Document:

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

  	
   

  

 

6

 

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.

 

7

 

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.

 

8Exhibit 10.2

 

MLA No. B0511

 

MASTER LOAN AGREEMENT

 

THIS MASTER LOAN AGREEMENT
is entered into as of June 17, 2004, between CoBANK
ACB (“CoBank”) and SOUTH DAKOTA
SOYBEAN PROCESSORS, LLC, Volga, South Dakota (the “Company”).

 

BACKGROUND

 

CoBank and the
Company (by virtue of the Company having assumed all obligations of South
Dakota Soybean Processors to CoBank) are parties to a Master Loan Agreement
dated February 26, 2002 (the “Existing Agreement”).  Pursuant to the terms of the Existing Agreement, the parties
entered into one or more Supplements thereto. 
CoBank and the Company now desire to amend and restate the Existing
Agreement and to apply such new agreement to the existing Supplements, as well
as any new Supplements that may be issued thereunder.  For that reason and for valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), CoBank and the Company hereby
agree that the Existing Agreement shall be amended and restated to read as
follows:

 

SECTION 1. 
Supplements. 
In the event the Company desires to borrow from CoBank and CoBank is
willing to lend to the Company, or in the event CoBank and the Company desire
to consolidate any existing loans hereunder, the parties will enter into a
Supplement to this agreement (a “Supplement”). 
Each Supplement will set forth the amount of the loan, the purpose of
the loan, the interest rate or rate options applicable to that loan, the
repayment terms of the loan, and any other terms and conditions applicable to
that particular loan.  Each loan will be
governed by the terms and conditions contained in this agreement and in the
Supplement relating to the loan.  As of
the date hereof, the following Supplements are outstanding hereunder and shall
be governed by the terms and conditions hereof: (1) the Statused Revolving
Credit Supplement dated June 17, 2004 and numbered B051S01G; and (2) the
Revolving Term Loan Supplement dated June 17, 2004 and numbered B051T05E.

 

SECTION 2. 
Availability. 
Loans will be made available on any day on which CoBank and the Federal
Reserve Banks are open for business upon the telephonic or written request of
the Company.  Requests for loans must be
received no later than 12:00 Noon Company’s local time on the date the loan is
desired.  Loans will be made available by
wire transfer of immediately available funds to such account or accounts as may
be authorized by the Company.  The
Company shall furnish to CoBank a duly completed and executed copy of a CoBank
Delegation and Wire and Electronic Transfer Authorization Form, and CoBank
shall be entitled to rely on (and shall incur no liability to the Company in
acting on) any request or direction furnished in accordance with the term
thereof.

 

SECTION 3. 
Repayment. 
The Company’s obligation to repay each loan shall be evidenced by the
promissory note set forth in the Supplement relating to that loan or by such
replacement note as CoBank may require. 
CoBank shall maintain a record of all loans, the interest accrued
thereon, and all payments made with respect thereto, and such record shall,

 

 

absent proof of manifest error,
be conclusive evidence of the outstanding principal and interest on the
loans.  All payments shall be made by
wire transfer of immediately available funds, by check, or by automated clearing
house or other similar cash handling processes as specified by separate
agreement between the Company and CoBank. 
Wire transfers shall be made to ABA No. 307088754 for advice to and
credit of CoBANK (or to such other account as CoBank may direct by
notice).  The Company shall give CoBank
telephonic notice no later than 12:00 noon Company’s local time of its intent
to pay by wire and funds received after 3:00 p.m. Company’s local time shall be
credited on the next business day. 
Checks shall be mailed to CoBank, Department 167, Denver, Colorado
80291-0167 (or to such other place as CoBank may direct by notice).  Credit for payment by check will not be
given until the latter of: (a) the day on which CoBank receives immediately available
funds; or (b) the next business day after receipt of the check.

