Construction Loan Security Agreement

EXHIBIT 10.87


CONSTRUCTION LOAN SECURITY AGREEMENT


by and between


VILLAGE FARMS INTERNATIONAL FINANCE ASSOCIATION,


as Debtor


and


COBANK, ACB,


as Agent for the Construction Lenders


TABLE OF CONTENTS


1. Definitions ...............................................................1


2. Collateral/Grant of Security Interest .....................................4


2.1 Grant of First Priority Interest .....................................4


2.2 Grant of Second Priority Security Interest ...........................5


2.3 Grant of First Priority Security Interest ............................6


3. Secured Obligations .......................................................6


4. Representations and Warranties ............................................6


4.1 Organization; Power and Authority, etc ...............................6


4.2 Due Authorization; Power .............................................7


4.3 Consents; Approvals ..................................................7


4.4 Title to Collateral ..................................................7


4.5 Underlying Construction Loans ........................................7


4.6 Principal Office; Collateral; Books and Records ......................8


5. Covenants of Debtor .......................................................8


5.1 Title to Collateral ..................................................8


5.2 Location of Debtor, Collateral and Books and Records .................8


5.3 Books and Records ....................................................8


5.4 Inspection of Collateral .............................................8


5.5 Transfers, Dispositions and Encumbrances .............................9


5.6 Maintenance and Repair; Taxes; Insurance .............................9


5.7 Compliance with Laws .................................................9


5.8 Change in Structure or Name ..........................................9


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5.9 Underlying Construction Loan Documents ...............................9


5.10 Possession of Collateral; Further Assurances .......................10


6. Events of Default ........................................................10


7. Rights Upon Default ......................................................10


7.1 General .............................................................10


7.2 Right of Secured Party to Take Possession and Dispose
of Collateral .......................................................10


7.3 Notice of Disposition of Collateral .................................11


7.4 Right of Secured Party to Use and Operate Collateral ................11


7.5 Collection of Accounts ..............................................12


7.6 Rights of Secured Party With Respect to the Securities Collateral ...13


7.7 Collection of Underlying Construction Loan Notes ....................14


8. General Provisions .......................................................15


8.1 Appointment and Rights of Agent .....................................15


8.2 Amendment, Modification, and Waiver .................................15


8.3 Costs and Attorneys'Fees ............................................15


8.4 Revival of Obligations ..............................................16


8.5 Performance by Secured Party ........................................16


8.6 Power of Attorney ...................................................16


8.7 Protection of Collateral ............................................17


8.8 Additional Rights of Secured Party ..................................17


8.9 Successors and Assigns ..............................................17


8.10 Advances ...........................................................17


8.11 Severability .......................................................17


8.12 Governing Law ......................................................18


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8.13 Notices ............................................................18


8.14 Financing Statement ................................................18


8.15 Conflict with Construction Loan Agreement ..........................18


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EXHIBITS


Exhibit 4.6 Location of Principal Office and Collateral


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CONSTRUCTION LOAN SECURITY AGREEMENT


THIS CONSTRUCTION LOAN SECURITY AGREEMENT ("Security Agreement") is made as of the 24th day of June, 1997, by and between VILLAGE FARMS INTERNATIONAL FINANCE ASSOCIATION, a Delaware corporation ("Debtor") whose address is 1811 Sardis Road North, Suite 207, Charlotte, North Carolina 28270 and COBANK, ACB ("CoBank"), as Agent on behalf of and for the benefit of the Construction Lenders (as hereinafter defined), whose address is 245 N. Waco Street, Wichita, Kansas 67202 (CoBank and all Successor Agents appointed pursuant to the Construction Loan Agreement are referred to herein as "Secured Party").


R E C I T A L S


A. The Construction Lenders have entered into a Credit Agreement (Construction Loan Funding) of even date herewith with Debtor (as amended from time to time, the "Construction Loan Agreement") pursuant to which the Construction Lenders have agreed (i) to loan funds to Debtor ("Construction Loan"), under the terms and conditions set forth in the Construction Loan Agreement, to be used by Debtor only to make loans to third parties ("Underlying Construction Loan Borrowers") for the purpose of providing financing for a portion of the costs of the construction (including costs of acquisition of land) by the Underlying Construction Loan Borrowers of facilities for the planting, growing and harvesting of vegetables and/or fruits ("Greenhouse Facilities"), and (ii) to issue letters of credit for the benefit of Underlying Construction Loan Borrowers, up to an aggregate for (i) and (ii) of $30,000,000.


B. The provisions of the Construction Loan Agreement require that Debtor execute certain documents, including this Security Agreement, whereby Debtor shall grant a lien and security interest to Secured Party in all of its property, both tangible and intangible, whether now owned or hereafter acquired, as security for the performance of its obligations under the Construction Loan Agreement and the other Construction Loan Documents (as defined below).


A G R E E M E N T S


In consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Debtor and Secured Party agree as follows:


1. Definitions. Capitalized terms used, but not defined, herein shall have the meaning given to such terms in the Construction Loan Agreement, if defined therein. In addition, unless otherwise defined herein, each term used herein and defined in the Uniform Commercial Code as enacted in the State of Colorado ("UCC") shall have the meaning given to such term in the UCC. As used in this Security Agreement, the following terms shall have the


meanings set forth below:


"Collateral" means the First Priority Collateral, the Second Priority Collateral and the Shared Collateral.


"Construction Agent" means CoBank in its role as Agent under the Construction Loan Agreement and each Successor Agent.


"Construction Lenders" means CoBank, in its role as a lender under the Construction Loan Agreement, and any other entity that purchases, now or in the future, a Syndication Interest in the Construction Loan.


"Construction Loan Documents" means the Construction Loan Agreement, any and all promissory notes now or hereafter executed by Debtor payable to the Construction Lenders in the aggregate maximum principal sum of $30,000,000.00, this Security Agreement and any and all other present and future agreements, documents and/or instruments evidencing, documenting, securing or otherwise relating to the Construction Loan, all as the same may from time to time be amended, modified, extended, renewed or restated.


"Hedge Agreement" means the secured interest rate hedging agreement of even date herewith executed by and between Debtor and CoBank.


"Intercreditor Agreement" means the Intercreditor Agreement of even date herewith by and between the Construction Lenders, the Term Lenders, the Line of Credit Lenders, the Construction Agent, the Term Agent, the Line of Credit Agent and Debtor.


"Line of Credit Agent" means CoBank in its role as Agent under the Line of Credit Agreement and each Successor Agent (as defined in the Line of Credit Agreement).


"Line of Credit Agreement" means the Credit Agreement (Line of Credit Facility) of even date herewith by and between CoBank for its own benefit as a lender and as Agent for the benefit of the present and future syndication parties as named or defined therein, and Debtor, wherein the Line of Credit Lenders have agreed to make available to Debtor a line of credit facility in the principal amount of up to $10,000,000 for the purpose of enabling Debtor to make line of credit loans to eligible third parties to use for the purposes therein specified and to issue letters of credit for the account of Debtor for the purposes therein specified.


"Line of Credit Lenders" means CoBank in its role as a lender under the Line of Credit Agreement and any other entity that purchases, now or in the future, a Syndication Interest (as defined in the Line of Credit Agreement) in the Line of Credit Loan.


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"Line of Credit Loan" means the line of credit facility made available to Debtor pursuant to the Line of Credit Agreement.


"Line of Credit Loan Documents" means the Line of Credit Agreement and any and all other present and future agreements, documents and/or instruments evidencing, documenting, securing or otherwise relating to any or all of the Line of Credit Loan, all as the same may from time to time be amended, modified, extended, renewed or restated.


"Term Agent" means CoBank in its role as Agent under the Term Loan Agreement and each Successor Agent (as defined in the Term Loan Agreement).


"Term Lenders" means CoBank, in its role as a lender under the Term Loan Agreement, and any other entity that purchases, now or in the future, a Syndication Interest (as defined in the Term Loan Agreement) in the Term Loan.


"Term Loan" means the credit facility made available to Debtor pursuant to the Term Loan Agreement.


"Term Loan Agreement" means the Credit Agreement (Term Loan Funding of even date herewith by and between CoBank for its own benefit as a lender and as Agent for the benefit of the present and future syndication parties as named or defined therein, and Debtor, wherein the Term Lenders have agreed to lend to Debtor an aggregate principal amount up to $50,000,000 for the purpose of enabling Debtor to make term loans to eligible third parties to use for the purposes therein specified.


"Term Loan Documents" means the Term Loan Agreement, the Hedge Agreement and any and all other present and future agreements, documents and/or instruments evidencing, documenting, securing or otherwise relating to any or all of the Term Loan, all as the same may from time to time be amended, modified, extended, renewed or restated.


"Underlying Construction Loan Collateral" means all of Debtor's assets relating to the Underlying Construction Loans, including without limitation, all promissory notes, loan agreements, security agreements, deeds of trust, mortgages, guaranties, financing statements and other documents, agreements and instruments executed in connection with the Underlying Construction Loans and all collateral security therefor.


"Underlying Line of Credit Collateral" means all of Debtor's assets relating to the Underlying Line of Credit Loans, including without limitation, all promissory notes, loan agreements, security agreements, reimbursement agreements, deeds of trust, mortgages, guaranties, financing statements and other documents, agreements and instruments executed in connection with the Underlying Line of Credit Loans and all collateral security therefor.


