SUBORDINATED SECURED PROMISSORY
March 27, 2009
FOR VALUE RECEIVED, the
undersigned, MGP INGREDIENTS, INC., a Kansas
corporation and MIDWEST GRAIN PIPELINE, INC., a
Kansas corporation (each a Borrower and
collectively the Borrowers), each jointly and severally promises to pay to the
order of the CLOUD L. CRAY, JR. TRUST under
agreement dated October 25, 1983, whose address is 20045 266th Road,
Atchison, Kansas 66002 (together with his successors and assigns, the Lender) the principal amount of TWO MILLION
DOLLARS ($2,000,000.00) (the Principal Amount),
together with interest upon the principal balance remaining outstanding from
time to time as set forth below, in payments as set forth below. The indebtedness evidenced by this
Subordinated Secured Promissory Note (the Note) is
referred to herein as the Loan..
TO PAY PRINCIPAL.
the terms of the Subordination Agreement (as defined below), the Borrowers
promise to pay to the Lender the outstanding principal of the Loan under this
Note in full on the Maturity Date of this Note.
Date of this Note shall be the earlier of: (a) the date that
is 1 year from the date hereof; or (b) the
acceleration of the Loan by the Lender upon the occurrence of an Event of
Default (as defined below).
The applicable interest rate
(the Applicable Interest Rate) shall be
interest at a rate per annum equal to seven percent (7%). Interest on this Note shall be calculated on
the actual number of days elapsed, on the basis of a calendar year.
The Borrowers shall make
payments to Lender at his address or as later communicated to Borrowers, in
immediately payable U.S. funds. Payments
shall be applied first to unpaid fees, costs, and expenses which are
reimbursable under the terms of this Note, then to accrued unpaid interest,
then to principal. If any payment due
date is a Saturday, Sunday, or holiday generally observed by banks in Atchison,
Kansas, the due date of the payment shall automatically be extended to the next
following banking business day.
and Principal Payments.
Subject to the terms of the Subordination Agreement, the Borrowers shall
pay interest in a single lump sum payment on the Maturity Date. Principal payments of the Loan will be paid
in accordance with Section 1.
Payment. Subject to
the terms of the Subordination Agreement, all accrued and unpaid interest, late
payment charges, outstanding principal, and all other amounts chargeable under
the Loan Documents shall be due and payable in full on the Maturity Date.
The purpose of the Loan is
to fund the Borrowers general corporate purposes. The Borrowers agree that the funds the
Borrowers receive under the terms of the Loan will be used only for these
purposes. The Borrowers agree that this
is a business loan and that none of the Loan proceeds have been or will be used
for any personal, consumer, family, or household purpose.
of Security Interest. Each
Borrower hereby grants to Lender a security interest in, and a lien on, all of
such Borrowers right, title and interest in the following property (together
with any property subject to a lien in favor of the Lender pursuant to any
other Loan Document, the Collateral)
wherever located and whether now owned or hereafter acquired or arising
(capitalized terms used in this Section 6
and not otherwise defined in this Note shall have the meaning assigned to such
terms in the Uniform Commercial Code as adopted by the State of Kansas):
(a) all Equipment;
(b) all General
Intangibles (including, without limitation, patents, trademarks and trade names
and applications for patents, trademarks and trade names);
(c) all Chattel
(d) all Documents;
(f) all Investment
(g) all Deposit
(h) all Fixtures;
(i) all As -
(j) all books,
records, ledger cards, data processing records, Software, and other property at
any time evidencing or relating to Collateral;
(k) all monies,
securities, and other property now or hereafter held, or received by, or in
transit to, Lender, from or for the Borrower;
(l) all parts,
accessories, attachments, special tools, additions, replacements,
substitutions, and accessions to or for all of the foregoing; and
(m) All Proceeds
and products of all of the foregoing in any form, including, without
limitation, amounts payable under any policies of insurance insuring the
foregoing against loss or damage, and all increases and profits received from
all of the foregoing.
Assets. Notwithstanding anything in
this Note to the contrary the Collateral shall not include the Excluded Assets.
Excluded Assets means:
(1) all Accounts;
(2) all Inventory;
(3) the Excluded GE
(4) the Excluded
Real Estate; and
(5) MGPs equity
interest in D.M. Ingredients GmbH.
Excluded GE Equipment Collateral means Equipment of the
Borrowers so long as such Equipment is encumbered by a the lien in favor of GE
Capital Public Finance, Inc. set forth in Schedule 5.1(m) of the
Senior Credit Agreement; provided, however,
that, upon the repayment or other satisfaction of the debt secured by any such
lien, the related Equipment shall no longer constitute Excluded GE Equipment
Excluded Real Estate means (1) MGPs new office
building and laboratory located in Atchison, Kansas and which has been conveyed
to, and leased back from, the City of Atchison in connection with an industrial
revenue bond financing transaction (including, without limitation, the Borrowers
leasehold interest in such property), and (2) MGPs plant located in
Kansas City, Kansas (i.e., the KCIT Facility), so long as such plant is
encumbered by a lien which secures Permitted Debt under the Senior Credit
Estate Collateral. The
obligations of the Borrowers to the Lender are also secured by certain liens on
certain parcels of the Borrowers real property in Pekin, Illinois and
Atchison, Kansas granted to the Lender by the Borrowers pursuant to those
certain Mortgage, Assignment of Leases, Security Agreements and Fixture Filing
Financing Statements (the Mortgages)
entered into as of the date of this Note.
security interests granted by Borrowers pursuant to this Section 6
secure payment of any and all indebtedness, and performance of all obligations
and agreements, of the Borrowers to Lender pursuant to this Note. The Borrowers authorize the Lender to file
any UCC financing statements the Lender deems necessary or desirable to perfect
the lien granted pursuant to this Section 6
including with a description of the collateral as all assets or a
substantially similar description; provided that such description shall
expressly exclude the Excluded Assets.
to Senior Obligations. The
security interest granted pursuant to this Note and the Lenders rights and
remedies with respect to the Collateral are subordinated to certain other
security interests and liens pursuant to, and to the extent provided in, that
certain Subordination Agreement dated as of March , 2009
(the Subordination Agreement) in favor of
Commerce Bank, N.A, a national banking association, in its capacity as Agent
under the Credit Agreement referred to in such Subordination Agreement, as the
same may be amended, restated, consolidated, replaced or otherwise modified
from time to time.
7. CONDITIONS PRECEDENT TO OBLIGATIONS
The Borrowers and the Lender shall
have delivered or caused to be delivered the following this Note, the
Mortgages, and the Intercreditor Agreement, in each case duly executed by
Borrowers and the Lender party thereto (as amended, restated, supplemented or
otherwise modified from time to time, the Loan Documents).
8. CONTINUING REPRESENTATIONS AND WARRANTIES
Lender to enter into this Note, and make Loan to the Borrowers as herein
provided, each Borrower represents and warrants as follows:
8.1. Existence. Each Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Kansas and is duly licensed or qualified to do business and in good standing in
every state in which the failure to be so licensed or qualified would
materially adversely affect the property, assets, financial condition, or
business of the Borrower or materially impair the right or ability of the
Borrower to carry on its operations substantially as conducted on the date of
and Authority. The
execution, delivery, and performance of this Note and the other Loan Documents
to which each Borrower is a party are within each Borrowers corporate powers,
have been duly authorized by all necessary and appropriate corporate and
shareholder action, and are not in contravention of any law or the terms of the
Borrowers Articles of Incorporation or Bylaws or any amendment thereto, or of
any indenture, agreement, undertaking, or other document to which each Borrower
is a party or by which each Borrower or any of the Borrowers property is bound
to Collateral. (i) Borrower
is the owner of the Collateral free of all security interests, liens, and other
encumbrances except for liens in favor of Lender and the Senior Lenders; (ii) each
Borrower has the authority to grant the security interest and liens under this
Note and the other Loan Documents to Lender; and (c) Lender has an
enforceable lien on all Collateral subject to the liens of the Senior Lenders.
8.4. Validity. This Note and the other Loan Documents
constitute the legal, valid, and binding obligations of Debtors party thereto,
enforceable in accordance with their respective terms, except as enforceability
may be limited by applicable bankruptcy and insolvency laws and laws affecting
creditors rights generally.
Consents. No consent,
license, approval, or authorization of, or registration, declaration, or filing
with, any court, governmental body or authority, or other person is required: (i) in
connection with the valid execution, delivery, or performance of this Note of
the other Loan Documents by Debtors (other than filings and recordings to
perfect security interests in or liens on the Collateral in connection with the
Loan Documents), or (ii) for the conduct of any Debtors business as now
conducted, except ordinary business licenses or permits which such Debtor has
obtained; in each case except to the extent already obtained.
9. EVENTS OF DEFAULT.
The following shall be Events of
Default under this Note in addition to any events of default
defined in the Loan Documents:
Default. A failure to
pay within 5 business days of when due any principal, interest, fee, expense
reimbursement, or escrow payment.
of Covenant; Default Under Loan Documents. The Borrowers breach of any other
obligation, covenant, representation, warranty, or agreement under the terms of
any Loan Document in strict accordance with the terms and provisions thereof,
and with respect to any such breach that is capable of being cured, Borrowers
failure to cure such breach within 30 days of receiving written notice (which
may be sent by e-mail, facsimile or other electronic transmission) of such
breach from Lender.
Insolvency; Debtor Relief. A Borrower:
a) making an assignment for the
benefit of creditors; b) filing
a voluntary proceeding seeking protection from creditors under any bankruptcy
or other law; c) becoming the subject of an
involuntary proceeding under any bankruptcy or other similar law (provided,
such filing shall not constitute a default for sixty (60) days following the
date of any such filing as long as the Borrower is at all times diligently
pursuing proceedings to discuss any such bankruptcy filing); or d) making any admission of its inability to pay its
debts generally as they become due.
Credit Agreement Cross Acceleration. The Senior Lenders providing notice to the
Borrowers demanding immediate payment of all obligations of the Borrowers under
the Senior Credit Agreement.
Subject to the terms of the
Subordination Agreement, upon the occurrence of an Event of Default, Lender
shall have the right to demand payment in full of the Loans and all other
obligations under this Note and any other Loan Document, to enforce its liens
and security interests and exercise any rights under the Loan Documents,
applicable law, and/or principles of equity.
11. COSTS AND EXPENSES.
Promptly upon Lenders
demand (but subject to the terms of the Subordination Agreement), the Borrowers
shall reimburse Lender for any reasonable costs, including but not limited to,
attorneys costs and fees (based upon time actually expended and at a
reasonable hourly rate) incurred in: a) collecting any sums due under the Loan Documents; b) enforcing or defending any lien on or security interest
related to the Collateral or the Loan Documents; c)
pursuing or defending any litigation based on, arising from, or related to any
Loan Document; and d) connection
with the custody, preservations, use, operation, or sale of the Collateral.
All provisions of this Note
which call for the payment of interest are intended to comply with all
applicable usury statutes and regulations.
If the terms of this Note would require the payment of interest in
excess of the amount permitted by any applicable law or regulation, the terms
of this Note shall be deemed to be modified to comply with all such applicable
laws or regulations without any action by either party. If Lender receives interest in excess of the
amount permitted by any applicable law or regulation, the excess portion of the
interest received shall be deemed to be a prepayment of principal without
premium as of the date received.
To the fullest extent
permitted by law, Borrower and all endorsers, sureties, and guarantors
irrevocably: a) waive presentment
for payment, notice of dishonor, notice of nonpayment, protest, notice of
protest, demand, other notices of every kind, and all rights to plead any
statute of limitations as a defense to any action hereunder; b) consent
that the time of payment of any installment may be extended from time to time,
that all or any part of the Collateral may be released, and that any person
liable under this Note may be released, all without notice, and all without
affecting the liability of any person or the lien on that portion of the
Collateral not expressly released; and c) agree that no delay in enforcing
any remedy under this Note or any Loan Document shall be construed to be a
waiver of that or any other remedy.
Lenders failure to exercise any of its rights, remedies, or powers set
forth herein or in the Loan Documents or Lenders acceptance of partial
payments or performance shall not constitute a waiver of any Event of Default,
but any such right, remedy, or power shall remain continually in force. A waiver of one Event of Default shall not be
construed as continuing or as a bar to or waiver of: x) such Event of Default at a later
date; y) any other Event of Default; or z) any other right, remedy,
communications required hereunder or in the Loan Documents shall be given to
Borrower and Lender at their respective addresses set forth underneath their
respective signatures hereto or at such other addresses as either party may
designate by notice given in accordance with the terms of this section. All communications required or permitted
pursuant to this Note shall be legible and shall be deemed to have been
properly given and received: a) if sent by hand delivery, then upon such delivery; b) if sent by nationally known overnight courier, then
on the next business day after dispatch; and c) if
mailed by registered or certified U.S. Mail, postage prepaid and return receipt
requested, then 3 days after deposit in the mail.
15.1. This Note shall
be binding on Borrower and Borrowers heirs, successors, and assigns, as
applicable, and shall inure to the benefit of Lender and Lenders successors
and assigns. Borrower may not assign its
obligations under this Note without Lenders prior written consent. Lender may assign its rights and obligations
under this Note with notice to the Borrower.
15.2. This Note may
not be modified, nor any of its provisions waived, without Lenders prior
15.3. Time shall be
of the essence of this Note.
15.4. The provisions
of this Note are separable. If any
judgment is hereafter entered holding any provision of this Note to be invalid
or unenforceable, then the remainder of this Note shall not be affected by such
judgment, and the remaining terms of this Note shall be carried out as nearly
as possible according to its original terms.
15.5. No inference in
favor of, or against, any person shall be drawn from the fact that such person
has drafted all or any part of this Note or any other Loan Document.
15.6. If there is a conflict between or among
the terms of this Note or any Loan Document, Lender may elect to enforce from
time to time those provisions that would afford Lender the maximum
benefits and security for the obligations evidenced and secured by the Loan
Documents and/or provide Lender the maximum assurance of payment and
performance of such obligations in full.
16. STATUTORY NOTICE. THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS CONSTITUTE THE COMPLETE AND FINAL EXPRESSION OF
THE CREDIT AGREEMENT (AS DEFINED IN K.S.A. § 16-117(A)) BETWEEN DEBTORS
AND SECURED PARTY AND MAY NOT BE CONTRADICTED BY EVIDENCE OF ANY PRIOR
ORAL CREDIT AGREEMENT OR OF ANY CONTEMPORANEOUS ORAL CREDIT AGREEMENT BETWEEN
DEBTORS AND SECURED PARTY. DEBTORS AGREE
THAT ALL NONSTANDARD TERMS AND ALL PRIOR ORAL CREDIT AGREEMENTS AND
CONTEMPORANEOUS ORAL CREDIT AGREEMENTS BETWEEN DEBTORS AND SECURED PARTY ARE
SUFFICIENTLY SET FORTH IN THE TRANSACTION DOCUMENTS EXCEPT AS FOLLOWS (IF NONE,
STATE NONE OR LEAVE BLANK): NONE.
DEBTORS ALSO AGREE THAT
THE ABOVE SPACE IS SUFFICIENT FOR THE DISCLOSURE OF TERMS AND AGREEMENTS NOT
OTHERWISE SET FORTH IN THE TRANSACTION DOCUMENTS. BY SIGNING THIS AGREEMENT, DEBTORS AND
SECURED PARTY AFFIRM THAT NO UNWRITTEN ORAL CREDIT AGREEMENT BETWEEN THEM
17. CHOICE OF LAW; VENUE.
This Note shall be deemed to
have been executed and shall be performed in the State of Kansas and shall be
governed by its laws. Borrower
irrevocably agrees that Lender may bring suit, action, or other legal
proceedings arising out of the Loan Documents in courts located in Atchison
County, Kansas, whether local, state, or federal. Borrower hereby submits to the jurisdiction
of such court(s) and waives any right Borrower may have to request a
change of venue or a removal to another court.
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MGP INGREDIENTS, INC., a Kansas
/s/ Timothy W. Newkirk
Name: Timothy W. Newkirk
Title: President and CEO
MIDWEST GRAIN PIPELINE, INC., a Kansas
/s/ Timothy W. Newkirk
Name: Timothy W. Newkirk
Title: President and CEO
c/o Cray Business Plaza
100 Commercial Street
Atchison, Kansas 66002
ACKNOWLEDGED AND AGREED TO BY LENDER:
/s/ Cloud L. Cray, Jr. TTEE
Cloud L. Cray, Jr., as Trustee
of the CLOUD L. CRAY, JR. TRUST under
agreement dated October 25, 1983
20045 266th Road
Atchison, Kansas 66002