 

SECTION 4. 
Security. 
The Company’s obligations under this agreement, all Supplements
(whenever executed), and all instruments and documents contemplated hereby or
thereby, shall be secured by a statutory first lien on all equity which the
Company may now own or hereafter acquire in CoBank and by a first lien (subject
only to exceptions approved in writing by CoBank) pursuant to all security
agreements, mortgages, and deeds of trust executed by the Company (including
those executed by South Dakota Soybean Processors, whose obligations to CoBank
have been assumed by the Company) in favor of CoBank, whether now existing or
hereafter entered into.  As additional
security for those obligations, the Company agrees to grant to CoBank, by means
of such instruments and documents as CoBank shall require, a first lien on such
of its other assets, whether now existing or hereafter acquired, as CoBank may
from time to time require, including an Assignment of project Documents
Agreement in form and substance satisfactory to CoBank.

 

SECTION 5. 
Conditions Precedent.  CoBank’s obligation to extend credit under the initial Supplement
hereto is subject to the receipt by CoBank of a duly executed copy of this
agreement and all instruments and documents contemplated hereby.  CoBank’s obligation to extend credit under
each Supplement is subject to the condition that CoBank receive, in form and
substance satisfactory to CoBank: (a) a duly executed copy of the Supplement
and all instruments and documents contemplated thereby; (b) such certified
board resolutions, evidence of incumbency, and other evidence as CoBank may
require that the Supplement, all instruments and documents executed in
connection therewith, and (in the case of the initial Supplement hereto) this
agreement and all instruments and documents executed in connection herewith,
have been duly authorized and executed; (c) all fees and other charges provided
for herein or in the Supplement; and (d) such evidence as CoBank may require that
CoBank has, as of the date of the Supplement, a duly perfected first priority
lien on all security for the Company’s obligations.  In addition, CoBank’s obligation to extend or to continue to
extend credit under each Supplement is subject to the Company being in
compliance with the terms of this agreement, the Supplements, and all security
and other instruments and documents related hereto or thereto (collectively, at
any time, the “Loan Documents”).

 

SECTION 6. 
Representations and Warranties.  The execution by the Company of each
Supplement shall constitute a representation and warranty to CoBank that: (a)
each representation and warranty and all information set forth in any
application or other document

 

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submitted in connection with,
or to induce CoBank to enter into, such Supplement, is correct in all material
respects as of the date of such Supplement; (b) the Loan Documents do not
conflict with any other agreement to which the Company is a party or with any
provision of the Company’s bylaws, articles of incorporation or other
organizational documents; (c) the Company is in compliance with all of the
terms of the Loan Documents (including, without limitation, Section 7(a) of
this agreement on eligibility to borrow from CoBank); and (d) the Loan
Documents create legal, binding, and enforceable obligations of the Company,
except as enforceability may be limited by bankruptcy and similar laws
affecting creditors’ rights generally.

 

SECTION 7. 
Affirmative Covenants.  Unless CoBank otherwise consents in writing,
while this agreement is in effect, the Company agrees to: (a) maintain its
status as an entity eligible to borrow from CoBank and its existence and good
standing in the jurisdiction of its incorporation or formation; (b) qualify and
remain qualified to transact business wherever such qualification is required
and obtain and maintain all licenses, certificates, permits, and like
authorizations which are material to its businesses or required by law, rule,
regulation, code, orders or the like (collectively, “Laws”); (c) comply in all
material respects with all applicable Laws, including all environmental Laws
and all Laws relating to any patron or member investment program that the
Company may have; (d) cause all persons occupying or present on any property of
the Company to comply in all material respects with all environmental laws; (e)
maintain insurance with companies satisfactory to CoBank in such amounts and
covering such risks as an customarily carried by companies engaged in the same
or similar business and similarly situated, and make such increases in the
amount or type of coverage as CoBank may request; (f) cause all policies
covering any collateral provided for herein or in any Supplement to have loss
payable clauses or endorsements in form and content acceptable to CoBank; (g)
maintain its property in good working condition, ordinary wear and tear
excepted; (h) keep books of account in accordance with generally accepted
accounting principles (“GAAP”) consistently applied; (i) permit CoBank or its
agents to inspect the Company’s properties, books, and records, and to discuss
the Company’s affairs, finances, and accounts with its directors, employees,
and independent certified public accountants; (j) purchase such equity in
CoBank as CoBank may from time to time require in accordance with its bylaws
(except that the maximum amount of equity which the Company may be required to
purchase in connection with any loan may not exceed the amount permitted by the
bylaws at the time the Supplement relating to that loan is entered into or such
loan is renewed or refinanced by CoBank); (k) have an excess of current assets
over current liabilities (both as determined in accordance with GAAP
consistently applied) of not less than $5,000,000.00 at the end of each period
for which financial statements are required to be furnished pursuant to Section
8 hereof through and including August 2004, and of not less than $6,000,000.00
at the end of each such period thereafter, except that in determining current
assets, any amount available under the Revolving Term Loan Supplement hereto
may be included, and except that in determining current liabilities, any
outstanding principal balance under the Statused Revolving Credit Supplement
hereto shall be included; (l) have at the end of each fiscal year of the
Company a “Debt Service Coverage Quotient” (as defined below) of not less than
1.2 to 1; (m) pay or cause to be removed by the initiation of legal proceedings
or otherwise, within sixty (60) days after notice from CoBank, any lien on the
Improvements or Property subject to any security document unless said lien is
covered by insurance or bond; and (n) comply with and keep in effect all
permits and approvals obtained

