Exhibit 10.2


 


R.J. O’BRIEN


Security Agreement and Assignment of Account


 


THIS ACCOUNT CONTROL AGREEMENT dated as of March 26, 2004 (the “Agreement”), among Golden Grain Energy,
a LLC (together with its successors and assigns, the “Debtor”), Home Federal Savings Bank,
a Corp (together with its successors and assigns, the “Secured Party”) and R. J. O’BRIEN, an
Illinois corporation (together with its successors and assigns, the “Commodity Intermediary”).


 


WHEREAS, the Debtor and the Secured Party are parties to a Secured
Financing Agreement dated as of a date even herewith which provides for the
Debtor to grant a security interest in certain assets to the Secured Party (the
“Financing Agreement”); and


 


WHEREAS, the assets pledged to the Secured Party include interests of
the Debtor in its Trading Account at the Commodity Intermediary (each as
defined below); and


 


WHEREAS, it is a condition to the provision of financing under the
Financing Agreement that the Debtor, the Secured Party and the Commodity
Intermediary enter into an Account Control Agreement;


 


NOW, THEREFORE, in consideration of the mutual agreements and covenants
herein contained and for other good and valuable consideration, the parties
herby agree as follows:


 


SECTION 1.                                Definitions.  As
used herein, the following terms have the following meanings:


 


“Distributions” means interest, dividends or distributions
on any Investment Property or other property that is credited to the Trading
Account.


 


“Entitlement Order” shall have the meaning provided in Section 4.


 


“Investment Property”
shall mean
any “investment property,” as defined in Section 9-102(a)(49) of the UCC.


 


“Lien” shall mean, with respect to any asset, any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind,
or any other type of preferential arrangement that has the practical effect of
creating a security interest, in respect of such asset.


 


“Person” shall mean an individual, a corporation, a
partnership, a limited liability company, an association, a trust or any other entity
or organization, including a government or political subdivision or an agency
or instrumentality thereof.


 


“Proceeds” shall mean all cash and other proceeds and
all other profits, products, rents or receipts, in whatever form, arising from
the collection, sale, lease, exchange, assignment, licensing or other
disposition of, other realization upon any Investment Property or other
property that is credited to the Trading Account.


 


“Trading Account” shall have the meaning provided in Section
2(a)(i).


 


“Trading Account
Property” shall
mean each item of property (whether Investment Property, a security, a security
entitlement, a commodity contract, an instrument or cash), Including Proceeds
and Distributions (i) that is or may in the future be standing to the credit of
the Trading Account, (ii) that has been received and accepted, or may in the
future be received and accepted, by the Commodity Intermediary for credit to
the Trading Account or (iii) as to which the Commodity Intermediary is or may
in the future become obligated by law, regulation, rule or agreement to credit
to the Trading Account.


 


“UCC” shall mean the Uniform Commercial Code as
in effect in the State of Illinois.


 


SECTION 2.                                Establishment of Trading Account.


 


(a)                                  The Commodity Intermediary hereby confirms
and agrees that:


 


(i)                                     At the request of, and for the account of
the Debtor, as owner of the assets therein, the Commodity Intermediary has
established account
number              in
the name of “Golden Grain Energy, LLC as Debtor” (such account and any
successor account, being herein called the “Trading
Account”).  The Commodity
Intermediary shall not change the name or account number of the Trading Account
without the prior written consent of the Secured Party.


 


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(ii)                                  Any and all monies or payments which may be
received by the Debtor, to which the Secured Party is entitled under and by
reason of this Agreement, shall be received by the Debtor as trustee for the
Secured Party and shall be immediately delivered in kind to the Secured Party
without commingling.


 


(iii)                               The Trading Account is an account to which Investment Property is or may
be credited.


 


(iv)                              Except for margin, commission and fee payments required to be made in
respect of the Trading Account, no debit of cash to the Trading Account shall
be made except pursuant to written instructions from the Secured Party, and the
Commodity Intermediary shall forthwith honor all debit instructions from the
Secured Party by transmitting each disbursement in immediately available funds
as instructed.


 


(b)                                 The Debtor hereby constitutes and appoints
the Secured Party its true, lawful and irrevocable attorney to demand, receive
and enforce payments and to give receipts, releases, satisfaction for, and to
sue for all monies payable to the Debtor, and this may be done in the name of
the Secured Party with the same force and effect as the Debtor could do had
this Agreement not been made.


