any of
such duties.  All costs and expenses incurred by the Secured Party in connection
therewith, together with interest thereon at the Secured Party's CoBank Base
Rate plus two percent per annum, shall become part of the Obligations secured
hereby and be paid by the Debtor upon demand.

 

                        F.        Indemnification, Etc.  The Debtor hereby
expressly indemnifies and holds the Secured Party harmless from any and all
claims, causes of action, or other proceedings, and from any and all liability,
loss, damage, and expense of every nature, arising by reason of the Secured
Party's enforcement of its rights and remedies hereunder, or by reason of the
Debtor's failure to comply with any environmental or other law or regulation. 
As to any action taken by the Secured Party hereunder, the Secured Party shall
not be liable for any error of judgment or mistake of fact or law, absent gross
negligence or willful misconduct on its part.

 

                        G.        Power of Attorney.  The Debtor hereby appoints
the Secured Party or the Secured Party's designee as its attorney‑in‑fact, which
appointment is irrevocable, durable, and coupled with an interest, with full
power of substitution, in the name of the Debtor or in the name of the Secured
Party, to take any action which the Debtor is obligated to perform hereunder or
which the Secured Party may deem necessary or advisable to accomplish the
purposes of this Security Agreement.  In taking any action in accordance with
this Section, the Secured Party shall not be deemed to be the agent of the
Debtor.  The powers conferred upon the Secured Party in this Section are solely
to protect its interest in the Collateral and shall not impose any duty upon the
Secured Party to exercise any such powers.

 

                        H.       Continuing Effect.  This Security Agreement,
the Secured Party's security interest in the Collateral, and all other documents
or instruments contemplated hereby shall continue in full force and effect until
all of the Obligations have been satisfied in full, the Secured Party has no
commitment to make any further advances to the Debtor, and the Debtor has sent a
valid written demand to the Secured Party for termination of this Security
Agreement.

 

                        I.          Binding Effect.  This Security Agreement
shall be binding upon and inure to the benefit of the Debtor and the Secured
Party and their respective successors and assigns.

 

                        J.         Security Agreement as Financing Statement and
Authorization to File.  A photographic copy or other reproduction of this
Security Agreement may be used as a financing statement.  In addition, the
Debtor authorizes the Secured Party to prepare and file financing statements
describing the Collateral, amendments thereto, and continuation statements and
file any financing statement, amendment thereto or continuation statement
electronically.  In addition, the Debtor authorizes the Secured Party to file
financing statements describing any agricultural liens or other statutory liens
held by the Secured Party.

 

                        K.       Governing Law.  Subject to any applicable
federal law, this Security Agreement shall be construed in accordance with and
governed by the laws of the State of Colorado, except to the extent that the UCC
provides for the application of the law of another state.

 

                        L.        Notices.  All notices, requests, demands, or
other communications required or permitted hereunder shall be in writing and
shall be deemed to have been given when sent by registered or certified mail,
return receipt requested, addressed to the other party at the respective
addresses given above, or to such other person or address as either party
designates to the other in the manner herein prescribed.

 

 

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                        M.     Severability.  The determination that any term or
provision of this Security Agreement is unenforceable or invalid shall not
affect the enforceability or validity of any other term or provision hereof.

 

            IN WITNESS WHEREOF, the Debtor has executed this Security Agreement
by its duly authorized officer as of the day and year shown below.

 

Date:  ___________, 2011

Debtor:

U.S. PREMIUM BEEF, LLC,

a Delaware limited liability company

        By:           Title:  

 

 

 

 

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SCHEDULE A

 

To Security Agreement Dated July 26, 2011

 

Executed By:  U.S. PREMIUM BEEF, LLC

 

Set forth below are the present locations (by county and state) of the Debtor’s
fixtures.

 

 

 

County:

Platte

 

State:

Missouri

 

County:

Ford

 

 

State:

Kansas

 

County:

Morris

 

 

State:

Kansas

 

County:

 

 

 

State:

 

 

County:

 

 

 

State: