Document:

Exhibit
10.5

 

CONTINUING GUARANTEE

 

1.             Absolute Guarantee.  For valuable consideration and to induce
CoBank, ACB (“CoBank”) to extend a loan or loans to DAKOTA GROWERS PASTA COMPANY, INC., Carrington, North Dakota (“Borrower”),
of which PRIMO PIATTO, INC. (“Guarantor”)
is a wholly owned subsidiary, Guarantor unconditionally and absolutely
guarantees and promises to pay to CoBank, or order, on demand, in lawful money
of the United States, any and all Indebtedness of Borrower to CoBank; provided
that the liability of the Guarantor hereunder shall be limited to the maximum
amount of the Indebtedness which Guarantor may guarantee without rendering this
Guarantee void or voidable under any applicable fraudulent conveyance or
fraudulent transfer law.  The word “Indebtedness”
is used herein in its more comprehensive sense, and includes any and all
advances, debts, obligations and liabilities of Borrower, including but not
limited to all principal, interest, fees, expenses and stock subscription
charges, heretofore, now or hereafter made, incurred or created, whether
voluntary or involuntary and however arising, whether due or not due, absolute
or contingent, liquidated or unliquidated, determined or undetermined, and
whether Borrower may be liable individually or jointly with others, or whether
recovery upon such Indebtedness may be or hereafter become barred by any
statute of limitation, or whether such Indebtedness may be or hereafter become
otherwise unenforceable.

 

2.             Continuing Guarantee.  No termination by Guarantor shall be
effective except by notice sent to CoBank by registered mail naming a
termination date effective not less than ninety (90) days after the receipt of
such notice by CoBank.  No such
termination shall affect (i) any Indebtedness of Borrower incurred prior
to the effective date of termination or (ii) any Indebtedness for
interest, fees, expenses and/or stock subscription charges incurred after
termination related to any Indebtedness outstanding on the effective date of
termination.

 

3.             Guarantee of Payment.  This continuing guarantee is a guarantee of
payment and not of collection.  The
obligations hereunder are joint and several, and independent upon the
Indebtedness of Borrower, and a separate action or actions may be brought and
prosecuted against Guarantor whether action is brought against Borrower or
whether Borrower be joined in any such action or actions; and Guarantor waives
the benefit of any statutes of limitations affecting its liability hereunder or
the enforcement thereof.

 

4.             Authorities of CoBank.  Guarantor authorizes CoBank, without notice
or demand and without affecting liability hereunder, from time to time, to (a) grant
additional credit to Borrower, and renew, compromise, extend, accelerate or
otherwise change the time for payment of, or otherwise change the terms of, the
Indebtedness or any part thereof, including increase or decrease of the rate of
interest thereon; (b) take and hold security for the payment of this
Guarantee or the Indebtedness guaranteed, and exchange, enforce, waive and
release any such security; (c) apply such security and direct the order or
manner of sale thereof as CoBank in its discretion may determine; and (d) release
or substitute any one or more endorsers or guarantors of the Indebtedness.

 

5.             Waivers.  Guarantor waives any right to require CoBank,
as a condition to proceeding against Guarantor, to (a) proceed against
Borrower or any other person; (b) proceed against or exhaust any security
held from Borrower or Guarantor; or (c) pursue any other remedy in CoBank’s
power whatsoever.  Guarantor waives any
defense arising by reason of any disability or other defense or counter-claim
that the Borrower may assert on the underlying debt, including but not limited
to failure of consideration, breach of warranty, fraud, statute of frauds,
bankruptcy, statute of limitations, lender liability, accord and satisfaction,
and usury or by reason of the cessation from any cause whatsoever of the
liability of Borrower.  Guarantor waives
the pleading or assertion of any defense based on the failure of CoBank to keep
Guarantor informed of the financial and business status of Borrower, it being
expressly acknowledged by Guarantor that it is Guarantor’s responsibility to
keep so informed.  Until all Indebtedness
of Borrower to CoBank shall have been paid in full, Guarantor shall have no
right of 

 

 

subrogation, and waives any right to enforce
any remedy which CoBank now has, or may hereafter have against Borrower, and
waives any benefit of, and any right to participate in any security now or
hereafter held by CoBank.  Guarantor
waives all setoffs and counterclaims, and all presentments, demands for
performance, notices of nonperformance, protests, notices of dishonor, notices
of sale of foreclosure of any security for the payment of the Indebtedness, and
notices of acceptance of this Guarantee and of the existence, creation, or
incurring or new or additional Indebtedness.

 

GUARANTOR
WARRANTS AND AGREES THAT EACH OF THE WAIVERS SET FORTH IN THIS AGREEMENT IS
MADE WITH GUARANTOR’S FULL KNOWLEDGE OF ITS SIGNIFICANCE AND CONSEQUENCES AND
THAT, UNDER THE CIRCUMSTANCES, THE WAIVERS ARE REASONABLE AND NOT CONTRARY TO
PUBLIC POLICY OR LAW.  IF ANY SUCH WAIVER
IS DETERMINED TO BE CONTRARY TO ANY APPLICABLE LAW OR PUBLIC POLICY, SUCH WAIVER
SHALL BE EFFECTIVE ONLY TO THE EXTENT PERMITTED BY LAW OR PUBLIC POLICY.

 

6.             Lien; Right of Setoff.  In addition to all liens upon, and all rights of setoff against the
monies, securities or other property of Guarantor given to CoBank by law or by
contract, CoBank shall have a lien upon and a right to setoff against all
monies securities and other property of Guarantor now or hereafter in the
possession of or on deposit with CoBank, whether held in a general or special
account of deposit, or for safekeeping or otherwise; and every such lien and
right of setoff may be exercised without demand upon or notice to
Guarantor.  No lien or right of setoff
shall be deemed to have been waived by any act or conduct on the part of
CoBank, or by any neglect to exercise such right of setoff or to enforce such
lien, or by any delay in so doing, and every right of setoff and lien shall
continue in full force and effect until such right of setoff or lien is
specifically waived or released by an instrument in writing executed by CoBank.

 

7.             No Waiver.  No exercise or nonexercise of any right
hereby given CoBank, no dealing by CoBank with Borrower or any other Guarantor,
no change, impairment, or suspension of any of CoBank’s rights or remedies,
shall in any way affect any of the obligations of Guarantor hereunder or any
security furnished by Guarantor or give Guarantor any recourse against
CoBank.  The Guarantor represents to
CoBank that he is now and will be completely familiar with the business,
operation, and condition of Borrower, and Guarantor waives any right to require
CoBank to notify Guarantor of any facts concerning Borrower, unknown to
Guarantor, material or otherwise, which might affect the relationship of
CoBank, Guarantor, and Borrower, or which might cause Guarantor to give CoBank
notice of termination of this Guarantee as herein provided.

 

8.             Subordination.  Any Indebtedness of Borrower to Guarantor now
or hereafter held by Guarantor is hereby subordinated to the Indebtedness of
Borrower to CoBank; and such Indebtedness of Borrower to Guarantor, if CoBank
so requests, shall be collected, enforced and received by Guarantor as trustee
for CoBank and be paid over to CoBank on account of the Indebtedness of
Borrower to CoBank but without reducing or affecting in any manner the
liability of Guarantor under the other provisions of this Guarantee.

 

9.             Corporate Authority.  Although Borrower is a corporation, it is not
necessary for CoBank to inquire into the powers of Borrower, or the officers,
directors, or agents acting or purporting to act on its behalf, and any
Indebtedness made or created in reliance upon the professed exercise of such
powers shall be guaranteed hereunder.

 

10.          Attorneys’ Fees.  Guarantor agrees to pay the attorneys’ fees
of CoBank and all other costs and expenses which may be incurred by CoBank in
the enforcement of this Guarantee.  This
Guarantee shall be interpreted and enforced in accordance with the laws of the
State of Colorado.

 

11.          Remedies Cumulative.  CoBank’s rights under this Guarantee are
cumulative and not alternative, and shall not be exhausted by CoBank’s exercise
of any one or more rights hereunder, or 

 

 

otherwise, or by any number of successive
actions, unless and until all obligations of Borrower and Guarantor have been
paid or performed.  The liability under
this Guarantee shall continue notwithstanding the incapacity or disability of
Guarantor, and its benefits shall inure to CoBank’s successors and
assigns.  CoBank may assign this
Guarantee, in whole or in part, without notice to Guarantor.  Guarantor waives all exemptions and all
setoffs and counterclaims.  Only to the
extent that this Guarantee is inconsistent with any prior guarantee given by
Guarantor to CoBank, or contains additional provisions, does this Guarantee
supersede such prior guarantees; otherwise, such prior guarantees remain in
full force and effect.

 

12.          Reinstatement of Payment.  If any payment received by CoBank and applied
to the Indebtedness is subsequently set aside, recovered, rescinded, or
required to be returned for any reason (including, without limitation, the
bankruptcy, insolvency or reorganization of Borrower), the Indebtedness to
which such payment was applied shall for the purposes of this continuing
guarantee be deemed to have continued in existence, and this continuing
guarantee shall be enforceable as to such Indebtedness as fully as if such
applications had never been made.

 

13.          Indemnification.  Guarantor expressly waives any and all rights
of subrogation, reimbursement, indemnity, exoneration, contribution or any
other claim which it may now or hereafter have against Borrower or any other
person directly or contingently liable for the Indebtedness guaranteed
hereunder, or against or with respect to Borrower’s property, including without
limitation, any property securing its Indebtedness to CoBank, arising from the
existence or performance of this Guarantee. 
In furtherance, and not in limitation, of the preceding waiver,
Guarantor agrees that any payment to CoBank by guarantor pursuant to this Guarantee
shall be deemed to be a contribution to the capital of Borrower or other
obligated party and such payment shall not cause Guarantor to be a creditor of
Borrower or any other obligated party. 
In addition to, and not in substitution for, any other rights granted to
CoBank by this Guarantee, including but not limited to any rights set forth in
Paragraph 11 above, in the event that a bankruptcy court determines that any
monies paid by Borrower to CoBank are avoidable preferences because they were made
for the benefit of Guarantor, then Guarantor shall indemnify and hold CoBank
harmless from any losses, including, but not limited to all costs and expenses,
including reasonable attorneys’ fees, which CoBank may incur as a result of
such determination.

 

14.          Right of Foreclosure.  The Guarantor agrees that if all or a portion
of the Indebtedness is, at any time, secured by a deed of trust or mortgage
covering interests in real property, CoBank, in its sole discretion, without
notice or demand, and without affecting the liability of the Guarantor, may
foreclose the deed of trust or mortgage, and the interest in real property,
secured thereby by nonjudicial sale; and the Guarantor hereby waives any
defense to the recovery by CoBank against the Guarantor of any deficiency after
a nonjudicial sale.

 

15.          Amendment.  Neither this Agreement, nor any provision
hereof, may be amended, modified, waived, or discharged except by an instrument
in writing duly signed by, or on behalf of, CoBank.

 

16.          Severability.  In case any right of CoBank herein shall be
held to be invalid, illegal, or unenforceable, such invalidity, illegality
and/or unenforceability shall not affect any other right granted hereby.

 

17.          Guarantor’s Representations.  Guarantor represents and
warrants that:  (a) no
representations or agreements of any kind have been made to the Guarantor which
would limit or qualify in any way the terms of this Guarantee; (b) the
Guarantor has not and will not, without CoBank’s prior written consent, sell,
lease, assign, encumber, hypothecate, transfer or otherwise dispose of any of
the Guarantor’s assets, or any interest therein, other than in the ordinary
course of business; (c) CoBank has made no representation to the Guarantor
as to the creditworthiness of the Borrower; (d) the Guarantor will provide
to CoBank financial and credit information in form acceptable to CoBank,
including balance 

 

 

sheets and income statements no less
frequently than annually, as soon as they become available, not later than 120
days after each fiscal year end or at such other times as CoBank may request.

 

18.          This Guarantee is secured by a Security Agreement of even date
herewith, executed by Guarantor as well as the following deed(s) of trust:
dated February 13, 1998 and recorded in the office of the Hennepin County,
Minnesota, Recorder as document no. 6855008, and also recorded in the office of
the Hennepin County, Minnesota, Registrar of Titles as document no. 2891901;
and dated August 5, 1998 and recorded in the office of the Hennepin County,
Minnesota, Recorder as document no. 6947302, and also recorded in the office of
the Hennepin County, Minnesota, Registrar of Titles as document no. 3060990;
including any replacements, modifications or amendments thereto.  In addition, at CoBank’s request, the
Guarantor agrees to grant to CoBank, by means of such instruments and documents
as CoBank shall require, a first lien on such of the Guarantor’s other assets,
whether now existing or hereafter acquired, as CoBank may from time to time
require.

 

IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guarantee this 23rd
day of May, 2005.

 

 

	
   

  	
  PRIMO PIATTO, INC.

  
	
   

  	
  New Hope, Minnesota

  
	
   

  	
   

  
	
   

  	
  By

  	
      /s/Thomas Friezen

  	
   

  
	
   

  	
  Title:

  	
        VP FinanceExhibit 10.6

 

SECURITY AGREEMENT

 

 

THIS SECURITY AGREEMENT is executed and
delivered by PRIMO PIATTO, INC.
(the “Debtor”), a Minnesota corporation, having its place of business (or chief
executive office if more than one place of business) located at 1 Pasta Avenue,
Carrington, North Dakota, to CoBank, ACB (the “Secured Party”), a federally
chartered instrumentality of the United States, whose mailing address is P.O.
Box 5110, Denver, Colorado 80217.

 

SECTION 1.         GRANT OF SECURITY
INTEREST.  For valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Debtor hereby
grants to the Secured Party a security interest in all of the personal property
of the Debtor, wherever located and whether now existing or hereafter acquired,
together with all accessions and additions thereto, and all products and
proceeds thereof, including:

 

accounts; inventory (including without limitation, returned or
repossessed goods); goods; as-extracted collateral; chattel paper; electronic
chattel paper; instruments; investment property (including, without limitation,
certificated and uncertificated securities, security entitlements, securities
accounts, commodity contracts, and commodity accounts); letters of credit;
letter-of-credit rights; documents; equipment; farm products; fixtures; general
intangibles (including, without limitation, payment intangibles, choses or
things in action, litigation rights and resulting judgments, goodwill, patents,
trademarks and other intellectual property, tax refunds, miscellaneous rights
to payment, investments and other interests in entities not included in the
definition of investment property (including, without limitation, all equities
and patronage rights in all cooperatives and all interests in partnerships and
joint ventures), margin accounts, computer programs, software, invoices, books,
records and other information relating to or arising out of the Debtor’s
business); and, to the extent not covered by the above, all other personal
property of the Debtor of every type and description, including without
limitation, supporting obligations, interests or claims in or under any policy
of insurance, commercial tort claims, deposit accounts, money, and judgments
(the “Collateral”).

 

Where applicable, all terms used herein shall have the same meaning as
presently and as hereafter defined in the Uniform Commercial Code (the “UCC”).

 

SECTION 2.         THE OBLIGATIONS.  The security interest granted hereunder shall
secure the payment of all indebtedness and the performance of all obligations
of the Debtor to the Secured Party of every type and description, whether now
existing or hereafter arising, fixed or contingent, as primary obligor or as
guarantor or surety, acquired directly or by assignment or otherwise,
liquidated or unliquidated, regardless of how they arise or by what agreement
or instrument they may be evidenced, including without limitation all loans,
advances and other extensions of credit and all covenants, agreements, and
provisions contained in all loan and other agreements between the parties (the “Obligations”).

 

SECTION 3.         REPRESENTATIONS,
WARRANTIES AND COVENANTS.  The Debtor
represents, warrants and covenants as follows:

 

A.            Title
to Collateral.  Except as permitted
by any other written agreement between the parties, and except for any security
interest in favor of the Secured Party, the Debtor has clear title to all
Collateral free of all adverse claims, interests, liens, or encumbrances.  Without the prior written consent of the
Secured Party, the Debtor shall not create or permit the existence of any
adverse claims, interests, liens, or other encumbrances against any of the
Collateral.  The Debtor shall provide
prompt written notice to the Secured Party of any future adverse claims,
interests, liens, or encumbrances against all Collateral, and shall defend
diligently the Debtor’s and the Secured Party’s interests in all Collateral.

 

 

B.            Validity
of Security Agreement; Corporate Authority.  This Security Agreement is the valid and
binding obligation of the Debtor, enforceable in accordance with its
terms.  The Debtor has the corporate
power to execute, deliver and carry out the terms and provisions of this
Security Agreement and all related documents, and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Security Agreement and all related documents.

 

C.            Location
of the Debtor.  The Debtor’s place of
business (or chief executive office if more than one place of business) is
located at the address shown above.  The
Debtor’s state of incorporation or formation is as shown above.

 

D.            Location
of Collateral.  All equipment and
inventory are now at the location or locations specified on Schedule A attached
hereto and made a part hereof.  All farm
products and fixtures are now at the location or locations specified on
Schedule B attached hereto and made a part hereof.

 

E.             Name,
Identity, and Corporate Structure. 
The Debtor’s exact legal name is as set forth above.  Except as otherwise disclosed to the Secured
Party in writing, the Debtor has not within the past ten years changed its
name, identity or corporate structure through incorporation, merger,
consolidation, joint venture or otherwise.

 

F.             Change
in Name, State of Debtor’s Location, Location of Collateral, Etc.  Without giving at least thirty days’
prior written notice to the Secured Party, the Debtor shall not change its
name, identity or corporate structure, the location of its place of business
(or chief executive office if more than one place of business), its state of
incorporation or formation, or the location of the Collateral.

 

G.            Further
Assurances.  Upon the request of the
Secured Party, the Debtor shall do all acts and things as the Secured Party may
from time to time deem necessary or advisable to enable it to perfect,
maintain, and continue the perfection and priority of the security interest of
the Secured Party in the Collateral, or to facilitate the exercise by the
Secured Party of any rights or remedies granted to the Secured Party hereunder
or provided by law. Without limiting the foregoing, the Debtor agrees to
execute, in form and substance satisfactory to the Secured Party, such
financing statements, amendments thereto, supplemental agreements, assignments,
notices of assignments, and other instruments and documents as the Secured
Party may from time to time request.  In
addition, in the event the Collateral or any part thereof consists of
instruments, documents, chattel paper, or money (whether or not proceeds of the
Collateral), the Debtor shall, upon the request of the Secured Party, deliver
possession thereof to the Secured Party (or to an agent of the Secured Party
retained for that purpose), together with any appropriate endorsements and/or
assignments.  Where Collateral is in the
possession of a third party, the Debtor will join with the Secured Party in
notifying the third party of the Secured Party’s security interest and
obtaining an acknowledgment from the third party that it is holding the
Collateral for the benefit of the Secured Party.  The Debtor will cooperate with the Secured
Party in obtaining control with respect to Collateral consisting of deposit
accounts (that are not held by the Secured Party as depositary institution),
investment property, letter-of-credit rights and electronic chattel paper.  The Secured Party shall use reasonable care
in the custody and preservation of such Collateral in its possession, but shall
not be required to take any steps necessary to preserve rights against prior parties.  All costs and expenses incurred by the
Secured Party to establish, perfect, maintain, determine the priority of, or
release the security interest granted hereunder (including the cost of all
filings, recordings, and taxes thereon and the fees and expenses of any agent
retained by Secured Party) shall become part of the Obligations secured hereby
and be paid by the Debtor on demand.

 

H.            Insurance.  The Debtor shall maintain such property
and casualty insurance with such insurance companies, in such amounts, and
covering such risks, as are at all times satisfactory to the Secured
Party.  All such policies shall provide
for loss payable clauses or endorsements in form and content acceptable to the
Secured Party.  Upon the request of the
Secured Party, all policies (or such other proof of compliance with this
Section as may be satisfactory to the Secured Party) shall be delivered to the
Secured Party.  The Debtor shall pay all
insurance premiums when due.  In the event
of loss, damage, or injury to 

 

 

any insured Collateral, the
Secured Party shall have full power to collect any and all insurance proceeds
due under any of such policies, and may, at its option, apply such proceeds to
the payment of any of the Obligations secured hereby, or may apply such
proceeds to the repair or replacement of such Collateral.

 

I.              Taxes,
Levies, Etc.  The Debtor has paid and
shall continue to pay when due all taxes, levies, assessments, or other charges
which may become an enforceable lien against the Collateral.

 

J.             Disposition
and Use of Collateral by the Debtor.  Without
the prior written consent of the Secured Party and provided the Debtor is not
in default hereunder, the Debtor shall not at any time sell, transfer, lease,
abandon, or otherwise dispose of any Collateral except in the ordinary course
of its business.  The Debtor shall not
use any of the Collateral in any manner which violates any statute, regulation,
ordinance, rule, decree, order, or insurance policy.

 

K.            Receivables.  The Debtor shall preserve, enforce, and
collect all accounts, chattel paper, electronic chattel paper, instruments,
documents and general intangibles, whether now owned or hereafter acquired or
arising (the “Receivables”), in a diligent fashion and, upon the request of the
Secured Party, the Debtor shall execute an agreement in form and substance
satisfactory to the Secured Party by which the Debtor shall direct all account
debtors and obligors on instruments to make payment to a lock box deposit
account under the exclusive control of the Secured Party.

 

L.            Condition
of Collateral.  All tangible
Collateral is now in good repair and condition and the Debtor shall at all
times hereafter, at its own expense, maintain all such Collateral in good
repair and condition.

 

M.           Condition
of Books and Records.  The Debtor has
maintained and shall maintain complete, accurate and up-to-date books, records,
accounts, and other information relating to all Collateral in such form and in
such detail as may be satisfactory to the Secured Party, and shall allow the
Secured Party or its representatives at any reasonable time to examine and copy
such books, records, accounts, and other information.

 

N.            Right
of Inspection.  At all reasonable
times upon the request of the Secured Party, the Debtor shall allow the Secured
Party or its representatives to visit any of the Debtor’s properties or
locations so that the Secured Party or its representatives may confirm, inspect
and appraise any of the Collateral.

 

SECTION 4.         DEFAULT.  The breach of any of the Obligations
secured hereby, and/or the breach of any representation, warranty, covenant, or
agreement contained in this Security Agreement, shall constitute default
hereunder.

 

SECTION 5.         RIGHTS AND REMEDIES.  Upon the Debtor’s default and at any time
thereafter, the Secured Party may declare all Obligations to be immediately due
and payable and may exercise any and all rights and remedies of the Secured
Party in the enforcement of its security interest under the UCC, this Security
Agreement, or any other applicable law. 
Without limiting the foregoing:

 

A.            Disposition
of Collateral.  The Secured Party may
sell, lease, or otherwise dispose of all or any part of the Collateral, in its
then present condition or following any commercially reasonable preparation or
processing thereof, whether by public or private sale or at any brokers’ board,
in lots or in bulk, for cash, on credit or otherwise, with or without
representations or warranties, and upon such other terms as may be acceptable
to the Secured Party, and the Secured Party may purchase at any public sale.  At any time when advance notice of sale is
required, the Debtor agrees that ten days’ prior written notice shall be
reasonable.  In connection with the
foregoing, the Secured Party may:

 

1.              require the Debtor
to assemble the Collateral and all records pertaining thereto and make such
Collateral and records available to the Secured Party at a place to be
designated by the Secured Party which is reasonably convenient to both parties;

 

2.              enter the premises
of the Debtor or premises under the Debtor’s control and take possession of the
Collateral;

 

3.             without charge, use or
occupy the premises of the Debtor or premises under the Debtor’s control,
including without limitation, warehouse and other storage facilities;

 

4.             without charge, use
any patent, trademark, tradename, or other intellectual property or technical
process used by the Debtor in connection with any of the Collateral; and

 

5.             rely conclusively upon
the advice or instructions of any one or more brokers or other experts selected
by the Secured Party to determine the method or manner of disposition of any of
the Collateral and, in such event, any disposition of the Collateral by the
Secured Party in accordance with such advice or instructions shall be deemed to
be commercially reasonable.

