Document:

Exhibit 4.8.5

 

SUBORDINATION AGREEMENT

 

THIS
SUBORDINATION AGREEMENT (“Agreement”),
dated as of July 16, 2009, is made by the CLOUD L. CRAY, JR. TRUST, under
an agreement dated October 25, 1983 (the “Subordinated
Creditor”), for the benefit of EXCHANGE NATIONAL BANK &
TRUST CO. (with its successors and assigns, the “Senior
Lender”).

 

MGP
Ingredients, Inc., a Kansas corporation (“Ingredients”),
is now or hereafter may be indebted to the Senior Lender on account of loans or
the other extensions of credit or financial accommodations from the Senior
Lender to Ingredients, or to any other person under the guaranty or endorsement
of Ingredients.

 

The
Subordinated Creditor has entered into certain financial accommodations with
Ingredients and Midwest Grain Pipeline, Inc., a Kansas corporation, a
wholly owned subsidiary of Ingredients (“Pipeline”;
together with Ingredients, the “Borrower”).

 

As
a condition to consenting to the imposition of liens in favor of Wells Fargo
National Association on certain of the Senior Lender’s Senior Collateral
purusant to a Credit and Security Agreement between such bank and Borrower, the
Senior Lender has required that the Subordinated Creditor (i) subordinate
the payment of the Subordinated Note and the Subordinated Creditor’s other financial
accommodations to the payment of any and all indebtedness of the Borrower to
the Senior Lender and (ii) subordinate its Liens in the Senior Collateral
to the Liens of the Senior Lender in the Senior Collateral.  Assisting Ingredients in obtaining credit
accommodations from the Senior Lender and subordinating his  interests
pursuant to the terms of this Agreement are in the Subordinated Creditor’s best
interest.

 

ACCORDINGLY,
in consideration of the loans and other financial accommodations that have been
made and may hereafter be made by the Senior Lender for the benefit of the
Borrower, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Subordinated Creditor hereby
agrees as follows:

 

1.                                       Definitions. As used
herein, the following terms have the meanings set forth below:

 

“Borrower Default” means a Default or Event of Default as
defined in any agreement or instrument evidencing, governing, or issued in
connection with Senior Lender Indebtedness, or any default under or breach of
any such agreement or instrument.

 

“Cray Collateral”
means all collateral now or hereafter securing payment of the Junior Lender
Indebtedness, including all proceeds thereof.

 

“Cray Filing” shall mean any UCC-1 filed with the Kansas
Secretary of State which shows Ingredients, Pipeline or Borrower as “Debtor”
and Subordinated Creditor as “Secured Party.”

 

 

“Lien” means any security interest,
mortgage, deed of trust, pledge, lien, charge, encumbrance, title retention agreement
or analogous instrument or device, including the interest of each lessor under
any capitalized lease and the interest of any bondsman under any payment or
performance bond, in, of or on any assets or properties of a Person, whether
now owned or hereafter acquired and whether arising by agreement or operation
of law.

 

“Senior Collateral” means all collateral now or hereafter
securing payment of the Senior Lender Indebtedness, including all proceeds
thereof.

 

“Senior Lender Indebtedness” is used herein in its most
comprehensive sense and means any and all advances, debts, obligations and
liabilities of Ingredients to the Senior Lender, 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 at any time entered into by the Ingredients with the
Senior Lender, and whether the Borrower may be liable individually or jointly
with others, or whether recovery upon such Indebtedness may be or hereafter
becomes unenforceable.

 

“Subordinated Indebtedness” means all obligations arising
under the Subordinated Note and each and every other debt, liability and
obligation of every type and description which the Borrower may now or at any
time hereafter owe to the Subordinated Creditor, whether such debt, liability
or obligation now exists or is hereafter created or incurred, and whether it is
or may be direct or indirect, due or to become due, absolute or contingent,
primary or secondary, liquidated or unliquidated, or joint, several or joint
and several.

 

“Subordinated Note” means the Borrower’s Subordinated Secured
Promissory Note made by the Borrower dated March 27, 2009, payable to the
order of the Subordinated Creditor in the original principal amount of
$2,000,000, together with all amendments, renewals, extensions and modifications
thereof and any note or notes issued in substitution therefore.

 

2.                                       Subordination.  The Subordinated Creditor hereby agrees that
the payment and performance of all of the Subordinated Indebtedness is hereby
expressly subordinated to the payment and performance in full of the Senior
Lender Indebtedness and regardless of any priority otherwise available to the
Subordinated Creditor by law or by agreement, the Senior Lender shall hold a
first priority Lien in the Senior Collateral, and any Lien claimed therein by
the Subordinated Creditor, including but not limited to the Lien evidenced by
the Cray Filing, shall be and remain fully subordinate for all purposes to the
Lien of the Senior Lender in the Senior Collateral for all purposes whatsoever.  The Subordinated Indebtedness shall continue
to be subordinated to the Senior Lender Indebtedness even if the Senior Lender
Indebtedness is 

 

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deemed unsecured,
under-secured, subordinated, avoided or disallowed under the United States
Bankruptcy Code or other applicable law. Notwithstanding the forgoing the
Subordinated Lender’s Lien in any Cray Collateral (other than the Senior
Collateral) is not subordinated hereunder nor is the Subordinated Lender’s
right to received any proceeds therefrom.