 

 

3

 

from any governmental bodies
that relate to the lawful construction of the Improvements, as well as with all
existing and future laws, regulations, orders and requirements of all
governmental, judicial or legal authorities having jurisdiction over the
Property or Improvements, and with all recorded restrictions affecting the
Property. For purposes of subsection (1) above, “Debt Service Coverage
Quotient” shall mean the following (all as calculated for the most current year
end in accordance with GAAP consistently applied, except as otherwise
specifically indicated): (i) net income (after taxes) plus depreciation and
amortization, minus non-cash patronage income, minus cash patronage paid or
scheduled to be paid, based on the most recent prior fiscal year, minus
extraordinary gains (plus losses); divided by (ii) all principal payments due
within one year on all long-term debt as of the prior fiscal year-end, but in
no event including any current portion of the Statused Revolving Credit
Supplement hereto.

 

SECTION 8. 
Reporting Covenants.  Unless
CoBank otherwise consents in writing, while this agreement is in effect, the
Company agrees to furnish to CoBank:

 

(a)           Annual
Financial Statements. Within 120 days after the end of
each fiscal year of the Company occurring during the term hereof: (i) annual
financial statements prepared in accordance with GAAP consistently applied and
audited by independent certified public accountants selected by the Company and
acceptable to CoBank; and (ii) a report of such accountants on such statements
containing an opinion acceptable to CoBank.

 

(b)           Interim
Financial Statements. Within 45 days after the end of
each month (other than the last month in each fiscal year), a balance sheet, a
statement of income for such month and for the period year to date, and such
other monthly statements as CoBank may specifically request, all prepared in
reasonable detail and in form and substance satisfactory to CoBank.

 

(c)           Notice
of Default. Promptly after becoming aware thereof,
notice of the occurrence of a default or of any event which with the giving of
notice and the passage of time would become a default hereunder.

 

(d)           Notice
of Litigation, Environmental Matters, Etc. Promptly
after becoming aware thereof:  (i)
notice of the commencement of all actions, suits, or proceedings affecting the
Company which, if determined adversely to the Company, could have a material
adverse effect on the Company; and (ii) notice of the receipt of all pleadings,
orders, complaints, indictments, or any other communication alleging a
condition that may require the Company to undertake or to contribute to a
cleanup or other response under environmental Laws, or which seek penalties,
damages, injunctive relief, or criminal sanctions related to alleged violations
of such Laws, or which claim personal injury or property damage to any person
as a result of environmental factors or conditions.

 

(e)           Bylaws
and Articles. Promptly after any change in the
Company’s bylaws or articles of incorporation (or like documents), copies of
all such changes, certified by the Company’s Secretary.

 

(f)            Other
Information. Such other information as CoBank may from
time to time request.

