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Exhibit 10.27
SECURITY AGREEMENT
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 u
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