CONFIDENTIAL TREATMENT REQUESTED
SECURITY AGREEMENT
Dated as of November 4, 2022
among
GREENFIELD AGRICULTURAL PARTNERS LLC, as Borrower,
GREENFIELD GRAIN STORAGE LLC,
and
GREENFIELD CROP INPUTS INC.,
as Grantors,
and
HEARTLAND COMMERCE BANK, NATIONAL ASSOCIATION, as Collateral Agent for the benefit of the Secured Parties
DRAFT — Prepared by Calderwood & Harkness LLP — Subject to Review and Comment
Calderwood & Harkness LLP Matter No. 1020-00001
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT (as amended, restated, supplemented, or otherwise modified from time to time, this "Security Agreement") is made and entered into as of November 4, 2022, by and among:
GREENFIELD AGRICULTURAL PARTNERS LLC, an Iowa limited liability company ("GAP" or the "Borrower");
GREENFIELD GRAIN STORAGE LLC, an Iowa limited liability company ("GGS");
GREENFIELD CROP INPUTS INC., an Illinois corporation ("GCI"; and together with GAP and GGS, each a "Grantor" and collectively the "Grantors"); and
HEARTLAND COMMERCE BANK, NATIONAL ASSOCIATION, a national banking association, in its capacity as Collateral Agent for the benefit of the Secured Parties (in such capacity, together with its successors and assigns in such capacity, the "Collateral Agent").
RECITALS
WHEREAS, GAP, as Borrower, the Guarantors party thereto, the Lenders party thereto, and Heartland Commerce Bank, National Association ("HCB"), as Administrative Agent and Collateral Agent, have entered into that certain Revolving Credit Agreement, dated as of the date hereof (as amended, restated, supplemented, or otherwise modified from time to time, the "Credit Agreement"), pursuant to which the Lenders have agreed to make available to the Borrower a senior secured asset-based revolving credit facility in an aggregate principal amount of up to Eighty Million Dollars ($80,000,000) (the "Revolving Credit Facility");
WHEREAS, the syndicate of Lenders party to the Credit Agreement and their respective commitments are as follows: (i) Heartland Commerce Bank, National Association, with a Commitment of Forty Million Dollars ($40,000,000), representing 50.00% of the aggregate Commitments; (ii) Meridian Agricultural Credit Corporation ("MACC"), with a Commitment of Twenty-Five Million Dollars ($25,000,000), representing 31.25% of the aggregate Commitments; and (iii) Tallgrass Capital Fund II, LP ("Tallgrass"), with a Commitment of Fifteen Million Dollars ($15,000,000), representing 18.75% of the aggregate Commitments;
WHEREAS, each Grantor is entering into this Security Agreement as a condition precedent to the Lenders' obligations to make Loans and issue Letters of Credit under the Credit Agreement;
WHEREAS, GAP is the Borrower under the Credit Agreement, and each of GGS and GCI is a Subsidiary Guarantor under that certain Guaranty Agreement, dated as of the date hereof (the "Guaranty Agreement"), made by the Guarantors party thereto in favor of the Collateral Agent for the benefit of the Secured Parties;
WHEREAS, each of the Grantors has a direct and material interest in the Revolving Credit Facility and will derive substantial direct and indirect benefits from the availability of borrowings thereunder;
WHEREAS, the proceeds of the Revolving Credit Facility will be used, among other things, to (i) refinance the existing revolving credit facility in an original aggregate principal amount of Fifty-Five Million Dollars ($55,000,000) with Prairie National Bank, N.A. ("PNB") (outstanding balance of approximately Thirty-Eight Million Seven Hundred Fifty Thousand Dollars ($38,750,000) as of September 30, 2022), (ii) fund seasonal working capital requirements of the Grantors and their respective operations, and (iii) provide for general corporate purposes of the Grantors; and
WHEREAS, as a condition precedent to the effectiveness of the Credit Agreement and the obligations of the Lenders to extend credit thereunder, each Grantor has agreed to execute and deliver this Security Agreement and to grant to the Collateral Agent, for the ratable benefit of the Secured Parties, a continuing first-priority security interest in and lien upon all of such Grantor's personal property as described herein to secure the payment and performance of all Obligations under the Loan Documents.
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I — DEFINITIONS
Section 1.1 — Defined Terms
As used in this Security Agreement, the following terms shall have the meanings set forth below. Capitalized terms used but not otherwise defined in this Security Agreement shall have the meanings ascribed to such terms in the Credit Agreement.
"Accounts" means all "accounts" as defined in Article 9 of the UCC, including, without limitation, all accounts receivable of each Grantor arising from the sale of inventory, the provision of services, and any other transaction, in each case whether now existing or hereafter arising. Without limiting the generality of the foregoing, Accounts shall specifically include (a) all crop-input receivables of GCI arising from the sale of seed, fertilizer, crop protection chemicals, and related agricultural products, (b) all grain merchandising receivables of GAP and GGS arising from the sale or other disposition of harvested grain, and (c) all right to payment for goods sold, leased, licensed, assigned, or otherwise disposed of, for services rendered, or to be rendered, for a policy of insurance issued or to be issued, for a secondary obligation incurred or to be incurred, for energy provided or to be provided, for the use or hire of a vessel under a charter or other contract, arising out of the use of a credit or charge card or information contained on or for use with the card, or as winnings in a lottery or other game of chance operated or sponsored by a state, governmental unit of a state, or person authorized to operate or sponsor such a lottery or game of chance under the laws of a state or governmental unit of a state.
"Borrowing Base" has the meaning assigned to such term in the Credit Agreement. As of the date hereof, the Borrowing Base is calculated on the basis of the following advance rates: (a) eighty-five percent (85%) of the net amount of Eligible Accounts Receivable; (b) sixty-five percent (65%) of the net orderly liquidation value ("NOLV") of Eligible Crop Inventory; (c) seventy percent (70%) of the lower of cost or market value of Eligible Crop-Input Inventory; and (d) eighty percent (80%) of the market value of Eligible Grain Warehouse Receipts.
"Chattel Paper" means all "chattel paper" as defined in Article 9 of the UCC, including, without limitation, all electronic chattel paper and tangible chattel paper, whether now existing or hereafter arising.
"Collateral" has the meaning assigned to such term in Section 2.1 of this Security Agreement.
"Collateral Agent" means Heartland Commerce Bank, National Association, in its capacity as collateral agent for the benefit of the Secured Parties under the Credit Agreement and this Security Agreement, together with its successors and assigns in such capacity.
"Commercial Tort Claims" means all "commercial tort claims" as defined in Article 9 of the UCC, as identified on Schedule 1.1(a) hereto or as supplemented from time to time in accordance with Section 4.11(d) of this Security Agreement.
"Credit Agreement" means that certain Revolving Credit Agreement, dated as of the date hereof, among GAP, as Borrower, the Guarantors party thereto, the Lenders party thereto, and HCB, as Administrative Agent and Collateral Agent, providing for an Eighty Million Dollar ($80,000,000) senior secured asset-based revolving credit facility, as the same may be amended, restated, amended and restated, supplemented, extended, renewed, replaced, refinanced, or otherwise modified from time to time in accordance with its terms.
"Crop Insurance Proceeds" means all proceeds payable under any crop insurance policy issued by Northstar Mutual Insurance Company or any replacement carrier, including, without limitation, all proceeds payable under any federal crop insurance policy, any private crop-hail insurance policy, and any revenue protection, yield protection, or similar crop insurance policy, in each case covering the Grantors' agricultural production, whether now in force or hereafter obtained.
"Deposit Accounts" means all "deposit accounts" as defined in Article 9 of the UCC, including, without limitation, all operating accounts, collection accounts, concentration accounts, payroll accounts, tax accounts, and all other deposit accounts of each Grantor maintained at any financial institution, in each case whether now existing or hereafter opened, and all funds and amounts deposited therein from time to time, subject in each case to the requirement that Deposit Account Control Agreements be executed and delivered with respect thereto as required under the Credit Agreement and this Security Agreement.
"Documents" means all "documents" as defined in Article 9 of the UCC, including, without limitation, all warehouse receipts (whether negotiable or non-negotiable), bills of lading, dock warrants, dock receipts, and similar documents of title, in each case whether now existing or hereafter acquired or arising.
"Equipment" means all "equipment" as defined in Article 9 of the UCC, including, without limitation, all grain elevator equipment, grain storage equipment, grain drying equipment, grain handling and conveyance equipment, transportation equipment (including trucks, trailers, rail cars, and related rolling stock), distribution equipment, farm machinery and implements (including tractors, combines, planters, sprayers, and tillage equipment), vehicles, fixtures, furniture, office equipment, computer hardware, telecommunications equipment, and all other tangible personal property used or usable in the Grantors' operations, together with all accessions thereto, substitutions therefor, and replacements thereof, in each case whether now owned or hereafter acquired.
"General Intangibles" means all "general intangibles" as defined in Article 9 of the UCC, including, without limitation, all payment intangibles, contract rights, intellectual property (including patents, trademarks, service marks, trade names, copyrights, trade secrets, and know-how), goodwill, customer lists, supplier relationships, governmental permits, licenses, franchises, governmental authorizations, tax refund claims, rights under insurance policies (other than to the extent constituting Proceeds), and all other intangible personal property, in each case whether now owned or hereafter acquired or arising.
"Grain Warehouse Receipts" means all warehouse receipts (whether negotiable or non-negotiable) issued by any Grantor or held by any Grantor evidencing ownership of stored grain, including, without limitation, warehouse receipts for corn, soybeans, wheat, and specialty grains, in each case whether in electronic or physical form, valued by reference to the Chicago Board of Trade ("CBOT") settlement price for the applicable commodity less applicable basis differentials, as determined in accordance with the Credit Agreement.
"Instruments" means all "instruments" as defined in Article 9 of the UCC, including, without limitation, all promissory notes, drafts, checks, certificates of deposit, and similar instruments evidencing a right to payment, in each case whether now held or hereafter acquired.
"Inventory" means all "inventory" as defined in Article 9 of the UCC, including, without limitation: (i) all harvested grain inventory, including corn, soybeans, and specialty grains, held in owned or leased grain elevators, storage bins, or other storage facilities; (ii) all crop-input inventory, including seed, fertilizer, crop protection chemicals (herbicides, pesticides, and fungicides), and related agricultural products, held at distribution centers, warehouses, or other locations; (iii) all grain in transit, whether by truck, rail, or barge; and (iv) all other goods held for sale, lease, or resale, all raw materials, work in process, finished goods, and all materials and supplies used or consumed in the Grantors' businesses, together with all accessions thereto, products thereof, and documents therefor, in each case whether now owned or hereafter acquired. The parties acknowledge that peak seasonal inventory of the Grantors is estimated at approximately One Hundred Twenty-Five Million Dollars ($125,000,000) to One Hundred Forty-Five Million Dollars ($145,000,000) during the September through November harvest season.
"Investment Property" means all "investment property" as defined in Article 9 of the UCC, including, without limitation, all securities (whether certificated or uncertificated), securities accounts, security entitlements, commodity contracts, commodity accounts, and all financial assets held in any securities account or commodity account, in each case whether now owned or hereafter acquired.
"Letter-of-Credit Rights" means all "letter-of-credit rights" as defined in Article 9 of the UCC, including, without limitation, all rights to payment or performance under any letter of credit, in each case whether now existing or hereafter acquired or arising.
"Lien" has the meaning assigned to such term in the Credit Agreement.
"Loan Documents" means, collectively, the Credit Agreement, this Security Agreement, the Guaranty Agreement, the Pledge Agreement, the Mortgages, the Deposit Account Control Agreements, the Assignment of Insurance, and all other documents, instruments, agreements, and certificates delivered in connection with any of the foregoing, in each case as amended, restated, supplemented, or otherwise modified from time to time.
"Obligations" means all obligations (including, without limitation, all obligations in respect of principal, interest (including interest accruing after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization, or similar proceeding, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), premium, fees, costs, charges, expenses, reimbursement obligations, indemnification obligations, and other amounts) owing by any Grantor under or in connection with the Loan Documents, whether now existing or hereafter arising, whether absolute or contingent, whether direct or indirect, whether joint or several, whether due or to become due, and however arising, including, without limitation, all obligations arising under or in connection with any Secured Hedge Agreement or any Banking Services Agreement (each as defined in the Credit Agreement).
"Permitted Liens" has the meaning assigned to such term in the Credit Agreement.
"Proceeds" means all "proceeds" as defined in Article 9 of the UCC, including, without limitation, (a) all cash proceeds and noncash proceeds, (b) all insurance proceeds (including Crop Insurance Proceeds), (c) all dividends, interest, distributions, rents, royalties, income, profits, and other amounts received or receivable with respect to or on account of the Collateral, and (d) any and all other amounts received or receivable upon the sale, exchange, collection, lease, license, or other disposition of, or realization upon, any Collateral, in each case whether now existing or hereafter arising.
"Secured Parties" means, collectively, the Collateral Agent, the Administrative Agent, and the Lenders (HCB, MACC, and Tallgrass), together with their respective successors and assigns, and any other Person from time to time holding any Obligation secured hereby.
"Supporting Obligations" means all "supporting obligations" as defined in Article 9 of the UCC, including, without limitation, all letters of credit, guaranties, suretyship agreements, and other secondary obligations supporting the payment or performance of any Account, Chattel Paper, Document, General Intangible, Instrument, or Investment Property constituting Collateral.
"UCC" means the Uniform Commercial Code as in effect from time to time in the State of Illinois; provided, however, that if the perfection, the effect of perfection or non-perfection, or the priority of the security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Illinois, "UCC" shall mean the Uniform Commercial Code as in effect from time to time in such other jurisdiction for purposes of the provisions hereof relating to such perfection, effect of perfection or non-perfection, or priority.
Section 1.2 — UCC Terms
Terms used but not defined herein or in the Credit Agreement that are defined in the UCC (including Article 9 as revised from time to time) shall have the meanings given to such terms in the UCC. Without limiting the generality of the foregoing, the terms "authenticate," "debtor," "entitlement holder," "entitlement order," "financial asset," "proceeds," "security," "securities account," and "securities intermediary" shall have the respective meanings assigned to such terms in the UCC.
Section 1.3 — Rules of Construction
The rules of interpretation and construction set forth in the Credit Agreement (including, without limitation, the provisions relating to the usage of defined terms, gender, number, inclusion, headings, references to agreements and laws, times of day, and rounding) are hereby incorporated by reference and shall apply to this Security Agreement mutatis mutandis. This Security Agreement shall be governed by, and construed in accordance with, the laws of the State of Illinois as provided in Section 8.6 hereof. In the event of any conflict between the terms of this Security Agreement and the terms of the Credit Agreement, the terms of the Credit Agreement shall control unless the context hereof clearly requires otherwise.
ARTICLE II — GRANT OF SECURITY INTEREST
Section 2.1 — Grant
Each Grantor hereby grants to the Collateral Agent, for the ratable benefit of the Secured Parties, a continuing first-priority security interest in, and lien upon, all of such Grantor's right, title, and interest in, to, and under the following property, in each case wherever located, whether now owned or existing or hereafter acquired or arising, and howsoever such Grantor's interest therein may arise or appear (whether by ownership, security interest, claim, or otherwise) (all of such property being collectively referred to herein as the "Collateral"):
(a) All Accounts;
(b) All Chattel Paper, including, without limitation, all electronic chattel paper and tangible chattel paper;
(c) All Commercial Tort Claims, as identified on Schedule 1.1(a) hereto, as such Schedule may be supplemented from time to time in accordance with Section 4.11(d) of this Security Agreement;
(d) All Deposit Accounts;
(e) All Documents, including, without limitation, all Grain Warehouse Receipts;
(f) All Equipment;
(g) All General Intangibles, including, without limitation, all payment intangibles;
(h) All Instruments;
(i) All Inventory, including, without limitation, all harvested grain (including corn, soybeans, and specialty grains), all crop-input inventory (including seed, fertilizer, and crop protection chemicals), and all grain in transit;
(j) All Investment Property;
(k) All Letter-of-Credit Rights;
(l) All Supporting Obligations;
(m) All books and records (including, without limitation, customer lists, credit files, correspondence, business records, tapes, computer programs, computer data, databases, and related data processing software) in any way pertaining to any of the foregoing; and
(n) All Proceeds and products of any and all of the foregoing, including, without limitation, all Crop Insurance Proceeds and all other insurance proceeds, and all accessions to, substitutions and replacements for, and rents, profits, and products of, each of the foregoing.
For the avoidance of doubt, the Collateral includes all personal property of each of GAP, GGS, and GCI, whether tangible or intangible, and whether now owned or hereafter acquired, subject only to the exclusions set forth in Section 2.2 below.
Section 2.2 — Excluded Assets
Notwithstanding anything to the contrary in Section 2.1 above, the Collateral shall not include any of the following (collectively, "Excluded Assets"):
(a) Any Excluded Account (if applicable), as such term is defined in the Credit Agreement;
(b) Any lease, license, contract, or agreement of any Grantor to the extent that the grant of a security interest therein would violate or invalidate such lease, license, contract, or agreement, or create a right of termination in favor of any other party thereto (other than any Grantor), pursuant to a valid and enforceable anti-assignment provision contained therein (after giving effect to the applicable anti-assignment override provisions of Sections 9-406, 9-407, 9-408, and 9-409 of the UCC and any other applicable law); provided, however, that (i) each Grantor shall use commercially reasonable efforts to obtain the consent of the applicable counterparty to the grant of a security interest in any such asset, (ii) any such asset shall be automatically included in the Collateral to the maximum extent that the grant of a security interest therein does not violate, invalidate, or give rise to a right of termination under such lease, license, contract, or agreement, and (iii) all Proceeds of any such excluded asset shall in any event constitute Collateral hereunder;
(c) Any intent-to-use trademark application filed with the United States Patent and Trademark Office to the extent that the grant of a security interest therein prior to the filing of a "Statement of Use" or an "Amendment to Allege Use" with respect thereto would impair the validity or enforceability of such intent-to-use trademark application under applicable law; provided that upon the filing of any such "Statement of Use" or "Amendment to Allege Use," such trademark application shall automatically be included in the Collateral; and
(d) Any asset to the extent that the pledge of, or the grant of a security interest in, such asset is prohibited by applicable law, rule, or regulation (other than to the extent that such prohibition is rendered ineffective by the UCC (including Sections 9-406, 9-407, 9-408, and 9-409 thereof) or by any other applicable law); provided that all Proceeds of any such excluded asset shall in any event constitute Collateral hereunder.
