Document:

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, Individuallyexv10w3

 

Exhibit 10.3

MANAGEMENT AND OPERATIONAL SERVICES AGREEMENT

     This Management and Operational Services Agreement (“Agreement”) is made and entered into as
of the 26th day of July, 2006, by and between West
Central Cooperative, a cooperative association organized and existing under the laws of the state of Iowa,
with offices at Ralston, Iowa (“West Central”), and Southern Iowa BioEnergy LLC, a limited
liability company organized and existing under the laws of the state of Iowa, with offices at 115
South Linden, Lamoni, Iowa (“SIBE”).

     RECITALS: SIBE and Renewable Energy Group, LLC (“REG”) have entered into a Letter of Intent
(“Letter of Intent”) concerning an engineering agreement, with respect to a biodiesel production
facility to be built for SIBE in Lamoni, Iowa (“Biodiesel Facility”). As a new entity without
staff, SIBE has recognized the importance of drawing upon the experience of West Central in the
initial operation of the Biodiesel Facility. SIBE and West Central have discussed the general
terms and conditions under which West Central would provide start up management and operational
services to SIBE with respect to the Biodiesel Facility, which the parties wish to reduce to this
writing.

     IT IS THEREFORE AGREED by and between the parties as follows:

	1.	 	General Scope. Subject to the terms of this Agreement, and in consideration of the
fee for such services to be paid by SIBE as set out herein, West Central will provide for the
overall management of the Biodiesel Facility, place a general manager and an operations
manager at the Biodiesel Facility, acquire feed stocks and the basic chemicals necessary for
the operation of the Biodiesel Facility, perform the administrative, sales and marketing
functions for the Biodiesel Facility, and provide human resources support for SIBE’s personnel
needs at the Biodiesel Facility. In fulfilling its duties and obligations hereunder, West
Central shall cooperate with SIBE and act in a manner to maximize the long-term success and
profitability of SIBE.

	2.	 	Responsibilities of West Central. Under this Agreement, West Central agrees to
provide
the following:

	 	A.	 	General Manager. West Central will provide a General Manager to
implement and oversee the business plan for the Biodiesel Facility, and direct, promote
and coordinate the staff, personnel and plant operations. The General Manager will be
an employee of West Central, but will be assigned to exclusively carry out the
responsibilities of General Manager at the Biodiesel Facility. Included among the
specific duties to be accomplished by the General Manager are:

	 	•	 	To utilize their ongoing best efforts to successfully and profitably manage
the Biodiesel Facility in SIBE’s best interests;
	 
	 	•	 	Development of an annual budget for presentation to and approval of SIBE’s
Board of Directors (or other board of governance (“Board”));

 

 

	 	•	 	Attend meetings of the Board and provide information regarding SIBE’s
operations, including but not limited to any information specifically
required by SIBE’s Board of Directors upon its request ;
	 
	 	•	 	Insure that all raw product costs are minimized and that all finished
product revenues are maximized;
	 
	 	•	 	Work with SIBE’s Board to formulate SIBE’s mission and goals
	 
	 	•	 	Work towards achievement of such mission and goals;
	 
	 	•	 	Monitor regulatory affairs and insure legal compliance;
	 
	 	•	 	Hire, terminate and replace Biodiesel Facility personnel as necessary;
	 
	 	•	 	Management of governmental relations, including USDA’s biodiesel programs;
and
	 
	 	•	 	Such other duties as may be agreed between West Central and SIBE.

	 	 	 	The General Manager will report to such officer of West Central as West Central
shall from time to time designate. West Central and SIBE agree to periodically
review the performance of the General Manager in meeting his or her duties and
obligations hereunder. All employee compensation and employee benefits associated
with the position of General Manager will be paid by West Central.

	 	B.	 	Operations Manager. West Central will provide an Operations Manager to
oversee the operation of the Biodiesel Facility. The Operations Manager will be an
employee of West Central, but will be assigned to exclusively carry out the
responsibilities of Operations Manager at the Biodiesel Facility. Included among the
specific duties to be accomplished by the Operations Manager are:

	 	•	 	Planning and scheduling biodiesel production to meet customer needs and
marketing goals;
	 
	 	•	 	Monitor and improve quality control;
	 
	 	•	 	Oversee facility and equipment maintenance;
	 
	 	•	 	Assist with budgeting and the monitoring of labor and other expenses in the
operation;
	 
	 	•	 	Implement processing changes and new technologies as they evolve, and plan
for new projects relating to biodiesel production; and
	 
	 	•	 	Such other duties as may be agreed to between West Central and SIBE.

	 	 	 	The Operations Manager will report to the General Manager . West Central and SIBE
agree to periodically review the job performance of the Operations Manager in
meeting his or her duties and obligations hereunder. All employee compensation and
employee benefits associated with the position of Operations Manager will be paid by
West Central.

	 	C.	 	Feed Stocks Procurement. West Central will arrange for the purchase
and procure all feed stocks necessary or appropriate for production at the Biodiesel
Facility, and will:

	 	•	 	Provide analysis and audit of feed stock suppliers;

- 2 -

 

	 	•	 	Purchase feed stocks at competitive prices meeting specifications and in
adequate quantities to fill the production schedule of the Biodiesel Facility;
	 
	 	•	 	Negotiate for discounts where obtainable on feed stocks;
	 
	 	•	 	Arrange for transportation, logistics, and scheduling of feed stock
deliveries; and
	 
	 	•	 	Provide analysis and audit of bulk transportation providers.

