exv10w7






Exhibit 10.7


 

 










SUBORDINATION AGREEMENT




among




RENEGY HOLDINGS, INC.

a Delaware corporation

(Junior Claimant)




and




SNOWFLAKE WHITE MOUNTAIN 
POWER, LLC,

an Arizona limited liability company

(Borrower)




and




COBANK, ACB

(Administrative Agent)




Dated as of January 1, 2009




 

 










 









 












TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE I. DEFINITIONS	 	 	2	 
	 
	 	1.1	 	Agreement Definitions	 	 	2	 
	 
	 	1.2	 	Credit Agreement Definitions	 	 	2	 
	 
	 	1.3	 	Rules of Interpretation	 	 	2	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE II. CERTAIN SUBORDINATION TERMS	 	 	2	 
	 
	 	2.1	 	Making of Payments	 	 	2	 
	 
	 	2.2	 	Legend	 	 	3	 
	 
	 	2.3	 	Proceeding Against Borrower; Proof of Claim	 	 	3	 
	 
	 	 	 	2.3.1   Proceeding Against SWMP	 	 	3	 
	 
	 	 	 	2.3.2   Proof of Claim	 	 	4	 
	 
	 	2.4	 	Time of Filing	 	 	4	 
	 
	 	2.5	 	Wrongful Collections	 	 	4	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE III. OWNERSHIP OF SUBORDINATED AMOUNTS; AMENDMENT OF LLC AGREEMENT;
CREDIT DOCUMENTS
	 	 	4	 
	 
	 	3.1	 	Ownership of Subordinated Amounts	 	 	4	 
	 
	 	3.2	 	Amendment of LLC Agreement	 	 	4	 
	 
	 	3.3	 	Credit Documents	 	 	4	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE IV. WAIVERS	 	 	5	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE V. REINSTATEMENT	 	 	5	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VI. BANKRUPTCY	 	 	5	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VII. FURTHER ASSURANCES	 	 	5	 
	 
	 	 	 	 	 	 	 	 
	ARTICLE VIII. MISCELLANEOUS	 	 	6	 
	 
	 	8.1	 	Notices	 	 	6	 
	 
	 	8.2	 	Benefit of Agreement	 	 	7	 
	 
	 	8.3	 	Delay and Waiver	 	 	7	 
	 
	 	8.4	 	Amendments	 	 	7	 
	 
	 	8.5	 	Governing Law	 	 	7	 
	 
	 	8.6	 	Consent to Jurisdiction	 	 	7	 
	 
	 	8.7	 	WAIVER OF JURY TRIAL	 	 	8	 
	 
	 	8.8	 	Severability	 	 	8	 
	 
	 	8.9	 	Headings	 	 	8	 
	 
	 	8.10	 	Successors and Assigns	 	 	8	 
	 
	 	8.11	 	Entire Agreement	 	 	8	 
	 
	 	8.12	 	Survival of Agreements	 	 	8	 
	 
	 	8.13	 	Counterparts	 	 	9	 







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          This SUBORDINATION AGREEMENT, dated as of January 1, 2009 (as amended, amended and restated,
supplemented or otherwise modified from time to time, this “Agreement”), is entered into
among RENEGY HOLDINGS, INC., a Delaware corporation (“Junior Claimant”), SNOWFLAKE WHITE
MOUNTAIN POWER, LLC, an Arizona limited liability company (“SWMP”), and COBANK, ACB, as
Administrative Agent (together with its successors and assigns in such capacity,
“Administrative Agent”) for the Senior Claimants (as defined in Section 1.1).




RECITALS




          A. SWMP owns, operates and maintains an approximately 24 MW biomass-fired power generation
plant located near Snowflake, Arizona (the “Project”).




          B. In connection with the ownership, operation and maintenance of the Project, SWMP has
entered into that certain Credit Agreement, dated as of September 1, 2006, as amended and restated
on the date hereof (as further amended, amended and restated, supplemented or otherwise modified
from time to time, the “Credit Agreement”), among SWMP, Renegy, LLC, an Arizona limited
liability company (“Renegy”), Renegy Trucking, LLC, an Arizona limited liability company
(“Renegy Trucking” and together with Renegy and SWMP, the “Borrowers”),
Administrative Agent and the financial institutions from time to time parties thereto
(collectively, the “Lenders”), pursuant to which, among other things, the Lenders have
extended Loans to, and for the benefit of, the Borrowers.




          C. Junior Claimant has entered into that certain Amended and Restated Limited Liability
Company Agreement of SWMP, dated on or about the date hereof (as amended, amended and restated,
supplemented or otherwise modified from time to time, the “LLC Agreement”), with AZ Biomass
LLC, a Delaware limited liability company (“SSB”), pursuant to which, subject to the terms
and conditions contained therein and herein, (i) Junior Claimant has agreed to provide working
capital loans to SWMP (the “Renegy Loans”) and (ii) SWMP has agreed to pay Junior Claimant
a management fee and reimburse Junior Claimant for certain out-of-pocket expenses incurred on
behalf of SWMP (the “Renegy Fees”).




          D. The Senior Claimants have agreed that Junior Claimant may enter into the LLC Agreement only
if Junior Claimant shall join in this Agreement and Junior Claimant shall subordinate, to the
extent and in the manner hereinafter set forth, all claims and rights in respect of the
Subordinated Amounts to all Senior Claims (each as defined below) to the extent set forth in this
Agreement.




AGREEMENT




          NOW, THEREFORE, in consideration of the promises contained herein, and in order to induce the
Lenders to continue to perform under the Credit Agreement and to make the advances of credit
contemplated thereby, and for other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as follows:




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ARTICLE I.

DEFINITIONS




          1.1 Agreement Definitions. The following terms when used in this Agreement, including
its preamble and recitals, shall have the following meanings:




          “Proceeding” means any (a) insolvency, bankruptcy, receivership, liquidation,
reorganization, readjustment, composition or other similar proceeding relating to SWMP, its
property or its creditors as such, (b) proceeding for any liquidation, dissolution or other
winding-up of SWMP, voluntary or involuntary, whether or not involving insolvency or
bankruptcy proceedings, (c) general assignment for the benefit of creditors of SWMP or (d)
other marshaling of the assets of SWMP.




          “Senior Claimants” means the Secured Parties under and as defined in the Credit
Agreement.




          “Senior Claims” means all other Obligations owing to any Senior Claimant,
whether now existing or hereafter incurred or created, under or with respect to the Credit
Documents and any related documents.




          “Subordinated Amounts” means the (i) repayment by SWMP to Junior Claimant of
any principal and interest on the Renegy Loans in accordance with Section 4.4 of the LLC
Agreement and (ii) the payment by SWMP to Junior Claimant of Renegy Fees in accordance with
Section 8.2 of the LLC Agreement.




          “Subordination Period” means the period of time commencing on the date of the
execution and delivery of this Agreement by each of the parties hereto and ending on the
date on which all Senior Claims shall have been paid in full, in cash, all of the
Commitments of the Lenders under the Credit Agreement shall have been terminated and all of
the Swap Agreements to which any Senior Claimant is a party shall have been terminated.




          1.2 Credit Agreement Definitions. All capitalized terms used herein and not otherwise
defined herein shall have the meaning given in the Credit Agreement.




          1.3 Rules of Interpretation. Unless otherwise provided herein, the rules of
interpretation set forth in Exhibit A to the Credit Agreement shall apply to this Agreement,
including its preamble and recitals.




ARTICLE II.

CERTAIN SUBORDINATION TERMS




          2.1 Making of Payments.
During the Subordination Period, notwithstanding anything in the LLC Agreement to the
contrary, each of the parties hereto agree as follows:





     (a) Subject to clause (c) below, Junior Claimant agrees, for the benefit of
Administrative Agent and the other Senior Claimants, that it will not ask, demand, sue



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for,
take or receive from SWMP by set-off or in any other manner, or retain payment (in whole or
in part) of, any of the Subordinated Amounts or any security therefor.




