This Security
Agreement (“Agreement”), dated as of December 19,
2006, is between CARDINAL ETHANOL, LLC, an Indiana limited
liability company (the “Debtor”), and FIRST NATIONAL
BANK OF OMAHA, a national banking association (the “Secured
Party”).
WHEREAS, the
Debtor has entered into a Construction Loan Agreement dated of even
date with this Agreement (as amended, restated and in effect from
time to time, the “Loan Agreement”), with the Secured
Party, pursuant to which the Secured Party, subject to the terms
and conditions contained therein, is to make loans or otherwise to
extend credit to the Debtor; and
WHEREAS, it is a
condition precedent to the Secured Party’s extending the
Obligations to the Debtor under the Loan Agreement that the Debtor
execute and deliver to the Secured Party a security agreement in
substantially the form hereof; and
WHEREAS, the
Debtor wishes to grant a security interest in favor of the Secured
Party as herein provided.
NOW, THEREFORE, in
consideration of the promises contained herein and for other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as
follows:
1.
Definitions . All capitalized terms used herein without
definitions shall have the respective meanings provided therefor in
the Loan Agreement. The term “State,” as used herein,
means the State of Nebraska. All terms defined in the Uniform
Commercial Code of the State and used herein shall have the same
definitions herein as specified therein. However, if a term is
defined in Article 9 of the Uniform Commercial Code of the
State differently than in another Article of the Uniform Commercial
Code of the State, the term has the meaning specified in Article 9.
The term “Obligations,” as used herein, means all of
the indebtedness, obligations and liabilities of the Debtor to the
Secured Party of every kind, nature or description, individually or
collectively, whether direct or indirect, joint or several,
absolute or contingent, primary or secondary, due or to become due,
now existing or hereafter arising, whether provided for under or in
respect of the Loan Agreement or otherwise or under any promissory
notes or other instruments or agreements executed and delivered
pursuant thereto or in connection therewith or this Agreement or
otherwise and any overdrafts or other deposit account liabilities
of the Debtor to the Secured Party, and the term “Event of
Default,” as used herein, means the failure of the Debtor to
pay or perform any of the Obligations as and when due to be paid or
performed under the terms of the Loan Agreement and the other Loan
Documents and shall also have the meaning given to such term in the
Loan Agreement or any other Loan Document.
2. Grant
of Security Interest . The Debtor hereby grants to the Secured
Party to secure the payment and performance in full of all of the
Obligations, a first priority security interest in and so pledges
and assigns to the Secured Party in all goods, property and assets
of the Debtor, including, but not limited to the following goods,
property, assets and rights of the
Debtor,
wherever located, whether now owned or hereafter acquired or
arising, and all proceeds and products thereof (all of the same
being hereinafter called the “Collateral”):
2.1. All personal
and fixture property of every kind and nature including, without
limitation, all goods, equipment, inventory, grain, furniture and
fixtures, all of every kind and nature (including any accessions,
additions, improvements, attachments and accessories thereto and
products and proceeds thereof, and all operating manuals, service
records, maintenance logs and warranties applicable thereto), and
including all inventory, including, but not limited to, all corn,
grain and ethanol inventory, in which the Debtor has an interest in
mass or a joint or other interest or right of any kind.
2.2. All
instruments (including promissory notes, notes receivable and
supporting obligations), documents, negotiable and non-negotiable
documents of title, negotiable and non-negotiable warehouse
receipts, bills of lading, transit receipts or other documents of
title, however denominated (collectively, “Warehouse
Receipts”), and the goods underlying or relating to Warehouse
Receipts, including, but not limited to, the Debtor’s present
and future rights to take possession and delivery of goods
underlying or relating to any Warehouse Receipt.
2.3. All accounts,
all of the Debtor’s rights to goods represented by or
securing any accounts, all proceeds from the disposition or
collection of accounts, all of the Debtor’s rights as an
unpaid vendor, including the right to reclaim goods, the right to
stop goods in transit and the right to replevy goods, and all
guaranties, letters of credit and other supports to the payment of
accounts, chattel paper (whether tangible or electronic), deposit
accounts (whether maintained with the Secured Party or other
financial institutions), certificates of deposit (whether
negotiable or non-negotiable), letter-of-credit rights (whether or
not the letter of credit is evidenced by a writing), supporting
obligations, any other contract rights or rights to the payment of
money, insurance claims and proceeds, trademarks, service marks,
copyrights, patents and other intellectual property rights and all
of the Debtor’s rights therein or thereto, software, general
intangibles (including all payment intangibles), all payments and
rights to payments whether or not earned by performance including,
but not limited to, accounts and payments from the USDA Commodity
Credit Corporation Bioenergy Program and other similar programs,
price support payments, subsidy payments, guaranty payments,
payments in kind, deficiency payments, letters of entitlements,
storage payments, emergency assistance, diversion payments,
production flexibility contracts, contract reserve payments, grain
insurance fund claim rights, grain insurance fund proceeds and all
similar programs of any and every kind, whether federal, state or
local, and any other rights to payment under or from any
preexisting, current or future federal, state or local government
program, and the products and proceeds of all the
foregoing.