Section 2.3 — Security for Obligations
The security interest granted pursuant to Section 2.1 of this Security Agreement secures the prompt and complete payment and performance in full when due (whether at stated maturity, by acceleration, or otherwise) of all Obligations of the Grantors under the Credit Agreement and the other Loan Documents, whether now existing or hereafter arising, whether absolute or contingent, whether direct or indirect, and whether joint or several.
ARTICLE III — REPRESENTATIONS AND WARRANTIES
Each Grantor hereby represents and warrants to the Collateral Agent and each of the Secured Parties as follows, as of the date hereof and as of each date on which any Loan is made or Letter of Credit is issued under the Credit Agreement:
Section 3.1 — Organization and Authority
Each Grantor is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization, as set forth below, and has all requisite limited liability company or corporate power and authority, as applicable, to own, lease, and operate its properties and to carry on its business as currently conducted:
(a) GAP is an Iowa limited liability company, organized and existing under the laws of the State of Iowa (Iowa Secretary of State Filing No. 622847; Employer Identification Number 47-3918265);
(b) GGS is an Iowa limited liability company, organized and existing under the laws of the State of Iowa (Employer Identification Number 84-2093417); and
(c) GCI is an Illinois corporation, incorporated and existing under the laws of the State of Illinois (Illinois Secretary of State File No. 08294731; Employer Identification Number 37-6182049).
Each Grantor has full limited liability company or corporate power and authority, as applicable, to execute, deliver, and perform this Security Agreement and to grant the security interest in the Collateral contemplated hereby. The execution, delivery, and performance of this Security Agreement by each Grantor have been duly authorized by all necessary limited liability company or corporate action on the part of such Grantor, as applicable. No consent, approval, authorization, or order of, or filing, registration, or qualification with, any governmental authority or any other Person is required in connection with the execution, delivery, and performance of this Security Agreement by any Grantor or the grant of the security interest contemplated hereby, except for (i) filings under the UCC contemplated by Article V hereof and (ii) such consents, approvals, authorizations, orders, filings, registrations, or qualifications as have been obtained or made and are in full force and effect.
Section 3.2 — Enforceability
This Security Agreement has been duly executed and delivered by each Grantor and constitutes the legal, valid, and binding obligation of each Grantor, enforceable against such Grantor in accordance with its terms, except as enforcement may be limited by (a) applicable bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, receivership, conservatorship, or similar laws affecting the enforcement of creditors' rights generally and (b) general principles of equity, whether considered in a proceeding in equity or at law (including concepts of materiality, reasonableness, good faith, and fair dealing), regardless of whether enforcement is sought in a proceeding in equity or at law.
Section 3.3 — Ownership of Collateral; No Other Liens
Each Grantor is the sole legal and beneficial owner of its Collateral, and has good and marketable title to such Collateral, free and clear of all Liens, claims, encumbrances, security interests, and other restrictions or limitations whatsoever, except for Permitted Liens. No Grantor has previously granted, and no Person other than the Collateral Agent holds, any security interest in, lien upon, or other encumbrance against any of the Collateral, except for Permitted Liens.
The parties acknowledge that the existing liens of Prairie National Bank, N.A., as evidenced by UCC-1 financing statements filed with the Iowa Secretary of State under Filing Nos. 2018-0041729 and 2018-0041730 (each originally filed on April 2, 2018), will be terminated upon the payoff and refinancing of the existing Fifty-Five Million Dollar ($55,000,000) revolving credit facility with PNB. Upon such termination, no other Person shall hold any security interest in or lien upon any of the Collateral other than Permitted Liens. Each Grantor shall use its best efforts to ensure that such UCC-3 termination statements are filed by PNB on or prior to the Closing Date (as defined in the Credit Agreement).
Section 3.4 — Organizational Identification
The exact legal name of each Grantor, as such name appears on the public organic records of its jurisdiction of organization, is as set forth on Schedule 3.4 attached hereto. The jurisdiction of organization, organizational identification number, Employer Identification Number, chief executive office address, and registered agent of each Grantor are set forth on Schedule 3.4.
No Grantor has, within the five (5) years preceding the date hereof, changed its legal name, its jurisdiction of organization, its organizational identification number, its identity, or its organizational structure (whether by merger, consolidation, conversion, reorganization, or otherwise), except as set forth on Schedule 3.4 hereto.
The chief executive office of each Grantor is located at the following address:
(a) GAP: 4100 Grand Prairie Boulevard, Suite 300, Des Moines, Iowa 50309;
(b) GGS: 4100 Grand Prairie Boulevard, Suite 310, Des Moines, Iowa 50309; and
(c) GCI: 780 Commerce Drive, Bloomington, Illinois 61701.
Section 3.5 — Locations of Collateral
All tangible Collateral (including, without limitation, all Inventory and Equipment) is located at the addresses set forth on Schedule 3.5 attached hereto, which includes, among other locations, the following:
(a) The headquarters offices of GAP and GGS located in Des Moines, Iowa;
(b) Fourteen (14) grain elevator sites located across the State of Iowa, including elevator facilities in Polk County and eight (8) additional Iowa counties, as more particularly described on Schedule 3.5;
(c) Three (3) regional distribution centers, including the principal GCI distribution center located at 780 Commerce Drive, Bloomington, Illinois 61701 (McLean County, Illinois), and additional distribution centers as described on Schedule 3.5; and
(d) Such other locations across the States of Iowa, Illinois, and Indiana as are identified on Schedule 3.5.