 

B.            Collection
of Receivables.  The Secured Party
may, but shall not be obligated to, take all actions reasonable or necessary to
preserve, enforce or collect the Receivables, including without limitation, the
right to notify account debtors and obligors on Receivables to make direct
payment to the Secured Party, to permit any extension, compromise, or
settlement of any of the Receivables for less than face value, or to sue on any
Receivable, all without prior notice to the Debtor.

 

C.            Proceeds.  The Secured Party may collect and apply
all proceeds of the Collateral, and may endorse the name of the Debtor in favor
of the Secured Party on any and all checks, drafts, money orders, notes,
acceptances, or other instruments of the same or a different nature, constituting,
evidencing, or relating to the Collateral. The Secured Party may receive and
open all mail addressed to the Debtor and remove there from any cash or non-cash
items of payment constituting proceeds of the Collateral.

 

D.            Insurance
Adjustments.  The Secured Party may
adjust, settle, and cancel any and all insurance covering any Collateral,
endorse the name of the Debtor on any and all checks or drafts drawn by any
insurer, whether representing payment for a loss or a return of unearned
premium, and execute any and all proofs of claim and other documents or
instruments of every kind required by any insurer in connection with any
payment by such insurer.

 

The net proceeds of any disposition of the Collateral may be applied by
the Secured Party, after deducting its reasonable expenses incurred in such
disposition, to the payment in whole or in part of the Obligations in such
order as the Secured Party may elect. 
The enumeration of the foregoing rights and remedies is not intended to
be exhaustive, and the exercise of any right and/or remedy shall not preclude
the exercise of any other rights or remedies, all of which are cumulative and
non-exclusive.

 

SECTION 6.         OTHER PROVISIONS.

 

A.            Amendment,
Modification, and Waiver.  Without
the prior written consent of the Secured Party, no amendment, modification, or
waiver of, or consent to any departure by the Debtor from, any provision
hereunder shall be effective.  Any such
amendment, modification, waiver, or consent shall be effective only in the
specific instance and for the specific purpose for which given.  No delay or failure by the Secured Party to
exercise any remedy hereunder shall be deemed a waiver thereof or of any other
remedy hereunder.  A waiver on any one
occasion shall not be construed as a bar to or waiver of any remedy on any
subsequent occasion.

 

 

B.            Costs
and Attorneys’ Fees.  Except as
prohibited by law, if at any time the Secured Party employs counsel in
connection with the creation, perfection, preservation, or release of the
Secured Party’s security interest in the Collateral or the enforcement of any
of the Secured Party’s rights or remedies hereunder, all of the Secured Party’s
reasonable attorneys’ fees arising from such services and all expenses, costs,
or charges relating thereto shall become part of the Obligations secured hereby
and be paid by the Debtor on demand.

 

C.            No
Obligation to Make Loans.  Nothing
contained herein or in any financing statement or other document executed or
filed in connection herewith shall be construed to obligate the Secured Party
to make any loans or advances to the Debtor, whether pursuant to a commitment
or otherwise.

 

D.            Revival
of Obligations.  To the extent the
Debtor or any third party makes a payment or payments to the Secured Party or
the Secured Party enforces its security interest or exercises any right of
setoff, and such payment or payments or the proceeds thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, and/or
required to be repaid to a trustee, receiver, or any other party under any
bankruptcy, insolvency or other law or in equity, then, to the extent of such
recovery, the Obligations or any part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such payment
or payments had not been made, or such enforcement or setoff had not occurred.

 

E.             Performance
by the Secured Party.  In the event
the Debtor shall at any time fail to pay or perform punctually any of its
duties hereunder, the Secured Party may, at its option and without notice to or
demand upon the Debtor, without obligation and without waiving or diminishing
any of its other rights or remedies hereunder, fully perform or discharge any
of such duties.  All costs and expenses
incurred by the Secured Party in connection therewith, together with interest
thereon at the Secured Party’s CoBank Base Rate plus four percent per annum,
shall become part of the Obligations secured hereby and be paid by the Debtor
upon demand.

