Document:

exh_4121.htm

Exhibit 4.1.21

 

ASSIGNMENT AND ASSUMPTION OF NOTE AND CREDIT AGREEMENT AND FOURTH AMENDMENT TO THE CREDIT AGREEMENT

THIS ASSIGNMENT AND ASSUMPTION OF NOTE AND CREDIT AGREEMENT AND FOURTH AMENDMENT TO THE CREDIT (this “Agreement”) is dated effective as of January 3, 2012 (the “Effective Date”) by and among MGP INGREDIENTS, INC., a Kansas corporation, subsequently to be known as MGPI Processing, Inc. (“Original Borrower”), MGPI HOLDINGS, INC., a Kansas corporation, subsequently to be known as MGP Ingredients, Inc. (the “Company”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”).

W I T N E S S E T H:

A. Pursuant to that certain Credit and Security Agreement dated July 21, 2009 between Original Borrower and Lender, as amended by a Consent dated December 31, 2009, as amended by a Consent dated February 2, 2010, as amended by a First Amendment to Credit and Security Agreement dated as of June 30, 2010, as amended by a Second Amendment to Credit and Security Agreement dated as of January 20, 2011, and as amended by a Third Amendment to Credit Agreement dated October 20, 2011 (as further modified, amended, renewed or restated, the “Credit Agreement”), Lender made certain loans available to Original Borrower in the maximum principal amount of up to $45,000,000.00 (the “Loans”);

 

B. The Loans are evidenced by that certain Amended and Restated Revolving Note dated October 20, 2011 from Original Borrower in favor of Lender (the “Note”);

 

C. The Original Borrower’s obligations under the Loans were secured by, among other items, that certain Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as August 19, 2009 (the “Mortgage”), recorded on August 26, 2009 in Book 577, Page 399 of the real property records of the Office of the Register of Deeds, Atchison County, Kansas (the “Land Records”), as modified by that certain Modification dated October 20, 2011, and that certain Leasehold Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated as February 15, 2010 (the “Leasehold Mortgages,” and collectively with the Mortgage, the “Mortgages,” and the real estate described in the Mortgages, the “Real Estate”), recorded on March 16, 2010 in Book 582, Page 552 in the Land Records, as modified by the certain Modification dated October 20, 2011;

 

D. In connection with the Credit Agreement, the Original Borrower was a party to various  other agreements, including but not limited to, Subordination Agreements, an Intercreditor Agreement, an Assignment of License Agreement, and a Patent and Trademark Security Agreement (such other agreements, as renewed, modified or restated, and together with the Credit Agreement, Note and Mortgages are hereinafter referred to as the “Loan Documents”);

 

E. The Original Borrower and Company have entered into or are concurrently herewith entering into an Agreement of Merger and Plan of Reorganization, pursuant to which (i) Original Borrower will merge with a subsidiary of Company with Original Borrower as the surviving entity (the “Merger”), (ii) the stock of Company owned by Original Borrower immediately prior to the Merger will be cancelled, and (iii) Original Borrower will become a wholly-owned subsidiary of Company and guarantor of the Company’s obligations assumed hereunder (the “Restructure”);

  

  

  

F. In connection with the Restructure, Original Borrower desires to assign all of its rights under the Credit Agreement, Note and other Loan Documents to the Company, in consideration of which the Company will assume all of Original Borrower’s obligations under the Credit Agreement, Note, and other Loan Documents, and requests that the Lender consent to such assignment and assumption;

 

G. Upon the Restructure, the Original Borrower shall be a Guarantor of the obligations assumed by the Company hereunder, with such guaranty secured by the Mortgages;

 

H. Due to the Restructure, the parties agree that certain terms of the Credit Agreement must be amended; and

 

I. The Original Borrower and Company have duly authorized the execution, delivery, and performance of this Agreement.

 

NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, and in consideration of the Restructure, the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company agrees with the Lender as follows:

1. Recitals.  The recitals set forth hereinabove are true, correct, and complete in all respects and such recitals and all terms and conditions of the Credit Agreement are incorporated herein as if fully set forth.

 

2. Definitions. All of the aforementioned definitions are incorporated by this reference and made a part of this Agreement.  Unless otherwise specifically defined herein, each term used herein which is defined in the Credit Agreement shall have the meaning assigned to such term in the Credit Agreement.

 

3. Assignment and Assumption.

 

(a) Original Borrower is, as of the Effective Date, conveying all of its rights under the Credit Agreement, Note, and other Loan Documents to the Company, subject in all regards to the terms and conditions of the Note, Credit Agreement, and other Loan Documents, and the lien of and security interests created by the Credit Agreement. The Company is accepting the conveyance of all of the rights of the Original Borrower, subject in all regards to the terms and conditions of the Note, Credit Agreement, and other Loan Documents, and the lien of and security interest created by the Credit Agreement.

 

(b) The Company hereby assumes all of the obligations and Indebtedness of Original Borrower under the Note, Credit Agreement (as amended hereby), and the other Loan Documents (the “Assumed Obligations”) and agrees (i) to pay the Note in accordance with its terms, (ii) to keep, observe and perform all of the covenants, agreements and obligations of the Borrower under the Note, Credit Agreement and other Loan Documents, according to their terms, and (iii) that the Company is primarily liable for and with respect to the Assumed Obligations.

