exv10w2



 







Exhibit 10.2




FOR RECORDER’S USE ONLY



 



Prepared By: Cherlyn Hullinger, Loan Processor, Great Western Bank, 111 N. Main, Leon, IA 50144,

(641) 446.4841




ADDRESS TAX STATEMENT:

     Southern Iowa BioEnergy LLC, 115 So Linden, Lamoni, IA 50140




RECORDATION REQUESTED BY:

     Great Western Bank, Leon, 111 N. Main, PO Box 171, Leon, IA 50144




WHEN RECORDED MAIL TO:

     Great Western Bank, Leon, 111 N. Main, PO Box 171, Leon, IA 50144



 




MORTGAGE



NOTICE: This Mortgage secures credit in the amount of $2,200,000,00. Loans and advances up to
this amount, together with interest, are senior to indebtedness to other creditors under
subsequently recorded or filed mortgages and liens.



The names of all Grantors (sometimes “Grantor”) can be found on page 1 of this Mortgage. The names
of all Grantees (sometimes “lender”) can be found on page 1 of this Mortgage. The property address
can be found on page ___ of this Mortgage. The legal description can be found on page 1 of this
Mortgage.



THIS MORTGAGE dated June 12, 2006, is made and executed between Southern Iowa Bio Energy, LLC
(referred to below as “Grantor”) and Great Western Bank, whose address is 111 N. Main, PO Box 171,
Leon, 1A 50144 (referred to below as “Lender”).



GRANT OF MORTGAGE. For valuable consideration, Grantor mortgages and conveys to Lender and grants
to Lender a security interest in all of Grantor’s right, title, and interest in and to the
following described real property, together with ail existing or subsequently erected or affixed
buildings, improvements and fixtures; rents and profits; all easements, rights of way, and
appurtenances; all water, water rights, watercourses and ditch rights (including stock in utilities
with ditch or irrigation rights); and all other rights, royalties, and profits relating to the real
property, including without limitation all minerals, oil, gas, geothermal and similar matters, (the
“Real Property”) located in Clarke County, State of Iowa:





Lots 2 and 3 located in the NE 1/4 SW 1/4 of Section 8, Township 72 North, Range 25 West, Clarke
County, Iowa, more particularly described as follows: A track of land bounded by a line
described as commencing at the Northwest Corner of the SW 114 of Section 8, Township 72 North,
Range 25 West of the 5th P.M.: thence East along the Northern boundary of said SW 1/4, a
distance of 1411.5 feet to the point of beginning, the same being the East right-of-way line of
spur-line of the Burlington Northern Railroad: thence East 568.5 feet along the Northern
boundary of said SW 114; thence South 1285 feet; thence West 300 feet to a point of the East
right-of-way line of a spur-line of the Burlington Northern Railroad; thence Northwesterly along
the Eastern right-of-way line of said spur-line of the Burlington Northern Railroad, a distance
of 1317.6 feet to the point of beginning.


Grantor presently assigns to Lender all of Grantor’s right, title, and interest in and to all
present and future leases of the Property and all Rents from the Property. In addition, Grantor
grants to Lender a Uniform Commercial Code security interest in the Personal Property and Rents.
The lien on the rents granted in this Mortgage shall be effective from the date of the Mortgage and
not just in the event of default.




 









 








					
	 
	 	MORTGAGE	 	 
	Loan No: 108002882
	 	(Continued)
	 	Page 2





FUTURE ADVANCES. In addition to the Note, this Mortgage secures all future advances made by Lender
to Grantor whether or not the advances are made pursuant to a commitment. Specifically, without
limitation, this Mortgage secures, in addition to the amounts specified in the Note, all future
amounts Lender in its discretion may loan to Grantor, together with all interest thereon.



THIS MORTGAGE, INCLUDING THE ASSIGNMENT OF RENTS AND THE SECURITY INTEREST IN THE RENTS AND
PERSONAL PROPERTY, IS GIVEN TO SECURE (A) PAYMENT OF THE INDEBTEDNESS AND (B) PERFORMANCE OF ANY
AND ALL OBLIGATIONS UNDER THE NOTE, THE RELATED DOCUMENTS, AND THIS MORTGAGE. THIS MORTGAGE IS
GIVEN AND ACCEPTED ON THE FOLLOWING TERMS:



PAYMENT AND PERFORMANCE. Except as otherwise provided in this Mortgage, Grantor shall pay to
Lender all amounts secured by this Mortgage as they become due and shall strictly perform all of
Grantor’s obligations under this Mortgage.



POSSESSION AND MAINTENANCE OF THE PROPERTY. Grantor agrees that Grantor’s possession and use of the
Property shall be governed by the following provisions: None of the collateral for the Indebtedness
constitutes, and none of the funds represented by the Indebtedness will be used to purchase: (1)
Agricultural products or property used for an agricultural purpose as defined in Iowa Code Section
535.13; (2) Agricultural land as defined in Iowa Code Section 9H1 (2) or 175.2 (1); or (3) Property
used for an agricultural purpose as defined in Iowa Code Section 570.A.1 (2). Grantor represents
and warrants that: (1) There are not now and will not be any wells situated on the Property; (2)
There are not now and will not be any solid waste disposal sites on the Property; (3) There are not
now and there will not be any hazardous wastes on the Property; (4) There are not now and there
will not be any underground storage tanks on the Property.





Possession and Use. Until the occurrence of an Event of Default, Grantor may (1) remain in
possession and control of the Property; (2) use, operate or manage the Property; and (3) collect
the Rents from the Property.




Duty to Maintain. Grantor shall maintain the Property in tenantable condition and promptly
perform all repairs, replacements, and maintenance necessary to preserve its value.




Compliance With Environmental Laws. Grantor represents and warrants to Lender that: (1) During
the period of Grantor’s ownership of the Property, there has been no use, generation,
manufacture, storage, treatment, disposal, release or threatened release of any Hazardous
Substance by any person on, under, about or from the Property; (2) Grantor has no knowledge of,
or reason to believe that there has been, except as previously disclosed to and acknowledged by
Lender in writing, (a) any breach or violation of any Environmental Laws, (b) any use,
generation, manufacture, storage, treatment, disposal, release or threatened release of any
Hazardous Substance on, under, about or from the Property by any prior owners or occupants of
the Property, or (c) any actual or threatened litigation or claims of any kind by any person
relating to such matters; and (3) Except as previously disclosed to and acknowledged by Lender
in writing, (a) neither Grantor nor any tenant, contractor, agent or other authorized user of
the Property shall use, generate, manufacture, store, treat, dispose of or release any Hazardous
Substance on, under, about or from the Property; and (b) any such activity shall be conducted in
compliance with all applicable federal, state, and local laws, regulations and ordinances,
including without limitation all Environmental Laws. Grantor authorizes Lender and its agents to
enter upon the Property to make such inspections and tests, at Grantor’s expense, as Lender may
deem appropriate to determine compliance of the Property with this section of the Mortgage. Any
inspections or tests made by Lender shall be for Lender’s purposes only and shall not be
construed to create any responsibility or liability on the part of Lender to Grantor or to any
other person. The representations and’ warranties contained herein are based on Grantor’s due
diligence in investigating the Property for Hazardous Substances. Grantor hereby (1) releases
and waives any future claims against Lender for indemnity or contribution in the event Grantor
becomes liable for cleanup or other costs under any such laws; and (2) agrees to indemnify and
hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and
expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of
this section of the Mortgage or as a consequence of any use, generation, manufacture, storage,
disposal, release or threatened release occurring prior to Grantor’s ownership or interest in
the Property, whether or not the same was or should have been known to Grantor. The provisions
of this section of the Mortgage, including the obligation to indemnify, shall survive the
payment of the Indebtedness and the satisfaction and reconveyance of the lien of this Mortgage
and shall not be affected by Lender’s acquisition of any interest in the Property, whether by
foreclosure or otherwise.




Nuisance, Waste. Grantor shall not cause, conduct or permit any nuisance nor commit, permit, or
suffer any stripping of or waste on or to the Property or any portion of the Property. Without
limiting the generality of the foregoing, Grantor will not remove, or grant to any other party
the right to remove, any timber, minerals (including oil and gas), coal, clay, scoria, soil,
gravel or rock products without Lender’s prior written consent.




Removal of Improvements. Grantor shall not demolish or remove any Improvements from the Real
Property without Lender’s prior written consent. As a condition to the removal of any
Improvements, Lender may require Grantor to make arrangements satisfactory to Lender to replace
such Improvements with Improvements of at least equal value.



 









 





					
	 
	 	MORTGAGE	 	 
	Loan No: 108002882
	 	(Continued)
	 	Page 3







Lender’s Right to Enter. Lender and Lender’s agents and representatives may enter upon the Real
Property at all reasonable times to attend to Lender’s interests and to inspect the Real
Property for purposes of Grantor’s compliance with the terms and conditions of this Mortgage.




Compliance with Governmental Requirements. Grantor shall promptly comply with all laws,
ordinances, and regulations, now or hereafter in effect, of all governmental’ authorities
applicable to the use or occupancy of the Property, including without limitation, the Americans
With Disabilities Act. Grantor may contest in good faith any such law, ordinance, or regulation
and withhold compliance during any proceeding, including appropriate appeals, so long as Grantor
has notified Lender in writing prior to doing so and so long as, in Lender’s sole opinion,
Lender’s interests in the Property are not jeopardized. Lender may require Grantor to post
adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lender’s
interest.




Duty to Protect. Grantor agrees neither to abandon or leave unattended the Property. Grantor
shall do all other acts, in addition to those acts set forth above in this section, which from
the character and use of the Property are reasonably necessary to protect and preserve the
Property.


TAXES AND LIENS. The following provisions relating to the taxes and liens on the Property are part
of this Mortgage:





Payment. Grantor shall pay when due (and in all events prior to delinquency) all taxes, payroll
taxes, special taxes, assessments, water charges and sewer service charges levied against or on
account of the Property, and shall ‘pay when due all claims for work done on or for services
rendered or material furnished to the Property. Grantor shall maintain the Property free of any
liens having priority over or equal to the interest of Lender under this Mortgage, except for
those liens specifically agreed to .in writing by Lender, and except for the lien of taxes and
assessments not due as further specified in the Right to Contest paragraph.




Right to Contest. Grantor may withhold payment of any tax, assessment, or claim in connection
with a good faith dispute over the obligation to pay, so long as Lender’s interest in the
Property is not jeopardized. If a lien arises or is filed as a result of nonpayment, Grantor
shall within fifteen (15) days after the lien arises or, if a lien is filed, within fifteen (15)
days after Grantor has notice of the filing, secure the discharge of the lien, or if requested
by Lender, deposit with Lender cash or a sufficient corporate surety bond or other security
satisfactory to Lender in an amount sufficient to discharge the lien plus any costs and
attorneys’ fees, or other charges that could accrue as a result of a foreclosure or sale under
the lien. In any contest, Grantor shall defend itself and Lender and shall satisfy any adverse
judgment before enforcement against the Property. Grantor shall name Lender as an additional
obligee under any surety bond furnished in the contest proceedings.




Evidence of Payment. Grantor shall upon demand furnish to Lender satisfactory evidence of
payment of the taxes or assessments .and shall authorize the appropriate governmental official
to deliver to Lender at any time a written statement of the taxes and assessments against the
Property.




Notice of Construction. Grantor shall notify Lender at least fifteen (15) days before any work
is commenced, any services are furnished, or any materials are supplied to the Property, if any
mechanic’s lien, materialmen’s lien, or other lien could be asserted on account of the work,
services, or materials. Grantor will upon request of Lender furnish to Lender advance assurances
satisfactory to Lender that Grantor can and will pay the cost of such improvements.


PROPERTY DAMAGE INSURANCE. The following provisions relating to insuring the Property are a part of
this Mortgage:





Maintenance of Insurance. Grantor shall procure and maintain policies of fire insurance with
standard extended coverage endorsements on a replacement basis for the full insurable value
covering all Improvements on .the Real Property in an amount sufficient to avoid application of
any coinsurance clause, and with a standard mortgagee clause in favor of Lender. , Grantor shall
also procure and maintain comprehensive general liability insurance in such coverage amounts as
Lender may request with Lender being named as additional insureds in such liability insurance
policies. Additionally, Grantor shall maintain such other insurance, including but not limited
to hazard, business interruption and boiler insurance as Lender may require. Policies shall be
written by such insurance companies and in such form as may be reasonably acceptable to Lender.
Grantor shall deliver to Lender certificates of coverage from each insurer containing a
stipulation that coverage will not be cancelled or diminished without a minimum of ten (10)
days’ prior written notice to Lender and not containing any disclaimer of the insurer’s
liability for failure to give such notice. Each insurance policy also shall include an
endorsement providing that coverage in favor of Lender will not be impaired in any way by any
act, omission or default of Grantor or any other person. Should the Real Property be located in
an area designated by the Director of the Federal Emergency Management Agency as a special flood
hazard area, Grantor agrees to obtain and maintain Federal Flood Insurance, if available, for
the full unpaid principal balance of the loan and any prior lien; on the property securing the
loan, up to the maximum policy limits set under the National Flood Insurance Program, or as
otherwise required by Lender, and to maintain such insurance for the term of the loan.



 









 





					
	 
	 	MORTGAGE	 	 
	Loan No: 108002882
	 	(Continued)
	 	Page 4







Application of Proceeds. Grantor shall promptly notify Lender of any loss or damage to the
Property. Lender may make proof of loss if Grantor fails to do so within fifteen (15) days of
the casualty. Whether or not Lender’s security is impaired, Lender may, at Lender’s election,
receive and retain the proceeds of any insurance and apply the proceeds to the reduction of the
Indebtedness, payment of any lien affecting the Property, or the restoration and repair of the
Property. If Lender elects to apply the proceeds to restoration and repair, Grantor shall
repair or replace the damaged or destroyed improvements in a manner satisfactory to Lender.
Lender shall, upon satisfactory proof of such expenditure, pay or reimburse Grantor from the
proceeds for the reasonable cost of repair or restoration if Grantor is not in default under
this Mortgage. Any proceeds which have not been disbursed within 180 days after their receipt
and which Lender has not committed to the repair or restoration of the Property shall be used
first to pay any amount owing to Lender under this Mortgage, then to pay accrued interest, and
the remainder, if any, shall be applied to the principal balance of the Indebtedness. If Lender
holds any proceeds after payment in full of the Indebtedness, such proceeds shall be paid to
Grantor as Grantor’s interests may appear.




Grantor’s Report on Insurance. Upon request of Lender, however not more than once a year,
Grantor shall furnish to Lender a report on each existing policy of insurance showing: (1) the
name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the property
insured, the then current replacement value of such property, and the manner of determining that
value; and (5) the expiration date of the policy. Grantor shall, upon request of Lender, have an
independent appraiser satisfactory to Lender determine the cash value replacement cost of the
Property.


LENDER’S EXPENDITURES. If any action or proceeding is commenced that would materially affect
Lender’s interest in the Property or if Grantor fails to comply with any provision of this Mortgage
or any Related Documents, including but not limited to Grantor’s failure to discharge or pay when
due any amounts Grantor is required to discharge or pay under this Mortgage or any Related
Documents, Lender on Grantor’s behalf may (but shall not be obligated to) take any action that
Lender deems appropriate, including but not limited to discharging or paying all taxes, liens,
security interests, encumbrances and other claims, at any time levied or placed on the Property and
paying all costs for insuring, maintaining and preserving the Property. All such expenditures
incurred or paid by Lender for such purposes will then bear interest at the rate charged under the
Note from the date incurred or paid by Lender to the date of repayment by Grantor. All such
expenses will become a part of the Indebtedness and, at Lender’s option, will (A) be payable on
demand; (B) be added to the balance of the Note and be apportioned among and be payable with any
installment payments to become due during either (1) the term of any applicable insurance policy;
or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and
payable at the Note’s maturity. The Mortgage also will secure payment of these amounts. Such right
shall be in addition to all other rights and remedies to which Lender may be entitled upon Default.



WARRANTY; DEFENSE OF TITLE. The following provisions relating to ownership of the Property are a
part of this Mortgage:





Title. Grantor warrants that: (a) Grantor holds good and marketable title of record to the
Property in fee simple, free and clear of all liens and encumbrances other than those set forth
in the Real Property description or in any title insurance policy, title report, or final title
opinion issued in favor of, and accepted by, Lender in connection with this Mortgage, (b)
Grantor has the full right, power, and authority to execute and deliver this Mortgage to Lender,
and (c) the liens granted hereby are not the type of lien referred to in Chapter 575 of the Iowa
Code Supplement, as now enacted or hereafter modified, amended or replaced. Grantor, for itself
and all persons claiming by, through or under Grantor, agrees that it claims no lien or right to
a lien of the type contemplated by Chapter 575 or any other chapter of the Code of Iowa and
further waives all notices and rights pursuant to said law with respect to the liens hereby
granted, and represents and warrants that it is the sole party entitled to do so and agrees to
indemnify and hold harmless Lender from any loss, damage, and costs, including reasonable
attorneys’ fees, threatened or suffered by Lender arising either directly or indirectly as a
result of any claim of the applicability of said law to the liens hereby granted.




Defense of Title. Subject to the exception in the paragraph above, Grantor warrants and will
forever defend the title to the Property against the lawful claims of all persons. In the event
any action or proceeding is commenced that questions Grantor’s title or the interest of Lender
under this Mortgage, Grantor shall defend the action at Grantor’s expense. Grantor may be the
nominal party in such proceeding, but Lender shall be entitled to participate in the proceeding
and to be represented in the proceeding by counsel of Lender’s own choice, and Grantor will
deliver, or cause to be delivered, to Lender such instruments as Lender may request from time to
time to permit such participation.




Compliance With Laws. Grantor warrants that the Property and Grantor’s use of the Property
complies with all existing applicable laws, ordinances, and regulations of governmental
authorities.




Survival of Representations and Warranties. All representations, warranties, and agreements
made by Grantor in this Mortgage shall survive the execution and delivery of this Mortgage,
shall be continuing in nature, and shall remain in full force and effect until such time as
Grantor’s Indebtedness shall be paid in full.


CONDEMNATION. The following provisions relating to condemnation proceedings are a part of this
Mortgage:




 









 








					
	 
	 	MORTGAGE	 	 
	Loan No: 108002882
	 	(Continued)
	 	Page 5







Proceedings. If any proceeding in condemnation is filed, Grantor shall promptly notify Lender
in writing, and Grantor shall promptly take such steps as may be necessary to defend the action
and obtain the award. Grantor may be the nominal party in such proceeding, but Lender shall be
entitled to participate in the proceeding and to be represented in the proceeding by counsel of
its own choice, and Grantor will deliver or cause to be delivered to Lender such instruments and
documentation as may be requested by Lender from time to time to permit such participation.




Application of Net Proceeds. If all or any part of the Property is condemned by eminent domain
proceedings or by any proceeding or purchase in lieu of condemnation, Lender may, at its
election require that all or any portion of the net proceeds of the award be applied to the
Indebtedness or the repair or restoration of the Property. The net proceeds of the award shall
mean the award after payment of all reasonable costs, expenses, and attorneys’ fees incurred by
Lender in connection with the condemnation,


IMPOSITION OF TAXES, FEES AND CHARGES BY GOVERNMENTAL AUTHORITIES. The following provisions
relating to governmental taxes, fees and charges are a part of this Mortgage:





Current Taxes, Fees and Charges. Upon request by Lender, Grantor shall execute such documents in
addition to this Mortgage and take whatever other action is requested by Lender to perfect and
continue Lender’s lien on the Real Property. Grantor shall reimburse Lender for all taxes, as
described below, together with all expenses incurred in recording, perfecting or continuing this
Mortgage, including without limitation all taxes, fees, documentary stamps, and other charges
for recording or registering this Mortgage.




Taxes. The following shall constitute taxes to which this section applies: (1) a specific tax
upon this type of Mortgage or upon all or any part of the Indebtedness secured by this Mortgage;
(2) a specific tax on Grantor which Grantor is authorized or required to deduct from payments on
the Indebtedness secured by this type of Mortgage; (3) a tax on this type of Mortgage chargeable
against the Lender or the holder of the Note; and (4) a specific tax on all or any portion of
the Indebtedness or on payments of principal and interest made by Grantor.




Subsequent Taxes. If any tax to which this section applies is enacted subsequent to the date of
this Mortgage, this event shall have the same effect as an Event of Default, and Lender may
exercise any or all of its available remedies for an Event of Default as provided below unless
Grantor either (1) pays the tax before it becomes delinquent, or (2) contests the tax as
provided above in the Taxes and Liens section and deposits with Lender cash or a sufficient
corporate surety bond or other security satisfactory to Lender.


SECURITY AGREEMENT; FINANCING STATEMENTS. The following provisions relating to this Mortgage as a
security agreement are a part of this Mortgage:





Security Agreement. This instrument shall constitute a Security Agreement to the extent any of
the Property constitutes fixtures, and Lender shall have all of the rights of a secured party
under the Uniform Commercial Code as amended from time to time.




Security Interest. Upon request by Lender, Grantor shall take whatever action is requested by
Lender to perfect and continue Lender’s security interest in the Rents and Personal Property. In
addition to recording this Mortgage in the real property records, Lender may, at any time and
without further authorization from Grantor, file executed counterparts, copies or reproductions
of this Mortgage as a financing statement. Grantor shall reimburse Lender for all expenses
incurred in perfecting or continuing this security interest. Upon default, Grantor shall not
remove, sever or detach the Personal Property from the Property. Upon default, Grantor shall
assemble any Personal Property not affixed to the Property in a manner and at a place reasonably
convenient to Grantor and Lender and make it available to Lender within three (3) days after
receipt of written demand from Lender to the extent permitted by applicable law.




Fixture Filing. From the date of its recording, this Mortgage shall be effective as a financing
statement filed as a fixture filing with respect to the Personal Property and for this purpose,
the name and address of the debtor is the name and address of Grantor as set forth on the first
page of this Mortgage and the name and address of the secured party is the name and address of
Lender as set forth on the first page of this Mortgage.




Addresses. The mailing addresses of Grantor (debtor) and Lender (secured party) from which
information concerning the security interest granted by this Mortgage may be obtained (each as
required by the Uniform Commercial Code) are as stated on the first page of this Mortgage.


FURTHER ASSURANCES; ATTORNEY-IN-FACT. The following provisions relating to further assurances and
attorney-in-fact are a part of this Mortgage:





Further Assurances. At any time, and from time to time, upon request of Lender, Grantor will
make, execute and deliver,



 









 





					
	 
	 	MORTGAGE	 	 
	Loan No: 108002882
	 	(Continued)
	 	Page 6







or will cause to be made, executed or delivered, to Lender or to Lender’s designee, and when
requested by Lender, cause to be filed, recorded, refiled, or rerecorded, as the case may be, at
such times and in such offices and places as Lender may deem appropriate, any and all such
mortgages, deeds of trust, security deeds, security agreements, financing statements,
continuation statements, instruments of further assurance, certificates, and other documents as
may, in the sole opinion of Lender, be necessary or desirable in order to effectuate, complete,
perfect, continue, or preserve (1) Grantor’s obligations under the Note, this Mortgage, and the
Related Documents, and (2) the liens and security interests created by this Mortgage as first
and prior liens on the Property, whether now owned or hereafter acquired by Grantor. Unless
prohibited by law or Lender agrees to the contrary in writing, Grantor shall reimburse Lender
for all costs and expenses incurred in connection with the matters referred to in this
paragraph,




Attorney-in-Fact. If Grantor fails to do any of the things referred to in the preceding
paragraph, Lender may do so for and in the name of Grantor and at Grantor’s expense. For such
purposes, Grantor hereby irrevocably appoints Lender as Grantor’s attorney-in-fact for the
purpose of making, executing, delivering, filing, recording, and doing all other things as may
be necessary or desirable, in Lender’s sole opinion, to accomplish the matters referred to in
the preceding paragraph.


FULL PERFORMANCE. If Grantor pays all the Indebtedness, including without limitation all future
advances, when due; and otherwise performs all the obligations imposed upon Grantor under this
Mortgage, Lender shall execute and deliver to Grantor a suitable satisfaction of this Mortgage and
suitable statements of termination of any financing statement on file evidencing Lender’s security
interest in the Rents and the Personal Property. Grantor will pay, if permitted by applicable law,
any reasonable termination fee as determined by Lender from time to time.



EVENTS OF DEFAULT. Each of the following, at Lender’s option, shall constitute an Event of Default
under this Mortgage:





Payment Default. Grantor fails to make any payment when due under the Indebtedness.




Default on Other Payments. Failure of Grantor within the time required by this Mortgage to make
any payment for taxes or insurance, or any other payment necessary to prevent filing of or to
effect discharge of any lien.




Other Defaults. Grantor fails to comply with or to perform any other term, obligation, covenant
or condition contained in this Mortgage or in any of the Related Documents or to comply with or
to perform any term, obligation, covenant or condition contained in any other agreement between
Lender and Grantor.




False Statements. Any warranty, representation or statement made or furnished to Lender by
Grantor or on Grantor’s behalf under this Mortgage or the Related Documents is false or
misleading in any material respect, either now or at the time made or furnished or becomes false
or misleading at any time thereafter.




Defective Collateralization. This Mortgage or any of the Related Documents ceases to be in full
force and effect (including failure of any collateral document to create a valid and perfected
security interest or lien) at any time and for any reason.




Death or Insolvency. The dissolution of Grantor’s (regardless of whether election to continue
is made), any member withdraws from the limited liability company, or any other termination of
Grantor’s existence as a going business or the death of any member, the insolvency of Grantor,
the appointment of a receiver for any part of Grantor’s property, any assignment for the benefit
of creditors, any type of creditor workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Grantor.




Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings,
whether by judicial proceeding, self-help, repossession or any other method, by any creditor of
Grantor or by any governmental agency against any property securing the indebtedness. This
includes a garnishment of any of Grantor’s accounts, including deposit accounts, with Lender.
However, this Event of Default shall not apply if there is a good faith dispute by Grantor as to
the validity or reasonableness of the claim which is the basis of the creditor or forfeiture
proceeding and if Grantor gives Lender written notice of the creditor or forfeiture proceeding
and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in
an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for
the dispute.




Breach of Other Agreement. Any breach by Grantor under the terms of any other agreement between
grantor and Lender that is not remedied within any grace period provided therein, including
without limitation any agreement concerning any indebtedness or other obligation of Grantor to
Lender, whether existing now or later.




Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of
any of the Indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the
validity of, or liability under, any Guaranty of the Indebtedness. In the event of a death,
Lender, at its option, may, but shall not be required to, permit the Guarantor’s estate to
assume unconditionally the obligations arising under the guaranty in a manner satisfactory to



 









 





					
	 
	 	MORTGAGE	 	 
	Loan No: 108002882
	 	(Continued)
	 	Page 7







Lender, and, in doing so, cure any Event of Default.




Adverse Change. A material adverse change occurs in Grantor’s financial condition, or Lender
believes the prospect of payment or performance of the indebtedness is impaired.




Right to Cure. If any default, other than a default in payment is curable and if Grantor has
not been given a notice of a breach of the same provision of this Mortgage within the preceding
twelve (12) months, it may be cured if Grantor, after receiving written notice from Lender
demanding cure of such default: (1) cures the default within twenty (20) days; or (2) if the
cure requires more than twenty (20) days, immediately initiates steps which Lender deems in
Lender’s sole discretion to be sufficient to cure the default and thereafter continues and
completes all reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.


RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of an Event of Default and at any time
thereafter, Lender, at Lender’s option, may exercise any one or more of the following rights and
remedies, in addition to any other rights or remedies provided by law:





Accelerate Indebtedness. Lender shall have the right at its option to declare the entire
Indebtedness immediately due and payable, including any prepayment penalty which Grantor would
be required to pay without notice, except as may be expressly required by applicable law.




UCC Remedies. With respect to all or any part of the Personal Property, Lender shall have all
the rights and remedies of a secured party under the Uniform Commercial Code.




Collect Rents. Lender shall have the right, without notice to Grantor, to take possession of the
Property and collect the Rents, including amounts past due and unpaid, and apply the net
proceeds, over and above Lender’s costs, against the indebtedness. In furtherance of this right,
Lender may require any tenant or other user of the Property to make payments of rent or use fees
directly to Lender. If the Rents are collected by Lender, then Grantor irrevocably designates
Lender as Grantor’s attorney-in-fact to endorse instruments received in payment thereof in the
name of Grantor and to negotiate the same and collect the proceeds. Payments by tenants or other
users to Lender in response to Lender’s demand shall satisfy the obligations for which the
payments are made, whether or not any proper grounds for the demand existed. Lender may exercise
its rights under this subparagraph either in person, by agent, or through a receiver.




Appoint Receiver. Lender shall have the right to have a receiver appointed to take possession of
all or any part of the Property, with the power to protect and preserve the Property, to operate
the Property preceding foreclosure or sale, and to collect the Rents from the Property and apply
the proceeds, over and above the cost of the receivership, against the indebtedness. The
receiver may serve without bond if permitted by law. Lender’s right to the appointment of a
receiver shall exist whether or not the apparent value of the Property exceeds the Indebtedness
by a substantial amount. Employment by Lender shall not disqualify a person from serving as a
receiver.




Judicial Foreclosure. Lender may obtain a judicial decree foreclosing Grantor’s interest in all
or any part of the Property.




Nonjudicial Foreclosure. Lender may exercise the right to non-judicial foreclosure pursuant to
Iowa Code Section 654.18 and Chapter 655A as now enacted or hereafter modified, amended or
replaced.




Deficiency Judgment. If permitted by applicable law, Lender may obtain a judgment for any
deficiency remaining in the Indebtedness due to Lender after application of all amounts received
from the exercise of the rights provided in this section.




Tenancy at Sufferance. If Grantor remains in possession of the Property after the Property is
sold as provided above or Lender otherwise becomes entitled to possession of the Property upon
default of Grantor, Grantor shall become a tenant at sufferance of Lender or the purchaser of
the Property and shall, at Lender’s option, either (1) pay a reasonable rental for the use of
the Property, or (2) vacate the Property immediately upon the demand of Lender. This paragraph
is subject to any rights of Grantor, under Iowa law, to remain in possession of the Property
during a redemption period.




Other Remedies. Lender shall have all other rights and remedies provided in this Mortgage or
the Note or available at law or in equity.




Sale of the Property. To the extent permitted by applicable law, Grantor hereby waives any and
all right to have the Property marshalled. In exercising its rights and remedies, Lender shall
be free to sell all or any part of the Property together or separately, in one sale or by
separate sales. Lender shall be entitled to bid at any public sale on all or any portion of the
Property.




Notice of Sale. Lender shall give Grantor reasonable notice of the time and place of any public
sale of the Personal



 









 





					
	 
	 	MORTGAGE	 	 
	Loan No: 108002882
	 	(Continued)
	 	Page 8







Property or of the time after which any private sale or other intended disposition of the
Personal Property is to be made. Reasonable notice shall mean notice given at least ten (10)
days before the time of the sale or disposition. Any sale of the Personal Property may be made
in conjunction with any sale of the Real Property.




Shortened Redemption. Grantor hereby agrees that, in the event of foreclosure of this Mortgage,
Lender may, at Lender’s sole option, elect to reduce the period of redemption pursuant to Iowa
Code Sections 628.26, 628.27, or 628.28, or any other Iowa Code Section, to such time as may be
then applicable and provided by law.




Election of Remedies. Election by Lender to pursue any remedy shall not exclude pursuit of any
other remedy, and an election to make expenditures or to take action to perform an obligation of
Grantor under this Mortgage, after Grantor’s failure to perform, shall not affect Lender’s right
to declare a default and exercise its remedies. Nothing under this Mortgage or otherwise shall
be construed so as to limit or restrict the rights and remedies available to Lender following an
Event of Default, or in any way to limit or restrict the rights and ability of Lender to proceed
directly against Grantor and/or against any other co-maker, guarantor, surety or endorser and/or
to proceed against any other collateral directly or indirectly securing the Indebtedness.




Attorneys’ Fees; Expenses. If Lender institutes any suit or action to enforce any of the terms
of this Mortgage, Lender shall be entitled to recover such sum as the court may adjudge
reasonable as attorneys’ fees at trial and upon any appeal. Whether or not any court action is
involved, and to the extent not prohibited by law, all reasonable expenses Lender incurs that in
Lender’s opinion are necessary at any time for the protection of its interest or the enforcement
of its rights shall become a part of the Indebtedness payable on demand and shall bear interest
at the Note rate from the date of the expenditure until repaid. Expenses covered by this
paragraph include, without limitation, however subject to any limits under applicable law,
Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is a lawsuit,
including attorneys’ fees and expenses for bankruptcy proceedings (including efforts to modify
or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment
collection services, the cost of searching records, obtaining title reports (including
foreclosure reports), surveyors’ reports, and appraisal fees and title insurance, to the extent
permitted by applicable law. Grantor also will pay any court costs, in addition to all other
sums provided by law.


NOTICES. Any notice required to be given under this Mortgage, including without limitation any
notice of default and any notice of sale shall be given in writing, and shall be effective when
actually delivered, when actually received by telefacsimile (unless otherwise required by law),
when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage prepaid, directed to the
addresses shown near the beginning of this Mortgage. All copies of notices of foreclosure from the
holder of any lien which has priority over this Mortgage shall be sent to Lender’s address, as
shown near the beginning of this Mortgage. Any party may change its address for notices under this
Mortgage by giving formal written notice to the other parties, specifying that the purpose of the
notice is to change the party’s address. For notice purposes, Grantor agrees to keep Lender
informed at all times of Grantor’s current address. Unless otherwise provided or required by law,
if there is more than one Grantor, any notice given by Lender to any Grantor is deemed to be notice
given to all Grantors.



MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Mortgage:





Amendments. This Mortgage, together with any Related Documents, constitutes the entire
understanding and agreement of the parties as to the matters set forth in this Mortgage. No
alteration of or amendment to this Mortgage shall be effective unless given in writing and
signed by the party or parties sought to be charged or bound by the alteration or amendment.




Annual Reports. If the Property is used for purposes other than Grantor’s residence, Grantor
shall furnish to Lender, upon request, a certified statement of net operating income received
from the Property during Grantor’s previous fiscal year in such form and detail as Lender shall
require. “Net operating income” shall mean all cash receipts from the Property less all cash
expenditures made in connection with the operation of the Property.




Caption Headings. Caption headings in this Mortgage are for convenience purposes only and are
not to be used to interpret or define the provisions of this Mortgage.




Governing Law. This Mortgage will be governed by federal law applicable to Lender and, to the
extent not preempted by federal law, the laws of the State of Iowa without regard to its
conflicts of law provisions. This Mortgage has been accepted by Lender in the State of Iowa.



No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Mortgage
unless such waiver is given in writing and signed by Lender. No delay or omission on the part of
Lender in exercising any right shall operate as a waiver of such right or any other right. A
waiver by Lender of a provision of this Mortgage shall not prejudice or constitute a waiver of
Lender’s right otherwise to demand strict compliance with that provision or any other provision
of this Mortgage. No prior waiver by Lender, .nor any course of dealing between Lender and
Grantor shall constitute a



 









 





					
	 
	 	MORTGAGE	 	 
	Loan No: 108002882
	 	(Continued)
	 	Page 9







waiver of any of Lender’s rights or of any of Grantor’s obligations as to any future
transactions. Whenever the consent of Lender is required under this Mortgage, the granting of
such consent by Lender in any instance shall not constitute continuing consent to subsequent
instances where such consent is required and in all cases such consent may be granted or
withheld in the sole discretion of Lender.




Severability. If a court of competent jurisdiction finds any provision of this Mortgage to be
illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the
offending provision illegal, invalid, or unenforceable as to any other circumstance. If
feasible, the offending provision shall be considered modified so that it becomes legal, valid
and enforceable. If the offending provision cannot be so modified, it shall be considered
deleted from this Mortgage. Unless otherwise required by law, the illegality, invalidity, or
unenforceability of any provision of this Mortgage shall not affect the legality, validity or
enforceability of any other provision of this Mortgage.




Merger. There shall be no merger of the interest or estate created by this Mortgage with any
other interest or estate in the Property at any time held by or for the benefit of Lender in any
capacity, without the written consent of Lender.




Successors and Assigns. Subject to any limitations stated in this Mortgage on transfer of
Grantor’s interest, this Mortgage shall be binding upon and inure to the benefit of the parties,
their successors and assigns. If ownership of the Property becomes vested in a person other than
Grantor, Lender, without notice to Grantor, may deal with Grantor’s successors with reference to
this Mortgage and the Indebtedness by way of forbearance or extension without releasing Grantor
from the obligations of this Mortgage or liability under the Indebtedness.




Time is of the Essence. Time is of the essence in the performance of this Mortgage.




Release of Rights of Dower, Homestead and Distributive Share. Each of the undersigned hereby
relinquishes all rights of dower, homestead and distributive share in and to the Property and
waives all rights of exemption as to any of the Property. If a Grantor is not an owner of the
Property, that Grantor executes this Mortgage for the sole purpose of relinquishing and waiving
such rights.


DEFINITIONS. The following capitalized words and terms shall have the following meanings when used
in this Mortgage. Unless specifically stated to the contrary, all references to dollar amounts
shall mean amounts in lawful money of the United States of America. Words and terms used in the
singular shall include the plural, and the plural shall include the singular, as the context .may
require. Words and terms not otherwise defined in this Mortgage shall have the meanings attributed
to such terms in the Uniform Commercial Code:





Borrower. The word “Borrower” means Southern Iowa BioEnergy LLC and includes all co-signers and
co-makers signing the Note and all their successors and assigns.




Default. The word “Default” means the Default set forth in this Mortgage in the section titled
“Default”.




Environmental Laws. The words “Environmental Laws” mean any and all state, federal and local
statutes, regulations and ordinances relating to the protection of human health or the
environment, including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section, 9601, at seq.
(“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499
(“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, at seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable
state or federal laws, rules, or regulations adopted pursuant thereto.




Event of Default. The words “Event of Default” mean any of the events of default set forth in
this Mortgage in the events of default section of this Mortgage.




Grantor. The word “Grantor” means Southern Iowa BioEnergy LLC.




Guarantor. The word “Guarantor” means any guarantor, surety, or accommodation party of any or
all of the indebtedness.




Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender, including without
limitation a guaranty of all or part of the Note.




Hazardous Substances. The words “Hazardous Substances” mean materials that, because of their
quantity, concentration or physical, chemical or infectious characteristics, may cause or pose a
present or potential hazard to human health or the environment when improperly used, treated,
stored, disposed of, generated, manufactured, transported or otherwise handled. The words
“Hazardous Substances” are used in their very broadest sense and include without limitation any
and all hazardous or toxic substances, materials or waste as defined by or listed under the



 









 





					
	 
	 	MORTGAGE	 	 
	Loan No: 108002882
	 	(Continued)
	 	Page 10







Environmental Laws. The term “Hazardous Substances” also includes, without limitation, petroleum
and petroleum by-products or any fraction thereof and asbestos.




Improvements. The word “improvements” means all existing and future improvements, buildings,
structures, mobile homes affixed on the Real Property, facilities, additions, replacements and
other construction on the Real Property.




Indebtedness. The word “Indebtedness” means all principal, interest and late fees, and other
amounts, costs and expenses payable under the Note or Related Documents, together with all
renewals of, extensions of, modifications of, consolidations of and substitutions for the Note
or Related Documents and any amounts expended or advanced by Lender to discharge Grantor’s
obligations or expenses incurred by Lender to enforce Grantor’s obligations under this Mortgage,
together with interest on such amounts as provided in this Mortgage. Specifically, without
limitation, Indebtedness includes the future advances set forth in the Future Advances provision
of this Mortgage, together with all interest thereon.




Lender. The word “Lender” means Great Western Bank, its successors and assigns.




Mortgage. The word “Mortgage” means this Mortgage between Grantor and Lender.




Note. The word “Note” means the promissory note dated June 12, 2006, in the original principal
amount of $2,200,000.00 from Grantor to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of, and substitutions for the promissory note
or agreement.




Personal Property. The words “Personal Property” mean all equipment, fixtures, and other
articles of personal property now or hereafter owned by Grantor, and now or hereafter attached
or affixed to the Real Property; together with all accessions, parts, and additions to, all
replacements of, and all substitutions for, any of such property; and together with all proceeds
(including without limitation all insurance proceeds and refunds of premiums) from any sale or
other disposition of the Property.




Property. The word “Property” means collectively the Real Property and the Personal Property.




Real Property. The words “Real Property” mean the real property, interests and rights, as
further described in this Mortgage.




Related Documents. The words “Related Documents” mean all promissory notes, credit agreements,
loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, security deeds, collateral mortgages, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection with the Indebtedness.




Rents. The word “Rents” means all present and future rents, revenues, income, issues, royalties,
profits, and other benefits derived from the Property.


GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS MORTGAGE, AND GRANTOR AGREES TO ITS
TERMS.



GRANTOR ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS MORTGAGE AND ALL OTHER DOCUMENTS RELATING
TO THIS DEBT.




	 	 	 	 	 
	GRANTOR:	 	 
	 
	 	 	 	 
	SOUTHERN IOWA BIOENERGY LLC	 	 
	 
	 	 	 	 
	By:

	 	/s/ William T. Higdon
 

William T. Higdon, President of Southern Iowa BioEnergy
LLC
	 	 
	 
	 	 	 	 
	By:

	 	/s/ Alan Elefson	 	 
	 

	 	 

Alan Elefson, Treasurer of Southern Iowa BioEnergy LLC
	 	 






 









 






					
	 
	 	MORTGAGE	 	 
	Loan No: 108002882
	 	(Continued)
	 	Page 11






 




LIMITED LIABILITY COMPANY ACKNOWLEDGMENT




	 	 	 	 	 	 	 	 	 
	STATE OF IOWA

	 	 	)	 	 	 	 	 
	 

	 	 	)	 	 	ss	 	 
	COUNTY OF DECATUR

	 	 	)	 	 	 	 	 





On this 12th day of June, A.D., 2006, before me, the undersigned Notary
Public in said County and State, personally appeared William T. Higdon, President; Alan Elefson,
Treasurer of Southern Iowa BioEnergy LLC, to me personally known, who being by me duly sworn, did
say that they are one of the members or designated agents of said limited liability company, and
that the instrument was signed and sealed on behalf of the limited liability company by authority
of the limited liability company and the members or designated agents acknowledged the execution of
the instrument to be the voluntary act and deed of the limited liability company by it and by the
members or designated agents voluntarily executed.




	 	 	 	 	 
	 

	 	/s/ Marcia L. McAlpin	 	 
	 

	 	 

Notary Public in the State of Iowa
	 	 
	NOTARY SEAL
	 	 	 	 
	 

	 	/s/ Marcia L. McAlpin	 	 
	 

	 	 	 	 





 









 






COMMERCIAL GUARANTY




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Call / Coll	 	 	 	Officer	 	 
	Principal	 	Loan Date	 	Maturity	 	Loan No.	 	IE / 150	 	Account	 	TLG	 	Initials
	References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.
Any item above containing ***** has been omitted due to text length limitations.






	 	 	 	 	 	 	 
	Borrower:

	 	Southern Iowa BioEnergy LLC (TIN: 20-2226223)
	 	Lender:
	 	Great Western Bank
	 

	 	5 So Linden
	 	 	 	Leon
	 

	 	Lamoni, IA 50140
	 	 	 	111 N. Main
	 

	 	 	 	 	 	PO Box 171
	 

	 	 	 	 	 	Leon, IA 50144
	Guarantor:

	 	Jack Cooley (SSN: ###-##-####)	 	 	 	 
	 

	 	1810 240th Avenue	 	 	 	 
	 

	 	Osceola, IA 50213	 	 	 	 





GUARANTEE OF PAYMENT AND PERFORMANCE. For good and valuable consideration, Guarantor absolutely
and unconditionally guarantees full and punctual payment and satisfaction of Guarantor’s Share of
the Indebtedness of Borrower to Lender, and the performance and discharge of all Borrower’s
obligations under the Note and the Related Documents. This is a guaranty of payment and performance
and not of collection, so Lender can enforce this Guaranty against Guarantor even when Lender has
not exhausted Lender’s remedies against anyone else obligated to pay the Indebtedness or against
any collateral securing the Indebtedness, this Guaranty or any other guaranty of the Indebtedness.
Guarantor will make any payments to Lender or its order, on demand, in legal tender of the United
States of America, in same-day funds, without set-off or deduction or counterclaim, and will
otherwise perform Borrower’s obligations under the Note and Related Documents.



INDEBTEDNESS. The word “Indebtedness” as used in this Guaranty means all of the principal amount
outstanding from time to time and at any one or more times, accrued unpaid interest thereon and all
collection costs and legal expenses related thereto permitted by law, attorneys’ fees, arising from
any and all debts, liabilities and obligations that Borrower individually or collectively or
interchangeably with others, owes or will owe Lender under the Note and Related Documents and any
renewals, extensions, modifications, refinancings, consolidations and substitutions. of the Note
and Related Documents.



If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from
Guarantor, Lender’s rights under all guaranties shall be cumulative. This Guaranty shall not
(unless specifically provided below to the contrary) affect or invalidate any such other
guaranties. Guarantor’s liability will be Guarantor’s aggregate liability under the terms of this
Guaranty and any such other unterminated guaranties.



GUARANTOR’S SHARE OF THE INDEBTEDNESS. The words “Guarantor’s Share of the Indebtedness” as used in
this Guaranty mean an amount not to exceed Three Hundred Thousand & 00/100 Dollars ($300,000.00) of
all the principal amount, interest thereon to the extent not prohibited by law, and all collection
costs, expenses and attorneys’ fees whether or not there is a lawsuit, and if there is a lawsuit,
any fees and costs for trial and appeals.



Guarantor’s Share of the indebtedness will only be reduced by sums actually paid by Guarantor under
this Guaranty, but will not be reduced by sums from any other source including, but not limited to,
sums realized from any collateral securing the Indebtedness or this Guaranty, or payments by anyone
other than Guarantor, or reductions by operation of law, judicial order or equitable principles.
Lender has the sole and absolute discretion to determine how sums shall be applied among guaranties
of the Indebtedness.



The above limitation on liability is not a restriction on the amount of the Note of Borrower to
Lender either in the aggregate or at any one time.



DURATION OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity
of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full
force until all the Indebtedness shall have been fully and finally paid and satisfied and all of
Guarantor’s other obligations under this Guaranty shall have been performed in full. Release of any
other guarantor or termination of any other guaranty of the indebtedness shall not affect the
liability of Guarantor under this Guaranty. A revocation Lender receives from any one or more
Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty.



GUARANTOR’S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, without notice or demand and
without lessening Guarantor’s liability under this Guaranty, from time to time: (A) to make one or
more additional secured or unsecured loans to Borrower, to lease equipment or other goods to
Borrower, or otherwise to extend additional credit to Borrower; (B) to alter, compromise, renew,
extend, accelerate, or otherwise change one or more times the time for payment or other terms of
the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of
interest on the Indebtedness; extensions may be repeated and may be for longer than the original
loan term; (C) to take and hold security for the payment of this Guaranty or the Indebtedness, and
exchange, enforce, ‘waive, subordinate, fail or decide not to perfect, and release any such
security, with or without the substitution of new collateral; (D) to release, substitute, agree not
to sue, or deal with any one or more of Borrower’s sureties, endorsers, or other guarantors on any
terms or in any manner Lender may choose; (E) to determine how, when and what application of
payments and credits shall be made on the Indebtedness; (F) to apply such security and direct the
order or manner of sale thereof, including without limitation, any nonjudicial sale permitted by
the terms of the controlling security agreement or deed of trust, as Lender in its discretion may
determine; (G) to sell, transfer, assign or grant participations in all or any part of the
Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.



GUARANTOR’S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (A) no
representations or agreements of any kind have been made to Guarantor which would limit or qualify
in any way the terms of this Guaranty; (B) this Guaranty is executed at Borrower’s request and not
at the request of Lender; (C) Guarantor has full power, right and authority to enter into this
Guaranty; (D) the provisions of this Guaranty do not conflict with or result in a default under any
agreement or other instrument binding upon Guarantor and do not result in a violation of any law,
regulation, court decree or order applicable to Guarantor; (E) Guarantor has not and will not,
without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor’s assets, or any interest therein;
(F) upon Lender’s request, Guarantor will provide to Lender financial and credit information in
form acceptable to Lender, and all such financial information which currently has been, and all
future financial information which will be provided to Lender is and will be true and correct in
all material respects and fairly present Guarantor’s financial condition as of the dates the
financial information is provided; (G) no material adverse change has occurred in Guarantor’s
financial condition since the date of the most recent financial statements provided to Lender and
no event has occurred which may materially adversely affect Guarantor’s financial condition; (H) no
litigation, claim, investigation, administrative proceeding or similar action (including those for
unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made no representation to
Guarantor as to the creditworthiness of Borrower; and (J) Guarantor has established adequate means
of obtaining from Borrower on a continuing basis information regarding Borrower’s financial
condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or
circumstances which might in any way affect Guarantor’s risks under this Guaranty, and Guarantor
further agrees that, absent a request for information, Lender shall have no obligation to disclose
to Guarantor any information or documents acquired by Lender in the course of its relationship with
Borrower.



GUARANTOR’S WAIVERS. Except as prohibited by applicable law, Guarantor waives any right to require
Lender (A) to continue lending money or to extend other credit to Borrower; (B) to make any
presentment, protest, demand, or notice of any kind, including notice of any nonpayment of the
Indebtedness or of any nonpayment related to any collateral, or notice of any action or nonaction
on the part of Borrower, Lender, any surety, endorser, or other guarantor in connection with the
Indebtedness or in connection with the creation of new or additional loans or obligations; (C) to
resort for payment onto proceed directly or at once against





 









 








					
	 
	 	COMMERCIAL GUARANTY	 	 
	Loan No: 108002882
	 	(Continued)
	 	Page 2





any person, including Borrower or any other guarantor; (D) to proceed directly against or exhaust
any collateral held by Lender from Borrower, any other guarantor, or any other person; (E) to give
notice of the terms, time, and place of any public or private sale of personal property security
held by Lender from Borrower or to comply with any other applicable provisions of the Uniform
Commercial Code; (F) to pursue any other remedy within Lender’s power; or (G) to commit any act or
omission of any kind, or at any time, with respect to any matter whatsoever.



Guarantor also waives any and all rights or defenses based on suretyship or impairment of
collateral including, but not limited to, any rights or defenses arising by reason of (A) any “one
action” or “anti-deficiency” law or any other law which may prevent Lender from bringing any
action, including a claim for deficiency, against Guarantor, before or after Lender’s commencement
or completion of any foreclosure action, either judicially or by exercise of a power of sale; (B)
any election of remedies by Lender which destroys or otherwise adversely affects Guarantor’s
subrogation rights or Guarantor’s rights to proceed against Borrower for reimbursement, including
without limitation, any loss of rights Guarantor may suffer by reason of any law limiting,
qualifying, or discharging the Indebtedness; (C) any disability or other defense of Borrower, of
any other guarantor, or of any other person, or by reason of the cessation of Borrower’s liability
from any cause whatsoever, other than payment in full in legal tender, of the Indebtedness; (D) any
right to claim discharge of the indebtedness on the basis of unjustified impairment of any
collateral for the Indebtedness; (E) any statute of limitations, If at any time any action or suit
brought by Lender against Guarantor is commenced, there is outstanding Indebtedness which is not
barred by any applicable statute of limitations; or (F) any defenses given to guarantors at law or
in equity other than actual payment and performance of the Indebtedness. If payment is made by
Borrower, whether voluntarily or otherwise, or by any third party, on the indebtedness and
thereafter Lender is forced to remit the amount of that payment to Borrower’s trustee in bankruptcy
or to any similar person under any federal or state bankruptcy law or law for the relief of
debtors, the Indebtedness shall be considered unpaid for the purpose of the enforcement of this
Guaranty.



Guarantor further waives and agrees not to assert or claim at any time any deductions to the amount
guaranteed under this Guaranty for any claim of setoff, counterclaim, counter demand, recoupment or
similar right, whether such claim, demand or right may be asserted by the Borrower, the Guarantor,
or both.



GUARANTOR’S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees that each of the
waivers set forth above is made with Guarantor’s full knowledge of its significance and
consequences and that, under the circumstances, the waivers are reasonable and not contrary to
public policy or law. If any such waiver is determined to be contrary to any applicable law or
public policy, such waiver shall be effective only to the extent permitted by law or public policy.



SUBORDINATION OF BORROWER’S DEBTS TO GUARANTOR. Guarantor agrees that the indebtedness, whether
now existing or hereafter created, shall be superior to any claim that Guarantor may now have or
hereafter acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever,
to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency
and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the
benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to
the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first
applied by Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims which it
may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose of assuring to
Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or
credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor
shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to
Lender. Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to
time to file financing statements and continuation statements and to execute documents and to take
such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.



MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Guaranty:





Amendments. This Guaranty, together with any Related Documents, constitutes the entire
understanding and agreement of the parties as to the matters set forth in this Guaranty. No
alteration of or amendment to this Guaranty shall be effective unless given in writing and
signed by the party or parties sought to be charged or bound by the alteration or amendment.




Attorneys’ Fees; Expenses. Guarantor agrees to pay upon demand all of Lender’s costs and
expenses, including Lender’s attorneys’ fees and Lender’s legal expenses, incurred in connection
with the enforcement of this Guaranty. Lender may hire or pay someone else to help enforce this
Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and
expenses include Lender’s attorneys’ fees and legal expenses whether or not there is a lawsuit,
including attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. Guarantor also shall pay all court costs and such additional fees as may
be directed by the court.




Caption Headings. Caption headings in this Guaranty are for convenience purposes only and are
not to be used to interpret or define the provisions of this Guaranty.




Governing Law. This Guaranty will be governed by federal law applicable to Lender and, to the
extent not preempted by federal law, the laws of the State of Iowa without regard to its
conflicts of law provisions. This Guaranty has been accepted by Lender in the State of Iowa.




Integration. Guarantor further agrees that Guarantor has read and fully understands the terms
of this Guaranty; Guarantor has had the opportunity to be advised by Guarantor’s attorney with
respect to this Guaranty; the Guaranty fully reflects Guarantor’s intentions and parol evidence
is not required to interpret the terms of this Guaranty. Guarantor hereby indemnifies and holds
Lender harmless from all losses, claims, damages, and costs (including Lender’s attorneys’ fees)
suffered or incurred by Lender as a result of any breach by Guarantor of the warranties,
representations and agreements of this paragraph.




Interpretation. In all cases where there is more than one Borrower or Guarantor, then all words
used in this Guaranty in the singular shall be deemed to have been used in the plural where the
context and construction so require; and where there is more than one Borrower named in this
Guaranty or when this Guaranty is executed by more than one Guarantor, the words “Borrower” and
“Guarantor” respectively shall mean all and any one or more of them. The words “Guarantor,”
“Borrower,” and “Lender” include the heirs, successors, assigns, and transferees of each of
them. If a court finds that any provision of this Guaranty is not valid or should not be
enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or
enforced. Therefore, a court will enforce the rest of the provisions of this Guaranty even if a
provision of this Guaranty may be found to be invalid or unenforceable. If any one or more of
Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar
entities, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or
of the officers, directors, partners, managers, or other agents acting or purporting to act on
their behalf and any indebtedness made or created in reliance upon the professed exercise of
such powers shall be guaranteed under this Guaranty.




Notices. Any notice required to be given under this Guaranty shall be given in writing, and
shall be effective when actually delivered, when actually received by telefacimiles (unless
otherwise required by law), when deposited with a nationally recognized overnight courier, or,
if mailed, when deposited in the United States mail, as first class, certified or registered
mail postage prepaid, directed to the addresses shown near the beginning of this Guaranty. Any
party may change its address for notices under this Guaranty by giving formal written notice to
the other parties, specifying that the purpose of the notice is to change the party’s address.
For notices purposes, Guarantor agrees to keep Lender informed at all times of Guarantor’s
current address. Unless otherwise provided or required by law, if there is more than one
Guarantor, any notice given by Lender to any Guarantor is deemed to be notice given to all
Guarantors.




No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Guaranty
unless such waiver is given in writing and signed by Lender. No delay or omission on the part
of Lender in exercising any right shall operate as a waiver of such right or any other right. A
waiver by Lender of a



 









 





					
	 
	 	COMMERCIAL GUARANTY	 	 
	Loan No: 108002882
	 	(Continued)
	 	Page 3







provision of this Guaranty shall not prejudice or constitute a waiver of Lender’s right
otherwise to demand strict compliance with that provision or any other provision of this
Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor,
shall constitute a waiver of any of Lender’s rights or of any of Guarantor’s obligations as to
any future transactions. Whenever the consent of Lender is required under this Guaranty, the
granting of such consent by Lender in any instance shall not constitute continuing consent to
subsequent instances where such consent is required and in all cases such consent may be granted
or withheld in the sole discretion of Lender.




Successors and Assigns. Subject to any limitations stated in this Guaranty on transfer of
Guarantor’s interest, this Guaranty shall be binding upon and inure to the benefit of the
parties, their successors and assigns.


DEFINITIONS. The following capitalized words and terms shall have the following meanings when used
in this Guaranty. Unless specifically stated to the contrary, all references to dollar amounts
shall mean amounts in lawful money of the United States of America. Words and terms used in the
singular shall include the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Guaranty shall have the meanings attributed
to such terms in the Uniform Commercial Code:





Borrower. The word “Borrower” means Southern Iowa BioEnergy LLC and includes all co-signers and
co-makers signing the Note and all their successors and assigns.




Guarantor. The word “Guarantor” means everyone signing this Guaranty, including without
limitation Jack Cooley, and in each case, any signer’s successors and assigns.




Guarantor’s Share of the Indebtedness. The words “Guarantor’s Share of Indebtedness” means
Guarantor’s indebtedness to Lender as more particularly described in this Guaranty.




Guaranty. The word “Guaranty” means this guaranty from Guarantor to Lender.




Indebtedness. The word “Indebtedness” means Borrower’s indebtedness to Lender as more
particularly described in this Guaranty.




Lender. The word “Lender” means Great Western Bank, its successors and assigns.




Note. The word “Note” means the promissory note dated June 12, 2006, in the original principal
amount of $2,200,000.00 from Borrower to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of, and substitutions for the promissory note
or agreement.




Related Documents. The words “Related Documents” mean all promissory notes, credit agreements,
loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, security deeds, collateral mortgages, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection with the Indebtedness.


EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES
TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON
GUARANTOR’S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE
UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY”. NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED JUNE 12,
2006.



GUARANTOR ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS COMMERCIAL GUARANTY AND ALL OTHER
DOCUMENTS RELATING TO THIS DEBT.




	 	 	 	 	 
	GUARANTOR:	 	 
	 
	 	 	 	 
	x

	 	/s/ Jack Cooley	 	 
	 

	 	 

Jack Cooley
	 	 






 




INDIVIDUAL ACKNOWLEDGEMENT




	 	 	 	 	 	 	 	 	 
	STATE OF Iowa

	 	 	)	 	 	 	 	 
	 

	 	 	)	 	 	ss	 	 
	COUNTY OF Decatur

	 	 	)	 	 	 	 	 





On this 12th day of June, A.D., 2006, before me, a Notary Public in and for
said County and State, personally appeared Jack Cooley, to me known to be the person named in and
who executed the foregoing instrument and acknowledgement that he or she executed the same as his
or her voluntary act and deed.




	 	 	 	 	 
	 

	 	/s/ Marcia L. McAlpin	 	 
	 

	 	 

	 	 
	NOTARY SEAL

	 	Notary Public in and for the State of Iowa	 	 
	 
	 	 	 	 
	 

	 	/s/Marcia L. McAlpin	 	 
	 

	 	 

	 	 






 









 






COMMERCIAL GUARANTY




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Call / Coll	 	 	 	Officer	 	 
	Principal	 	Loan Date	 	Maturity	 	Loan No.	 	IE / 150	 	Account	 	TLG	 	Initials
	References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.
Any item above containing ***** has been omitted due to text length limitations.






	 	 	 	 	 	 	 
	Borrower:

	 	Southern Iowa BioEnergy LLC (TIN: 20-2226223)
	 	Lender:
	 	Great Western Bank
	 

	 	5 So Linden
	 	 	 	Leon
	 

	 	Lamoni, IA 50140
	 	 	 	111 N. Main
	 

	 	 	 	 	 	PO Box 171
	 

	 	 	 	 	 	Leon, IA 50144
	Guarantor:

	 	William T. Higdon (SSN: ###-##-####)	 	 	 	 
	 

	 	1810 240th Avenue	 	 	 	 
	 

	 	Osceola, IA 50213	 	 	 	 





GUARANTEE OF PAYMENT AND PERFORMANCE. For good and valuable consideration, Guarantor absolutely
and unconditionally guarantees full and punctual payment and satisfaction of Guarantor’s Share of
the Indebtedness of Borrower to Lender, and the performance and discharge of all Borrower’s
obligations under the Note and the Related Documents. This is a guaranty of payment and performance
and not of collection, so Lender can enforce this Guaranty against Guarantor even when Lender has
not exhausted Lender’s remedies against anyone else obligated to pay the Indebtedness or against
any collateral securing the Indebtedness, this Guaranty or any other guaranty of the Indebtedness.
Guarantor will make any payments to Lender or its order, on demand, in legal tender of the United
States of America, in same-day funds, without set-off or deduction or counterclaim, and will
otherwise perform Borrower’s obligations under the Note and Related Documents.



INDEBTEDNESS. The word “Indebtedness” as used in this Guaranty means all of the principal amount
outstanding from time to time and at any one or more times, accrued unpaid interest thereon and all
collection costs and legal expenses related thereto permitted by law, attorneys’ fees, arising from
any and all debts, liabilities and obligations that Borrower individually or collectively or
interchangeably with others, owes or will owe Lender under the Note and Related Documents and any
renewals, extensions, modifications, refinancings, consolidations and substitutions. of the Note
and Related Documents.



If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from
Guarantor, Lender’s rights under all guaranties shall be cumulative. This Guaranty shall not
(unless specifically provided below to the contrary) affect or invalidate any such other
guaranties. Guarantor’s liability will be Guarantor’s aggregate liability under the terms of this
Guaranty and any such other unterminated guaranties.



GUARANTOR’S SHARE OF THE INDEBTEDNESS. The words “Guarantor’s Share of the Indebtedness” as used in
this Guaranty mean an amount not to exceed Three Hundred Thousand & 00/100 Dollars ($300,000.00) of
all the principal amount, interest thereon to the extent not prohibited by law, and all collection
costs, expenses and attorneys’ fees whether or not there is a lawsuit, and if there is a lawsuit,
any fees and costs for trial and appeals.



Guarantor’s Share of the indebtedness will only be reduced by sums actually paid by Guarantor under
this Guaranty, but will not be reduced by sums from any other source including, but not limited to,
sums realized from any collateral securing the Indebtedness or this Guaranty, or payments by anyone
other than Guarantor, or reductions by operation of law, judicial order or equitable principles.
Lender has the sole and absolute discretion to determine how sums shall be applied among guaranties
of the Indebtedness.



The above limitation on liability is not a restriction on the amount of the Note of Borrower to
Lender either in the aggregate or at any one time.



DURATION OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity
of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full
force until all the Indebtedness shall have been fully and finally paid and satisfied and all of
Guarantor’s other obligations under this Guaranty shall have been performed in full. Release of any
other guarantor or termination of any other guaranty of the indebtedness shall not affect the
liability of Guarantor under this Guaranty. A revocation Lender receives from any one or more
Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty.



GUARANTOR’S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, without notice or demand and
without lessening Guarantor’s liability under this Guaranty, from time to time: (A) to make one or
more additional secured or unsecured loans to Borrower, to lease equipment or other goods to
Borrower, or otherwise to extend additional credit to Borrower; (B) to alter, compromise, renew,
extend, accelerate, or otherwise change one or more times the time for payment or other terms of
the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of
interest on the Indebtedness; extensions may be repeated and may be for longer than the original
loan term; (C) to take and hold security for the payment of this Guaranty or the Indebtedness, and
exchange, enforce, ‘waive, subordinate, fail or decide not to perfect, and release any such
security, with or without the substitution of new collateral; (D) to release, substitute, agree not
to sue, or deal with any one or more of Borrower’s sureties, endorsers, or other guarantors on any
terms or in any manner Lender may choose; (E) to determine how, when and what application of
payments and credits shall be made on the Indebtedness; (F) to apply such security and direct the
order or manner of sale thereof, including without limitation, any nonjudicial sale permitted by
the terms of the controlling security agreement or deed of trust, as Lender in its discretion may
determine; (G) to sell, transfer, assign or grant participations in all or any part of the
Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.



GUARANTOR’S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (A) no
representations or agreements of any kind have been made to Guarantor which would limit or qualify
in any way the terms of this Guaranty; (B) this Guaranty is executed at Borrower’s request and not
at the request of Lender; (C) Guarantor has full power, right and authority to enter into this
Guaranty; (D) the provisions of this Guaranty do not conflict with or result in a default under any
agreement or other instrument binding upon Guarantor and do not result in a violation of any law,
regulation, court decree or order applicable to Guarantor; (E) Guarantor has not and will not,
without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor’s assets, or any interest therein;
(F) upon Lender’s request, Guarantor will provide to Lender financial and credit information in
form acceptable to Lender, and all such financial information which currently has been, and all
future financial information which will be provided to Lender is and will be true and correct in
all material respects and fairly present Guarantor’s financial condition as of the dates the
financial information is provided; (G) no material adverse change has occurred in Guarantor’s
financial condition since the date of the most recent financial statements provided to Lender and
no event has occurred which may materially adversely affect Guarantor’s financial condition; (H) no
litigation, claim, investigation, administrative proceeding or similar action (including those for
unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made no representation to
Guarantor as to the creditworthiness of Borrower; and (J) Guarantor has established adequate means
of obtaining from Borrower on a continuing basis information regarding Borrower’s financial
condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or
circumstances which might in any way affect Guarantor’s risks under this Guaranty, and Guarantor
further agrees that, absent a request for information, Lender shall have no obligation to disclose
to Guarantor any information or documents acquired by Lender in the course of its relationship with
Borrower.



GUARANTOR’S WAIVERS. Except as prohibited by applicable law, Guarantor waives any right to require
Lender (A) to continue lending money or to extend other credit to Borrower; (B) to make any
presentment, protest, demand, or notice of any kind, including notice of any nonpayment of the
Indebtedness or of any nonpayment related to any collateral, or notice of any action or nonaction
on the part of Borrower, Lender, any surety, endorser, or other guarantor in connection with the
Indebtedness or in connection with the creation of new or additional loans or obligations; (C) to
resort for payment onto proceed directly or at once against




 









 








					
	 
	 	COMMERCIAL GUARANTY	 	 
	Loan No: 108002882
	 	(Continued)
	 	Page 2





any person, including Borrower or any other guarantor; (D) to proceed directly against or exhaust
any collateral held by Lender from Borrower, any other guarantor, or any other person; (E) to give
notice of the terms, time, and place of any public or private sale of personal property security
held by Lender from Borrower or to comply with any other applicable provisions of the Uniform
Commercial Code; (F) to pursue any other remedy within Lender’s power; or (G) to commit any act or
omission of any kind, or at any time, with respect to any matter whatsoever.



Guarantor also waives any and all rights or defenses based on suretyship or impairment of
collateral including, but not limited to, any rights or defenses arising by reason of (A) any “one
action” or “anti-deficiency” law or any other law which may prevent Lender from bringing any
action, including a claim for deficiency, against Guarantor, before or after Lender’s commencement
or completion of any foreclosure action, either judicially or by exercise of a power of sale; (B)
any election of remedies by Lender which destroys or otherwise adversely affects Guarantor’s
subrogation rights or Guarantor’s rights to proceed against Borrower for reimbursement, including
without limitation, any loss of rights Guarantor may suffer by reason of any law limiting,
qualifying, or discharging the Indebtedness; (C) any disability or other defense of Borrower, of
any other guarantor, or of any other person, or by reason of the cessation of Borrower’s liability
from any cause whatsoever, other than payment in full in legal tender, of the Indebtedness; (D) any
right to claim discharge of the indebtedness on the basis of unjustified impairment of any
collateral for the Indebtedness; (E) any statute of limitations, If at any time any action or suit
brought by Lender against Guarantor is commenced, there is outstanding Indebtedness which is not
barred by any applicable statute of limitations; or (F) any defenses given to guarantors at law or
in equity other than actual payment and performance of the Indebtedness. If payment is made by
Borrower, whether voluntarily or otherwise, or by any third party, on the indebtedness and
thereafter Lender is forced to remit the amount of that payment to Borrower’s trustee in bankruptcy
or to any similar person under any federal or state bankruptcy law or law for the relief of
debtors, the Indebtedness shall be considered unpaid for the purpose of the enforcement of this
Guaranty.



Guarantor further waives and agrees not to assert or claim at any time any deductions to the amount
guaranteed under this Guaranty for any claim of setoff, counterclaim, counter demand, recoupment or
similar right, whether such claim, demand or right may be asserted by the Borrower, the Guarantor,
or both.



GUARANTOR’S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees that each of the
waivers set forth above is made with Guarantor’s full knowledge of its significance and
consequences and that, under the circumstances, the waivers are reasonable and not contrary to
public policy or law. If any such waiver is determined to be contrary to any applicable law or
public policy, such waiver shall be effective only to the extent permitted by law or public policy.



SUBORDINATION OF BORROWER’S DEBTS TO GUARANTOR. Guarantor agrees that the indebtedness, whether
now existing or hereafter created, shall be superior to any claim that Guarantor may now have or
hereafter acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever,
to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency
and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the
benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to
the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first
applied by Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims which it
may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose of assuring to
Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or
credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor
shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to
Lender. Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to
time to file financing statements and continuation statements and to execute documents and to take
such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.



MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Guaranty:





Amendments. This Guaranty, together with any Related Documents, constitutes the entire
understanding and agreement of the parties as to the matters set forth in this Guaranty. No
alteration of or amendment to this Guaranty shall be effective unless given in writing and
signed by the party or parties sought to be charged or bound by the alteration or amendment.




Attorneys’ Fees; Expenses. Guarantor agrees to pay upon demand all of Lender’s costs and
expenses, including Lender’s attorneys’ fees and Lender’s legal expenses, incurred in connection
with the enforcement of this Guaranty. Lender may hire or pay someone else to help enforce this
Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and
expenses include Lender’s attorneys’ fees and legal expenses whether or not there is a lawsuit,
including attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. Guarantor also shall pay all court costs and such additional fees as may
be directed by the court.




Caption Headings. Caption headings in this Guaranty are for convenience purposes only and are
not to be used to interpret or define the provisions of this Guaranty.




Governing Law. This Guaranty will be governed by federal law applicable to Lender and, to the
extent not preempted by federal law, the laws of the State of Iowa without regard to its
conflicts of law provisions. This Guaranty has been accepted by Lender in the State of Iowa.




Integration. Guarantor further agrees that Guarantor has read and fully understands the terms
of this Guaranty; Guarantor has had the opportunity to be advised by Guarantor’s attorney with
respect to this Guaranty; the Guaranty fully reflects Guarantor’s intentions and parol evidence
is not required to interpret the terms of this Guaranty. Guarantor hereby indemnifies and holds
Lender harmless from all losses, claims, damages, and costs (including Lender’s attorneys’ fees)
suffered or incurred by Lender as a result of any breach by Guarantor of the warranties,
representations and agreements of this paragraph.




Interpretation. In all cases where there is more than one Borrower or Guarantor, then all words
used in this Guaranty in the singular shall be deemed to have been used in the plural where the
context and construction so require; and where there is more than one Borrower named in this
Guaranty or when this Guaranty is executed by more than one Guarantor, the words “Borrower” and
“Guarantor” respectively shall mean all and any one or more of them. The words “Guarantor,”
“Borrower,” and “Lender” include the heirs, successors, assigns, and transferees of each of
them. If a court finds that any provision of this Guaranty is not valid or should not be
enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or
enforced. Therefore, a court will enforce the rest of the provisions of this Guaranty even if a
provision of this Guaranty may be found to be invalid or unenforceable. If any one or more of
Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar
entities, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or
of the officers, directors, partners, managers, or other agents acting or purporting to act on
their behalf and any indebtedness made or created in reliance upon the professed exercise of
such powers shall be guaranteed under this Guaranty.




Notices. Any notice required to be given under this Guaranty shall be given in writing, and
shall be effective when actually delivered, when actually received by telefacimiles (unless
otherwise required by law), when deposited with a nationally recognized overnight courier, or,
if mailed, when deposited in the United States mail, as first class, certified or registered
mail postage prepaid, directed to the addresses shown near the beginning of this Guaranty. Any
party may change its address for notices under this Guaranty by giving formal written notice to
the other parties, specifying that the purpose of the notice is to change the party’s address.
For notices purposes, Guarantor agrees to keep Lender informed at all times of Guarantor’s
current address. Unless otherwise provided or required by law, if there is more than one
Guarantor, any notice given by Lender to any Guarantor is deemed to be notice given to all
Guarantors.




