HERON LAKE BIOENERGY, LLC
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(Exact name of small business issuer as specified in its charter)
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Minnesota
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000-51825
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41-2002393
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(State or other jurisdiction of incorporation or organization)
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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91246 390th Avenue, Heron Lake, MN
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56137-1375
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(Address of principal executive offices)
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(Zip Code)
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(507) 793-0077
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(Issuer's telephone number)
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o
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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o
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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•
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the principal amount of Note was increased from $3.05 million to approximately $3.06 million;
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•
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the commencement of monthly principal repayment was deferred from January 1, 2015 to May 1, 2015 and the amount of the monthly principal repayment was decreased from approximately $51,000 to $36,000 per month plus interest;
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•
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the maturity date of the Note was shortened from December 1, 2019 to May 1, 2019.
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ITEM 2.03
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CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT
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Name
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Votes For
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David Woestehoff
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16,000,888
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Doug Schmitz
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17,785,063
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Gregory L. Grossbach
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2,554,900
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(a)
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None.
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(b)
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None.
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(c)
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None.
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(d)
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Exhibits
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10.1
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Allonge Agreement dated March 30, 2015 by and between Agrinatural Gas, LLC, and Heron Lake BioEnergy, LLC
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10.2
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Loan Agreement dated March 30, 2015 by and between Agrinatural Gas, LLC, and Heron Lake BioEnergy, LLC
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10.3
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Promissory Note dated March 30, 2015 between Heron Lake BioEnergy, LLC, as Holder, and Agrinatural Gas, LLC, as Borrower
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10.4
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Security Agreement dated March 30, 2015 by and between Agrinatural Gas, LLC, and Heron Lake BioEnergy, LLC
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10.5
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Collateral Assignment dated March 30, 2015 by and between Agrinatural Gas, LLC, and Heron Lake BioEnergy, LLC
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10.6
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Guaranty dated March 30, 2015 by Rural Energy Solutions, LLC, guarantor, in favor of Heron Lake BioEnergy, LLC
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10.7
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Restructure Agreement dated March 30, 2015 by and between Agrinatural Gas, LLC and Swan Engineering, Inc.
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HERON LAKE BIOENERGY, LLC
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Date: March 30, 2015
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/s/ Stacie Schuler
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Stacie Schuler, Chief Financial Officer
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AGRINATURAL GAS, LLC
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HERON LAKE BIOENERGY, LLC
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By:
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/s/ John Sprangers
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By:
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/s/ Steve A. Christensen
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Its:
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CEO
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Its:
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CEO/GM
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a)
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Such Security Agreements as shall grant Heron Lake a first priority lien on all of Agrinatural’s personal property including, but not limited to, all inventory, supplies, accounts, goods, chattel paper, equipment, instruments, investment property, documents, deposit accounts, Letter of Credit rights, general intangibles, contracts, etc., as all defined in Article 9 of the Minnesota Uniform Commercial Code.
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b)
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Upon request of Heron Lake, Agrinatural shall grant Heron Lake a first position security interest in and to an Assignment for purposes of security of all rights and obligations of contracts and agreements incidental to Agrinatural’s business operations, including, but not limited to, any agreements regarding the delivery and/or sale of natural gas or other products. Such shall include, but not be limited to, assignments of all agreements incidental to Agrinatural’s business operations.
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c)
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Upon request, Agrinatural shall assign to Heron Lake for security purposes its interest in all hedge accounts and assign any documentation reasonably required to secure Heron Lake’s interest in any and all accounts relating to hedging activities. Agrinatural hereby authorizes Heron Lake to enter into a Control Agreement with Agrinatural’s broker, as such broker my exist from time-to-time, relating to all hedge or brokerage accounts and hedging activities and Agrinatural shall join in executing all such documents and agreements reasonably required by Heron Lake.
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7.1
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Limited Liability Company Existence and Power
. Agrinatural is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, and is duly licensed and qualified to transact business in all jurisdictions where the character of the property owned or leased or the nature of the business transacted by it makes its licensing and qualification necessary. Agrinatural has all requisite power and authority to conduct its business, to own its properties, and to execute and deliver, and to perform all of the obligations under this Agreement, the Notes and the Security Agreements.
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7.2
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Limited Liability Company Authority
. The execution, delivery and performance by Agrinatural of this Agreement, the Notes, Mortgages, Security Agreements and other documents required hereby and the borrowing, from time-to-time, hereunder do not: (1) require any consent or approval of the members of Agrinatural, or any authorization, consent or approval by any governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign; (2) violate any provision of any law, rule or regulation or of any order, writ, injunction or decree presently in effect having applicability to Agrinatural or to the Limited Liability Company Agreement of Agrinatural; (3) result in the breach of or constitute a default under any indenture or loan or credit agreement or any other agreement, lease or instrument to which Agrinatural is a party or by which it or its properties may be bound or affected; or (4) result in or require the creation or imposition of any mortgage, deed of trust, pledge, lien, security interest or other charge or encumbrance of any nature upon or with respect to any of the properties now owned or hereafter acquired by Agrinatural.
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7.3
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Financial Condition
. The financial statements delivered to Heron Lake are true and correct and accurately show the condition of Agrinatural. There are no undisclosed contingent liabilities of which Agrinatural is aware that would materially impact upon their financial condition. All taxes owed by Agrinatural have been paid or are fully reserved or the liabilities otherwise disclosed in prior financial statements issued to Heron Lake. In addition, there has been no material adverse change in the business, properties or condition (financial or otherwise) of Agrinatural since the date of the latest financial statement given to Heron Lake.
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7.4
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Litigation
. There are no actions, suits or proceedings pending or, to the knowledge of Agrinatural, threatened against or affecting Agrinatural or the
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7.5
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Titles and Liens
. Agrinatural has good and marketable title to each of the properties and, as it is reflected in the latest balance sheet given to Heron Lake, free and clear of all Mortgages, security interests, liens and encumbrances, except for liens/mortgages as previously granted to Heron Lake and covenants, restrictions, rights, easements and minor irregularities of title which do not materially interfere with the business or operations of Agrinatural as presently conducted.
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7.6
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Project Compliance
. The current assets and operations of Agrinatural do, or upon completion, shall comply with all applicable environmental, pollution control and ecological laws, ordinances, rules and regulations. All governmental authorities having jurisdiction over the Real Estate have issued all necessary permits, licenses or other authorizations for the construction, occupancy, operation and use of the Real Estate.
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7.7
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Utility Availability
. Subject only to payment of fees to be paid upon the approved budget, all utility and municipal services required for the construction, occupancy and operation of Agrinatural’s facilities and assets, including, but not limited to, water supply, gas, electric and telephone facilities, are available for use and tap-on at the boundaries of the Sites, and shall be available in sufficient amounts for the normal and intended use of the facilities. Written permission has been or shall be obtained from the applicable utility companies or municipalities to connect the facilities into each of these services.
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8.1
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Financial Statements
. Agrinatural shall deliver to Heron Lake, as soon as available and in such frequencies as Heron Lake shall request from time-to-
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8.2
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Books and Records; Inspection and Examination
. Agrinatural shall keep accurate books of record and account for itself in which true and complete entries shall be made in accordance with generally accepted accounting principles consistently applied and, upon the request of Heron Lake, shall give any representative of Heron Lake access to and permit such representative to examine, copy or make extracts from any and all books, records and documents in their possession, to inspect any of the properties, and to discuss their affairs, finances and accounts with any of the principal officers, all at such time during normal business hours and as often as Heron Lake may reasonably request.
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8.3
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Production Records
. Agrinatural shall maintain such records and reports of production and shall provide said reports to Heron Lake on such frequency as shall be agreed on by Heron Lake.
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8.4
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Insurance
. Agrinatural shall obtain and maintain insurance with insurers believed by Agrinatural to be financially sound and reputable. The insurance coverages to be obtained by Agrinatural shall include, but not be limited to, property loss, general casualty, liability, business interruption, construction in progress and such other coverages usually carried by companies engaged in similar business and owning similar properties in the same general areas in which Agrinatural operates. All insurance coverages shall be in amounts acceptable to Heron Lake and shall list Heron Lake as loss payee.
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8.5
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Preservation of Limited Liability Company Existence
. Agrinatural shall preserve and maintain its limited liability company existence and all of its rights, privileges and franchises; provided, however, that Agrinatural shall not be required to preserve any of its rights, privileges and franchises if its members shall determine that the preservation thereof is no longer desirable in the conduct of business of Agrinatural and that the loss thereof is not disadvantageous in any material respect to Heron Lake as a holder of Notes under the terms of this Agreement.
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8.6
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Costs and Expenses
. Agrinatural shall pay, when due, all costs and expenses required by this Agreement, including, without limitation: (a) all taxes and assessments applied to the Real Estate; and (b) all premiums for insurance policies.
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8.7
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Negative Pledge
. Agrinatural shall not mortgage, pledge, assign or grant security interests in any asset to any other party without the prior written consent of Heron Lake. Agrinatural shall not borrow money from any other party without the prior written consent of Heron Lake.
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8.8
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Dividends and Distributions to Members
. Agrinatural shall not: (a) pay member dividends or distributions, and (b) make payments to members (owners) in the form of labor expense or management fees in any fiscal year without the prior written consent of Heron Lake, except subject to all the other terms and conditions of this Loan Agreement and other
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8.9
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Capital Expenditures
. Agrinatural shall not, during any calendar year, beginning January 1, 2015 and thereafter, acquire or obligate themselves to acquire any facilities, cash investments in other organizations or other non-current assets of more than One Hundred Thousand and no/100 Dollars ($100,000.00) (including the asset value of leased equipment) without the prior written consent of Heron Lake, except that Agrinatural is authorized to proceed with and pay up to $350,000.00 for capital expenditures in calendar year 2015. (Such capital expenditures related to previous commitments made by Agrinatural.)
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8.10
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Accounts Receivable
. Agrinatural shall take action on any aged accounts receivable more than thirty (30) days old and over One Hundred and no/100 Dollars ($100.00). Agrinatural will initiate notice and disconnection procedures on accounts receivable more than sixty (60) days old and over One Hundred and no/100 Dollars ($100.00), pursuant to State Rule or Statute, or Commission Proceedings.
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8.11
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Inventory Report
. Agrinatural shall furnish inventory reports in such form and frequency as required by Heron Lake.
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8.12
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Hedge Line Monitoring
. Agrinatural shall provide Heron Lake a written monthly statement and reconciliation of all transactions associated with the purchase and sale of commodities, to be received within ten (10) days after the end of each month.
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8.13
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Minimum Debt Service Coverage Ratio
. The Company will have at the end of the fiscal year 2015 of the Company a “Debt Service Coverage Ratio” (as defined below) of not less than 1.5 to 1.00, and for each fiscal year thereafter a ratio of not less than 1.20 to 1.00. For purposes hereof, the term “Debt Service Coverage Ratio” shall mean the following (all as calculated for the most current year end in accordance with GAAP): (1) net income plus depreciation and amortization, divided by (2) The debt as then owed by Agrinatural to Heron Lake (as of the date the Ratio is calculated).
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8.14
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Minimum Working Capital
. The Company, beginning March 1, 2015 will have at the end of each period for which financial statements are required to be furnished an excess of current assets over current liabilities (both as determined in accordance with GAAP) of not less than $400,000.00, excluding obligations and debt owed to related parties.
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8.15
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Payments by Agrinatural to Swan Engineering on Debt Owed For Prior Services On Project Management Agreement
. Agrinatural owes approximately $475,000 to Swan Engineering for services previously provided by Swan Engineering pursuant to the Project Management Agreement (construction). Such amounts may be paid by Agrinatural to Swan Engineering (subject to the requirements of paragraph 8.16 hereof) on the following schedule:
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(a)
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$200,000.00 in calendar year 2015;
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(b)
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$200,000.00 in calendar year 2016;
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(c)
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The remaining balance in calendar year 2017.
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8.16
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All Payments Subject to Available Cash (Cash Flow)
. All payments as allowed by this Loan Agreement (to Swan Engineering as described in paragraph 8.15 hereof; for dividends and distributions to members for estimated tax consequences and any other payments allowed by this Loan Agreement) shall be subject to Agrinatural having adequate cash and verification of cash flow so as to fund any such payments out of cash, reserving sufficient cash for operations, including the Minimum Working Capital as required by paragraph 8.14 hereof and reserving (retaining) at all times, at least $200,000.00 of cash on hand, specifically keeping in mind and accounting for the required debt payments to Heron Lake as required by the promissory notes owed by Agrinatural to Heron Lake. All payments to Swan Engineering as allowed by paragraph 8.15 hereof shall be calculated and shall occur on a quarterly basis. Any dividends and distributions to members for estimated tax shall be calculated and occur at year end (each calendar year).
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8.17
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Environmental Representations, Conditions and Indemnity Clause
. Except as disclosed in writing to Heron Lake, Agrinatural represents and agrees as follows:
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(a)
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Hazardous Material Notice
. At all times during which Agrinatural is in control or possession of the facilities, whether directly or indirectly, Agrinatural agrees that it will not cause or permit any hazardous wastes to be brought upon, used, or stored upon or at the facilities which are not necessary or useful to Agrinatural’s business. For purposes of this section, “hazardous wastes” shall have the same meaning as defined at Minn. Stat. § 116.06, Subd. 11. All hazardous wastes that are necessary or useful to the facilities shall be properly handled and disposed of to comply with all federal, state, local and county laws and regulations governing such materials. Agrinatural shall immediately notify Heron Lake of any notice it receives from any federal, state or local governmental or regulatory agencies or entities of ay violations relating to hazardous wastes. Agrinatural shall comply with all rules, regulations and directives of the Minnesota Pollution Control Agency in any way relating to the handling, storage and disposal of hazardous wastes, and Agrinatural shall be solely liable under the Minnesota Environmental Response and Liability Act.
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(b)
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No Violation of Environmental Laws
. Agrinatural has not and shall not violate any federal, state or local environmental laws relating to or affecting their owned or leased Real Estate and/or pipelines, which violation would have a material effect on Agrinatural’s business or the value of the collateral.
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(c)
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Licenses
. Agrinatural shall, at all times, continue to exercise due diligence to obtain and maintain all licenses, permits and other approvals necessary to comply with environmental laws.
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(d)
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No Lawsuits
. There is no pending or threatened action, suit, investigation or proceeding against Agrinatural or any of its owned or leased Real Estate and/or pipelines seeking to enforce any right or remedy under any environmental law.
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(e)
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No Release of Hazardous Materials
. There has been no release of such nature requiring notification to proper authorities of any hazardous material onto Agrinatural’s owned or leased Real Estate and/or pipelines. Agrinatural shall not willfully cause or permit such a release of hazardous material onto, or from, its owned or leased Real Estate and/or pipelines. It shall give Heron Lake written notice of the release at the same time it gives notice to the proper authorities.
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(f)
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Storage Tanks and Pipelines Registered No Leaks
. All above ground and underground storage tanks and all pipelines have been duly registered with all applicable federal, state and local government authorities. Agrinatural has no knowledge of any leaks from any of its above ground or underground storage tanks or from any of its pipelines.
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(g)
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Investigation of Released Hazardous Materials
. If there is a suspected release of hazardous materials, Agrinatural shall conduct all investigations, testing and other action, including an environmental audit made at Heron Lake’s request, necessary to determine the extent (if any) of the release of hazardous materials and to clean up and remove all hazardous material in accordance with environmental laws. The party performing such action shall be an environmental firm satisfactory to Heron Lake, and the action shall be done at Agrinatural’s expense.
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(h)
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Indemnity
. Agrinatural agrees to indemnify, hold harmless and defend Heron Lake against all liens, liabilities, demands, claims, actions, suits, judgments, expenses (including attorneys’, consultants’ and experts’ fees) paid or asserted against Heron Lake (or any of Agrinatural’s Real Estate and/or pipelines Heron Lake has taken title to by foreclosure or otherwise) as a direct result of Agrinatural’s violation of any environmental law, including, but not limited to, the release of any Hazardous Material, whether or not such violation was caused or within the control of Agrinatural. This indemnity shall continue for the benefit of Heron Lake after the termination of this Agreement or other loan documents, including the release of any security interest.
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(i)
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Definition
. Hazardous material is defined as any toxic, radioactive or hazardous substance, material, waste, pollutant, emission or contaminant, including, but not limited to: asbestos, urea formaldehyde; the group of organic compounds known as polychlorinated biphenyls (PCBs); any petroleum product and by-product, including, but not limited to, gasoline, fuel, oil, crude oil and the various constituents of such products; pesticides, fertilizers and other agricultural chemicals. It also includes any other substance or material whose generation, storage, treatment, handling, release or disposal is regulated by the provisions of any environmental law or any other waste, material, substance, pollutant or contaminant that might give rise to any common law or regulatory
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9.
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Events of Default, Rights and Remedies
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(a)
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The occurrence of any of the following shall constitute a default by Agrinatural in all indebtedness outstanding to Heron Lake. A default under any Note or obligation shall constitute a default under all other Notes and obligations due and owing from Agrinatural to Heron Lake. Conditions or events of default shall mean any one of the following events (such being in addition to those conditions or events of default contained in Note(s) and other documents related to this Agreement):
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(i)
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If Agrinatural fails to make any payment of indebtedness when and as due under its Notes.
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(ii)
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Any representation or warranty made by Agrinatural in this Agreement, or made by Agrinatural in any certificate, instrument or statement contemplated by or made or delivered to Heron Lake shall prove to have been incorrect in any material respect when made.
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(iii)
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Default in the performance, or breach, of any covenant or agreement of Agrinatural in this Agreement and/or in Note(s) and/or other documents related to this Agreement.
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(iv)
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Default by Agrinatural in the performance, or breach, of any covenant or agreement with any other creditor.
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(v)
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Agrinatural has been adjudicated a bankrupt or insolvent or admits, in writing, its inability to pay its debts as they mature and makes an assignment for the benefit of creditors; Agrinatural shall apply for and consent to the appointment of any receiver, trustee or other similar officer for all or any substantial part of its property; or such receiver, trustee or other similar officer shall be appointed without the application or consent of Agrinatural, and such appointment shall continue undischarged for a period of thirty (30) days; Agrinatural shall institute any bankruptcy, whether voluntary or involuntary; or any judgment, writ, warrant of attachment or execution or similar process shall be issued or levied
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(vi)
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A mechanic’s lien is recorded in the real estate records in any of the counties where the Real Estate and/or pipelines are located, and Agrinatural fails to obtain a discharge or release of the mechanic’s lien within thirty (30) days of its recording or fails to deposit with Heron Lake, within said thirty (30) days, sufficient monies to act as a reserve to pay the mechanic’s lien in full should the lien be determined to be valid and enforceable by a court of law.
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(b)
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Upon the occurrence of an event of default or at any time thereafter until such event of default is cured to the written satisfaction of Heron Lake, Heron Lake may, but is not obligated to, exercise any and all of the following rights and remedies (such being in addition to those rights and remedies contained in Note(s) and other documents related to this Agreement):
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(i)
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Heron Lake may, by notice to Agrinatural, declare the entire unpaid principal amount of any or all Notes or obligations then outstanding, all interest accrued and unpaid thereon, and all other amounts payable under this Agreement or otherwise to be forthwith due and payable, whereupon such Notes or obligations, all such accrued interest in all such amounts shall become due and be forthwith due and payable without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by Agrinatural.