 

(c) The Company hereby confirms, acknowledges, represents, warrants, covenants and agrees, for the benefit of the Lender, and without any further action by any person, the following:

 

(i) The Company assumes (pursuant to this Agreement) each and every covenant, agreement, term, condition, obligation, appointment, duty and liability of the Original Borrower and, by virtue of the foregoing, accepts and assumes all liability of the Original Borrower related to any representation and warranty made by the Original 

 

  

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Borrower under or in connection with the Note, Credit Agreement and any other Loan Documents and all such representations and warranties remain true, complete and correct, and shall be deemed to have been confirmed and restated as of the Effective Date; and

 

(ii) The Company shall be the “Borrower” referred to in the Credit Agreement and the Note, and the “Borrower” referred to in the Subordination Agreements and Intercreditor Agreement, and the Company shall perform and observe all the covenants, agreements, terms, conditions, obligations, appointments, duties and liabilities of the Original Borrower under the Note, Credit Agreement and all other Loan Documents executed by the Original Borrower, all as if such Company were the direct, actual and original signatory thereto.

 

(d) Concurrently with the Restructure, the Original Borrower will execute a Continuing Guaranty evidencing its status as a Guarantor of the Indebtedness under the Credit Agreement.  Notwithstanding anything herein to the contrary, Original Borrower is not released and remains primarily liable for all Assumed Obligations on an ongoing basis, including, without limitation, the continuing obligation (i) to pay the Note in accordance with its terms, (ii) to keep, observe and perform all of the covenants, agreements and obligations as the Borrower under the Note, Credit Agreement and the other Loan Documents, according to their terms.

 

4. Consent to Restructure, Assignment and Assumption.  Upon satisfaction of the conditions precedent in Section 9 below:

 

(a) The Lender consents to the Restructure in consideration of the assumption by the Company of all Assumed Obligations.

 

(b) The consent given herein by Lender shall not be deemed a consent or an agreement by the Lender to any future such assignment, assumption, or ownership restructure, or a waiver of any of the rights of the Lender under the Loan Documents to declare any assignment, assumption, or ownership restructure an Event of Default under the Credit Agreement and to exercise the rights and remedies provided in the Loan Documents or in equity or at law.

 

(c) Original Borrower, and its representatives, successors and assigns, hereby knowingly, voluntarily and irrevocably release, remise and forever discharge the Lender, and their representatives, successors and assigns, from any and all claims or liability, whether known or unknown and whether now or hereafter existing, arising under or related to the Note or the Credit Agreement.  The provisions of this section shall forever survive any termination of this Agreement (or the termination of any one or more Loan Documents) and payment in full of all amounts owing under the Loan Documents.

 

5. Amendment to the Credit Agreement.  The Credit Agreement is hereby amended as follows:

 

(b) The following definitions found in Section 1.1 of the Credit Agreement are amended and restated as follows:

 

“Account Value at Market” means the value of the Eligible Swap Account as determined by (i) the amount shown as the “account value at market” on the most recent statement from ADM summarizing the ADM Account, or such other comparable term that may be used from time to time by ADM on ADM Account statements, or (ii) should Borrower or a Subsidiary enter into an Eligible Swap Account with a vendor other than 

 

  

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ADM, the market value of the Eligible Swap Account as shown on the most recent account statement from such vendor.”

 

“ADM Account” means the account maintained by Borrower or a Subsidiary with ADM to accommodate Swap Contract transactions.”

 

“Current Maturities of Long Term Debt” means during a period beginning and ending on designated dates, the amount of the Borrower’s and Subsidiaries’ long-term debt and capitalized leases which become due during that period.

 

“Dilution” means, as of any date of determination, a percentage, based upon the experience of the trailing six-month period ending on the date of determination, which is the result of dividing (a) actual bad debt write-downs, discounts, advertising allowances, credits, or other dilutive items with respect to the Accounts as determined by Lender in its sole but reasonable discretion during such period, by (b) the Borrower’s and Subsidiaries’ net sales during such period (excluding extraordinary items) plus the amount of clause (a).

 

“Eligible Barreled Alcohol Inventory” means all Inventory owned by Borrower or a Subsidiary consisting of barreled alcoholic beverages which is (a) acceptable to Lender in its sole but reasonable discretion determined in good faith for lending purposes, (b) Eligible Inventory in all respects.

 

“Eligible Corn Inventory” means all Inventory owned by Borrower or a Subsidiary consisting of corn which is (a) acceptable to Lender in its sole but reasonable discretion determined in good faith for lending purposes, (b) Eligible Inventory in all respects and (c) Raw Materials Inventory.

 

“Eligible Finished Goods Inventory” means all Inventory owned by Borrower or a Subsidiary consisting of a finished product (which finished product is to be held by Borrower or a Subsidiary for sale, lease or furnishing under a contract for service in the ordinary course of Borrower’s or Subsidiary’s business) which is (a) acceptable to Lender in its sole but reasonable discretion determined in good faith for lending purposes and (b) Eligible Inventory in all respects (other than Eligible Food Grade Alcohol Inventory, Eligible Fuel Grade Alcohol Inventory, Eligible Protein Inventory and Eligible Starch Inventory).

 

“Eligible Flour Inventory” means all Inventory owned by Borrower or a Subsidiary consisting of flour which is (a) acceptable to Lender in its sole but reasonable discretion determined in good faith for lending purposes, (b) Eligible Inventory in all respects and (c) Raw Materials Inventory.

 

“Eligible Food Grade Alcohol Inventory” means all Inventory owned by Borrower or a Subsidiary consisting of food grade alcohol which is (a) acceptable to Lender in its sole but reasonable discretion determined in good faith for lending purposes and (b) Eligible Inventory in all respects.

 

“Eligible Fuel Grade Alcohol Inventory” means all Inventory owned by Borrower or a Subsidiary consisting of fuel grade alcohol which is (a) acceptable to Lender in its sole but reasonable discretion determined in good faith for lending purposes and (b) Eligible Inventory in all respects.

 

  

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“Eligible Protein Inventory” means all Inventory owned by Borrower or a Subsidiary consisting of protein which is (a) acceptable to Lender in its sole but reasonable discretion determined in good faith for lending purposes and (b) Eligible Inventory in all respects.

 

“Eligible Starch Inventory” means all Inventory owned by Borrower or a Subsidiary consisting of starch which is (a) acceptable to Lender in its sole but reasonable discretion determined in good faith for lending purposes and (b) Eligible Inventory in all respects.

 

“Interest Expense” means for a fiscal year-to-date period, the Borrower’s and Subsidiaries’ aggregate total gross interest expense during such period (excluding interest income), and shall in any event include (i) interest expensed (whether or not paid) on all Debt and (ii) the portion of any capitalized lease obligation allocable to interest expense.

 

“Rail Reserve” means $175,000 or such other amount as the Lender may from time to time establish in its sole but reasonable discretion as an amount sufficient offset certain costs of exercising rights and remedies in respect of Inventory of the Borrower or a Subsidiary located or anticipated to be located on or in railcars from time to time.

 

“Raw Materials Inventory ” shall mean raw materials held for the purpose of production into a finished product (which finished product is to be held by Borrower or Subsidiary for sale, lease or furnishing under a contract for service in the ordinary course of Borrower’s or Subsidiary’s business), but which have not yet been subject to the commencement of such production, and which are new and unused and free from defects which would, in Lender’s sole determination determined in good faith, affect their market value.

 

“Real Estate Collateral” means all real estate owned by Borrower or a Subsidiary, except the KCK Facility, and the LDI Facility.

 

(c) Subsection 2.9(d) of the Credit Agreement is hereby added as follows:

 

“All Borrower obligations and duties imposed under this Section 2.9 shall apply equally to Subsidiary Guarantors of Borrower, provided, however, that following the date of the Acquisition of LDI, and for a period of three (3) months following such date (or such later date to which Lender reasonably agrees), Accounts and account debtors acquired by Borrower or a Subsidiary related to LDI shall not be subject to Sections 2.9(a) or (b).”

(d) Section 8.17 of the Credit Agreement is hereby added as follows:

 

“Section 8.17.  Consolidated Entity.  Notwithstanding any other language herein, when the term “Borrower” is used in Articles 5 and 6 of this Agreement, and in each Compliance Certificate, the term shall refer to the Borrower and all Subsidiaries as a single, consolidated entity, and therefore all such representations, warranties and covenants shall be construed to apply to the Borrower and Subsidiaries as a single, consolidated entity. For the avoidance of doubt, whenever in this Agreement or the Loan Documents a reference is made to the continued accuracy, truth, compliance, or satisfaction of the terms contained in Articles 5 and 6 of this Agreement, such reference shall apply to the Borrower and all Subsidiaries as a single, consolidated entity.”

  

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6. Confirmation and Ratification of the Loan Documents.  Except as expressly modified pursuant to the terms of this Agreement, all of the terms, covenants and conditions of the Loan Documents shall continue unamended and in full force and effect, and the Company and Original Borrower hereby confirm, ratify and reaffirm all of such terms, representations, warranties, covenants and conditions, with such representations, warranties and covenants being applicable to Company and Original Borrower (treating Company and Original Borrower as a consolidated entity) as of the date hereof. Further, the Company ratifies, confirms, and reaffirms its obligations owed to Lender under the Loans and the accuracy and satisfaction of all representations, warranties, and covenants contained in the Loan Documents (treating Company and Original Borrower as a consolidated entity), and that this Agreement shall not constitute a novation of the indebtedness evidenced by the Loan Documents, that the terms and provisions of the Loan Documents shall remain valid and in full force and effect, except as herein modified and amended, that this Agreement shall in no way occasion a release of any Collateral, and that all Collateral held by Lender as security to or for the Loans shall continue to secure the Loans. The Company hereby authorizes and directs Lender to take action necessary to conform the Loan Documents to the terms as herein modified and accept and confirm the Loan Documents with the terms herein modified.  The Company and Original Borrower hereby acknowledge that (i) as of the date hereof they have no defenses, offsets, or claims against the enforceability of the Credit Agreement, Note, Mortgages and other Loan Documents; and (ii) neither the Company nor the Original Borrower is aware that any Event of Default currently exists or that any event has occurred which, with the passage of time or giving of notice or both, would result in any Event of Default occurring.

 

7. Confirmation of Lien Upon Real Estate.

 

(a) The Original Borrower acknowledges and agrees that the Mortgages constitute valid liens upon the Real Estate in favor of the Lender. The Real Estate is and shall remain subject to and encumbered by the liens, charges and encumbrances of the Mortgages, and nothing herein contained shall affect or be construed to affect the liens or encumbrances of the Mortgages, or the priority thereof over other liens or encumbrances. This Agreement does not constitute a novation.

 

(b) The Original Borrower agrees to execute modifications of the Mortgages to indicate that the obligations secured therein include the Original Borrower’s Guarantor obligations as described in the Continuing Guaranty executed concurrently herewith.

 

8. Further Assurances.  The Company hereby reaffirms the grant of a security interest provided in Article III of the Credit Agreement. The Company hereby authorizes the Lender to file one or more UCC financing statements relating to all or any part of the Collateral, without the signature of the Company, in such jurisdictions and with such offices as the Lender deems necessary. The Company further authorizes the Lender to file such UCC financing statement amendments to modify the Company/Debtor name, and such continuation statements to any UCC financing statements as the Lender deems necessary, continue, perfect, and extend their security interest(s) in the Collateral.  The Company shall not amend, modify, restate, or terminate any financing statements filed by any Lender or its agents without the prior written consent of such Lender. A copy of this Agreement, together with the Credit Agreement, shall be sufficient as a financing statement to the extent permitted by law.

 

9. Conditions Precedent.  This Agreement, and the amendments, consent, assignment, and assumption contemplated hereby, shall become effective upon satisfaction of the following conditions:

 

(a) Lender’s receipt of this Agreement executed by all parties hereto;

 

(b) Lender’s receipt of a Third Party Security Agreement, in form and content acceptable to Lender, in which Original Borrower grants a security interests in the assets 

 

  

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described therein to secure the  Indebtedness, fully executed and delivered by the Original Borrower;

 

(c) The Lender’s receipt of a Continuing Guaranty, in form and content acceptable to Lender, which provides for the ongoing, continuing and unlimited guaranty by Original Borrower of all of the Indebtedness, fully executed and delivered by Original Borrower;

 

(d) The Lender’s receipt of an Assumption and Amendment of Assignment of Membership Interests and Stock Pledge Agreement, in form and content acceptable to Lender, which provides for the grant of a perfected first priority security interest in Company’s stock interests in the Original Borrower, and the Company’s grant of a perfected first priority security interest in the stock or membership interests of Midwest Grain Pipeline, Inc. (subsequently to be known as MGPI Pipeline, Inc.), Illinois Corn Processing, LLC,  and MGPI of Indiana, LLC, as applicable, upon such entities distribution from Original Borrower to Company pursuant to the Restructure, fully executed and delivered by Original Borrower

 

(e) Filing of Uniform Commercial Code Financing Statements and Amendments, identifying the Company as the debtor, in the appropriate records;

 

(f) Filing of Uniform Commercial Code Financing Statement Amendment to amend the Original Borrower’s name in connection with the Restructure;

 

(g) Receipt of Modifications to the Mortgages to reflect the Restructure;

 

(h) Lender’s receipt of certified entity documentation related to the Company, including but not limited to certified articles of organization, bylaws and a certificate of good standing;

 

(i) Lender’s receipt and approval of a certified resolution of the Original Borrower and Company, with such incumbency certificates as it shall require, establishing the approval of this Agreement by Company, the authority of the parties executing such Agreement, and such other matters as Lender shall require;

 

(j) Lender’s receipt of the Company’s Federal Identification Number;

 

(k) Payment of all fees and expenses of Lender associated with the transactions contemplated by this Agreement, including reasonable attorneys fees; and

 

(l) Any other certificates, documents, or other information reasonably requested by Lender in connection herewith, including, but not limited to, filings and documents evidencing the Restructure.

 

10. Representations and Warranties of the Company.  The Company hereby represents and warrants to the Lender that as of the date hereof: (a) the Company is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, and has all organizational powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted, and to execute and perform this Agreement; (b) the Company has duly executed and delivered this Agreement and this Agreement, and the Loan Documents, constitute its legal and validly binding obligations; (c) all information provided by the Company to the Lender prior to the date hereof was, at such time, true and correct in all material respects; and (d) this Agreement is not being entered into with the intent to hinder or defraud any person.

