Exhibit 10.4





 

 


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: