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EXHIBIT 10.12
SUBORDINATION AND INTERCREDITOR AGREEMENT
THIS SUBORDINATION AND INTERCREDITOR AGREEMENT, dated as of June
30, 2006, is made and given by LAND O’LAKES, INC., a
Minnesota cooperative corporation, (the " Junior Creditor ")
in favor of COBANK, ACB, a federally chartered instrumentality
under the Farm Credit Act of 1971, as agent (the " Agent ")
for the lenders from time to time party to the Credit Agreement (as
defined below), (together with the Agent, the " Senior
Creditors ").
RECITALS:
A.
Golden Oval Eggs, LLC, a limited liability company
organized under the laws of the State of Delaware, Midwest
Investors of Iowa, Cooperative, a cooperative organized under the
laws of the State of Iowa and GOECA, LP, a Delaware limited
partnership (individually, a " Borrower " and, collectively,
the " Borrowers "), is or may become indebted to the Junior
Creditor under that certain promissory note dated as of June 30,
2006 made by the Borrowers and payable to the Junior Creditor in
the original principal amount of $17,000,000, in the form attached
hereto as Exhibit A (the " Subordinated Note ").
B.
The Borrowers are now, or may hereafter be, indebted
to the Senior Creditors as a result of the advance of monies and
other extensions of credit by the Senior Creditors to the Borrowers
under or pursuant to a Credit Agreement dated as of September 13,
2004, as amended from time to time (as the same may be amended,
restated or otherwise modified from time to time hereafter, the "
Credit Agreement ") between the Borrowers, the Agent and the
Senior Creditors.
C.
The Junior Creditor and Senior Creditors each
acknowledge that the loan or advance of monies or other extensions
of any financial accommodation or credit to the Borrowers by each
of the Junior Creditor and the Senior Creditors is of value to the
other party.
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged by the parties, and in order to induce
the Senior Creditors to continue to make loans or extend credit or
any other financial accommodation to or for the benefit of the
Borrowers, or to grant such renewals or extension thereof as the
Senior Creditors may deem advisable, and to better secure the
Senior Creditors in respect of the foregoing, the parties hereby
agree as follows:
Section 1.
Definitions, Rules of Constructions.
1.1
For purpose of this Agreement, the following terms
shall have the following meanings:
" Bankruptcy Code " shall mean 11 U.S.C. 101 et seq., as
amended from time to time.
" Borrower " and " Borrowers " shall have the
meaning given to such terms in Recital A, above, and any successor
(including a debtor-in-possession under the Bankruptcy Code),
assignee, receiver, trustee or estate thereof.
" Credit Agreement " shall have the meaning given to that
term in Recital B, above, and shall include any amendments,
modifications or restatements thereto or thereof and any credit
agreement hereafter entered into in replacement thereof.
" Default " shall mean any event which with the giving of
notice or lapse of time, or both, would become an Event of
Default.
" Event of Default " shall mean (i) any
Event of Default (as therein defined) under the Credit Agreement,
(ii) any failure of any Borrower to pay when due (whether at the
date scheduled therefor or earlier upon acceleration), or when
demanded (with respect to any obligation payable on demand), any
item constituting Senior Debt, or (iii) any event shall occur or
condition shall exist and shall continue for more than the period
of grace, if any, applicable thereto and shall have the effect of
causing, or permitting the Senior Creditors or any subsequent
holder of Senior Debt to cause, any item of Senior Debt to become
due prior to its stated maturity or to realize upon any collateral
given as security therefor.
" Junior Collateral " shall mean the property or
interests in property of the Borrowers identified on Exhibit
B hereto in which the Borrowers have granted to Junior Creditor
a security interest to secure payment of the Subordinated Note.
" Junior Creditor " shall mean Land O’Lakes, Inc.
and any successor thereto (including a debtor-in-possession under
the Bankruptcy Code), assignee, receiver, trustee or estate
thereof.
" Junior Creditor Documents " shall mean the Subordinated
Note, the Subordinated Security Documents and any documents or
instruments executed and delivered by the Borrowers in connection
with any of the foregoing.
" Lien " shall mean any mortgage, deed of trust, pledge,
lien, security interest, charge, set-off right or other
encumbrance, whether now existing or hereafter created, acquired or
arising.
" Permitted Payments " shall have the meaning given in
Section 3 below.
" Person " shall mean an individual, cooperative,
corporation, association, partnership, limited partnership, limited
liability company, trust, organization, individual or government or
any governmental agency or any political subdivision thereof.
" Senior Collateral " shall mean all collateral now or
hereafter securing payment of the Senior Debt, including proceeds
thereof.
" Senior Creditors " shall have the meaning given in the
preamble to this Agreement and shall include any successor to any
Senior Creditor (including a debtor-in-possession under the
Bankruptcy Code), assignee, receiver, trustee or estate of any
Senior Creditor.
" Senior Creditor Documents " shall mean (a) the Credit
Agreement, (b) all promissory notes delivered in connection with
the Credit Agreement, and (c) all Credit Documents (as described in
the Credit Agreement) and any mortgages, guaranties, deeds of
trust, security agreements or other documents given by any Person
in favor of the Agent or the Senior Creditors to secure all or any
portion of the Senior Debt, in each of the forgoing cases as any of
the forgoing may be amended, supplemented, restated, extended or
otherwise modified from time to time.
" Senior Debt " shall mean all liabilities and
obligations of the Borrowers to the Senior Creditors howsoever
created, arising or evidenced, whether direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter
arising or incurred, including, without limitation, all of the
Borrowers’ obligations to the Senior Creditors under the
Senior Creditor Documents, and all other obligations under any
other agreement between the Borrowers and the Agent or the Senior
Creditors now or hereafter in effect, and also including, without
limitation, any and all interest accruing on any of the Senior Debt
after the commencement of any proceedings referred to in Section 6
hereof, notwithstanding any provision or rule of law which might
restrict the rights of the Senior Creditors, as against the
Borrowers or anyone else, to collect such interest.
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" Subordinated Debt " shall mean all
obligations, liabilities and indebtedness of the Borrowers to the
Junior Creditor under the Junior Creditor Documents.
" Subordinated Note " shall have the meaning given to
such term in Recital A above, and shall include any amendments,
modifications or restatements thereto or thereof and any note
hereafter entered into in replacement thereof (but nothing in this
definition shall be deemed to waive the provisions of
Section 12 below requiring the Senior Creditors’ prior
written consent to any change in any instrument or agreement
evidencing the Subordinated Debt, including without limitation any
warrants attached thereto).
" Subordinated Security Documents " shall mean any
security agreement or other document in which the Borrowers have
granted to the Junior Creditor a security interest in the Junior
Collateral.
1.2
In this Agreement, in the computation of a period of
time from a specified date to a later specified date, unless
otherwise stated the word "from" means "from and including" and the
word "to" or "until" each means "to but excluding."
1.3
Other terms may be defined in other parts of this
Agreement. All references to agreements and other contractual
instruments shall be deemed to include all subsequent amendments
thereto or changes therein entered into in accordance with their
respective terms, and all references to Persons shall be deemed to
include their permitted successors and assigns. Unless the
context in which used herein otherwise clearly requires, "or" has
the inclusive meaning represented by the phrase "and/or." All
incorporations by reference of covenants, terms, definitions or
other provisions from other agreements are incorporated into this
Agreement as if such provisions were fully set forth herein, and
include all necessary information and related provisions from such
other agreements, and all such covenants, terms, definitions or
other provisions from other agreements incorporated into this
Agreement by reference shall survive any termination of such other
agreements until the Senior Debt has been paid in full and all
financing arrangements between the Borrowers and the Senior
Creditors shall have been terminated.
Section 2.
Standby; Subordination; Standby;
Subordination .
2.1
The payment and performance of the Subordinated Debt
is hereby subordinated to the payment and performance of the Senior
Debt, and, except as set forth in Section 3 below, the Junior
Creditor will not ask, demand, sue for, take or receive from any
Borrower or any other Person liable for all or any part of the
Senior Debt, by setoff or in any other manner, the whole or any
part of the Subordinated Debt, or any monies which may now or
hereafter be owing in respect of the Subordinated Debt (whether
such amounts represent principal or interest, or obligations which
are due or not due, direct or indirect, absolute or contingent),
including, without limitation, taking any security for any of the
foregoing, except as set forth in Section 2.2, or the taking of any
negotiable instrument therefor (except the Subordinated Note),
unless and until all of the Senior Debt shall have been fully and
indefeasibly paid and satisfied and all financing arrangements
between the Borrowers and Senior Creditors pursuant to the Credit
Agreement have been terminated. The Subordinated Debt shall
continue to be subordinated to the Senior Debt even if the Senior
Debt is subordinated, avoided or disallowed under the United States
Bankruptcy Code or other applicable law. The Junior Creditor
shall not challenge, and irrevocably waives any right it may have
to challenge, the validity, enforceability or priority of the
Senior Debt in any judicial, administrative or alternative dispute
resolution proceeding.