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(ii)
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Heron Lake may cancel all further advances or disbursements to Agrinatural or on Agrinatural’s behalf against any Notes.
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(iii)
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Heron Lake may, by notice to Agrinatural, declare any commitments then outstanding to be terminated, whereupon the same shall be forthwith terminated.
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(iv)
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Heron Lake may, without notice to Agrinatural and without further action, apply any and all money owing by Heron Lake to Agrinatural to the payment of any Notes then outstanding, including interest accrued thereon, and of all sums then owing
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(v)
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Heron Lake may exercise and enforce its rights and remedies under any Notes, Security Agreements and Mortgages and to proceed with the enforcement of any other rights and remedies it has under law.
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(vi)
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Heron Lake may seek equitable relief to obtain immediate possession of the facilities (including pipelines) to continue its operation or may request the appointment of a receiver for the operation of the facilities, Real Estate and pipelines until such time as the foreclosure of Heron Lake’s Mortgage(s) and/or security interests are completed and the redemption period has expired. Agrinatural hereby consents to the appointment of a receiver in the event of default, and Agrinatural will not hinder or interfere with the receiver’s use or possession and quiet enjoyment of the premises.
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10.
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Miscellaneous
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10.1
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Costs and Expenses
. Agrinatural agrees to pay, on demand, all costs and expenses of Heron Lake in connection with the preparation and filing/recording of this Agreement, the Notes, security interests and other instruments and documents to be delivered hereunder and thereunder, including the reasonable fees and out-of-pocket expenses of counsel for Heron Lake with respect thereto, as well as all out-of-pocket expenses of legal counsel retained by Heron Lake in connection with the enforcement of this Agreement, the Notes, Security Agreements, Mortgages, and other documents and instruments to be delivered hereunder and thereunder. This includes legal fees incurred by Heron Lake in the collection of the Notes; the enforcement of its liens or security interests, taking action in any bankruptcy of Agrinatural, and consulting on matters relating to the Notes and this Agreement.
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10.2
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No Waiver; Cumulative Remedies
. No failure or delay on the part of Heron Lake in exercising any right, power or remedy hereunder or under the Security Agreements, Mortgages or other documents taken under the terms of this Agreement shall operate as a wavier thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof, or
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10.3
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Amendments, Etc.
No amendment, modification, termination or waiver of any of the provisions of this Agreement, the Security Agreements, Assignments or Notes or consent by Agrinatural to any departure therefrom shall be effective unless the same shall be in writing and signed by Heron Lake, and then such waiver and consent shall be effective only in the specific instance and for the specific purpose for which given. No notice or demand on Agrinatural in any case shall entitle Agrinatural to any other or further notice or demand in similar or other circumstances.
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10.4
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Addresses for Notices, Etc.
Except as otherwise expressly provided herein, all notices, requests, demands and other communications provided for hereunder and under the Notes, Mortgages or Security Agreements shall be in writing and mailed or delivered to the applicable party at is address indicated below:
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10.5
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Application of Payments
. All payments received shall be applied to accrued interest as of the date the payment was received and then principal thereafter.
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10.6
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Entire Agreement
. This Agreement constitutes the entire agreement between Agrinatural and Heron Lake. Any prior oral discussions or representations are considered merged into this Agreement. This Agreement may only be modified by a subsequent written document signed by both Heron Lake and Agrinatural.
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10.7
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Binding Effect, Assignment
. This Agreement and the Security Agreements, Mortgages and other documents taken in connection herewith shall be binding upon and inure to the benefit of Agrinatural and Heron Lake and their respective successors and assigns, except that Agrinatural shall not have the right to assign their rights hereunder or thereunder or any interest therein or herein without the prior written consent of Heron Lake.
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10.8
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Governing Law
. This Agreement, the Notes and Security Agreements, Real Estate Mortgages and other documents taken hereunder shall be governed by and construed in accordance with the laws of the State of Minnesota.
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10.9
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Survival of Representations
. All representations, warranties, terms and conditions of this Agreement shall survive the closing and final disbursement on the loan(s) and shall continue to be binding and enforceable between the parties until any and all indebtedness owed Heron Lake has been paid in full.
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10.10
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Review
. Agrinatural and Heron Lake each acknowledge that they have had the opportunity to carefully read through the terms and conditions of this Agreement, and each has had sufficient time to consult with an attorney of their choice and to make revisions, modifications or changes to the original drafts of this Agreement. Both parties acknowledge that they have had the opportunity to contribute to the terms and provisions of the final draft of this Agreement, and as a consequence, the parties agree and acknowledge that, in the event that it becomes necessary, at any time in the future, for a court of proper jurisdiction to review and interpret the terms and conditions of this Agreement, such terms and
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1.
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Grant of Security Interest
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For valuable consideration, and to secure the Indebtedness:
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a.
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Grantor grants to Lender a security interest in all of Grantor’s currently existing and hereafter acquired property detailed in Exhibit A annexed hereto and incorporated herein by reference (the “
Collateral
”). Grantor agrees that Lender shall have the rights stated in this Security Agreement with respect to the Collateral, in addition to all other rights which Lender may have by law.
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b.
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Grantor shall assign all existing easements in which Grantor is the holder, dominant tenant or has any other beneficial interest whatsoever.
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2.
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Cross Collateralization
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In addition to the Note, this Security Agreement secures all obligations, debts and liabilities, plus interest thereon, of Grantor to Lender, or any one or more of them, as well as all claims by Lender against Grantor or any one or more of them, whether now existing or hereafter arising, whether related or unrelated to the purpose of the Note, whether voluntary or otherwise, whether due or not due, direct or indirect, determined or undetermined, absolute or contingent, liquidated or unliquidated whether Grantor may be liable individually or jointly with others, whether obligated as guarantor, surety, accommodation party or otherwise, and whether recovery upon such amounts may be or hereafter may become barred by any statute of limitations, and whether the obligation to repay such amounts may be or hereafter may become otherwise unenforceable. All rights of Lender and all obligations of Grantor hereunder shall be absolute and unconditional irrespective of (i) any lack of validity or enforceability of the Note or any Related Documents, (ii) any change in the time, manner or place of payment of, or in any other term in respect of, all or any of the obligations under the Note or any Related Documents, or any other amendment or waiver of or consent to any departure from the Note or any Related Documents, (iii) any exchange or release of (except to the extent of such release), or non-perfection of any lien on any Collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the obligations under the Note or any Related Documents, or (iv) any other circumstance that might otherwise constitute a defense available to, or a discharge of, Lender in respect of the Note or any Related Documents.
