EXHIBIT 10.6

 

SECURITY AGREEMENT

 

This Security Agreement (the “Agreement”) is given as of May 9, 2008, from
BLACKHAWK BIOFUELS, LLC, a Delaware limited liability company (the “Borrower”),
to FIFTH THIRD BANK, a Michigan banking corporation (the “Lender”).

 

Preliminary Statement.  The Borrower and the Lender have entered into, or
contemporaneously herewith are entering into, that certain Loan Agreement dated
on or about the date hereof (as amended or otherwise modified from time to time,
the “Loan Agreement”) pursuant to which, and subject to the terms and conditions
thereof, the Lender has agreed to extend credit to or for the benefit of the
Borrower.  Capitalized terms used and not defined herein shall have the meanings
given to them in the Loan Agreement or the Code.  The Borrower now desires to
grant to the Lender a security interest in all present and future personal
property of the Borrower as security for all present and future obligations of
the Borrower to the Lender.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the Borrower and the Lender agree as follows:

 

l.  Grant of Security Interest.   The Borrower hereby grants to the Lender a
security interest in all assets and personal property of the Borrower, including
but not limited to all the Borrower’s right, title and interest in and to the
following property, wherever located, whether held by Borrower or any other
person (including Secured Party, any financial institution or securities
intermediary) and whether such property or interest therein is now owned or
existing or hereafter acquired or arising (collectively, the “Collateral”):

 

(A)                                  ALL ACCOUNTS, ACCOUNTS RECEIVABLE, OTHER
RECEIVABLES, ANY RIGHT TO PAYMENT  OF A  MONETARY OBLIGATION, WHETHER OR NOT
EARNED BY PERFORMANCE, LEASES AND LEASE PAYMENTS, CONTRACT RIGHTS, ANY OTHER
OBLIGATIONS OR INDEBTEDNESS OWED TO BORROWER FROM WHATEVER SOURCE ARISING, ALL
OTHER RIGHTS OF BORROWER TO RECEIVE PERFORMANCE OR ANY PAYMENTS IN MONEY OR IN
KIND WHETHER OR NOT EARNED BY PERFORMANCE, ALL GUARANTIES, SECURITY INTERESTS
AND SUPPORTING OBLIGATIONS OF ANY OF THE FOREGOING AND INSURANCE POLICIES AND
PROCEEDS RELATING THERETO, AND ALL RIGHTS OF BORROWER AS AN UNPAID SELLER OF
GOODS AND SERVICES, INCLUDING, BUT NOT LIMITED TO, THE RIGHTS TO STOPPAGE IN
TRANSIT, REPLEVIN, RECLAMATION, AND RESALE, ALL RIGHTS TO PAYMENT FOR MONEY OR
FUNDS ADVANCED OR SOLD.

 

(B)                                 ALL INVENTORY, MERCHANDISE, RAW MATERIALS,
GOODS IN PROCESS, WORK IN PROGRESS, MATERIALS USED OR CONSUMED IN A BUSINESS,
FINISHED GOODS, COMPONENT MATERIALS, AND ALL SUPPLIES, INCIDENTALS, OFFICE
SUPPLIES, PACKAGING MATERIALS AND ANY AND ALL PROPERTY OR ITEMS USED OR CONSUMED
IN THE OPERATION OF THE BUSINESS OF BORROWER OR WHICH CONTRIBUTE TO THE FINISHED
PRODUCTS OR TO THE SALE, PROMOTION AND SHIPMENT THEREOF, AS-EXTRACTED
COLLATERAL, ALL PROPERTY LEASED BY BORROWER, HELD

 

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BY BORROWER FOR SALE OR LEASE OR TO BE FURNISHED UNDER A CONTRACT OF SERVICE, OR
FURNISHED BY BORROWER UNDER A CONTRACT FOR SERVICE AND ALL DOCUMENTS EVIDENCING
ANY PART OF ANY OF THE FOREGOING.

 

(C)                                  ALL EQUIPMENT, GOODS OTHER THAN INVENTORY,
PARTS, COMPUTERS, INCLUDING DATA, HARDWARE AND SOFTWARE, MACHINERY, FIXTURES,
FURNITURE, FURNISHINGS, TOOLS, DIES, AIRCRAFT, VESSELS AND VEHICLES OF EVERY
KIND AND DESCRIPTION, WHETHER OR NOT TITLED, ALL PARTS AND ACCESSORIES FOR OR
RELATING TO ANY OF THE FOREGOING.

 

(d)                                 all Documents, including, without
limitation, all warehouse receipts, bills of lading and similar documents of
title relating to goods in which Borrower at any time has an interest, whether
now or at any time or times hereafter issued to Borrower or Lender by any person
or entity, and whether covering any portion of Borrower’s inventory or
otherwise;

 

(e)                                  all Instruments (including, without
limitation, Promissory Notes) of any kind or nature whatsoever, whether
negotiable or non-negotiable;

 

(f)                                    all Chattel Paper of any kind or nature
whatsoever, including, without limitation, all leases, rental agreements,
installment sale agreements, conditional sale agreements and other chattel paper
relating to or arising out of the sale, rental, lease or other disposition of
any of the Collateral;

 

(g)                                 all General Intangibles of any kind or
nature whatsoever, including, without limitation, all Payment Intangibles, all
patents, trademarks, copyrights and other intellectual property, and all
applications for, registrations of and licenses of the foregoing and all
computer software, product specifications, trade secrets, licenses, trade names,
service marks, goodwill, tax refunds, rights to tax refunds, franchises, rights
related to prepaid expenses, rights under executory contracts, choses in action,
causes of action and rights under partnership, joint venture, co-ownership,
management and/or similar agreements and/or arrangements, except to the extent
that Borrower is prohibited from granting a security interest in any of the
foregoing under the applicable license or agreement giving rise to Borrower’s
rights in same;

 

(h)                                 all monies, reserves, deposits, cash, cash
equivalents and other property now or at any time or times hereafter in the
possession or under the control of Lender or any bailee of Lender;

 

(i)                                     all Deposit Accounts and certificates of
deposit and all interest or dividends thereon;

 

(j)                                     all Investment Property and financial
assets of any kind or type, whether certificated or uncertificated, including,
without limitation, all securities, securities accounts, securities
entitlements, stocks, bonds, options, warrants, commodity contracts, futures
contracts, commodity accounts, commodity options, commercial paper, money market
funds and/or accounts, Treasury bills, notes and bonds,

 

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instruments, certificates of deposit, mutual fund shares, cash and money,
together with all rights, income, revenues, proceeds and profits therefrom,
including, without limitation, all dividends, distributions (cash or stock,
extraordinary as well as ordinary), interest and other payments, all additions
thereto, substitutions or replacements thereof, any goods or other property to
be delivered thereunder, and any exchanges for or changes in any of the
foregoing;

 

(k)                                  all Commercial Tort Claims (Lender
acknowledges that the attachment of its security interest in any Commercial Tort
Claim as original collateral is subject to Borrower’s compliance with
Section 3(d));

 

(l)                                     all Supporting Obligations;

 

(m)                               all letters of credit and Letter-of-Credit
Rights;

 

(n)                                 all books, records, computer records,
computer disks, ledger cards, programs and other computer materials, customer
and supplier lists, invoices, orders and other property and general intangibles
at any time evidencing or relating to any of the Collateral;

 

(o)                                 all accessions to any of the property
described above and all substitutions, renewals, improvements and replacements
of and additions thereto; and

 

(p)                                 all proceeds, including, without limitation,
proceeds which constitute property of the types described in (a), (b), (c), (d),
(e), (f), (g), (h), (i), (j), (k), (l), (m), (n) and/or (o) above and any rents
and profits of any of the foregoing items, whether cash or noncash, immediate or
remote, including, without limitation, all income, accounts, contract rights,
general intangibles, payment intangibles, chattel paper, notes, drafts,
acceptances, instruments and other rights to the payment of money arising out of
the sale, rental, lease, exchange or other disposition of any of the foregoing
items (provided, however, that nothing contained herein shall be deemed to
permit or assent to any such disposition other than the sale or lease of
inventory in the ordinary course of business (which does not include any sale,
lease or other transfer of inventory in partial or total satisfaction of any
Indebtedness)), or the disposition of obsolete Collateral in the ordinary course
of business, and insurance proceeds, and all products, of (a), (b), (c), (d),
(e), (f), (g), (h), (i), (j), (k), (l), (m), (n) and/or (o) above, and any
indemnities, warranties and guaranties payable by reason of loss or damage to or
otherwise with respect to any of the foregoing items.

 

2.  Security for Obligations.  This Agreement secures the payment and
performance of all obligations of (i) the Borrower to the Lender under the Loan
Agreement and the other Loan Documents, (ii) the obligations of Borrower and/or
the Lender to the IFA pursuant to the IFA Guaranty Documents, whether due to any
Lender recovery under the IFA Guaranty or otherwise, and (iii) any other
obligation of the Borrower to the Lender, whether monetary, nonmonetary, direct,
indirect, acquired, joint,

 

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several, joint and several, liquidated, unliquidated, contractual,
noncontractual, existing, future, contingent or otherwise, and any replacements,
renewals, extensions and other modifications of any of the above, together with
any interest, fees, expenses and other charges thereon, and any amounts expended
by or on behalf of the Lender for the protection and preservation of the
security interest granted herein by the Borrower to the Lender, including,
without limitation, any post-petition financing provided by the Lender in
connection with any bankruptcy or insolvency proceeding with respect to Borrower
(collectively, the “Obligations”).

 

3.  Further Assurances.

 

(a)  The Borrower agrees that from time to time, at the sole expense of the
Borrower, the Borrower shall promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary or
desirable, or that the Lender may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby or to
enable the Lender to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.  Without limiting the generality of the foregoing,
the Borrower shall: (i) if any Collateral shall be evidenced by any certificated
Investment Property or promissory note or other Instrument, deliver and pledge
to the Lender such note or instrument, duly endorsed with recourse by the
Borrower, and accompanied by duly executed instruments of transfer or
assignment, all in form and content satisfactory to the Lender; and (ii) execute
and file such assignments, financing or continuation statements, or amendments
thereto, title or lien registrations and such other instruments or notices, as
may be necessary or desirable, or as the Lender may request, in order to perfect
and preserve the security interests granted or purported to be granted hereby. 
When any Collateral is in the possession of a third party, the Borrower will
join with the Lender in notifying the third party of the Lender’s security
interest and obtaining an acknowledgement from the third party that it is
holding the Collateral for the benefit of the Lender.  The Borrower will obtain
control agreements in form satisfactory to the Lender as deemed necessary by the
Lender for purposes of further perfecting or enforcing the security interests of
the Lender hereunder.  The Borrower shall not create any Chattel Paper without
delivering same to the Lender or placing a legend on the Chattel Paper
acceptable to the Lender indicating that the Lender has a security interest in
the Chattel Paper.

 

(B)                                 THE BORROWER HEREBY AUTHORIZES THE LENDER TO
FILE ONE OR MORE FINANCING OR CONTINUATION STATEMENTS, AND AMENDMENTS THERETO,
RELATING TO ALL OR ANY PART OF THE COLLATERAL, WITHOUT THE SIGNATURE OF THE
BORROWER.  A COPY OF THIS AGREEMENT SHALL BE SUFFICIENT AS A FINANCING STATEMENT
TO THE EXTENT PERMITTED BY LAW.

 

(c)  The Borrower will furnish to the Lender from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Lender may reasonably request
from time to time, all in reasonable detail.

 

(d)  The Borrower agrees that if Borrower shall at any time hold or acquire a
commercial tort claim, Borrower will promptly notify Lender in a writing signed
by

 

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Borrower of the brief details thereof and grant to Lender in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement.

 

(E)                                  THE BORROWER’S (I) CHIEF EXECUTIVE OFFICE
AND ALL COLLATERAL LOCATIONS ARE AS PROVIDED IN SCHEDULE 3(E) OF THIS SECURITY
AGREEMENT; (II) STATE OF ORGANIZATION IS DELAWARE AND (III) EXACT LEGAL NAME IS
BLACKHAWK BIOFUELS, LLC.

 

4.  The Lender’s Duties.  The powers conferred on the Lender hereunder are
solely to protect its interest in the Collateral and shall not impose any duty
upon it to exercise any such powers.  Unless otherwise required by law or as
agreed to in writing between the Borrower and Lender, the Borrower has the risk
of loss of the Collateral and the Lender shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against other
parties or any other rights pertaining to any Collateral.

 

5.               CONTINUING BORROWER LIABILITY.

 

(A)                                  NOTWITHSTANDING ANYTHING HEREIN TO THE
CONTRARY, (I) THE BORROWER SHALL REMAIN LIABLE UNDER THE CONTRACTS AND
AGREEMENTS INCLUDED IN THE COLLATERAL TO THE EXTENT SET FORTH THEREIN TO PERFORM
ALL OF ITS DUTIES AND OBLIGATIONS THEREUNDER TO THE SAME EXTENT AS IF THIS
AGREEMENT HAD NOT BEEN EXECUTED, (II) THE EXERCISE BY THE LENDER OF ANY OF ITS
RIGHTS HEREUNDER SHALL NOT RELEASE THE BORROWER FROM ANY OF ITS DUTIES OR
OBLIGATIONS UNDER THE CONTRACTS AND AGREEMENTS INCLUDED IN THE COLLATERAL, AND
(III) THE LENDER SHALL NOT HAVE ANY OBLIGATION OR LIABILITY UNDER THE CONTRACTS
AND AGREEMENTS INCLUDED IN THE COLLATERAL BY REASON OF THIS AGREEMENT, NOR SHALL
THE LENDER BE OBLIGATED TO PERFORM ANY OF THE OBLIGATIONS OR DUTIES OF THE
BORROWER THEREUNDER OR TO TAKE ANY ACTION TO COLLECT OR ENFORCE ANY CLAIM FOR
PAYMENT ASSIGNED HEREUNDER.

 

(B)                                 THIS AGREEMENT AND ANY AND ALL SECURITY
INTERESTS CREATED OR EVIDENCED HEREBY AND ALL OBLIGATIONS WILL CONTINUE TO BE
EFFECTIVE OR BE REINSTATED, AS THE CASE MAY BE, AS THOUGH PAYMENT HAD NOT BEEN
MADE, IF AT ANY TIME ANY AMOUNT RECEIVED BY LENDER IN RESPECT OF THE OBLIGATIONS
IS RESCINDED OR MUST OTHERWISE BE RESTORED OR RETURNED BY LENDER, INCLUDING UPON
THE INSOLVENCY, BANKRUPTCY, DISSOLUTION, LIQUIDATION OR REORGANIZATION OF THE
BORROWER OR UPON THE APPOINTMENT OF ANY INTERVENOR OR CONSERVATOR OF, OR TRUSTEE
OR SIMILAR OFFICIAL FOR, THE BORROWER, ANY SUBSTANTIAL PART OF ITS ASSETS, OR
OTHERWISE.

 

6.  Remedies.  If any Event of Default shall have occurred and be continuing:

 

(a)  The Lender shall have the right to take immediate possession of the
Collateral, and (i) to require the Borrower to assemble the Collateral, at the
Borrower’s expense, and make it available to the Lender at a place designated by
the Lender which is reasonably convenient to both parties, and (ii) to enter any
of the premises of the Borrower or wherever any of the Collateral shall be
located, and to keep and store the same on such premises until sold or otherwise
realized upon (and if such premises are the property of the Borrower, the
Borrower agrees not to charge the Lender for storage thereof).

 

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(B)  THE LENDER SHALL HAVE THE RIGHT TO SELL OR OTHERWISE DISPOSE OF ALL OR ANY
COLLATERAL AT PUBLIC OR PRIVATE SALE OR SALES, WITH SUCH NOTICE AS MAY BE
REQUIRED BY LAW, ALL AS THE LENDER, IN ITS SOLE DISCRETION, MAY DEEM ADVISABLE. 
THE BORROWER AGREES THAT TEN (10) DAYS WRITTEN NOTICE TO THE BORROWER OF ANY
PUBLIC OR PRIVATE SALE OR OTHER DISPOSITION OF SUCH COLLATERAL SHALL BE
REASONABLE NOTICE THEREOF, AND SUCH SALE SHALL BE AT SUCH LOCATIONS AS THE
LENDER MAY DESIGNATE IN SUCH NOTICE.  THE LENDER SHALL HAVE THE RIGHT TO CONDUCT
SUCH SALES ON THE BORROWER’S PREMISES, WITHOUT CHARGE THEREFOR.  ALL PUBLIC OR
PRIVATE SALES MAY BE ADJOURNED FROM TIME TO TIME IN ACCORDANCE WITH APPLICABLE
LAW.  THE LENDER SHALL HAVE THE RIGHT TO SELL, LEASE OR OTHERWISE DISPOSE OF
SUCH COLLATERAL, OR ANY PART THEREOF, FOR CASH, CREDIT OR ANY COMBINATION
THEREOF, AND THE LENDER MAY PURCHASE ALL OR ANY PART OF SUCH COLLATERAL AT
PUBLIC OR, IF PERMITTED BY LAW, PRIVATE SALE AND, IN LIEU OF ACTUAL PAYMENT OF
SUCH PURCHASE PRICE, MAY SET OFF THE AMOUNT OF SUCH PRICE AGAINST THE
OBLIGATIONS.  AT ANY SALE, THE LENDER MAY SPECIFICALLY DISCLAIM ANY WARRANTIES
INCLUDING OF TITLE OR THE LIKE.  THE LENDER MAY COMPLY WITH ANY APPLICABLE STATE
OR FEDERAL LAW REQUIREMENTS IN CONNECTION WITH A DISPOSITION OF THE COLLATERAL
AND COMPLIANCE WILL NOT BE CONSIDERED TO ADVERSELY AFFECT THE COMMERCIAL
REASONABLENESS OF ANY SALE OR DISPOSITION OF THE COLLATERAL.