The Grantors collectively manage approximately eighty-two thousand (82,000) acres of agricultural land (both owned and leased). Schedule 3.5 is cross-referenced to the Real Property Collateral Schedule attached to the Credit Agreement for appraised values (aggregate appraised value of approximately Sixty-Four Million Eight Hundred Thousand Dollars ($64,800,000)). No tangible Collateral is stored at any location other than those identified on Schedule 3.5 except for Inventory in transit in the ordinary course of business.
Section 3.6 — Accounts
Each Account constituting Collateral arises or will arise out of a bona fide sale of goods or rendering of services by the applicable Grantor in the ordinary course of business, and each such Account represents a genuine obligation of the applicable account debtor to pay the amount stated therein. No Grantor has knowledge of any fact or circumstance that would impair the validity, enforceability, or collectibility of any material Account (individually or in the aggregate). The amounts shown on the books and records of each Grantor with respect to its Accounts are true, correct, and complete in all material respects. No Account is subject to any defense, setoff, counterclaim, or other reduction (other than customary early payment discounts and volume rebates granted in the ordinary course of business), except as disclosed to the Collateral Agent in writing.
Section 3.7 — Inventory
All Inventory constituting Collateral is of good and merchantable quality, free from material defects, and is in compliance with all applicable laws, regulations, and standards (including, without limitation, all applicable agricultural grading standards and food safety regulations). Inventory includes, without limitation, (a) harvested grain, including corn, soybeans, and specialty grains, (b) crop inputs, including seed, fertilizer, and crop protection chemicals (herbicides, pesticides, and fungicides), and (c) related agricultural materials and supplies. All Inventory is stored at the locations identified on Schedule 3.5 hereto or is in transit between such locations in the ordinary course of business. No Grantor has consigned any Inventory to any other Person, except as disclosed on Schedule 3.7, if any.
Section 3.8 — Deposit Accounts
All Deposit Accounts of each Grantor are identified on Schedule 3.8 attached hereto, which sets forth the name and address of each depository bank, the account number, the account type (operating, collection, concentration, or other), and the status of the applicable Deposit Account Control Agreement. No Grantor maintains any Deposit Account that is not listed on Schedule 3.8 (as such Schedule may be updated from time to time in accordance with the terms of this Security Agreement and the Credit Agreement). Each Grantor shall enter into, and shall cause each applicable depository bank to enter into, Deposit Account Control Agreements with respect to all Deposit Accounts as and when required under the Credit Agreement.
Section 3.9 — Intellectual Property
All material intellectual property owned by each Grantor is identified on Schedule 3.9 attached hereto, which sets forth a description of all material trademarks, trade names, service marks, copyrights, patents, patent applications, and other intellectual property owned by such Grantor, including registration numbers and filing dates, to the extent applicable. No Grantor has received any written claim of infringement, misappropriation, or other violation with respect to such intellectual property, and to each Grantor's knowledge, no such claim is threatened. No Grantor's use of its intellectual property violates or infringes upon the rights of any other Person in any material respect.
Section 3.10 — Insurance
All Collateral constituting tangible personal property is insured against loss, damage, and destruction in accordance with the requirements of the Credit Agreement and customary practices in the agricultural industry. Primary crop insurance (including federal crop insurance and private crop-hail insurance) is provided by Northstar Mutual Insurance Company, and all property and casualty insurance, business interruption insurance, and commercial general liability insurance is maintained by the Grantors through Northstar Mutual Insurance Company, in each case brokered through Redwood Insurance Group, Inc. All such insurance policies are in full force and effect, all premiums due thereon have been paid, and such policies comply with the Collateral Agent's requirements for loss payee endorsements (in favor of the Collateral Agent, for the benefit of the Secured Parties) and additional insured endorsements, in each case in form and substance satisfactory to the Collateral Agent. True, correct, and complete copies of all such insurance policies, binders, and endorsements have been delivered to the Collateral Agent.
Section 3.11 — Commercial Tort Claims
All Commercial Tort Claims of each Grantor with a value in excess of One Hundred Thousand Dollars ($100,000) (or such other threshold amount as may be specified in the Credit Agreement) as of the date hereof are identified and described on Schedule 1.1(a) attached hereto. As of the date hereof, no Grantor holds any Commercial Tort Claim that is not listed on Schedule 1.1(a), other than Commercial Tort Claims with an individual value of less than One Hundred Thousand Dollars ($100,000).
Section 3.12 — No Financing Statements
No effective financing statement or other public filing covering all or any part of the Collateral is on file in any recording office, filing office, or registry, except for (a) the UCC-1 financing statements filed on behalf of Prairie National Bank, N.A. with the Iowa Secretary of State under Filing Nos. 2018-0041729 and 2018-0041730 (each originally filed on April 2, 2018), which financing statements will be terminated upon the closing and payoff of the existing PNB revolving credit facility, and (b) any financing statements or filings relating to Permitted Liens. No Grantor has authorized any Person other than the Collateral Agent to file any financing statement covering any portion of the Collateral (other than the PNB financing statements referenced above and any financing statements relating to Permitted Liens).