 

4

 

SECTION 9. 
Negative Covenants.  Unless
CoBank otherwise consents in writing, while this agreement is in effect, the
Company will not: (a) create, assume or allow to exist any indebtedness or
liability for borrowed money or for the deferred purchase price of property or
services (including capitalized leases not otherwise permitted hereunder),
except for indebtedness to CoBank, indebtedness under the Company’s member or
patron investment program (provided such indebtedness is expressly stated to be
subordinated to all indebtedness to CoBank), indebtedness to any local, state
or federally sponsored developmental agencies in an aggregate principal amount
not to exceed $1,000,000.00, but no extensions and refinancings thereof,
miscellaneous indebtedness not to exceed $500,000.00 at any one time
outstanding, indebtedness to Urethane Soy Systems Company’s shareholders in an
aggregate principal amount not to exceed $2,673,000.00, but no extensions and
refinancings thereof, accounts payable to trade creditors; and current
operating liabilities (other than for borrowed money) incurred in the ordinary
course of business; (b) grant, assume or allow to exist any security interest,
mortgage, deed of trust or other consensual lien on any of its property, except
liens in favor of CoBank, liens in existence on the date hereof in favor of any
local, state or federally sponsored developmental agencies to secure
indebtedness permitted hereunder, liens securing miscellaneous indebtedness
permitted under subsection (a) above; and liens in existence on the date hereof
in favor of Urethane Soy Systems Company’s shareholders to secure indebtedness
permitted hereunder, (c) allow to exist any non-consensual or statutory liens
that secure obligations that are past due or any judgment liens; unless said
liens are subject to and covered by insurance or bonds or are being contested
by the Company in legal proceedings or on appeal; (d) merge or consolidate with
any other entity, or form or create any new subsidiary, or purchase all or a
material part of the assets of any person or entity, or commence operations
under any other name or organization; (e) sell, lease, or otherwise dispose of
any assets, except in the ordinary course of business; (f) lend money or
otherwise extend credit, except for trade credit extended in the ordinary
course of business; (g) assume, guarantee, or otherwise become liable (directly
or indirectly) for the debts of another; (h) engage in any business activities
substantially different from the Company’s present business activities; (i)
declare or pay any dividends or retire capital equities or other written
notices of allocation, or make any other distribution or allocation of its
earnings, surplus or assets to any holder of stock, allocated equities or other
written notices of allocation, except that the Company may distribute earnings
annually in the form of cash value-added payments and qualified written notices
of allocation, so long as the Company is operating on a profitable basis and is
in full compliance with all loan covenants, and such written notices constitute
equity and not debt; (j) create, incur, assume, or permit to exist any
obligation as lessee except (1) operating leases for the rental or hire of any
real or personal property (excluding railroad cars) which do not in the
aggregate require the Company to make scheduled payments to the lessors in any
fiscal year of the Company occurring during the term hereof in excess of
$350,000.00, (2) leases which should be capitalized in accordance with GAAP for
the rental or hire of any real or personal property which do not in the
aggregate require the Company to make scheduled payments to the lessors in any
fiscal year of the company occurring during the term hereof in excess of
$200,000.00, (3) leases for the rental or hire of up to 400 tanker and/or
hopper railroad cars under terms and conditions acceptable to CoBank (4) other
leases of railroad cars with original maturities of less than 18 months, at the
Company’s discretion, and (3) leases of soybean oil storage tank space with
aggregate annual payments not to exceed $400,000.00; or (1) purchase or install
any materials, equipment, fixture,

 

 

5

 

or articles of personal
property of the Company placed in the Improvements if such shall be covered
under any security agreement or other agreement where the seller reserves or
purports to reserve title or the right of removal or repossession, or the right
to consider them personal property after their incorporation in the work of
construction, unless authorized by CoBank in writing, except in support of
financing permitted under Sections 9(a) and 9(j).