2.2
The Junior Creditor warrants and represents that the
Subordinated Debt is unsecured except for its subordinated security
interest securing the Subordinated Note in the Junior Collateral as
permitted hereunder, and agrees that the Junior Creditor hereafter
will not, unless and until all of the Senior Debt shall have been
fully and indefeasibly paid and satisfied and all financial
arrangements between the Borrowers and the Senior Creditors
pursuant to the Credit Agreement shall have been
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terminated, accept any other security therefor
from any Borrower or any other Person liable for all or any part of
the Senior Debt for the benefit of any Borrowers and in the event
the Junior Creditor does obtain any such additional security for
the Subordinated Debt, at the request of the Agent, the Junior
Creditor hereby authorizes the Agent to file such subordinations,
termination statements and releases as the Senior Creditors shall
reasonably request to subordinate or release the Junior
Creditor’s security interest in or lien against such
property. Prior to the indefeasible payment in full and
discharge of the Senior Debt and the termination of all financial
arrangements between the Borrowers and the Senior Creditors
pursuant to the Credit Agreement, the Junior Creditor shall have no
right to enforce any claim or take action against any collateral
held by it with respect to the Subordinated Debt, or to take any
action against any Borrower or the property of any Borrowers or of
any other Person liable for all or any part of the Senior
Debt. The Junior Creditor shall not challenge, and
irrevocably waives any right it may have to challenge, the
attachment, validity, perfection, priority or extent of the Lien of
the Senior Creditors or any of them, in the Senior Collateral in
any judicial, administrative or alternative dispute resolution
proceeding.
2.3
The Junior Creditor hereby agrees that its security
interest in the Junior Collateral is subject and subordinate to the
security interest of the Senior Creditors in the Junior Collateral
to secure indebtedness of the Borrowers to Senior Creditors.
The Junior Creditor hereby further agrees that (A) the Junior
Creditor shall have no right to possession of any of the Junior
Collateral or to foreclose upon any of the Junior Collateral,
whether by judicial action or otherwise, unless and until all of
the indebtedness of the Borrowers to Senior Creditors secured by
Senior Creditors’ senior security interest in the Junior
Collateral shall have been fully and indefeasibly paid and
satisfied and all financial arrangements between the Borrowers and
Senior Creditors secured by such senior security interest have been
terminated and (B) at the request of the Agent, in connection with
any sale of all or any part of the Junior Collateral by the Senior
Creditors or to which Senior Creditors have consented, the Junior
Creditor shall execute and deliver to the Agent such termination
statements and releases as the Senior Creditors shall reasonably
request to release, or evidence the release of, the Junior
Creditor’s security interest in the Junior
Collateral. The Junior Creditor will not join with any
creditor (unless the Senior Creditors shall so join) in bringing
any proceeding against any 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.
2.4
The Junior Creditor acknowledges and agrees that, to
the extent the terms and provisions of this Agreement are
inconsistent with any agreement or understanding between the Junior
Creditor and the Borrowers, including without limitation, the
Junior Creditor Documents, such agreement or understanding shall be
subject to this Agreement.
Section 3.
Permitted Payments .
3.1
Notwithstanding the provisions of Section 2 of this
Agreement, until the Agent gives the Junior Creditor written notice
(in the manner set forth below) of the occurrence of an Event of
Default or a Default, and provided that:
-
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(a)
there shall not then exist any breach of this
Agreement by the Junior Creditor which has not been waived, in
writing, by the Senior Creditors,
(b)
at the time of the payment described below no Event
of Default or Default exists and is continuing,
(c)
the payment described below, if made, would not give
rise to the occurrence of any Event of Default or Default,
and
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the Borrowers may pay to the Junior Creditor, and the Junior
Creditor may accept from the Borrowers the warrants set forth in
the Subordinated Note (which may not be exercised prior to the
scheduled maturity of the Subordinated Debt) and, following the
second anniversary of the effective date hereof, interest and
ordinary scheduled principal payments when due (without
acceleration) set forth in the Subordinated Note (the "Permitted
Payments"). Notwithstanding the foregoing, Permitted Payments
of scheduled principal may not exceed $200,000 per calendar
quarter.
Section 4.
Notice of an Event of Default .
Immediately or no later than five (5) business days after the
Junior Creditor becomes aware of an occurrence of an event of
default under the Junior Creditor Documents, the Junior Creditor
shall give written notice thereof to the other party as provided in
Section 17 hereof. A failure to give such notice shall
not diminish the Junior Creditor’s rights under its creditor
documents.
Section 5.
Subordinated Debt Owed Only to the Junior
Creditor .&n
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