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3.
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Right of Setoff
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To the extent permitted by applicable law, Lender reserves a right of setoff and Grantor authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any obligations that Lender may have to Grantor at any time.
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4.
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Grantor's Representations and Warranties with Respect to the Collateral
. With respect to the Collateral, Grantor represents, promises and warrants to Lender that:
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a.
|
Perfection of Security Interest
.
Grantor agrees to execute financing statements and to take whatever other actions are requested by Lender to perfect and continue Lender's security interest in the Collateral. Upon request of Lender, Grantor will deliver to Lender any and all of the documents evidencing or constituting the Collateral, and Grantor will note Lender's interest upon any and all chattel paper if not delivered to Lender for possession by Lender. This is a continuing Security Agreement and will continue in effect even though all or any part of the Indebtedness is paid
in full
and even though for a period of time Grantor may not be indebted to Lender.
|
b.
|
Enforceability of Collateral
.
To the extent the Collateral consists of accounts, chattel paper, or general intangibles, as defined by the Uniform Commercial Code, the Collateral is enforceable in accordance with its terms, is genuine, and fully complies with all applicable laws and regulations concerning form, content and manner of preparation and execution, and all persons appearing to be obligated on the Collateral have authority and capacity to contract and are in fact obligated as they appear to be on the Collateral. At the time any Account becomes subject to a security interest in favor of Lender, the Account shall be a good and valid account representing an undisputed, bona fide indebtedness incurred by the account debtor, for merchandise held subject to delivery instructions or previously shipped or delivered pursuant to a contract of sale, or for services previously performed by Grantor with or for the account debtor. So long as this Security Agreement remains in effect, Grantor shall not, without Lender's prior written consent, compromise, settle, adjust, or extend payment under or with regard to any such Accounts. There shall be no setoffs or counterclaims against any of the Collateral, and no agreement shall have been made under which any deductions or discounts may be claimed concerning the Collateral except those disclosed to Lender in writing.
|
c.
|
Location of the Collateral
.
Except in the ordinary course of Grantor's business, Grantor agrees to keep the Collateral (or to the extent the Collateral consists of intangible property such as accounts or general intangibles, the records concerning the Collateral) at Grantor's address shown above or at such other locations as are acceptable to Lender. Upon Lender's request, Grantor will deliver to Lender in form satisfactory to Lender a schedule of real properties and Collateral locations relating to Grantor's operations, including without limitation the following: (1) all real property Grantor owns or is purchasing; (2) all real property Grantor is renting or leasing; (3) all storage facilities Grantor owns, rents, leases, or uses; and (4) all other properties where Collateral is or may be located.
|
d.
|
Removal of the Collateral
.
Except in the ordinary course of Grantor's business, including the sales of inventory, Grantor shall not remove the Collateral from its existing location without Lender's prior written consent. To the extent that the Collateral consists of vehicles, or other titled property, Grantor shall not take or permit any action which would require application for certificates of title for the vehicles outside the State of Minnesota, without Lender's prior written consent. Grantor shall, whenever requested, advise Lender of the exact location of the Collateral.
|
e.
|
Severance from Real Property
. Grantor agrees that all Collateral shall be and remain severed from the real property wherever the same may be installed and further agrees that upon any Event of Default, that Lender may (a) take possession of and remove said fixture(s) (the Collateral) without notice to (including without notice to any other creditors of Grantor) and without liability to Grantor or any of its creditors for any diminution of value of the real estate caused by the absence of the fixture(s) (the Collateral) or by any necessity for replacing the fixture(s) (the Collateral), and (b) enforce Lender’s security interest granted herein against said fixture(s) (the Collateral).
|
f.
|
Transactions Involving Collateral
.
Except for inventory sold or accounts collected in the ordinary course of Grantor's business, or as otherwise provided for in this Security Agreement, Grantor shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral. While Grantor is not in default under this Security Agreement, Grantor may sell inventory, but only in the ordinary course of its business and only to buyers who qualify as a buyer in the ordinary course of business. A sale in the ordinary course of Grantor's business does not include a transfer in partial or total satisfaction of a debt or any bulk sale. Grantor shall not pledge, mortgage, encumber or otherwise permit the Collateral to be subject to any lien, security interest, encumbrance, or charge, other than the security interest provided for in this Security Agreement, without the prior written consent of Lender. This includes security interests even if junior in right to the security interests granted under this Security Agreement. Unless waived by Lender, all proceeds from any disposition of the Collateral (for whatever reason) shall be held in trust for Lender and shall not be commingled with any other funds; provided however, this requirement shall not constitute consent by Lender to any sale or other disposition. Upon receipt, Grantor shall immediately deliver any such proceeds to Lender.
|
g.
|
Title
. Grantor represents and warrants to Lender that Grantor holds good and marketable title to the Collateral, free and clear of all liens and encumbrances except for the lien of this Security Agreement. No financing statement covering any of the Collateral is on file in any public office other than those which reflect the security interest created by this Security Agreement or to which Lender has specifically consented. Grantor shall defend Lender's rights in the Collateral against the claims and demands of all other persons.
|
h.
|
Repairs and Maintenance
.
Grantor agrees to keep and maintain, and to cause others to keep and maintain, the Collateral in good order, repair and condition at all times while this Security Agreement remains in effect. Grantor further agrees to pay when due all claims for work done on, or services rendered or material furnished in connection with the Collateral so that no lien or encumbrance may ever attach to or be filed against the Collateral.
|
i.
|
Inspection of Collateral
. Lender and Lender's designated representatives and agents shall have the right at all reasonable times to examine and inspect the Collateral wherever located.
|
j.
|
Taxes, Assessments and Liens
.
Grantor will pay when due all taxes, assessments and liens upon the Collateral, its use or operation, upon this Security Agreement, upon any promissory note or notes evidencing the Indebtedness, or upon any of the other Related Documents. Grantor may withhold any such payment or may elect to contest any lien if
|
k.
|
Compliance with Governmental Requirements
.
Grantor shall comply promptly with all laws, ordinances, rules and regulations of all governmental authorities, now or hereafter in effect, applicable to the ownership, production, disposition, or use of the Collateral. Grantor may contest in good faith any such law, ordinance or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Lender's interest in the Collateral, in Lender's opinion, is not jeopardized.
|
l.
|
Hazardous
Substances
.