 

  

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11. No Waiver by Implication.  The Company hereby agrees that, except as specified in Section 4(a) above, nothing herein shall constitute a waiver by Lender of any default, whether known or unknown, which may exist under the Loan Documents.  The Company hereby further agrees that no action, inaction or agreement by Lender, including, without limitation, any extension, indulgence, waiver, consent, or agreement of modification which may have occurred or been granted or entered into (or which may be occurring or be granted or entered into hereunder or otherwise) with respect to non-payment of any Loan or any portion thereof, or with respect to matters involving security for any Loan, or with respect to any other matter relating to any Loan, shall require or imply any future extension, indulgence, waiver, consent or agreement by Lender.  The Company hereby acknowledges and agrees that Lender has made no agreement, and is in no way obligated, to grant any future extension, indulgence, waiver or consent or enter into any further agreement of modification with respect to the Loans.

 

12. Status.  The Company hereby represents and agrees that the Loan Documents as modified hereby constitute the entire agreement between the Company and Lender with respect to the Loans. Nothing herein shall constitute and there has not otherwise occurred any extinguishment or release of or substitution for the obligations and agreements of the Company under the Loan Documents, except as specifically provided in this Agreement, and nothing herein shall constitute and there has not otherwise occurred any novation with respect to the Mortgages, or any other Loan Document.

 

13. Loan Document.  This Agreement is a Loan Document executed pursuant to the Credit Agreement, and shall be construed, administered and applied in accordance with the terms and provisions of the Credit Agreement.

 

14. Successors and Assigns.  This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of, and be enforceable by, the Lender and its respective successors and assigns.

 

15. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state of Kansas without giving effect to the conflicts of law principles thereof.

 

16. Counterparts.  This Agreement may be executed in two or more counterparts, each of which when so executed and delivered shall be an original but all of which together shall constitute one and the same instrument.

 

17. Time of the Essence.  Time is of the essence of this Agreement.

 

18. Severability.  If any clause, sentence, section or provision of this Agreement is or becomes illegal, invalid or unenforceable because of present or future laws or any rule or regulation of any governmental body or entity, the intention of the parties hereto is that the remaining parts of this Agreement shall not be affected thereby.

 

19. No Other Modification.  Except as expressly amended and modified herein, all terms, covenants and provisions of the Loan Documents shall remain unaltered and in full force and effect, and the parties hereto do hereby expressly ratify and confirm the Loan Documents as modified hereby.

 

20. Other Acts.  At the request of the Lender, Original Borrower and/or the Company will promptly execute and deliver such further instruments and do such further acts and things as may be required to carry out the intent and purpose of this Agreement.

 

  

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21. Entire Agreement.  This Agreement constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior agreements (if any), understandings, negotiations and discussions of the parties, whether oral or written.

 

[Signatures on Following Page]

 

 

 

 

 

 

 

 

 

  

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           IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed and delivered by their duly authorized officers effective as of the day and year first above written.

 

	  	
COMPANY:

	  	  
	
 

	
MGPI HOLDINGS, INC, a Kansas corporation,

subsequently to be known as MGP Ingredients, Inc.

	  	  
	  	  
	  	
By: /s/ Timothy W. Newkirk

	  	
Name: Timothy W. Newkirk

	  	
Title:  President & CEO

	  	  
	  	
ORIGINAL BORROWER:

	  	  
	 	
MGP INGREDIENTS, INC, a Kansas corporation,

subsequently to be known as MGPI Processing, Inc.

	  	  
	  	  
	  	  
	  	
By:  /s/ Timothy W. Newkirk

	  	
Name: Timothy W. Newkirk

	  	
Title: President & CEO

	  	  
	  	  
	 	
LENDER:

	  	  
	 	
WELLS FARGO BANK, NATIONAL ASSOCIATION

	  	  
	  	  
	  	  
	  	
By:  /s/ Jeffrey D. Farrell

	  	
Name:  Jeffrey D. Farrell

	  	
Title:   SVP

 

 

 

Assignment and Assumption of Note and Credit Agreement and Fourth Amendment to Credit Agreement

Signature Pageexh_4122.htm

Exhibit 4.1.22

 

CONTINUING GUARANTY

 

TO:           WELLS FARGO BANK, NATIONAL ASSOCIATION

 

1. GUARANTY; DEFINITIONS.  In consideration of any credit or other financial accommodation heretofore, now or hereafter extended or made to MGPI HOLDINGS, INC., a Kansas corporation, subsequently to be known as MGP INGREDIENTS, INC., ("Borrowers"), or any of them, by WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank"), and for other valuable consideration, the undersigned MGP INGREDIENTS, INC., a Kansas corporation, subsequently to be known as MGPI PROCESSING, INC. (the "Guarantor"), jointly and severally unconditionally guarantees and promises to pay to Bank, or order, on demand in lawful money of the United States of America and in immediately available funds, any and all Indebtedness of any of the Borrowers to Bank.  The term "Indebtedness" is used herein in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities of Borrowers, or any of them, heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary and however arising, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, including under any swap, derivative, foreign exchange, hedge, deposit, treasury management or other similar transaction or arrangement, and whether any of the Borrowers may be liable individually or jointly with others, or whether recovery upon such Indebtedness may be or hereafter becomes unenforceable.  This Guaranty is a guaranty of payment and not collection.