	 	D.	 	Chemical Inputs Procurement. West Central will arrange for the
purchase and procure all basic chemical inputs necessary or appropriate for production
at the Biodiesel Facility, and will:

	 	•	 	Perform due diligence requirements for investigation of suppliers of the
chemical inputs;
	 
	 	•	 	Provide analysis and audit of chemical suppliers;
	 
	 	•	 	Purchase chemical inputs at competitive prices meeting specifications for
use in the Biodiesel Facility;
	 
	 	•	 	Negotiate for discounts where obtainable on chemicals;
	 
	 	•	 	Procure adequate chemical inputs to meet production schedules for the
Biodiesel Facility;
	 
	 	•	 	Provide analysis and audit of bulk transportation suppliers; and
	 
	 	•	 	Arrange for transportation, logistics, and scheduling services for chemical
input deliveries by suppliers.

	 	E.	 	Administrative Services. West Central shall provide administrative
services to support the operation of the Biodiesel Facility, agreeing to provide
assistance within the following areas as more fully described on Exhibit A hereto (and
at West Central’s expense except for those materials and items noted on such Exhibit
A):

	 	•	 	Accounting
	 
	 	•	 	Human Resources
	 
	 	•	 	Information Technology
	 
	 	•	 	Insurance Administration
	 
	 	•	 	Payroll
	 
	 	•	 	Communications

	 	F.	 	Sales and Marketing. West Central will utilize its best efforts as
SIBE’s sales representative to market all biodiesel, glycerin and fatty acids produced
at the Biodiesel Facility (“Products”) at the Product Prices (as defined below). With
respect to such services, West Central agrees to provide:

	 	•	 	Market analysis of biodiesel supply and demand utilizing non-proprietary
public information;

- 3 -

 

	 	•	 	Opportunities for participation in a trade association (which if necessary
West Central to work within the biodiesel industry to create), to access
additional historical data regarding prices, costs, and other analysis,
contributed and disseminated to members on an aggregated basis;
	 
	 	•	 	Enhanced access to biodiesel markets with West Central’s established
distribution channels and transportation at pass through costs;
	 
	 	•	 	Analysis and audit of biodiesel customers desiring to purchase SIBE Product,
including credit analysis;
	 
	 	•	 	Marketing specialists to serve as SIBE’s representatives to identify
potential customers and attain and establish sales opportunities for the
Product at the prices and terms as established by SIBE;
	 
	 	•	 	Arrangements for transportation, logistics, and scheduling of biodiesel
shipments;
	 
	 	•	 	Where advantageous, arrange for leased tankers for rail shipments;
	 
	 	•	 	Analyze and audit bulk transportation providers;
	 
	 	•	 	Oversee reconciliation of shipments, invoicing and payments on a weekly
basis; and
	 
	 	•	 	Provide invoicing, accounts receivable management and collection services
(not including litigation) for biodiesel shipments.

	 	G.	 	Personnel Changes. West Central agrees not to move a person placed as
General Manager, Operations Manager or other management or supervisory level employee
at the Biodiesel Facility to another facility operated by West Central during the term
of this Agreement without the written consent of SIBE. Subject to the foregoing, West
Central has the right to hire, fire, and replace persons selected to serve as General
Manager or Operations Manager at the Biodiesel Facility.

	3.	 	Compensation for Services. In consideration of the services to be rendered during the
term of this Agreement:

	 	A.	 	Monthly Fee. SIBE shall initially pay to West Central, on a monthly
basis, a fee equal to 5.7¢ per gallon of biodiesel produced from the Biodiesel Facility
during the month for which the fee is computed (the rate per gallon herein the “Fee
Rate,” and the payment per month the “Monthly Fee”). For purposes of this Agreement,
determination of the biodiesel produced from the Biodiesel Facility for a month shall
be based upon a compilation of the daily production reports for the Biodiesel Facility
for such month, and references to a “gallon” shall be to the U.S. liquid measure of
capacity, 231 cubic inches, corrected to 60 degrees Fahrenheit.
	 
	 	 	 	The Fee Rate shall be adjusted for the month following the first anniversary of the
Biodiesel Facility first producing Product for sale (“First Production Month”), and
annually for such month thereafter, according to the movement in the Consumer Price
Index for all-urban consumers, U.S. City Average, All Items published by

- 4 -

 

	 	 	 	the Department of Labor (the “CPI”) in the following manner. The CPI for the First Production Month
shall be used as the denominator and the CPI for the month preceding the month for which the
adjusted Fee Rate is being computed shall be used as the numerator. This fraction shall be
multiplied by the amount of the initial Fee Rate, and the resulting amount shall be the new Fee
Rate to be used to compute the Monthly Fee for twelve months beginning with the month for which the
adjusted Fee Rate was computed, except that in no event shall the adjusted Fee Rate be less than
the initial Fee Rate as set out above. The Fee Rate for each subsequent year of the term shall be
adjusted in a similar manner, with the CPI for the First Production Month being used as the
denominator and the CPI for the month preceding the month for which the adjusted Fee Rate is being
	 	 	 	computed being used as the numerator, and such fraction being multiplied by the
initial Fee Rate, such adjusted Fee Rate in no event to be less than the initial Fee
Rate as set out above. If CPI information is not yet available when payment of the
Monthly Fee is due, the Monthly Fee shall be paid at the Fee Rate in effect prior to
adjustment, the parties agreeing upon receipt of the CPI information and calculation
of the adjusted Fee Rate to make any necessary adjustment in payment so that the
correct Monthly Fees have been paid. If the Department of Labor’s method of
computing the CPI is substantially modified or ceases, the parties agree to adopt
another measure of the cost of living for these purposes.
	 
	 	B.	 	Net Income Bonus. As an incentive to West Central, and as additional
compensation for the services being rendered, SIBE agrees to pay a bonus to West
Central on a yearly basis equal to six percent (6%) of the Net Income of SIBE’s
Biodiesel Facility (“Net Income Bonus), as determined hereafter. For purposes of
this Agreement, SIBE’s “Net Income” shall be the net income for its fiscal year
before any deduction or allowance for federal or state income taxes, determined in
accordance with generally accepted accounting principles applied on a consistent
basis by the independent CPA firm engaged by SIBE, and then adjusted as necessary
to: (i) include the receipt of government payments such as under the federal excise
tax credit program or similar federal or state payments; (ii) exclude any gains or
losses realized on the sale or disposition of capital assets; (iii) adjust
depreciation to utilize Internal Revenue Service Class lives depreciated on a
straight line, mid-month basis (with no bonus depreciation, Section 179 expense
(election to expense certain depreciable assets) or any other method of accelerated
depreciation, first year write-off or expensing to be taken), and (iv) exclude any
reduction for the Net Income Bonus paid or accrued to West Central as a result of
this subsection. For any partial fiscal year for SIBE occurring during the term of
this Agreement, West Central shall receive a Net Income Bonus, if any, computed for
that period of the fiscal year in which West Central provides services hereunder.

	 	C.	 	Payment. The Monthly Fee shall be due on the tenth (10th) of the month
following the month for which such fees are computed and payable. The Net Income Bonus
shall be paid within ten (10) days after SIBE’s Board accepts the audit report for the
fiscal year for which such Net Income Bonus is computed,

- 5 -

 

	 	 	 	except that if the Net Income Bonus is not paid within three (3) months of the close
of SIBE’s fiscal year because the audit has not been received (or within three (3)
months of the end of the term of this Agreement in the event of the computation of
an Income Bonus for a partial fiscal year), SIBE shall compute and pay an estimated
Net Income Bonus (if any is due) based on its internal figures on or before the end
of such three (3) month period, the parties agreeing upon receipt of the audited
figures to make any necessary adjustment in such estimated payment so that the
correct Net Income Bonus has been paid.

	4.	 	Responsibilities of SIBE. Concurrent with performance of the obligations of West
Central as previously set out in this Agreement, SIBE understands and recognizes that upon
completion of the Biodiesel Facility by REG, it shall be the obligation of SIBE to:

	 	A.	 	Establish a Board of Directors or similar group to provide governance of SIBE,
and input and guidance to the General Manager regarding the Biodiesel Facility, and to
take action upon recommendations of the General Manager, and if the Board of Directors
deems appropriate, approve for implementation reasonable suggestions of the General
Manager.
	 
	 	B.	 	Establish on a monthly basis (or more often as needed) the price for which West
Central, as SIBE’s sales representative, is to sell SIBE’s Product, and review and
determine production levels to be maintained at the Biodiesel Facility.
	 
	 	C.	 	Provide the names of at least three (3) persons who would be authorized on
SIBE’s behalf to establish Product Prices, approve special prices, agree to the
handling of off-grade Product, and approve the write off of accounts receivable or
filing of suit to collect accounts receivable (it being understood that all other
litigation by or on behalf of SIBE must be authorized by the Board of Directors of
SIBE), and further to notify West Central of any changes in such designees (such
designees to be reasonably available for contact by West Central, and able to respond
in a timely fashion).
	 
	 	D.	 	Provide funds for:

	 	(i)	 	Purchase, installation and maintenance of software, hardware,
and related equipment located at the Biodiesel Facility, together with
utilities and related charges, in order to accomplish the necessary
communication of voice and data between the parties, and conduct SIBE’s
business at and operate the Biodiesel Facility.
	 
	 	(ii)	 	The cost of acquisition and implementation of newly evolving
technologies (and including those developed by West Central or its affiliates)
at the Biodiesel Facility, which have been approved by the Board.

- 6 -

 

	 	(iii)	 	Payment of all compensation, benefits, insurance, taxes and
costs with respect to SIBE’s employees necessary for filing operational needs
at the Biodiesel Facility (“Employees”).
	 
	 	(iv)	 	Offices and computers located at the Biodiesel Facility, cell
phones, and other facilities, services and support for the personnel needed to
operate the Biodiesel Facility (and including the General Manager and
Operations Manager) and appropriate for the performance of their duties for
SIBE.
	 
	 	(v)	 	Payment or reimbursement for reasonable travel and other
similar out of pocket expenses incurred in furtherance of the business of SIBE
and in fulfillment of the duties of the personnel needed to operate the
Biodiesel Facility (and including the General Manager and Operations Manager),
upon submission and substantiation of such expenses as may be required for tax
or auditing purposes.
	 
	 	(vi)	 	Payment of the costs of legal counsel and outside auditors as
may be determined necessary by the Board, and including for the examination of
financial records, preparation of income tax returns for SIBE and related
reports to its owners and third parties, securities filings, and similar
reports.
	 
	 	(vii)	 	In general, the purchase and delivery of all feed stocks,
chemical and other inputs, all staff and personnel costs (other than those of
the General Manager and Operations Manager) necessary to operate the Biodiesel
Facility, and all other expenses of doing business at the Biodiesel Facility
not specifically being assumed by West Central as a part of the furnishing of
services hereunder, as well as all required capital expenditures to maintain
the Biodiesel Facility in a condition capable of producing Product acceptable
to the market place.

	 	E.	 	Perform such other tasks and duties as have been separately set out hereunder
and agreed to by SIBE.

	5.	 	Other Operational Understandings & Agreements:

	 	A.	 	Risk Management Program. SIBE agrees to consider adoption of the risk
management program used by West Central which supports the procurement of feed stocks
and chemical inputs hereunder (“Risk Management Program”). The objective of the program
is to manage the commodity price risk resulting from fluctuating prices of feedstock
(oils and fats), chemical inputs (methanol and catalysts), and the finished Products
(biodiesel and glycerin) due to changing market conditions. Under the Risk Management
Program, West Central will utilize the Chicago Board of Trade, New York Mercantile
Exchange, and other exchanges as warranted to establish an account or accounts in
SIBE’s name, and

- 7 -

 

	 	 	 	acquire instruments as necessary to implement risk management strategies. Such
account(s) and instruments would be funded by SIBE, with all resulting gains and
losses from the purchase and sale transactions of any futures contracts, options,
and cash instruments associated with the Risk Management Program to flow to the
benefit of or be borne by SIBE. SIBE agrees to adopt such resolutions and execute
such agreements as are reasonably necessary to implement the Risk Management
Program, and pay transactional costs incurred to carry out such program.
	 
	 	B.	 	Plant Information Program. In its management of the Biodiesel Facility,
West Central shall utilize a software program (“PI System”) interfacing with the
computer control system running the Biodiesel Facility, making available production
data for operations, engineering, sales, marketing, logistics and management to better
make informed decisions with respect to production processes. During the term of this
Agreement, the PI System will also allow for West Central’s remote access to
information on the operation of the Biodiesel Facility to provide for data collection,
monitoring, benchmarking and trouble shooting, all to better aid performance for SIBE.
	 
	 	C.	 	Product Pricing. On at least a monthly basis (or more often as needed),
West Central shall identify and provide available marketing information to SIBE with
respect to Products.. SIBE will establish the Product prices for West Central to use in
selling Products (“Product Prices”), based upon market place conditions. Any change in
Product Prices shall be effective for Product sales made beginning the seventh (7th)
calendar day after West Central’s receipt of notice of new Product Prices, except for
quotations still open and extended prior to the change in the Product Prices, or unless
otherwise agreed to by the parties (SIBE and West Central to honor all pre-existing
contracts and agreements with respect to price). All Product sales by West Central as
SIBE’s sales agent shall be at or above the Product Prices then in effect, unless
written consent is received from SIBE for special prices due to volume commitments,
SIBE storage constraints, or other reasons approved by SIBE. West Central specifically
states that it will not sell the Product at prices less than the Product Prices without
SIBE’s prior written approval, and that if West Central is able to sell Products at
prices above the Product Prices, SIBE would nonetheless receive all proceeds of any
such sales. West Central will in any event use its best efforts, as SIBE’s sales agent,
to maximize the sales revenues received by SIBE.
	 
	 	D.	 	Off Site Storage. In order to maximize profit potential, and including
taking advantage of regional marketing opportunities, there will be times in the
marketing of Product that West Central will recommend the storage of SIBE’s Product in
third party locations. In such case, SIBE agrees that it will be responsible for
transportation costs for its Product to the storage facility, in and out charges, such
Product’s prorated share of storage, and other related expense, so long as approved by
SIBE prior to use of off site storage.

- 8 -

 

	 	E.	 	Product Sales, Handling of Proceeds. It is expected that sales of
Products will be made in West Central’s name. West Central shall take title to the
Product when loaded for delivery FOB the Biodiesel Facility, unless otherwise agreed.
West Central will pay over to SIBE all Product proceeds received from sales of SIBE
Products. West Central shall remit by electronic transfer to SIBE by the close of
business each Wednesday all such proceeds received during the previous seven (7) days.
	 
	 	F.	 	Off Grade Product. In the event off grade Product is produced at the
Biodiesel Facility that is not marketable at the Product Prices then in effect, West
Central will nonetheless use its best efforts to sell such Product for SIBE at the
highest prices reasonably obtainable. With respect to biodiesel, and for purposes of
this Agreement, off-grade Product shall include biodiesel which fails to meet the
specifications contained in ASTM D6751 as it may be amended or modified (or such other
standards for biodiesel as may in the future develop in the biodiesel industry) or if
for any other reason a customer reasonably rejects biodiesel. With respect to Products
other than biodiesel, for purposes of this Agreement, off-grade Product shall include
Product which fails to meet specifications mutually agreed upon by the parties, or if
for any other reason a customer reasonably rejects such Product. In the event off-grade
Product is sold, West Central shall work to minimize any loss to SIBE for returned
Product, cost of cover, and related expenses. West Central shall advise SIBE of Product
complaints, and shall not accept the return of, or make any allowance with respect to
any Product, without SIBE’s prior written approval. West Central and SIBE shall work
together to determine the resolution of customer complaints and off-grade Product
sales. SIBE shall pay for any costs associated with resolution of customer complaints
or returned Product, including freight costs, cover, reasonable attorney fees and
related expenses, unless such Product deficiencies were caused by the negligence or
willful misconduct of West Central, in which event West Central will be responsible for
such costs. Except where caused by West Central’s negligence or willful misconduct,
SIBE agrees to indemnify West Central from any loss, claim or damage (including
reasonable attorney fees) incurred as a result of the sale of off-grade Product.
	 
	 	G.	 	Credit Risk. West Central agrees to manage the accounts receivable and
work to minimize bad debt losses. West Central shall pursue all reasonable efforts at
collecting accounts, SIBE agreeing to pay for third party collection costs including
attorney fees (Collection Costs”) except as may be subsequently shared as set out
hereafter. West Central understands that any litigation commenced for the collection of
accounts receivable must be approved by SIBE’s Board of Directors. The write off of
accounts receivable shall be as mutually agreed by the parties. SIBE understands that
losses on accounts receivable due to bad debt up to one-half per cent of Product sales
will be borne entirely by SIBE as a cost of doing business. West Central agrees to
share losses equally with SIBE with respect to accounts receivable for Product sales
(including Collection Costs) to the extent that the total of such losses (not
previously shared by the parties)

- 9 -

 

	 	 	 	incurred from the commencement of the term of this Agreement to the date of
computation of such losses exceed one half of one percent of SIBE’s total sales made
under this Agreement for the same period. Should SIBE desire West Central to sell
Product to buyers not approved by West Central, West Central shall make such sale in
SIBE’s name, and provide normal invoicing and billing services. However, any risk of
receipt or collection of such sale shall remain with SIBE, and shall not be included
in the total of losses which might be shared by the parties as set out above.
	 
	 	H.	 	Employees. During the term of this Agreement, SIBE shall employ the
Employees necessary for filling operational needs at the Biodiesel Facility
(‘Employees”). The arrangement with respect to such Employees shall be upon the
following terms:

	 	(i)	 	The Employees assigned to perform the services contemplated by
this Agreement will be and shall remain common law employees of SIBE.
	 
	 	(ii)	 	SIBE has sole responsibility for determining the rate of pay,
hours and other terms and conditions of employment of the Employees, and shall
be solely responsible for payment of all wages, employee benefits, withholding
and remitting taxes, vacation and paid time off as required by state and
federal law.
	 
	 	(iii)	 	SIBE bears sole responsibility for statutory insurance for the
Employees, for FICA, unemployment, and workers’ compensation in accordance with
applicable statutory requirements and limits.
	 
	 	(iv)	 	In the event SIBE requests West Central to handle payroll with
respect to the Employees (including preparation of checks), SIBE will provide
all necessary funds to pay directly or to reimburse West Central for all
payments and costs associated with SIBE’s Employee costs (“Employee Costs”).
On a monthly basis, West Central shall submit to SIBE an invoice detailing the
Employee Costs attributed to the Employees for such month which have been paid
in behalf of SIBE by West Central. Within ten (10) days of receipt of such
invoices, SIBE shall remit payment in full to West Central.
	 
	 	(v)	 	SIBE shall delegate to the General Manager, and the General
Manager shall exercise supervisory responsibilities with respect to the
Employees, including without limitation, their day to day control and
supervision, performance reviews and evaluations, and hiring and firing.

	6.	 	Term of Agreement. This Agreement is effective as of the date of its execution by the
parties (with services to commence by West Central hereunder at such time or times as
appropriate based upon construction progress of the Biodiesel Facility), and shall remain in
force for three (3) years after the end of the first month in which the Biodiesel Facility

- 10 -

 

	 	 	is producing Product for sale (subject to early termination due to default as set out
hereafter). This Agreement shall continue after the initial term unless and until one party
gives written notice of termination to the other of a proposed termination date at least
twelve (12) months in advance of a proposed termination date. The initial term or any
subsequent term may also be modified upon the mutual written consent of the parties.
	 
	7.	 	Confidentiality. SIBE agrees that in the performance of this Agreement, SIBE may
receive or otherwise learn of certain items of information that are non-public, proprietary,
or confidential to West Central or to parties with whom West Central has entered into
contractual relationships (herein “Confidential Information” with respect to West Central), to
include but not be limited to information concerning West Central’s operations, processes,
methods and accumulated experience incidental to the processing, sale and distribution of
Products, and including supplier and customer lists, the disclosure of which to third parties
would be injurious to West Central or to parties with whom West Central has entered into
contractual relationships. West Central agrees that in the performance of this Agreement, West
Central will receive financial information including the results of SIBE’s operations, and may
otherwise learn of certain items of information that are non-public, proprietary, or secret to
SIBE or to parties with whom SIBE has entered into contractual relationships (herein
“Confidential Information” with respect to SIBE) , the disclosure of which to third parties
would be injurious to SIBE or to parties with whom SIBE has entered into contractual
relationships. Each party as recipient (the “Recipient”) agrees not to use the Confidential
Information of the other party (the “Provider”) for any purpose outside this Agreement.
Recipient agrees not to disclose the Confidential Information of the Provider to any third
party for any reason without the Provider’s prior express written consent, and then only after
such third party had been made aware of these protective provisions and the need to prevent
further dissemination of the Confidential Information, the Recipient in such case to be
responsible for compliance with these provisions by any third party to whom the Recipient
discloses Confidential Information. Recipient agrees that in the event of an actual or
threatened disclosure of the Confidential Information of the other party, the Provider would
not be adequately compensated by money damages and therefore agrees that the Provider shall be
entitled to injunctive relief, specific performance or other equitable relief to limit or
prevent such actual or threatened disclosure, together with recovery of costs of litigation
from Recipient as a result of breach, including reasonable attorneys fees. These obligations
of confidentiality shall not apply to any information which: (a) was known to Recipient or was
in the public domain prior to disclosure hereunder; or (b) becomes known to the public from a
source other than Recipient; or (c) is disclosed to Recipient by a third party having a legal
right to make such disclosure.
	 
	 	 	Notwithstanding any provision herein to the contrary, the parties acknowledge and agree that
SIBE shall be entitled to obtain and use at any time (and including after termination of the
Agreement) any accounting records maintained by West Central with respect to the financial
statement, assets and liabilities, and operation of SIBE and the Biodiesel Facility, and
including accounts receivable and accounts payable.

- 11 -

 

	 	 	In the management and operation of the Biodiesel Facility, West Central will direct the
General Manager, Operations Manager, and Employees (as such term is defined herein) to hold
competitively sensitive information of SIBE confidential and not disclose such information
to West Central and its other employees with the consent of SIBE.
	 
	 	 	The parties acknowledge that in order to comply with certain statutory or regulatory
requirements, this Agreement may need to be disclosed to the Securities Exchange Commission,
the Iowa Securities Bureau or other regulators, and agree to allow such disclosure upon
receipt of appropriate request.
	 
	8.	 	Intellectual Property Rights. SIBE shall have no right under the Agreement to make
use of any brand names trademarked by West Central, nor any of the intellectual properties or
know-how developed by West Central in conjunction with the operation of a plant similar to the
Biodiesel Facility, or to use any of West Central’s intellectual properties and know-how other
than pursuant to such separate licensing arrangements as may be entered into by the parties
(if any), but the parties expressly agree that no such rights are being conveyed by virtue of
the execution or performance of this Agreement.
	 