 


(c)                                  The Debtor agrees to take such steps and
execute and deliver (or cause the execution and delivery of) such financing and
other documents, agreements (including, without limitation, security
agreements) and papers (all in form and substance acceptable to the Secured
Party) as the Secured Party may from time to time request to perfect preserve
the security interest granted hereby.


 


SECTION 3.                                Payment of Funds.


 


(a)                                  The Commodity Intermediary will comply with
all notifications it receives directing it to liquidate or redeem any property
in the Trading Account originated by the Secured Party without further consent
by the Debtor.  The Secured Party is
hereby authorized and fully empowered without further authority from the Debtor
to request the Commodity Intermediary to pay the Secure Party funds that may
hereafter be withdrawable or payable out of the Trading Account, and the
Commodity Intermediary is hereby authorized and directed to pay such funds to
the Secured Party upon its demand.  The
Secured Party is also hereby authorized and fully empowered without further
authority from the Debtor to request the Commodity Intermediary to remit to the
Secured Party any funds that may be due to the Debtor, and the Commodity
Intermediary is hereby authorized and directed to pay to the Secured Party such
sums as the Secured Party shall so request or demand without the consent of, or
notice to, the Debtor.  The Debtor
agrees not to withdraw or attempt to withdraw any funds or other property from
the Trading Account except as permitted by the Secured Party.


 


(b)                                 Any sums paid by the Commodity Intermediary
from the Trading Account to the Secured Party shall be applied by the Secured
Party to the payment of any indebtedness owed by the Debtor to the Secured
Party.  Any balance remaining after the
payment of said indebtedness shall be paid by the Secured Party to the
Debtor.  The receipt or receipts of the
Secured Party for such funds so paid to it by the Commodity Intermediary shall,
as to the Commodity Intermediary, operate as the receipt by the Debtor as fully
and as completely as if funds had been paid to the Debtor in person and
receipted for by the Debtor.


 


SECTION 4.                                Entitlement Orders.


 


(a)                                  The Debtor hereby grants its continuing
consent to the Commodity Intermediary to comply with any and all notifications,
whether written or oral, communicated to the Commodity Intermediary directing
transfer, liquidation, or redemption of any of the Trading Account Property
(each such notification being referred to herein as an “Entitlement Order”) originated by the
Secured Party, without any further consent by the Debtor or any other Person.


 


(b)                                 Nothing herein contained shall be construed
so as to prevent the Debtor from remaining the owner, subject to the interest
for the Secured Party as it may appear, of the Trading Account.  Until the Secured Party elects to the
contrary and delivers notice of such election in writing to the Commodity
Intermediary, the Debtor may make such additional transactions in said account
as the Commodity Intermediary shall be willing to accept for execution and/or
clearance.  In the event the Secured
Party does make such election and delivers such notice in writing to the
Commodity Intermediary, the Debtor shall not thereafter executed any
transactions in the Trading Account, and the Commodity Intermediary shall cease
complying with orders or other directions concerning the Trading Account, and
the Commodity Intermediary shall cease complying with order or other directions
concerning the Trading Account originated by the Debtor.  Upon receipt by the Commodity Intermediary
of notice of such election and if directed by the Secured Party, the Commodity
Intermediary will use commercially reasonable efforts to cancel open orders
that have been entered by the Debtor through the Commodity Intermediary which
have not yet been executed.  If the
Commodity Intermediary is unable to cancel such orders before they are
executed, the transactions will be considered valid and binding on the Debtor
and the Secured Party.  In the event
that orders are executed for the Debtor’s account by a third party pursuant to
the terms of a “give-up” or similar agreement among the Debtor, the Commodity
Intermediary and such third party, the Commodity Intermediary will use
commercially reasonable efforts,


 


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subject
to the terms of such agreement, to notify such third party that the Commodity
Intermediary will not thereafter accept trades executed by such third party for
clearance into the Debtor’s account.


 


(c)                                  The Commodity Intermediary has not entered
into any agreement with the Debtor or any other Person purporting to limit or
condition the obligation of the Commodity Intermediary to comply with
Entitlement Orders originated by the Secured Party.