Grantor represents and warrants that the Collateral never has been, and never will be so long as this Security Agreement remains a lien on the Collateral, used in violation of any Environmental Laws or for the generation, manufacture, storage, transportation, treatment, disposal, release or threatened release of any Hazardous Substance. Grantor hereby (1) releases and waives any future claims against Lender for indemnity or contribution in the event Grantor becomes liable for cleanup or other costs under any Environmental Laws, and (2) agrees to indemnify and hold harmless Lender against any and all claims and losses resulting from a breach of this provision of this Security Agreement. This obligation to indemnify shall survive the payment of the Indebtedness and the satisfaction of this Security Agreement.
|
m.
|
Maintenance of Casualty Insurance
.
Grantor shall procure and maintain all risks insurance, including without limitation fire, theft and liability coverage together with such other insurance as Lender may require with respect to the Collateral, in form, amounts, coverages and basis reasonably acceptable to Lender and issued by a company or companies reasonably acceptable to Lender. Grantor, upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without at least ten (10) days' prior written notice to Lender and not including any disclaimer of the insurer's liability for failure to give such a notice. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Grantor or any other person. In connection with all policies covering assets in which Lender holds or is offered a security interest, Grantor will provide Lender with such loss payable or other endorsements as Lender may require, if Grantor at any time fails to obtain or maintain any insurance as required under this Security Agreement, Lender may (but shall not be obligated to) obtain such insurance as Lender deems appropriate, including if Lender so chooses "single interest insurance," which will cover only Lender's interest in the Collateral.
|
n.
|
Application of Insurance Proceeds
.
Grantor shall promptly notify Lender of any loss or damage to the Collateral. Lender may make proof of loss if Grantor fails to do so within fifteen (15) days of the casualty. All proceeds of any insurance on the Collateral, including accrued proceeds thereon, shall be held by Lender as part of the Collateral. If Lender consents to repair or replacement of the damaged or destroyed Collateral, Lender shall, upon satisfactory proof of expenditure, pay or reimburse Grantor from the proceeds
|
o.
|
Financing Statements
.
Grantor authorizes Lender to file a UCC-1 financing statement, or alternatively, a copy of this Security Agreement to perfect Lender's security interest. At Lender's request, Grantor additionally agrees to sign all other documents that are necessary to perfect, protect, and continue Lender's security interest in the Collateral. Grantor will pay all filing fees, title transfer fees, and other fees and costs involved unless prohibited by law or unless Lender is required by law to pay such fees and costs. Grantor irrevocably appoints Lender to execute financing statements and documents of title in Grantor's name and to execute all documents necessary to transfer title if there is a default, Lender may file a copy of this Security Agreement as a financing statement. If Grantor changes Grantor's name or address, or the name or address of any person granting a security interest under this Security Agreement changes, Grantor will promptly notify the Lender of such change.
|
5.
|
Notices to Lender
.
Grantor will promptly notify Lender in writing at Lender's address shown above (or such other addresses as Lender may designate from time to time) prior to any (1) change in Grantor's name; (2) change in Grantor's assumed business name(s); (3) change in the management of the Corporation Grantor; (4) change in the authorized signer(s); (5) change in Grantor's principal office address; (6) change in Grantor's state of organization; (7) conversion of Grantor to a new or different type of business entity; or (8) change in any other aspect of Grantor that directly or indirectly relates to any agreements between Grantor and Lender. No change in Grantor's name or state of organization will take effect until after Lender has received notice.
|
6.
|
No Violation
.
The execution and delivery of this Security Agreement will not violate any law or agreement governing Grantor or to which Grantor is a party, and its certificate or articles of incorporation and bylaws do not prohibit any term or condition of this Security Agreement.
|
7.
|
Grantor's Right to Possession and to Collect Accounts
. Until default and except as otherwise provided below with respect to accounts, Grantor may have possession of the tangible personal property and beneficial use of all the Collateral and may use it in any lawful manner not inconsistent with this Security Agreement or the Related Documents, provided that Grantor's right to possession and beneficial use shall not apply to any Collateral where possession of the Collateral by Lender is required by law to perfect Lender's security interest in such Collateral. Until otherwise notified by Lender, Grantor may collect any of the Collateral consisting of accounts. At any time, and even though no Event of Default exists, Lender may exercise its rights to collect the accounts and to notify account debtors to make payments directly to Lender for application to the Indebtedness. If Lender at any time has possession of any Collateral, whether before or after an Event of Default, Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral if
|
8.
|
Lender's Expenditures
. If any action or proceeding is commenced that would materially affect Lender's interest in the Collateral or if Grantor fails to comply with any provision of this Security Agreement or any Related Documents, including but not limited to Grantor's failure to discharge or pay when due any amounts Grantor is required to discharge or pay under this Security Agreement or any Related Documents, Lender on Grantor's behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any time levied or placed on the Collateral and paying all costs for insuring, maintaining and preserving the Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Grantor. All such expenses will become a part of the Indebtedness and, at Lender's option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note's maturity. This Security also will secure payment of these amounts. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon Default.
|
9.
|
Default
.
Each of the following shall constitute an Event of Default under this Security Agreement:
|
a.
|
Payment Default
. Grantor fails to make any payment when due under the Indebtedness.
|
b.
|
Other Defaults
.
Grantor fails to comply with or to perform any other term, obligation, covenant or condition contained in this Security Agreement or in any of the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Grantor.
|
c.
|
Default in Favor of Third Parties
. Should Borrower or any Grantor default under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Grantor's property or Grantor's or any Grantor's ability to repay the Indebtedness or perform their respective obligations under this Security Agreement or any of the Related Documents.
|
d.
|
False Statements
.
Any warranty, representation or statement made or furnished to Lender by Grantor or on Grantor's behalf under this Security Agreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.
|
e.
|
Defective Collateralization
. This Security Agreement or any of the Related Documents
|
f.
|
Insolvency
.
The dissolution, termination, or suspension of Grantor's existence as an ongoing business, the Grantor admits in writing its inability to pay its debts as they mature, the insolvency of Grantor, the appointment of a receiver for any part of Grantor's property, any assignment by the Grantor for the benefit of its creditors, any type of creditor workout, or the commencement of any bankruptcy, reorganization or other insolvency proceedings by or against Grantor.
|
g.
|
Creditor or Forfeiture Proceedings
.
Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Grantor or by any governmental agency against any collateral securing the Indebtedness. This includes a garnishment of any of Grantor's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Grantor as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding.
|
h.
|
Events Affecting Guarantor
.
Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the Indebtedness or guarantor, endorser, surety, or any accommodation party dies or becomes incompetent or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness.
|
i.
|
Adverse Change
.
A material adverse change occurs in Grantor's financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired.
|
j.
|
Insecurity
.
Lender in good faith believes itself insecure.
|
10.
|
Rights and Remedies on Default
.