2.4. All farm
products, including, but not limited to, all poultry and livestock
and their young, together with all products and replacements for
such poultry and livestock; all crops, annual or perennial, and all
products of such crops; and all grain, feed, seed, fertilizer,
chemicals, medicines, and other supplies used or produced in the
Debtor’s operations or sold as inventory, and the products
and proceeds and rights to payments associated with all or any of
the foregoing.
2.5. All books,
records, ledger sheets or cards, reports, invoices, purchase
orders, customer lists, mailing lists, files, correspondence,
computer programs, tapes, disks and other
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documents or
data processing software that at any time relates to any of the
foregoing or are otherwise necessary or helpful in realizing on or
collecting on any Collateral.
2.6. All
investment property, securities, securities accounts (including,
but not limited to, all accounts maintained with First National
Capital Markets, Inc.) and the securities entitlements, securities
and investment property contained therein, all hedging accounts and
all commodity and securities entitlements, investment property,
commodities and other rights associated with such hedging accounts,
and all commodity accounts and all the commodities, securities and
investment property contained therein.
2.7. All
commercial tort claims now existing or hereafter arising. The
Secured Party acknowledges that the attachment of its security
interest in any additional commercial tort claim as original
collateral is subject to the Debtor’s compliance with
Section 4.7 below.
3.
Authorization to File Financing Statements . The Debtor
hereby irrevocably authorizes the Secured Party at any time and
from time to time to file in any filing office in any Uniform
Commercial Code jurisdiction any initial financing statements and
amendments thereto that (a) indicate and describe the
Collateral, including, but not limited to, descriptions of the
Collateral as all assets of the Debtor, or words of similar effect,
and (b) provide any other information required by part 5 of
Article 9 of the Uniform Commercial Code of the State, or such
other jurisdiction, for the sufficiency or filing office acceptance
of any financing statement or amendment, including (i) whether
the Debtor is an organization, the type of organization and any
organizational identification number issued to the Debtor and,
(ii) in the case of a financing statement filed as a fixture
filing or indicating Collateral as as-extracted collateral or
timber to be cut, a sufficient description of real property to
which the Collateral relates. The Debtor agrees to furnish any such
information to the Secured Party promptly upon the Secured
Party’s request. In addition, the Debtor hereby authorizes
the Secured Party to file all effective financing statements
pursuant to 7 U.S.C. Section 1631, and amendments to effective
statements, describing the Collateral in any offices as the Secured
Party, in its sole discretion, may determine. If requested by the
Secured Party, the Debtor will provide the Secured Party with a
list of the buyers, commission merchants and selling agents to or
through whom the Debtor may sell farm products or grain and a list
of all elevators, warehousemen or others where the Debtor stores
corn. The Debtor authorizes the Secured Party to notify all such
buyers, commission merchants, selling agents, elevators,
warehousemen or any other person, of the Secured Party’s
security interest in the Debtor’s farm products, corn or
grain unless prohibited by law. The Debtor also ratifies its
authorization for the Secured Party to have filed in any Uniform
Commercial Code jurisdiction any like initial financing statements
or amendments thereto if filed prior to the date hereof.
4. Other
Actions . To further the attachment, perfection and first
priority of, and the ability of the Secured Party to enforce, the
Secured Party’s security interest in the Collateral, and
without limitation on the Debtor’s other obligations in this
Agreement, the Debtor agrees, in each case at the Debtor’s
expense, to take the following actions with respect to the
following Collateral:
4.1. Promissory
Notes, Instruments and Tangible Chattel Paper . If the Debtor
shall at any time hold or acquire any instruments, promissory notes
or tangible chattel
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paper, the
Debtor shall, upon request of the Secured Party, forthwith endorse,
assign and deliver the same to the Secured Party, accompanied by
such instruments of transfer or assignment duly executed in blank
as the Secured Party may from time to time specify. The Debtor will
not deliver possession of, endorse or assign any instruments,
promissory notes or tangible chattel paper to any person or entity
other than the Secured Party.