 


(d)                                 If at any time the Commodity Intermediary
shall receive any Entitlement Order from the Secured Party, the Commodity
Intermediary shall comply with such Entitlement Order without further consent
by the Debtor or any other Person, notwithstanding that such Entitlement Order
may conflict with any instruction or notification by the Debtor or any other
Person.


 


(e)                                  The Commodity Intermediary need not
investigate whether the Secured Party is entitled under the Secured Party’s
agreements with the Debtor to give an Entitlement Order or a notice of
exclusive control.  The Commodity
Intermediary may rely on notices and communications it reasonably believes are
given by the appropriate party.


 


(f)                                    The Commodity Intermediary will not be
liable to the Secured Party for complying with orders or other instructions
from the Debtor that are received by the Commodity Intermediary before the
Commodity Intermediary has received and had reasonable opportunity to act on
the Secured Party’s notice of election of exclusive control.


 


(g)                                 The rights and powers granted to the Secured
Party under this Section 4 and the
other provisions of this Agreement have been granted in order to perfect the
Secured Party’s Lien with respect to the Trading Account and the Trading
Account Property, are powers coupled with an interest, and will not be affected
by the bankruptcy of the Debtor or by the lapse of time.


 


SECTION 5.                                Additional Rights of the Secured Party.


 


(a)                                  Whenever the Secured Party deems it
necessary for its protection, it shall be entitled, without the consent or
concurrence of or prior notice to the Debtor, to direct the Commodity
Intermediary to liquidate any and all then outstanding open positions in the
Trading Account and to direct the Commodity Intermediary to pay to the Secured
Party any credit balance as shall exist in the Trading Account after such
liquidation and after the payment to the Commodity Intermediary of all
indebtedness of the Debtor to the Commodity Intermediary in connection with
transactions in the Debtor’s accounts with the Commodity Intermediary.  The Debtor shall be liable to the Commodity
Intermediary for any debit or deficit that may be created when the Secured
Party initiates a liquidation.


 


(b)                                 If the Commodity Intermediary requires
additional margin for an open position, the Secured Party shall advance to the
Commodity Intermediary on behalf of the Debtor such amounts as may be required
by the Commodity Intermediary to margin such position, or shall give the
Commodity Intermediary reasonable notice of its intent not to advance such
margin as stated below; provided, however, that the Debtor in all respects
shall remain liable to the Secured Party for any amount so advanced.  The Secured Party shall notify the Commodity
Intermediary immediately, and in no event more than one business day after the
Commodity Intermediary requests additional margin, if the Secured Party
determines not to make any further advance or extension of credit on behalf of
the Debtor.


 


(c)                                  The Debtor and the Secured Party agree that
the Secured Party may obtain collateral for the Debtor obligations and that the
Secured Party may proceed hereunder against the Trading Account or resort to
any other collateral, or both, in its sole discretion.


 


Section 6.                                            Commodity Intermediary Lien. 
The security interest and Lien of the Secured Party against the Debtor’s
Trading Account is subject to the Commodity Intermediary’s right of set-off and
to the prior payment of all indebtedness of the Debtor to the Commodity
Intermediary as such may exist from time to time, including fees and
commissions which may have been incurred in connection with the Debtor’s
transactions with the Commodity Intermediary, and to the Commodity
Intermediary’s Lien and the right of foreclosure thereof in connection with the
indebtedness of the Debtor to the Commodity Intermediary (including any right
of the Commodity Intermediary to liquidate open positions or exercise commodity
options, all without prior demand for additional margin without prior notice).


 


SECTION 7.                                Governing Law.


 


(a)                                  Regardless of any provisions of any other
agreement, this Agreement, the Trading Account, Trading Account Property, or
other property therein shall be governed by and construed in accordance with
the internal law (excluding the conflicts-of-law rules) of the State of
Illinois.


 


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(b)                                 Regardless of any provision in any other
agreement, for purpose of Sections 9-304, 9-305, 9-306 and 8-110(e) of the UCC,
the Commodity Intermediary’s jurisdiction and location of the accounts
established pursuant to Section 2
hereof shall be deemed to be the State of Illinois, and the parties agree that
none of them has entered or will enter into any agreement to the contrary.


 


SECTION 8.                                Conflict with Other Agreements.  In
the event of any conflict between the terms of the Commodity Intermediary’s
account agreement (or any portion thereof) with the Debtor and this Agreement,
such account agreement shall prevail. 
In the event of any conflict between this Agreement (or any portion
thereof) and any other agreement now existing or hereafter entered into, other
than such account agreement, the terms of this Agreement shall prevail.