 

SECTION 10. 
Events of Default.  The
Company shall be in default hereunder if any of the following occur: (a) any
payment required to be made hereunder or under any Supplement is not made when
due; (b) any representation or warranty made or deemed made by the Company
herein or in any other Loan Document shall prove to have been false or
misleading in any material respect on the date made or deemed made; (c) the
Company should fail to comply with Subsection (7)(a) through (7)(i) hereof or
Subsections 8(a), (b), (e), and (f) hereof or any reporting covenant set forth
in any Supplement hereto, and such breach continues for 15 days after written
notice thereof shall have been given to the Company; (d) any other covenant or
agreement set forth herein or in any other Loan Document is breached or the
Company uses the proceeds of any loan for any unauthorized purpose; (e) the
Company should breach or be in default under any other agreement between the
Company and CoBank; (f) the Company should fail to pay when due any
indebtedness to any other person or entity for borrowed money or any long-term
obligation for the deferred purchase price of the property (including any
capitalized lease), or any other event occurs which constitutes or would, with
the giving of notice and/or the passage of time, constitute a default under any
agreement relating to such indebtedness or obligation; (g) the Company becomes
insolvent or does not pay its debts as they come due or suspends its business
operations or a material part thereof or makes an assignment for the benefit of
creditors or commences or has commenced against it any proceeding for the
appointment of a receiver, trustee, or other custodian for it or any of its
property or any proceeding under any bankruptcy, reorganization, dissolution,
or similar law; and (h) any material adverse change occurs in the Company’s
financial condition, results of operation, or ability to perform its
obligations to CoBank under this agreement and the other Loan Documents.

 

SECTION 11. 
Remedies.  Upon
the occurrence of a default or of any event which with the giving of notice and
the passage of time would become a default hereunder, CoBank shall have no
obligation to continue to extend credit to the Company and may discontinue
doing so at any time without prior notice. In addition, upon the occurrence of
each and every default hereunder, CoBank may, upon notice to the Company: (a)
terminate any commitment; (b) declare the unpaid principal of the loans, all
accrued interest thereon, and all other amounts payable under this agreement
and the other Loan Documents to be immediately due and payable (whereupon the
same shall become immediately due and payable without presentment, demand, or
further notice of any kind, all of which are hereby waived); (c) proceed to
protect, exercise, and enforce such rights and remedies as may be provided by
agreement or under Law; (d) apply all payments received by CoBank to the
Company’s obligations in such order and manner as CoBank may elect; and (e)
hold and/or set off and apply against the Company’s obligations to CoBank, the
proceeds of any equity in CoBank, any cash collateral held by CoBank, or any
balances held by CoBank for the Company’s account (whether or not such balances
are then due). The Company acknowledges that each and every one of CoBank’s
rights and remedies shall be cumulative and may be exercised from time to time,
and no failure on the part of CoBank to exercise, and no delay in exercising,
any right or remedy shall operate as a waiver thereof, nor

 

6

 

shall any single or partial
exercise of any right or remedy preclude any other or future exercise thereof
or the exercise of any other right or remedy.

 

In addition to
the rights and remedies set forth above: (i) if the Company fails to purchase
any equity in CoBank when required or fails to make any payment to CoBank when
due, then at CoBank’s option in each instance, such payment shall bear interest
from the date due to the date paid at 4% per annum in excess of the rate(s) of
interest that would otherwise be in effect on that loan; and (ii) after the
maturity of any loan (whether as a result of acceleration or otherwise), the
unpaid principal balance of such loan (including without limitation, principal,
interest, fees and expenses) shall automatically bear interest at 4% per annum
in excess of the rate(s) of interest that would otherwise be in effect on that
loan. All interest provided for herein shall be payable on demand and shall be
calculated on the basis of a year consisting of 360 days.

 

SECTION 12. 
Broken Funding Surcharge.  Notwithstanding
any provision contained in any Supplement giving the Company the right to repay
any loan prior to the date it would otherwise be due and payable, the Company
agrees that in the event it repays any fixed rate balance prior to its
scheduled due date or prior to the last day of the fixed rate period applicable
thereto (whether such payment is made voluntarily, as a result of an
acceleration, or otherwise), the Company will pay to CoBank a surcharge in an
amount which would result in CoBank being made whole (on a present value basis)
for the actual or imputed funding losses incurred by CoBank as a result
thereof. Notwithstanding the foregoing, in the event any fixed rate balance is
repaid as a result of the Company refinancing the loan with another lender or
by other means, then in lieu of the foregoing, the Company shall pay to CoBank
a surcharge in an amount sufficient (on a present value basis) to enable CoBank
to maintain the yield it would have earned during the fixed rate period on the
amount repaid. Such surcharges will be calculated in accordance with
methodology established by CoBank (a copy of which will be made available to
the Company upon request).