ARTICLE IV — COVENANTS
Each Grantor hereby covenants and agrees with the Collateral Agent and each of the Secured Parties as follows:
Section 4.1 — Protection of Security Interest; Further Assurances
Each Grantor shall take all actions reasonably necessary or desirable to establish, maintain, protect, perfect, and continue the perfection and first-priority status of the Collateral Agent's security interest in the Collateral, including, without limitation:
(a) The prompt execution and delivery of, and authorization for the Collateral Agent to file, UCC-1 financing statements (and UCC-3 amendments, continuations, and other filings) in the State of Iowa (with respect to GAP and GGS, as Iowa limited liability companies), the State of Illinois (with respect to GCI, as an Illinois corporation), and such other jurisdictions as may be required to perfect the security interest granted herein (including the States of Indiana and Delaware, to the extent that any Grantor maintains Collateral or has any organizational connection thereto);
(b) The execution and delivery of such amendments, supplements, continuation statements, and other documents and instruments as the Collateral Agent may reasonably request from time to time to maintain and continue the perfection and priority of the security interest granted herein;
(c) The delivery to the Collateral Agent (or its designee) of all possessory Collateral, including, without limitation, all certificated securities (with duly executed stock powers or other instruments of transfer), negotiable instruments (with duly executed endorsements in blank or to the order of the Collateral Agent), and negotiable documents of title (including negotiable Grain Warehouse Receipts), in each case as required by Article V hereof; and
(d) Such other cooperation and assistance as the Collateral Agent may reasonably request in connection with the filing, recording, registration, and perfection of the security interest in any Collateral, including, without limitation, cooperation in obtaining landlord waivers, bailee letters, and other third-party acknowledgments.
Each Grantor hereby authorizes the Collateral Agent to file any and all financing statements, amendments, and continuations thereof, and any other documents or instruments, that the Collateral Agent may deem reasonably necessary or advisable to perfect or continue the perfection of the security interest granted herein, in each case without the signature of such Grantor to the extent permitted by applicable law.
Section 4.2 — Changes in Name, Location, or Structure
No Grantor shall change its legal name, its jurisdiction of organization, its organizational identification number, its identity, or the location of its chief executive office, or otherwise reorganize, reincorporate, merge with or into another entity, or change its organizational structure in any manner, without (a) providing at least thirty (30) days' prior written notice to the Collateral Agent of such proposed change (which notice shall include a description of the proposed change and the effective date thereof) and (b) prior to or concurrently with such change, executing and delivering to the Collateral Agent, and authorizing the Collateral Agent to file, such financing statements, amendments, and other documents as may be necessary or desirable to maintain the perfection and first-priority status of the Collateral Agent's security interest in the Collateral.
Section 4.3 — Maintenance of Collateral
Each Grantor shall maintain all tangible Collateral in good condition and repair (ordinary wear and tear excepted) and shall not commit or suffer any waste with respect to any Collateral. Each Grantor shall maintain all Equipment and Inventory in accordance with prudent agricultural industry practices and in compliance with all manufacturer's recommendations and specifications. Without limiting the foregoing, all grain elevators, grain storage facilities, drying equipment, and related infrastructure shall be operated and maintained in compliance with all applicable governmental regulations, including, without limitation, all regulations of the United States Department of Agriculture, the Environmental Protection Agency, the Occupational Safety and Health Administration, and applicable state agricultural and environmental agencies. Each Grantor shall promptly make all repairs, replacements, and improvements to its Equipment that are necessary or appropriate to maintain such Equipment in good working order and condition.
Section 4.4 — Insurance
Each Grantor shall obtain and maintain, at its sole cost and expense, insurance on all insurable Collateral in such amounts, with such deductibles, and against such risks as are required by the Credit Agreement and as are customary in the agricultural industry for businesses of similar size and nature, including, without limitation:
(a) Crop Insurance. All applicable crop insurance coverage (including federal crop insurance and private crop-hail insurance) provided by Northstar Mutual Insurance Company or such other carrier as may be approved by the Collateral Agent, covering all of the Grantors' agricultural production;
(b) Property and Casualty Insurance. All-risk property and casualty insurance covering all tangible Collateral, including Inventory, Equipment, and improvements, in an amount not less than the full replacement cost of such Collateral;
(c) Business Interruption Insurance. Business interruption insurance in amounts and with coverage periods satisfactory to the Collateral Agent; and
(d) Commercial General Liability Insurance. Commercial general liability insurance with coverage limits not less than those specified in the Credit Agreement, including coverage for products liability, completed operations, contractual liability, and environmental liability.
All such insurance policies shall name the Collateral Agent as loss payee (as its interest may appear) with respect to all property, casualty, and crop insurance policies, and as additional insured with respect to all liability insurance policies, in each case pursuant to endorsements in form and substance satisfactory to the Collateral Agent. No insurance policy shall be cancelled, materially modified, or allowed to lapse without at least thirty (30) days' prior written notice to the Collateral Agent (or ten (10) days in the case of cancellation for non-payment of premium). Each Grantor shall deliver to the Collateral Agent an executed Assignment of Insurance in the form required under the Loan Documents, together with evidence of insurance (including certificates of insurance, binders, and endorsements) satisfactory to the Collateral Agent.
Section 4.5 — Accounts — Collection and Reporting
Each Grantor shall diligently collect and enforce all of its Accounts in the ordinary course of business, consistent with past practices and prudent business judgment, subject to the Collateral Agent's right to direct collection of Accounts and to notify account debtors to make payment directly to the Collateral Agent upon the occurrence and during the continuance of a Trigger Period (as defined in the Credit Agreement) or an Event of Default (as defined in the Credit Agreement).
Each Grantor shall deliver to the Collateral Agent borrowing base certificates in the form required by the Credit Agreement: (i) on a monthly basis during normal operating periods and (ii) on a weekly basis during any Trigger Period, in each case setting forth in reasonable detail the calculation of the Borrowing Base as of the applicable reporting date.
The Accounts of each Grantor shall be subject to periodic field examinations conducted by Pryor & Associates LLC (or such other independent examination and appraisal firm as may be designated by the Collateral Agent from time to time). The Collateral Agent shall be entitled to conduct a maximum of two (2) field examinations per calendar year at the Borrower's expense, at a cost not to exceed Fifty Thousand Dollars ($50,000) per examination; provided, however, that during any Trigger Period or upon the occurrence and during the continuance of any Event of Default, the Collateral Agent may conduct unlimited field examinations at the Borrower's expense, without regard to such cost limitations.
Section 4.6 — Inventory — Reporting and Access
Each Grantor shall maintain complete and accurate records of all Inventory, including, without limitation, records reflecting the quantities, types, grades, qualities, locations, and values of all Inventory at each location. Such records shall be updated on a current basis and shall be made available to the Collateral Agent and its agents upon request.