     (b) Subject to clause (c) below, SWMP agrees that it will not make any payment of any
kind on account of, or provide any additional security or guarantee for, the Subordinated
Amounts, and SWMP agrees that it will not make any payment of any kind on account of, or
provide any additional security or guarantee for, the Subordinated Amounts (whether on
behalf of SWMP or otherwise).




     (c) Notwithstanding anything contained in clauses (a) or (b) above, SWMP may pay to
Junior Claimant (and Junior Claimant may receive from SWMP) Subordinated Amounts due to
Junior Claimant with funds available for distribution by SWMP to Junior Claimant under
Waterfall Level 8.




     (d) Junior Claimant directs SWMP to make, and SWMP agrees to make, the payment of the
Senior Claims prior to the payment of the Subordinated Amounts, except as permitted by
clause (c) above.



          2.2 Legend. Each negotiable instrument or promissory note evidencing a Subordinated
Amount or a lien, if any, in respect thereof shall bear a legend (or otherwise include notice
provisions satisfactory to Administrative Agent) providing that payment of the Subordinated Amounts
thereunder and the priority of any such lien have been subordinated to prior payment of the Senior
Claims and the liens in respect thereof in the manner and to the extent set forth in this
Agreement.




          2.3 Proceeding Against SWMP; Proof of Claim.




                2.3.1 Proceeding Against SWMP. At any general meeting of creditors of SWMP or any
member thereof, or in the event of any Proceeding during the Subordination Period, Administrative
Agent, on behalf of the Senior Claimants, is hereby irrevocably authorized at any such meeting or
in any such Proceeding:





     (a) to enforce claims comprising the Subordinated Amounts in the name of Junior
Claimant, by proof of debt, proof of claim, suit or otherwise;




     (b) to collect any assets of SWMP distributed, divided or applied by way of dividend or
payment as a result of a Proceeding, or such securities issued, on account of the
Subordinated Amounts as a result thereof and apply the same, or the proceeds of any
realization upon the same that the Senior Claimants in their discretion elect to effect, to
Senior Claims until all Senior Claims shall have been paid in full (the Senior
Claimants hereby agreeing to render any surplus as a court of competent jurisdiction may
direct); and




     (c) other than voting claims comprising or arising out of the Subordinated Amounts in
any Proceeding (including the right to vote to accept or reject any plan of partial or
complete liquidation or reorganization), to take generally any action in connection with any
such meeting or proceeding which Junior Claimant might otherwise take in respect of the
Subordinated Amounts and claims relating thereto.



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               2.3.2 Proof of Claim. After the commencement of any Proceeding referred to in Section
2.3.1, Junior Claimant may inquire of Administrative Agent in writing whether Administrative Agent,
on behalf of Senior Claimants, intends to exercise the foregoing rights with respect to the
Subordinated Amounts. Should Administrative Agent fail, within a reasonable time after receipt of
such inquiry, either to file a proof of claim with respect to the Subordinated Amounts and to
furnish a copy thereof to Junior Claimant, or to inform Junior Claimant in writing that the Senior
Claimants intend to exercise their rights to assert the Subordinated Amounts in the manner
hereinabove provided, Junior Claimant may, but shall not be required to, proceed to file a proof of
claim with respect to the Subordinated Amounts and take such further steps with respect thereto,
not inconsistent with this Agreement, as Junior Claimant may reasonably deem proper.



          2.4 Time of Filing. Notwithstanding the time of filing, attachment or recording of
any document or other instrument, it is agreed by Junior Claimant that the Liens of the Collateral
Documents shall be senior to any liens arising in favor of Junior Claimant as part of or relating
to the LLC Agreement.




          2.5 Wrongful Collections. Should any payment on account of, or any collateral for any
part of, the Subordinated Amounts be received by Junior Claimant in violation of this Agreement,
such payment or collateral shall be delivered by Junior Claimant forthwith to Administrative Agent,
on behalf of the Senior Claimants, for application to Senior Claims, in the form received.
Administrative Agent is irrevocably authorized to supply any required endorsement or assignment
which may have been omitted. Until so delivered, any such payment or collateral shall be held by
Junior Claimant in trust for the Senior Claimants and shall not be commingled with other funds or
property of Junior Claimant.




ARTICLE III.