If an Event of Default occurs under this Security Agreement, at any time thereafter, Lender shall have all the rights of a secured party under this Security Agreement and the Minnesota Uniform Commercial Code. In addition and without limitation, Lender may exercise any one or more of the following rights and remedies:
|
a.
|
Accelerate Indebtedness
. Lender may declare the entire Indebtedness, including any prepayment penalty which Grantor would be required to pay, immediately due and payable, without notice of any kind to Grantor.
|
b.
|
Assemble Collateral
. Lender may require Grantor to deliver to Lender all or any portion, of the Collateral and any and all certificates of title and other documents relating to the Collateral. Lender may require Grantor to assemble the Collateral and make it available to Lender at a place to be designated by Lender. Lender also shall have full power to enter upon the property of Grantor to take possession of and remove the Collateral. If the Collateral contains other goods not covered by this Security Agreement at the time of repossession, Grantor agrees Lender may take such other goods, provided that Lender makes reasonable efforts to return them to Grantor after repossession.
|
c.
|
Sell the Collateral
. Lender shall have full power to sell, lease, transfer, or otherwise deal with the Collateral or proceeds thereof in Lender's own name or that of Grantor. Lender may sell the Collateral at public auction or private sale. Unless the Collateral threatens to
|
d.
|
Appoint Receiver
. Lender shall have the right to have a receiver appointed to take possession of all or any part of the Collateral, with the power to protect and preserve the Collateral, to operate the Collateral preceding foreclosure or sale, and to collect the Rents from the Collateral and apply the proceeds, over and above the cost of the receivership, against the Indebtedness. The receiver may serve without bond if permitted by law. Lender's right to the appointment of a receiver shall exist whether or not the apparent value of the Collateral exceeds the Indebtedness by a substantial amount. Employment by Lender shall not disqualify a person from serving as a receiver.
|
e.
|
Collect Revenues, Apply Accounts
. Lender, either itself or through a receiver, may collect the payments, rents, income, and revenues from the Collateral. Lender may at any time in Lender's discretion transfer any Collateral into Lender's own name or that of Lender's nominee and receive the payments, rents, income, and revenues therefrom and hold the same as security for the Indebtedness or apply it to payment of the Indebtedness in such order of preference as Lender may determine. Insofar as the Collateral consists of accounts, general intangibles, insurance policies, instruments, chattel paper, choses in action, or similar property, Lender may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose, or realize on the Collateral as Lender may determine, whether or not the Indebtedness or Collateral is then due. For these purposes, Lender may, on behalf of and in the name of Grantor, receive, open and dispose of mail addressed to Grantor; change any address to which mail and payments are to be sent; and endorse notes, checks, drafts, money orders, documents of title, instruments and items pertaining to payment, shipment, or storage of any Collateral. To facilitate collection, Lender may notify account debtors and obligors on any Collateral to make payments directly to Lender.
|
f.
|
Obtain Deficiency
. If Lender chooses to sell any or all of the Collateral, Lender may obtain a judgment against Grantor for any deficiency remaining on the Indebtedness due to Lender after application of all amounts received from the exercise of the rights provided in this Security Agreement. Grantor shall be liable for a deficiency even if the transaction described in this subsection is a sale of accounts or chattel paper.
|
g.
|
Other Rights and Remedies
. Lender shall have all the rights and remedies of a secured creditor under the provisions of the Uniform Commercial Code, as may be amended from
|
h.
|
Election of Remedies
. Except as may be prohibited by applicable law, all of Lender's rights and remedies, whether evidenced by this Security Agreement, the Related Documents, or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Grantor under this Security Agreement, after Grantor's failure to perform, shall not affect Lender's right to declare a default and exercise its remedies.
|
11.
|
Miscellaneous Provisions
.
The following miscellaneous provisions are a part of this Security Agreement:
|
a.
|
Amendments
. This Security Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Security Agreement. No alteration of or amendment to this Security Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.
|
b.
|
Attorneys' Fees; Expenses
. Grantor agrees to pay upon demand all of Lender's costs and expenses, including Lender's reasonable attorneys' fees and Lender's legal expenses, incurred in connection with the enforcement of this Security Agreement. Lender may hire or pay someone else to help enforce this Security Agreement, and Grantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's reasonable attorneys' fees and legal expenses whether or not there is a lawsuit, including reasonable attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services. Grantor also shall pay all court costs and such additional fees as may be directed by the court.
|
c.
|
Caption Headings
. Caption headings in this Security Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Security Agreement.
|
d.
|
Governing Law
. This Security Agreement will be governed by, construed and enforced in accordance with federal law and the laws of the State of Minnesota. This Security Agreement has been accepted by Lender in the State of Minnesota.
|
e.
|
No Waiver by Lender
. Lender shall not be deemed to have waived any rights under this Security Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Security Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Security Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Grantor, shall constitute a waiver of any of Lender's rights or of any of Grantor's obligations as to any future transactions. Whenever the consent of Lender is required
|
f.
|
Notices
. Any notice required to be given under this Security Agreement shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Security Agreement. Any party may change its address for notices under this Security Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party's address. For notice purposes, Grantor agrees to keep Lender informed at all times of Grantor's current address. Unless otherwise provided or required by law, if there is more than one Grantor, any notice given by Lender to any Grantor is deemed to be notice given to all Grantors.
|
g.
|
Power of Attorney
. Grantor hereby appoints Lender as Grantor's irrevocable attorney-in-fact for the purpose of executing any documents necessary to perfect, amend, or to continue the security interest granted in this Security Agreement or to demand termination of filings of other secured parties. Lender may at any time, and without further authorization from Grantor, file a carbon, photographic or other reproduction of any financing statement or of this Security Agreement for use as a financing statement. Grantor will reimburse Lender for all expenses for the perfection and the continuation of the perfection of Lender's security interest in the Collateral.
|
h.
|
Severability
. If a court of competent jurisdiction finds any provision of this Security Agreement to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Security Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Security Agreement shall not affect the legality, validity or enforceability of any other provision of this Security Agreement.
|
i.
|
Successors and Assigns
. Subject to any limitations stated in this Security Agreement on transfer of Grantor's interest, this Security Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested in a person other than Grantor, Lender, without notice to Grantor, may deal with Grantor's successors with reference to this Security Agreement and the Indebtedness by way of forbearance or extension without releasing Grantor from the obligations of this Security Agreement or liability under the Indebtedness.
|
j.
|
Survival of Representations and Warranties
. All representations, warranties, and agreements made by Grantor in this Security Agreement shall survive the execution and delivery of this Security Agreement, shall be continuing in nature, and shall remain in full force and effect until such time as Grantor's Indebtedness shall be paid in full.
|
k.
|
Time is of the Essence
. Time is of the essence in the performance of this Security Agreement.
|
12.
|
Definitions
.