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"Underlying Line of Credit Loans" shall mean "Underlying Loans" as defined in the Line of Credit Agreement and the reimbursement obligations owed to Debtor in connection with the issuance of Letters of Credit (as defined in the Line of Credit Agreement) pursuant to the Line of Credit Agreement.


"Underlying Term Loans" shall have the meaning given to such term in the Term Loan Agreement.


"Underlying Term Loan Collateral" means all of Debtor's assets relating to the Underlying Term Loans, including without limitation, promissory notes, loan agreements, security agreements, deeds of trust, mortgages, guaranties, financing statements and other documents, agreements and instruments executed in connection with the Underlying Term Loans and all collateral security therefor.


2. Collateral/Grant of Security Interest.


2.1. Grant of First Priority Interest. Debtor, for consideration and to secure the Secured Obligations (as defined below), hereby grants a first priority security interest to Secured Party in the Underlying Construction Loan Collateral, tangible and intangible, wherever located and whether now owned or hereafter acquired, together with all additions, substitutions, products thereof and proceeds therefrom or arising out of the rights reflected therein, and all renewals, amendments, substitutions, and replacements of all or any part thereof, including without limitation the following property (collectively, the "First Priority Collateral"):


(a) all promissory notes made by Underlying Construction Loan Borrowers payable to Debtor to evidence the obligations of such Underlying Construction Loan Borrowers to Debtor under their respective Underlying Construction Loans (collectively, "Underlying Construction Loan Notes");


(b) all of Debtor's rights under (i) all loan agreements executed by and between Debtor and an Underlying Construction Loan Borrower in connection with an Underlying Construction Loan (collectively, "Underlying Construction Loan Agreements"), (ii) all mortgages, deeds of trust, security agreements, financing statements, leasehold assignments and consents, assignments and any other documents and agreements executed as security for the obligations of an Underlying Construction Loan Borrower to Debtor (collectively, "Underlying Construction Security Documents"), and (iii) any other instruments, documents or agreements executed and delivered in connection with, or to secure the obligations of an Underlying Construction Loan Borrower under its Underlying Construction Loan Agreement (collectively, with its Underlying Construction Loan Note, Underlying Construction Loan Agreement and Underlying Construction Security Documents, "Underlying Construction Loan Documents");


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(c) all assets and properties acquired by Debtor through foreclosure, or deed in lieu of foreclosure, on collateral for an Underlying Construction Loan, including without limitation the following:


(i) all of an Underlying Construction Loan Borrower's right, title and interest in and to all permits, licenses, franchises, certificates, plans and specifications, studies, contract rights (but not obligations), claims against third parties, judgments, awards, building materials, rights for utilities and other rights and privileges obtained in connection with its Greenhouse Facility and the real property on which its Greenhouse Facility is built ("Property"), and all equipment, fixtures, and other personal property of any kind or character, now or later located on or about its Property and its Greenhouse Facility or used in connection with the construction or operation thereof, or stored off its Property for future incorporation on or about its Property and its Greenhouse Facility, together with all accessories thereto, replacements thereof and substitutions therefor;


(ii) all seed, fertilizer and other supplies, and all crops now or in the future planted or growing on an Underlying Construction Loan Borrower's Property, all crops harvested now or in the future on its Property ("Produce") and all other farm products, and the products and cash and non-cash proceeds of such crops, including general intangibles, instruments, and Paid In Kind certificates and any governmental subsidies, rebates or other payments with respect to farming or related operations of such Underlying Construction Loan Borrower on its Property or otherwise under any governmental programs;


(iii) all of the rents, bonuses, royalties, revenues, income, proceeds, damages, profits and other benefits and income paid or payable to an Underlying Construction Loan Borrower from its Property and the improvements located thereon, the Leases (as defined below), or from the use, possession, operation, or sale of its Property and the improvements located thereon, including without limitation any insurance or condemnation proceeds; and


(iv) any and all leases, subleases, assignments, licenses, concessions or other agreements (written or oral, now or later in effect) which grant a possessory interest in and to, or the right to use, all or any part of an Underlying Construction Loan Borrower's Property and the improvements located thereon ("Leases"), and any and all security and other deposits made in connection with the Leases and all guaranties of those leases, including also any oil, gas and mineral leases, and any bonuses, royalties, and other income from Leases.


2.2. Grant of Second Priority Security Interest. Debtor, for consideration and to secure the Secured Obligations, hereby grants a second priority security interest to Secured Party in (a) the Underlying Term Loan Collateral, wherever located and whether now owned or hereafter acquired, together with all additions, substitutions, products thereof and proceeds therefrom or arising out of the rights reflected therein, and all renewals, amendments, substitutions, and replacements of all


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or any part thereof, to be shared pari passu with the Line of Credit Agent pursuant to the terms a ...