OWNERSHIP OF SUBORDINATED AMOUNTS; AMENDMENT OF LLC AGREEMENT; CREDIT DOCUMENTS




          3.1 Ownership of Subordinated Amounts. Junior Claimant represents and warrants that
it is the lawful owner of the right to receive the Subordinated Amounts and no part thereof has
been assigned to or subordinated or subjected to any other security interest in favor of anyone
other than the Senior Claimants. Junior Claimant shall not assign all or any portion of the
Subordinated Amounts, its commitment under, or any of its rights or remedies under, the LLC
Agreement without the prior written
consent of Administrative Agent and the Majority Lenders, the Required Lenders or all Lenders,
as applicable (which consent may be granted or withheld in their respective sole discretion), and
in any event only upon the execution and delivery to Administrative Agent of an agreement by any
such assignee to be bound by the terms of this Agreement (including provisions relating to
assignment), in form and substance the same as this Agreement, or otherwise as may be reasonably
satisfactory to Administrative Agent.




          3.2 Amendment of LLC Agreement. Junior Claimant shall not amend the LLC Agreement
without Administrative Agent’s prior written consent.




          3.3 Credit Documents. Junior Claimant acknowledges that it has been provided with a
copy of the Credit Documents and has read and is familiar with the provisions



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thereof. Junior
Claimant hereby consents to the application of Project Revenues in the order of priority and in the
manner set forth in Article 7 of the Credit Agreement, notwithstanding anything in any of the LLC
Agreement to the contrary. Junior Claimant shall not otherwise take any action prejudicial to or
inconsistent with the Senior Claimants’ priority position over Junior Claimant created by this
Agreement.




ARTICLE IV.

WAIVERS




          Administrative Agent and the Senior Claimants are hereby authorized to demand specific
performance of this Agreement, whether or not SWMP shall have complied with the provisions hereof
applicable to it, at any time when Junior Claimant shall have failed to comply with any provision
hereof applicable to it. Junior Claimant hereby irrevocably waives any defense based on the
adequacy of a remedy at law which might be asserted as a bar to the remedy of specific performance
hereof in any action brought therefor by the Senior Claimants. Junior Claimant further waives
presentment, notice and protest in connection with all negotiable instruments evidencing Senior
Claims or Subordinated Amounts to which Junior Claimant may be a party, notice of the acceptance of
this Agreement by the Senior Claimants, notice of any loan made, extension granted or other action
taken in reliance hereon, and all demands and notices of every kind in connection with this
Agreement, Senior Claims or time of payment of Senior Claims or Subordinated Amounts. Junior
Claimant hereby assents to any renewal, extension or postponement of the time of payment of Senior
Claims or any other indulgence with respect thereto, to any increase in the amount of Senior
Claims, to any substitution, exchange or release of collateral therefor and to the addition or
release of any person primarily or secondarily liable thereon and assents to the provisions of any
instrument, security or other writing evidencing Senior Claims.




ARTICLE V.

REINSTATEMENT




          The obligations of Junior Claimant under this Agreement shall continue to be effective, or be
reinstated, as the case may be, if at any time any payment in respect of any Senior Claim, or any
other payment to any holder of any Senior Claim in its capacity as such, is
rescinded or must otherwise be restored or returned by the holder of such Senior Claims upon
the occurrence of any Proceeding, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or trustee or similar officer for, SWMP or any substantial part of
its property, or otherwise, all as though such payment had not been made.




ARTICLE VI.

BANKRUPTCY




          This Agreement shall remain in full force and effect as between Junior Claimant and Senior
Claimant notwithstanding the occurrence of any Proceeding affecting SWMP or any member thereof.



ARTICLE VII.

FURTHER ASSURANCES



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          SWMP and Junior Claimant shall execute and deliver to the Senior Claimants such further
instruments and shall take such further action as the Senior Claimants may at any time or times
reasonably request in order to carry out the provisions and intent of this Agreement. To this end,
Junior Claimant (a) irrevocably authorizes and empowers (without imposing any obligation on) the
Senior Claimants and any agent thereof to demand, sue for, collect and receive all payments and
distributions on or in respect of its Subordinated Amounts which are required to be paid or
delivered to the Senior Claimants, as provided herein, and to file and prove all claims therefor
and take all such other action, in the name of Junior Claimant or otherwise, as the Senior
Claimants may determine to be necessary or appropriate for the enforcement of these subordination
provisions, all in such manner as the Senior Claimants or Administrative Agent shall instruct, (b)
irrevocably authorizes and empowers (without imposing any obligation) the Senior Claimants and
Administrative Agent to vote the Subordinated Amounts in such manner as the Senior Claimants or
Administrative Agent shall instruct and (c) agrees to execute and deliver to the Senior Claimants
or Administrative Agent all such further instruments confirming the above authorization, and all
such proofs of claim, assignments of claim and other instruments, and to take all such other
action, as may be requested by Senior Claimants in order to enable the Senior Claimants to enforce
all claims upon or in respect of the Subordinated Amounts.




ARTICLE VIII.

MISCELLANEOUS




          8.1 Notices. Any communications between the parties hereto or notices provided herein
to be given may be given to the following addresses:




	 	 	 
	If to Administrative Agent:

	 	CoBank, ACB
	 

	 	5500 S. Quebec Street
	 

	 	Greenwood Village, CO 80111
	 

	 	Attn: Dale Keyes
	 

	 	Facsimile: (303) 224-2599
	 
	 	 
	If to SWMP:

	 	Snowflake White Mountain Power, LLC
	 

	 	3418 N. Val Vista Drive
	 

	 	Mesa, AZ 85213
	 

	 	Attn: Robert M. Worsley
	 

	 	Telecopy: (480) 718-7977
	 
	 	 
	If to Junior Claimant:

	 	Renegy Holdings, Inc.
	 

	 	301 West Warner Road, Suite 132
	 

	 	Tempe, Arizona 85284-2961
	 

	 	Attn: Robert M. Worsley
	 

	 	Telecopy No.: (480) 556-5500





All notices or other communications required or permitted to be given hereunder shall be in
writing and shall be considered as properly given (a) if delivered in person, (b) if sent by
overnight delivery service (including Federal Express, UPS, ETA, Emery, DHL, AirBorne and other
similar overnight delivery services), (c) if mailed by first class United States Mail, postage


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prepaid, registered or certified with return receipt requested, or (d) if sent by facsimile.
Notice so given shall be effective upon receipt by the addressee, except that communication or
notice so transmitted by facsimile or other direct written electronic means shall be deemed to have
been given when sent and receipt has been confirmed (except that, if not given during normal
business hours for the recipient, shall be deemed to have been given at the opening of business on
the next business day for recipient). Any party shall have the right to change its address for
notice hereunder to any other location within the continental United States by giving of 30 days’
notice to the other parties in the manner set forth above.




          8.2 Benefit of Agreement. Nothing in this Agreement, expressed or implied, shall give
or be construed to give to any Person other than the parties hereto and the Senior Claimants, any
legal or equitable right, remedy or claim under this Agreement, or under any covenants and
provisions of this Agreement, each such covenant and provision being for the sole benefit of the
parties hereto and the Senior Claimants. The rights granted to the Senior Claimants hereunder are
solely for their protection and nothing herein contained shall impose on the Senior Claimants any
duties with respect to any property of SWMP or Junior Claimant received hereunder. The Senior
Claimants shall have no duty to preserve rights against prior parties in any property of any kind
received hereunder.




          8.3 Delay and Waiver. No failure or delay by Administrative Agent in exercising any
right or power hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such
a right or power, preclude any other or further exercise thereof or the exercise of any other right
or power. The rights and remedies of Administrative Agent hereunder are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of
this Agreement or any other Credit Document or consent to any departure by SWMP therefrom shall in
any event be effective unless the same shall be permitted by Section 13.4, and then such
waiver or consent shall be effective only in the specific instance and for the purpose for
which given.




          8.4 Amendments. This Agreement may not be amended, modified or supplemented, except
in a writing signed by each of the parties hereto.




          8.5 Governing Law. This Agreement shall be governed by, and construed under, the laws
of the State of New York, without reference to conflicts of laws (other than Section 5-1401 of the
New York General Obligations Law).




          8.6 Consent to Jurisdiction. Each of the parties hereto agrees that any legal action
or proceeding by or against SWMP or Junior Claimant or with respect to or arising out of this
Agreement may be brought in or removed to the courts of the State of New York, in and for the
County of New York, or of the United States of America for the Southern District of New York, as
Administrative Agent may elect. By execution and delivery of this Agreement, each of the parties
hereto accepts, for itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. Each of the parties hereto irrevocably consents to the
service of process out of any of the aforementioned courts in any manner permitted by law. Nothing
herein shall affect the right of Administrative Agent to bring legal action or proceedings in any
other competent jurisdiction. Each of the parties hereto hereby waives any right to stay or




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dismiss any action or proceeding under or in connection with this Agreement brought before the
foregoing courts on the basis of forum non-conveniens.




          8.7 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY,
AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS AGREEMENT, OR ANY COURSE OR
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF ANY PARTY HERETO.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO THIS AGREEMENT.




          8.8 Severability. The provisions of this Agreement are severable, and if any clause
or provision shall be held invalid or unenforceable in whole or in part in any jurisdiction, then
such invalidity or unenforceability shall affect only such clause or provision, or part thereof, in
such jurisdiction and shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision of this Agreement in any jurisdiction.




          8.9 Headings. Article and Section headings have been inserted in this Agreement as a matter of
convenience for reference only and it is agreed that such article and section headings are not a
part of this Agreement and shall not be used in the interpretation of any provision of this
Agreement.




          8.10 Successors and Assigns. Without limiting anything set forth in Article
3, this Agreement shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, provided that neither SWMP nor Junior Claimant may
assign or otherwise transfer any of its rights or obligations hereunder without the prior written
consent of Administrative Agent (which consent may be withheld in its sole discretion).




          8.11 Entire Agreement. This Agreement and any agreement, document or instrument
attached hereto or referred to herein among the parties hereto integrate all the terms and
conditions mentioned herein or incidental hereto and supersede all oral negotiations and prior
writings in respect of the subject matter hereof. In the event of any conflict between the terms,
conditions and provisions of this Agreement and any such agreement, document or instrument, the
terms, conditions and provisions of this Agreement shall prevail.




          8.12 Survival of Agreements. All covenants, agreements, representations and
warranties made by SWMP and Junior Claimant herein and in the other instruments delivered in
connection with or pursuant to this Agreement shall be considered to have been relied upon by the
other parties hereto and shall survive the execution and delivery of this Agreement and the
termination of the Subordination Period. The provisions regarding the payment of expenses and
indemnification obligations, including Section 13.13, shall survive and remain in full force and
effect regardless of the consummation of the transactions contemplated hereby, the termination of
the Subordination Period, or the termination of this Agreement or any provision hereof.




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          8.13 Counterparts. This Agreement and any amendments, waivers, consents or
supplements hereto or in connection herewith may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to the same document.




[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]





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          IN WITNESS WHEREOF, the parties hereto, by their officers duly authorized, intending to be
legally bound, have caused this Subordination Agreement to be duly executed and delivered as of the
date first above written.




	 	 	 	 	 
	 	SNOWFLAKE WHITE MOUNTAIN POWER, LLC,

an Arizona limited liability company

 	 
	 	By:  	Renegy Holdings, Inc., a Delaware corporation, as Manager
 	 
	 	 	 
	 	 	                                             /s/ Robert M. Worsley
 	 
	 	 	Name:  	Robert M. Worsley 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	RENEGY HOLDINGS, INC.,

a Delaware corporation

 	 
	 	By:  	/s/ Robert M. Worsley
 	 
	 	 	Name:  	Robert M. Worsley 	 
	 	 	Title:  	Chief Executive Officer 	 
	 
	 	COBANK, ACB,

as Administrative Agent

 	 
	 	By:  	/s/ Dale Keyes
 	 
	 	 	Name:  	Dale Keyes 	 
	 	 	Title:  	Vice President, Energy Banking Group 	 
	 



SUBORDINATION AGREEMENT (RENEGY HOLDINGS)