The following capitalized words and terms shall have the following meanings when used in this Security Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Security Agreement shall have the meanings attributed to such terms in the Uniform Commercial Code:
|
a.
|
Account
. The word "Account" means a trade account, account receivable, other receivable, or other right to payment for goods sold or services rendered owing to Grantor (or to a third party grantor acceptable to Lender).
|
b.
|
Borrower
. The word "Borrower" means Agrinatural Gas, LLC, and includes all co-signers and co-makers signing the Note.
|
c.
|
Default
. The word "Default" means the Default set forth in this Security Agreement in the section titled "Default".
|
d.
|
Environmental Laws
. The words "Environmental Laws" mean any and all state, federal and local statutes, regulations and ordinances relating to the protection of human health or the environment.
|
e.
|
Event of Default
. The words "Event of Default" mean any of the events of default set forth in this Security Agreement in the default section of this Security Agreement.
|
f.
|
Guaranty
. The word "Guaranty" means the guaranty from guarantor, endorser, surety, or accommodation party to Lender, including without limitation a guaranty of all or part of the Note.
|
g.
|
Hazardous
Substances
. The words "Hazardous Substances" mean materials that, because of their quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled.
|
h.
|
Indebtedness
. The word "Indebtedness" means the indebtedness evidenced by the Negotiable Promissory Note dated July 29, 2014 and the Note or Related Documents, including all principal and interest together with all other indebtedness and costs and expenses for which Grantor is responsible under this Security Agreement or under any of the Related Documents.
|
i.
|
Note
. The word "Note" means that certain Negotiable Promissory Note executed Grantor on even date herewith, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit agreement.
|
j.
|
Related Documents
. The words "Related Documents" mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments,
|
13.
|
Prior Agreements and Documents to Remain in Effect
. The documents as previously executed by and between the parties regarding the loan by Heron Lake to Agrinatural that occurred July 29, 2014 shall remain in full force and effect. The intention is the terms and conditions of this Security Agreement and the other Agreements/documents being executed in conjunction with this new loan shall be cumulative to and provide further rights and assurances to Heron Lake and shall not be construed to limit any rights and authority as granted to Heron Lake by previous documents or as granted by these newly executed agreements and documents.
|
By:
/s/ John Sprangers
Print Name:
John Sprangers
Its.:
CEO
|
By:
/s/ Steve A. Christensen
Print Name:
Steve A. Christensen
Its.:
CEO/GM
|
By:
/s/ Ann Tessier
Print Name:
Ann Tessier
Its.:
CFO
|
By:
/s/ Stacie Schuler
Print Name:
Stacie Schuler
Its.:
CFO
|
1)
|
All accessions, attachments, accessories, tools, parts, supplies, replacements, expansions, or substitutions of and additions to any of the property described herein, whether added now or later;
|
2)
|
All products and produce of any of the property described in this Collateral section;
|
3)
|
All accounts, general intangibles, instruments, rents, monies, payments, and all other rights, arising out of a sale, lease, consignment or other disposition of any of the property described in this Collateral section;
|
4)
|
All proceeds (including insurance proceeds) from the sale, destruction, loss, or other disposition of any of the property described in this Collateral section, and sums due from a third party who has damaged or destroyed the Collateral or from that party's insurer, whether due to judgment, settlement or other process; and
|
5)
|
All records and data relating to any of the property described in this Collateral section, whether in the form of a writing, photograph, microfilm, microfiche, or electronic media, together with all of Grantor's right, title, and interest in and to all computer software required to utilize, create, maintain, and process any such records or data on electronic media.
|
By:
/s/ John Sprangers
Print Name:
John Sprangers
Its.:
CEO
|
By:
/s/ Steve A. Christensen
Print Name:
Steve A. Christensen
Its.:
CEO/GM
|
By:
/s/ Ann Tessier
Print Name:
Ann Tessier
Its.:
CFO
|
By:
/s/ Stacie Schuler
Print Name:
Stacie Schuler
Its.:
CFO
|
1.
|
All of Assignor’s easements, easement agreements, and easement rights in which Assignor is the holder, dominant tenant or has any other beneficial interest whatsoever, whether now existing or hereafter acquired by Assignor, relating to or involving real property located in Brown, Cottonwood, Jackson and Nobles Counties, in the State of Minnesota, and in any such other counties in which Assignor may acquire future easement rights, and in locations represented on Attachment 1, pages 1 thru 12, to this Exhibit “A”.
|
2.
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All of Assignor’s contracts and licenses of whatever type and nature and all transportation service agreements of whatever type and nature. Such assignment includes, but is not limited to, any and all pipeline and maintenance service agreements and pipeline construction agreements.
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(a)
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To modify or otherwise change any terms of all or any part of the Liabilities or the rate of interest thereon (but not to increase the principal amount of the note of the Debtor to Lender), to grant any extension or renewal thereof and any other indulgence with respect thereto, and to effect any release, compromise or settlement with respect thereto;
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(b)
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To enter into any agreement of forbearance with respect to all or any part of the Liabilities, or with respect to all or any part of the collateral, and to change the terms of any such agreement;
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(c)
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To forbear from calling for additional collateral to secure any of the Liabilities or to secure any obligation comprised in the collateral;
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(d)
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To consent to the substitution, exchange, or release of all or any part of the collateral, whether or not the collateral, if any, received by Lender upon any such substitution, exchange, or release shall be of the same or of a different character or value than the collateral surrendered by Lender;
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(e)
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In the event of the nonpayment when due, whether by acceleration or otherwise, of any of the Liabilities, or in the event of default in the performance of any obligation comprised in the collateral, to realize on the collateral or any part thereof, as a whole or in such parcels or subdivided interests as Lender may elect, at any public or private sale or sales, for cash or on credit or for future delivery, without demand, advertisement or notice of the time or place of sale or any adjournment thereof (the Undersigned hereby waiving any such demand, advertisement and notice to the extent permitted by law), or by foreclosure or otherwise, or to forbear from realizing thereon, all as Lender in its uncontrolled discretion may deem proper, and to purchase all or any part of the collateral for its own account at any such sale or foreclosure, such powers to be exercised only to the extent permitted by law.
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By:
/s/ John Sprangers
Its.:
CEO
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By:
/s/ Mychael L. Swan
Its.:
CEO/Chairman/Owner
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By:
/s/ Ann Tessier
Its.:
CFO
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By:
Its.:
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