 

F.             Indemnification,
Etc.  The Debtor hereby expressly
indemnifies and holds the Secured Party harmless from any and all claims,
causes of action, or other proceedings, and from any and all liability, loss,
damage, and expense of every nature, arising by reason of the Secured Party’s
enforcement of its rights and remedies hereunder, or by reason of the Debtor’s
failure to comply with any environmental or other law or regulation.  As to any action taken by the Secured Party
hereunder, the Secured Party shall not be liable for any error of judgment or
mistake of fact or law, absent gross negligence or willful misconduct on its
part.

 

G.            Power
of Attorney.  The Debtor hereby
appoints the Secured Party or the Secured Party’s designee as its attorney-in-fact,
which appointment is irrevocable, durable, and coupled with an interest, with
full power of substitution, in the name of the Debtor or in the name of the
Secured Party, to take any action which the Debtor is obligated to perform
hereunder or which the Secured Party may deem necessary or advisable to
accomplish the purposes of this Security Agreement.  In taking any action in accordance with this
Section, the Secured Party shall not be deemed to be the agent of the
Debtor.  The powers conferred upon the
Secured Party in this Section are solely to protect its interest in the
Collateral and shall not impose any duty upon the Secured Party to exercise any
such powers.

 

H.            Continuing
Effect.  This Security Agreement, the
Secured Party’s security interest in the Collateral, and all other documents or
instruments contemplated hereby shall continue in full force and effect until
all of the Obligations have been satisfied in full, the Secured Party has no
commitment to make any further advances to the Debtor, and the Debtor has sent
a valid written demand to the Secured Party for termination of this Security
Agreement.

 

I.              Binding
Effect.  This Security Agreement
shall be binding upon and inure to the benefit of the Debtor and the Secured
Party and their respective successors and assigns.

 

 

J.             Security
Agreement as Financing Statement and Authorization to File.  A photographic copy or other reproduction
of this Security Agreement may be used as a financing statement.  In addition, the Debtor authorizes the
Secured Party to prepare and file financing statements describing the
Collateral, amendments thereto, and continuation statements and file any
financing statement, amendment thereto or continuation statement
electronically.  In addition, the Debtor
authorizes the Secured Party to file financing statements describing any
agricultural liens or other statutory liens held by the Secured Party.

 

K.            Governing
Law.  Subject to any applicable
federal law, this Security Agreement shall be construed in accordance with and
governed by the laws of the State of Colorado, except to the extent that the
UCC provides for the application of the law of another state.

 

L.            Notices.  All notices, requests, demands, or other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given when sent by registered or certified mail, return
receipt requested, addressed to the other party at the respective addresses
given above, or to such other person or address as either party designates to
the other in the manner herein prescribed.

 

M.           Severability.  The determination that any term or
provision of this Security Agreement is unenforceable or invalid shall not
affect the enforceability or validity of any other term or provision hereof.

 

IN WITNESS WHEREOF, the Debtor has executed
this Security Agreement by its duly authorized officer as of the day and year
shown below.

 

	
  Date:

  	
    May 23, 2005

  	
   

  	
  DEBTOR:

  	
  PRIMO PIATTO, INC.,

  
	
   

  	
   

  	
   

  	
  a Minnesota corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
    /s/ Thomas Friezen

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
    VP Finance

  	
   

  

 

 

SCHEDULE A

 

To Security Agreement
Dated:  May 23, 2005

 

	
   

  	
   

  	
  Executed By:

  	
    PRIMO PIATTO, INC.

  	
   

  
	
   

  	
   

  	
    (Name of
  Debtor)

  

 

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

 

 

SCHEDULE B

 

To Security
Agreement Dated:  May 23, 2005

 

	
   

  	
   

  	
  Executed By:

  	
    PRIMO PIATTO, INC.

  	
   

  
	
   

  	
   

  	
    (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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