 

(c)  The Lender may exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein, under the Loan Agreement or under the
other Loan Documents, all the rights and remedies of a secured party on default
under the Code or otherwise available at law or in equity.

 

7.  Indemnity and Expenses.

 

(a)  The Borrower agrees to indemnify the Lender from and against any and all
claims, losses and liabilities arising out of or relating to this Agreement,
and/or any of the Obligations (including, without limitation, enforcement of
this Agreement and the Lender’s exercise of its rights and remedies hereunder),
unless such claim, loss or liability is caused solely by the gross negligence or
willful misconduct of Bank.  The foregoing indemnity shall survive the
termination of this Security Agreement and the Loan Agreement and payment in
full of the Obligations.

 

(b)  The Borrower shall upon demand pay to the Lender the amount of any and all
expenses, including, without limitation, the reasonable fees and disbursements
of its counsel and of any experts and agents, which the Lender may incur
following Borrower’s default in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use of, or the sale of, collection
from, or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Lender hereunder or (iv) the failure by
the Borrower to perform or observe any of the provisions hereof.  All such fees,
expenses and disbursements shall be deemed Obligations under the Loan Agreement
that are secured by this Agreement.

 

8.  Notice.  All notices, requests and demands to or upon a party hereto shall
be given in accordance with Section 10.3 of the Loan Agreement.

 

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9.  Governing Law.  This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Missouri without giving effect
to any choice of law rules thereof; provided, however, that if any of the
Collateral shall be located in any jurisdiction other than Missouri, the laws of
such jurisdiction shall govern the method, manner and procedure for foreclosure
of the Lender’s lien upon or other interest in such Collateral and the
enforcement of the Lender’s other remedies in respect of such Collateral to the
extent that the laws of such jurisdiction are different from or inconsistent
with the laws of Missouri.  THE BORROWER HEREBY CONSENTS TO THE JURISDICTION OF
ANY STATE COURT LOCATED WITHIN THE CITY OF ST. LOUIS OR ST. LOUIS COUNTY,
MISSOURI OR FEDERAL COURT IN THE EASTERN DISTRICT OF MISSOURI, EASTERN DIVISION,
AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO THE
BORROWER AT THE ADDRESS STATED IN SECTION 10.3 OF THE LOAN AGREEMENT AND SERVICE
SO MADE SHALL BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF.  THE
BORROWER WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED
AGAINST IT AS PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK
OF JURISDICTION OR VENUE.

 

10.  Miscellaneous.  No amendment or waiver of any provision of this Agreement
nor consent to any departure by the Borrower herefrom, shall in any event be
effective unless the same shall be in writing and signed by the party against
whom enforcement of such amendment, waiver or consent is sought, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.  The paragraph and section headings herein are
solely for convenience and shall not be deemed to limit or otherwise affect the
meaning or construction of any part of this Agreement.  This document shall be
construed without regard to any presumption or rule requiring construction
against the party causing such document or any portion thereof to be drafted. 
If any provision or provisions of this Agreement shall be unlawful, then such
provision or provisions shall be null and void, but the remainder of the
Agreement shall remain in full force and effect and be binding on the parties. 
A facsimile or other electronically transmitted signature of the Borrower shall
be deemed an original signature.

 

11.                                 WAIVER OF JURY TRIAL.  THE BORROWER HEREBY
WAIVES ANY RIGHT TO TRIAL BY JURY (WHICH THE BANK ALSO WAIVES) IN ANY ACTION,
SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE OBLIGATIONS, THE COLLATERAL OR THE BANK’S CONDUCT IN RESPECT OF
ANY OF THE FOREGOING.

 

[SIGNATURE PAGE TO FOLLOW]

 

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IN WITNESS WHEREOF, the Borrower has caused this Agreement to be executed and
delivered by its duly authorized representative as of the date first above
written.

 

 

BLACKHAWK BIOFUELS, LLC,

 

a Delaware limited liability company

 

 

 

 

 

By:

      /S/  Ronald L. Mapes

 

 

Ronald L. Mapes, Chair

 

Signature Page

 

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SCHEDULE 3(e)

 

CHIEF EXECUTIVE OFFICE AND ALL COLLATERAL LOCATIONS

 

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