 

SECTION 13. 
Other Types of Credit.  From
time to time, CoBank may issue letters of credit or extend other types of
credit to or for the account of the Company. In the event the parties desire to
do so under the terms of this agreement, such extensions of credit may be set
forth in any Supplement hereto and this agreement shall be applicable thereto.

 

SECTION 14. 
Miscellaneous. 
The Loan Documents are intended by the parties to be a complete and
final expression of their agreement. No amendment, modification, or waiver of
any provision nor any consent to any departure therefrom, shall be effective
unless in writing and signed by CoBank, and then such waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which granted. In the event this agreement is amended or restated, each such
amendment and restatement shall be applicable to all Supplements hereto. This
agreement shall continue in effect until all indebtedness or obligations of the
Company shall have been paid, CoBank has no further commitment to extend credit
to or for the account of the Company under any Supplement, and either party
furnishes notice of termination to the other. Except to the extent governed by
applicable federal law, this agreement and cash Supplement shall be governed by
the haws of the State of Colorado, without reference to choice of law doctrine.
Any provision of this agreement or any other Loan Document which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent thereof

 

7

 

without invalidating the
remaining provisions hereof or thereof. The Loan Documents shall be binding
upon and inure to the benefit of the Company and CoBank and their respective
successors and assigns, except that the Company may not assign or transfer its
rights or obligations under the Loan Documents without the prior written
consent of CoBank.

 

SECTION 15. 
Notices.  All
notices provided for herein shall be in writing (including facsimile) and shall
be mailed or delivered to the Following addresses or facsimile numbers or to
such other address or facsimile number as either party may specify by notice to
the other: (a) If to CoBank, to Attention: Credit Information Services, P.O.
Box 5101, Denver, Colorado 80217, Fax No: (303) 224-6101; and (b) if to the
Company, to Attention: President, 100 Caspain Ave., Volga, South Dakota 57071,
Fax No: (605) 627-5869.

 

SECTION 16. 
Taxes and Expenses.  To
the extent allowed by law, the Company agrees to pay all reasonable
out-of-pocket costs and expenses (including the fees and expenses of counsel
retained by CoBank) incurred by CoBank in connection with the origination,
administration, collection, and enforcement of this agreement and the other
Loan Documents, including, without limitation, all costs and expenses incurred
in perfecting, maintaining, determining the priority of; and releasing any
security for the Company’s obligations hereunder or under any Supplement and
any stamp, intangible, transfer, or similar tax payable in connection with this
agreement or any other Loan Document.

 

SECTION 17. 
Notice of Completion.  The
Company irrevocably appoints CoBank as the Company’s agent to file of record
any notice of completion, cessation of labor or any other notice that CoBank
deems necessary to file to protect any of the interests of CoBank. CoBank,  however, shall have no duty to make such
filing.

 

SECTION 18. 
Signs and Publicity.  At
CoBank’s request, the Company will allow CoBank to post signs on the Property
at the construction site for the purpose of identifying CoBank as the
“Construction Lender”. At the request of CoBank, the Company will use its best
efforts to identify CoBank as the construction lender in publicity concerning
the project.

 

SECTION 19. 
Cooperation. 
The Company will cooperate at all times with CoBank in bringing about
the timely completion of the Improvements, and the Company will resolve all
disputes arising during the work of construction in a manner which will allow
work to proceed expeditiously.

 

IN WITNESS WHEREOF,
the parties have caused this agreement to be executed by their duly authorized
officers as of the date shown above.

 

	
  COBANK, ACB

  	
  SOUTH DAKOTA SOYBEAN

  PROCESSORS, LLC

  
	
  By:

  	
  /s/ Teresa L.

  	
   

  	
  By:

  	
  /s/ Rodney Christianson

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   Assistant Corporate Secretary

  	
   

  	
  Title:

  	
   Chief Executive Officer

  	
   

  
								

 

8

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