4.2. Deposit
Accounts . For each deposit account that the Debtor at any time
opens or maintains, the Debtor shall, at the Secured Party’s
request and option, pursuant to an agreement in form and substance
satisfactory to the Secured Party, either (a) cause the
depositary bank to comply at any time with instructions from the
Secured Party to such depositary bank directing the disposition of
funds from time to time credited to such deposit account, without
further consent of the Debtor, or (b) arrange for the Secured
Party to become the customer of the depositary bank with respect to
the deposit account, with the Debtor being permitted, only with the
consent of the Secured Party, to exercise rights to withdraw funds
from such deposit account. The Secured Party agrees with the Debtor
that the Secured Party shall not give any such instructions or
withhold any withdrawal rights from the Debtor, unless an Event of
Default has occurred and is continuing, or would occur, if effect
were given to any withdrawal not otherwise permitted by the Loan
Documents. The provisions of this paragraph shall not apply to
(i) any deposit account for which the Debtor, the depositary
bank and the Secured Party have entered into a cash collateral
agreement specially negotiated among the Debtor, the depositary
bank and the Secured Party for the specific purpose set forth
therein, (ii) a deposit account for which the Secured Party is
the depositary bank and is in automatic control, and
(iii) deposit accounts specially and exclusively used for
payroll, payroll taxes and other employee wage and benefit payments
to or for the benefit of the Debtor’s salaried
employees.
4.3. Investment
Property . If the Debtor shall at any time hold or acquire any
certificated securities, the Debtor shall forthwith endorse, assign
and deliver the same to the Secured Party, accompanied by such
instruments of transfer or assignment duly executed in blank as the
Secured Party may from time to time specify. If any securities now
or hereafter acquired by the Debtor are uncertificated and are
issued to the Debtor or its nominee directly by the issuer thereof,
the Debtor shall immediately notify the Secured Party thereof and,
at the Secured Party’s request and option, pursuant to an
agreement in form and substance satisfactory to the Secured Party,
either (a) cause the issuer to agree to comply with
instructions from the Secured Party as to such securities, without
further consent of the Debtor or such nominee, or (b) arrange
for the Secured Party to become the registered owner of the
securities. If any commodity interests or securities, whether
certificated or uncertificated, or other investment property now or
hereafter acquired by the Debtor are held by the Debtor or its
nominee through a securities intermediary or commodity
intermediary, the Debtor shall immediately notify the Secured Party
thereof and, at the Secured Party’s request and option,
pursuant to an agreement in form and substance satisfactory to the
Secured Party, either (i) cause such securities intermediary
or (as the case may be) commodity intermediary to agree to comply
with entitlement orders or other instructions from the Secured
Party to such securities intermediary as to such securities or
other investment property, or (as the case
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may be) to
apply any value distributed on account of any commodity contract as
directed by the Secured Party to such commodity intermediary, in
each case without further consent of the Debtor or such nominee, or
(ii) in the case of financial assets or other investment
property held through a securities intermediary, arrange for the
Secured Party to become the entitlement holder with respect to such
investment property, with the Debtor being permitted, only with the
consent of the Secured Party, to exercise rights to withdraw or
otherwise deal with such investment property. The Secured Party
agrees with the Debtor that the Secured Party shall not give any
such entitlement orders or instructions or directions to any such
issuer, securities intermediary or commodity intermediary, and
shall not withhold its consent to the exercise of any withdrawal or
dealing rights by the Debtor, unless an Event of Default has
occurred and is continuing, or, after giving effect to any such
investment and withdrawal rights not otherwise permitted by the
Loan Documents, would occur.
4.4. Collateral
in the Possession of a Bailee . If any Collateral is at any
time in the possession of a bailee, warehouseman or elevator, the
Debtor shall promptly notify the Secured Party thereof and, at the
Secured Party’s request and option, shall promptly obtain an
acknowledgement from the bailee, warehouseman or elevator, in form
and substance satisfactory to the Secured Party, that the bailee,
warehouseman or elevator holds such Collateral for the benefit of
the Secured Party, and that such bailee, warehouseman or elevator
agrees to comply, without further consent of the Debtor, with
instructions from the Secured Party as to such Collateral,
including, but not limited to, the delivery of such Collateral to
the Secured Party or as the Secured Party directs, or the payment
of the sale proceeds of such Collateral to the Secured Party, or as
the Secured Party directs. The Secured Party agrees with the Debtor
that the Secured Party shall not give any such instructions unless
an Event of Default has occurred and is continuing or would occur
after taking into account any action by the Debtor with respect to
the bailee, warehouseman or elevator.