 

3.                                       Payments.  Until all of the Senior Lender Indebtedness
has been indefeasibly paid and performed in full and the Senior Lender has
released its Lien in the Senior Collateral, the Subordinated Creditor shall
not, without the Senior Lender’s prior written consent, demand, receive or
accept any payment (whether of principal, interest or otherwise) from the
Borrower in respect of the Subordinated Indebtedness, or exercise any right of
or permit any setoff in respect of the Subordinated Indebtedness except
that (i) the Subordinated Creditor may accept scheduled, current (but not
past due), non-accelerated payments (but not prepayments) of principal and
interest required to be paid under the Subordinated Note, (ii) upon the
earlier to occur of the follow events (each a “Remedies
Event”): (A) any filing of a petition by or against Ingredients
under the United States Bankruptcy Code or any other bankruptcy, insolvency,
liquidation or similar proceeding or the appointment of a trustee, receivor or
similar officer for Ingredients or a substantial portion of its assets or (ii) 120
days after any other event constituting a Borrower Default, the Subordinated
Lender may exercise any remedies it may have against the Cray Collateral (other
than the Senior Collateral) and accept proceeds therefrom to be applied against
the Subordinated Indebtedness.

 

4.                                       Receipt of
Prohibited Payments. If the Subordinated Creditor receives any payment
on the Subordinated Indebtedness that the Subordinated Creditor is not entitled
to receive under Section 3, the Subordinated Creditor will hold the amount
so received in trust for the Senior Lender and will forthwith turn over such
payment to the Senior Lender in the form received (except for the endorsement
of the Subordinated Creditor where necessary) for application to then-existing
Senior Lender Indebtedness (whether or not due), in such manner of application
as the Senior Lender may deem appropriate. If the Subordinated Creditor
exercises any right of setoff which the Subordinated Creditor is not permitted
to exercise under the provisions of this Agreement, the Subordinated Creditor
will promptly pay over to the Senior Lender, in immediately available funds, an
amount equal to the amount of the claims or obligations offset. If the
Subordinated Creditor fails to make any endorsement required under this
Agreement, the Senior Lender, or any of its officers or employees or agents on
behalf of the Senior Lender, is hereby irrevocably appointed as the
attorney-in-fact (which appointment is coupled with an interest) for the
Subordinated Creditor to make such endorsement in the Subordinated Creditor’s
name.

 

5.                                       Action on
Subordinated Indebtedness. 
Unless and until the Senior Lender Indebtedness has been indefeasibly
paid and performed in full and the Senior Lender has released its Lien in the
Collateral:

 

(a)                                  The
Subordinated Creditor will not commence any action or proceeding against the
Borrower to recover all or any part of the Subordinated Indebtedness, or join
with any creditor (unless Senior Lender shall so join) in bringing any
proceeding against the Borrower under any bankruptcy, reorganization,
readjustment of debt, arrangement of debt receivership, 

 

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liquidation or insolvency
law or statute of the federal or any state government other than after the
occurrence of a Remedies Event; and

 

(b)                                 The
Subordinated Creditor will not commence any action or proceeding with respect
to the Senior Collateral or against the Borrower, will not take possession of,
sell or dispose of, or otherwise deal with, the Senior Collateral, and will not
exercise or enforce any other right or remedy which may be available to the
Subordinated Creditor against the Borrower or with respect to the Senior
Collateral.

 

6.                                       Action
Concerning Collateral and Restrictions on Liens.

 

(a)                                  Subordinated
Creditor represents, warrants, covenants, promises and agrees to and with
Senior Lender that unless and until all of the Senior Lender Indebtedness has
been indefeasibly paid and performed in full and the Senior Lender has released
its Lien in the Collateral the Subordinated Creditor will not modify, amend,
restate or otherwise change the Subordinated Note or any documents, agreements
or instruments representing or related to any Subordinated Indebtedness other
than extending the maturity date thereof from time to time;

 

(b)                                 Senior Lender
may take possession of, sell, dispose of, and otherwise deal with all or any
part of the Senior Collateral, and may enforce any right or remedy available to
it with respect to the Borrower or the Senior Collateral, all without notice to
or consent of the Subordinated Creditor except as specifically required by
applicable law.  In addition, and without
limiting the generality of the foregoing, if (i) a Borrower Default has
occurred and is continuing, (ii) the Borrower or the Senior Lender intends
to sell or otherwise dispose of any Senior Collateral to an unrelated third
party outside the ordinary course of business, (iii) Senior Lender has
given written notice thereof to the Subordinated Creditor, and (iv) the
Subordinated Creditor has failed, within ten (10) days after receipt of
such notice, to purchase for cash the Senior Lender Indebtedness for the full
amount thereof, the Subordinated Creditor shall be deemed to have consented to
such sale or disposition, to have released any Lien it may have in such
Collateral and to have authorized Senior Lender or its agents to file partial
releases (and any related financing statements such as “in lieu” financing
statements under Part 7 of Article 9 of the Uniform Commercial Code)
with respect to such Collateral; provided that Subordinated Lender shall be
entitled to any proceeds in excess of the amount necessary to satisfy the
Senior Lender Indebtedness.

 

(c)                                  The Senior
Lender shall have no duty to preserve, protect, care for, insure, take
possession of, collect, dispose of, or otherwise realize upon any of the Senior
Collateral or any other property or assets of the Borrower, and in no event
shall the Senior Lender be deemed the Subordinated Creditor’s agent with
respect to the Senior Collateral. All proceeds received by the Senior Lender
with respect to any Senior Collateral may be applied, first, to pay or
reimburse the Senior Lender for all costs and expenses (including reasonable
attorneys’ fees) incurred by the Senior Lender in connection with the 

 

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collection
of such proceeds, and, second, to any Senior Lender Indebtedness secured by the
Senior Lender’s Lien in that Senior Collateral in any order that it may choose.

 

(d)                                 Nothing
contained herein will prevent Ingredients and Senior Lender from amending,
modifying, restating and otherwise dealing with the Senior Lender Indebtedness
in any manner Ingredients and Senior Lender deem necessary and/or desirable
without notice to or consent of the Subordinated Creditor (the “Modified Senior Lender Indebtedness”).  This Agreement shall remain fully applicable
to such Modified Senior Lender Indebtedness and the Modified Senior Lender
Indebtedness will be deemed the “Senior Lender Indebtedness” for all purposes
hereunder.

 

7.                                       Bankruptcy and
Insolvency. In the event of any receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization or
arrangement with creditors, whether or not pursuant to bankruptcy law, the sale
of all or substantially all of the assets of the Borrower, dissolution,
liquidation or any other marshalling of the assets or liabilities of the
Borrower, the Subordinated Creditor will file all claims, proofs of claim or
other instruments of similar character necessary to enforce the obligations of
the Borrower in respect of the Subordinated Indebtedness and except as
otherwise provided in Section 3 will hold in trust for the Senior Lender
and promptly pay over to the Senior Lender in the form received (except for the
endorsement of the Subordinated Creditor where necessary) for application to
the then-existing Senior Lender Indebtedness, any and all moneys, dividends or
other assets received in any such proceedings on account of the Subordinated
Indebtedness, unless and until the Senior Lender Indebtedness has been paid in
full and the Senior Lender’s Lien in the Senior Collateral has been terminated.
If the Subordinated Creditor shall fail to take any such action, the Senior
Lender, as attorney-in-fact for the Subordinated Creditor, may take such action
on the Subordinated Creditor’s behalf. The Subordinated Creditor hereby
irrevocably appoints the Senior Lender, or any of its officers or employees on
behalf of the Senior Lender, as the attorney-in-fact for the Subordinated
Creditor (which appointment is coupled with an interest) with the power but not
the duty to demand, sue for, collect and receive any and all such moneys,
dividends or other assets and give acquittance therefor and to file any claim,
proof of claim or other instrument of similar character, to vote claims
comprising Subordinated Indebtedness to accept or reject any plan of partial or
complete liquidation, reorganization, arrangement, composition or extension and
to take such other action in the Senior Lender’s own name or in the name of the
Subordinated Creditor as the Senior Lender may deem necessary or advisable for
the enforcement of the agreements contained herein; and the Subordinated
Creditor will execute and deliver to the Senior Lender such other and further
powers-of-attorney or instruments as the Senior Lender may request in order to
accomplish the foregoing. If the Senior Lender desires to permit the use of
cash collateral or to provide post-petition financing to the Borrower, the
Subordinated Creditor shall not object to the same or assert that its interests
are not being adequately protected.

 

8.                                       Continuing
Effect. This Agreement shall constitute a continuing agreement of
subordination, and the Senior Lender may, without notice to or consent by the
Subordinated Creditor, modify any term of the Senior Lender Indebtedness in
reliance upon this Agreement. Without limiting the generality of the foregoing,
the Senior Lender may, at any time 

 

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and from time to time,
without the consent of or notice to the Subordinated Creditor and without
incurring responsibility to the Subordinated Creditor or impairing or releasing
any of the Senior Lender’s rights or any of the Subordinated Creditor’s
obligations hereunder:

 

(a)                                  change the
interest rate or change the amount of payment or extend the time for payment or
renew or otherwise alter the terms of any Senior Lender Indebtedness or any
instrument evidencing the same in any manner;

 

(b)                                 sell, exchange,
release or otherwise deal with any property at any time securing payment of the
Senior Lender Indebtedness or any part thereof;

 

(c)                                  release anyone
liable in any manner for the payment or collection of the Senior Lender
Indebtedness or any part thereof;

 

(d)                                 exercise or
refrain from exercising any right against the Borrower or any other person
(including the Subordinated Creditor); and

 

(e)                                  apply any sums
received by the Senior Lender, by whomsoever paid and however realized, to the
Senior Lender Indebtedness in such manner as the Senior Lender shall deem
appropriate.

 

10.                                 No Commitment. None of the
provisions of this Agreement shall be deemed or construed to constitute or
imply any commitment or obligation on the part of the Senior Lender to make any
future loans or other extensions of credit or financial accommodations to the
Borrower.

 

11.                                 Waiver and
Consent.  Senior Lender shall have no
obligation to the Subordinated Creditor with respect to the Senior Collateral
or the Senior Lender Indebtedness. 
Senior Lender may (a) exercise collection rights, (b) take
possession of, sell or dispose of, and otherwise deal with, the Senior
Collateral, (c) in Senior Lender’s name or in Borrower’s name, demand, sue
for, collect or receive any money or property at any time payable or receivable
on account of, or securing, any right to payment, or grant any extension to,
make any compromise or settlement with or otherwise agree to waive, modify,
amend or change the obligations (including collateral obligations) of any
account debtor or other obligor of Ingredients; (d) prosecute, settle and
receive proceeds on any insurance claims relating to the Senior Collateral, and
(e) exercise and enforce any right or remedy available to Senior Lender
with respect to the Senior Collateral, whether available before or after the
occurrence of any default; all without notice to or consent by anyone except as
specifically required by law. Senior Lender may apply the proceeds of the
Senior Collateral in any order of application, and may remit or release such
proceeds or any other sums or amounts to the Borrower without being obligated
to assure that any such proceeds or sums are applied to the satisfaction of the
Subordinated Creditor’s subordinated security interest in any Senior
Collateral, except as required by law. The Subordinated Creditor hereby waives
any and all right to require the marshalling of assets in connection with the
exercise of any of the remedies permitted by applicable law or agreement.