 


SECTION 9.                                Amendments.  No amendment or modification
of this Agreement or waiver of any right hereunder shall be binding on any
party hereto unless it is in writing and is signed by all of the parties
hereto.


 


SECTION 10.                          Severability.  To
the extent any provision of the Agreement is found by a tribunal of competent
jurisdiction to be unenforceable, this Agreement will be construed as if the
unenforceable provision were omitted.


 


SECTION 11.                          Successor and Assigns. 
This Agreement shall be binding upon and inure to the benefit of the
Debtor, the Secured Party and the Commodity Intermediary and their respective
successors (including their respective corporate successors or heirs and
personal representatives who obtain such rights solely by operation of law and
not by agreement or other voluntary act) and assigns, except that neither the
Debtor nor the Commodity Intermediary may assign or delegate any of its respective
rights or obligations under this Agreement without the prior written consent of
the Secured Party.  In the event of any
assignment by the Secured Party, the Secured Party shall give written notice of
such assignment to the Debtor and the Commodity Intermediary and the assignee
will thereupon be the Secured Party hereunder, with all the same rights, duties
and privileges as though originally named as the Secured Party hereunder.


 


SECTION 12.                          No Adverse Claims. 
Except for the claims and interest of the parties hereto in the Trading
Account and the Trading Account Property, the Commodity Intermediary does not
know of any claim to, or interest in, the Trading Account or the Trading
Account Property.  If any Person
notifies the Commodity Intermediary that it is asserting any Lien or adverse
claim (including, but not limited to, any writ, garnishment, judgment, warrant
of attachment, execution or similar process) against the Trading Account or the
Trading Account Property, the Commodity Intermediary will promptly notify the
Secured Party and the Debtor thereof.


 


SECTION 13.                          Maintenance of Trading Account.  In
addition to, and not in lieu of, the obligation of the Commodity Intermediary
to honor Entitlement Orders as agreed in Section
4 hereof, the Commodity Intermediary agrees to maintain the Trading
Account as follows:


 


(a)                                  The Commodity Intermediary will promptly
send copies of all statements, confirmations and other correspondence
concerning the Trading Account to Debtor and, upon the request of the Secured
Party, simultaneously to the Secured Party at the address provided in this
Agreement.


 


(b)                                 All items of income, gain, expense and loss
recognized in the Trading Account be reported to taxing authorities under the
name and taxpayer identification number (if applicable) of the Debtor.


 


SECTION 14.                          Representations and Warranties of the
Commodity Intermediary.


 


(a)                                  The Commodity Intermediary covenants,
represents and warrants as follows (where applicable, within the meaning of
relevant provisions of the UCC and Code of Federal Regulations).


 


(i)                                     that it is a “Commodity Intermediary” (as
defined in Section 9-102(a)(17) of the UCC);


 


(ii)                                  that the Commodity Intermediary has not
entered into, and until the termination of this Agreement will not entered into
without the consent of the Secured Party, any arrangements granting or
purporting to grant “control” (as defined in Section 9-106 of the UCC) over the
Trading Account or the Trading Account Property with any Person except the
Secured Party;


 


(iii)                               that the Trading Account (A) is or has been established as set forth in Section 2 above, (B) is a “commodity
account” as such term is defined in Section 9-102(a)(14) of the UCC, and (C)
will be maintained in the manner set forth herein until termination of this
Agreement and


 


(iv)                              that this Agreement is the valid and legally binding obligations of the
Commodity Intermediary.


 


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SECTION 15.                          Indemnification and Exculpation of the
Commodity Intermediary.  The Debtor and the Secured Party, jointly
and severally, hereby agree that (a) the Commodity Intermediary (which shall
include for purposes of the entirety of this Section
15, its directors, officers, employees and agents) is released from
any and all liabilities to the Debtor and the Secured Party arising from the
terms of this Agreement and the compliance of the Commodity Intermediary with
the terms of this Agreement, except to the extent that such liabilities arise
from the Commodity Intermediary’s bad faith, gross negligence or willful
misconduct and (b) the Debtor and the Secured Party and their successors and
assigns, jointly and severally, shall at all times indemnify and save harmless
the Commodity Intermediary from and against any and all claims, actions and
suits of others arising out of the terms of this Agreement or the Financing
Agreement or the compliance of the Commodity Intermediary with the terms
hereof, except to the extent that such arises from the Commodity intermediary’s
bad faith, gross negligence or willful misconduct and from and against any and
all liabilities, losses, damages, costs, charges, counsel fees and
disbursements and other expenses of every nature and character arising by
reason of the same.  The indemnity shall
survive the termination of the Agreement and the resignation or removal of the
Commodity Intermediary.


 


SECTION 16.                          Notices.  Any notices, request or other communication required or permitted
to be given under this Agreement shall be in writing and deemed to have been
properly given when delivered in person, or when sent by telecopy or other
electronic means and electronic confirmation of error free receipt is received
or two days after being sent by certified or registered Unties States mail,
return receipt requested, postage prepaid, addressed to the party at the
address set forth below; provided, however,
that Entitlement Orders may be given orally and if so will be deemed to have
been properly given at the time of oral delivery.  In the event funds transfer instructions are given (other than in
writing at the time of execution of this Agreement), whether in writing, by
telecopy or otherwise, the Commodity Intermediary is authorized to seek
confirmation of such instructions by telephone call-back to the source at the
source’ s voice number as set forth below, and the Commodity Intermediary may
rely upon the confirmations of anyone purporting to be the person or persons so
designated.  The persons and telephone
number for call-backs may be changed only in writing actually received and acknowledged
by the Commodity Intermediary.  The
parties to this Agreement acknowledge that such security procedure is
commercially reasonable.


 


	
  Debtor:

  	
   

  	
  Secured Party

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  [Company Name]

  	
  Golden Grain Energy, LLC

  	
  [Company Name]

  	
  Home Federal Savings Bank

  
	
  [Address Line 1]

  	
  Box 435

  	
  [Address Line 1]

  	
  14 North 7th Avenue, Suite 29

  
	
  [Address Line 2]

  	
  New Hampton, Iowa

  	
  [Address Line 2]

  	
  St. Cloud Minn 56303

  
	
  Telephone Number:

  	
  (X)  641-394-4059

  	
  Telephone Number:

  	
  (X)  302-259-4082

  
	
  Facsimile Number:

  	
  (X)  641-394-2431

  	
  Facsimile Number:

  	
  (X)  6302-259-4065

  
	
   

  	
   

  	
  Please Print

  	
   

  	
   

  	
  Please Print

  
						



 


Commodity Intermediary:


 


R.J. O’Brien


222 S. Riveside Plaza


Chicago, Illinois 60606


Telephone Number: (312) 373-5000


Facsimile Number:   (312)
373-5225


 


Any party may change his, her or its address for notices in the manner
set forth above.


 


SECTION 17.                          Termination. 
The obligations of the Commodity Intermediary to the Secured Party
pursuant to the Agreement shall continue in effect until the security interest
of the Secured Party in the Trading Account and the Trading Account Property
has been terminated pursuant to the terms of the Financing Agreement and the
Secured Party has notified the Commodity Intermediary of such termination in
writing.  The termination of this
Agreement shall not termination the Trading Account or alter the obligations of
the Debtor to the Commodity Intermediary pursuant to the other agreement with
respect to the Trading Account.


 


SECTION 18.                          Counterparts. 
This Agreement may be exuded in one or more counterparts (including
faxed versions) each of which shall be deemed an original agreement, but all of
which together constitute one and the same instrument.


 


IN WITNESS THEREOF, the undersigned have signed this Agreement as of
the first date mentioned above.


 


	
   

  	
  Golden Grain Energy, LLC, 

  	
  as Debtor

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Walter Wendland

  	
  President

  
	
   

  	
   

  	
  Name:

  	
  Title:

  
					



 


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  Home Federal Savings Bank

  	
  , as Secured Party

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Eric Oftedahl

  	
  VP

  
	
   

  	
   

  	
  Name:

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  R.J.O’Brien, as Commodity Intermediary

  
	
   

  	
   

  
	
   

  	
  /s/ Jennifer Matrenec

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Jennifer Matrenec

  	
  Compliance Assistant

  
	
   

  	
   

  	
  Name:

  	
  Title:

  
							



 


Rev. 4/02


 


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