Exhibit 10.1


 


CoBANK, ACB


SECURITY AGREEMENT


 


THIS SECURITY AGREEMENT is
executed and delivered by SOUTH DAKOTA
SOYBEAN PROCESSORS, LLC (the “Debtor”), a South Dakota limited
liability company, having its place of business (or chief executive office if
more than one place of business) located at 100 Caspian Avenue, Volga, South
Dakota 57071, and whose taxpayer identification number is 46-0462968, 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);
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, ail other personal property of the Debtor of
every type and description, including, without limitation, supporting
obligations, interests to 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:


 


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 or 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 Parry 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


 


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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 endorsement 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.


 


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


 


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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 he 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 instruments 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.


 


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.


 


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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 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 National Variable 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


 


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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 its 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
addresses 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.


 


	
   

  	
   

  	
   

  	
  DEBTOR:

  	
  SOUTH DAKOTA SOYBEAN PROCESSORS, LLC

  
	
   

  	
   

  	
   

  	
   

  	
  a South
  Dakota limited liability company

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   
  /s/ Rodney Christianson

  	
   

  
	
  Date:

  	
  June 17,
  2004

  	
   

  	
   

  	
  Title:

  	
    Chief Executive Officer

  	
   

  



 


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SCHEDULE A


 


To Security
Agreement Dated:  June 17, 2004


 


	
  Executed By:

  	
   

  	
  SOUTH DAKOTA SOYBEAN PROCESSORS, LLC (Name

  of Debtor)

  



 


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


 


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SCHEDULE B


 


To Security
Agreement Dated:  June 17, 2004


 


	
  Executed By:

  	
   

  	
  SOUTH DAKOTA SOYBEAN PROCESSORS, LLC (Name

  of Debtor)

  



 


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


 


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