No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Guaranty
unless such waiver is given in writing and signed by Lender. No delay or omission on the part
of Lender in exercising any right shall operate as a waiver of such right or any other right. A
waiver by Lender of a



 









 





					
	 
	 	COMMERCIAL GUARANTY	 	 
	Loan No: 108002882
	 	(Continued)
	 	Page 3







provision of this Guaranty shall not prejudice or constitute a waiver of Lender’s right
otherwise to demand strict compliance with that provision or any other provision of this
Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor,
shall constitute a waiver of any of Lender’s rights or of any of Guarantor’s obligations as to
any future transactions. Whenever the consent of Lender is required under this Guaranty, the
granting of such consent by Lender in any instance shall not constitute continuing consent to
subsequent instances where such consent is required and in all cases such consent may be granted
or withheld in the sole discretion of Lender.




Successors and Assigns. Subject to any limitations stated in this Guaranty on transfer of
Guarantor’s interest, this Guaranty shall be binding upon and inure to the benefit of the
parties, their successors and assigns.


DEFINITIONS. The following capitalized words and terms shall have the following meanings when used
in this Guaranty. Unless specifically stated to the contrary, all references to dollar amounts
shall mean amounts in lawful money of the United States of America. Words and terms used in the
singular shall include the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Guaranty shall have the meanings attributed
to such terms in the Uniform Commercial Code:





Borrower. The word “Borrower” means Southern Iowa BioEnergy LLC and includes all co-signers and
co-makers signing the Note and all their successors and assigns.




Guarantor. The word “Guarantor” means everyone signing this Guaranty, including without
limitation Jack Cooley, and in each case, any signer’s successors and assigns.




Guarantor’s Share of the Indebtedness. The words “Guarantor’s Share of Indebtedness” means
Guarantor’s indebtedness to Lender as more particularly described in this Guaranty.




Guaranty. The word “Guaranty” means this guaranty from Guarantor to Lender.




Indebtedness. The word “Indebtedness” means Borrower’s indebtedness to Lender as more
particularly described in this Guaranty.




Lender. The word “Lender” means Great Western Bank, its successors and assigns.




Note. The word “Note” means the promissory note dated June 12, 2006, in the original principal
amount of $2,200,000.00 from Borrower to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of, and substitutions for the promissory note
or agreement.




Related Documents. The words “Related Documents” mean all promissory notes, credit agreements,
loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, security deeds, collateral mortgages, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection with the Indebtedness.


EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES
TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON
GUARANTOR’S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE
UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY”. NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED JUNE 12,
2006.



GUARANTOR ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS COMMERCIAL GUARANTY AND ALL OTHER
DOCUMENTS RELATING TO THIS DEBT.




	 	 	 	 	 
	GUARANTOR:	 	 
	 
	 	 	 	 
	x

	 	/s/ William T. Higdon	 	 
	 

	 	 

William T. Higdon
	 	 






 




INDIVIDUAL ACKNOWLEDGEMENT




	 	 	 	 	 	 	 
	STATE OF Iowa

	 	 	)	 	 	 
	 

	 	 	)	 	 	ss
	COUNTY OF Decatur

	 	 	)	 	 	 





On this 12th day of June, A.D., 2006, before me, a Notary Public in and for
said County and State, personally appeared William T. Higdon, to me known to be the person named in
and who executed the foregoing instrument and acknowledgement that he or she executed the same as
his or her voluntary act and deed.




	 	 	 	 	 
	 

	 	/s/ Marcia L. McAlpin	 	 
	 

	 	 

	 	 
	NOTARY SEAL

	 	Notary Public in and for the State of Iowa	 	 
	 
	 	 	 	 
	 

	 	/s/Marcia L. McAlpin	 	 
	 

	 	 

	 	 







 









 








COMMERCIAL GUARANTY




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Call / Coll	 	 	 	Officer	 	 
	Principal	 	Loan Date	 	Maturity	 	Loan No.	 	IE / 150	 	Account	 	TLG	 	Initials
	References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.
Any item above containing ***** has been omitted due to text length limitations.






	 	 	 	 	 	 	 
	Borrower:

	 	Southern Iowa BioEnergy LLC (TIN: 20-2226223)
	 	Lender:
	 	Great Western Bank
	 

	 	5 So Linden
	 	 	 	Leon
	 

	 	Lamoni, IA 50140
	 	 	 	111 N. Main
	 

	 	 	 	 	 	PO Box 171
	 

	 	 	 	 	 	Leon, IA 50144
	Guarantor:

	 	William Douglas Morain (SSN: ###-##-####)	 	 	 	 
	 

	 	1810 240th Avenue	 	 	 	 
	 

	 	Osceola, IA 50213	 	 	 	 






GUARANTEE OF PAYMENT AND PERFORMANCE. For good and valuable consideration, Guarantor absolutely
and unconditionally guarantees full and punctual payment and satisfaction of Guarantor’s Share of
the Indebtedness of Borrower to Lender, and the performance and discharge of all Borrower’s
obligations under the Note and the Related Documents. This is a guaranty of payment and performance
and not of collection, so Lender can enforce this Guaranty against Guarantor even when Lender has
not exhausted Lender’s remedies against anyone else obligated to pay the Indebtedness or against
any collateral securing the Indebtedness, this Guaranty or any other guaranty of the Indebtedness.
Guarantor will make any payments to Lender or its order, on demand, in legal tender of the United
States of America, in same-day funds, without set-off or deduction or counterclaim, and will
otherwise perform Borrower’s obligations under the Note and Related Documents.



INDEBTEDNESS. The word “Indebtedness” as used in this Guaranty means all of the principal amount
outstanding from time to time and at any one or more times, accrued unpaid interest thereon and all
collection costs and legal expenses related thereto permitted by law, attorneys’ fees, arising from
any and all debts, liabilities and obligations that Borrower individually or collectively or
interchangeably with others, owes or will owe Lender under the Note and Related Documents and any
renewals, extensions, modifications, refinancings, consolidations and substitutions. of the Note
and Related Documents.



If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from
Guarantor, Lender’s rights under all guaranties shall be cumulative. This Guaranty shall not
(unless specifically provided below to the contrary) affect or invalidate any such other
guaranties. Guarantor’s liability will be Guarantor’s aggregate liability under the terms of this
Guaranty and any such other unterminated guaranties.



GUARANTOR’S SHARE OF THE INDEBTEDNESS. The words “Guarantor’s Share of the Indebtedness” as used in
this Guaranty mean an amount not to exceed Three Hundred Thousand & 00/100 Dollars ($300,000.00) of
all the principal amount, interest thereon to the extent not prohibited by law, and all collection
costs, expenses and attorneys’ fees whether or not there is a lawsuit, and if there is a lawsuit,
any fees and costs for trial and appeals.



Guarantor’s Share of the indebtedness will only be reduced by sums actually paid by Guarantor under
this Guaranty, but will not be reduced by sums from any other source including, but not limited to,
sums realized from any collateral securing the Indebtedness or this Guaranty, or payments by anyone
other than Guarantor, or reductions by operation of law, judicial order or equitable principles.
Lender has the sole and absolute discretion to determine how sums shall be applied among guaranties
of the Indebtedness.



The above limitation on liability is not a restriction on the amount of the Note of Borrower to
Lender either in the aggregate or at any one time.



DURATION OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity
of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full
force until all the Indebtedness shall have been fully and finally paid and satisfied and all of
Guarantor’s other obligations under this Guaranty shall have been performed in full. Release of any
other guarantor or termination of any other guaranty of the indebtedness shall not affect the
liability of Guarantor under this Guaranty. A revocation Lender receives from any one or more
Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty.



GUARANTOR’S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, without notice or demand and
without lessening Guarantor’s liability under this Guaranty, from time to time: (A) to make one or
more additional secured or unsecured loans to Borrower, to lease equipment or other goods to
Borrower, or otherwise to extend additional credit to Borrower; (B) to alter, compromise, renew,
extend, accelerate, or otherwise change one or more times the time for payment or other terms of
the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of
interest on the Indebtedness; extensions may be repeated and may be for longer than the original
loan term; (C) to take and hold security for the payment of this Guaranty or the Indebtedness, and
exchange, enforce, ‘waive, subordinate, fail or decide not to perfect, and release any such
security, with or without the substitution of new collateral; (D) to release, substitute, agree not
to sue, or deal with any one or more of Borrower’s sureties, endorsers, or other guarantors on any
terms or in any manner Lender may choose; (E) to determine how, when and what application of
payments and credits shall be made on the Indebtedness; (F) to apply such security and direct the
order or manner of sale thereof, including without limitation, any nonjudicial sale permitted by
the terms of the controlling security agreement or deed of trust, as Lender in its discretion may
determine; (G) to sell, transfer, assign or grant participations in all or any part of the
Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.



GUARANTOR’S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (A) no
representations or agreements of any kind have been made to Guarantor which would limit or qualify
in any way the terms of this Guaranty; (B) this Guaranty is executed at Borrower’s request and not
at the request of Lender; (C) Guarantor has full power, right and authority to enter into this
Guaranty; (D) the provisions of this Guaranty do not conflict with or result in a default under any
agreement or other instrument binding upon Guarantor and do not result in a violation of any law,
regulation, court decree or order applicable to Guarantor; (E) Guarantor has not and will not,
without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor’s assets, or any interest therein;
(F) upon Lender’s request, Guarantor will provide to Lender financial and credit information in
form acceptable to Lender, and all such financial information which currently has been, and all
future financial information which will be provided to Lender is and will be true and correct in
all material respects and fairly present Guarantor’s financial condition as of the dates the
financial information is provided; (G) no material adverse change has occurred in Guarantor’s
financial condition since the date of the most recent financial statements provided to Lender and
no event has occurred which may materially adversely affect Guarantor’s financial condition; (H) no
litigation, claim, investigation, administrative proceeding or similar action (including those for
unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made no representation to
Guarantor as to the creditworthiness of Borrower; and (J) Guarantor has established adequate means
of obtaining from Borrower on a continuing basis information regarding Borrower’s financial
condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or
circumstances which might in any way affect Guarantor’s risks under this Guaranty, and Guarantor
further agrees that, absent a request for information, Lender shall have no obligation to disclose
to Guarantor any information or documents acquired by Lender in the course of its relationship with
Borrower.



GUARANTOR’S WAIVERS. Except as prohibited by applicable law, Guarantor waives any right to require
Lender (A) to continue lending money or to extend other credit to Borrower; (B) to make any
presentment, protest, demand, or notice of any kind, including notice of any nonpayment of the
Indebtedness or of any nonpayment related to any collateral, or notice of any action or nonaction
on the part of Borrower, Lender, any surety, endorser, or other guarantor in connection with the
Indebtedness or in connection with the creation of new or additional loans or obligations; (C) to
resort for payment onto proceed directly or at once against



 









 





	 	 	 	 	 
	 

	 	COMMERCIAL GUARANTY	 	 
	Loan No: 108002882

	 	(Continued)
	 	Page 2






any person, including Borrower or any other guarantor; (D) to proceed directly against or exhaust
any collateral held by Lender from Borrower, any other guarantor, or any other person; (E) to give
notice of the terms, time, and place of any public or private sale of personal property security
held by Lender from Borrower or to comply with any other applicable provisions of the Uniform
Commercial Code; (F) to pursue any other remedy within Lender’s power; or (G) to commit any act or
omission of any kind, or at any time, with respect to any matter whatsoever.



Guarantor also waives any and all rights or defenses based on suretyship or impairment of
collateral including, but not limited to, any rights or defenses arising by reason of (A) any “one
action” or “anti-deficiency” law or any other law which may prevent Lender from bringing any
action, including a claim for deficiency, against Guarantor, before or after Lender’s commencement
or completion of any foreclosure action, either judicially or by exercise of a power of sale; (B)
any election of remedies by Lender which destroys or otherwise adversely affects Guarantor’s
subrogation rights or Guarantor’s rights to proceed against Borrower for reimbursement, including
without limitation, any loss of rights Guarantor may suffer by reason of any law limiting,
qualifying, or discharging the Indebtedness; (C) any disability or other defense of Borrower, of
any other guarantor, or of any other person, or by reason of the cessation of Borrower’s liability
from any cause whatsoever, other than payment in full in legal tender, of the Indebtedness; (D) any
right to claim discharge of the indebtedness on the basis of unjustified impairment of any
collateral for the Indebtedness; (E) any statute of limitations, If at any time any action or suit
brought by Lender against Guarantor is commenced, there is outstanding Indebtedness which is not
barred by any applicable statute of limitations; or (F) any defenses given to guarantors at law or
in equity other than actual payment and performance of the Indebtedness. If payment is made by
Borrower, whether voluntarily or otherwise, or by any third party, on the indebtedness and
thereafter Lender is forced to remit the amount of that payment to Borrower’s trustee in bankruptcy
or to any similar person under any federal or state bankruptcy law or law for the relief of
debtors, the Indebtedness shall be considered unpaid for the purpose of the enforcement of this
Guaranty.



Guarantor further waives and agrees not to assert or claim at any time any deductions to the amount
guaranteed under this Guaranty for any claim of setoff, counterclaim, counter demand, recoupment or
similar right, whether such claim, demand or right may be asserted by the Borrower, the Guarantor,
or both.



GUARANTOR’S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees that each of the
waivers set forth above is made with Guarantor’s full knowledge of its significance and
consequences and that, under the circumstances, the waivers are reasonable and not contrary to
public policy or law. If any such waiver is determined to be contrary to any applicable law or
public policy, such waiver shall be effective only to the extent permitted by law or public policy.



SUBORDINATION OF BORROWER’S DEBTS TO GUARANTOR. Guarantor agrees that the indebtedness, whether
now existing or hereafter created, shall be superior to any claim that Guarantor may now have or
hereafter acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever,
to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency
and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the
benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to
the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first
applied by Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims which it
may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose of assuring to
Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or
credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor
shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to
Lender. Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to
time to file financing statements and continuation statements and to execute documents and to take
such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.



MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Guaranty:




Amendments. This Guaranty, together with any Related Documents, constitutes the entire
understanding and agreement of the parties as to the matters set forth in this Guaranty. No
alteration of or amendment to this Guaranty shall be effective unless given in writing and
signed by the party or parties sought to be charged or bound by the alteration or amendment.




Attorneys’ Fees; Expenses. Guarantor agrees to pay upon demand all of Lender’s costs and
expenses, including Lender’s attorneys’ fees and Lender’s legal expenses, incurred in connection
with the enforcement of this Guaranty. Lender may hire or pay someone else to help enforce this
Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and
expenses include Lender’s attorneys’ fees and legal expenses whether or not there is a lawsuit,
including attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. Guarantor also shall pay all court costs and such additional fees as may
be directed by the court.




Caption Headings. Caption headings in this Guaranty are for convenience purposes only and are
not to be used to interpret or define the provisions of this Guaranty.




Governing Law. This Guaranty will be governed by federal law applicable to Lender and, to the
extent not preempted by federal law, the laws of the State of Iowa without regard to its
conflicts of law provisions. This Guaranty has been accepted by Lender in the State of Iowa.




Integration. Guarantor further agrees that Guarantor has read and fully understands the terms
of this Guaranty; Guarantor has had the opportunity to be advised by Guarantor’s attorney with
respect to this Guaranty; the Guaranty fully reflects Guarantor’s intentions and parol evidence
is not required to interpret the terms of this Guaranty. Guarantor hereby indemnifies and holds
Lender harmless from all losses, claims, damages, and costs (including Lender’s attorneys’ fees)
suffered or incurred by Lender as a result of any breach by Guarantor of the warranties,
representations and agreements of this paragraph.




Interpretation. In all cases where there is more than one Borrower or Guarantor, then all words
used in this Guaranty in the singular shall be deemed to have been used in the plural where the
context and construction so require; and where there is more than one Borrower named in this
Guaranty or when this Guaranty is executed by more than one Guarantor, the words “Borrower” and
“Guarantor” respectively shall mean all and any one or more of them. The words “Guarantor,”
“Borrower,” and “Lender” include the heirs, successors, assigns, and transferees of each of
them. If a court finds that any provision of this Guaranty is not valid or should not be
enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or
enforced. Therefore, a court will enforce the rest of the provisions of this Guaranty even if a
provision of this Guaranty may be found to be invalid or unenforceable. If any one or more of
Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar
entities, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or
of the officers, directors, partners, managers, or other agents acting or purporting to act on
their behalf and any indebtedness made or created in reliance upon the professed exercise of
such powers shall be guaranteed under this Guaranty.




Notices. Any notice required to be given under this Guaranty shall be given in writing, and
shall be effective when actually delivered, when actually received by telefacimiles (unless
otherwise required by law), when deposited with a nationally recognized overnight courier, or,
if mailed, when deposited in the United States mail, as first class, certified or registered
mail postage prepaid, directed to the addresses shown near the beginning of this Guaranty. Any
party may change its address for notices under this Guaranty by giving formal written notice to
the other parties, specifying that the purpose of the notice is to change the party’s address.
For notices purposes, Guarantor agrees to keep Lender informed at all times of Guarantor’s
current address. Unless otherwise provided or required by law, if there is more than one
Guarantor, any notice given by Lender to any Guarantor is deemed to be notice given to all
Guarantors.



 









 





	 	 	 	 	 
	 

	 	COMMERCIAL GUARANTY	 	 
	Loan No: 108002882

	 	(Continued)
	 	Page 3







No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Guaranty
unless such waiver is given in writing and signed by Lender. No delay or omission on the part
of Lender in exercising any right shall operate as a waiver of such right or any other right. A
waiver by Lender of a provision of this Guaranty shall not prejudice or constitute a waiver of
Lender’s right otherwise to demand strict compliance with that provision or any other provision
of this Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and
Guarantor, shall constitute a waiver of any of Lender’s rights or of any of Guarantor’s
obligations as to any future transactions. Whenever the consent of Lender is required under
this Guaranty, the granting of such consent by Lender in any instance shall not constitute
continuing consent to subsequent instances where such consent is required and in all cases such
consent may be granted or withheld in the sole discretion of Lender.




Successors and Assigns. Subject to any limitations stated in this Guaranty on transfer of
Guarantor’s interest, this Guaranty shall be binding upon and inure to the benefit of the
parties, their successors and assigns.



DEFINITIONS. The following capitalized words and terms shall have the following meanings when used
in this Guaranty. Unless specifically stated to the contrary, all references to dollar amounts
shall mean amounts in lawful money of the United States of America. Words and terms used in the
singular shall include the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Guaranty shall have the meanings attributed
to such terms in the Uniform Commercial Code:




Borrower. The word “Borrower” means Southern Iowa BioEnergy LLC and includes all co-signers and
co-makers signing the Note and all their successors and assigns.




Guarantor. The word “Guarantor” means everyone signing this Guaranty, including without
limitation Jack Cooley, and in each case, any signer’s successors and assigns.




Guarantor’s Share of the Indebtedness. The words “Guarantor’s Share of Indebtedness” means
Guarantor’s indebtedness to Lender as more particularly described in this Guaranty.




Guaranty. The word “Guaranty” means this guaranty from Guarantor to Lender.




Indebtedness. The word “Indebtedness” means Borrower’s indebtedness to Lender as more
particularly described in this Guaranty.




Lender. The word “Lender” means Great Western Bank, its successors and assigns.




Note. The word “Note” means the promissory note dated June 12, 2006, in the original principal
amount of $2,200,000.00 from Borrower to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of, and substitutions for the promissory note
or agreement.




Related Documents. The words “Related Documents” mean all promissory notes, credit agreements,
loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, security deeds, collateral mortgages, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection with the Indebtedness.



EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES
TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON
GUARANTOR’S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE
UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY”. NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED JUNE 12,
2006.



GUARANTOR ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS COMMERCIAL GUARANTY AND ALL OTHER
DOCUMENTS RELATING TO THIS DEBT.



GUARANTOR:




	 	 	 	 	 
	x

	 	/s/ William Douglas Morain	 	 
	 

	 	 

William Douglas Morain
	 	 






 




INDIVIDUAL ACKNOWLEDGEMENT




	 	 	 	 	 
	STATE OF Iowa

	 	)	 	 
	 

	 	) ss

	COUNTY OF Decatur

	 	)	 	 






On this 12th day of June, A.D., 2006, before me, a Notary Public in and for
said County and State, personally appeared William Douglas Morain, to me known to be the person
named in and who executed the foregoing instrument and acknowledgement that he or she executed the
same as his or her voluntary act and deed.



	 	 	 	 	 	 	 
	 

	 	 	 	/s/ Marcia L. McAlpin	 	 
	 

	 	NOTARY SEAL
	 	 

Notary Public in and for the State of Iowa
	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	/s/Marcia L. McAlpin	 	 
	 

	 	 	 	 	 	 





 









 





Prepared by Marcia McAlpin, Great Western Bank, PO Box 171, Leon, Iowa 50144, phone: (641)
446-4841


 





COLLATERAL ASSIGNMENT OF AGREEMENT FOR

PRE-CONSTRUCTION SERVICES




KNOW ALL MEN BY THESE PRESENTS: In consideration of a $2,200,000.00 loan for Southern Iowa
Bioenergy, LLC by Great Western Bank. Leon, Iowa, GRANTEE (hereinafter referred to as BANK),
receipt of which is hereby acknowledged, Southern Iowa Bioenergy, LLC, Lamoni & Osceola, Iowa.
(hereinafter collectively referred to as GRANTOR), and by these presents does assign transfer and
convey to BANK all GRANTOR’S right, title and interest in and to a certain Contract between,
Renewable Energy Group, LLC, Ralston, Iowa, vendor(s) and, Southern Iowa Bioenergy, LLC
purchaser(s) conveying the attached Agreement for Pre-Construction Services.



This assignment is given as additional security by GRANTOR to secure a certain Agreement for
Pre-Construction Services dated the 12th day of June, 2006, wherein GRANTOR is GRANTOR, and Great
Western Bank is GRANTEE.



To have and to hold the same unto BANK, its successors and assigns, subject only to the provisions
of said Agreement for Pre Construction Services and to the condition that if the said GRANTOR, his
personal representative or assigns shall pay BANK the principle sum of $2,200,000 with interest
according to the terms and conditions of a promissory note bearing even date herewith (or any
renewal or extension thereof) then this conveyance to be void; otherwise to be in full force and
effect.



Words and phrases herein, including acknowledgment hereof, shall be construed as in the singular or
plural number, and as masculine, feminine or neuter gender, according to the context.



Dated this 12th day of June, 2006.



	 	 	 	 	 	 	 	 	 
	 

	 	Southern Iowa Bioenergy, LLC
	 	 	 	Southern Iowa Bioenergy, LLC	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	/s/ William T. Higdon
	 	 	 	/s/ Alan Elefson	 	 
	 

	 	 

William Higdon, President
	 	 	 	 

Alan Elefson, Treasurer
	 	 
	 

	 	Southern Iowa Bioenergy, LLC
	 	 	 	Southern Iowa Bioenergy, LLC	 	 






INDIVIDUAL ACKNOWLEDGEMENT




	 	 	 	 	 
	STATE OF IOWA

	 	)	 	 
	 

	 	)	 ss	 
	COUNTY OF DECATUR
	 	 	 	 






On this 12th day of June, A.D., 2006, before me personally came William Higdon,
President, to me known to be the individual described in and who executed the assignment and
acknowledged to me that they executed the same.



	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	/s/ Marcia L. McAlpin	 	 
	 

	 	NOTARY SEAL
	 	 	 	 

   Notary Public
	 	 






INDIVIDUAL ACKNOWLEDGEMENT




	 	 	 	 	 
	STATE OF IOWA

	 	)	 	 
	 

	 	) ss

	COUNTY OF DECATUR

	 	)	 	 






On this 12th day of June, A.D., 2006, before me personally came Alan Elefson,
Treasurer, to me known to be the individual described in and who executed the assignment and
acknowledged to me that they executed the same.



	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	/s/ Marcia L. McAlpin	 	 
	 

	 	NOTARY SEAL
	 	 	 	 

   Notary Public
	 	 






 









 





COMMERCIAL GUARANTY




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Call / Coll	 	 	 	Officer	 	 
	Principal	 	Loan Date	 	Maturity	 	Loan No.	 	IE / 150	 	Account	 	TLG	 	Initials
	References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.
Any item above containing ***** has been omitted due to text length limitations.






	 	 	 	 	 	 	 
	Borrower:

	 	Southern Iowa BioEnergy LLC (TIN: 20-2226223)
	 	Lender:
	 	Great Western Bank
	 

	 	5 So Linden
	 	 	 	Leon
	 

	 	Lamoni, IA 50140
	 	 	 	111 N. Main
	 

	 	 	 	 	 	PO Box 171
	 

	 	 	 	 	 	Leon, IA 50144
	Guarantor:

	 	Leon G. Kessel (SSN: ###-##-####)	 	 	 	 
	 

	 	1810 240th Avenue	 	 	 	 
	 

	 	Osceola, IA 50213	 	 	 	 






GUARANTEE OF PAYMENT AND PERFORMANCE. For good and valuable consideration, Guarantor absolutely
and unconditionally guarantees full and punctual payment and satisfaction of Guarantor’s Share of
the Indebtedness of Borrower to Lender, and the performance and discharge of all Borrower’s
obligations under the Note and the Related Documents. This is a guaranty of payment and performance
and not of collection, so Lender can enforce this Guaranty against Guarantor even when Lender has
not exhausted Lender’s remedies against anyone else obligated to pay the Indebtedness or against
any collateral securing the Indebtedness, this Guaranty or any other guaranty of the Indebtedness.
Guarantor will make any payments to Lender or its order, on demand, in legal tender of the United
States of America, in same-day funds, without set-off or deduction or counterclaim, and will
otherwise perform Borrower’s obligations under the Note and Related Documents.



INDEBTEDNESS. The word “Indebtedness” as used in this Guaranty means all of the principal amount
outstanding from time to time and at any one or more times, accrued unpaid interest thereon and all
collection costs and legal expenses related thereto permitted by law, attorneys’ fees, arising from
any and all debts, liabilities and obligations that Borrower individually or collectively or
interchangeably with others, owes or will owe Lender under the Note and Related Documents and any
renewals, extensions, modifications, refinancings, consolidations and substitutions. of the Note
and Related Documents.



If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from
Guarantor, Lender’s rights under all guaranties shall be cumulative. This Guaranty shall not
(unless specifically provided below to the contrary) affect or invalidate any such other
guaranties. Guarantor’s liability will be Guarantor’s aggregate liability under the terms of this
Guaranty and any such other unterminated guaranties.



GUARANTOR’S SHARE OF THE INDEBTEDNESS. The words “Guarantor’s Share of the Indebtedness” as used in
this Guaranty mean an amount not to exceed Three Hundred Thousand & 00/100 Dollars ($300,000.00) of
all the principal amount, interest thereon to the extent not prohibited by law, and all collection
costs, expenses and attorneys’ fees whether or not there is a lawsuit, and if there is a lawsuit,
any fees and costs for trial and appeals.



Guarantor’s Share of the indebtedness will only be reduced by sums actually paid by Guarantor under
this Guaranty, but will not be reduced by sums from any other source including, but not limited to,
sums realized from any collateral securing the Indebtedness or this Guaranty, or payments by anyone
other than Guarantor, or reductions by operation of law, judicial order or equitable principles.
Lender has the sole and absolute discretion to determine how sums shall be applied among guaranties
of the Indebtedness.



The above limitation on liability is not a restriction on the amount of the Note of Borrower to
Lender either in the aggregate or at any one time.



DURATION OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity
of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full
force until all the Indebtedness shall have been fully and finally paid and satisfied and all of
Guarantor’s other obligations under this Guaranty shall have been performed in full. Release of any
other guarantor or termination of any other guaranty of the indebtedness shall not affect the
liability of Guarantor under this Guaranty. A revocation Lender receives from any one or more
Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty.



GUARANTOR’S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, without notice or demand and
without lessening Guarantor’s liability under this Guaranty, from time to time: (A) to make one or
more additional secured or unsecured loans to Borrower, to lease equipment or other goods to
Borrower, or otherwise to extend additional credit to Borrower; (B) to alter, compromise, renew,
extend, accelerate, or otherwise change one or more times the time for payment or other terms of
the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of
interest on the Indebtedness; extensions may be repeated and may be for longer than the original
loan term; (C) to take and hold security for the payment of this Guaranty or the Indebtedness, and
exchange, enforce, ‘waive, subordinate, fail or decide not to perfect, and release any such
security, with or without the substitution of new collateral; (D) to release, substitute, agree not
to sue, or deal with any one or more of Borrower’s sureties, endorsers, or other guarantors on any
terms or in any manner Lender may choose; (E) to determine how, when and what application of
payments and credits shall be made on the Indebtedness; (F) to apply such security and direct the
order or manner of sale thereof, including without limitation, any nonjudicial sale permitted by
the terms of the controlling security agreement or deed of trust, as Lender in its discretion may
determine; (G) to sell, transfer, assign or grant participations in all or any part of the
Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.



GUARANTOR’S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (A) no
representations or agreements of any kind have been made to Guarantor which would limit or qualify
in any way the terms of this Guaranty; (B) this Guaranty is executed at Borrower’s request and not
at the request of Lender; (C) Guarantor has full power, right and authority to enter into this
Guaranty; (D) the provisions of this Guaranty do not conflict with or result in a default under any
agreement or other instrument binding upon Guarantor and do not result in a violation of any law,
regulation, court decree or order applicable to Guarantor; (E) Guarantor has not and will not,
without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor’s assets, or any interest therein;
(F) upon Lender’s request, Guarantor will provide to Lender financial and credit information in
form acceptable to Lender, and all such financial information which currently has been, and all
future financial information which will be provided to Lender is and will be true and correct in
all material respects and fairly present Guarantor’s financial condition as of the dates the
financial information is provided; (G) no material adverse change has occurred in Guarantor’s
financial condition since the date of the most recent financial statements provided to Lender and
no event has occurred which may materially adversely affect Guarantor’s financial condition; (H) no
litigation, claim, investigation, administrative proceeding or similar action (including those for
unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made no representation to
Guarantor as to the creditworthiness of Borrower; and (J) Guarantor has established adequate means
of obtaining from Borrower on a continuing basis information regarding Borrower’s financial
condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or
circumstances which might in any way affect Guarantor’s risks under this Guaranty, and Guarantor
further agrees that, absent a request for information, Lender shall have no obligation to disclose
to Guarantor any information or documents acquired by Lender in the course of its relationship with
Borrower.



GUARANTOR’S WAIVERS. Except as prohibited by applicable law, Guarantor waives any right to require
Lender (A) to continue lending money or to extend other credit to Borrower; (B) to make any
presentment, protest, demand, or notice of any kind, including notice of any nonpayment of the
Indebtedness or of any nonpayment related to any collateral, or notice of any action or nonaction
on the part of Borrower, Lender, any surety, endorser, or other guarantor in connection with the
Indebtedness or in connection with the creation of new or additional loans or obligations; (C) to
resort for payment onto proceed directly or at once against



 









 





	 	 	 	 	 
	 

	 	COMMERCIAL GUARANTY	 	 
	Loan No: 108002882

	 	(Continued)
	 	Page 2






any person, including Borrower or any other guarantor; (D) to proceed directly against or exhaust
any collateral held by Lender from Borrower, any other guarantor, or any other person; (E) to give
notice of the terms, time, and place of any public or private sale of personal property security
held by Lender from Borrower or to comply with any other applicable provisions of the Uniform
Commercial Code; (F) to pursue any other remedy within Lender’s power; or (G) to commit any act or
omission of any kind, or at any time, with respect to any matter whatsoever.



Guarantor also waives any and all rights or defenses based on suretyship or impairment of
collateral including, but not limited to, any rights or defenses arising by reason of (A) any “one
action” or “anti-deficiency” law or any other law which may prevent Lender from bringing any
action, including a claim for deficiency, against Guarantor, before or after Lender’s commencement
or completion of any foreclosure action, either judicially or by exercise of a power of sale; (B)
any election of remedies by Lender which destroys or otherwise adversely affects Guarantor’s
subrogation rights or Guarantor’s rights to proceed against Borrower for reimbursement, including
without limitation, any loss of rights Guarantor may suffer by reason of any law limiting,
qualifying, or discharging the Indebtedness; (C) any disability or other defense of Borrower, of
any other guarantor, or of any other person, or by reason of the cessation of Borrower’s liability
from any cause whatsoever, other than payment in full in legal tender, of the Indebtedness; (D) any
right to claim discharge of the indebtedness on the basis of unjustified impairment of any
collateral for the Indebtedness; (E) any statute of limitations, If at any time any action or suit
brought by Lender against Guarantor is commenced, there is outstanding Indebtedness which is not
barred by any applicable statute of limitations; or (F) any defenses given to guarantors at law or
in equity other than actual payment and performance of the Indebtedness. If payment is made by
Borrower, whether voluntarily or otherwise, or by any third party, on the indebtedness and
thereafter Lender is forced to remit the amount of that payment to Borrower’s trustee in bankruptcy
or to any similar person under any federal or state bankruptcy law or law for the relief of
debtors, the Indebtedness shall be considered unpaid for the purpose of the enforcement of this
Guaranty.



Guarantor further waives and agrees not to assert or claim at any time any deductions to the amount
guaranteed under this Guaranty for any claim of setoff, counterclaim, counter demand, recoupment or
similar right, whether such claim, demand or right may be asserted by the Borrower, the Guarantor,
or both.



GUARANTOR’S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees that each of the
waivers set forth above is made with Guarantor’s full knowledge of its significance and
consequences and that, under the circumstances, the waivers are reasonable and not contrary to
public policy or law. If any such waiver is determined to be contrary to any applicable law or
public policy, such waiver shall be effective only to the extent permitted by law or public policy.



SUBORDINATION OF BORROWER’S DEBTS TO GUARANTOR. Guarantor agrees that the indebtedness, whether
now existing or hereafter created, shall be superior to any claim that Guarantor may now have or
hereafter acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever,
to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency
and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the
benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to
the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first
applied by Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims which it
may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose of assuring to
Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or
credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor
shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to
Lender. Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to
time to file financing statements and continuation statements and to execute documents and to take
such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.



MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Guaranty:




Amendments. This Guaranty, together with any Related Documents, constitutes the entire
understanding and agreement of the parties as to the matters set forth in this Guaranty. No
alteration of or amendment to this Guaranty shall be effective unless given in writing and
signed by the party or parties sought to be charged or bound by the alteration or amendment.




Attorneys’ Fees; Expenses. Guarantor agrees to pay upon demand all of Lender’s costs and
expenses, including Lender’s attorneys’ fees and Lender’s legal expenses, incurred in connection
with the enforcement of this Guaranty. Lender may hire or pay someone else to help enforce this
Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and
expenses include Lender’s attorneys’ fees and legal expenses whether or not there is a lawsuit,
including attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. Guarantor also shall pay all court costs and such additional fees as may
be directed by the court.




Caption Headings. Caption headings in this Guaranty are for convenience purposes only and are
not to be used to interpret or define the provisions of this Guaranty.




Governing Law. This Guaranty will be governed by federal law applicable to Lender and, to the
extent not preempted by federal law, the laws of the State of Iowa without regard to its
conflicts of law provisions. This Guaranty has been accepted by Lender in the State of Iowa.




Integration. Guarantor further agrees that Guarantor has read and fully understands the terms
of this Guaranty; Guarantor has had the opportunity to be advised by Guarantor’s attorney with
respect to this Guaranty; the Guaranty fully reflects Guarantor’s intentions and parol evidence
is not required to interpret the terms of this Guaranty. Guarantor hereby indemnifies and holds
Lender harmless from all losses, claims, damages, and costs (including Lender’s attorneys’ fees)
suffered or incurred by Lender as a result of any breach by Guarantor of the warranties,
representations and agreements of this paragraph.




Interpretation. In all cases where there is more than one Borrower or Guarantor, then all words
used in this Guaranty in the singular shall be deemed to have been used in the plural where the
context and construction so require; and where there is more than one Borrower named in this
Guaranty or when this Guaranty is executed by more than one Guarantor, the words “Borrower” and
“Guarantor” respectively shall mean all and any one or more of them. The words “Guarantor,”
“Borrower,” and “Lender” include the heirs, successors, assigns, and transferees of each of
them. If a court finds that any provision of this Guaranty is not valid or should not be
enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or
enforced. Therefore, a court will enforce the rest of the provisions of this Guaranty even if a
provision of this Guaranty may be found to be invalid or unenforceable. If any one or more of
Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar
entities, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or
of the officers, directors, partners, managers, or other agents acting or purporting to act on
their behalf and any indebtedness made or created in reliance upon the professed exercise of
such powers shall be guaranteed under this Guaranty.




Notices. Any notice required to be given under this Guaranty shall be given in writing, and
shall be effective when actually delivered, when actually received by telefacimiles (unless
otherwise required by law), when deposited with a nationally recognized overnight courier, or,
if mailed, when deposited in the United States mail, as first class, certified or registered
mail postage prepaid, directed to the addresses shown near the beginning of this Guaranty. Any
party may change its address for notices under this Guaranty by giving formal written notice to
the other parties, specifying that the purpose of the notice is to change the party’s address.
For notices purposes, Guarantor agrees to keep Lender informed at all times of Guarantor’s
current address. Unless otherwise provided or required by law, if there is more than one
Guarantor, any notice given by Lender to any Guarantor is deemed to be notice given to all
Guarantors.




No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Guaranty
unless such waiver is given in writing and signed by Lender. No delay or omission on the part
of Lender in exercising any right shall operate as a waiver of such right or any other right. A
waiver by Lender of a



 









 





	 	 	 	 	 
	 

	 	COMMERCIAL GUARANTY	 	 
	Loan No: 108002882

	 	(Continued)
	 	Page 3







provision of this Guaranty shall not prejudice or constitute a waiver of Lender’s right
otherwise to demand strict compliance with that provision or any other provision of this
Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor,
shall constitute a waiver of any of Lender’s rights or of any of Guarantor’s obligations as to
any future transactions. Whenever the consent of Lender is required under this Guaranty, the
granting of such consent by Lender in any instance shall not constitute continuing consent to
subsequent instances where such consent is required and in all cases such consent may be granted
or withheld in the sole discretion of Lender.




Successors and Assigns. Subject to any limitations stated in this Guaranty on transfer of
Guarantor’s interest, this Guaranty shall be binding upon and inure to the benefit of the
parties, their successors and assigns.



DEFINITIONS. The following capitalized words and terms shall have the following meanings when used
in this Guaranty. Unless specifically stated to the contrary, all references to dollar amounts
shall mean amounts in lawful money of the United States of America. Words and terms used in the
singular shall include the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Guaranty shall have the meanings attributed
to such terms in the Uniform Commercial Code:




Borrower. The word “Borrower” means Southern Iowa BioEnergy LLC and includes all co-signers and
co-makers signing the Note and all their successors and assigns.




Guarantor. The word “Guarantor” means everyone signing this Guaranty, including without
limitation Jack Cooley, and in each case, any signer’s successors and assigns.




Guarantor’s Share of the Indebtedness. The words “Guarantor’s Share of Indebtedness” means
Guarantor’s indebtedness to Lender as more particularly described in this Guaranty.




Guaranty. The word “Guaranty” means this guaranty from Guarantor to Lender.




Indebtedness. The word “Indebtedness” means Borrower’s indebtedness to Lender as more
particularly described in this Guaranty.




Lender. The word “Lender” means Great Western Bank, its successors and assigns.




Note. The word “Note” means the promissory note dated June 12, 2006, in the original principal
amount of $2,200,000.00 from Borrower to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of, and substitutions for the promissory note
or agreement.




Related Documents. The words “Related Documents” mean all promissory notes, credit agreements,
loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, security deeds, collateral mortgages, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection with the Indebtedness.



EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES
TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON
GUARANTOR’S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE
UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY”. NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED JUNE 12,
2006.



GUARANTOR ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS COMMERCIAL GUARANTY AND ALL OTHER
DOCUMENTS RELATING TO THIS DEBT.



GUARANTOR:




	 	 	 	 	 
	x

	 	/s/ Leon G. Kessel	 	 
	 

	 	 

Leon G. Kessel
	 	 






 




INDIVIDUAL ACKNOWLEDGEMENT




	 	 	 	 	 
	STATE OF Iowa

	 	)	 	 
	 

	 	) ss

	COUNTY OF Decatur

	 	)	 	 






On this 12th day of June, A.D., 2006, before me, a Notary Public in and for
said County and State, personally appeared Leon G. Kessel, to me known to be the person named in
and who executed the foregoing instrument and acknowledgement that he or she executed the same as
his or her voluntary act and deed.



	 	 	 	 	 	 	 
	 

	 	 	 	/s/ Marcia L. McAlpin	 	 
	 

	 	NOTARY SEAL
	 	 

Notary Public in and for the State of Iowa
	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	/s/Marcia L. McAlpin	 	 
	 

	 	 	 	 	 	 





 









 





COMMERCIAL GUARANTY




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Call / Coll	 	 	 	Officer	 	 
	Principal	 	Loan Date	 	Maturity	 	Loan No.	 	IE / 150	 	Account	 	TLG	 	Initials
	References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.
Any item above containing ***** has been omitted due to text length limitations.






	 	 	 	 	 	 	 
	Borrower:

	 	Southern Iowa BioEnergy LLC (TIN: 20-2226223)
	 	Lender:
	 	Great Western Bank
	 

	 	5 So Linden
	 	 	 	Leon
	 

	 	Lamoni, IA 50140
	 	 	 	111 N. Main
	 

	 	 	 	 	 	PO Box 171
	 

	 	 	 	 	 	Leon, IA 50144
	Guarantor:

	 	James R. Cornett (SSN: ###-##-####)	 	 	 	 
	 

	 	1810 240th Avenue	 	 	 	 
	 

	 	Osceola, IA 50213	 	 	 	 






GUARANTEE OF PAYMENT AND PERFORMANCE. For good and valuable consideration, Guarantor absolutely
and unconditionally guarantees full and punctual payment and satisfaction of Guarantor’s Share of
the Indebtedness of Borrower to Lender, and the performance and discharge of all Borrower’s
obligations under the Note and the Related Documents. This is a guaranty of payment and performance
and not of collection, so Lender can enforce this Guaranty against Guarantor even when Lender has
not exhausted Lender’s remedies against anyone else obligated to pay the Indebtedness or against
any collateral securing the Indebtedness, this Guaranty or any other guaranty of the Indebtedness.
Guarantor will make any payments to Lender or its order, on demand, in legal tender of the United
States of America, in same-day funds, without set-off or deduction or counterclaim, and will
otherwise perform Borrower’s obligations under the Note and Related Documents.



INDEBTEDNESS. The word “Indebtedness” as used in this Guaranty means all of the principal amount
outstanding from time to time and at any one or more times, accrued unpaid interest thereon and all
collection costs and legal expenses related thereto permitted by law, attorneys’ fees, arising from
any and all debts, liabilities and obligations that Borrower individually or collectively or
interchangeably with others, owes or will owe Lender under the Note and Related Documents and any
renewals, extensions, modifications, refinancings, consolidations and substitutions. of the Note
and Related Documents.



If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from
Guarantor, Lender’s rights under all guaranties shall be cumulative. This Guaranty shall not
(unless specifically provided below to the contrary) affect or invalidate any such other
guaranties. Guarantor’s liability will be Guarantor’s aggregate liability under the terms of this
Guaranty and any such other unterminated guaranties.



GUARANTOR’S SHARE OF THE INDEBTEDNESS. The words “Guarantor’s Share of the Indebtedness” as used in
this Guaranty mean an amount not to exceed Three Hundred Thousand & 00/100 Dollars ($300,000.00) of
all the principal amount, interest thereon to the extent not prohibited by law, and all collection
costs, expenses and attorneys’ fees whether or not there is a lawsuit, and if there is a lawsuit,
any fees and costs for trial and appeals.



Guarantor’s Share of the indebtedness will only be reduced by sums actually paid by Guarantor under
this Guaranty, but will not be reduced by sums from any other source including, but not limited to,
sums realized from any collateral securing the Indebtedness or this Guaranty, or payments by anyone
other than Guarantor, or reductions by operation of law, judicial order or equitable principles.
Lender has the sole and absolute discretion to determine how sums shall be applied among guaranties
of the Indebtedness.



The above limitation on liability is not a restriction on the amount of the Note of Borrower to
Lender either in the aggregate or at any one time.



DURATION OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity
of any acceptance by Lender, or any notice to Guarantor or to Borrower, and will continue in full
force until all the Indebtedness shall have been fully and finally paid and satisfied and all of
Guarantor’s other obligations under this Guaranty shall have been performed in full. Release of any
other guarantor or termination of any other guaranty of the indebtedness shall not affect the
liability of Guarantor under this Guaranty. A revocation Lender receives from any one or more
Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty.



GUARANTOR’S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, without notice or demand and
without lessening Guarantor’s liability under this Guaranty, from time to time: (A) to make one or
more additional secured or unsecured loans to Borrower, to lease equipment or other goods to
Borrower, or otherwise to extend additional credit to Borrower; (B) to alter, compromise, renew,
extend, accelerate, or otherwise change one or more times the time for payment or other terms of
the Indebtedness or any part of the Indebtedness, including increases and decreases of the rate of
interest on the Indebtedness; extensions may be repeated and may be for longer than the original
loan term; (C) to take and hold security for the payment of this Guaranty or the Indebtedness, and
exchange, enforce, ‘waive, subordinate, fail or decide not to perfect, and release any such
security, with or without the substitution of new collateral; (D) to release, substitute, agree not
to sue, or deal with any one or more of Borrower’s sureties, endorsers, or other guarantors on any
terms or in any manner Lender may choose; (E) to determine how, when and what application of
payments and credits shall be made on the Indebtedness; (F) to apply such security and direct the
order or manner of sale thereof, including without limitation, any nonjudicial sale permitted by
the terms of the controlling security agreement or deed of trust, as Lender in its discretion may
determine; (G) to sell, transfer, assign or grant participations in all or any part of the
Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part.



GUARANTOR’S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (A) no
representations or agreements of any kind have been made to Guarantor which would limit or qualify
in any way the terms of this Guaranty; (B) this Guaranty is executed at Borrower’s request and not
at the request of Lender; (C) Guarantor has full power, right and authority to enter into this
Guaranty; (D) the provisions of this Guaranty do not conflict with or result in a default under any
agreement or other instrument binding upon Guarantor and do not result in a violation of any law,
regulation, court decree or order applicable to Guarantor; (E) Guarantor has not and will not,
without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer,
or otherwise dispose of all or substantially all of Guarantor’s assets, or any interest therein;
(F) upon Lender’s request, Guarantor will provide to Lender financial and credit information in
form acceptable to Lender, and all such financial information which currently has been, and all
future financial information which will be provided to Lender is and will be true and correct in
all material respects and fairly present Guarantor’s financial condition as of the dates the
financial information is provided; (G) no material adverse change has occurred in Guarantor’s
financial condition since the date of the most recent financial statements provided to Lender and
no event has occurred which may materially adversely affect Guarantor’s financial condition; (H) no
litigation, claim, investigation, administrative proceeding or similar action (including those for
unpaid taxes) against Guarantor is pending or threatened; (I) Lender has made no representation to
Guarantor as to the creditworthiness of Borrower; and (J) Guarantor has established adequate means
of obtaining from Borrower on a continuing basis information regarding Borrower’s financial
condition. Guarantor agrees to keep adequately informed from such means of any facts, events, or
circumstances which might in any way affect Guarantor’s risks under this Guaranty, and Guarantor
further agrees that, absent a request for information, Lender shall have no obligation to disclose
to Guarantor any information or documents acquired by Lender in the course of its relationship with
Borrower.



GUARANTOR’S WAIVERS. Except as prohibited by applicable law, Guarantor waives any right to require
Lender (A) to continue lending money or to extend other credit to Borrower; (B) to make any
presentment, protest, demand, or notice of any kind, including notice of any nonpayment of the
Indebtedness or of any nonpayment related to any collateral, or notice of any action or nonaction
on the part of Borrower, Lender, any surety, endorser, or other guarantor in connection with the
Indebtedness or in connection with the creation of new or additional loans or obligations; (C) to
resort for payment onto proceed directly or at once against



 









 





	 	 	 	 	 
	 

	 	COMMERCIAL GUARANTY	 	 
	Loan No: 108002882

	 	(Continued)
	 	Page 2






any person, including Borrower or any other guarantor; (D) to proceed directly against or exhaust
any collateral held by Lender from Borrower, any other guarantor, or any other person; (E) to give
notice of the terms, time, and place of any public or private sale of personal property security
held by Lender from Borrower or to comply with any other applicable provisions of the Uniform
Commercial Code; (F) to pursue any other remedy within Lender’s power; or (G) to commit any act or
omission of any kind, or at any time, with respect to any matter whatsoever.



Guarantor also waives any and all rights or defenses based on suretyship or impairment of
collateral including, but not limited to, any rights or defenses arising by reason of (A) any “one
action” or “anti-deficiency” law or any other law which may prevent Lender from bringing any
action, including a claim for deficiency, against Guarantor, before or after Lender’s commencement
or completion of any foreclosure action, either judicially or by exercise of a power of sale; (B)
any election of remedies by Lender which destroys or otherwise adversely affects Guarantor’s
subrogation rights or Guarantor’s rights to proceed against Borrower for reimbursement, including
without limitation, any loss of rights Guarantor may suffer by reason of any law limiting,
qualifying, or discharging the Indebtedness; (C) any disability or other defense of Borrower, of
any other guarantor, or of any other person, or by reason of the cessation of Borrower’s liability
from any cause whatsoever, other than payment in full in legal tender, of the Indebtedness; (D) any
right to claim discharge of the indebtedness on the basis of unjustified impairment of any
collateral for the Indebtedness; (E) any statute of limitations, If at any time any action or suit
brought by Lender against Guarantor is commenced, there is outstanding Indebtedness which is not
barred by any applicable statute of limitations; or (F) any defenses given to guarantors at law or
in equity other than actual payment and performance of the Indebtedness. If payment is made by
Borrower, whether voluntarily or otherwise, or by any third party, on the indebtedness and
thereafter Lender is forced to remit the amount of that payment to Borrower’s trustee in bankruptcy
or to any similar person under any federal or state bankruptcy law or law for the relief of
debtors, the Indebtedness shall be considered unpaid for the purpose of the enforcement of this
Guaranty.



Guarantor further waives and agrees not to assert or claim at any time any deductions to the amount
guaranteed under this Guaranty for any claim of setoff, counterclaim, counter demand, recoupment or
similar right, whether such claim, demand or right may be asserted by the Borrower, the Guarantor,
or both.



GUARANTOR’S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees that each of the
waivers set forth above is made with Guarantor’s full knowledge of its significance and
consequences and that, under the circumstances, the waivers are reasonable and not contrary to
public policy or law. If any such waiver is determined to be contrary to any applicable law or
public policy, such waiver shall be effective only to the extent permitted by law or public policy.



SUBORDINATION OF BORROWER’S DEBTS TO GUARANTOR. Guarantor agrees that the indebtedness, whether
now existing or hereafter created, shall be superior to any claim that Guarantor may now have or
hereafter acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby
expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever,
to any claim that Lender may now or hereafter have against Borrower. In the event of insolvency
and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the
benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to
the payment of the claims of both Lender and Guarantor shall be paid to Lender and shall be first
applied by Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims which it
may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower;
provided however, that such assignment shall be effective only for the purpose of assuring to
Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or
credit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor
shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to
Lender. Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to
time to file financing statements and continuation statements and to execute documents and to take
such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its
rights under this Guaranty.



MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Guaranty:




Amendments. This Guaranty, together with any Related Documents, constitutes the entire
understanding and agreement of the parties as to the matters set forth in this Guaranty. No
alteration of or amendment to this Guaranty shall be effective unless given in writing and
signed by the party or parties sought to be charged or bound by the alteration or amendment.




Attorneys’ Fees; Expenses. Guarantor agrees to pay upon demand all of Lender’s costs and
expenses, including Lender’s attorneys’ fees and Lender’s legal expenses, incurred in connection
with the enforcement of this Guaranty. Lender may hire or pay someone else to help enforce this
Guaranty, and Guarantor shall pay the costs and expenses of such enforcement. Costs and
expenses include Lender’s attorneys’ fees and legal expenses whether or not there is a lawsuit,
including attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to
modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. Guarantor also shall pay all court costs and such additional fees as may
be directed by the court.




Caption Headings. Caption headings in this Guaranty are for convenience purposes only and are
not to be used to interpret or define the provisions of this Guaranty.




Governing Law. This Guaranty will be governed by federal law applicable to Lender and, to the
extent not preempted by federal law, the laws of the State of Iowa without regard to its
conflicts of law provisions. This Guaranty has been accepted by Lender in the State of Iowa.




Integration. Guarantor further agrees that Guarantor has read and fully understands the terms
of this Guaranty; Guarantor has had the opportunity to be advised by Guarantor’s attorney with
respect to this Guaranty; the Guaranty fully reflects Guarantor’s intentions and parol evidence
is not required to interpret the terms of this Guaranty. Guarantor hereby indemnifies and holds
Lender harmless from all losses, claims, damages, and costs (including Lender’s attorneys’ fees)
suffered or incurred by Lender as a result of any breach by Guarantor of the warranties,
representations and agreements of this paragraph.




Interpretation. In all cases where there is more than one Borrower or Guarantor, then all words
used in this Guaranty in the singular shall be deemed to have been used in the plural where the
context and construction so require; and where there is more than one Borrower named in this
Guaranty or when this Guaranty is executed by more than one Guarantor, the words “Borrower” and
“Guarantor” respectively shall mean all and any one or more of them. The words “Guarantor,”
“Borrower,” and “Lender” include the heirs, successors, assigns, and transferees of each of
them. If a court finds that any provision of this Guaranty is not valid or should not be
enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or
enforced. Therefore, a court will enforce the rest of the provisions of this Guaranty even if a
provision of this Guaranty may be found to be invalid or unenforceable. If any one or more of
Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar
entities, it is not necessary for Lender to inquire into the powers of Borrower or Guarantor or
of the officers, directors, partners, managers, or other agents acting or purporting to act on
their behalf and any indebtedness made or created in reliance upon the professed exercise of
such powers shall be guaranteed under this Guaranty.




Notices. Any notice required to be given under this Guaranty shall be given in writing, and
shall be effective when actually delivered, when actually received by telefacimiles (unless
otherwise required by law), when deposited with a nationally recognized overnight courier, or,
if mailed, when deposited in the United States mail, as first class, certified or registered
mail postage prepaid, directed to the addresses shown near the beginning of this Guaranty. Any
party may change its address for notices under this Guaranty by giving formal written notice to
the other parties, specifying that the purpose of the notice is to change the party’s address.
For notices purposes, Guarantor agrees to keep Lender informed at all times of Guarantor’s
current address. Unless otherwise provided or required by law, if there is more than one
Guarantor, any notice given by Lender to any Guarantor is deemed to be notice given to all
Guarantors.




No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Guaranty
unless such waiver is given in writing and signed by



 









 





	 	 	 	 	 
	 

	 	COMMERCIAL GUARANTY	 	 
	Loan No: 108002882

	 	(Continued)
	 	Page 3







Lender. No delay or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of this Guaranty
shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict
compliance with that provision or any other provision of this Guaranty. No prior waiver by
Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any
of Lender’s rights or of any of Guarantor’s obligations as to any future transactions. Whenever
the consent of Lender is required under this Guaranty, the granting of such consent by Lender in
any instance shall not constitute continuing consent to subsequent instances where such consent
is required and in all cases such consent may be granted or withheld in the sole discretion of
Lender.




Successors and Assigns. Subject to any limitations stated in this Guaranty on transfer of
Guarantor’s interest, this Guaranty shall be binding upon and inure to the benefit of the
parties, their successors and assigns.



DEFINITIONS. The following capitalized words and terms shall have the following meanings when used
in this Guaranty. Unless specifically stated to the contrary, all references to dollar amounts
shall mean amounts in lawful money of the United States of America. Words and terms used in the
singular shall include the plural, and the plural shall include the singular, as the context may
require. Words and terms not otherwise defined in this Guaranty shall have the meanings attributed
to such terms in the Uniform Commercial Code:




Borrower. The word “Borrower” means Southern Iowa BioEnergy LLC and includes all co-signers and
co-makers signing the Note and all their successors and assigns.




Guarantor. The word “Guarantor” means everyone signing this Guaranty, including without
limitation Jack Cooley, and in each case, any signer’s successors and assigns.




Guarantor’s Share of the Indebtedness. The words “Guarantor’s Share of Indebtedness” means
Guarantor’s indebtedness to Lender as more particularly described in this Guaranty.




Guaranty. The word “Guaranty” means this guaranty from Guarantor to Lender.




Indebtedness. The word “Indebtedness” means Borrower’s indebtedness to Lender as more
particularly described in this Guaranty.




Lender. The word “Lender” means Great Western Bank, its successors and assigns.




Note. The word “Note” means the promissory note dated June 12, 2006, in the original principal
amount of $2,200,000.00 from Borrower to Lender, together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of, and substitutions for the promissory note
or agreement.




Related Documents. The words “Related Documents” mean all promissory notes, credit agreements,
loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, security deeds, collateral mortgages, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection with the Indebtedness.



EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY AND AGREES
TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPON
GUARANTOR’S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUE
UNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY”. NO FORMAL
ACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED JUNE 12,
2006.



GUARANTOR ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS COMMERCIAL GUARANTY AND ALL OTHER
DOCUMENTS RELATING TO THIS DEBT.



GUARANTOR:




	 	 	 	 	 
	x

	 	/s/ James R. Cornett	 	 
	 

	 	 

James R. Cornett
	 	 






 




INDIVIDUAL ACKNOWLEDGEMENT




	 	 	 	 	 
	STATE OF Iowa

	 	)	 	 
	 

	 	) ss

	COUNTY OF Decatur

	 	)	 	 






On this 12th day of June, A.D., 2006, before me, a Notary Public in and for
said County and State, personally appeared James R. Cornett, to me known to be the person named in
and who executed the foregoing instrument and acknowledgement that he or she executed the same as
his or her voluntary act and deed.



	 	 	 	 	 	 	 
	 

	 	 	 	/s/ Marcia L. McAlpin	 	 
	 

	 	NOTARY SEAL
	 	 

Notary Public in and for the State of Iowa
	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	/s/Marcia L. McAlpin	 	 
	 

	 	 	 	 	 	 





 









 





PROMISSORY NOTE




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Principal	 	Loan Date	 	Maturity	 	Loan No.	 	Call / Coll	 	 	 	Officer	 	 
	$2,200,000.00	 	06-12-2006	 	10-12-2006	 	108002882	 	IE / 150	 	Account	 	TLG	 	Initials
	References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.
Any item above containing ***** has been omitted due to text length limitations.






	 	 	 	 	 	 	 
	Borrower:

	 	Southern Iowa BioEnergy LLC (TIN: 20-2226223)
	 	Lender:
	 	Great Western Bank
	 

	 	115 So Linden
	 	 	 	Leon
	 

	 	Lamoni, IA 50140
	 	 	 	111 N. Main
	 

	 	 	 	 	 	PO Box 171
	 

	 	 	 	 	 	Leon, IA 50144






	 	 	 	 	 
	Principal Amount: $2,200,000.00

	 	Interest Rate: 12.000%
	 	Date of Note: June 12, 2006






PROMISE TO PAY. Southern Iowa BioEnergy LLC (“Borrower”) promises to pay to Great Western Bank
(“Lender”), or order, in lawful money of the United States of America, the principal amount of Two
Million Two Hundred Thousand & 00/100 Dollars ($2,200,000.00), together with Interest at the rate
of 12.000% per annum on the unpaid principal balance from June 12, 2006, until paid in full. The
interest rate may change under the terms and conditions of the INTEREST AFTER DEFAULT” section.



PAYMENT. Borrower will pay this loan In one principal payment of $2,200,000.00 plus interest on
October 12, 2006. This payment due on October 12, 2006, will be for all principal and all accrued
interest not yet paid. Unless otherwise agreed or required by applicable law, payments will be
applied first to any accrued unpaid interest; then to principal; then to any unpaid collection
costs; and then to any late charges. The annual Interest rate for this Note is computed on a
365/360 basis; that is, by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number of days the
principal balance is outstanding. Borrower will pay Lender at Lender’s address shown above or at
such other place as Lender may designate in writing.



PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges are earned fully
as of the date of the loan and will not be subject to refund upon early payment (whether voluntary
or as a result of default), except as otherwise required by law. Except for the foregoing, Borrower
may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments
will not, unless agreed to by Lender in writing, relieve Borrower of Borrower’s obligation to
continue to make payments under the payment schedule. Rather, early payments will reduce the
principal balance due. Borrower agrees not to send Lender payments marked “paid in full”, “without
recourse”, or similar language. If Borrower sends such a payment, Lender may accept it without
losing any of Lender’s rights under this Note, and Borrower will remain obligated to pay any
further amount owed to Lender. All written communications concerning disputed amounts, including
any check or other payment instrument that indicates that the payment constitutes “payment in full”
of the amount owed or that is tendered with other conditions or limitations or as full satisfaction
of a disputed amount must be mailed or delivered to: Great Western Bank, Leon, 111 N. Main, PO Box
171, Leon, IA 50144.



LATE CHARGE. If a payment is 15 days or more late, Borrower will be charged $50.00.



INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, the interest
rate on this Note shall be increased to 21.000% per annum. However, in no event will the interest
rate exceed the maximum interest rate limitations under applicable law,



DEFAULT. Each of the following shall constitute an event of default (“Event of
Default") under this Note:




Payment Default. Borrower fails to make any payment when due under this Note.




Other Defaults. Borrower fails to comply with or to perform any other term, obligation,
covenant or condition contained in this Note or in any of the related documents or to comply
with or to perform any term, obligation, covenant or condition contained in any other agreement
between Lender and Borrower.




False Statements. Any warranty, representation or statement made or furnished to Lender by
Borrower or on Borrower’s behalf under this Note or the related documents is false or misleading
in any material respect, either now or at the time made or furnished or becomes false or
misleading at any time thereafter.




Death or Insolvency. The dissolution of Borrower (regardless of whether election to continue is
made), any member withdraws from Borrower, or any other termination of Borrower’s existence as a
going business or the death of any member, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower’s property, any assignment for the benefit of creditors, any
type of creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.




Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings,
whether by judicial proceeding, self-help, repossession or any other method, by any creditor of
Borrower or by any governmental agency against any collateral securing the loan. This includes a
garnishment of any of Borrower‘s accounts, including deposit accounts, with Lender.
However, this Event of Default shall not apply if there is a good faith dispute by Borrower as
to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture
proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding
and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in
an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for
the dispute.




Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of
any of the indebtedness or any Guarantor dies or becomes incompetent, or revokes or disputes the
validity of, or liability under, any guaranty of the indebtedness evidenced by this Note. In the
event of a death, Lender, at its option, may, but shall not be required to, permit the
Guarantor‘s estate to‘ assume unconditionally the obligations arising
under the guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of
Default.




Adverse Change. A material adverse change occurs in Borrower‘s financial condition,
or Lender believes the prospect of payment or performance of this Note is impaired.




Cure Provisions. If any default, other than a default in payment is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within the preceding
twelve (12) months, it may be cured if Borrower, after receiving written notice from Lender
demanding cure of such default: (1) cures the default within twenty (20) days; or (2) if the
cure requires more than twenty (20) days, immediately initiates steps which Lender deems in
Lender’s sole discretion to be sufficient to cure the default and thereafter continues and
completes ell reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.



LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance under this
Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount.



ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if
Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits
under applicable law, Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is a



 









 





	 	 	 	 	 
	 

	 	PROMISSORY NOTE	 	 
	Loan No: 108002882

	 	(Continued)
	 	Page 2






lawsuit, including without limitation all attorneys’ fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals.
If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all
other sums provided by law.



GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent
not preempted by federal law, the laws of the State of Iowa without regard to its conflicts of law
provisions. This Note has been accepted by Lender In the State of Iowa.



RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in
all Borrower’s accounts with Lender (whether checking, savings, or some other account). This
includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open
in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for
which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on the indebtedness against any and all such
accounts.



COLLATERAL. Borrower acknowledges this Note is secured by ALL COLLATERAL INCLUDING BUT NOT LIMITED
TO: Real Estate Mortgage dated 6-12-2006 and Security Agreement dated 6-12-2006 siting the
assignment of Pre-Construction Services Agreement dated 6-12-2006.



PURPOSE OF LOAN. The specific purpose of this loan is: Equipment Down for Bio Diesel Plant.



SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and upon
Borrower‘s heirs, personal representatives, successors and assigns, and shall inure to
the benefit of Lender and its successors and assigns.



GENERAL PROVISIONS. If any pert of this Note cannot be enforced, this fact will not affect the rest
of the Note. Lender may delay or forgo enforcing any of its rights or remedies under this Note
without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to
the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any
change in the terms of this Note, and unless otherwise expressly stated in writing, no party who
signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released
from liability. All such parties agree that Lender may renew or extend (repeatedly and for any
length of time) this loan or release any party or guarantor or collateral; or impair, fail to
realize upon or perfect lender’s security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree
that Lender may modify this loan without the consent of or notice to anyone other than the party
with whom the modification is made. The obligations under this Note are joint and several.



PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE. BORROWER
AGREES TO THE TERMS OF THE NOTE.



BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE AND ALL OTHER DOCUMENTS
RELATING TO THIS DEBT.



BORROWER:




SOUTHERN IOWA BIOENERGY LLC




	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ William T. Higdon
 

William T. Higdon, President of Southern Iowa
BioEnergy LLC
	 	 	 	By:
	 	/s/ Alan Elefson
 

Alan Elefson, Treasurer of Southern Iowa Bioenergy
LLC
	 	 






 









 





DISBURSEMENT REQUEST AND AUTHORIZATION




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Principal	 	Loan Date	 	Maturity	 	Loan No.	 	Call / Coll	 	 	 	Officer	 	 
	$2,200,000.00	 	06-12-2006	 	10-12-2006	 	108002882	 	1E / 150	 	Account	 	TLG	 	Initials
	References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.
Any item above containing ***** has been omitted due to text length limitations.






	 	 	 	 	 	 	 
	Borrower:

	 	Southern Iowa BioEnergy LLC (TIN: 20-2226223)
	 	Lender:
	 	Great Western Bank
	 

	 	115 So Linden
	 	 	 	Leon
	 

	 	Lamoni, IA 50140
	 	 	 	111 N. Main
	 

	 	 	 	 	 	PO Box 171
	 

	 	 	 	 	 	Leon, IA 50144






LOAN TYPE. This is a Fixed Rate (12.000%) Nondisclosable Loan to a Limited Liability Company
for $2,200,000.00 due on October 12, 2006.



PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for:




	 	o	 	 Personal, Family, or Household Purposes or Personal Investment.
	 
	 	þ	 	 Business (Including Real Estate Investment).





SPECIFIC PURPOSE. The specific purpose of this loan is: Equipment Down for Bio Diesel Plant.



DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be disbursed until
all of Lender’s conditions for making the loan have been satisfied. Please disburse the loan
proceeds of $2,200,000.00 as follows:



	 	 	 	 	 
	Amount paid to Borrower directly:
	 	$	2,200,000.00	 
	$2,200,000.00 Lender’s Check # Renewal
	 	 	 	 
	Energy Group
	 	 	 	 
	/s/ WH /s/ AR
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Note Principal:
	 	$	2,200,000.00	 
	 
	 	 	 	 





CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the following charges:



	 	 	 	 	 
	Prepaid Finance Charges Paid In Cash:
	 	$	44,000.00	 
	$44,000.00 Loan Origination Fee
	 	 	 	 
	 
	 	 	 
	 
	 	 	 	 
	Total Charges Paid In Cash:
	 	$	44,000.00	 






BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS DISBURSEMENT REQUEST AND
AUTHORIZATION AND ALL OTHER DOCUMENTS RELATING TO THIS DEBT.



FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND WARRANTS TO
LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND THAT THERE HAS BEEN NO
MATERIAL ADVERSE CHANGE IN BORROWER’S FINANCIAL CONDITION AS DISCLOSED IN BORROWER’S MOST
RECENT FINANCIAL STATEMENT TO LENDER. THIS AUTHORIZATION IS DATED JUNE 12, 2006.



BORROWER:



SOUTHERN IOWA BIOENERGY, LLC



	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/William T. Higdon
 

William T. Higdon, President of Southern Iowa

     BioEnergy LLC
	 	 	 	By:
	 	/s/ Alan Elefson
 

Alan Elefson, Treasurer of Southern Iowa BioEnergy LLC
	 	 






 









 





NOTICE OF FINAL AGREEMENT




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Principal	 	Loan Date	 	Maturity	 	Loan No.	 	Call / Coll	 	 	 	Officer	 	 
	$2,200,000.00	 	06-12-2006	 	10-12-2006	 	108002882	 	IE / 150	 	Account	 	TLG	 	Initials
	References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.
Any item above containing ***** has been omitted due to text length limitations.






	 	 	 	 	 	 	 
	Borrower:

	 	Southern Iowa BioEnergy LLC (TIN: 20-2226223)
	 	Lender:
	 	Great Western Bank
	 

	 	115 So Linden
	 	 	 	Leon
	 

	 	Lamoni, IA 50140
	 	 	 	111 N. Main
	 

	 	 	 	 	 	PO Box 171
	 

	 	 	 	 	 	Leon, IA 50144











	 	 	 	 	 
	IMPORTANT: READ BEFORE SIGNING. THE TERMS OF THE LOAN AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY
THOSE TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR ORAL PROMISES NOT CONTAINED IN THE WRITTEN LOAN
AGREEMENT MAY BE LEGALLY ENFORCED. BORROWER MAY CHANGE THE TERMS OF THE LOAN AGREEMENT ONLY BY ANOTHER
WRITTEN AGREEMENT.
	 
	 	 	 	 
	As used in this Notice, the following terms have the following meanings:
	 
	 	 	 	 
	 	 	Loan. The term “Loan” means the following described loan: a Fixed Rate (12.000%) Nondisclosable Loan
to a Limited Liability Company for $2,200,000.00 due on October 12, 2006.
	 
	 	 	 	 
	 	 	Loan Agreement. The term “Loan Agreement” means one or more promises, promissory notes, agreements,
undertakings, security agreements, deeds of trust or other documents, or commitments, or any
combination of those actions or documents, relating to the Loan, including without limitation the
following:
	 
	 	 	 	 
	LOAN DOCUMENTS
	 

	 	LLC Resolution: Southern Iowa BioEnergy LLC
	 	Promissory Note
	 

	 	IA Commercial Guaranty: James R. Cornett
	 	IA Commercial Guaranty: Jack Cooley
	 

	 	IA Commercial Guaranty: William T. Higdon
	 	IA Commercial Guaranty: Leon G. Kessel
	 

	 	IA Commercial Guaranty: William Douglas Morain
	 	IA Commercial Security Agreement: Assignment of Agreement
	 

	 	IA Mortgage for
	 	for Pre-Construction Services ; owned by Southern Iowa
	 

	 	IA National UCC Financing Statement (Rev. 05/22/02):
	 	BioEnergy LLC
	 

	 	Assignment of Agreement for Pre-Construction S
	 	Agreement to Provide Insurance: ; owned by Southern Iowa
	 

	 	Disbursement Request and Authorization
	 	BioEnergy LLC
	 

	 	Notice of Final Agreement	 	 
	 
	 	 	 	 
	Parties. The term “Parties” means Great Western Bank and any and all entities or individuals who are
obligated to repay the loan or have pledged property as security for the Loan, including without limitation
the following:
	 
	 	 	 	 
	 

	 	Borrower: Southern Iowa BioEnergy LLC	 	 
	 

	 	Grantor(s): Southern lowa BioEnergy LLC	 	 
	 

	 	Guarantor 1: Leon G. Kessel	 	 
	 

	 	Guarantor 2: James R. Cornett	 	 
	 

	 	Guarantor 3: Jack Cooley	 	 
	 

	 	Guarantor 4: William Douglas Morain	 	 
	 

	 	Guarantor 5: William T. Higdon	 	 










Each Party who signs below, other then Greet Western Bank, acknowledges, represents, and warrants
to Great Western Bank that It has received, read and understood this Notice of Final Agreement.
This Notice is dated June 12, 2006.



BORROWER:

SOUTHERN IOWA BIOENERGY LLC




	 	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/William T. Higdon
 

William T. Higdon, President of Southern Iowa
BioEnergy, LLC
	 	 	 	By:
	 	/s/Alan Elefson
 

Alan Elefson, Treasurer of Southern Iowa BioEnergy
LLC
	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	GUARANTOR:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	x

	 	/s/Leon G. Kessel	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	Leon G. Kessel, Individually	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	GUARANTOR:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	x

	 	/s/James R. Cornett	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	James R. Cornett, Individually	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	GUARANTOR:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	x

	 	/s/Jack Cooley	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	Jack Cooley, Individually	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	GUARANTOR:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	x

	 	/s/William Douglas Morain	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	William Douglas Morain, Individually	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	GUARANTOR:	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	x

	 	/s/William T. Higdon	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	William T. Higdon, Individually