	9.	 	Non-Solicitation of Employees. Each party agrees that neither party (nor any
affiliate, successor or permitted assign thereof) shall solicit for employment or consulting
an employee of the other while such employment by the other continues, and for a period of
three (3) years thereafter.
	 
	10.	 	Indemnification. The parties shall have the following indemnification/hold harmless
rights and obligations hereunder:

	 	A.	 	Except as to matters for which West Central is required to defend, indemnify
and hold harmless SIBE under Section 10.B below, and provided that West Central and its
directors, officers and employees, have otherwise satisfied and performed their duties
and obligations in accordance with this Agreement, SIBE shall defend, indemnify and
hold West Central, and its directors, officers and employees, harmless from and against
any and all claims, suits, losses, liabilities, costs, damages and expenses, including
reasonable attorneys’ fees and court costs, suffered or incurred by any such party in
defending any legal action or claim arising out of this Agreement, or West Central’s
actions or inactions taken thereunder.
	 
	 	B.	 	West Central shall defend, indemnify and hold SIBE, and its directors, officers
and employees, harmless from and against any and all claims, suits, losses,
liabilities, costs, damages and expenses, including reasonable attorneys’ fees and
court costs, suffered or incurred by any such party arising from or as a result of:
(i) breach by West Central or any representative, agent, officer or employee of West
Central, of any warranty, representation, term, covenant or condition of this
Agreement; or (ii) negligence, fraud or willful misconduct by the West Central or any
representative, agent, officer or employee of West Central.

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	11.	 	Access to Books and Records. This Agreement provides for the payment by SIBE to West
Central of a sum dependent upon the amount of production of biodiesel at the Biodiesel
Facility, and the Net Income of SIBE’s Biodiesel Facility. For that reason SIBE agrees to make
available its books and records for inspection and copying which are reasonably necessary for
purposes of providing information with respect to biodiesel production, and verifying the
computation of the Net Income Bonus, to the extent not already available to West Central in
performance of its duties hereunder. West Central agrees to treat information received under
such access rights as Confidential Information with respect to SIBE.
	 
	 	 	This Agreement provides for reimbursement by SIBE of various expenses of West Central,
including with respect to Employee Costs which may be paid by West Central in behalf of
SIBE. For that reason West Central agrees to make available those portions of its books and
records for inspection and copying which are reasonably necessary for purposes of verifying
appropriate amounts of reimbursement, and West Central’s compliance with its obligations set
forth hereunder. SIBE agrees to treat information received under such access rights as
Confidential Information with respect to West Central.
	 
	 	 	The expense of any such inspection or audit shall be borne by the party making such
inspection, unless the need for a material correction to payment is revealed, in which case
the reasonable expense of such inspection or audit shall be borne by the party whose books
and records are being audited.
	 
	12.	 	Force Majeure. Neither party hereto shall be liable for any delay arising from
circumstances beyond its control including (but not limited to) acts of God, riot or civil
commotion, industrial dispute, fire, flood, drought, shortage of material or labor or act of
government, terrorist acts, war, or sabotage, provided that the party seeking to be excused
shall make every reasonable effort to minimize the delay resulting therefrom, and shall give
prompt written notice of the force majeure event to the other party. The obligations of the
party giving notice, so far as they are affected by the force majeure event, will be suspended
during, but not longer than, the continuance of the force majeure event. The affected party
must act with commercially reasonable diligence to resume performance and notify the other
party that the force majeure event no longer affects its ability to perform under the
Agreement.
	 
	13.	 	Arbitration. Should any controversy, claim, dispute or difference arise between the
parties hereunder, out of or relating to this Agreement, including, without limitation, its
formation, validity, binding effect, interpretation, performance, breach or termination, then
each and every such controversy, claim, dispute or difference shall be submitted and settled
by arbitration in accordance with the Commercial Arbitration Rules then in effect of the
American Arbitration Association, and shall be conducted in Des Moines, Iowa. Judgment upon
the award rendered by the arbitrator or arbitrators may be entered in any court of competent
jurisdiction.

- 13 -

 

	14.	 	Independent Status. Subject to the terms and conditions of this Agreement, West
Central is authorized to perform services for SIBE as set out in the Agreement as an
independent contractor and as an agent with such authority as is necessary to carry out the
services herein provided. Nothing in this Agreement or in the course of dealing by the parties
shall be construed to constitute SIBE and West Central as partners, joint venturors, or as
guarantors for one another or as authorizing either party to obligate the other in any manner
except as is necessary for West Central to fulfill the services provided for hereunder.
	 
	15.	 	Early Termination. Notwithstanding the provisions of Section 6 hereof, this Agreement
may be terminated in accordance with the following provisions:

	 	A.	 	A party hereto may (but is not required to) terminate this Agreement if the
other party breaches any provision of this Agreement and fails to remedy such breach
within thirty (30) days after delivery of written notice from the non-breaching party
describing the alleged breach and the proposed remedy. However, if the breach is
non-payment by SIBE under Section 3, or West Central of proceeds of sale under Section
5(E), the cure period shall be ten (10) days after delivery of written notice by the
non-breaching party.
	 
	 	B.	 	Either party hereto may terminate this Agreement effective immediately upon
delivery of written notice to the other party, if the other party (i) is unable to pay
its debts as they mature or admits in writing its inability to pay its debts as they
mature, (ii) makes a general assignment for the benefit of its creditors, (iii) files a
voluntary petition for bankruptcy, or (iv) applies for the appointment of a receiver or
trustee for all or substantially all of its assets or permits the appointment of any
such receiver or trustee who is not discharged within a period of sixty (60) days after
such appointment.
	 
	 	C.	 	SIBE may terminate this Agreement effective immediately upon delivery of
written notice to West Central, if REG has defaulted under the Construction Contract
with regard to the Biodiesel Facility, and fails to remedy such default within the cure
period provided under such Construction Contract.
	 
	 	D.	 	West Central may terminate this Agreement effective immediately upon delivery
of written notice to SIBE, if SIBE has defaulted under the Construction Contract with
regard to the Biodiesel Facility, and failed to remedy such default within the cure
period provided under such Construction Contract.
	 
	 	E.	 	Notwithstanding any termination of this Agreement, the obligations and rights
of the parties which have accrued as of the time of such termination shall survive.
	 
	 	F.	 	Without limiting the generality thereof, if termination is due to a breach by a
party (the “Breaching Party”), then the Breaching Party shall indemnify the other party
(the “Non-Breaching Party”) against any loss, claim or damages (including reasonable
attorney fees) resulting from such breach or termination, and shall pay

- 14 -

 

	 	 	 	the costs of satisfying any obligations arranged by the Non-Breaching Party on
behalf of the Breaching Party prior to such termination, including commitments for
raw materials, transportation, sales, and hedging transactions.

	16.	 	Remedies in the Event of Default. Where the Breaching Party commits a material breach
of this Agreement (or of the Construction Contract as set out under subsections 15(C) or (D)),
and: (a) if except as set out herein such material breach continues beyond the allowable cure
period after the receipt of written demand for cure of such breach by the Non-Breaching Party
as set out in Section 15 hereof (or the allowable cure period under the Construction
Contract); or (b) if such material breach cannot be cured within such period and the Breaching
Party does not within such cure period start to cure the breach and thereafter proceed
diligently with the cure thereof, then the Non-Breaching Party may terminate this Agreement
and may recover its money damages caused by such material breach (including arbitration fees,
court costs, litigation expenses, and reasonable attorney fees) on written notice and demand
to the Breaching Party for payment. Such payment shall be without prejudice to any other right
or remedy that the Non-Breaching Party may have against the Breaching Party under this
Agreement, at law or in equity, including injunctive relief and rights of specific
performance.
	 
	17.	 	Representations and Warranties. As a material inducement to the other party to enter
into this Agreement and with the understanding that the other party shall be relying thereon
in consummating the transaction contemplated hereunder, each party hereby represents and
warrants to the other party as follows:

	 	A.	 	Authorization. The execution of this Agreement has been duly authorized
by the appropriate owners and board of governance as may be required for such party to
proceed.
	 
	 	B.	 	Standing. Such party is duly organized, validly existing and in good
standing under the laws of the state of formation and such other states as may be
required for this transaction, and has all requisite power and authority to consummate
the transactions contemplated hereunder.
	 
	 	C.	 	Consents. No approval or consent is needed from any third party with
respect to the performance of obligations hereunder by such party.
	 
	 	D.	 	Breaches. The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby do not and shall not result in any
material breach of any terms or conditions of any mortgage, agreement or contract or
obligation entered in to by such party (or in the case of SIBE by which the Biodiesel
Facility is bound), nor, to the best of such party’s knowledge, shall they violate any
statute, regulation, judgment or decree of any court in which such party may be bound
(or in the case of SIBE by which the Biodiesel Facility may be subject).

- 15 -

 

	 	E.	 	Litigation. There is no action, suit or proceeding pending, or to the
best of such party’s knowledge, threatened against such party which might prevent or
delay such party’s performance of its obligations hereunder.
	 
	 	F.	 	Ownership and Operation. SIBE (by its duly authorized representative
signing below) further represents and warrants that it will be the owner of the
Biodiesel Facility upon completion of its construction.
	 
	 	G.	 	Notices. All notices required or desired to be given under this
Agreement must be given in writing, and shall be sent by registered or certified mail,
return receipt requested, or by courier service, addressed to the parties at their
addresses set forth below, or such other addresses as may subsequently be designated in
writing by such party:

	 	 	 
	To SIBE:

	 	Southern Iowa BioEnergy, LLC
	 

	 	115 South Linden
	 

	 	Lamoni, IA 50140
	 

	 	Attention: William Higdon
	 
	 	 
	With copy to:

	 	Brown Winick Graves Law Firm
	 

	 	666 Grand Avenue, Suite 2000
	 

	 	Des Moines, Iowa 50309
	 

	 	Attention: Chris Sackett
	 
	 	 
	To West Central:

	 	West Central Cooperative
	 

	 	406 1st Street, PO Box 68
	 

	 	Ralston, IA 51459
	 

	 	Attention: Nile Ramsbottom
	 
	 	 
	With copy to:

	 	Wilcox, Polking, Gerken, Schwarzkopf & Copeland, P.C.
	 

	 	115 East Lincolnway, Suite 200
	 

	 	Jefferson, IA 50129
	 

	 	Attn: John A. Gerken

Any notice or other communications made shall be deemed to have been given when received or
refused. A party may change its address for notice by giving notice of such address as
provided in this Section.

	19.	 	Annual Review of Agreement. This Agreement will be reviewed annually by the parties,
as they determine the best procedures for accomplishing such services, define their roles, and
react to changes in the industry. Any changes to the Agreement shall require the mutual
written consent of SIBE and West Central.

- 16 -

 

	20.	 	Miscellaneous.

	 	A.	 	Benefits. This Agreement shall bind and benefit the parties and their
permitted successors and assigns.
	 
	 	B.	 	Assignment. Neither party may assign any of its rights in or delegate
any of its duties under this Agreement without the prior written consent of the other
party. Notwithstanding the foregoing, a party (“Assignor”) may assign any or all of
its rights, duties and obligations under this Agreement to such party’s affiliate
(“Assignee”), if such Assignee expressly assumes all obligations not otherwise
remaining with Assignor hereunder, and Assignor nonetheless remains responsible
hereunder in the event of any default by Assignee.
	 
	 	C.	 	Governing Law. Iowa law shall govern the construction and enforcement
of this Agreement.
	 
	 	D.	 	Entire Agreement; Amendment. This Agreement contains the entire
agreement of the parties with respect to the subject matter and supersedes all prior
oral or written agreements and understandings. This Agreement may not be amended or
modified except in writing signed by both parties.
	 
	 	E.	 	Execution and Delivery. This Agreement may be executed in counterparts
and delivered by facsimile, which, taken together, shall be considered one instrument
and deemed an original.
	 
	 	F.	 	No Inference from Drafting. The parties both acknowledge that they have
been represented by counsel, and that this Agreement has resulted from extended
negotiations between the parties. No inference in favor of or against any party shall
be drawn from the fact that such party has drafted any portion of this Agreement.
	 
	 	G.	 	Waiver. The waiver by either party of a breach of any provision of this
Agreement will not constitute or be construed as a waiver of any future breach of any
provision of this Agreement.
	 
	 	H.	 	Survival. The provisions of Sections 7, 8, 9, 10, 11 and 13 of this
Agreement shall indefinitely survive the expiration and termination of this Agreement.
	 
	 	I.	 	Covenant of Further Cooperation. Each of the parties agrees to execute
and deliver such further documents and to cooperate in such manner as may be necessary
to implement and give effect to the provisions contained herein.
	 
	 	J.	 	Enforceability and Interpretation. It is the desire and intent of the
parties hereto that this Agreement be enforced to the fullest extent possible under the
laws and public policies of the state of Iowa. Accordingly, if any particular
provision of

- 17 -

 

	 	 	 	this Agreement is adjudicated to be invalid or unenforceable, such portion shall be
deleted, and such deletion shall apply only to such provision with the remainder of
the Agreement remaining valid and enforceable, to be construed in conformity with
the parties’ initial intent. Further, to the extent any provision hereof is deemed
unenforceable by virtue of its scope or terms with respect to geographical area or
length of time, but may be enforceable by limitations thereon, the parties agree
that this Agreement shall remain enforceable to the fullest extent possible after
the application of such limitations.

	21.	 	Condition Precedent to West Central’s Performance. West Central’s obligations and
performance under the Agreement are expressly conditioned upon SIBE entering into a
Design-Build Agreement with REG for construction of the Biodiesel Facility.

	 	 	 	 	 	 	 	 	 
	WEST CENTRAL COOPERATIVE	 	 	 	SOUTHERN IOWA BIOENERGY, LLC
	 
	 	 	 	 	 	 	 	 
	By

	 	/s/Jeffrey Stroburg
	 	 
	 	By
	 	/s/William T. Hidgon
	 

	 	 
	 	 	 	 	 	 
	 

	 	Jeffrey Stroburg, President
	 	 	 	 	 	President (Title)

- 18 -

 

Exhibit A to

Management and Operational Services Agreement (“Agreement”)

West Central and SIBE

Listing of Administrative Services to be Provided

     Pursuant to the Agreement to which this is attached, and as a part of the services it will
perform thereunder, West Central will provide to SIBE the administrative services as set out
hereafter. Such services will be included at no additional cost to SIBE other than the compensation
set out under Section 3 of the Agreement, unless otherwise noted hereafter or separately in the
Agreement.

     Accounting:

	 	•	 	Financial Statements
	 
	 	•	 	General Ledger Maintenance
	 
	 	•	 	Cash Management
	 
	 	•	 	Customer Statements
	 
	 	•	 	Accounts Receivable
	 
	 	•	 	Accounts Payable
	 
	 	•	 	Bank Reconciliation
	 
	 	•	 	Depreciation
	 
	 	•	 	Audit Preparation
	 
	 	•	 	External Audit (providing assistance to external auditors, the expense of
the external auditor to be paid by SIBE)

     Human Resources:

	 	•	 	Hiring
	 
	 	•	 	Training, Job Descriptions, Government Reporting with respect to personnel
	 
	 	•	 	Employee hand book, policies/procedures
	 
	 	•	 	Workers Comp

     Information Technology:

	 	•	 	AS400 Software/Application Maintenance (West Central to be reimbursed by
SIBE for West Central’s costs (including employee expenses) for preparation of
any special requested applications.)
	 
	 	•	 	Telephone/Network Services (SIBE to reimburse West Central for the cost of
all equipment required and utility expenses incurred.)
	 
	 	•	 	Backup for Network
	 
	 	•	 	Backup for AS400 Files
	 
	 	•	 	Web Site Hosting

     Insurance Administration:

	 	•	 	Compile Initial Insurance Specifications
	 
	 	•	 	Solicit Coverage Bids

 

 

	 	•	 	Review Bids/Coverage Issues
	 
	 	•	 	Select Carriers to be Utilized (Cost of Coverage to be paid by SIBE)
	 
	 	•	 	Review Policies
	 
	 	•	 	Compile Insurance Summaries
	 
	 	•	 	COI setup dbase review
	 
	 	•	 	Certificate of Insurance Follow up
	 
	 	•	 	Claim Reporting Procedure
	 
	 	•	 	Claims Tracking
	 
	 	•	 	Claims Review
	 
	 	•	 	Claim reporting Follow up
	 
	 	•	 	Answer Coverage Questions

     Communications:

	 	•	 	Press Releases
	 
	 	•	 	Writing for Website
	 
	 	•	 	Media Relations
	 
	 	•	 	Publicity for Annual Meeting
	 
	 	•	 	Newsletters (SIBE to reimburse West Central for supply costs, postage if
applicable, and any outside printing services utilized.)

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