SUBORDINATION AGREEMENT
Exhibit 10.4
THIS SUBORDINATION AGREEMENT (this “Agreement”), dated as of June 24, 2014, is made by and among BUNGE NORTH AMERICA, INC., a New York corporation (“Bunge”), ICM INVESTMENTS, LLC, a Kansas limited liability company (“ICM”), CoBANK, ACB, and its successors and assigns, as Agent (the “Agent”) for itself and for the other commercial, banking or financial institutions whose signatures appear on the signature pages to the Credit Agreement (as defined below) or which hereafter become parties to the Credit Agreement (the “Banks”). Bunge and ICM are each referred to individually herein as a “Subordinated Noteholder” and, collectively, as the “Subordinated Noteholders.” Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement.
RECITALS
A. SOUTHWEST IOWA RENEWABLE ENERGY, LLC, an Iowa limited liability company (“SIRE”), the Agent, and the Banks have entered into a Credit Agreement dated June 24, 2014, (as amended, restated, modified or otherwise supplemented from time to time, the “Credit Agreement”) under which the Banks agreed to extend certain loans in the original principal amount of up to $66,000,000.00 (the “Loans”) to SIRE for the operation of an ethanol production facility (the “Project”). SIRE’s obligation to repay the Loans is secured by a mortgage on the Project and a security interest in substantially all of the assets of SIRE.
X. Xxxxx has provided a term loan to SIRE pursuant to the terms of a Subordinated Term Loan Note dated as of June 23, 2014 (the “Bunge Subordinated Note”) in the principal amount of $19,517,136.99.
C. ICM has provided a term loan to SIRE pursuant to a Negotiable Subordinated Term Loan Note dated as of June 23, 2014 (the “ICM Subordinated Note”), in an original maximum principal amount of $6,726,757.85.
D. The Banks require that the Subordinated Noteholders subordinate the payment of the Subordinated Indebtedness to the payment of any and all indebtedness of SIRE to the Banks as provided in the Credit Agreement.
E. This Agreement replaces and supersedes in its entirety that certain Subordination Agreement, dated as of June 17, 2010, executed by and between Bunge, ICM and parties to predecessor credit facilities, which have been retired.
AGREEMENT
NOW, THEREFORE, in order to induce the Banks to consummate the transactions contemplated by the CoBank Loan Documents, and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereby agrees as follows:
1. Definitions. As used herein, the following terms have the meanings set forth below:
“CoBank Indebtedness” shall mean all obligations, liabilities and indebtedness of every nature of SIRE from time to time owed to the Banks under the CoBank Loan Documents, including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, whether before or after the filing of a proceeding under the Bankruptcy Code together with (a) any amendments, modifications, renewals or extensions thereof and (b) any interest accruing thereon after the commencement of a proceeding, without regard to whether or not such interest is an allowed claim. CoBank Indebtedness shall be considered to be outstanding whenever any loan commitment or loan under the CoBank Loan Documents is outstanding.
“CoBank Loan Documents” shall mean the Credit Agreement and all other notes, mortgages, security agreements, documents, instruments, and assignments and contracts between SIRE and the Banks as the same may be amended, restated, supplemented or otherwise modified from time to time.
“SIRE Default” shall mean a Default or Event of Default as defined in the CoBank Loan Documents, or any other agreement or instrument evidencing, governing, or issued in connection with the Loans, or any default under or breach of any such agreement or instrument.
“Subordinated Debt Documents” shall mean the Bunge Subordinated Note, the ICM Subordinated Note and all indentures, loan agreements, documents and other instruments executed in connection therewith, as the same may be amended, restated, supplemented or otherwise modified from time to time.
“Subordinated Indebtedness” shall mean all obligations, liabilities and indebtedness of every nature of SIRE from time to time owed to the Subordinated Noteholders pursuant to the Subordinated Debt Documents, including, without limitation, the principal amount of all debts, claims and indebtedness, accrued and unpaid interest and all fees, costs and expenses, whether primary, secondary, direct, contingent, fixed or otherwise, heretofore, now and from time to time hereafter owing, due or payable, whether before or after the filing of a proceeding under the Bankruptcy Code together with (a) any amendments, modifications, renewals or extensions thereof and (b) any interest accruing thereon after the commencement of a proceeding, without regard to whether or not such interest is an allowed claim. The Subordinated Indebtedness shall be considered to be outstanding whenever any loan commitment or loan under a Subordinated Debt Document is outstanding.
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2. Subordination.
(a) Payment Subordination. The payment of the Subordinated Indebtedness is hereby expressly subordinated to the CoBank Indebtedness on the terms set forth in this Agreement; provided, however, that SIRE shall have the right to pay, and the applicable Subordinated Noteholder will have the right to accept payment of: (i) without the prior written consent of the Agent all payments of principal and interest on the Subordinated Indebtedness permitted by Section 7.7 of the Credit Agreement, (ii) with the prior written consent of the Agent any principal or interest on: (A) the Bunge Subordinated Note, to the extent such payment constitutes a prepayment of the Bunge Subordinated Note as required by the terms of the Bunge Subordinated Note; (B) the ICM Subordinated Note, to the extent such payment constitutes a prepayment of the ICM Subordinated Note as required by the terms of the ICM Subordinated Note; and (C) any other Subordinated Indebtedness from and after its stated maturity, which shall be not earlier than the maturity date of the Term Loan (as defined in the Credit Agreement). Nothing in this subsection 2(a) shall be deemed to prohibit (i) any interest from being capitalized and added to the principal balance of any Subordinated Indebtedness in accordance with the terms of the Subordinated Debt Documents or (ii) any Subordinated Noteholder from converting any or all of the Subordinated Indebtedness held by it into the applicable series of units in SIRE upon the terms set forth in the Subordinated Debt Documents.
(b) Security Interest Subordination. Regardless of any priority otherwise available to a Subordinated Noteholder by law or by agreement, the Agent for the benefit of the Banks shall hold a first security interest in all collateral securing payment of the CoBank Indebtedness (the “CoBank Collateral”), and any security interest claimed therein (including any proceeds thereof) by any Subordinated Noteholder shall be and remain fully subordinate for all purposes to the security interest of Banks therein for all purposes whatsoever.
3. Payments Prior to Acceleration or Demand for Payment. It is understood and agreed that SIRE shall not pay, and no Subordinated Noteholder shall accept, any principal or interest on any Subordinated Indebtedness, except as expressly set forth in subsection 2(a) above. In the event of receipt of payments by a Subordinated Noteholder described in subsection 2(a) prior such Subordinated Noteholder’s receipt of a notice of acceleration or demand for payment of the CoBank Indebtedness, such payments shall belong to such Subordinated Noteholder as its own property, and such Subordinated Noteholder shall have no obligation under this Agreement to hold or remit any part of such payments for the account of the Banks.
4. Payments After Acceleration or Demand for Payment. In the event of receipt of any payments by a Subordinated Noteholder from SIRE under a Subordinated Debt Document after such Subordinated Noteholder’s receipt of the notice of acceleration or demand for payment in full of the CoBank Indebtedness from Agent (unless Agent has revoked such notice in writing), such payments shall be applied by such Subordinated Noteholder as follows:
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(a)
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All payments received by such Subordinated Noteholder after the receipt of the notice of acceleration or demand for payment in full of the CoBank Indebtedness from Agent shall be held in trust by such Subordinated Noteholder, and shall
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promptly be transferred to the Agent and thereafter shall be applied to the payment of the CoBank Indebtedness.
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(b)
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Until all of CoBank Indebtedness has been paid in full, such Subordinated Noteholder shall not, without Agent’s prior written consent, exercise any right of or permit any setoff in respect of any Subordinated Indebtedness.
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(c)
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If such Subordinated Noteholder receives any payment on the Subordinated Indebtedness that such Subordinated Noteholder is not entitled to receive under the provisions of this Agreement, such Subordinated Noteholder will hold the amount so received in trust for the Banks and will forthwith turn over such payment to Agent in the form received (except for the endorsement of such Subordinated Noteholder where necessary) for application to the CoBank Indebtedness (whether or not due). If such Subordinated Noteholder exercises any right of setoff which such Subordinated Noteholder is not permitted to exercise under the provisions of this Agreement, such Subordinated Noteholder will promptly pay over to Agent, in immediately available funds, an amount equal to the amount of the claims or obligations offset. If such Subordinated Noteholder fails to make any endorsement required under this Agreement, Agent, or any of its officers or employees or agents on behalf of Agent, is hereby irrevocably appointed as the attorney-in-fact (which appointment is coupled with an interest) for such Subordinated Noteholder to make such endorsement in such Subordinated Noteholder’s name.
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(d)
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In the event of the bankruptcy of, or the appointment of a trustee, receiver or other representative or liquidator for any of the property of SIRE, or if SIRE shall become the subject of any proceeding of any character under any federal or state bankruptcy or insolvency act or law, all monies and other property allocated or allocable to the Subordinated Indebtedness and which would be payable or deliverable to a Subordinated Noteholder in the absence of the provisions of this Agreement shall be paid and delivered directly to Agent for application by Agent as hereinafter provided, regardless of whether a Subordinated Noteholder or Agent or both file a claim on behalf of a Subordinated Noteholder in any such proceeding. Agent is irrevocably authorized, at its option, but is under no duty or obligation, (a) to represent a Subordinated Noteholder in any such proceeding, and (b) in its own name or otherwise, to make proof of, and receive any payments and property allocated or declared for payment or delivery on account of the Subordinated Indebtedness in any such proceeding; and for said purposes, each Subordinated Noteholder further agrees at Agent’s request to deliver to Agent a separate instrument of assignment assigning the Subordinated Indebtedness to Agent. Agent may apply all payments and property it receives on such of CoBank Indebtedness as it shall then elect, until full payment of all of CoBank Indebtedness, the excess, if any, to be paid to the Subordinated Noteholders.
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(e)
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The Subordinated Noteholders’ and SIRE’s undertakings and Agent’s rights and remedies shall not be affected or impaired by (a) any neglect or omission on the
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part of Agent to look to, or to preserve any collateral at any time securing payment of the CoBank Indebtedness, or (b) any act on the part of Agent in releasing, canceling or surrendering all or part of such collateral, or in extending the time for payment with respect to all or any part of the CoBank Indebtedness or such collateral, or in enforcing or relying upon such collateral, or (c) any other act or omission by Agent or any Bank. No notice need be given to any Subordinated Noteholder at any time of the CoBank Indebtedness or the amount thereof, whether now existing or later arising, or any increase or decease therein, or any payment thereof, or with respect to any collateral, or in any other respect.
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(f)
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No Subordinated Noteholder shall, without the prior written consent of Agent, assign, pledge or otherwise transfer, or permit to be assigned, pledged or otherwise transferred or execute any power of attorney with respect to the Subordinated Indebtedness or any part thereof, except to Agent.
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(g)
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The Subordinated Debt Documents shall not be amended or modified without the prior written consent of the Agent.
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5. Continuing Effect. This Agreement shall constitute a continuing agreement of subordination, and Agent may, subject to the provisions of the CoBank Loan Documents and without notice to or consent by any Subordinated Noteholder, modify any of the CoBank Loan Documents in reliance upon this Agreement. Without limiting the generality of the foregoing, Agent may, at any time and from time to time, either before or after receipt of any such notice of revocation, without the consent of or notice to any Subordinated Noteholder and without incurring responsibility to any Subordinated Noteholder or impairing or releasing any of Agent’s rights or any of Subordinated Noteholder’s obligations hereunder:
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(a)
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change the interest rate or change the amount of payment or extend the time for payment or renew or otherwise alter the terms of any CoBank Indebtedness or any instrument evidencing the same in any manner;
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(b)
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sell, exchange, release or otherwise deal with any property at any time securing payment of CoBank Indebtedness or any part thereof;
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(c)
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release anyone liable in any manner for the payment or collection of CoBank Indebtedness or any part thereof;
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(d)
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exercise or refrain from exercising any right against SIRE or any other person (including any Subordinated Noteholder); and
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(e)
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apply any sums received by Agent, by whomsoever paid and however realized, to CoBank Indebtedness in such manner as Agent shall deem appropriate.
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6. Notice. All notices and other communications hereunder shall be in writing and shall be (i) personally delivered, (ii) transmitted by registered mail, postage prepaid, or (iii)
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transmitted by telecopy, in each case addressed to the party to whom notice is being given at its address as set forth below:
If to Bunge:
Xxxxx X.X. Holdings, Inc.
x/x Xxxxx Xxxxx Xxxxxxx, Inc.
00000 Xxxxxx Xxxxx
Xx. Xxxxx, XX 00000
Facsimile: (000)000-0000
Attention: General Manager, Biofuels
With copy to:
Bunge North America, Inc.
00000 Xxxxxx Xxxxx
Xx. Xxxxx, XX 00000
Facsimile: (000)000-0000
Attention: General Counsel
If to ICM:
ICM Investments, LLC
000 X. Xxxxx Xx.
Xxxxxxx, XX 00000
Facsimile: (000)000-0000
Attention: General Counsel
If to Agent:
CoBank, ACB
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxx Xxxxxxx, XX 00000
Facsimile:
Attention:
or at such other address as may hereafter be designated in writing by that party. All such notices or other communications shall be deemed to have been given on (i) the date received if delivered personally, (ii) the date of posting if delivered by mail, or (iii) the date of transmission if delivered by telecopy.
7. Conflict. In the event of any conflict between any term, covenant or condition of this Agreement and any term, covenant or condition of any of the CoBank Loan Documents, the provisions of this Agreement shall control and govern.
8. Headings. The paragraph headings used in this Agreement are for convenience only and shall not affect the interpretation of any of the provisions hereof.
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9. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
10. Severability. In the event that any provision of this Agreement is deemed to be invalid, illegal or unenforceable by reason of the operation of any law or by reason of the interpretation placed thereon by any court or governmental authority, the validity, legality and enforceability of the remaining provisions of this Agreement shall not in any way be affected or impaired thereby, and the affected provision shall be modified to the minimum extent permitted by law so as most fully to achieve the intention of this Agreement.
11. Termination of Agreement. This Agreement shall remain in full force and effect until the indefeasible payment in full in cash of the CoBank Indebtedness and termination of the CoBank Loan Documents after which this Agreement shall terminate without further action on the part of Agent hereto.
12. Applicable Law. This Agreement shall be governed by and shall be construed and enforced in accordance with the internal laws of the State of Iowa, without regard to conflicts of law principles.
14. WAIVER OF JURY TRIAL. EACH SUBORDINATED NOTEHOLDER HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT. EACH SUBORDINATED NOTEHOLDER ACKNOWLEDGES THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP AND THAT AGENT HAS RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT. EACH SUBORDINATED NOTEHOLDER REPRESENTS AND WARRANTS THAT IT HAS HAD THE OPPORTUNITY TO REVIEW THIS AGREEMENT AND THIS WAIVER WITH LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.
15. SUBROGATION. Subject to the payment of the CoBank Indebtedness in full, to the extent cash, property or securities otherwise payable or deliverable to any Subordinated Noteholder shall have been applied to the payment of CoBank Indebtedness pursuant to this Agreement (whether by reason of turnover by such Subordinated Noteholder to the Agent or any Bank or otherwise), then such Subordinated Noteholder shall be subrogated to the rights of the Agent and the Banks to receive payments and distributions of cash, property and securities applicable to the CoBank Indebtedness until the Subordinated Indebtedness is paid in full. For purposes of such subrogation, no payments or distributions to the Agent or any Bank of any cash, property or securities to which a Subordinated Noteholder would have been entitled except for the provisions of this Agreement, and no payments pursuant to the provisions of this Agreement by a Subordinated Noteholder to the Agent or any Bank, shall, as among SIRE and/or any of SIRE’s creditors (other than the Agent, the Banks and the Subordinated Noteholders), be deemed to be a payment or distribution by SIRE to or on account of any of the CoBank Indebtedness.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above-written.
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BUNGE NORTH AMERICA, INC.,
a New York corporation
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| By: | /s/ Xxxx X. Xxxxxxx | ||
| Name: | Xxxx X. Xxxxxxx | ||
| Title: | Vice President | ||
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ICM INVESTMENTS, LLC,
a Kansas limited liability company
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| By: | /s/ Xxxxx Xxxxxx | ||
| Name: | Xxxxx Xxxxxx | ||
| Title: | Secretary & General Counsel | ||
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COBANK, ACB,
and its successors and assigns,
as Agent for itself and the other Banks
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| By: | /s/ Xxx X. Xxxxxx | ||
| Name: | Xxx X. Xxxxxx | ||
| Title: | Vice President |
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ACKNOWLEDGEMENT
The undersigned hereby acknowledges and agrees to the terms and provisions of this Subordination Agreement. By executing this Acknowledgement, Southwest Iowa Renewable Energy, LLC, through the undersigned authorized manager, agrees to be bound by the provisions of the Subordination Agreement insofar as such provisions relate to the relative rights of Agent and the Subordinated Noteholders thereto as among such parties. The undersigned further agrees that the terms of the Debt Subordination Agreement shall not give the undersigned any substantive rights vis-à-vis the parties and does not affect the undersigned’s obligations under the CoBank Loan Documents or the Subordinated Debt Documents.