 

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12.                                 Notice. All notices
and other communications hereunder shall be in writing and shall be (i) personally
delivered, (ii) transmitted by registered mail, postage prepaid, or (iii) transmitted
by telecopy, in each case addressed to the party to whom notice is being given
at its address as set forth below:

 

If
to the Senior Lender:

 

Exchange
National Bank

                                            

                                            

                                            

Attention:

Telecopier:

 

If to the Subordinated Creditor:

 

Cloud
Cray, Jr. Trust

20045
266th Road

Atchison,
KS 66002

Attention:

Telecopier:
(      )

 

or
at such other address as may hereafter be designated in writing by that party.
All such notices or other communications shall be deemed to have been given on (i) the
date received if delivered personally, (ii) the date of posting if
delivered by mail, or (iii) the date of transmission if delivered by
telecopy.

 

13.                                 Conflict in
Agreements. If the subordination provisions of any instrument
evidencing Subordinated Indebtedness conflict with the terms of this Agreement,
the terms of this Agreement shall govern the relationship between the Senior
Lender and the Subordinated Creditor.

 

14.                                 No Waiver. No waiver
shall be deemed to be made by the Senior Lender of any of its rights hereunder
unless the same shall be in writing signed on behalf of the Senior Lender, and
each such waiver, if any, shall be a waiver only with respect to the specific
matter or matters to which the waiver relates and shall in no way impair the
rights of the Senior Lender or the obligations of the Subordinated Creditor to
the Senior Lender in any other respect at any time.

 

15.                                 Binding Effect;
Acceptance. This Agreement shall be binding upon the
Subordinated Creditor and the Subordinated Creditor’s heirs, legal
representatives, successors and assigns and shall inure to the benefit of the
Senior Lender and its participants, successors and assigns irrespective of
whether this or any similar agreement is executed by any other creditor of the
Borrower. Notice of acceptance by the Senior Lender of this Agreement or of
reliance by the Senior Lender upon this Agreement is hereby waived by the
Subordinated Creditor.

 

7

 

16.                                 Miscellaneous. The paragraph
headings herein are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose. This Agreement may
be executed in any number of counterparts, each of which shall be an original,
but all of which together shall constitute one instrument.

 

17.                                 Governing Law;
Consent to Jurisdiction and Venue; Waiver of Jury Trial. This
Agreement shall be governed by and construed in accordance with the substantive
laws (other than conflict laws) of the State of Kansas.  Each party consents to the personal
jurisdiction of the state and federal courts located in the State of Kansas in
connection with any controversy related to this Agreement, waives any argument
that venue in any such forum is not convenient, and agrees that any litigation
initiated by any of them in connection with this Agreement may be venued in
either the state or federal courts located in Atchison County, Kansas.  THE PARTIES WAIVE ANY
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR PERTAINING TO
THIS AGREEMENT.

 

[Signature Page Follows]

 

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IN
WITNESS WHEREOF, the Subordinated Creditor has executed this Agreement as of
the date and year first above-written.

 

 

	
   

  	
  CLOUD
  L. CRAY, JR. TRUST

  
	
   

  	
  under
  an agreement dated October 25, 1983

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Its:

  	
   

  

 

9

 

Acknowledgment by Borrower

 

The undersigned, being the
Borrower referred to in the foregoing Agreement, hereby (i) acknowledges
receipt of a copy thereof, (ii) agrees to all of the terms and provisions
thereof, (iii) agrees to and with the Senior Lender that it shall make no
payment on the Subordinated Indebtedness that the Subordinated Creditor would
not be entitled to receive under the provisions of the Agreement, (iv) agrees
that any such payment will constitute a default under the Senior Lender
Indebtedness, and (v) agrees to mark its books conspicuously to evidence
the subordination of the Subordinated Indebtedness effected hereby.

 

 

	
   

  	
  MIDWEST
  GRAIN PIPELINE, INC.

  
	
   

  	
  a
  Kansas corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MGP
  INGREDIENTS, INC.

  
	
   

  	
  a
  Kansas corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Its:Exhibit 4.8.6

 

SUBORDINATION AGREEMENT

 

THIS
SUBORDINATION AGREEMENT (“Agreement”),
dated as of July 16, 2009, is made by the CLOUD L. CRAY, JR. TRUST, under
an agreement dated October 25, 1983 (the “Subordinated Creditor”), for the benefit of WELLS FARGO BANK,
NATIONAL ASSOCIATION (with its participants, successors and assigns, the “Senior Lender”), acting through its Wells
Fargo Business Credit operating division.

 

MGP
Ingredients, Inc., a Kansas corporation (“Ingredients”), is now or hereafter may be indebted to the
Senior Lender on account of loans or the other extensions of credit or
financial accommodations from the Senior Lender to Ingredients, or to any other
person under the guaranty or endorsement of Ingredients.

 

The
Subordinated Creditor has entered into certain financial accommodations with
Ingredients and Midwest Grain Pipeline, Inc., a Kansas corporation, a
wholly owned subsidiary of Ingredients (“Pipeline”;
together with Ingredients, the “Borrower”).

 

As
a condition to making any loan or extension of credit to Ingredients, the
Senior Lender has required that the Subordinated Creditor (i) subordinate
the payment of the Subordinated Note and the Subordinated Creditor’s other
financial accommodations to the payment of any and all indebtedness of the
Borrower to the Senior Lender and (ii) subordinate its Liens in the
Collateral to the Liens of the Senior Lender in the Collateral.  Assisting Ingredients in obtaining credit
accommodations from the Senior Lender and subordinating his  interests pursuant to the terms of this
Agreement are in the Subordinated Creditor’s best interest.

 

ACCORDINGLY,
in consideration of the loans and other financial accommodations that have been
made and may hereafter be made by the Senior Lender for the benefit of the
Borrower, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Subordinated Creditor hereby
agrees as follows:

 

1.             Definitions. As used
herein, the following terms have the meanings set forth below:

 

“Average Excess Availability” means, as of
any date of determination by Senior Lender, the average of Ingredient’s
Availability (as defined in the Credit Agreement) assuming, for purposes of
calculation, that all accounts payable which remain unpaid more than sixty (60)
days after the invoice date thereof as the close of business on such date are
treated as additional Advances (as defined in the Credit Agreement) outstanding
on such date.

 

“Borrower Default” means a Default or Event
of Default as defined in any agreement or instrument evidencing, governing, or
issued in connection with Senior Lender Indebtedness, including, but not
limited to, the Credit Agreement, or any default under or breach of any such
agreement or instrument.

 

 

“Collateral” means all collateral
now or hereafter securing payment of the Senior Lender Indebtedness, including
all proceeds thereof.

 

“Cray Filing” shall mean any UCC-1 filed
with the Kansas Secretary of State which shows Ingredients, Pipeline or
Borrower as “Debtor” and Subordinated Creditor as “Secured Party.”

 

“Credit Agreement” means
that certain Credit and Security Agreement dated as of July       ,
2009, by and between Ingredients and the Senior Lender as the same may
hereafter be amended, supplemented or restated from time to time.

 

“Lien” means any security
interest, mortgage, deed of trust, pledge, lien, charge, encumbrance, title
retention agreement or analogous instrument or device, including the interest
of each lessor under any capitalized lease and the interest of any bondsman
under any payment or performance bond, in, of or on any assets or properties of
a Person, whether now owned or hereafter acquired and whether arising by
agreement or operation of law.

 

“Senior Lender Indebtedness”
is used herein in its most comprehensive sense and means any and all advances,
debts, obligations and liabilities of Ingredients to the Senior Lender,
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 at any time entered into
by the Ingredients with the Senior Lender, and whether the Borrower may be
liable individually or jointly with others, or whether recovery upon such
Indebtedness may be or hereafter becomes unenforceable.

 

“Subordinated Indebtedness”
means all obligations arising under the Subordinated Note and each and every
other debt, liability and obligation of every type and description which the
Borrower may now or at any time hereafter owe to the Subordinated Creditor,
whether such debt, liability or obligation now exists or is hereafter created
or incurred, and whether it is or may be direct or indirect, due or to become
due, absolute or contingent, primary or secondary, liquidated or unliquidated,
or joint, several or joint and several.

 

“Subordinated Note” means the Borrower’s Subordinated
Secured Promissory Note made by the Borrower dated March 27, 2009, payable
to the order of the Subordinated Creditor in the original principal amount of
$2,000,000, together with all renewals, extensions and modifications thereof
and any note or notes issued in substitution therefore.

 

“Trade Payable Indebtedness” means the trade
payable indebtedness owed by Borrower to Subordinated Creditor, whether such
trade payable debt now exists or is hereafter created or
incurred, and whether it is or may be direct or indirect, due or to become due,
absolute or contingent, primary or secondary, liquidated or unliquidated,

 

2

 

or
joint, several or joint and several, which shall not include indebtedness evidenced
by the Subordinated Note.

 

2.             Subordination.  The Subordinated Creditor hereby agrees that
the payment and performance of all of the Subordinated Indebtedness is hereby
expressly subordinated to the payment and performance in full of the Senior
Lender Indebtedness and regardless of any priority otherwise available to the
Subordinated Creditor by law or by agreement, the Senior Lender shall hold a
first priority Lien in the Collateral, and any Lien claimed therein by the
Subordinated Creditor, including but not limited to the Lien secured by the
Cray Filing, shall be and remain fully subordinate for all purposes to the Lien
of the Senior Lender in the Collateral for all purposes whatsoever.  The Subordinated Indebtedness shall continue
to be subordinated to the Senior Lender Indebtedness even if the Senior Lender
Indebtedness is deemed unsecured, under-secured, subordinated, avoided or
disallowed under the United States Bankruptcy Code or other applicable law.

 

3.             Payments.  Until all of the Senior Lender Indebtedness
has been indefeasibly paid and performed in full and the Senior Lender has
released its Lien in the Collateral, the Subordinated Creditor shall not,
without the Senior Lender’s prior written consent, demand, receive or accept
any payment (whether of principal, interest or otherwise) from the Borrower in
respect of the Subordinated Indebtedness, or exercise any right of or permit
any setoff in respect of the Subordinated Indebtedness except that the
Subordinated Creditor may accept scheduled, current (but not past due),
non-accelerated payments (but not prepayments) of principal and interest
required to be paid under the Subordinated Note provided (i) no Borrower Default has occurred or
would occur as a result of any such payments, (ii) Borrower shall have had
Average Excess Availability of not less than $5,000,000 for the 60 day period
prior to such payment, (iii) after giving effect to such payment Borrower
shall have Average Excess Availability of not less than $3,000,000, and (iv) on
the date of such payment, Borrower shall have paid all accounts payable which
remain unpaid more than thirty (30) days after the invoice date.

 

4.             Receipt of Prohibited
Payments. If the Subordinated Creditor receives any payment
on the Subordinated Indebtedness that the Subordinated Creditor is not entitled
to receive under the provisions of this Agreement, the Subordinated Creditor
will hold the amount so received in trust for the Senior Lender and will
forthwith turn over such payment to the Senior Lender in the form received
(except for the endorsement of the Subordinated Creditor where necessary) for
application to then-existing Senior Lender Indebtedness (whether or not due),
in such manner of application as the Senior Lender may deem appropriate. If the
Subordinated Creditor exercises any right of setoff which the Subordinated
Creditor is not permitted to exercise under the provisions of this Agreement,
the Subordinated Creditor will promptly pay over to the Senior Lender, in
immediately available funds, an amount equal to the amount of the claims or
obligations offset. If the Subordinated Creditor fails to make any endorsement
required under this Agreement, the Senior Lender, or any of its officers or
employees or agents on behalf of the Senior Lender, is hereby irrevocably
appointed as the attorney-in-fact (which appointment is coupled with an
interest) for the Subordinated Creditor to make such endorsement in the
Subordinated Creditor’s name.

 

3

 

5.             Action on Subordinated
Indebtedness.  Unless and
until the Senior Lender Indebtedness has been indefeasibly paid and performed
in full and the Senior Lender has released its Lien in the Collateral:

 

(a)           The Subordinated Creditor
will not commence any action or proceeding against the Borrower to recover all
or any part of the Subordinated Indebtedness, or join with any creditor (unless
Senior Lender shall so join) in bringing any proceeding against the Borrower
under any bankruptcy, reorganization, readjustment of debt, arrangement of debt
receivership, liquidation or insolvency law or statute of the federal or any
state government; and

 

(b)           The Subordinated Creditor
will not commence any action or proceeding with respect to the Collateral, any
collateral which secures the Subordinated Indebtedness or against the Borrower,
will not take possession of, sell or dispose of, or otherwise deal with, the
Collateral or any collateral which secures the Subordinated Indebtedness, and
will not exercise or enforce any other right or remedy which may be available
to the Subordinated Creditor against the Borrower or with respect to the
Collateral or any collateral which secures the Subordinated Indebtedness.

 

6.             Action Concerning Collateral
and Restrictions on Liens.

 

(a)           Subordinated Creditor
represents, warrants, covenants, promises and agrees to and with Senior Lender
that unless and until all of the Senior Lender Indebtedness has been
indefeasibly paid and performed in full and the Senior Lender has released its
Lien in the Collateral the Subordinated Creditor will not modify, amend,
restate or otherwise change the Subordinated Note or any documents, agreements
or instruments representing or related to any Subordinated Indebtedness;

 

(b)           Senior Lender may take
possession of, sell, dispose of, and otherwise deal with all or any part of the
Collateral, and may enforce any right or remedy available to it with respect to
the Borrower or the Collateral, all without notice to or consent of the
Subordinated Creditor except as specifically required by applicable law.  In addition, and without limiting the
generality of the foregoing, if (i) a Borrower Default has occurred and is
continuing, (ii) the Borrower or the Senior Lender intends to sell or
otherwise dispose of any Collateral to an unrelated third party outside the
ordinary course of business, (iii) Senior Lender has given written notice
thereof to the Subordinated Creditor, and (iv) the Subordinated Creditor
has failed, within ten (10) days after receipt of such notice, to purchase
for cash the Senior Lender Indebtedness for the full amount thereof, the
Subordinated Creditor shall be deemed to have consented to such sale or
disposition, to have released any Lien it may have in such Collateral and to
have authorized Senior Lender or its agents to file partial releases (and any
related financing statements such as “in lieu” financing statements under Part 7
of Article 9 of the Uniform Commercial Code) with respect to such
Collateral.

 

(c)           The Senior Lender shall have
no duty to preserve, protect, care for, insure, take possession of, collect,
dispose of, or otherwise realize upon any of the Collateral or any other
property or assets of the Borrower, and in no event shall the Senior Lender be

 

4

 

deemed
the Subordinated Creditor’s agent with respect to the Collateral. All proceeds
received by the Senior Lender with respect to any Collateral may be applied,
first, to pay or reimburse the Senior Lender for all costs and expenses
(including reasonable attorneys’ fees) incurred by the Senior Lender in
connection with the collection of such proceeds, and, second, to any Senior
Lender Indebtedness secured by the Senior Lender’s Lien in that Collateral in
any order that it may choose.

 

(d)           Nothing contained
herein will prevent Ingredients and Senior Lender from amending, modifying,
restating and otherwise dealing with the Senior Lender Indebtedness in any
manner Ingredients and Senior Lender deem necessary and/or desirable without
notice to or consent of the Subordinated Creditor (the “Modified Senior Lender Indebtedness”).  This Agreement shall remain fully applicable
to such Modified Senior Lender Indebtedness and the Modified Senior Lender
Indebtedness will be deemed the “Senior Lender Indebtedness” for all purposes
hereunder.

 

7.             Bankruptcy and Insolvency. In the event
of any receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization or arrangement with creditors, whether or not
pursuant to bankruptcy law, the sale of all or substantially all of the assets
of the Borrower, dissolution, liquidation or any other marshalling of the
assets or liabilities of the Borrower, the Subordinated Creditor will file all
claims, proofs of claim or other instruments of similar character necessary to
enforce the obligations of the Borrower in respect of the Subordinated
Indebtedness and will hold in trust for the Senior Lender and promptly pay over
to the Senior Lender in the form received (except for the endorsement of the
Subordinated Creditor where necessary) for application to the then-existing
Senior Lender Indebtedness, any and all moneys, dividends or other assets
received in any such proceedings on account of the Subordinated Indebtedness,
unless and until the Senior Lender Indebtedness has been paid in full and the
Senior Lender’s Lien in the Collateral has been terminated. If the Subordinated
Creditor shall fail to take any such action, the Senior Lender, as attorney-in-fact
for the Subordinated Creditor, may take such action on the Subordinated
Creditor’s behalf. The Subordinated Creditor hereby irrevocably appoints the
Senior Lender, or any of its officers or employees on behalf of the Senior
Lender, as the attorney-in-fact for the Subordinated Creditor (which
appointment is coupled with an interest) with the power but not the duty to
demand, sue for, collect and receive any and all such moneys, dividends or
other assets and give acquittance therefor and to file any claim, proof of
claim or other instrument of similar character, to vote claims comprising
Subordinated Indebtedness to accept or reject any plan of partial or complete
liquidation, reorganization, arrangement, composition or extension and to take
such other action in the Senior Lender’s own name or in the name of the Subordinated
Creditor as the Senior Lender may deem necessary or advisable for the
enforcement of the agreements contained herein; and the Subordinated Creditor
will execute and deliver to the Senior Lender such other and further powers-of-attorney
or instruments as the Senior Lender may request in order to accomplish the
foregoing. If the Senior Lender desires to permit the use of cash collateral or
to provide post-petition financing to the Borrower, the Subordinated Creditor
shall not object to the same or assert that its interests are not being
adequately protected.

 

5

 

8.             Restrictive Legend; Transfer
of Subordinated Indebtedness; Amendment.

 

(a)           The Subordinated Creditor
will cause the Subordinated Note and all other notes, bonds, debentures or
other instruments evidencing the Subordinated Indebtedness or any part thereof
to contain a specific statement thereon to the effect that the indebtedness
thereby evidenced is subject to the provisions of this Agreement, and the
Subordinated Creditor will mark its books conspicuously to evidence the
subordination effected hereby.  Attached
hereto is a true and correct copy of the Subordinated Note bearing such legend.  The Subordinated Creditor shall deposit with
the Senior Lender, the Subordinated Note and  all
of the other  notes, bonds,
debentures or other instruments evidencing the Subordinated Indebtedness, which
notes, bonds, debentures or other instruments may be held by the Senior Lender
so long as any Senior Lender Indebtedness remains outstanding or the Senior
Lender’s Lien in the Collateral has not been terminated. The Subordinated
Creditor is the lawful holder of the Subordinated Note and has not transferred
any interest therein to any other person or entity. Without the prior written
consent of the Senior Lender, the Subordinated Creditor will not assign,
transfer or pledge to any other person any of the Subordinated Indebtedness or
agree to a discharge or forgiveness of the same.

 

(b)           While this Agreement remains
in effect, Subordinated Creditor will cause the following language to be
included on the face of all original filings wherein Ingredients, Pipeline or
Borrower is “Debtor” and Subordinated Creditor is “Secured Party,” including
but not limited to the Cray Filing:

 

“THE SECURITY INTEREST OF SECURED PARTY IN ALL OF THE COLLATERAL
DESCRIBED IN THIS FINANCING STATEMENT IS SUBJECT TO A SUBORDINATION AGREEMENT
DATED JULY     , 2009 BETWEEN SECURED PARTY AND WELLS FARGO
BANK, NATIONAL ASSOCIATION (“WFBC”), WHEREIN WFBC AND SECURED PARTY HAVE
AGREED, AS BETWEEN WFBC AND SECURED PARTY ONLY, THAT THE PRIORITY OF THE
SECURED PARTY’S SECURITY INTERESTS IN THE COLLATERAL DESCRIBED IN THIS
FINANCING STATEMENT SHALL AT ALL TIMES BE SUBORDINATE TO WFBC’S SECURITY INTERESTS
IN SUCH COLLATERAL, NOTWITHSTANDING THE TIME, ORDER OR MANNER OF FILING OR
PERFECTION.”

 

In the event such language is not included on the face of such original
filings, without limiting any other remedies of Senior Lender, Subordinated
Creditor hereby authorizes Senior Lender to amend such filings consistent with
this Agreement.

 

9.             Continuing Effect. This
Agreement shall constitute a continuing agreement of subordination, and the
Senior Lender may, without notice to or consent by the Subordinated Creditor,
modify any term of the Senior Lender Indebtedness in reliance upon this
Agreement. Without limiting the generality of the foregoing, the Senior Lender
may, at any time and from time to time, without the consent of or notice to the
Subordinated Creditor and without incurring responsibility to the Subordinated
Creditor or impairing or releasing any of the Senior Lender’s rights or any of
the Subordinated Creditor’s obligations hereunder:

 

6

 

(a)           change the interest rate or
change the amount of payment or extend the time for payment or renew or
otherwise alter the terms of any Senior Lender Indebtedness or any instrument
evidencing the same in any manner;

 

(b)           sell, exchange, release or
otherwise deal with any property at any time securing payment of the Senior
Lender Indebtedness or any part thereof;

 

(c)           release anyone liable in any
manner for the payment or collection of the Senior Lender Indebtedness or any
part thereof;

 

(d)           exercise or refrain from
exercising any right against the Borrower or any other person (including the
Subordinated Creditor); and

 

(e)           apply any sums received by
the Senior Lender, by whomsoever paid and however realized, to the Senior
Lender Indebtedness in such manner as the Senior Lender shall deem appropriate.

 

10.           No Commitment. None of the
provisions of this Agreement shall be deemed or construed to constitute or
imply any commitment or obligation on the part of the Senior Lender to make any
future loans or other extensions of credit or financial accommodations to the
Borrower.

 

11.           Waiver and Consent.  Senior Lender shall have no obligation to the
Subordinated Creditor with respect to the Collateral or the Senior Lender
Indebtedness.  Senior Lender may (a) exercise
collection rights, (b) take possession of, sell or dispose of, and
otherwise deal with, the Collateral, (c) in Senior Lender’s name, the
Subordinated Creditor’s name or in Borrower’s name, demand, sue for, collect or
receive any money or property at any time payable or receivable on account of,
or securing, any right to payment, or grant any extension to, make any
compromise or settlement with or otherwise agree to waive, modify, amend or
change the obligations (including collateral obligations) of any account debtor
or other obligor of the Debtor; (d) prosecute, settle and receive proceeds
on any insurance claims relating to the Collateral, and (e) exercise and
enforce any right or remedy available to Senior Lender with respect to the
Collateral, whether available before or after the occurrence of any default;
all without notice to or consent by anyone except as specifically required by
law. Senior Lender may apply the proceeds of the Collateral in any order of
application, and may remit or release such proceeds or any other sums or
amounts to the Borrower without being obligated to assure that any such
proceeds or sums are applied to the satisfaction of the Subordinated Creditor’s
subordinated security interest in any Collateral, except as required by law.
The Subordinated Creditor hereby waives any and all right to require the
marshalling of assets in connection with the exercise of any of the remedies
permitted by applicable law or agreement.

 

12.           Notice. All notices
and other communications hereunder shall be in writing and shall be (i) personally
delivered, (ii) transmitted by registered mail, postage prepaid, or (iii) transmitted
by telecopy, in each case addressed to the party to whom notice is being given
at its address as set forth below:

 

7

 

If
to the Senior Lender:

 

Wells
Fargo Bank, National Association

MAC
N9312-040

109
South 7th Street, 4th Floor

Minneapolis,
MN 55402

Attention:  Becky A. Koehler

Telecopier:  (612) 341-2472

 

If to the Subordinated Creditor:

 

Cloud
Cray, Jr. Trust

20045
266th Road

Atchison,
KS 66002

Attention:

Telecopier: (      )

 

or
at such other address as may hereafter be designated in writing by that party.
All such notices or other communications shall be deemed to have been given on (i) the
date received if delivered personally, (ii) the date of posting if
delivered by mail, or (iii) the date of transmission if delivered by
telecopy.

 

13.           Conflict in Agreements. If the
subordination provisions of any instrument evidencing Subordinated Indebtedness
conflict with the terms of this Agreement, the terms of this Agreement shall
govern the relationship between the Senior Lender and the Subordinated
Creditor.

 

14.           No Waiver. No waiver
shall be deemed to be made by the Senior Lender of any of its rights hereunder
unless the same shall be in writing signed on behalf of the Senior Lender, and
each such waiver, if any, shall be a waiver only with respect to the specific
matter or matters to which the waiver relates and shall in no way impair the
rights of the Senior Lender or the obligations of the Subordinated Creditor to
the Senior Lender in any other respect at any time.

 

15.           Binding Effect; Acceptance. This
Agreement shall be binding upon the Subordinated Creditor and the Subordinated
Creditor’s heirs, legal representatives, successors and assigns and shall inure
to the benefit of the Senior Lender and its participants, successors and
assigns irrespective of whether this or any similar agreement is executed by
any other creditor of the Borrower. Notice of acceptance by the Senior Lender
of this Agreement or of reliance by the Senior Lender upon this Agreement is
hereby waived by the Subordinated Creditor.

 

16.           Miscellaneous. The paragraph
headings herein are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose. This Agreement may
be executed in any number of counterparts, each of which shall be an original,
but all of which together shall constitute one instrument.

 

8

 

17.           Governing Law; Consent to
Jurisdiction and Venue; Waiver of Jury Trial. This Agreement shall be
governed by and construed in accordance with the substantive laws (other than
conflict laws) of the State of Minnesota. 
Each party consents to the personal jurisdiction of the state and
federal courts located in the State of Minnesota in connection with any
controversy related to this Agreement, waives any argument that venue in any
such forum is not convenient, and agrees that any litigation initiated by any
of them in connection with this Agreement may be venued in either the state or
federal courts located in Hennepin County, Minnesota.  THE PARTIES
WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED ON OR
PERTAINING TO THIS AGREEMENT.

 

[Signature Page Follows]

 

9

 

IN
WITNESS WHEREOF, the Subordinated Creditor has executed this Agreement as of
the date and year first above-written.

 

 

	
   

  	
  CLOUD
  L. CRAY, JR. TRUST

  
	
   

  	
  under
  an agreement dated October 25, 1983

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Cloud L. Cray, Jr., Ttee

  
	
   

  	
  Name:

  	
  Cloud
  L. Cray, Jr.

  
	
   

  	
  Its:

  	
  Trustee

  

 

10

 

Acknowledgment by Borrower

 

The
undersigned, being the Borrower referred to in the foregoing Agreement, hereby (i) acknowledges
receipt of a copy thereof, (ii) agrees to all of the terms and provisions
thereof, (iii) agrees to and with the Senior Lender that it shall make no
payment on the Subordinated Indebtedness that the Subordinated Creditor would
not be entitled to receive under the provisions of the Agreement, (iv) agrees
that any such payment will constitute a default under the Senior Lender
Indebtedness, and (v) agrees to mark its books conspicuously to evidence
the subordination of the Subordinated Indebtedness effected hereby.

 

 

	
   

  	
  MIDWEST GRAIN PIPELINE, INC.

  
	
   

  	
  a
  Kansas corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy W. Newkirk

  
	
   

  	
  Name:

  	
  Timothy
  W. Newkirk

  
	
   

  	
  Its:

  	
  President
  & CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MGP INGREDIENTS, INC.

  
	
   

  	
  a
  Kansas corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Timothy W. Newkirk

  
	
   

  	
  Name:

  	
  Timothy
  W. Newkirk

  
	
   

  	
  Its:

  	
  President
  & CEO

  

 

 

EXHIBIT A

 

attach
copy of Subordinated Note with following legend

 

“THIS PROMISSORY NOTE IS SUBJECT TO THE TERMS OF A SUBORDINATION
AGREEMENT BY CLOUD L. CRAY, JR. TRUST, UNDER AN AGREEMENT DATED OCTOBER 25,
1983 IN FAVOR OF WELLS FARGO BANK, NATIONAL ASSOCIATION, ACTING THROUGH ITS
WELLS FARGO BUSINESS CREDIT OPERATING DIVISION, DATED JULY,
        , 2009.”

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