4.5. Electronic
Chattel Paper and Transferable Records . If the Debtor at any
time holds or acquires an interest in any electronic chattel paper
or any “transferable record,” as that term is defined
in Section 201 of the federal Electronic Signatures in Global
and National Commerce Act (as hereafter amended), or in
Section 16 of the Uniform Electronic Transactions Act as in
effect in any relevant jurisdiction, the Debtor shall promptly
notify the Secured Party thereof and, at the request and option of
the Secured Party, shall take such action as the Secured Party may
reasonably request to vest in the Secured Party control, under
Section 9-105 of the Uniform Commercial Code, of such
electronic chattel paper or control under Section 201 of the
federal Electronic Signatures in Global and National Commerce Act
or, as the case may be, Section 16 of the Uniform Electronic
Transactions Act, as so in effect in such jurisdiction, of such
transferable record. The Secured Party agrees with the Debtor that
the Secured Party will arrange, pursuant to procedures satisfactory
to the Secured Party and so long as such procedures will not result
in the Secured Party’s loss of control, for the Debtor to
make alterations to the electronic chattel paper or transferable
record permitted under UCC Section 9-105 or, as the case may
be, Section 201 of the federal Electronic Signatures in Global
and National Commerce Act or Section 16 of the Uniform
Electronic Transactions
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Act for a party
in control to make without loss of control, unless an Event of
Default has occurred and is continuing or would occur after taking
into account any action by the Debtor with respect to such
electronic chattel paper or transferable record.
4.6.
Letter-of-Credit Rights . If the Debtor is at any time a
beneficiary under a letter of credit, the Debtor shall promptly
notify the Secured Party thereof and, at the request and option of
the Secured Party, the Debtor shall, pursuant to an agreement in
form and substance satisfactory to the Secured Party, either
(i) arrange for the issuer and any confirmer or other
nominated person of such letter of credit to consent to an
assignment to the Secured Party of the proceeds of the letter of
credit, or (ii) arrange for the Secured Party to become the
transferee beneficiary of the letter of credit, with the Secured
Party agreeing, in each case, that the proceeds of the letter to
credit are to be applied to the Obligations in such order and
priority as the Secured Party.
4.7 Commercial
Tort Claims . If the Debtor shall at any time hold or acquire a
commercial tort claim, the Debtor shall immediately notify the
Secured Party in a writing signed by the Debtor of the particulars
thereof and grant to the Secured Party in such writing a security
interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance
satisfactory to the Secured Party.
4.8 Other
Actions as to Any and All Collateral . The Debtor further
agrees, at the request and option of the Secured Party, to take any
and all other actions the Secured Party may determine to be
necessary or useful for the attachment, perfection and first
priority of, and the ability of the Secured Party to enforce, the
Secured Party’s security interest in any and all of the
Collateral, including, without limitation, (a) executing,
delivering and, where appropriate, filing financing statements and
amendments relating thereto under the Uniform Commercial Code, to
the extent, if any, that the Debtor’s signature thereon is
required therefor, (b) causing the Secured Party’s name
to be noted as secured party on any certificate of title for a
titled good if such notation is a condition to attachment,
perfection or priority of, or ability of the Secured Party to
enforce, the Secured Party’s security interest in such
Collateral, (c) complying with any provision of any statute,
regulation or treaty of the United States as to any Collateral if
compliance with such provision is a condition to attachment,
perfection or priority of, or ability of the Secured Party to
enforce, the Secured Party’s security interest in such
Collateral, (d) obtaining governmental and other third party
waivers, consents and approvals in form and substance satisfactory
to Secured Party, including, without limitation, any consent of any
licensor, lessor or other person obligated on Collateral,
(e) obtaining waivers from mortgagees and landlords in form
and substance satisfactory to the Secured Party and (f) taking all
actions under any earlier versions of the Uniform Commercial Code
or under any other law, as reasonably determined by the Secured
Party to be applicable in any relevant Uniform Commercial Code or
other jurisdiction, including any foreign jurisdiction.
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4.9.
Warehouse Receipts .
(a) The Debtor has
delivered or will deliver to the Secured Party any and all
documents, instruments and writings in any way relating to the
Warehouse Receipts or in any way relating to the property evidenced
thereby. As long as this Agreement remains in effect, the Debtor
shall immediately deliver to the Secured Party any and all future
documents, instruments, or other writings applicable or in any way
relating to the foregoing in the Debtor’s possession. In the
event that the Debtor is unable to deliver original Warehouse
Receipts, and such other documents, to the Secured Party at the
time this Agreement is executed, as required above, the Debtor
agrees to deliver immediately such Warehouse Receipts to the
Secured Party upon issuance of the same.
(b) The Debtor
further agrees that the Secured Party shall have the right at any
time, and from time to time, whether or not one or more Event of
Default exist under the Loa
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