Exhibit 10.5


 


SECURITY AGREEMENT


 


THIS SECURITY AGREEMENT is executed and delivered by DNA Dreamfields
Company, LLC (the “Debtor”), an Ohio limited lliability company, having its
place of business (or chief executive office if more than one place of business)
located at One Pasta Avenue, Carrington, ND 
58421, 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 Collateral.  All
equipment and inventory are now at the location or locations specified on
Schedule A attached hereto and made a part hereof.  All farm products and fixtures are now at the
location or locations specified on Schedule B 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, 


 


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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.


 


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 and provided the Debtor is not in default hereunder, the Debtor shall not
at any time sell, transfer, lease, abandon, or otherwise dispose of any
Collateral except in the ordinary course of its 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 instruments 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.


 


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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.


 


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


 


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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 there from any
cash or non-cash items of payment constituting proceeds of the Collateral.


 


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.  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


 


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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.


 


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 four 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 


 


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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.


 


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:

  	
  January 22, 2008

  	
   

  	
  DEBTOR:

  	
  DNA DREAMFIELDS COMPANY, LLC, an Ohio 

  
	
   

  	
   

  	
   

  	
  limited liability company

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Edward Irion

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
  CFO

  	
   

  
							



 


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SCHEDULE A


 


To Security Agreement Dated January 22, 2008


 


	
   

  	
  Executed By:

  	
  DNA
  DREAMFIELDS COMPANY, LLC

  	
   

  
	
   

  	
  (Name
  of Debtor)

  
					



 


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


 


None.


 


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SCHEDULE B


 


To Security Agreement Dated January 22, 2008


 


	
   

  	
  Executed By:

  	
  DNA
  DREAMFIELDS COMPANY, LLC

  	
   

  
	
   

  	
  (Name
  of Debtor)

  
					



 


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


 


None.


 


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