Inventory appraisals and valuations shall be conducted by Pryor & Associates LLC (or such other independent appraisal firm as may be designated by the Collateral Agent from time to time), at the intervals and in the manner specified in the Credit Agreement. Inventory valuations for borrowing base purposes shall be determined as follows: (a) harvested crop inventory shall be valued at NOLV, (b) crop-input inventory shall be valued at the lower of cost or market, and (c) Grain Warehouse Receipts shall be valued at market value (determined by reference to the CBOT settlement price for the applicable commodity, less applicable basis differentials).
The Collateral Agent and its authorized agents and representatives (including field examiners, appraisers, auditors, and other professionals) shall have reasonable access to all locations where Collateral is stored, maintained, or kept for purposes of inspection, appraisal, field examination, and verification, upon reasonable prior notice during normal business hours (and at any time, without notice, upon the occurrence and during the continuance of an Event of Default). Each Grantor shall cooperate fully with, and provide all reasonable assistance to, the Collateral Agent and its agents in connection with any such inspection, appraisal, or examination.
Section 4.7 — Deposit Account Control Agreements
Within the time periods specified in the Credit Agreement, each Grantor shall execute and deliver, and shall cause each applicable depository bank to execute and deliver, Deposit Account Control Agreements with respect to each of its Deposit Accounts (other than any Excluded Account), in the form agreed among the applicable Grantor, the depository bank (including Prairie National Bank, N.A. and Heartland Commerce Bank, N.A., as applicable), and the Collateral Agent, granting the Collateral Agent "control" (as defined in Section 9-104 of the UCC) over such Deposit Accounts. Each Deposit Account Control Agreement shall be in form and substance satisfactory to the Collateral Agent and shall provide that, upon notice from the Collateral Agent following the occurrence and during the continuance of an Event of Default, the depository bank shall comply solely with instructions originated by the Collateral Agent directing the disposition of funds in such Deposit Accounts, without further consent from the applicable Grantor.
Section 4.8 — Commodity Contracts and Hedging
Consistent with the anti-hedging negative covenant set forth in the Credit Agreement, no Grantor shall enter into any commodity hedging transaction, futures contract, options contract, swap, or similar derivative instrument with respect to agricultural commodities in excess of eighty percent (80%) of such Grantor's anticipated production for the applicable crop year, without the prior written consent of the Collateral Agent (acting at the direction of the Required Lenders, as defined in the Credit Agreement). Each Grantor shall provide the Collateral Agent with periodic reports regarding its outstanding hedging positions as required by the Credit Agreement.
Section 4.9 — Restrictions on Disposition
No Grantor shall sell, transfer, assign, pledge, hypothecate, or otherwise dispose of any Collateral, or grant or permit to exist any Lien upon or with respect to any Collateral (other than Permitted Liens), except for:
(a) Sales of Inventory in the ordinary course of business;
(b) Collections of Accounts in the ordinary course of business;
(c) Use or consumption of Inventory and supplies in the ordinary course of business; and
(d) Other dispositions expressly permitted under the Credit Agreement (including dispositions of worn-out or obsolete Equipment permitted thereunder).
Any Proceeds received by any Grantor from any permitted disposition of Collateral shall constitute Collateral hereunder and shall be subject to the security interest granted in Section 2.1.
Section 4.10 — Books and Records
Each Grantor shall maintain complete and accurate books and records with respect to the Collateral, including, without limitation, records reflecting the nature, quality, quantity, value, and location of all Collateral. All such books and records shall be maintained in accordance with generally accepted accounting principles consistently applied and in accordance with applicable legal requirements. Each Grantor shall permit the Collateral Agent and its authorized representatives to inspect, examine, audit, and copy such books and records at reasonable times during normal business hours upon reasonable prior notice (and at any time, without notice, upon the occurrence and during the continuance of an Event of Default), at such Grantor's offices or at such other locations where such books and records are maintained.
Section 4.11 — Notices
Each Grantor shall promptly (and in any event within five (5) Business Days (as defined in the Credit Agreement)) notify the Collateral Agent in writing of:
(a) Any material loss, damage, or destruction of any Collateral (individually or in the aggregate), including any loss of or damage to harvested grain or crop-input inventory at any storage facility;
(b) Any claim, action, suit, litigation, investigation, or proceeding affecting or involving the Collateral or any material portion thereof;
(c) Any change in the location of any tangible Collateral from a location identified on Schedule 3.5, other than Inventory in transit in the ordinary course of business; and
(d) Any new Commercial Tort Claim acquired or arising after the date hereof with a value in excess of One Hundred Thousand Dollars ($100,000) (or such other threshold as specified in the Credit Agreement), together with a supplement to Schedule 1.1(a) describing such Commercial Tort Claim in reasonable detail, which supplement shall be deemed to amend and become part of Schedule 1.1(a) upon delivery to the Collateral Agent.
Section 4.12 — Compliance with Laws
Each Grantor shall comply in all material respects with all applicable laws, rules, regulations, orders, judgments, decrees, permits, licenses, and governmental authorizations relating to the Collateral, the use, operation, storage, and disposition thereof, and the conduct of such Grantor's business, including, without limitation, all applicable agricultural laws and regulations, environmental laws and regulations (including laws governing the storage and handling of fertilizers, pesticides, and other crop chemicals), food safety laws and regulations, grain warehouse and elevator regulations (including licensing requirements), transportation laws and regulations, and occupational health and safety laws and regulations.
ARTICLE V — PERFECTION
Section 5.1 — Filing of Financing Statements
Each Grantor hereby irrevocably authorizes the Collateral Agent to prepare, execute (to the extent the Collateral Agent's signature is required), and file UCC-1 financing statements (and UCC-3 amendments, continuations, assignments, and terminations) in the appropriate filing offices to perfect the security interest granted herein, including, without limitation, the following filing offices:
(a) The Iowa Secretary of State (with respect to GAP and GGS, as Iowa limited liability companies whose jurisdiction of organization is the State of Iowa);
(b) The Illinois Secretary of State (with respect to GCI, as an Illinois corporation whose jurisdiction of organization is the State of Illinois); and
(c) Such other jurisdictions as may be necessary or advisable to perfect the security interest in all Collateral, including the States of Indiana and Delaware, to the extent that any Grantor maintains Collateral in, or has any organizational connection to, such jurisdictions.