 

2. SUCCESSIVE TRANSACTIONS; REVOCATION; OBLIGATION UNDER OTHER GUARANTIES.  This is a continuing guaranty and all rights, powers and remedies hereunder shall apply to all past, present and future Indebtedness of each of the Borrowers to Bank, including that arising under successive transactions which shall either continue the Indebtedness, increase or decrease it, or from time to time create new Indebtedness after all or any prior Indebtedness has been satisfied, and notwithstanding the death, incapacity, dissolution, liquidation or bankruptcy of any of the Borrowers or Guarantor or any other event or proceeding affecting any of the Borrowers or Guarantor.  This Guaranty shall not apply to any new Indebtedness created after actual receipt by Bank of written notice of its revocation as to such new Indebtedness; provided however, that loans or advances made by Bank to any of the Borrowers after revocation under commitments existing prior to receipt by Bank of such revocation, and extensions, renewals or modifications, of any kind, of Indebtedness incurred by any of the Borrowers or committed by Bank prior to receipt by Bank of such revocation, shall not be considered new Indebtedness.  Any such notice must be sent to Bank by registered U.S. mail, postage prepaid, addressed to its office at 7500 College Blvd., Suite 200, Overland Park, KS 66210, or at such other address as Bank shall from time to time designate.  Any payment by Guarantor shall not reduce Guarantor's maximum obligation hereunder unless written notice to that effect is actually received by Bank at or prior to the time of such payment.  The obligations of Guarantor hereunder shall be in addition to any obligations of Guarantor under any other guaranties of any liabilities or obligations of any of the Borrowers or any other persons heretofore or hereafter given to Bank unless said other guaranties are expressly modified or revoked in writing; and this Guaranty shall not, unless expressly herein provided, affect or invalidate any such other guaranties.

 

3. OBLIGATIONS JOINT AND SEVERAL; SEPARATE ACTIONS; WAIVER OF STATUTE OF LIMITATIONS; REINSTATEMENT OF LIABILITY.  The obligations hereunder are joint and several and independent of the obligations of Borrowers, and a separate action or actions may be 

 

  

 

  

brought and prosecuted against Guarantor whether action is brought against any of the Borrowers or any other person, or whether any of the Borrowers or any other person is joined in any such action or actions.  Guarantor acknowledges that this Guaranty is absolute and unconditional, there are no conditions precedent to the effectiveness of this Guaranty, and this Guaranty is in full force and effect and is binding on Guarantor as of the date written below, regardless of whether Bank obtains collateral or any guaranties from others or takes any other action contemplated by Guarantor.  Guarantor waives the benefit of any statute of limitations affecting Guarantor's liability hereunder or the enforcement thereof, and Guarantor agrees that any payment of any Indebtedness or other act which shall toll any statute of limitations applicable thereto shall similarly operate to toll such statute of limitations applicable to Guarantor's liability hereunder.  The liability of Guarantor hereunder shall be reinstated and revived and the rights of Bank shall continue if and to the extent for any reason any amount at any time paid on account of any Indebtedness guaranteed hereby is rescinded or must otherwise be restored by Bank, whether as a result of any proceedings in bankruptcy or reorganization or otherwise, all as though such amount had not been paid.  The determination as to whether any amount so paid must be rescinded or restored shall be made by Bank in its sole discretion; provided however, that if Bank chooses to contest any such matter at the request of Guarantor, Guarantor agrees to indemnify and hold Bank harmless from and against all costs and expenses, including reasonable attorneys' fees, expended or incurred by Bank in connection therewith, including without limitation, in any litigation with respect thereto.

 

4. AUTHORIZATIONS TO BANK.  Guarantor authorizes Bank either before or after revocation hereof, without notice to or demand on Guarantor, and without affecting Guarantor's liability hereunder, from time to time to:  (a) alter, compromise, renew, extend, accelerate or otherwise change the time for payment of, or otherwise change the terms of the Indebtedness or any portion thereof, including increase or decrease of the rate of interest thereon; (b) take and hold security for the payment of this Guaranty or the Indebtedness or any portion thereof, and exchange, enforce, waive, subordinate or release any such security; (c) apply such security and direct the order or manner of sale thereof, including without limitation, a non-judicial sale permitted by the terms of the controlling security agreement, mortgage or deed of trust, as Bank in its discretion may determine; (d) release or substitute any one or more of the endorsers or any other guarantors of the Indebtedness, or any portion thereof, or any other party thereto; and (e) apply payments received by Bank from any of the Borrowers to any Indebtedness of any of the Borrowers to Bank, in such order as Bank shall determine in its sole discretion, whether or not such Indebtedness is covered by this Guaranty, and Guarantor hereby waives any provision of law regarding application of payments which specifies otherwise.  Bank may without notice assign this Guaranty in whole or in part.  Upon Bank's request, Guarantor agrees to provide to Bank copies of Guarantor's financial statements.

 

5. REPRESENTATIONS AND WARRANTIES.  Guarantor represents and warrants to Bank that: (a) this Guaranty is executed at Borrowers' request; (b) Guarantor shall not, without Bank's prior written consent, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of all or a substantial or material part of Guarantor's assets other than in the ordinary course of Guarantor's business; (c) Bank has made no representation to Guarantor as to the creditworthiness of any of the Borrowers; and (d) Guarantor has established adequate means of obtaining from each of the Borrowers on a continuing basis financial and other information pertaining to Borrowers' 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 hereunder, and Guarantor further agrees that Bank shall have no obligation to 

 

  

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disclose to Guarantor any information or material about any of the Borrowers which is acquired by Bank in any manner.

 

6. GUARANTOR'S WAIVERS.

 

(a) Guarantor waives any right to require Bank to: (i) proceed against any of the Borrowers or any other person; (ii) marshal assets or proceed against or exhaust any security held from any of the Borrowers or any other person; (iii) give notice of the terms, time and place of any public or private sale or other disposition of personal property security held from any of the Borrowers or any other person; (iv) take any other action or pursue any other remedy in Bank's power; or (v) make any presentment or demand for performance, or give any notice of nonperformance, protest, notice of protest or notice of dishonor hereunder or in connection with any obligations or evidences of indebtedness held by Bank as security for or which constitute in whole or in part the Indebtedness guaranteed hereunder, or in connection with the creation of new or additional Indebtedness.

 

(b) Guarantor waives any defense to its obligations hereunder based upon or arising by reason of: (i) any disability or other defense of any of the Borrowers or any other person; (ii) the cessation or limitation from any cause whatsoever, other than payment in full, of the Indebtedness of any of the Borrowers or any other person; (iii) any lack of authority of any officer, director, partner, agent or any other person acting or purporting to act on behalf of any of the Borrowers which is a corporation, partnership or other type of entity, or any defect in the formation of any such Borrower; (iv) the application by any of the Borrowers of the proceeds of any Indebtedness for purposes other than the purposes represented by Borrowers to, or intended or understood by, Bank or Guarantor; (v) any act or omission by Bank which directly or indirectly results in or aids the discharge of any of the Borrowers or any portion of the Indebtedness by operation of law or otherwise, or which in any way impairs or suspends any rights or remedies of Bank against  any of the Borrowers; (vi) any impairment of the value of any interest in any security for the Indebtedness or any portion thereof, including without limitation, the failure to obtain or maintain perfection or recordation of any interest in any such security, the release of any such security without substitution, and/or the failure to preserve the value of, or to comply with applicable law in disposing of, any such security; (vii) any modification of the Indebtedness, in any form whatsoever, including any modification made after revocation hereof to any Indebtedness incurred prior to such revocation, and including without limitation the renewal, extension, acceleration or other change in time for payment of, or other change in the terms of, the Indebtedness or any portion thereof, including increase or decrease of the rate of interest thereon; or (viii) any requirement that Bank give any notice of acceptance of this Guaranty.  Until all Indebtedness shall have been paid in full, Guarantor shall have no right of subrogation, and Guarantor waives any right to enforce any remedy which Bank now has or may hereafter have against any of the Borrowers or any other person, and waives any benefit of, or any right to participate in, any security now or hereafter held by Bank.  Guarantor further waives all rights and defenses Guarantor may have arising out of (A) any election of remedies by Bank, even though that election of remedies, such as a non-judicial foreclosure with respect to any security for any portion of the Indebtedness, destroys Guarantor's rights of subrogation or Guarantor's rights to proceed against any of the Borrowers for reimbursement, or (B) any loss of 

 

  

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rights Guarantor may suffer by reason of any rights, powers or remedies of any of the Borrowers in connection with any anti-deficiency laws or any other laws limiting, qualifying or discharging Borrowers' Indebtedness, whether by operation of law or otherwise, including any rights Guarantor may have to a fair market value hearing to determine the size of a deficiency following any foreclosure sale or other disposition of any real property security for any portion of the Indebtedness.

 

7. BANK'S RIGHTS WITH RESPECT TO GUARANTOR'S PROPERTY IN BANK'S POSSESSION.  In addition to all liens upon and rights of setoff against the monies, securities or other property of Guarantor given to Bank by law, Bank shall have a lien upon and a right of setoff against all monies, securities and other property of Guarantor now or hereafter in the possession of or on deposit with Bank, whether held in a general or special account or deposit or for safekeeping or otherwise, and every such lien and right of setoff may be exercised without demand upon or notice to Guarantor.  No lien or right of setoff shall be deemed to have been waived by any act or conduct on the part of Bank, or by any neglect to exercise such right of setoff or to enforce such lien, or by any delay in so doing, and every right of setoff and lien shall continue in full force and effect until such right of setoff or lien is specifically waived or released by Bank in writing.

 

8. SUBORDINATION.  Any Indebtedness of any of the Borrowers now or hereafter held by Guarantor is hereby subordinated to the Indebtedness of Borrowers to Bank.  Such Indebtedness of Borrowers to Guarantor is assigned to Bank as security for this Guaranty and the Indebtedness and, if Bank requests, shall be collected and received by Guarantor as trustee for Bank and paid over to Bank on account of the Indebtedness of Borrowers to Bank but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty.  Any notes or other instruments now or hereafter evidencing such Indebtedness of any of the Borrowers to Guarantor shall be marked with a legend that the same are subject to this Guaranty and, if Bank so requests, shall be delivered to Bank. Bank is hereby authorized in the name of Guarantor from time to time to file financing statements and continuation statements and execute such other documents and take such other action as Bank deems necessary or appropriate to perfect, preserve and enforce its rights hereunder.

 

9. REMEDIES; NO WAIVER.  All rights, powers and remedies of Bank hereunder are cumulative.  No delay, failure or discontinuance of Bank in exercising any right, power or remedy hereunder shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy.  Any waiver, permit, consent or approval of any kind by Bank of any breach of this Guaranty, or any such waiver of any provisions or conditions hereof, must be in writing and shall be effective only to the extent set forth in writing.

 

10. COSTS, EXPENSES AND ATTORNEYS' FEES.  Guarantor shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel), expended or incurred by Bank in connection with the enforcement of any of Bank's rights, powers or remedies and/or the collection of any amounts which become due to Bank under this Guaranty, and the prosecution or defense of any action in any way related to this Guaranty, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the 

 

  

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foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Guarantor or any other person or entity.  All of the foregoing shall be paid by Guarantor with interest from the date of demand until paid in full at a rate per annum equal to the greater of ten percent (10%) or Bank’s Prime Rate in effect from time to time.

 

11. SUCCESSORS; ASSIGNMENT.  This Guaranty shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided however, that Guarantor may not assign or transfer any of its interests or rights hereunder without Bank's prior written consent.  Guarantor acknowledges that Bank has the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, any Indebtedness of Borrowers to Bank and any obligations with respect thereto, including this Guaranty.  In connection therewith, Bank may disclose all documents and information which Bank now has or hereafter acquires relating to Guarantor and/or this Guaranty, whether furnished by Borrowers, Guarantor or otherwise.  Guarantor further agrees that Bank may disclose such documents and information to Borrowers.

 

12. AMENDMENT.  This Guaranty may be amended or modified only in writing signed by Bank and Guarantor.

 

13. APPLICATION OF SINGULAR AND PLURAL.  In all cases where there is but a single Borrower, then all words used herein in the plural shall be deemed to have been used in the singular where the context and construction so require; and when there is more than one Borrower named herein, or when this Guaranty is executed by more than one Guarantor, the word "Borrowers" and the word "Guarantor" respectively shall mean all or any one or more of them as the context requires.

 

14. UNDERSTANDING WITH RESPECT TO WAIVERS; SEVERABILITY OF PROVISIONS.  Guarantor warrants and agrees that each of the waivers set forth herein 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 waiver or other provision of this Guaranty shall be held to be prohibited by or invalid under applicable public policy or law, such waiver or other provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such waiver or other provision or any remaining provisions of this Guaranty.

 

15. GOVERNING LAW.  This Guaranty shall be governed by and construed in accordance with the laws of the State of Kansas.

 

16. ARBITRATION.

 

(a) Arbitration.  The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise, in any way arising out of or relating to this Guaranty and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination.

 

  

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(b) Governing Rules.  Any arbitration proceeding will (i) proceed in a location in Kansas selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to herein, as applicable, as the “Rules”).  If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control.  Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute.  Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.

 

(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure.  The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding.  This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.

 

(d) Arbitrator Qualifications and Powers.  Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00.  Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations.  The arbitrator will be a neutral attorney licensed in the State of Kansas or a neutral retired judge of the state or federal judiciary of Kansas, in either case with a minimum of ten years’ experience in the substantive law applicable to the subject matter of the dispute to be arbitrated.  The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim.  In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator's discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication.  The arbitrator shall resolve all disputes in accordance with the substantive law of Kansas and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award.  The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Kansas Rules of Civil Procedure or other applicable law.  Judgment upon the award rendered by the arbitrator 

 

  

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may be entered in any court having jurisdiction.  The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.

 

(e) Discovery.  In any arbitration proceeding, discovery will be permitted in accordance with the Rules.  All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date.  Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party's presentation and that no alternative means for obtaining information is available.

 

(f) Class Proceedings and Consolidations.  No party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except parties who have executed this Guaranty or any other contract, instrument or document relating to any Indebtedness, or to include in any arbitration any dispute as a representative or member of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity.

 

(g) Payment Of Arbitration Costs And Fees.  The arbitrator shall award all costs and expenses of the arbitration proceeding.

 

(h) Real Property Collateral.  Notwithstanding anything herein to the contrary, no dispute shall be submitted to arbitration if the dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of Kansas, thereby agreeing that all indebtedness and obligations of the parties, and all mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable.

 

(i) Miscellaneous.  To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA.  No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business or by applicable law or regulation.  If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the documents between the parties or the subject matter of the dispute shall control.  This arbitration provision shall survive termination, amendment or expiration of any of the documents or any relationship between the parties.

 

  

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IN WITNESS WHEREOF, the undersigned Guarantors have executed this Guaranty effective as of January 3, 2012.

 

 

	
MGP INGREDIENTS, INC., a Kansas

corporation, subsequently to be known as MGPI

Processing, Inc.

 

 

By:  /s/  Timothy W. Newkirk

Name: Timothy W. Newkirk

Title: President & CEO

	  

 

 

 

 -8-

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