Each financing statement filed pursuant to this Section 5.1 may describe the Collateral as "all personal property" or "all assets" of the applicable Grantor, or in such other manner as is sufficient under the UCC to perfect a security interest in all personal property of such Grantor, or may contain a more specific description of the Collateral as the Collateral Agent may determine in its sole discretion. Each Grantor ratifies and confirms any financing statement or amendment thereto previously filed by or on behalf of the Collateral Agent with respect to such Grantor's Collateral. The filing offices for UCC financing statements are set forth on Schedule 5.1 attached hereto.
Section 5.2 — Existing Financing Statements — Termination
Upon the closing of the transactions contemplated by the Credit Agreement and the payoff in full of all obligations of the Grantors under the existing Fifty-Five Million Dollar ($55,000,000) revolving credit facility with Prairie National Bank, N.A., each Grantor shall cause PNB to promptly file UCC-3 termination statements with the Iowa Secretary of State with respect to Iowa SOS Filing Nos. 2018-0041729 and 2018-0041730 (each originally filed on April 2, 2018), and with any other applicable filing office where PNB has filed any financing statement covering any of the Collateral. Each Grantor shall deliver to the Collateral Agent satisfactory evidence of such termination filings (including file-stamped copies of such UCC-3 termination statements) promptly following the filing thereof, and in any event within five (5) Business Days of the Closing Date. Pending the filing and effectiveness of such termination statements, each Grantor shall cooperate with the Collateral Agent in taking such actions as may be necessary to ensure that the Collateral Agent's security interest in the Collateral has first-priority status.
Section 5.3 — Control Agreements
Perfection of the security interest in Deposit Accounts shall be accomplished through the execution and delivery of Deposit Account Control Agreements in favor of the Collateral Agent, as more fully described in Section 4.7 hereof. Perfection of the security interest in electronic chattel paper shall be accomplished through the Collateral Agent's obtaining "control" (as defined in Section 9-105 of the UCC) of such electronic chattel paper. Perfection of the security interest in letter-of-credit rights shall be accomplished through the consent of the applicable issuer or nominated person. Perfection of the security interest in investment property held in securities accounts shall be accomplished through the execution and delivery of securities account control agreements or through the Collateral Agent's obtaining "control" (as defined in Section 9-106 of the UCC) by other means permitted under the UCC. Each Grantor shall take all actions necessary to effectuate such control and to cooperate with the Collateral Agent in connection therewith.
Section 5.4 — Delivery of Possessory Collateral
Each Grantor shall promptly deliver to the Collateral Agent (or its designee) all certificated securities, negotiable instruments (accompanied by duly executed endorsements in blank or to the order of the Collateral Agent), and negotiable documents of title (including, without limitation, all negotiable Grain Warehouse Receipts, accompanied by duly executed endorsements in blank or to the order of the Collateral Agent), in each case constituting Collateral, for purposes of perfection by possession in accordance with the UCC; provided, however, that temporary possession of negotiable Grain Warehouse Receipts by any Grantor may be permitted to the extent expressly authorized under the Credit Agreement in connection with the ordinary course sale or delivery of grain. To the extent that any Grain Warehouse Receipts are non-negotiable, perfection of the security interest therein shall be accomplished by filing of UCC financing statements, by notification to the bailee (as required by Section 9-312(d) of the UCC), or by such other methods as are available under the UCC. Each Grantor shall cooperate with the Collateral Agent in obtaining bailee acknowledgments and warehouseman's undertakings, as applicable.
Section 5.5 — Intellectual Property Filings
To the extent that any Grantor owns intellectual property that is registerable with the United States Patent and Trademark Office (the "USPTO") or the United States Copyright Office (the "USCO"), such Grantor shall, upon the request of the Collateral Agent, execute and deliver to the Collateral Agent supplemental security agreements, short-form security interest assignments, or other instruments in form suitable for recording with the USPTO, the USCO, or other applicable federal or state intellectual property office, as the case may be, to perfect or evidence the security interest of the Collateral Agent in such intellectual property. Each such supplemental security agreement or assignment shall be in form and substance satisfactory to the Collateral Agent and shall supplement (and not supersede) the security interest granted pursuant to this Security Agreement.
ARTICLE VI — RIGHTS AND REMEDIES UPON DEFAULT
Section 6.1 — Events of Default
The term "Event of Default" as used herein shall have the meaning assigned to such term in the Credit Agreement. The occurrence of an Event of Default under the Credit Agreement shall constitute an Event of Default under this Security Agreement.
Section 6.2 — Remedies Generally
Upon the occurrence and during the continuance of an Event of Default, the Collateral Agent shall have, in addition to all other rights and remedies available to it under this Security Agreement, the Credit Agreement, the other Loan Documents, applicable law, or in equity, the following rights and remedies, in each case exercisable at the Collateral Agent's sole discretion and without further notice to or consent of any Grantor (except as otherwise required by applicable law):
(a) Exercise of UCC Rights. The Collateral Agent may exercise all rights and remedies of a secured party under Article 9 of the UCC (whether or not the UCC applies to the affected Collateral) and under any other applicable law;
(b) Assembly of Collateral. The Collateral Agent may require each Grantor to assemble the Collateral and make it available to the Collateral Agent at a reasonably convenient place designated by the Collateral Agent;
(c) Entry and Possession. The Collateral Agent may enter any premises where Collateral is located (including any grain elevator, storage facility, distribution center, warehouse, or office), with or without judicial process, take possession of the Collateral, remove the Collateral therefrom, and, in connection therewith, use any Grantor's premises, vehicles, supplies, and equipment for such purpose, all without liability for rent, storage, utilities, or other charges or compensation to any Grantor;